<PAGE>
As filed with the Securities and Exchange Commission on July 2, 1999
File No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
Issuer of Senior Discount Notes Registered hereby
COMPLETEL EUROPE N.V.
(Exact Name of Registrant as Specified in its Charter)
AMSTERDAM, THE NETHERLANDS 4813 98-0202823
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code) Identification No.)
Organization)
WASHINGTON PLAZA--IMMEUBLE ARTOIS, 44 RUE WASHINGTON
75008 PARIS CEDEX 08, FRANCE
33-1-53-53-83-83
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
Guarantor of Senior Discount Notes Registered hereby
COMPLETEL LLC
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 4813 52-2073805
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code) Identification No.)
Organization)
6300 SOUTH SYRACUSE WAY, SUITE 335
ENGLEWOOD, COLORADO 80111
(303) 741-4788
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID E. LACEY
CHIEF FINANCIAL OFFICER
6300 SOUTH SYRACUSE WAY, SUITE 335
ENGLEWOOD, COLORADO 80111
(303) 741-4788
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE FOR THE REGISTRANT)
COPIES TO:
LINDA WACKWITZ, ESQ.
W. DEAN SALTER, ESQ.
MARIA V. WOODS, ESQ.
HOLME ROBERTS & OWEN LLP
1700 LINCOLN STREET, SUITE 4100
DENVER, COLORADO 80203
(303) 861-7000
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, 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, 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each class of Amount to be Proposed maximum offering Proposed maximum Amount of
securities to be registered registered price per unit (1) aggregate offering price registration fee
- ----------------------------------- ------------ ------------------------- ------------------------ ----------------
<S> <C> <C> <C> <C>
14% Series B Senior Discount Notes $147,500,000 $505.67 $74,585,953 $20,734.89
Guarantees of the Notes (2) N/A N/A N/A N/A
</TABLE>
(1) Calculated pursuant to Rule 457(f)(2) based on the book value on July 2,
1999 of the notes to be received by the Registrant in the exchange
described herein.
(2) Pursuant to Rule 457(n) no separate fee is required.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
THE INFORMATION IN THIS PRELIMINARY 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
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 2, 1999
PRELIMINARY PROSPECTUS [LOGO]
OFFER TO EXCHANGE ALL OUTSTANDING
14% SENIOR DISCOUNT NOTES DUE 2009
FOR
14% SERIES B SENIOR DISCOUNT NOTES DUE 2009
OF
COMPLETEL EUROPE N.V.
We offer to exchange your existing 14% Senior Discount Notes due 2009 for new
14% Series B Senior Discount Notes due 2009.
- If you decide to participate in the exchange offer, the new notes
issued to you will have substantially the same terms as your old
notes, except the new notes will be registered and generally will be
able to be resold without complying with the registration requirements
of the Securities Act of 1933. Any old notes not exchanged will
continue to have restrictions on their transfer.
- There is no existing public market for your old notes, and there will
be no public market for the new notes issued in the exchange offer.
- Your old notes can be traded in the PORTAL Market.
- We will exchange all of the old notes that you validly tender and do
not withdraw.
- You may withdraw tenders of your old notes at any time before the
expiration of the exchange offer.
- The exchange offer expires at 5:00 p.m. New York City time on _______,
1999, unless we extend the offer.
- We will not receive any proceeds from the exchange offer.
- The exchange of your old notes for new notes will not be a taxable
exchange for U.S. federal income tax purposes.
You should carefully review the Risk Factors beginning on page 8 of this
prospectus.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
We are not making this exchange offer in any jurisdiction where it is not
permitted.
Each purchaser represents and agrees that (i) it has not offered, sold or
transferred and will not offer, sell or transfer any notes, whether directly
or indirectly, other than to persons or entities, located in or outside of
The Netherlands that trade or invest in securities as a business (including
banks, securities firms, investment institutions, insurance companies,
pension funds and other institutional investors or businesses which regularly
invest in securities as an ancillary activity to their business), and (ii) it
has mentioned or will mention this selling restriction in all offers, offer
advertisements, publications and other documents in which an offer is made or
a forthcoming offer is announced.
----------------------
The date of this prospectus is __________, 1999
----------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . .
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Selected Consolidated Financial Data of CompleTel Europe . . . . . . . 31
Unaudited Pro Forma Condensed Consolidated Financial Statements . . . . 32
Management's Discussion and Analysis of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Certain Relationships and Related Transactions . . . . . . . . . . . . 70
Security Ownership of Certain Beneficial Owners and Management . . . . 74
Description of Certain Indebtedness . . . . . . . . . . . . . . . . . . 76
Description of the Notes . . . . . . . . . . . . . . . . . . . . . . . 77
Description of the Share Capital and Corporate Structure of CompleTel
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Description of Equity Registration and Other Rights . . . . . . . . . . 115
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . 116
Book-Entry; Delivery and Form . . . . . . . . . . . . . . . . . . . . . 119
Certain Tax Considerations . . . . . . . . . . . . . . . . . . . . . . 121
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 126
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Index to Consolidated Financial Statements . . . . . . . . . . . . . . F-1
</TABLE>
----------------------
AVAILABLE INFORMATION
We have filed with the SEC a registration statement on Form S-4 to
register this exchange offer. This prospectus which forms a part of the
registration statement does not contain all of the information included in
that registration statement. This prospectus contains summaries of the
material terms and provisions of documents files as exhibits to the
registration statement. For further information about CompleTel Europe,
CompleTel LLC and the new notes offered in this prospectus, you should refer
to the registration statement and the exhibits.
You may read and copy any document we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549. Copies of the registration statement may be obtained from the
Commission at prescribed rates from the Public Reference Section of the
Commission at such address, and at the Commission's regional offices located
at 7 World Trade Center, 13th Floor, New York, New York 10048, and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the Public Reference Room. We file our SEC
materials electronically with the SEC, so you can also review our filings by
accessing the web site maintained by the SEC at http://www.sec.gov. This
site contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD
- CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE CAPTION "RISK
FACTORS,"
- READ THE ENTIRE PROSPECTUS, INCLUDING THE FINANCIAL STATEMENTS AND THE
NOTES TO THE FINANCIAL STATEMENTS, AND
- READ THE ENTIRE LETTER OF TRANSMITTAL.
In this prospectus, except where otherwise indicated, references to "$" or
"U.S. dollars" are to the lawful currency of the United States. References
to "FF" or "French francs" are to the lawful currency of the Republic of
France. Unless otherwise indicated, amounts in U.S. dollars over $1 million
and amounts in French francs over FF1 million have been rounded to one
decimal place and amounts in U.S. dollars under $1 million and amounts in
French francs under FF1 million have been rounded to the nearest thousand.
WHO WE ARE
Our strategic objective is to become a leading facilities-based provider
of switched local telecommunications and related services to business and
government end-users, carriers and Internet service providers in targeted
metropolitan areas across Western Europe. Initially, we are focusing on
building networks in France, Germany and the United Kingdom. We are:
- FOCUSING ON PROVIDING FACILITIES-BASED LOCAL EXCHANGE SERVICES. This
differentiates us from many of the recent market entrants in the
Western European telecommunications market that concentrate on
offering primarily long distance access, carrier-to-carrier networks
and resold services.
- SELECTIVELY TARGETING MAJOR METROPOLITAN MARKETS THROUGHOUT WESTERN
EUROPE. In specific large metropolitan markets in Western Europe, we
plan to exploit selected areas that have attractive demographics and
have not experienced significant competitive activity by competitive
telecommunications service providers.
- SEEKING TO ACHIEVE EARLY MARKET ENTRY. We seek to achieve competitive
advantages by securing an early market position in our target markets.
- TARGETING BUSINESS AND GOVERNMENT END-USERS, CARRIERS AND INTERNET
SERVICE PROVIDERS. We are focusing on geographically concentrated
high-volume end-users, carrier customers and Internet service
providers that have large telecommunications budgets and require a
broad range of retail and wholesale services.
- EMPLOYING A REVENUE-DRIVEN APPROACH TO NETWORK DEPLOYMENT. We are
directing our network development and sales efforts toward large,
strategically-located business and government end-users, carriers and
Internet service providers. After acquiring "anchor tenant"
customers, we seek to add other customers in the same building or in
buildings that are directly accessible from the existing network,
resulting in incremental, revenue-driven network deployment.
In each of our target markets in France, Germany and the United Kingdom,
we intend to deploy high-capacity, protocol transparent fiber optic
communications networks linking state-of-the-art switching equipment with our
customers, and to interconnect our networks with those of the incumbent
public telecommunications operator and other providers. We are building
these advanced networks in order to offer a broad range of fully integrated
telecommunications services using various telecommunications protocols,
including synchronous digital hierarchy, Internet protocol and other
technologies. We are seeking to augment those services with an emphasis on
superior sales, marketing, customer care and information management systems.
<PAGE>
To establish an early competitive position in our initial markets, we
are employing a flexible deployment strategy tailored to each market.
Depending on the nature of each market, we will install networks by:
- constructing fiber backbone;
- leasing dark fiber and conduit space; and
- building or leasing point-to-point wireless transmission systems.
We are seeking to capitalize on the size, growth potential and
increasing liberalization of competition in Western Europe telecommunications
markets. We expect the growth rate of telecommunications revenues in Western
Europe to increase as the historical dominance of the national public
telecommunications operator in each country is challenged by the opening of
telecommunications markets for competition. Considerable liberalization of
competition has already taken place in the United Kingdom, and liberalization
is rapidly increasing in other Western European countries, driven by European
Commission directives requiring European Union member states to liberalize
the provision of telephony services.
We plan to deploy our networks initially in France, Germany and the
United Kingdom, the three largest telecommunication markets in Western Europe
in terms of telecommunication revenue and telephone access lines. Our
deployment plan in France includes constructing networks initially in four
metropolitan markets and in additional markets as financing is obtained. We
believe that the French telecommunications market represents a particularly
attractive initial opportunity because:
- France is one of the three largest telecommunications markets in
Western Europe in terms of telecommunications revenue and telephone
access lines;
- France has liberalized its telecommunications industry, but witnessed
the introduction of only limited facilities-based competition; and
- France has adopted a comprehensive regulatory scheme that provides for
attractive interconnection costs and other terms for local
facilities-based providers.
Germany and the United Kingdom also present significant opportunities for
facilities-based providers of switched local telecommunications services.
Germany represents Western Europe's largest telecommunications market. The
United Kingdom is one of the three largest telecommunications markets in
Western Europe in terms of telecommunications revenue and telephone access
lines.
Our initial markets include four metropolitan markets in France (Paris,
Lyon, Lille and Marseilles), and in one market in each of Germany and the
United Kingdom (Berlin and London). If we obtain additional financing and
regulatory approvals, we intend to deploy networks in additional areas within
France, Germany and the United Kingdom, and to further deploy networks in
markets throughout Western Europe.
CompleTel Europe's principal executive offices are located at Washington
Plaza--Immeuble Artois, 44 rue Washington, 75008 Paris CEDEX 08, France, and
its telephone number is 33-1-53-53-83-83.
CompleTel LLC's principal executive offices are located at 6300 S.
Syracuse Way, Suite 355, Englewood, Colorado 80111, and its telephone number
is (303) 751-4788.
2
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer . . . . . . On February 16, 1999, we issued
$147.5 million aggregate principal amount at
maturity of notes in a transaction exempt
from the registration requirements of the
Securities Act. We are offering to exchange
$1,000 principal amount at maturity of new
notes in exchange for each $1,000 principal
amount at maturity of old notes. The terms
of the new notes and the old notes are
substantially identical, except that the new
notes will not be subject to contractual
restrictions on transferability. In order to
be exchanged, an old note must be properly
tendered and accepted. We will exchange all
old notes validly tendered and not validly
withdrawn.
Expiration Date. . . . . . . . The exchange offer will expire at 5:00 p.m.,
New York City time, ________, 1999 or a later
date and time to which we extend it.
Withdrawal . . . . . . . . . . You may withdraw any old notes that you have
tendered in the exchange offer at any time
prior to 5:00 p.m., New York City time, on
the expiration date.
Resales of Exchange Notes. . . We believe that you may offer new notes for
resale without compliance with the
registration and prospectus delivery
requirements of the Securities Act of 1933,
provided that:
- you acquire the new notes in the
ordinary course of your business
and you are not engaged in, and do
not have an arrangement with any
person to engage in, a distribution
of new notes, and
- you are not one of our "affiliates"
or a broker-dealer who purchased
old notes directly from us to
resell under Rule 144A or any other
available exemption under the
Securities Act.
By tendering your old notes as
described below, you will be making
representations to this effect. If this
belief is inaccurate and you transfer any new
notes issued to you in the exchange offer
without delivering a prospectus which meets
the requirements of the Securities Act or
without an exemption from these requirements,
you may incur liability under the Securities
Act. We do not assume any liability if you
do and we will not indemnify you.
If you are a broker-dealer and wish
to exchange old notes that you received as a
result of market-making or other trading
activities, you must agree to deliver this
prospectus in connection with the sale of new
notes you receive in this exchange offer.
Broker-dealers who acquired old
notes directly from us and not as a result of
market-making activities or other trading
activities may not participate in the
exchange offer and must comply with the
prospectus delivery requirements of the
Securities Act in order to resell the old
notes.
3
<PAGE>
Procedures for
Tendering Old Notes. . . . . . To accept the exchange offer, you must:
- complete, sign and date a copy of
the letter of transmittal and mail
or otherwise deliver it, together
with the old notes and any other
required documentation, to the
exchange agent at the address set
forth in this prospectus; or
- if you hold old notes through The
Depository Trust Company, you must
arrange for your notes to be
tendered under The Depository Trust
Company's automated tender offer
program.
Under The Depository Trust Company's
automated tender offer program, each
tendering participant will agree to be bound
by the letter of transmittal.
Exchange Agent . . . . . . . . U.S. Bank Trust National Association.
Income Tax Considerations. . . The exchange of old notes for new notes in
the exchange offer should not be a taxable
exchange for United States federal income tax
purposes or for Netherlands income tax
purposes. You should not recognize any
taxable gain or loss or any interest income
as a result of such exchange.
Effect of not Tendering. . . . Old notes that are not tendered or that are
tendered but not accepted will continue to be
subject to the existing restrictions on
transfer. We have, however, agreed to
register under the Securities Act any sale of
old notes that are not exchanged for new
notes or new notes that are not freely
tradeable after the exchange offer. We have
agreed to keep such registration in effect
for two years.
Selling Restrictions . . . . . We are not making this exchange offer in any
jurisdictions where it is not permitted. In
particular, each purchaser represents and
agrees that (i) it has not offered, sold or
transferred and will not offer, sell or
transfer any notes, whether directly or
indirectly, other than to persons or
entities, located in or outside of The
Netherlands that trade or invest in
securities as a business (including banks,
securities firms, investment institutions,
insurance companies, pension funds and other
institutional investors or businesses which
regularly invest in securities as an
ancillary activity to their business) and
(ii) it has mentioned or will mention this
selling restriction in all offers, offer
advertisements, publications and other
documents in which an offer is made or a
forthcoming offer is announced.
4
<PAGE>
THE NEW NOTES
THE NEW NOTES TO BE ISSUED TO YOU IN THE EXCHANGE OFFER WILL
EVIDENCE THE SAME OBLIGATIONS OF COMPLETEL EUROPE AS THE NOTES YOU CURRENTLY
HOLD. THE INDENTURE THAT CURRENTLY GOVERNS YOUR EXISTING NOTES IS THE SAME
INDENTURE THAT WILL GOVERN THE NEW NOTES. THE TERMS OF THE NEW NOTES WILL BE
THE SAME AS THE EXISTING NOTES, EXCEPT THAT THERE WILL BE NO LEGENDS ON THE
NEW NOTES RESTRICTING THEIR TRANSFER AND THE NEW NOTES WILL BE REGISTERED
UNDER THE SECURITIES ACT INSTEAD OF HAVING REGISTRATION RIGHTS. YOU SHOULD
READ THE "DESCRIPTION OF THE NOTES" SECTION OF THIS PROSPECTUS BEGINNING ON
PAGE 77 FOR A DETAILED DESCRIPTION OF THE TERMS AND CONDITIONS OF THE NEW
NOTES.
Issuer . . . . . . . . . . . . CompleTel Europe N.V.
Notes Offered. . . . . . . . . $147,500,000 aggregate principal amount at
maturity of 14% Series B Senior Discount
Notes due 2009. The notes will be issued in
a minimum denomination of $100,000 and in
increments of $1,000 above $100,000.
Maturity Date. . . . . . . . . February 15, 2009.
Original Issue Discount. . . . For U.S. federal income tax purposes, a note
will be treated as having been issued with
"original issue discount" equal to the
difference between the issue price and the
sum of all cash payments (whether denominated
as principal or interest) to be made on the
note. Each U.S. holder of a note must include
as gross income for U.S. federal income tax
purposes a portion of such original issue
discount for each day during each taxable
year in which a note is held even though cash
interest payments will not be received prior
to August 15, 2004. The accretion of the
notes from their original issue price to
their principal amount will produce taxable
ordinary interest income in the amount of the
accretion for holders of the notes during the
accretion period. The Internal Revenue Code
calls this original issue discount "OID".
Accretion, Interest Rates and
Payment Dates. . . . . . . . . The notes will not accrue cash interest
before February 15, 2004. The principal
amount represented by each note will accrete
from $508.54 at the date of issuance of the
old notes to $1,000 at February 15, 2004.
Cash interest will accrue at a rate of 14%
per annum after February 15, 2004. Cash
interest will be payable in arrears on
February 15 and August 15 of each year,
beginning on August 15, 2004.
Withholding Taxes. . . . . . . All payments with respect to the notes made
by CompleTel Europe will be made without
withholding or deduction for Netherlands
taxes or taxes of any other jurisdiction in
which CompleTel Europe is engaged in business
unless required by law. If withholding is
required, CompleTel Europe will generally be
required to pay such additional amounts as
may be necessary so that the net amount
received by the holders after such
withholding or deduction will not be less
than the amount that would have been received
in the absence of such withholding or
deduction.
5
<PAGE>
Ranking and Parent Guaranty. . Except for the parent guaranty described
below, the notes:
- are senior unsecured obligations of
CompleTel Europe;
- rank equally in right of payment
with all existing and future
unsecured and unsubordinated debt
of CompleTel Europe; and
- rank senior in right of payment to
any existing and future debt
expressly subordinated to the new
notes.
The notes will be effectively subordinated to
all secured indebtedness of CompleTel Europe
to the extent of the value of the assets
securing such indebtedness and structurally
subordinated to all indebtedness (including
trade payables) of subsidiaries of CompleTel
Europe.
To comply with certain Netherlands laws, the
notes are guaranteed on a senior unsecured
basis by CompleTel LLC, the ultimate parent
of CompleTel Europe. Because CompleTel LLC is
a holding company with no operations other
than the operations conducted by subsidiaries
of CompleTel Europe, it is unlikely that
CompleTel LLC could satisfy its obligations
under the parent guaranty if CompleTel Europe
is unable to satisfy its obligations on the
notes.
Sinking Fund . . . . . . . . . None.
Optional Redemption. . . . . . We may not elect to redeem the notes prior to
February 15, 2004, except as set forth below.
On or after February 15, 2004, we may elect
to redeem the notes, in whole or in part, at
any time prior to maturity at the redemption
prices set forth under "Description of
Notes--Optional Redemption."
In addition, prior to February 15, 2002, we
may redeem up to one-third of the aggregate
principal amount at maturity of the notes
with the proceeds of certain public equity
offerings at a redemption price of 114% of
the accreted value of the notes being
redeemed, plus accrued interest, if any. Our
ability to do so, however, is subject to the
requirement that at least $98,334,000
aggregate principal amount at maturity of the
notes remains outstanding after the
redemption.
Redemptions for Changes in
Netherlands Withholding Taxes. In the event CompleTel Europe has or would
become obligated to pay additional amounts of
interest as a result of changes affecting
Netherlands withholding taxes, CompleTel
Europe may elect to redeem the notes in
whole, but not in part, at 100% of the
accreted value of the notes to be redeemed,
with accrued interest, if any, to the date of
redemption.
Change of Control. . . . . . . If an event treated as a change of control
under the indenture for the notes occurs, you
have the right to
6
<PAGE>
require us to repurchase all or a portion
of your notes at a price equal to 101% of
the accreted value, with accrued interest,
if any, to the date of purchase. We may
not have sufficient funds available to
satisfy our obligations to purchase the
notes if a change of control occurs.
Covenants. . . . . . . . . . . The indenture for the notes contains
covenants for your benefit, including
covenants that limit our ability and the
ability of our restricted subsidiaries to:
- incur additional debt;
- create liens;
- pay dividends or make other
distributions with respect to our
capital stock;
- purchase, redeem or retire our
capital stock;
- make investments;
- create or permit to exist dividend
or payment restrictions affecting
restricted subsidiaries;
- create subsidiary guarantees;
- consolidate, merge or transfer all
or substantially all our assets;
- sell assets; and
- transact business with our
affiliates.
The indenture generally allows modification
and amendment of these and other covenants by
a vote of holders of a majority in aggregate
principal amount of the notes. Also, holders
of a majority in aggregate principal amount
of the notes may waive our compliance with
some of the covenants in the indenture.
Risk Factors . . . . . . . . . We urge you to carefully review the following
risk factors for a discussion of factors you
should consider before exchanging your old
notes for new notes.
7
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD CONSIDER
THE FOLLOWING RISK FACTORS CAREFULLY IN EVALUATING US AND OUR BUSINESS AND
BEFORE DECIDING TO PARTICIPATE IN THE EXCHANGE OFFER.
IF YOU DO NOT EXCHANGE YOUR OLD NOTES, THEY WILL CONTINUE TO BE SUBJECT TO
RESTRICTIONS ON TRANSFER
Holders of old notes who do not exchange their old notes for new notes
will continue to be subject to the restrictions on transfer of the old notes
as set forth in the legends on the old notes. The old notes may not be
offered or sold unless they are registered under the Securities Act or are
exempt from registration. We have agreed that we will register under the
Securities Act any old notes that are not exchanged and that we will keep the
registration effective for two years. If you do not sell old notes under
that registration statement while it is effective, or if we fail to make the
registration statement become effective, the old notes that are not exchanged
will continue to be subject to transfer restrictions.
OUR LIMITED HISTORY OF OPERATIONS MAY NOT BE A RELIABLE BASIS FOR EVALUATING
OUR PROSPECTS
Our short operating history gives you limited operating and financial
data you can use to evaluate our performance and determine whether you should
invest in the new notes. As a result, you have limited information on which
to base a prediction whether we will be able to achieve our business
objectives and generate sufficient revenues to make principal and interest
payments on the notes and our other indebtedness.
WE HAVE EXPERIENCED OPERATING LOSSES IN OUR OPERATIONS TO DATE
We are a development stage company that has generated operating losses
and negative cash flow from our activities to date. We expect to continue to
experience operating losses and negative earnings as we expand our operations
and enter new markets. If we fail to generate sufficient revenues, we may
default in the payment of our outstanding indebtedness, including the notes.
If we default in the payment of our indebtedness, you could lose your
investment.
WE WILL NEED ADDITIONAL CAPITAL TO EXPAND OUR BUSINESS AND INCREASE REVENUE
AND THE FAILURE TO SECURE ADDITIONAL FINANCING COULD RESTRICT OUR GROWTH AND
PROFITABILITY
We will need additional capital to achieve our business objectives. We
may not be successful in raising sufficient additional capital at all or on
terms that we will consider acceptable to develop our business. If we do not
receive additional financing, we may be unable to complete the deployment of
networks in all of our targeted markets. Our principal capital expenditure
requirements will involve the construction, leasing and maintenance of our
telecommunications networks, the purchase, installation and maintenance of
network switches and switch electronics and network operations center
expenditures.
Based on our current plans and projections, we expect our aggregate
capital requirements to fund the deployment and operation of networks in our
six initial target markets through the end of 2001 will total approximately
$240 million. We currently expect to be able to fund deployment and
operations in our four initial French markets through the end of 2001 with
the proceeds from the issuance of the old notes, the funding expected to be
available from senior credit facilities for which we have received bank and
vendor commitments and equity contributions received to date. Cost overruns
or our inability to complete the final documentation for the senior credit
facilities could cause us to suffer a funding shortfall that would prevent us
from deploying our planned networks in France. We also expect to be able to
fund deployment of our initial planned market in the United Kingdom through
the end of 2001 with proceeds from the issuance of the old notes. We believe
we have sufficient financing to begin our planned deployment and operation in
our initial market in Germany, and we are currently seeking additional bank
and vendor financing necessary to fund the
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deployment and operations of our initial market in Germany through the end of
2001. We are not certain that we will secure adequate additional financing.
If we are unsuccessful, we may have to alter our initial deployment plans.
We are also seeking additional equity, senior bank financing and vendor
financing in order to complete planning and begin network deployment and
operations in six additional target markets in France and Germany. We cannot
be certain that we will get the financing we need to deploy networks and
begin operations in our additional target markets.
In addition, the actual amount and timing of our future capital
requirements may differ materially from our estimates. We may need additional
financing if we suffer:
- cost overruns;
- demand for our services that varies from our expectations;
- adverse regulatory, technological, or competitive developments;
- adverse changes in interest or currency exchange rates;
- engineering design changes and changes in technology; and
- unforeseen delays.
The size and timing of any future acquisitions will also effect our capital
requirements, revenues and costs. These factors may cause actual revenues
and costs to vary from our expectations to a material degree, which would
affect our future capital requirements. We may also need additional capital
if we alter the schedule or targets of our market deployment plan.
If we fail to raise sufficient funds, we may have to modify, delay, or
abandon some of our planned expansion or expenditures, which could adversely
effect our ability to pay amounts due on the notes.
OUR ROLL-OUT PLAN IS PRELIMINARY AND WE MAY HAVE TO REALLOCATE FUNDS
Our anticipated network deployment plan is preliminary in nature.
Although our business plans for our initial markets in France and Germany are
well developed, our analysis of and our business plan for our initial market
in the United Kingdom is still being developed. We are also investigating six
additional target markets in France and Germany. As a result, the business
and network deployment plans for our initial market in the United Kingdom may
need to change as we complete detailed market-specific analyses. We may also
decide to change our network deployment plans for our initial target markets
in Germany or the United Kingdom if the additional target markets that we are
investigating in Germany and France appear to be more effective uses of our
resources.
We continuously evaluate our business and network deployment plans in
light of evolving competitive and market conditions. That may lead us to
alter our plans and reallocate funds in order to accelerate deployment of
networks in other metropolitan markets to accommodate:
- changes or inaccuracies in our research or assumptions;
- unexpected results of operations in our initial target markets;
- regulatory, technological, market and competitive developments; or
- changes in or discoveries of specific market conditions favoring
expedited deployment into other attractive Western European
metropolitan markets.
If we reallocate any funds to deploy networks in other markets, we may delay
deployment in one or more of our initial target markets and we may need
additional financing to complete our network deployment in our initial target
markets. We may find that such financing is not available at all or is
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not available on terms we can reasonably accept. Our ability to make
principal and interest payments on the notes and to pursue our business plans
and complete network deployment in our initial target markets could be
adversely affected if we fail to obtain such additional financing.
DEPLOYMENT OF OUR NETWORKS INVOLVES MANY CHALLENGES THAT COULD STOP OR SLOW
OUR GROWTH
Our success will depend upon our ability:
- to assess and enter potential markets;
- to design network routes and install facilities;
- to acquire rights-of-way and telephone numbers;
- to lease necessary facilities;
- to obtain governmental licenses and authorizations;
- to secure financing;
- to develop a sufficient customer base; and
- to implement efficient operations support.
Moreover, our success will depend on our ability to complete those tasks
in a timely manner, at reasonable and anticipated costs and on acceptable
terms and conditions. The successful implementation of our business strategy
is subject to a variety of risks, including:
- operating and technical problems;
- regulatory uncertainties;
- possible delays in the full implementation of the European Commission
directives regarding telecommunications liberalization;
- increased competition; and
- the availability of capital.
For example, we are likely to encounter various difficulties in
acquiring necessary rights-of-way and building permits while we deploy our
networks. Similarly, we will inevitably face construction delays caused by
weather, labor stoppages or other factors outside our control. We may also
encounter difficulties presented by the existence of differing technical
standards among the Western European countries in which we intend to deploy
networks. These and other impediments to the deployment of our networks could
prevent or significantly delay the deployment of one or more planned
networks. Such impediments could also significantly increase our costs for
deploying our planned networks.
In some markets, we plan to purchase and install or lease point-to-point
wireless transmission systems on a case-by-case basis. If appropriate
opportunities exist, we may also seek to install point-to-multipoint
transmission systems. Point-to-multipoint licenses are currently available
in France only on a limited and experimental basis through December 1999.
Moreover, the French telecommunications authority is still considering
whether these wireless systems will be permitted in the future. On June 9,
1999, we received an experimental license for deployment of
point-to-multipoint links in portions of Marseilles, France, one of our
initial target markets.
Wireless transmission systems require a direct line of sight between two
antennas constituting a link and are subject to distance and rain attenuation
as well as line of sight limitations. Consequently, our ability to integrate
the planned wireless portions of our networks depends upon
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securing suitable roof rights. If we cannot obtain suitable rights, we may
be forced to forego a wireless link, which could result in additional expense
or prevent us from serving a particular customer or area.
IF WE DO NOT EFFECTIVELY MANAGE RAPID EXPANSION OF OUR BUSINESS, OUR
FINANCIAL CONDITION WILL SUFFER
Our business plan calls for a rapid expansion and considerable increases
in the complexity of our operations. This rapid expansion and increased
complexity may strain our management, operational, financial and other
resources. If we fail to manage our growth effectively, our network
deployment plans could be delayed and we could lose customers and revenues.
Our ability to manage future growth will depend upon many factors, including
our ability
- to develop efficient operations support and other back office systems,
- to monitor operations,
- to control costs,
- to maintain regulatory compliance,
- to maintain effective quality controls,
- to significantly expand our internal management, technical,
information and accounting systems and
- to attract, assimilate and retain additional qualified personnel.
OUR SUBSTANTIAL INDEBTEDNESS COULD MAKE US UNABLE TO SERVICE INDEBTEDNESS AND
MEET OUR OTHER REQUIREMENTS AND COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH
We are incurring significant amounts of indebtedness in order to develop
and deploy our initial networks and we expect to incur significant additional
indebtedness to deploy additional networks. If we are unable to make the
required payments under any of our financing arrangements, a default under
the indenture could be triggered. As of March 31, 1999, CompleTel LLC had
received $65.8 million of equity contributions of which $59.5 million was
contributed to CompleTel Europe. We have $147.5 million in principal amount
of the notes at maturity outstanding. We also have commitments for up to $90
million of senior financing. In addition, we are currently seeking
additional senior financing to fund our current and future network deployment
and operation plans. The indenture allows us to have $170 million of senior
financing and $225 million of network financing.
Our high degree of leverage could:
- place us at a competitive disadvantage to any competitors that are not
as highly leveraged;
- impair our ability to adjust to rapidly changing market conditions,
invest in new or developing technologies or take advantage of business
opportunities as they arise;
- impair our ability to obtain additional financing needed for working
capital, capital expenditures, acquisitions and general corporate
purposes;
- require us to dedicate a substantial portion of our cash flow from
operations to the payment of principal and interest on indebtedness,
which would reduce the funds available for deployment of our networks;
and
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- make us more vulnerable in the event of a downturn in general economic
conditions or in our business or of changing market conditions and
regulations.
The successful implementation of our business plan is essential for us
to meet our working capital, capital expenditure and debt service
requirements. We cannot assure you that we will be able to meet those
requirements. In addition, our committed senior financing will, and future
financings are likely to, bear interest at floating rates. An increase in
those interest rates could adversely affect our ability to make our required
debt payments.
UNDER OUR CURRENT HOLDING COMPANY STRUCTURE THE NOTES WILL BE STRUCTURALLY
SUBORDINATE TO CREDITORS OF OUR OPERATING SUBSIDIARIES; WE ARE DEPENDENT UPON
CASH FLOW FROM THESE SUBSIDIARIES TO REPAY THE NOTES
Except for the guaranty of CompleTel LLC, the notes will be obligations
exclusively of CompleTel Europe. CompleTel Europe is a holding company with no
material business operations, sources of income or assets other than interests
in its operating subsidiaries. As such, CompleTel Europe will rely upon
dividends and loan repayments from its subsidiaries to generate the funds
necessary to meet its obligations. Although cash interest does not become
payable on the notes until 2004, we expect that CompleTel Europe will continue
to rely on such dividends and loan repayments from subsidiaries for the payment
of principal of and interest on the notes. The subsidiaries are legally distinct
from CompleTel Europe and will have no obligation to pay amounts due on the
notes or to make funds available for such payment. CompleTel Europe's
subsidiaries have not guaranteed the notes. CompleTel Europe's subsidiaries will
only be able to make such payments to CompleTel Europe if
- funds are available,
- the terms of such subsidiaries' indebtedness and/or other agreements
allow them to make such payments, and
- local corporate and other laws and regulations permit the subsidiary
to pay dividends or make loan repayments to affiliates.
Claims of creditors of CompleTel Europe's subsidiaries, including trade
creditors, will have priority as to the assets of such subsidiaries over the
claims of the holders of the notes. Accordingly, the notes will be
effectively subordinated in right of payment to all existing and future
indebtedness and other liabilities of the subsidiaries of CompleTel Europe,
including liabilities that may be incurred under senior bank and vendor
financings.
To comply with certain Netherlands laws, the notes will be
unconditionally and irrevocably guaranteed on a senior unsecured basis by
CompleTel LLC. Because CompleTel LLC is a holding company, it is unlikely
that CompleTel LLC could satisfy its obligations under its guaranty if
CompleTel Europe is unable to satisfy its obligations on the notes.
THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO OUR CURRENT AND FUTURE SECURED
INDEBTEDNESS
The notes are not secured by any of our assets. We currently have bank
and vendor commitments for $90 million of senior financing for network
deployment and operations in France. When incurred, our obligations under
the terms of such committed senior financing will be secured by a perfected
security interest in our assets in France. The notes will be effectively
subordinated to such indebtedness, and any other secured indebtedness, to the
extent of such security interests. In the event that a default were to occur
with respect to any of our secured indebtedness and the holders were to
foreclose on the collateral, or in the event of our bankruptcy, liquidation,
or reorganization, the holders of such indebtedness would be entitled to
payment out of the proceeds of their collateral prior to the holders of the
notes. Also, if the value of such collateral is insufficient to satisfy such
secured indebtedness, holders of amounts remaining outstanding on the secured
indebtedness may be entitled to share the same priority with holders of the
notes with respect to other assets of CompleTel
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Europe. Such assets may not be sufficient to pay amounts due on any or all of
the notes then outstanding.
LIMITATIONS IMPOSED BY RESTRICTIVE COVENANTS COULD LIMIT HOW WE CONDUCT
BUSINESS AND A DEFAULT UNDER OUR INDENTURE AND FINANCING AGREEMENTS COULD
SIGNIFICANTLY IMPACT OUR ABILITY TO REPAY OUR INDEBTEDNESS
The indenture for the notes contains, and we expect any agreements
entered into in connection with senior financing to contain very stringent
covenants that may limit our flexibility to conduct our business, which in
turn may limit our ability to generate the revenues necessary to repay our
indebtedness. If we fail to comply with any of the covenants, a default
would be triggered under the indenture, which could cause a default under our
senior debt. These covenants may restrict our ability:
- to incur additional indebtedness;
- to create liens;
- to pay dividends and make other distributions;
- to make investments;
- to create dividend or payment restrictions affecting restricted
subsidiaries;
- to prepay subordinated indebtedness;
- to make investments and other restricted payments;
- to enter into sale and leaseback transactions;
- to consolidate, merge or transfer all or substantially all of our
assets;
- to sell assets; and
- to engage in certain transactions with affiliates.
Our future financing arrangements will most likely contain similar or more
restrictive covenants as well as other covenants that will require us to
maintain specified financial ratios and satisfy financial tests. These
restrictions limit how we conduct business and may make it more difficult for us
to raise additional debt or equity financing to operate during general economic
or business downturns, to compete effectively or to take advantage of new
business opportunities, and this may affect our ability to generate revenues and
make profits.
IF WE DO NOT CONTINUALLY ADAPT TO TECHNOLOGICAL CHANGE, WE COULD LOSE CUSTOMERS
AND MARKET SHARE
The telecommunications industry is subject to rapid and significant changes
in technology, and we rely on outside vendors for the development of and access
to new technology. The effect of technological changes on our business cannot be
predicted. We believe our future success will depend, in part, on our ability to
anticipate or adapt to such changes and to offer, on a timely basis, services
that meet customer demands. We cannot assure you that we will obtain access to
new technology on a timely basis or on satisfactory terms. If we fail to obtain
new technology we could lose customers and market share.
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OUR SUCCESS DEPENDS ON OUR KEY PERSONNEL AND WE MAY NOT BE ABLE TO REPLACE
KEY EXECUTIVES WHO LEAVE
We are managed by a small number of key executive officers. The loss of
the services of one or more of these key individuals could materially and
adversely affect our business and its prospects. We are securing key person
life insurance for three of our executive officers, but insurance alone will
not avoid the impact of the loss of any of those employees. We also believe
that our future growth and success will depend in large part on our ability
to attract, retain and motivate highly skilled and qualified managerial,
sales, marketing, administrative, operating, and technical personnel.
Competition for qualified personnel in the telecommunications industry in
Europe is intense. Consequently, we cannot assure you that we will be able to
hire or retain necessary personnel in the future.
WE ARE DEPENDENT ON EFFECTIVE BILLING, CUSTOMER SERVICE AND INFORMATION
SYSTEMS AND WE MAY HAVE DIFFICULTIES IN DEVELOPING THESE SYSTEMS
Sophisticated "back office" information and processing systems are vital
to our operations and potential for growth. Such systems are essential for
us to monitor costs, bill customers, initiate, implement and track customer
orders and achieve operating efficiencies. We cannot assure you that these
systems will be successfully implemented on a timely basis or at all or will
perform as expected because:
- our vendors may fail to deliver proposed products and services in a
timely and effective manner and at an acceptable price;
- we may fail to identify adequately all of our information and
processing needs;
- our processing or information systems may fail or be inadequate;
- we may be unable to effectively integrate such products or services;
- we may fail to upgrade systems as necessary; and
- third party vendors may cancel or fail to renew license agreements
that relate to these systems.
WE MAY BE ADVERSELY IMPACTED BY YEAR 2000 ISSUES, MANY OF WHICH ARE BEYOND OUR
CONTROL
Until well into the year 2000, we will not be certain that all of our
computer systems will function adequately after December 31, 1999. A failure
of our customers or vendors, including other telecommunications operators, to
cause their software and systems to be year 2000 compliant could adversely
effect our ability to operate our networks or bill our customers. Our
customers' operations could also be affected in ways that could reduce their
usage of our networks or cause them to delay payments or fail to pay us. Any
of those factors could reduce our revenues and adversely affect our ability
to service our indebtedness.
The "year 2000" issue generally describes the various problems that may
result from the improper processing of dates and date-sensitive transactions
by computers and other equipment as a result of computer hardware and
software using two digits to identify the year in a date. The failure to
process dates could result in network and system failures or miscalculations
causing disruptions in operations including, among other things, a temporary
inability to process transactions, send invoices or engage in other routine
business activities. We are selecting and purchasing our computer and
operational systems so as to be year 2000 compliant. We are requiring
certain conditions, warranties, and remedies in vendor supply agreements for
such systems that such systems will be year 2000 compliant. Consequently, we
anticipate that our systems will be fully year 2000 compliant as they are
brought online. However, we will not know until the year 2000 occurs that
all systems will then function adequately. In addition, we are dependent
upon third-party suppliers, including our competitors in some cases, for the
delivery of services and on our customers for the
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purchase of services. A failure in a system operated by our customers or
suppliers could adversely affect our operations and our ability to meet our
obligations on the notes. France Telecom has informally notified us that, if
they suffer significant year 2000 problems, France Telecom may not focus
attention in late 1999 on completing interconnections with our networks in
France. That failure could delay the initiation of service in one or more of
our additional target markets unless we are able to purchase services from
operators in the affected markets that already are interconnected to France
Telecom.
RISKS ASSOCIATED WITH CONVERSION TO EURO
In the countries belonging to the European and Monetary Union that have
adopted the euro as their common legal currency, we are required to transact
business in both the euro and the participating countries' respective
individual currencies. This requirement imposes significant logistical
problems on us, our suppliers and customers. While we are working to minimize
and eliminate these problems where possible, we may incur increased
operational costs from having to transact business in euros as well as each
national currency. We are selecting and purchasing our computer and
operational systems with a view to their ability to transact business without
impairment from the introduction of the euro. While we believe that our
systems will not be adversely impacted by the euro conversion, accounting,
billing and logistical difficulties may still arise. We may also be adversely
affected if our suppliers or customers fail to successfully manage the euro
conversion.
BECAUSE THE NOTES ARE OBLIGATIONS OF A FOREIGN ISSUER, YOU COULD EXPERIENCE
DIFFICULTY OR ADDITIONAL EXPENSE IN ENFORCING CIVIL JUDGMENTS AGAINST US THAT
YOU WOULD NOT EXPERIENCE IF WE WERE A DOMESTIC COMPANY
The notes are obligations of CompleTel Europe, which is a limited
liability company incorporated under the laws of the Netherlands and having
its statutory domicile in Amsterdam. The sole director of CompleTel Europe
is a non-resident of the United States, and a substantial portion of the
assets of CompleTel Europe and its director are located outside the United
States. Investors seeking to file suit may find it difficult to effect
service of process within the United States upon CompleTel Europe or its
director or to enforce judgments obtained in United States courts against any
of them in United States courts. This difficulty may extend to efforts to
enforce judgments predicated upon the civil liability provisions of the
federal securities laws of the United States. In the absence of an applicable
treaty or convention providing for the recognition and enforcement of
judgments in civil and commercial matters which is binding in the
Netherlands, a judgment rendered by a foreign court against CompleTel Europe
will not be recognized and enforced by the courts of the Netherlands.
Consequently, in order to obtain a judgment that is enforceable against
CompleTel Europe, it may be necessary to relitigate the matter before the
competent court of the Netherlands and to submit the judgment rendered by the
foreign court in the course of such proceedings, in which case the
Netherlands court may give such effect to the foreign judgment as it deems
appropriate.
There are no treaties between the Netherlands and the United States of
America on the recognition and enforcement of civil or commercial judgments.
However, according to current practice, based upon case law, Netherlands
courts will generally recognize and render a judgment in accordance with a
foreign judgment if:
- the foreign court had jurisdiction over the matter on internationally
acceptable grounds and conducted the proceedings in accordance with
generally accepted Netherlands principles of fair trial;
- the foreign judgment is final and definite; and
- such recognition is not in conflict with Netherlands public policy or
an existing Netherlands judgment.
Nevertheless, we cannot assure you that United States investors will be able to
enforce against CompleTel Europe, or members of its management board, or certain
experts named herein who are
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residents of the Netherlands or other countries outside the United States,
any judgments in civil and commercial matters, including judgments under the
United States federal securities laws. In addition, a Netherlands court might
not impose civil liability on CompleTel Europe or on the members of its
management board in an original action predicated solely upon the federal
securities laws of the United States. CompleTel Europe has consented to
service of process in the borough of Manhattan, the City of New York, for
claims based upon the indenture or the notes.
TO CONDUCT OUR BUSINESS, WE MUST INTERCONNECT WITH OUR PRIMARY COMPETITORS,
THE PUBLIC TELECOMMUNICATIONS OPERATORS, AND OTHER COMPETITORS WHO MAY TRY TO
USE INTERCONNECTIONS TO THEIR COMPETITIVE ADVANTAGE
Our ability to provide viable local-exchange telecommunications service
depends on our ability to secure and maintain interconnection arrangements
with the incumbent public telecommunications operators and other
facilities-based providers in our initial target markets. We have entered
into interconnection agreements with France Telecom and Deutsche Telekom. We
expect to enter into interconnection arrangements in the United Kingdom when
necessary, but do not expect those interconnection arrangements to entail
substantive negotiations. European Union law mandates that member nations
ensure that market dominant telecommunications operators provide
interconnection rates that are transparent and cost-justified. Nevertheless,
we may experience difficulties in negotiating and obtaining favorable
interconnection agreements in our initial target markets that may delay our
ability to offer services to potential customers, make our operations more
expensive or reduce the profit margins for our services.
WE NEED TO OBTAIN AND MAINTAIN LICENSES, PERMITS, RIGHTS-OF-WAY AND LEASED
CAPACITY TO SUCCESSFULLY BUILD AND OPERATE OUR BUSINESS
In order to build, expand, and operate our local networks, we must
obtain licenses and permits, as well as rights-of-way or other agreements to
utilize third-party facilities such as underground conduit, aerial pole space
and building roof access from various parties, including our competitors,
governments and private parties. In addition, in some of our initial target
markets, we may seek to lease local fiber trunking capacity or wireless
transmission systems in order to achieve rapid network deployment and
maximize speed to market. If we cannot complete those arrangements on
favorable terms in any of our target markets, we may not be able to implement
our business plan and planned network buildout of that market on acceptable
terms.
To obtain wireless frequencies in certain of our initial target markets,
we must obtain a license from the government. We have no guarantee that we
will obtain the frequencies or the amount of frequency, referred to as
"bandwidth," necessary to establish and operate wireless local
telecommunications networks in the geographic areas in which we plan to
establish and operate such systems. Moreover, we may not be able to obtain
such frequencies economically.
OUR COMPETITORS HAVE ADVANTAGES THAT MAY ADVERSELY AFFECT OUR ABILITY TO
COMPETE WITH THEM
If our competitors devote significant additional resources to the
provision of facilities-based local exchange telecommunications services to
our target customer base, we may not be able to compete effectively and could
fail to achieve revenue growth. Many of our current and potential
competitors have financial, technical, marketing, personnel and other
resources and competitive advantages, including brand name recognition,
substantially greater than ours. Competition for the provision of local
services in Western Europe is still in the early stages of development. We
believe that the ongoing liberalization of the Western European
telecommunications market will induce more competitive telecommunications
service providers, including large, pan-European providers, to enter the
market and increase the intensity of competition. Public telecommunications
operators have become and may continue to become competitive in the local
exchange markets outside of their home countries.
In each market we enter, we must compete with the incumbent public
telecommunications operator and, in some markets, with other competitive
telecommunications service providers. Public
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telecommunications operators offer both local and long distance services and
benefit from their position as the sole historic provider in the markets they
serve. Public telecommunications operators also generally have several
competitive advantages over new competitors, including us, resulting from
their substantial economic and human resources, close ties to local and
national regulatory authorities, ubiquitous local and long distance
distribution facilities, existing rights-of-way, control of or access to
telephone numbers and control over virtually all existing local
telecommunications facilities. In addition, although public
telecommunications operators have generally not reduced local exchange rates
in recent years, and in many cases have increased them, rate reductions in
the local exchange market could become more prevalent as competition
increases. We also expect to compete with cable communications companies,
wireless communications companies, electric and other utilities with
rights-of-way, railways, microwave carriers, and large end-users that have
private networks. Finally, because France, Germany, and most of our intended
Western European markets have only recently liberalized or still are in the
process of liberalizing telecommunications competition, customers in these
markets are not accustomed to obtaining services from competitors to public
telecommunications operators and may be reluctant to use competitive private
telecommunications providers. Consequently, we do not expect to achieve a
significant market share relative to established public telecommunications
operators for any of our services in the foreseeable future.
WE DEPEND ON SUPPLIERS
We depend upon third party suppliers to provide switching equipment,
wireline and wireless transmission facilities, and billing and other
information management and operations support systems to buildout our
networks and operate our business. Any reductions or interruptions in the
supply or increases in the price of equipment or services we purchase from
third party suppliers could disrupt the deployment of our networks or our
operations, or increase our capital or operating costs.
OUR NEED TO COMPLY WITH EXTENSIVE GOVERNMENT REGULATION COULD INCREASE OUR
COSTS AND SLOW OUR GROWTH
France, Germany, the United Kingdom and the other Western European
countries in which we intend to operate subject the telecommunications
industry to a significant degree of regulation. We need telecommunications
licenses or equivalent authorizations to begin and to carry on business in
each of these countries. Our ability to deploy networks and to provide
services in these countries depends on our ability to obtain appropriate
licenses and other authorizations or permissions. We must keep our licenses
and other authorizations in force in order to continue providing services in
each country. Moreover, we must keep our licenses in our initial target
markets in force or we will be in default under the indenture for the notes.
In most cases, these licenses and other authorizations or permissions are of
fixed duration, and we must comply with regulations and technical
requirements in order to maintain them in force. For example, in France we
must comply with French and European Community regulations and technical
standards regarding interconnection, secrecy, neutrality, nondiscrimination,
security, environmental protection, limitations on ownership, and public
service.
In December 1998, the French regulatory authority awarded us a fixed
wireline license and a service license for network deployment and the
provision of services in 10 regions that we intend to target, including our
four initial French target markets. Similar licenses were granted in the
United Kingdom on January 11, 1999, and in Germany on March 8, 1999, which
include our initial target markets in those countries. We cannot assure you
that we will successfully obtain, maintain, or renew licenses and other
authorizations we require for services we provide or plan to provide. In
addition, we cannot assure you that such licenses and other authorizations
will be issued or renewed on commercially viable terms.
Our business plan forming the basis for the issuance of the French
licenses contemplates deploying networks in 12 French markets in addition to
our four initial French target markets and raising sufficient financing to
fund such deployment. We have not yet secured financing in the amount
required to deploy and operate networks in all of such markets. We have been
advised that
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this does not, by itself, constitute a violation of our requirements under
the French licenses. However, the French regulatory authorities may take
this into account, together with any other relevant items, when assessing
whether there exists a material adverse variation to the financial or
technical capacity of our French operating subsidiary. If and to the extent
the French regulatory authorities were to determine that we have materially
and adversely deviated from our business plan or that we lack the financial
capacity to implement this plan, the French regulatory authorities could seek
to modify or revoke the licenses in whole or in part. Our German licenses,
which cover the metropolitan areas of Berlin, Frankfurt and Munich, are
subject to a similar risk of revocation if we are not able to secure adequate
financing to deploy and operate networks in the areas covered by the
licenses. We have applied for an extension of these licenses to cover
additional areas in Germany we believe present attractive market
opportunities but we have no assurance that we will be successful in
obtaining the extensions.
Because the markets for public switched services in France, Germany and
many of the other Western European countries in which we intend to operate
were closed to competition until January 1, 1998, the legislators, regulators
and courts in those countries have limited experience in implementing a
pro-competitive regulatory regime. Historically, no entity other than the
incumbent public telecommunications operators had the right to provide public
voice telephone service or public networks in those countries. As a result,
few pro-competitive regulations and judicial decisions existed in those
countries, and no impartial regulator existed to enforce laws or regulations
against the incumbent public telecommunications operators. Those entrusted
to ensure a competitive telecommunications market in such countries had
little experience, and few detailed laws or regulations on which to base
decisions, regarding interaction between competitive public telephone or
network providers. Their prior experience was generally of an environment in
which no competition existed and the incumbent public telecommunications
operators had a protected monopoly.
Unlike any U.S. carrier, the incumbent public telecommunications
operators in France and Germany are owned partially by their national
governments. This ownership may provide the regulators in France and Germany
with an incentive to favor the incumbent public telecommunications operators,
notwithstanding the nominal political independence of the telecommunications
regulatory authorities. Even if the authorities do not overtly favor the
incumbent public telecommunications operators, government ownership may
insulate the incumbent public telecommunications operators from some impacts
of market forces that affect other carriers.
While we believe that each European Union member state where we intend
to build networks and provide services will enact and enforce, on a timely
basis, the measures necessary to ensure that we can compete with the
incumbent public telecommunications operators as required by the European
Union, we may be wrong. We may also be incorrect in our assumption that we
will be allowed to provide and to expand our services in those European Union
member states. We cannot assure you that future changes in the law,
regulation, or government in those states will not adversely affect our
network deployment plans or ability to operate there.
WE AND CERTAIN HOLDERS FACE FOREIGN EXCHANGE RATE RISKS
We expect that our revenue and expenses will be largely denominated in
European currencies. Investments of most of our equity investors and our
indebtedness are denominated in U.S. dollars. As a result, we and our
investors, including the holders of the notes, will be exposed to foreign
exchange risks, because our results of operations will be affected by
fluctuations in the value of the local currencies where we transact business
relative to the U.S. dollar. The terms of our existing commitments for senior
financing require us to enter into and maintain hedging arrangements in an
attempt to reduce our exposure to currency fluctuations. We cannot assure
you that these hedging transactions will be successful.
Additionally, non-U.S. investors should be aware that an investment in a
security that is denominated and payable in U.S. dollars entails significant
currency exchange risks to non-U.S. investors. Such risks include the
possibility of significant changes in rates of exchange between U.S. dollars
and the investors' home currency. Such risks generally depend on economic and
political events over which we have no control.
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WE FACE POTENTIAL CONFLICTS OF INTEREST CAUSED BY INVESTOR CONTROL WHICH COULD
BE DETRIMENTAL TO HOLDERS OF THE NOTES
Conflicts may arise between the interests of our equity investors and
the interests of the holders of the notes. Our equity investors control the
Board of Directors of CompleTel LLC, which indirectly controls CompleTel
Europe, the issuer of the notes. From time to time, some decisions about our
operations or financial structure may present conflicts of interest between
our equity investors and the holders of the notes. For example, if we
encounter financial difficulties, our equity investors may have interests
that conflict with those of the holders of notes. In addition, our equity
investors may have an interest in pursuing transactions that could eventually
enhance the value of their equity investment, even though such transactions
might involve increased risk to the holders of the notes. In addition to
their investment in us, our private equity investors currently have
significant investments in other telecommunications companies and may in the
future invest in other entities engaged in the telecommunications business.
As a result, these investors have, and may develop, relationships with
businesses that are or may become our competitors, or we may develop
relationships with companies in which our investors have an interest, and
conflicts may arise. Such conflicts, for example, may arise if we seek to
enforce our rights against a supplier or competitor in which our equity
investors hold an interest.
IF WE ARE SUBJECT TO THE INVESTMENT COMPANY ACT, IT COULD ADVERSELY AFFECT
OUR FINANCING ACTIVITIES AND FINANCIAL RESULTS
The Investment Company Act of 1940 requires the registration of, and
imposes various substantive restrictions on, certain companies ("investment
companies") that are, that are deemed to be or that hold themselves out as
being, engaged primarily, or propose to engage primarily, in the business of
investing, reinvesting or trading in securities. If we were required to
register as an investment company under the Investment Company Act, we would
become subject to substantial regulation with respect to our capital
structure, management, operations and other matters. Application of the
provisions of the Investment Company Act would result in a default under the
notes and have a material adverse effect on our business and prospects.
We believe that we are primarily engaged in a business other than
investing, reinvesting, owning, holding, or trading securities, and we intend
to invest our funds so as not to be an investment company within the meaning
of the Investment Company Act. We believe this means we are not an investment
company within the meaning of that law. If found to be an investment
company, we may be able to rely upon an exemption from the Investment Company
Act for certain "transient" or temporary investment companies. However, such
exemption would only be available to us, if at all, for a limited period of
time.
ORIGINAL ISSUE DISCOUNT MAY CAUSE UNFAVORABLE TAX AND OTHER LEGAL
CONSEQUENCES FOR HOLDERS OF NOTES AND FOR US
The old notes were, and the new notes will be, issued at a substantial
discount from their stated amount at maturity. Although cash interest will
not accrue on the notes prior to February 15, 2004, and there will be no
payments of cash interest on the notes prior to August 15, 2004, original
issue discount, equal to the difference between the stated redemption price
at maturity and the issue price of the notes, will accrue from the issue date
of the old notes. Original issue discount will be includable as interest
income periodically in gross income for United States federal income tax
purposes in advance of receipt of the cash payments to which the income is
attributable.
If a bankruptcy case under the U.S. Bankruptcy Code were to be commenced
by or against us, the claim of a holder of notes with respect to the
principal amount thereof may be limited to an amount equal to the sum of (1)
the initial offering price and (2) that portion of the original issue
discount that is not deemed to constitute "unmatured interest" for purposes
of the U.S. Bankruptcy Code. Any original issue discount that was not
amortized as of the time of any such bankruptcy filing would constitute
"unmatured interest." Similarly, if CompleTel Europe were to be declared
bankrupt (FAILLIET VERKLAARD) or be granted a suspension of payments
(SURSEANCE VAN BETALING) under
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the laws of The Netherlands, the claim of a holder of notes could be limited
to an amount equal to the sum of (1) the initial offering price of such notes
and (2) that portion of the original issue discount of such notes that can be
deemed to constitute interest amortized on the initial offering price until
the date of the bankruptcy or suspension of payments of CompleTel Europe.
THE NOTES HAVE NO PUBLIC MARKET, SO YOU MAY NOT BE ABLE TO SELL THEM WHEN YOU
WISH OR YOU MAY NOT BE ABLE TO SELL THE NOTES AT A FAVORABLE PRICE
There is no active trading market for the notes. We cannot assure you
that any such market will develop. If any such market develops, we do not
know whether it will be active enough to provide you adequate liquidity. If
any of the notes are traded after their initial issuance, they may trade at a
discount from their initial offering price, depending upon prevailing
interest rates, the market for similar securities, our financial condition
and prospects and other factors outside of our control.
WE MAY NOT HAVE THE FUNDS NECESSARY TO FINANCE ANY CHANGE OF CONTROL OFFER
THAT MAY BE REQUIRED BY THE INDENTURE
The indenture for the notes provides that upon a change of control, each
note holder will have the right to require us to purchase all or a portion of
such holder's notes. We would be required to purchase the notes at a
purchase price of 101% of the accreted value of the notes, plus any accrued
and unpaid interest to the date of repurchase. We cannot assure you that we
would have sufficient funds at that time to repurchase our notes.
OUR FORWARD-LOOKING STATEMENTS MAY MATERIALLY DIFFER FROM ACTUAL EVENTS OR
RESULTS
This prospectus contains "forward-looking statements," which you generally
can identify by our use of forward-looking words such as "anticipates,"
"believes," "could," "expects," "may," "plans," "should" and "will" or the
negative or other variations of such terms or comparable terminology, or by
discussion of strategy that involve risks and uncertainties. We often use these
types of statements when discussing our plans and strategies, our anticipation
of revenues from designated markets and statements regarding the development of
our businesses, the markets for our services and products, our anticipated
capital expenditures, operations support systems, changes in regulatory
requirements and other statements contained in this prospectus regarding matters
that are not historical facts.
We caution you that these forward-looking statements are only predictions
and estimates regarding future events and circumstances. We cannot assure you
that we will achieve the future results reflected in these statements. The
risks we face that could cause us not to achieve these results include, but are
not limited to, our ability to do the following in a timely manner, at
reasonable costs and on satisfactory terms and conditions:
- successfully market our services to current and new customers;
- interconnect with and develop cooperative working relationships with
incumbent local exchange carriers;
- develop efficient operations support systems and other back office
systems;
- successfully and efficiently transfer new customers to our networks
and access new geographic markets;
- identify, finance and complete suitable acquisitions;
- secure additional financing necessary to carry out our deployment and
operations plans;
- install new switching facilities and other network equipment; and
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- obtain leased fiber optic line capacity, rights-of-way, building
access rights and any required governmental authorizations, franchises
and permits.
Regulatory, legislative and judicial developments could also cause actual
results to differ materially from the future results reflected in such
forward-looking statements. You should consider all of our current and
subsequent written and oral forward-looking statements only in light of such
cautionary statements. You should not place undue reliance on these
forward-looking statements and you should understand that they reflect our
understanding of circumstances on the date of this prospectus and may not
reflect our understanding of circumstances at a later date.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
On February 16, 1999, we originally issued and sold units in an offering
that was exempt from registration under the Securities Act in reliance upon
the exemptions provided by Section 4(2) of the Securities Act, and on Rule
144A and Regulation S of the Securities Exchange Commission under the
Securities Act. Each unit consisted of an old note and 10 non-voting Class B
membership interests of CompleTel Holding LLC. As a result of the sale being
exempt from the Securities Act, the old notes may not be transferred in the
United States unless registered or unless an exemption from the registration
requirements of the Securities Act and applicable state securities laws is
available.
As a condition to the sale of the old notes, we and the initial
purchasers of the old notes entered into a registration rights agreement as
of February 16, 1999. In the registration rights agreement, we agreed that we
would:
- file, by July 16, 1999, a registration statement with the SEC
registering the exchange of the new notes for the old notes;
- use our best efforts to cause the registration statement to be
declared effective under the Securities Act by October 14, 1999; and
- keep the offer of the new notes in exchange for surrender of the old
notes open for at least 30 days after the effectiveness of the
registration statement.
We have filed a copy of the registration rights agreement as an exhibit
to the registration statement of which this prospectus is a part. The
registration statement satisfies certain of our obligations under the
registration rights agreement.
RESALE OF THE NEW NOTES
Based on no-action letters issued by the staff of the Securities
Exchange Commission to other issues, we believe that the new notes issued in
the exchange offer will be freely transferable after the exchange offer
without further registration under the Securities Act if the holder of the
new notes:
- is not one of our "affiliates," as defined in Rule 405 of the
Securities Act,
- is acquiring the new notes in the ordinary course of its business, and
- has made no arrangement to participate in the distribution, within the
meaning of the Securities Act, of the new notes.
The SEC has not, however, considered this exchange offer and we cannot
assure you that the staff of the SEC would make a similar determination with
respect to this exchange offer. Holders of old notes wishing to accept this
exchange offer must represent to us that the above conditions have been met.
A broker-dealer that acquired old notes for its own account as a result of
market-making or other trading activities and exchanges them for new notes for
its own account in this exchange offer may be deemed to be an "underwriter"
within the meaning of the Securities Act. Broker-dealers must deliver a
prospectus meeting the requirements of the Securities Act in connection with
their sales of new notes, if required.
We have agreed that we will make this prospectus available to any
broker-dealer for use in connection with a resale for a period of one year after
closing the exchange offer. A broker-dealer that delivers a prospectus to
purchasers in connection with resales will be subject to the civil liability
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provisions under the Securities Act and will be bound by the provisions of
the registration rights agreement, including indemnification and contribution
rights and obligations.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
This prospectus and the accompanying letter of transmittal together make
up the exchange offer. On the terms and subject to the conditions set forth
in this prospectus and the letter of transmittal, we will accept for exchange
any old notes that are properly tendered on or before the expiration date
unless they are withdrawn as permitted below. We will issue new notes in
denominations of $1,000 principal amount at maturity in exchange for each
$1,000 principal amount at maturity of outstanding old notes surrendered in
the exchange offer. Old notes may be exchanged only in integral multiples of
$1,000. The minimum denomination of any note is $100,000. The form and
terms of the new notes are the same as the form and terms of the old notes
except that the exchange will be registered under the Securities Act and so
the new notes will not bear legends restricting their transfer. The new notes
will evidence the same debt as the old notes and will be issued under the
same indenture.
As of the date of this prospectus, an aggregate of $147,500,000 in
principal amount at maturity of the old notes is outstanding. This prospectus
is first being sent on or about ________, 1999, to all holders of old notes
known to us.
Holders of the old notes do not have any appraisal or dissenters' rights
under the indenture in connection with the exchange offer.
We may, at any time or from time to time, extend the period of time
during which the exchange offer is open and delay acceptance for exchange of
any old notes, by giving written notice of the extension to the holders as
described below. During the extension, all old notes previously tendered will
remain subject to the exchange offer and may be accepted for exchange by us.
Any old notes not accepted for exchange for any reason will be returned
without expense to the tendering holder as promptly as practicable after the
expiration of the exchange offer.
We reserve the right to amend or terminate the exchange offer. We will
give written notice of any extension, amendment, nonacceptance or termination
to the holders of the old notes as promptly as practicable. Any extension
that we intend to issue by means of a press release or other public
announcement will be issued no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
PROCEDURES FOR TENDERING OLD NOTES
The tender by a holder of old notes as set forth below and our acceptance
of such notes will create a binding agreement between us and the tendering
holder upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal. Except as set forth below, a
holder who wishes to tender old notes for exchange must send a completed and
signed letter of transmittal, including all other documents required by the
letter of transmittal, to the exchange agent at one of the addresses specified
below on or before the expiration date. In addition:
- the exchange agent must receive before the expiration date
certificates for the old notes along with the letter of transmittal;
or
- the exchange agent must receive confirmation before the expiration
date of a book-entry transfer of the old notes into the exchange
agent's account at The Depository Trust Company as described below; or
- the holder must comply with the guaranteed delivery procedures
described below.
The method of delivery of old notes, letters of transmittal and all other
required documents is at the election and risk of the holders. If the delivery
is by mail, we recommend that holders use registered mail, properly insured,
with return receipt requested. In all cases, holders should allow
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sufficient time to assure timely delivery. Holders should send letters of
transmittal and old notes only to the exchange agent and NOT to CompleTel.
If your old notes are registered in the name of a broker, dealer, commercial
bank, trustee or other nominee, and if you wish to tender your old notes for
exchange, you should contact the registered holder of the old notes promptly
and instruct the registered holder to tender your notes on your behalf. If
your notes are registered in the name of a nominee and you wish to tender on
your own behalf, then before completing and signing the letter of transmittal
and delivering your old notes, you must either register ownership of the old
notes in your name or obtain a properly completed power of attorney from the
registered holder of your old notes. The transfer of record ownership may
take considerable time. If the letter of transmittal is signed by a person
other than the registered holder of the old notes, the old notes must be
endorsed or accompanied by appropriate powers of attorney. In either case the
letter of transmittal must be signed exactly as the name of the registered
holder that appears on the old notes.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed unless the old notes surrendered for exchange are tendered:
- by a registered holder of the old notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal; or
- for the account of a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an eligible guarantor institution. Eligible
guarantor institutions include:
-- a member of a registered national securities exchange;
-- a member of the National Association of Securities Dealers, Inc.;
or
-- a commercial bank or trustee having an office or correspondent in
the United States.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantees must be by an eligible guarantor
institution.
If old notes are registered in the name of a person other than the
person that signs the letter of transmittal, the old notes surrendered for
exchange must be endorsed by the registered holder with the signature
guaranteed by an eligible guarantor institution. Alternatively, the old notes
may be accompanied by a written assignment, signed by the registered holder
with the signature guaranteed by an eligible guarantor institution.
We will determine all questions as to the validity, form, eligibility,
time of receipt and acceptance of old notes tendered for exchange in our sole
discretion, and our determination shall be final and binding. We reserve the
absolute right to reject any tenders of any particular old notes not properly
tendered or not to accept any particular old notes whose acceptance might, in
our judgment of or the judgment of our counsel, be unlawful. We also reserve
the absolute right to waive any defects or irregularities or conditions of
the exchange offer as to any particular old notes either before or after the
expiration date. Our interpretation of the terms and conditions of the
exchange offer as to any particular old notes either before or after the
expiration date will be binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of old notes for exchange must be
cured within a reasonable period of time as we shall determine. Neither
CompleTel, the exchange agent nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
old notes for exchange.
If the letter of transmittal or any old notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless we waive this
requirement, those persons must submit satisfactory evidence of their
authority to act.
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By tendering, each holder will represent to CompleTel:
- that it is not one of our "affiliates," as defined in Rule 405 of the
Securities Act, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities
Act to the extent applicable;
- that it is acquiring the new notes in the ordinary course of its
business; and
- at the time of the closing of the exchange offer it has no arrangement
to participate in the distribution, within the meaning of the
Securities Act, of the new notes.
If the holder is a broker-dealer that will receive new notes for its own
account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities, the holder may be
deemed to be an "underwriter" within the meaning of the Securities Act. Those
holders will be required to acknowledge in the letter of transmittal that
they will deliver a prospectus in connection with any resale of the new
notes. However, by so acknowledging and by delivering a prospectus, the
holder will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange
offer, we will accept, promptly after the expiration date, all old notes
properly tendered and will issue the new notes promptly after acceptance of
the old notes. We will be deemed to have accepted properly tendered old notes
for exchange when we have given oral or written notice to the exchange agent.
The issuance of new notes for old notes that are accepted for exchange
will be made only after timely receipt by the exchange agent of certificates
for the old notes or a timely book-entry confirmation of the old notes into
the exchange agent's account at the book-entry transfer facility, a completed
and signed letter of transmittal and all other required documents. If any
tendered old notes are not accepted for any reason set forth in the terms and
conditions of the exchange offer, or if old notes are submitted for a greater
amount than the holder desires to exchange, the unaccepted or non-exchanged
old notes will be returned without expense to the tendering holder as
promptly as practicable after the exchange offer expires or terminates. In
the case of old notes tendered by book-entry procedures described below, the
non exchanged old notes will be credited to an account maintained with the
book-entry transfer facility.
CONDITIONS OF THE EXCHANGE OFFER
We will not be required to accept for exchange any old notes and may
terminate or amend the exchange offer prior to the expiration date, if we
determine that we are not permitted to effect the exchange offer because of:
- any changes in law, or applicable interpretations by the SEC; or
- any action or proceeding is instituted or threatened in any court or
governmental agency with respect to the exchange offer.
Holders may have certain rights and remedies under the registration rights
agreement if we fail to close the exchange offer, whether or not the conditions
stated above occur. These conditions are not intended to modify those rights or
remedies.
ACCRETION; INTEREST
The old notes tendered and accepted for exchange will continue to accrete
at the rate of 14% per annum to, but excluding the date of issuance of the new
notes and will cease to accrete upon the cancellation of the old notes and
issuance of the new notes. Any old notes not tendered or accepted
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for exchange will continue to accrete at the rate of 14% per annum in
accordance with their terms. From and after the date of issuance of the new
notes, the new notes will accrete at the rate of 14% per annum, but no cash
interest will be payable in respect of the new notes prior to February 15,
2004. From and after February 15, 2004, interest on the new notes will
accrue on the principal amount at maturity at the rate of 14% per annum and
will be payable semi-annually in arrears on each February 15 and August 15,
beginning August 15, 2004.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account for the
old notes at the book-entry transfer facility for the exchange offer within
two business days after the date of this prospectus, and any financial
institution that is a participant in the book-entry transfer facility's
systems may make book-entry delivery of old notes by causing the book-entry
transfer facility to transfer the old notes into the exchange agent's account
at the book-entry transfer facility under the book-entry transfer facility's
procedures for transfer. However, although delivery of old notes may be
effected through book-entry transfer at the book-entry transfer facility, the
letter of transmittal or facsimile, or an agent's message, with any required
signature guarantees and any other required documents, must be received by
the exchange agent on or before the expiration date or the guaranteed
delivery procedures described below must be complied with.
The term "agent's message" means a message, transmitted by Depository
Trust Company to the exchange agent and forming a part of a book-entry
confirmation, that states that The Depository Trust Company has received an
express acknowledgment from the tendering participant stating that the
participant has received and agrees to be bound by the terms of the letter of
transmittal, and that we may enforce the letter of transmittal against the
participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the old notes wishes to tender the old notes
and the old notes are not immediately available, or time will not permit the
holder's old notes or other required documents to reach the exchange agent
before the expiration date, or the procedure for book-entry transfer cannot
be completed on time, the old notes may nevertheless be exchanged if:
- the tender is made through an eligible guarantor institution;
- before the expiration date, the exchange agent has received from the
eligible guarantor institution a completed and signed letter of
transmittal, or a facsimile, and a notice of guaranteed delivery,
substantially in the form we are providing to you. Delivery may be
made by telegram, telex, facsimile transmission, mail or hand
delivery. The letter of transmittal and notice of guaranteed delivery
must set forth the name and address of the holder of the old notes and
the amount of old notes, state that the tender is being made and
guarantee that within five trading days on the New York Stock Exchange
after the date of signing of the notice of guaranteed delivery, the
certificates for all physically tendered old notes, in proper form for
transfer, or a book-entry confirmation, and any other documents
required by the letter of transmittal, will be deposited by the
eligible guarantor institution with the exchange agent; and
- the certificates for all physically tendered old notes, in proper form
for transfer, or a book-entry confirmation and all other documents
required by the letter of transmittal, are received by the exchange
agent within five New York Stock Exchange trading days after the date
of signing the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw your tender of old notes at any time prior to the
expiration date.
For a withdrawal to be effective, the exchange agent must have received a
written notice of withdrawal. Any notice of withdrawal must:
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- specify the name of the person who tendered the old notes to be
withdrawn;
- identify the old notes to be withdrawn, including the amount of the
old notes; and
- where certificates for old notes have been transmitted, specify the
name in which the old notes are registered, if different from that of
the withdrawing holder.
If certificates for old notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of the
certificates the withdrawing holder must also submit the serial numbers of
the particular certificates to be withdrawn and a signed notice of withdrawal
with signatures guaranteed by an eligible guarantor institution unless the
holder is an eligible guarantor institution. If old notes have been tendered
under the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn old notes and otherwise
comply with the procedures of the facility. We will determine all questions
as to the validity, form, eligibility and time of receipt of the notices and
our determination will be final and binding on all parties. Any old notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the exchange offer. Any old notes that have been tendered for
exchange but that are not exchanged for any reason will be returned to the
holder without cost to the holder as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. In the case of old
notes tendered by book-entry transfer into the exchange agent's account at
the book-entry transfer facility under the book-entry transfer procedures
described above, the old notes will be credited to an account with the
book-entry transfer facility specified by the holder. Properly withdrawn old
notes may be retendered by following one of the procedures described under
"--Procedures for Tendering Old Notes" above at any time on or before the
expiration date.
EXCHANGE AGENT
U.S. Bank Trust Company has been appointed as the exchange agent for the
exchange offer. All signed letters of transmittal should be directed to the
exchange agent at the addresses set forth below. Questions and requests for
assistance, requests for additional copies of this prospectus or of the
letter of transmittal and requests for notices of guaranteed delivery should
be directed to the exchange agent addressed as follows:
By Mail: By Overnight Courier:
U.S. Bank Trust National Association U.S. Bank Trust National Association
180 East Fifth Street 180 East Fifth Street
St. Paul, MN 55101 St. Paul, MN 55101
Attn: Specialized Finance Dept. Attn: Specialized Finance Dept.
By Hand:
U.S. Bank Trust National Association
4th Floor Bond Drop Window
180 East Fifth Street
St. Paul, MN 55101
By Facsimile Transmission
(for Eligible Institutions only):
(651) 244-1537
Attention: Specialized Finance Department
Confirm by Telephone:
(651) 244-5011
For Information Call:
(651) 244-5011
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DELIVERY TO OTHER THAN THE ABOVE ADDRESSES OR FACSIMILE NUMBER WILL NOT
CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
We will not make any payment to brokers, dealers or others soliciting
acceptances of the exchange offer.
We will pay the expenses that will be incurred in connection with the
exchange offer. We estimate the expense will be approximately $280,000
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result
of the exchange offer. The expenses of the exchange offer will be amortized
over the term of the new notes.
TRANSFER TAXES
Holders who instruct us to register new notes in the name of a person
other than the registered tendering holder will be responsible for paying any
applicable transfer tax, as will holders who request that old notes not
tendered or not accepted in the exchange offer be returned to a person other
than the registered tendering holder. In all other cases, no transfer taxes
will be due.
REGULATORY MATTERS
We are not aware of any governmental or regulatory approvals that are
required in order to complete the exchange offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. Old notes that are
not exchanged for new notes will remain restricted securities. As a result,
those old notes may only be transferred:
- to a person who the seller reasonably believes is a qualified
institutional buyer under Rule 144A,
- in an offshore transaction under Rule 903 or Rule 904 of Regulation S
under the Securities Act,
- under Rule 144 under the Securities Act, if available, or
- pursuant to an effective registration statement under the Securities
Act;
and after complying with all applicable securities laws of the states of the
United States. We are required to file a shelf registration statement under
the Securities Act to register the sale of any old notes that are not
exchanged for new notes in the exchange offer. We have agreed to keep such
registration statement effective for two years. Nevertheless, if we fail to
cause such a registration statement to become effective or if a holder of old
notes fails to sell such notes under the registration statement while it is
effective, the old notes will remain restricted securities.
28
<PAGE>
PAYMENT OF ADDITIONAL INTEREST UPON REGISTRATION DEFAULTS
If we fail to meet our obligations to complete the exchange offer or
file a shelf registration statement, in each case additional interest will
accrue on the notes.
29
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes
in exchange for the old notes. In exchange for the new notes, we will
receive old notes in an equal principal amount. The old notes surrendered
for exchange will be retired and canceled and cannot be reissued.
Accordingly, the issuance of the new notes will not result in any change in
our outstanding indebtedness.
We are using the net proceeds of the issuance of the old notes, together
with other available funds and funds expected to be available from senior
financing to be provided by banks and vendors, to fund the deployment and
operation of our networks through the end of 2001 in our initial target
markets in France, Germany and the United Kingdom. CompleTel Europe is
required for purposes of Netherlands law to lend to or to invest in its
operating subsidiaries at least 95% of its balance sheet total assets,
including the net proceeds from the offering of the old notes.
Our principal cash requirements include:
- developing and constructing our fiber-optic network backbone routes,
and, to a lesser extent, leasing fiber networks and constructing and
leasing wireless networks;
- purchasing and installing digital switches, related transmission
equipment, and customer premise equipment;
- developing, acquiring, and integrating necessary operations support
and other back office systems;
- recruiting, training, and motivating an effective sales and marketing
force; and
- assessing target markets and obtaining necessary licenses, permits,
rights-of-way, and interconnection agreements.
The actual amount and timing of our capital requirements in our initial
target markets and in additional target markets may differ materially from
our estimates, and additional financing may be required in the event of
departures from our business plans and projections. Departures could be
caused by
- unforeseen delays,
- cost overruns,
- engineering design changes,
- demand for our services that varies from what we expect, and
- regulatory, technological, or competitive developments.
Any one or more of those factors could lead management to determine that
funds on hand or funds from future financings should be redirected to
different markets. We have described this potential for reallocation more
thoroughly in the section entitled "Our Roll-out Plan is Preliminary and We
May Have to Reallocate Funds" under "Risk Factors."
30
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF COMPLETEL EUROPE
The following selected consolidated financial data for CompleTel Europe
have been derived from CompleTel Europe's audited and unaudited consolidated
financial statements included elsewhere in this prospectus. The selected
consolidated financial data set forth below are qualified by reference to and
should be read in conjunction with the consolidated financial statements of
CompleTel Europe and notes thereto and also with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. Operating results for this period are not necessarily
indicative of the results that may be expected for the entire year.
CompleTel Europe is a development stage company and has generated
operating losses and negative cash flow from its limited operating activities
to date. As a result of CompleTel Europe's limited operating history,
prospective investors have limited operating and financial data about
CompleTel Europe upon which to base an evaluation of CompleTel Europe's
performance and an investment in the notes.
<TABLE>
<CAPTION>
COMMENCEMENT COMMENCEMENT
OF OPERATIONS FOR THE OF OPERATIONS
(JANUARY 8, 1998) THREE MONTHS (JANUARY 8, 1998)
TO ENDED TO
DECEMBER 31, 1998 MARCH 31, 1999 MARCH 31, 1999
----------------- -------------- --------------
(AUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues . . . . . . . . . . . . . . . . . . . . . $ ---- $ ---- $ ----
Network costs. . . . . . . . . . . . . . . . . . . ---- 134 134
Selling, general and administrative expense. . . . 4,552 3,911 8,463
Management fees to affiliate . . . . . . . . . . . 2,963 960 3,923
Depreciation and amortization. . . . . . . . . . . 46 138 184
---------- ---------- -----------
Operating loss . . . . . . . . . . . . . . . . . . (7,561) (5,143) (12,704)
Other income (expense).. . . . . . . . . . . . . . ---- (752) (752)
---------- ---------- -----------
Net loss . . . . . . . . . . . . . . . . . . . . . $ (7,561) $ (5,895) $ (13,456)
---------- ---------- -----------
---------- ---------- -----------
Basic and diluted loss per common share. . . . . . $ (1.55) $ (0.39) $ (1.93)
---------- ---------- -----------
---------- ---------- -----------
Deficiency of earnings available to
cover fixed charges. . . . . . . . . . . . . . . $ (7,561) $ (5,895) $ (13,456)
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
<TABLE>
AS OF AS OF
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
(AUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Unrestricted and restricted cash and cash equivalents. . . . $ 1,718 $ 110,107
Property and equipment, net. . . . . . . . . . . . . . . . . $ 3,371 $ 14,203
Licenses and other intangibles . . . . . . . . . . . . . . . $ 950 $ 2,991
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $ 7,870 $ 134,763
Affiliate payables . . . . . . . . . . . . . . . . . . . . . $ 10,470 $ 5,466
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . $ 1,453 $ 757
Total liabilities. . . . . . . . . . . . . . . . . . . . . . $ 13,882 $ 85,873
Total shareholder's equity (deficit) . . . . . . . . . . . . $ (6,012) $ 48,890
- --------------------
</TABLE>
31
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On March 24, 1999, CompleTel SAS (a wholly owned subsidiary of the
Company) acquired all of the outstanding stock of Acces Internet et Solutions
("ASI"), an Internet service provider based in Lyon, for approximately $2.1
million. The transaction was recorded under the purchase method of
accounting as of March 31, 1999. The purchase price was first allocated to
the fair value of the net tangible assets acquired of $73,000. The resulting
excess cost over the fair value of tangible net assets acquired, or goodwill,
was recorded in the amount of approximately $2.0 million and is being
amortized under the straight-line method over a ten year period.
The following unaudited pro forma condensed consolidated statements of
operations for the period from commencement of operations (January 8, 1998)
to December 31, 1998, and for the three months ended March 31, 1999, reflect
the pro forma effects of the ASI acquisition as if the acquisition occurred
on January 8, 1998. For purposes of the pro forma statements of operations,
the acquisition is assumed to have been financed through an equity
contribution from the Company's ultimate parent.
The unaudited pro forma condensed consolidated statements of operations
are based on, and should be read in conjunction with, the historical
consolidated financial statements of the Company and ASI, giving effect to
the assumptions and adjustments noted above and in the accompanying notes to
the unaudited pro forma condensed consolidated statements of operations.
These unaudited pro forma condensed consolidated statements of operations are
presented for illustrative purposes and they do not purport to represent what
the Company's results of operations would actually have been had the
acquisition been consummated as of January 8, 1998, and is not indicative of
the results that may be obtained in the future.
<TABLE>
<CAPTION>
For the Period from Commencement of Operations (January 8, 1998)
to December 31, 1998
----------------------------------------------------------------
Historical
---------------------------- Pro Forma
The Pro Forma As
Company ASI Adjustments Adjusted
----------- ----------- ----------- -----------
(unaudited) (unaudited)
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Revenues $ - $1,020 $ - $ 1,020
Operating Expenses:
Network costs and costs of goods sold - 324 - 324
Selling, general and administrative 4,552 551 - 5,103
Management fees to affiliate 2,963 - - 2,963
Depreciation and amortization 46 35 200 (1) 281
---------- ------ -------- ---------
Total operating expenses 7,561 910 200 8,671
---------- ------ -------- ---------
Income (Loss) Before Income Taxes (7,561) 110 (200) (7,651)
Income Tax Provision - (48) - (48)
---------- ------ -------- ---------
Net Income (Loss) $ (7,561) $ 62 $ ( 200) $ (7,699)
---------- ------ -------- ---------
---------- ------ -------- ---------
Basic and Diluted Loss Per Share $ (1.55) $ (1.57)
---------- ----------
---------- ----------
Weighted Average Number of Common Shares Outstanding 4,888,964 4,888,964
---------- ----------
---------- ----------
</TABLE>
- ------------------
(1) Reflects amortization of the $2 million of goodwill recorded in connection
with the acquisition of ASI.
32
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1999
--------------------------------------------------------
Historical
--------------------------- Pro Forma
The Pro Forma As
Company ASI Adjustments Adjusted
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Revenues $ - $257 $ - $ 257
Operating Expenses:
Network costs 134 116 - 250
Selling, general and administrative 3,911 178 - 4,089
Management fees to affiliate 960 - - 960
Depreciation and amortization 138 10 50 (1) 198
----------- ----- ---- -----------
Total operating expenses 5,143 304 50 5,497
----------- ----- ---- -----------
Loss from Operations (5,143) (47) (50) (5,240)
Other Income (Expense):
Interest income 561 - - 561
Interest expense (1,313) - - (1,313)
----------- ----- ---- -----------
Other income (expense), net (752) - - (752)
----------- ----- ---- -----------
Loss Before Income Taxes (5,895) (47) (50) (5,992)
Income Tax Provision - - - -
----------- ----- ---- -----------
Net Loss $ (5,895) $(47) ($50) $ (5,992)
----------- ----- ---- -----------
----------- ----- ---- -----------
Basic and Diluted Loss per Share $ (0.39) $ (0.39)
----------- -----------
----------- -----------
Weighted Average Number of Common Shares Outstanding 15,244,875 15,244,875
----------- -----------
----------- -----------
</TABLE>
- -----------------
(1) Reflects amortization of the $2 million of goodwill recorded in connection
with the acquisition of ASI.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS ALONG WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THAT BEGIN ON PAGE
F-1 OF THIS PROSPECTUS. COMPLETEL LLC'S ONLY MATERIAL ASSETS CONSIST OF ITS
93% EQUITY INTEREST IN COMPLETEL HOLDINGS, WHICH (THROUGH ITS WHOLLY OWNED
SUBSIDIARY COMPLETEL (N.A.) N.V.) OWNS 100% OF THE OUTSTANDING CAPITAL STOCK
OF COMPLETEL EUROPE.
INTRODUCTION
CompleTel Europe N.V. is the European holding company for a group of
companies whose ultimate parent is CompleTel LLC, a Delaware limited
liability company. CompleTel LLC indirectly owns 93% of CompleTel Europe
and its subsidiaries. We began our present business in January 1998.
CompleTel Europe was incorporated in December 1998 in connection with a
reorganization of the holding company structure to permit the issuance of the
old notes. We accounted for these transactions as a reorganization of
entities under common control, similar to a pooling of interests. This
discussion reviews the financial position of CompleTel Europe and its
subsidiaries as if they had been formed and were a consolidated entity since
January 1998. In this discussion "we" and "our" refer to CompleTel Europe
N.V. and its subsidiaries.
OVERVIEW
We intend to be a leading local facilities-based provider of switched
local telecommunications and related services to business and government
end-users, carriers and Internet service providers in targeted metropolitan
areas across Western Europe. Initially, we plan to deploy networks in four
metropolitan markets in France (Paris, Lyon, Lille and Marseilles), and in
one market in each of Germany and the United Kingdom (Berlin and London). In
each of our six initial target markets, we intend to deploy high-capacity,
protocol transparent fiber optic communications networks linking our
state-of-the-art switching equipment with our customers, and to interconnect
our networks with those of the incumbent providers and other providers.
Subject to obtaining additional financing and regulatory approvals, we
also intend to deploy additional networks, first in three additional target
markets in France and three additional target markets in Germany, then in
additional markets in France, Germany and the United Kingdom, and throughout
Western Europe.
We believe that there is significant demand among business and
governmental end-users in our target markets for an alternative provider to
supply some of their local switched service requirements. We intend to be
that provider and to deploy sales teams in areas where we can serve customers
through direct connection, using high capacity circuits connected to our
facilities. We intend to supplement our retail business to end-users with
sales of wholesale services to carriers and Internet service providers.
In January 1999, we reorganized our holding company structure and
concurrently received capital contributions, both from our existing investors
and from new investors, totaling $52.6 million. This amount represented
final funding by all investors of their funding commitments to CompleTel LLC
totaling $65.75 million.
On February 16, 1999, we closed a Rule 144A financing in which we raised
gross proceeds of $75 million (resulting in $70.5 million, net of estimated
fees and costs) through an offering of CompleTel Europe N.V. units consisting
of high-yield notes with attached Class B membership interests in CompleTel
Holdings LLC. The equity interests sold with the notes represented seven
percent of the outstanding equity interests of CompleTel Holdings LLC and,
indirectly, of CompleTel Europe and its subsidiaries. Under the terms of the
note purchase agreement, we were required to put 100% of the proceeds into an
escrow account for the benefit of the holders for 60 days or until we could
obtain a bank financing commitment for at least $90 million.
34
<PAGE>
On April 14,1999, our French operating subsidiary, CompleTel S.A.S., and
our service bureau subsidiary, CompleTel Services S.A.S., received
commitments for senior secured credit facilities of $90 million in the
aggregate from Paribas and Nortel Networks to finance our deployment of
networks in our four initial markets in France. To implement the senior
credit facilities we must satisfy certain customary conditions. Once
implemented, to use the available credit we must again satisfy certain
conditions such as achieving a minimum number of business access lines in
service and meeting certain ratio tests. These commitments for senior credit
facilities met the requirements of the escrow agreement. On April 14, 1999,
the escrow trustee released the proceeds of the high-yield notes to CompleTel
Europe.
On March 24, 1999, our French operating subsidiary acquired all of the
outstanding stock of Acces Internet et Solutions S.A.R.L. ("ASI"), an
Internet service provider based in Lyon, for $2.1 million. The transaction
was accounted for as a purchase effective on March 31, 1999. Beginning in
the second quarter of 1999, we will reflect the operations of ASI in our
consolidated financial statements.
In the first quarter, we began installing and commissioning our first
switches and procuring rights-of-way and constructing and leasing our
networks. As of March 31, 1999, we had approximately 57 kilometers of fiber
installed or leased and available for use.
We currently plan to initiate telecommunications service in all six of
our initial markets in 1999. Any number of factors, however, could change our
plan.
RESULTS OF OPERATIONS
Our consolidated net loss during the three-month period ended March 31,
1999, was $5.9 million compared to $281,000 in the corresponding period of
1998. The increase was primarily the result of substantial start-up costs of
the operating subsidiaries, especially the French company. Start-up
facilities-based telecommunications companies, such as ours, typically incur
large capital expenditures to construct their networks, obtain operating
licenses, and obtain equipment, hardware and software to operate their
networks. Start-up telecommunications companies also normally incur
significant marketing and other expenses as they begin commercial operations.
We will begin to depreciate and amortize our telecommunications network
capital costs upon the launch of our operations. We have expensed and will
continue to expense all other start-up and organization costs in accordance
with generally accepted accounting principles.
Many securities analysts use the measure of earnings before deducting
interest, taxes, depreciation and amortization, also commonly referred to as
"EBITDA," as a way of evaluating a company. During this development stage,
we have experienced significant operating losses and negative EBITDA. We
expect to continue to generate negative EBITDA in each market, as we
emphasize development, construction and expansion of our business, until we
have established a sufficient revenue-generating customer base in that
market. We expect to experience increasing operating losses and negative
cash flows from operations as we expand our operations and enter new markets,
even if and after we have achieved positive cash flow from operations in our
initial markets. From inception (January 8, 1998) through March 31, 1999, we
had operating losses of $12.7 million, net losses of $13.5 million, and
negative EBITDA of $12.5 million.
REVENUES
We have generated no revenues from inception (January 8, 1998) through
March 31, 1999. Since January 1998, we have developed and refined our
business plans, procured regulatory and governmental authorizations for our
initial six markets, raised capital, hired management and other key
personnel, designed, developed and begun installing our fiber-optic networks
and operation support systems, obtained bank and vendor financing commitments
and negotiated equipment and facilities agreements. During the same time
period, our French operating subsidiary has entered into an interconnection
agreement with France Telecom, has procured most of the rights-of-way
agreements for the initial French markets, has begun installing switches and
fiber, and has completed one acquisition.
35
<PAGE>
We expect to generate most of our revenues from local access, local
usage, special access and private line services, from long-distance resale
and from Internet access sales, all to high-volume end-users. We may also
pursue additional acquisitions during 1999, which will supplement our core
strategy in our initial markets.
We intend to price our services competitively and may offer combined
service discounts designed to give customers incentives to buy a portfolio of
services from us. We plan generally to price our costs for local service at
a discount to the incumbent providers. However, although pricing will be an
important part of our strategy, we believe that customer relationships,
customer care, and consistent quality will be the keys to generating customer
loyalty and to minimizing customer churn. Our marketing plan includes
various sales promotions to win customers, including free installation and
risk-free trials, especially in the first few years as we establish a market
presence.
OPERATING EXPENSES
Our primary operating expenses during 1999 will consist of network
costs, selling, general and administrative expenses, and depreciation and
amortization expenses.
NETWORK COSTS
Our network costs include costs such as:
- the cost of leasing high capacity digital lines that interconnect our
network with the networks of other providers;
- the cost of leasing local loop lines that connect our customers to our
network;
- switch site rent, operating and maintenance costs; and
- network operations center rent, operating and maintenance costs.
We expect these costs will increase as we expand our networks and initiate
services.
We plan to deploy digital switching platforms with hybrid local and long
distance capability and to construct fiber and wireless local loops in our
selected markets. This will require us to invest a significant amount of
funds to develop the central office switch sites, deploy the transmission and
distribution electronics, and invest in quality information technology
software (for example, billing and traffic management).
In January 1999, our French operating subsidiary entered into an
equipment supply agreement with Matra Nortel Communications to provide
switches and related equipment and services in our markets in France. At the
same time, we entered into an agreement with Nortel plc establishing certain
guidelines for any future agreements we may make with Nortel affiliates to
purchase equipment and services in other countries within the European Union
where we may establish a network.
We expect switch-site and operation service center lease costs to be a
large fixed component of our ongoing cost of services. We will also lease
dark fiber and conduit to establish and augment our networks in certain
markets. We expect these additional lease costs to increase as we increase
the size of our networks and to be a significant component of our cost of
services in some markets. For the three months ended March 31, 1999, switch
site rent and leased line expenses totaled $134,000.
We expect interconnection costs to be a major portion of our cost of
services. To enter a market and make ubiquitous calling available to
customers, we must enter into interconnection agreements with incumbent
providers. Typically, interconnection agreements set the fixed and variable
costs to be charged by each party for calls that are exchanged between the
two carriers' networks. Generally, a carrier must compensate another carrier
when a call by the first carrier's customer terminates on the second
carrier's network. These costs will grow as our customers' outbound call
volume grows. We expect, however, to generate revenue from other carriers
for inbound calls to our customers. These inbound revenues will offset our
outbound interconnection costs to some extent. In December 1998,
36
<PAGE>
our French subsidiary entered into an interconnection agreement with France
Telecom. In June 1999, our German subsidiary entered into an interconnection
agreement with Deutsche Telekom.
We plan to enter into resale agreements with long distance carriers to
provide us with transmission services. Typically, long distance carriers
resell their services on a per-minute basis and may require us to make a
minimum volume commitment and to pay underutilization charges if we don't
meet the minimum commitment. If we underestimate our need for transmission
capacity, we may be required to obtain capacity through more expensive means.
We expect these costs will be a significant portion of our cost to deliver
long distance services. These costs will increase as our customers' long
distance calling volume increases.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Our selling, general and administrative expenses include infrastructure
costs, such as selling and marketing costs, customer care, billing, corporate
administration, salaries and other personnel costs, network maintenance, and
legal fees. Selling, general and administrative expenses increased $3.6
million to $3.9 million for the three months ended March 31, 1999, compared
to $0.3 million for the three months ended March 31, 1998. This increase was
primarily due to the rapid growth of salaries and other personnel costs in
our startup.
We are assembling a large, locally based, direct sales force in our
local and regional markets and a national account team to service multiple
location customers and key account executives. To attract and retain a
highly qualified sales force, we plan to offer our sales and customer-care
personnel a highly competitive compensation package. The number of employees
increased from 3 as of March 31, 1998 to 139 as of March 31, 1999. On March
31, 1999 we had a sales force of 32 (including managers and administrators),
compared to none on March 31, 1998. We expect the number of sales and
marketing personnel to grow significantly as we prepare to introduce our
services in the initial markets and as we expand into new markets. We
expect our selling and marketing costs will increase as we develop and expand
our operations.
We have incurred and will continue to incur significant costs as we
continue to develop and implement our customer support and network support
systems. We also will incur ongoing expenses for customer care and billing.
Since our strategy stresses the importance of personalized customer care, we
expect the expense of running our customer-care department to be a large part
of our ongoing administrative expenses. Billing will also be a significant
part of our ongoing administrative expenses.
We incur other costs and expenses associated with the maintenance of our
networks, administrative overhead, office leases and bad debt. We expect
that administrative overhead will be a large portion of these expenses during
the start-up phase of our business. We also expect that these costs will
grow as we expand our operations but that they will become smaller as a
percentage of revenue as we build our customer base.
Our ultimate parent, our European holding company, and each of the
entities between our ultimate parent and the operating subsidiaries, incur
overhead costs and expenses associated with their holding company operations.
Our operating subsidiaries will bear these costs and expenses. During 1998,
our ultimate parent, CompleTel LLC, and its wholly owned subsidiary, CableTel
Management, Inc., a Colorado corporation, entered into an agreement for
CableTel Management to provide management services for CompleTel LLC and all
the other companies in the group. The companies pay CableTel Management a
management fee of 105% (103% for periods prior to the end of January 1999) of
all allocated costs, expenses, charges and disbursements that CableTel
Management incurs in rendering services to each of the companies. For the
three months ended March 31, 1999, we recorded $960,000 of related-party
management fees. For the period from inception to March 31, 1999, we have
recorded $3.9 million of such fees.
We have recorded depreciation and amortization expense of $138,000 for
the three months ended March 31, 1999, compared to $1,000 for the three
months ended March 31, 1998. This increase is due to increases in
non-network related property and equipment. We will begin recording network
depreciation when we initiate network services.
37
<PAGE>
We have incurred interest expense of $1.3 million during the three
months ended March 31, 1999. The interest expense recorded reflects the
accretion of the notes. Interest income for the same period was $561,000
which represents the investment of the proceeds from the high-yield notes and
the investment of the available cash from the equity investments.
In addition to the above expenses, some of our employees have purchased
common units of CompleTel LLC for which CompleTel LLC incurs non-cash
compensation charges. We also will be subject to these non-cash compensation
charges. For accounting purposes, we will record the non-cash compensation
as a deemed capital contribution to us.
FOREIGN EXCHANGE AND INTEREST RATES
We are exposed to changes in currency exchange rates because our
revenues, costs, assets and liabilities are, for the most part, denominated
in local currencies. As a result, our financial condition and results of
operations, as reported in U.S. dollars, may be affected by changes in the
value of the local currencies in which we transact business. The notes also
expose us to exchange rate fluctuations as the payment of principal and
interest on the notes will be made in U.S. dollars, and a substantial portion
of our future cash flow used to service these payments will be denominated in
local currencies, including the euro. We expect that under the senior credit
facility we will be required to maintain financial hedging instruments to
offset some of the interest rate and exchange rate risks with respect to the
notes during the term of the senior credit facility. While we intend to take
steps to minimize interest rate and exchange rate risks, we cannot assure you
that we will not be materially adversely effected by variations in interest
rates and currency exchange rates.
LIQUIDITY AND CAPITAL RESOURCES
The telecommunications business is capital intensive. Since January
1998, and for the foreseeable future, we will need large amounts of capital
to fund capital expenditures, working capital, debt service, and operating
losses. As of March 31, 1999, we had $110.1 million of cash and short-term
investments. This includes restricted securities that were placed in an
escrow account while we negotiated the senior financing commitments. The
escrow was released April 14, 1999.
Based on our current business plan and projections, we estimate that we
will need approximately $240 million to fund the deployment and operation of
networks in our initial six target markets (including requirements to finance
capital expenditures, working capital, financing costs, and debt service in
those markets) through the end of 2001. Since January 1998, CompleTel LLC
has received $65.8 million in private equity contributions, of which $59.5
was contributed to our French operating subsidiary. In February 1999, we
closed in escrow a high yield note offering with gross proceeds of $75
million. In April 1999, we received out of the escrow $73.1 million in net
proceeds and accrued interest, a portion of which we used to pay costs of the
offering. We also have commitments for senior financing of $90 million to
fund development and operations in France. To implement the senior credit
facilities, we must satisfy customary closing conditions. After
implementation, we will need to satisfy additional financial and other
conditions to draw on the available credit.
Based on our current level of funding and commitments, we believe we
have sufficient financing to fund our planned deployment and operations
through the end of 2001 in our four initial markets in France and our market
in the United Kingdom. But, we will need to secure additional financing to
fully fund our planned development in our initial market in Germany. We are
currently seeking additional bank and vendor financing to complete our
financing plan for that market. We have no assurance that we will succeed in
securing sufficient funding. If we are unsuccessful, we may have to alter
our initial deployment plans.
We have begun evaluating the deployment of networks in three additional
target markets in France and in three additional target markets in Germany.
We will proceed with these development plans if we can secure sufficient
financing and, in the case of the German markets, the necessary licenses and
regulatory approvals.
38
<PAGE>
We have had, and will continue to have, discussions concerning potential
acquisitions of Internet service providers and other providers of
telecommunication services. Subject to the availability of funds, we intend
to pursue attractive acquisition opportunities.
The actual amount and timing of our future capital requirements may
differ materially from our estimates as a result of, among other things:
- the cost of development of the networks in each market;
- demand for our services;
- regulatory, technological, or competitive developments, including new
market developments and opportunities within or outside of the initial
markets;
- any change in development plans or projections that leads to
alterations in the roll-out plan schedule or targets;
- the decision to pursue joint ventures, strategic alliances and
acquisition opportunities;
- the decision to deploy networks in other markets beyond the initial
markets.
As such, our actual costs and revenues may vary from expected amounts,
possibly by a significant degree. Any variation is likely to affect our
future capital requirements.
In the first quarters of 1999 and 1998, we made capital expenditures of
$11.0 million and $11,000, respectively, for property and equipment necessary
to deploy networks in our initial markets. We also used capital during both
of these periods to fund operations. Excess cash was invested in short-term
investments and money market investments.
IMPACT OF THE YEAR 2000
The "year 2000" generally describes the various problems that may result
from the improper processing of dates and date-sensitive calculations by
computers and other equipment as a result of computer hardware and software
using only the last two digits of the year to identify the year in a date
field. If a computer program or other piece of equipment fails to properly
process dates including and after the year 2000, the computer's calculations
may be inaccurate and equipment may malfunction. The failure to process
dates could result in system failures or miscalculations causing disruptions
in operations including, among other things, a temporary inability to process
transactions, send invoices or engage in other routine business activities.
STATE OF READINESS. Generally, we have identified two areas for year
2000 review: internal systems and operations, and external systems and
services. As a new enterprise, we are not burdened internally with legacy
systems that are not year 2000 ready. As we develop our network and support
systems, we intend to ensure that all systems will be year 2000 ready. We
are purchasing our customer and network support systems with express
specifications, warranties and remedies that all systems be year 2000 ready.
However, until well into the year 2000, we cannot assure you that all systems
will function adequately. Also, we intend to sell our telecommunications
services to companies that may rely upon computerized systems to make
payments for our services, and to interconnect certain portions of our
network and systems with other companies' networks and systems. These
transactions and interactions potentially expose us to year 2000 problems
arising in these other companies' systems.
We are in the process of contacting our external suppliers, vendors and
providers to obtain information about their year 2000 readiness. Based on
that information we are assessing the extent to which these external
information technology and non-information systems (including embedded
technology) could cause a material adverse effect on our operations in the
event that these systems fail to properly process date-sensitive calculations
after December 31, 1999.
Our assessment of our year 2000 readiness is ongoing as we continue to
develop our operations support systems and as we become reliant on the
systems of additional third parties as we
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expand our business into additional markets. As a result, in the future we
may identify a significant internal or external year 2000 issue which, if not
remedied in a timely manner, could have a material adverse effect on our
business, financial condition and results of operations.
COSTS TO ADDRESS YEAR 2000 ISSUES. We have used our internal
information technology and other personnel, not outside consultants, to
identify year 2000 issues. As a result, we have not incurred any significant
costs in identifying issues. We also do not anticipate any significant costs
to insure that our internal systems are year 2000 compliant because we do not
expect that any remediation will be required. Because we have not identified
any material year 2000 issues in connection with external sources, we cannot
reasonably estimate costs that may be required for remediation or for
implementation of contingency plans. As we gather information relating to
external sources of year 2000 issues, we will reevaluate our ability to
estimate costs associated with year 2000 issues. Despite our efforts, we
cannot assure you that as additional year 2000 issues are addressed, our
costs to remediate such issues will be consistent with our historical costs.
RISKS OF YEAR 2000 ISSUES. We cannot reasonably ascertain the extent of
the risks involved in the event that any one system fails to process
date-sensitive calculations accurately because we have not identified any
material year 2000 issues. Potential risks include:
- the inability to process customer billing accurately or in a timely
manner;
- the inability to provide accurate financial reporting to management,
auditors, investors and others;
- litigation costs associated with potential suits from customers and
investors;
- delays in implementing other information technology projects as a
result of work by internal personnel on year 2000 issues;
- delays in receiving payment or equipment from customers or suppliers
as a result of their systems' failure; and
- the inability to occupy and operate in a facility.
Any one of these risks, if they materialize, could individually have a
material adverse effect on our business, financial condition or results of
operations.
All of our information technology and non-information technology systems
and products are manufactured or supplied by third parties outside of our
control. As a result, we cannot assure you that the systems of any of those
companies will be year 2000 ready. In particular, we will be dependent upon
France Telecom, Deutsche Telekom, other incumbent public telecommunications
providers and other competitive providers and long-distance carriers for
interconnection and completion of off-network calls. These interconnection
arrangements are critical to our ability to conduct our business and failure
by any of these providers to be year 2000 ready may have a material adverse
effect on our business in the affected market. We have recently been
informally notified by France Telecom that they may need to redirect their
technicians' attention on year 2000 problems during the last quarter of 1999.
If year 2000 problems arise for France Telecom, the interconnections that we
need to put certain of our additional target markets in France into service
may be delayed unless we are able to purchase services from operators that
already are interconnected to France Telecom. France Telecom could not
indicate the likelihood or scope of delays they expect to occur.
Moreover, although we have taken precautions to purchase our internal
systems to be fully year 2000 ready, we cannot assure you that every vendor
will fully comply with year 2000 readiness requirements. If some or all of
our internal and external systems fail or are not year 2000 ready in a timely
manner, there could be a material adverse effect on our business, financial
condition or results of operations.
CONTINGENCY PLANS. Even though we have not identified any specific year
2000 issues, we believe that the design of our networks and support systems
could provide us with operating contingencies in the event critical external
systems fail. For example, in most of our markets we have established or
intend to establish interconnection agreements with the incumbent provider
and other regional and international carriers with points of presence in that
market to have the ability to remote traffic to another carrier should one
fail for any reason including year 2000 problems. As a result, in large
markets such as Paris or London, and even in smaller markets such as Lyon, if
we are able to interconnect with all carriers, we believe the risk of
complete loss of interconnection should be
40
<PAGE>
reduced. This may not be the case, however, in other markets where the
incumbent public telecommunications provider may be the only interconnection
provider. In that case, if the carrier fails, there may be nothing we can do
to mitigate the impact of that failure on our operations.
We have attempted to ensure that our own operations facilities and
systems are fully backed up with auxiliary power generators capable of
operating all equipment and systems for indefinite periods should power
supplies fail, subject to the availability of fuel to run these generators.
We also have the ability to relocate headquarters and administrative
personnel to one of our backed-up facilities should power and other services
at our Paris headquarters fail. Despite these contingency plans, which are
intended to avoid singular significant disruptions, we cannot assure you that
we will not experience numerous disruptions, individually insignificant, but
in the aggregate sufficient to cause a material disruption to our operations.
EURO CONVERSION
On January 1, 1999, 11 of the 15 member countries of the European Union
(excluding Denmark, Greece, the United Kingdom and Sweden, which may convert
to the euro at later dates) established fixed conversion rates between their
then existing sovereign currencies (the legacy currencies) and the euro and
adopted the euro as their common legal currency on that date. The legacy
currencies are scheduled to remain legal tender in the participating
countries as denominations of the euro until January 1, 2002. During the
transition period, public and private parties may pay for goods and services
using either the euro or the participating countries' legacy currency.
Because our company is newly established, we are not burdened with
systems that must be redesigned to accommodate the introduction of the euro.
We have purchased and specified our business support systems, including
billing, to accommodate euro transactions and dual currency operations during
the transition period. In addition, we intend to require all vendors
supplying third party software to us to warrant compliance.
We will be dependent on banks, customers and other providers to complete
business transactions and we will be exposed to problems inherent in these
third-party systems. During the transition period, to the extent we are
supplying local and national service, we can continue billings and
collections in the legacy currency to avoid euro conversion problems.
However, to the extent we have international transactions, we will be exposed
to euro-related risks.
The establishment of the European Monetary Union may have a significant
effect on the economies of the participant countries. While we believe that
the introduction of the euro will eliminate exchange rate risks in respect of
the currencies of those member states that have adopted the euro, there can
be no assurance as to the relative strength of the euro against other
currencies. Since a substantial portion of our net sales will be denominated
in euro or legacy currencies of participant countries, we will be exposed to
that risk.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INVESTMENT PORTFOLIO AND INTEREST RATE SENSITIVITY. Our investment
policy is limited by the indenture for the notes. We are restricted to
investing in financial instruments with a maturity of one year or less (with
certain limited exceptions). The indenture requires investments that meet
high credit quality standards, such as obligations of the United States
government or any European Economic Community member government or any agency
thereof guaranteed by the country, certificates of deposits, money market
deposits, and commercial paper with a rating of A-1 or P-1.
Interest income earned on our investment portfolio is affected by
changes in short-term interest rates. We are thus exposed to market risk
related to changes in market interest rates. To date, we have managed these
risks by monitoring market rates and the duration of our investments.
We do not think we are exposed to significant changes in fair value of
our investment portfolio because of our conservative investment strategy.
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IMPACT OF FOREIGN CURRENCY RATE CHANGES. We are exposed to foreign
exchange rate changes related to our operating subsidiaries' monetary assets
and liabilities and to the financial results of those foreign subsidiaries
when their respective financial statements are translated into U.S. dollars
in consolidation.
Our operating subsidiaries' monetary assets and liabilities are subject
to foreign currency exchange risk because purchases of network equipment and
services are denominated in currencies other than the subsidiary's their own
functional currency.
The spot rates for the euro and the pound sterling are shown below per
one U.S. dollar.
<TABLE>
<CAPTION>
Euro Pound Sterling
---- --------------
<S> <C> <C>
December 31, 1998. . . . . . . . . . . .86 0.60
March 31, 1999 . . . . . . . . . . . . .93 0.62
</TABLE>
We intend to manage exchange rate risk by incurring financing
liabilities denominated in the currency of the county of operations. In
addition, we will continue to evaluate whether to adopt hedging strategies to
manage our exposure to foreign currency exchange rate risk.
42
<PAGE>
BUSINESS
OVERVIEW
Our strategic objective is to become a leading facilities-based provider
of switched local telecommunications and related services to business and
government end-users, supplemented with wholesale services to carriers and
Internet service providers, in targeted metropolitan areas across Western
Europe. Initially, we will focus on network deployment in France, Germany
and the United Kingdom. Through our advanced networks, we intend to offer a
broad range of fully integrated telecommunications services, which we will
combine with an emphasis on superior sales, marketing, and customer care. Our
initial services offerings consist of local access, special access and
private line services, Internet access, and long distance resale. The
state-of-the-art, protocol transparent scalable technology platform we are
developing will enable us to supplement our initial service offerings over
time based on customer demand for enhanced services in each targeted market.
We were founded to capitalize on the significant opportunities created
by the size, growth potential, and increasing liberalization of
telecommunications in Western Europe. We believe that Western Europe
represents a one of the most significant telecommunications markets in the
world, but Western Europe, unlike the U.S., is just beginning to permit
competition in local exchange telecommunications markets. Our management
team has significant experience in the Western European telecommunications
industry and in developing newly-formed companies into successful going
concerns.
We are focusing our initial network deployment efforts in France,
Germany and the United Kingdom, which according to industry data are the
three largest telecommunications markets in Western Europe. We expect the
rate of growth in Western European telecommunications revenues will increase
as the historical dominance of the national public telecommunications
operators is challenged as a result of the opening of telecommunications
markets for competition. Considerable liberalization has already taken place
in the United Kingdom, and liberalization is rapidly increasing in other
Western European countries, driven by European Commission directives
requiring European Union member states to have liberalized the provision of
voice telephony services not later than January 1, 1998.
Our deployment plan in France includes the deployment of networks
initially in four metropolitan markets, and our networks in Germany and in
the United Kingdom will consist of the deployment of networks initially in
selected areas of greater Berlin and London. We refer to the geographic
markets included in our initial deployment of networks in France, Germany and
the United Kingdom are referred to as our "initial target markets." In each
of our initial target markets in France and Germany, we intend to deploy
high-capacity, protocol transparent fiber optic communications networks
linking our state-of-the-art switching equipment with our customers, and to
interconnect our networks with those of the incumbent public
telecommunications operator and other telecommunications providers. In
London, however, we plan initially to deploy a fiber optic network and to
initially deliver special access services to the carrier and Internet service
provider markets.
Based on current plans and expectations, we believe our current level of
funding and commitments are sufficient financing to fund our network
deployment and operations through the end of 2001 in our initial target
markets in France and the United Kingdom. We believe we have sufficient
financing to begin our planned network deployment and operations in our
initial target market in Germany, and we are currently seeking additional
bank and vendor financing necessary to fund the deployment and operations
through the end of 2001. We have no assurance that we will succeed in
securing additional funding. If we are unsuccessful, we may have to alter
our current deployment plans.
Subject to obtaining necessary additional financing and regulatory
approvals, we intend to deploy networks in additional areas within France and
Germany and eventually in markets throughout Western Europe. We are
analyzing market opportunities and beginning network and business planning
for three additional markets in France, and three additional markets in
Germany. We refer to these six markets as our "additional target markets."
To fully deploy networks in our additional target markets we will, however,
need additional equity, vendor and senior financing and, in the case of the
German markets, licenses and regulatory approvals.
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On December 13, 1998, the French telecommunications regulatory authority
awarded our French operating subsidiary a fixed wireline license and a
service license for network deployment and the provision of services in 10
regions in France that we intend to serve. Point-to-multipoint licenses are
currently available in France only on a limited and experimental basis
through December 1999. We received a point-to-multipoint license on June 9,
1999, to cover a portion of our planned local loop in Marseilles from the
French regulatory authorities. We also entered into an interconnection
agreement with France Telecom on December 18, 1998, and we began the
deployment of our networks in France in January 1999. We plan to initiate
switched services in all four of our initial target markets in France during
1999.
On March 8, 1999 the telecommunications regulatory authority in Germany
granted our German operating subsidiary, CompleTel GmbH, similar licenses for
3 markets in Germany including our initial target market. On January 11,
1999, the telecommunications regulatory authority in the United Kingdom
granted our United Kingdom operating subsidiary, CompleTel UK Limited, a
license to operate public telecommunications systems of any kind in the
United Kingdom. We are beginning deployment of our initial networks in
Germany and in the United Kingdom and plan to initiate service during 1999.
BUSINESS STRATEGY
Our business strategy seeks to:
- FOCUS ON PROVIDING FACILITIES-BASED LOCAL EXCHANGE SERVICES. We plan
to focus primarily on providing facilities-based competitive local
exchange and related services. We believe that this differentiates us
from many of the other recent market entrants in the Western European
telecommunications market that have concentrated on offering primarily
long distance access, carrier-to-carrier networks and resold services.
Only a limited number of facilities-based carriers have addressed the
local exchange market segment in Western Europe and these have focused
primarily on major financial centers (E.G., the City of London or the
La Defense section of Paris). Moreover, we believe that the regulatory
frameworks in France and other European Union countries currently
provide competitive advantages to facilities-based providers that are
willing to make the capital investment necessary to construct, own,
and operate local exchange networks.
- SELECTIVELY TARGET MAJOR METROPOLITAN MARKETS THROUGHOUT WESTERN
EUROPE. We seek to be highly selective in identifying target markets
and deploying our networks. Some of the largest metropolitan markets
in Western Europe have witnessed local exchange telecommunications
competition concentrated in their financial centers. We plan to
exploit selected areas of those large metropolitan markets that have
attractive demographics. Other metropolitan markets throughout Western
Europe have significant concentrations of high-volume
telecommunications users but have not yet experienced meaningful
facilities-based local exchange competition. In those other markets,
we are seeking to achieve deep deployment of our networks to
capitalize on the current lack of competition. Attractive markets are
characterized by a pro-competitive regulatory environment,
capital-efficient geographic clustering of potential customers, market
size sufficient to warrant capital expenditures, and low levels of
facilities-based local exchange competitive activity.
- ACHIEVE EARLY MARKET ENTRY. We seek to secure an early market position
in our initial target markets in order to obtain competitive
advantages including:
-- establishment of a loyal customer base prior to widespread
competition;
-- early procurement of key technical and marketing personnel and
distribution channels;
-- achievement of name recognition as one of the early competitors
of the dominant incumbent public telecommunications operator; and
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-- development of fiber and wireless transmission infrastructure
before the entry of other competitive local network providers.
To enter our initial target markets as quickly as possible and reduce
entry costs, we are employing a flexible approach to deploying our
local network technology. This flexible approach includes using a
combination of constructing fiber backbone, leasing dark fiber and
conduit, and building or leasing point-to-point and, possibly point-
to-multipoint, wireless transmission systems, as available and
appropriate in each market. In addition, we are seeking to
selectively acquire Internet service providers and other carriers in
our target markets in order to achieve early market entry and
establish customer lists.
- TARGET BUSINESS AND GOVERNMENT END-USERS, SUPPLEMENTED WITH WHOLESALE
SERVICES TO CARRIERS AND INTERNET SERVICE PROVIDERS. We plan to focus
principally on business and government end-user customers. We believe
that these customers generally:
-- are geographically concentrated and therefore provide an
opportunity to leverage an efficiently deployed local exchange
network;
-- are high-volume users that have large telecommunications budgets
and require a broad range of sophisticated telecommunications
services; and
-- are interested in high-quality alternatives to the incumbent
public telecommunications operator.
We intend to supplement our core end-user-focused business strategy by
selectively supplying wholesale services, including special access,
equipment collocation, and facilities management services, to Internet
service providers and telecommunications carriers.
- EMPLOY A REVENUE-DRIVEN APPROACH TO NETWORK DEPLOYMENT. Prior to
entering a market, we perform a detailed analysis, reviewing the
demographic, competitive, economic, and telecommunications demand
characteristics. We use the results of this analysis, together with
other information and a detailed capital cost forecasting model, to
identify clusters of business establishments and buildings with
geographically concentrated populations of target customers, determine
the optimal scope of areas to be served, and develop our plan and
schedule for network construction and expansion. From this analysis,
we direct our sales programs toward large business and government end-
users, carriers and Internet service providers located in buildings
strategically positioned within attractive building clusters. After
we acquire the "anchor tenant" customers, we seek to add other
customers within the anchor buildings and then in other nearby
buildings that are accessible directly from our fiber networks or,
where available, through point-to-point and, possibly, point-to-
multipoint wireless transmission systems.
MARKET OPPORTUNITY AND TARGET MARKETS
MARKET OPPORTUNITY. We believe that Western Europe represents a rapidly
growing telecommunications market opportunity. Initially, we have targeted
markets in the three countries that represent greater than 50% of the Western
European telecommunications market.
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The following table sets forth telecommunications market statistics as
of 1997 year end.
<TABLE>
<CAPTION>
Percentage of 1997 Percentage of
Telephone Access Lines in Telecommunications Revenue in
Countries Access Lines Western Europe Revenue Western Europe
--------- ------------ --------------- ------------------ --------------
<S> <C> <C> <C> <C>
France 33.7 million 17.0% $26.9 billion 14.8%
Germany 45.2 million 22.8% $46.1 billion 25.3%
United Kingdom 31.9 million 16.1% $32.4 billion 17.8%
Total 110.8 million 55.9% $105.4 billion 57.8%
Western Europe 198.0 million 100% $182.1 billion 100%
</TABLE>
-------------------
Source: International Telecommunications Union
FRENCH TELECOMMUNICATIONS MARKET. According to industry data, France is
among the three largest telecommunications markets in Europe in terms of
telephone access lines and total telecommunications revenue. We believe that
the local market in France remains relatively unaffected by competition
because fiber deployment by competitive carriers other than France Telecom
has predominately been in the long haul area, and facilities-based local
exchange competitors have to date primarily focused on the major financial
centers in and around Paris. We believe that the liberalization of the French
telecommunications market represents a particularly attractive initial
opportunity because France has adopted a comprehensive regulatory scheme
providing for attractive interconnection costs and other terms for local
facilities-based providers.
France Telecom's rate rebalancing plan is expected to be completed by
the end of 1999. The rebalancing has resulted in an average price increase at
the local level of 16% compound annual growth rate per year from 1994 to
1997, which has further increased potential profit margin opportunities for
new local loop competitors such as CompleTel. We believe that our ability to
provide a broad product offering, superior local customer care and service
price discounts will give us a competitive advantage over France Telecom.
Further, we believe that our presence in France's four largest markets will
enable us to attract business and government customers with multiple
locations in one or more of our markets. Overall, we believe that we will be
able to capture a significant share of both the existing markets for
customers who desire the services an alternative provider can supply and the
incremental line and service growth that we expect to occur as the market
utilizes these newer products.
GERMAN TELECOMMUNICATIONS MARKET. According to industry data, Germany
is the largest telecommunications market in Europe, and third largest in the
world. Germany's incumbent public telecommunications operator, Deutsche
Telekom, has established a priority to upgrade the infrastructure in Eastern
Germany following reunification. The size of the German telecommunications
market is encouraging competition and the regulatory landscape has been
liberalized, minimizing entry requirements. We anticipate that our initial
target market and three additional markets in Germany will allow us to serve
a key customer base of businesses and government facilities in selected areas
in which little infrastructure-based competition exists.
UNITED KINGDOM TELECOMMUNICATIONS MARKET. According to industry data,
the United Kingdom is also one of the three largest telecommunications market
in Western Europe in terms of telecommunications revenue and telephone access
lines. The United Kingdom has been at the forefront of privatization in
Europe. Since 1992, the United Kingdom has allowed competition in its
telecommunications market. The first local exchange competitors to the United
Kingdom's incumbent public telecommunications operator, British Telecom, were
cable television companies and Cable & Wireless Communications. In recent
years, the United Kingdom's local exchange competitors have expanded to
include competitive carriers at all levels of service.
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Facilities-based carriers in the United Kingdom have focused
predominantly on the City of London, Westminister, and the Docklands in
deploying their networks. Cable operators have generally focused on
residential telephony services rather than the business sector. In an effort
to capitalize on the opportunities presented by the United Kingdom, we intend
to exploit selected attractive areas that we believe have experienced limited
competition from other facilities-based carriers. We believe that
concentrating on sales efforts, superior customer care, and offering services
at attractive prices will allow us to successfully penetrate and establish
market share in these markets.
INITIAL TARGET MARKETS.
In identifying initial target markets and deploying our networks, we
seek markets that have a pro-competitive regulatory environment and
capital-efficient geographic clustering of potential customers. We also
analyze whether the market size of a potential market would be sufficient to
warrant capital expenditures, and contains acceptable levels of
facilities-based local exchange competitive activity. We plan to exploit
selected areas of large metropolitan markets that have attractive
demographics. We have identified six markets in France, Germany and the
United Kingdom as our initial target markets.
SERVICE OFFERINGS
We are positioning CompleTel as a provider of a broad range of high
quality telecommunications services including enhanced services available
only on a limited basis from public telecommunications operators such as
France Telecom. In addition to providing local exchange and enhanced services
through our own local access networks, we expect to provide long distance
services through strategic alliances or resale agreements. We also plan to
provide Internet access services either through our own facilities, through
resale, or through other strategic arrangements. We believe that the close
contact with customers achieved from our direct sales force and customer care
personnel will enable us to tailor our service offerings to meet customers'
needs and to creatively package our services to provide customized solutions
for those customers who desire one supplier of telecommunications services.
Our initial services offering in each market will consist of local
exchange services, dedicated access and private line services, Internet
access and long distance resale. Consistent with our revenue-led network
deployment strategy, the state-of-the-art, protocol transparent, scalable
technology platform that we are developing will enable us to augment this
offering as appropriate based on customer demand for enhanced services in
each targeted market. We expect that our available service offering will
include the following:
- LOCAL EXCHANGE SERVICES. We plan to offer "dial tone" service
providing local switched connections together with:
-- Calling features, including forwarding, speed dialing, call
waiting, automatic call distribution, call transfer, conference
calling, calling line identification presentation, calling line
identification restriction, and direct dialing inwards.
-- Centrex services where telephone density is high and customers
desire similar services, such as in office buildings or campus-
type environments. Digital Centrex service provides customers
with an alternative to the use of a private automated branch
exchange ("PABX"). PABX is an automated switching system within
an office building that allows calls from the outside to be
routed directly to the individual instead of being routed through
a central number. A PABX also allows for calling within an
office by way of three or four digit extensions. Centrex can
simulate this service from an outside switching source. Centrex
customers can avoid the large investment in equipment and fixed
costs associated with maintaining a PABX infrastructure, while
benefiting from a sophisticated telecommunications system.
- DEDICATED ACCESS AND PRIVATE LINE SERVICES. We plan to offer several
types of dedicated access and private lines to end-user and carrier
customers. Dedicated access and private line services are established
as a permanent physical connection between locations for the
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exclusive use of the customer purchasing them. Our local dedicated
access and private line services will be available over our own
networks at transmission speeds from 64 KBPS to 622 MBPS. We plan to
offer the following types of dedicated access and private line
services:
-- Carrier-to-carrier dedicated access, which connects carriers
(E.G., long distance providers, Internet service providers,
wireless carriers) to other carriers.
-- End-user-to-long-distance-provider dedicated access, which
connects end users to their chosen long distance providers.
-- Private line service, which is a dedicated line connecting two
end-user locations for voice and data applications.
- ISDN AND HIGH SPEED DATA SERVICES. We will offer high speed data
transmission services, including:
-- Integrated services digital network ("ISDN") services, which
permit the upgrade of an analog, copper twisted pair network to
an all-digital mode of operation. This technology can provide
both traditional circuit switching and data services. ISDN can
carry voice, video and data traffic. We plan to market ISDN not
only as business lines, but also as a means to provide bandwidth
on demand for connectivity of corporate wide area networks
("WANs"), which involve longer distances, and remote local area
network ("LAN"), which involve shorter distances, Internet
related access applications, video-conferencing and as a leased
line backup.
-- Frame relay services, which provide high speed transmission
capability by organizing data into units called "frames" instead
of providing fixed bandwidth as with private lines. Frame relay
is designed to operate at high speeds on modern fiber optic
networks. Frame relay services have been available for some time
in Europe, but have not been successfully marketed. In France,
France Telecom has been more successful at marketing frame relay
services largely because of the acceptance of its X.25 data
communications networks. We plan to offer frame relay services as
an alternative to dedicated data circuits.
-- Asynchronous transfer mode ("ATM") services, which are designed
to provide a cost-effective means for customers to simplify and
improve their network data communications. ATM is a switching and
transmission technology that is one of a general class of packet
technologies that relay traffic by way of an address contained
within the first five bits of a standard fifty-three bit-long
"packet" or "cell " ATM based packet transport was specifically
developed to allow the switching and transmission of mixed voice,
data and video information at varying rates. ATM services appeal
to customers with requirements to move large amounts of
information between locations quickly and reliably and can be
used by many different information systems including LANs. With
transmission speeds of up to 155 MBPS, ATM is one of the fastest
data transmission services available. ATM enables companies that
utilize this technology to simplify their telecommunications
network architecture and provides greater flexibility in the
event of network growth or alterations. Common applications for
customers purchasing ATM service will include interconnection of
customer LANs between two or more locations, connecting customer
locations to data service providers who offer data back-up,
disaster recovery or data archiving services and high speed
Internet access to Internet service providers connected to our
network.
- ENHANCED INTERNET SERVICES. We plan to offer dedicated and dial-up
high speed Internet access services via conventional modem
connections, ISDN, digital subscriber line ("DSL"), and E1 and higher
speed connections.
- INTERNET PROTOCOL SERVICES. We believe that, as technology advances, a
range of Internet, intranet, and extranet protocol services designed
for business communications and information services will be provided
over networks utilizing "Internet Protocol"
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technology. These services will include traditional voice and fax
services, as well as other services such as virtual private
networks. To address this market sector, we are designing our
networks to be "protocol transparent," which means that the
networks can handle voice and data communications transmitted using
traditional, Internet protocol and other technologies. We intend
to develop and offer gateway-based services for Internet access and
seamless interconnection to the public switched telephone networks
or PSTNs.
- WEB SITE DESIGN AND HOSTING SERVICES. We intend to offer Web site
design services and will offer Web site hosting on our own computer
servers to provide customers with a turn-key solution that gives them
a presence on the World Wide Web.
- SWITCHED ACCESS TO LONG DISTANCE SERVICES. We intend to offer switched
access to long distance service which will allow end-user customers to
be connected to long distance providers on a "demand" or call-by-call
basis (E.G., when a customer dials a provider-specific prefix). Such
services will be provided based on the assignment of single- or
multiple-digit prefixes for all long distance providers. We are
currently negotiating resale agreements with long distance providers
to enable us to purchase long distance services at a wholesale rate
and offer these services to customers that require both local and long
distance voice services. In France, we may be required by the French
regulatory authorities to provide our end-user customers with equal
access to the long distance providers of their choice by 2000.
- FACILITIES AND SYSTEMS INTEGRATION SERVICES. We plan to assist
individual customers with the design and implementation of turn-key
solutions in order to meet their specific communication needs,
including the selection of the customer's premises equipment,
interconnection of LANs and WANs, provision of Intelligent Network
applications and implementation of virtual private networks. Our
managed LAN services are being designed to provide customers with a
seamless network by the integration of their existing LAN and
providing flexibility to accommodate network growth or alterations. We
plan to provide managed LAN connection services at speeds ranging from
128 KBPS per second to 100 MBPS per second for WANs in the same city.
- NETWORK MANAGEMENT. We plan to provide remote management of customer
networks in all of our target markets. Local access synchronous
digital hierarchy ("SDH") networks offer our customers a reliable
solution to gaining the full benefits of advanced Intranet and
international broadband networks all the way to the end user. 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 used in
optical communications transmissions systems such as ours. 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. With SDH, we have designed our local access networks to
support both current and future services, such as metropolitan area
networks, switched multimegabit data service, broadband ISDN, and
personal communications networks. We are designing and plan to
construct local access networks that are not based on proprietary
interfaces and will achieve interconnectivity between all network
suppliers.
- WHOLESALE SERVICES TO INTERNET SERVICE PROVIDERS AND OTHER CARRIERS.
We believe that with the recent growth in demand for Internet
services, numerous Internet service providers are unable to obtain
network capacity rapidly enough to meet customer demand and eliminate
network congestion problems. We plan to supplement our core end-user
product offerings by providing a full array of local services to
Internet service providers, including telephone numbers and switched
and dedicated access to the Internet.
We plan generally to price our retail services at a discount to the public
telecommunications operators' prices in our various markets. We plan to set our
wholesale rates at or slightly below the market price of the leading
facilities-based carriers, but we do not anticipate offering a standard discount
relative to any major carrier.
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CUSTOMERS
We have targeted four principal customer groups, each with its own
distinct products and services needs. These targeted groups are:
- businesses end users;
- government end users;
- carriers; and
- Internet service providers.
We will focus our sales efforts for switched local services and resale
of long distance services on business and government end-users. We believe
that many potential customers in all three groups are interested in having
alternative suppliers to the incumbent public telecommunications operators.
Many business and government customers prefer a local, responsive company for
their telecommunications requirements, including customized local products,
local installation and maintenance and responsive customer service. Moreover,
we believe that many multi-line customers are interested in having more than
one source for their telecommunications traffic, thereby increasing
reliability through "vendor diversity."
We believe that carrier customers (including long distance providers)
and Internet service providers are interested in dedicated access circuits to
connect to their global accounts and that, in France and Germany, carriers
presently have only limited alternatives to the incumbent public
telecommunications operator. The dedicated access product line is relatively
new in France and we believe that provision of dedicated access is an
important potential service there and in our other initial target markets.
Participants in the Internet service provider market have indicated interest
in co-location and interconnection services, and we plan to provide these
services to large and small Internet service providers.
We expect to evolve our targeted customer strategy over time. The first
customer targets in each city will be municipalities and large businesses.
Following our "revenue-led" deployment strategy we will use the first sales
orders from these large customers to prioritize the network buildout. As
large customers are installed, we will expand our sales focus to capture
medium and small businesses located on the networks built to serve these
large customers. As we deploy networks in more geographic markets, we plan to
develop a national/pan-European sales and service function that will pursue
national and pan-European customers.
CUSTOMER CARE
We believe that our planned customer care systems will be a critical
element in attracting and retaining, and in selling additional services to,
customers. We believe that our customer care systems, combined with
state-of-the-art information systems, will give us a competitive advantage
over the incumbent public telecommunications operators in our target markets,
which have the "legacy" of older customer care and information systems. We
plan to offer high quality and responsive personalized services in each
target market by means of local management and sales and installation teams,
which will be supported by a European operations center and a European
after-hours customer care call center employing operators fluent in the
languages spoken in our target markets. In addition, we believe that the
following planned features of our customer care systems will be attractive to
customers:
- quick response to customer needs through an integrated enterprise
information data base system that can immediately access all of a
customer's data;
- the delivery of a customizable, integrated billing statement for all
of our services;
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- the ability of customers to manage certain services via on-line
service ordering, order status viewing, billing inquiries and other
services;
- the availability of on-line, live customer care personnel 24 hours a
day, 7 days a week, fluent in the customers' languages; and
- a local designated sales account executive to grow and support the
customer relationship.
SALES AND MARKETING
We believe that a direct sales and customer care program focusing on
infrastructure-based alternatives to the incumbent public telecommunications
operators, local responsive service and substantial discounts on comparable
public telecommunications operator services will provide us with a
competitive advantage. We intend to provide services to large business and
government retail end-users, as well as to Internet service providers and
carriers, and expect that a significant portion of our initial revenue will
come from these segments. Therefore, we plan to organize our sales and
customer care organizations to serve each of these market segments. For
larger businesses and government end-users, we plan to use dedicated account
teams, including sales engineering and customer care, all working together in
an effort to establish business relationships and applications sales. For the
incremental small and medium-sized businesses segment, we also plan to use a
direct sales approach, but structured around geographic areas of major
accounts. Internet service providers and carriers will be treated as major
customers, and we plan to have a carrier sales group located in each country
that will report to our European headquarters in Paris.
We plan to target customers in buildings located on our planned
networks as well as customers that are within reach of our initial fiber
optic rings using a combination of marketing information tools and marketing
promotions conducted within such buildings. We also intend to market select
services to the small business sector to maximize our penetration of on-net
buildings.
In each of our initial target markets, we intend to recruit experienced
sales, marketing, and customer care personnel with strong
business-to-business backgrounds in the local market. We believe that
experienced local personnel:
- will provide useful knowledge of local dynamics and the target
customer base;
- will often have established contacts and relationships in the local
market, enabling them to pre-sell our products and services prior to
our initiating network operation in that market; and
- will enable us to tailor our product and service offerings to specific
local customer needs.
In addition, we believe that a strong local presence will help to demonstrate
our commitment to each market and can facilitate more rapid access to
rights-of-way for network construction. We have already retained local
executives to act as regional managers for each of our four initial target
markets in France and country managers for each of Germany and the United
Kingdom. Notwithstanding the employment of local personnel, however, we
believe that a key to effectively implementing our business plan is to create
an "umbrella" pan-European identity under the CompleTel trade name through
common branding, standards, and network architecture.
INFORMATION AND BILLING SYSTEMS
We are assembling an integrated, enterprise-wide information management
system, which we call our "Enterprise Business & Network Support System,"
that has been designed to coordinate smoothly and effectively the information
and processes necessary for
- customer acquisition and order management,
- network design and service provisioning,
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- customer care, billing and collection,
- account management,
- network management and maintenance and
- business financial systems.
In addition, our information management system includes a project management
system to coordinate and monitor our network buildout and capital
expenditures. We have retained professional information technology consulting
firms experienced in the design and integration of these types of systems to
specify and manage the selection and assembly of our information management
system. Our plan relies on system vendors to supply and integrate their
products to yield an efficient enterprise-wide operational system, managed by
an external system integrator to achieve the specified results. These
products are readily available and are proven in actual use by competitive
local exchange carriers in Europe and the United States. We believe that our
selection and assembly of a market-proven, state-of-the-art, scalable
information management system will give us a competitive advantage in product
development, customer service and growth.
One of the key functions of our information management system is to
deliver an automated ordering and provisioning capability directly to the
end-user and our staff. We believe that a significant ongoing challenge will
be to continuously improve the provisioning systems to effectively facilitate
the transfer of public telecommunications operator customers to our network.
To meet this challenge, we are focusing on developing effective electronic
bonding between our information management system and the systems of the
public telecommunications operators and other carriers. When implemented,
electronic bonding will permit us to provision service requests on-line. We
believe that our information management system strategy along with the
project management capabilities of our information management system will
allow us to rapidly implement switched local services in our markets and
shorten the time between the receipt of a customer order and the generation
of revenues. We are also designing our information management system to
permit our sales force to monitor customer line usage on a daily basis and to
perform customer analyses to identify better product offerings for particular
customers and detect changes in usage.
We have designed our network management system to allow us to control
network operations and respond rapidly to network or service issues, usually
without any service degradation or customer impact. This rapid response is
crucial to achieving our goal of providing high quality customer care. As
designed, our network management system complements the advanced technology
of our switching and transmission network designs and is integrated with our
information management system.
We are purchasing our information systems from established suppliers,
with modifications to meet our specific requirements. By having new,
integrated systems, we are not hampered by many of the problems of older,
"legacy" systems, and we believe that our integrated information systems will
provide us with sufficient flexibility to meet developments in technology,
services, and evolving customer needs.
We expect that the first phase of the installation of our network
management system, currently scheduled for the beginning of the third quarter
of 1999, will contain the functionality necessary to support the set of
services and customer care we plan to offer at that time. Subsequent
releases are scheduled to support the planned roll out of our complete set of
services.
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NETWORK ARCHITECTURE
OVERVIEW
We believe that, relative to companies that primarily resell capacity
and services on facilities owned by third parties, telecommunications
companies that have networks directly connected to their customers:
- appear more credible to customers as a competitive provider of local
switched services;
- are often able to respond more quickly to customer needs for
additional capacity and services;
- develop a more knowledgeable and cooperative relationship with their
customers;
- are less subject to changes in their cost structure because resellers
are dependent on prices set by others for the services that they
resell; and
- experience higher operating margins.
To deliver the highest quality, reliable telecommunications services, we
plan to employ a state-of-the-art, uniform, high-capacity, protocol
transparent technology platform based on digital telephone switches and the
latest European telecommunications standards--based SDH transmission
technology, with a centralized network management and monitoring center
located in France.
Our network design strategy has three key elements.
- FIRST, we have designed and are deploying our networks to provide
efficient coverage of principal local business and government
concentrations.
- SECOND, we plan to construct high capacity networks that utilize large
144-fiber bundles capable of carrying large volumes of voice, data,
video and Internet traffic as well as other high bandwidth services.
We will evaluate leasing capacity on other companies' fiber optic
networks as well as leasing conduit space where appropriate to
accelerate the deployment of our services and networks. The SDH fiber
optic ring design we have selected will be scalable, and should be
flexible and reliable, allowing us to be technologically equal to the
incumbent public telecommunications operators.
- THIRD, we plan to employ a uniform technology platform based on
European telecommunication standards, incorporating as the network's
key components advanced digital telephone switches and ancillary
transmission technologies. The uniform technology platform is expected
to enable us to deploy features and services quickly, to expand
switching capacity in a cost effective manner and to lower maintenance
costs through reduced training and spare parts. We are evaluating
customers' access expectations and, in order to accommodate faster
provisioning of service, we will evaluate using wireless transmission
for the "last mile" of transport.
In many circumstances, we intend to utilize our own network for one
portion of a call and resell the services of another carrier for the
remaining portion of a call. In other instances, we expect that both the
origination and termination of a call will take place on our networks. We are
designing our networks in an effort to maximize our ability to connect
directly with significant numbers of prospective customers and to easily
interconnect and provide a least-cost routing flow of traffic between our
network and other networks in the marketplace.
Our Senior Vice-President and Chief Technology Officer, Richard
Clevenger, who has more than 30 years' experience in the telephone and cable
television industries, is leading our network development efforts. We have
selected Nortel Networks to provide the technological core components of our
network transmission and switching equipment, and to assist us in designing
and assembling our networks, in France because of Nortel's recognized
expertise in the telecommunications industry. In other markets, we expect to
purchase equipment from Nortel or from other vendors with
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technologically equivalent standards and capacity. Our core network
facilities will consist of six network layers:
LAYER 1--INTERCONNECTION WITH PUBLIC TELECOMMUNICATIONS OPERATORS AND
OTHER CARRIERS. We plan to interconnect with incumbent public
telecommunications operators at a variety of locations within each market,
both at the end office and local tandem switching levels. We also plan to
interconnect with other long distance carriers and national and international
backbone providers.
LAYER 2--FIBER OPTIC TRANSMISSION FACILITIES INTERCONNECTING
COMMUNITIES. The core network architecture within metropolitan areas will be
composed of European telecommunications standards-based SDH fiber optic
backbone rings with multiple local network nodes and fiber optic spurs
providing access for customer service loops. To add utility to the
metropolitan networks and surrounding communities, our networks are being
designed with high capacity fiber optic SDH backbones between service areas
and commune to commune. These interconnect backbone facilities will be
configured to support transport for voice and data based services and
capacity for dedicated high bandwidth services. These interconnect
transmission facilities are designed to support the natural expansion of
capacity as voice and data traffic volume demands increase.
LAYER 3--OUR VOICE SWITCHING FACILITIES. We intend to use
state-of-the-art, high-capacity digital switches from Nortel and other
vendors to form a highly reliable switching platform for the delivery of a
variety of switched access services, enhanced services and local dial tone.
By the end of 1999, we plan to have a minimum of five feature-rich digital
switches installed servicing business clusters in our initial target markets
in France and Germany. We intend to use smaller access remote subscriber
switches, having the capability to be upgraded to full standalone digital
switches, to complement the end office digital switching capacity for areas
serving smaller business communities. We plan to install up-to-date software
in our switches to ensure their compatibility with the large number of
signaling systems in use in the European markets. We have selected and have
begun to install switching facilities that can provide, within a single
switch, access to all market segments from the residential homeworker to the
corporate end-user.
LAYER 4--DATA NETWORKS AND DATA SWITCHING FACILITIES. To respond to the
growing demand for cell-based and fast-packet data services, we are designing
our networks to offer frame relay for the existing imbedded base of frame
relay users and asynchronous transfer mode services for those users requiring
higher bandwidth.
LAYER 5--FIBER OPTIC TRANSMISSION LINKS BETWEEN LOCAL NETWORK NODES AND
OUR SWITCHES. A key part of our strategy is constructing our own fiber optic
backbone rings in order to have full control of the transmission capacity
between all points in the backbone ring and the switch interconnection
transmission layers of our network. Backbone transmission networks
constructed within service areas will be composed of a series of fiber optic
cables configured in a network of rings throughout the service area. The
fiber backbone ring and the customer local access segments of our networks
will be fiber optic SDH broadband. We will construct fiber optic backbone
ring networks in the central business districts and industrial parks. These
backbone rings will be connected to our switches and to local network nodes
and will connect to our backbone fiber interconnects between communes.
LAYER 6--LOCAL LOOP ACCESS FACILITIES. The local loop access layer of
our networks will use a mixture of local fiber rings and fiber spurs to
provide our full complement of state-of-the-art services for business and
government customers. Synchronous multiplexers will perform both multiplexing
and line terminating functions. Fiber optic rings extending to the customer
locations will typically have ten to twenty customer locations connected to
the ring. We are evaluating point-to-point SDH microwave transmission
technology for links between regions and cities and point-to-multipoint
wireless links as an alternative to wireline based local access loops.
In general, we seek to build networks that encompass the principal
downtown and suburban business parks and concentrations of businesses in each
area we plan to serve. We plan to extend the reach and efficiency of our
core network rings through alternative methods, such as leased fiber or
wireless. We believe that this type of broad coverage of our target markets
will maximize the number of buildings that can be economically connected to
our network, thereby increasing the number of potential customers for our
services.
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CONSTRUCTION
The time necessary to construct a new fiber optic network will vary,
depending upon factors such as the size of the fiber ring to be installed,
whether the construction is underground or aerial, whether the conduit is in
place or requires construction and the initial number of buildings targeted
for connection to the fiber ring. Our fiber optic cables will be installed in
conduits that we own or that we lease from third parties. We may also lease
conduit or pole space from utilities, railroads, carriers, provincial highway
authorities, local governments and transit authorities. These arrangements
will generally be for multi-year terms and have renewal options.
We will connect office buildings to our network primarily by extensions
to one of a number of physical rings of fiber optic cable, which originate
and terminate at our central hub within the community served. We will perform
technical and economic analyses for each building in order to determine
whether to access the building using our own fiber, leased fiber or wireless
technology. Most buildings served will have a discrete CompleTel
point-of-presence located in the building. Within each building, internal
wiring will connect the point-of-presence to the customer premises. Customer
equipment will be connected electronic equipment we provide in the
point-of-presence where customer transmissions are digitized, combined and
converted to an optical signal. The traffic is then transmitted through the
network to our central hub where originating traffic is routed to its
ultimate destination.
COMPETITION
OVERVIEW
Competition for the provision of local services in Europe is still in
the early stages of development. The European Union is actively seeking to
stimulate competition among providers and to foster an environment in which
competing telecommunications networks and innovative services can flourish.
Member states are required to end restrictions and adopt standardized
regulations intended to promote competition. We believe that the ongoing
liberalization of the European telecommunications market will cause
additional competitive local exchange carriers, including pan-European
carriers, to enter the market and increase the intensity of competition. In
addition, public telecommunications operators may themselves seek to compete
in local exchange services markets outside of their home countries, alone or
in joint ventures with other entities.
In each market we enter, we will compete with the incumbent public
telecommunications operator and, in certain markets, with other competitive
local exchange carriers in the provision of high quality, integrated
telecommunications services. Public telecommunications operators offer both
local and long distance services and benefit greatly from their position as
the sole historic provider in the markets they serve. Public
telecommunications operators generally have several competitive advantages
over new competitors, including substantially greater economic and human
resources, close ties to local and national regulatory authorities,
ubiquitous local and long distance distribution facilities, existing
rights-of-way, control of or access to telephone numbers, and control over
virtually all local telecommunications connectivity.
We believe that the principal competitive factors affecting our business
will be price, customer service, network quality, accurate billing and, to a
lesser extent, variety of services. Our ability to compete effectively will
depend upon our ability to maintain high quality, market-driven services at
prices generally equal to or below those charged by our competitors. Because
France, Germany and most of our intended Western European markets, other than
the United Kingdom, have only recently liberalized or still are in the
process of liberalizing the provision of voice telephony, customers in most
of these markets are not accustomed to obtaining services from competitors to
public telecommunications operators and may be reluctant to use emerging
telecommunications providers. In particular, our target customer base of
business and government end-users with significant calling needs may in some
instances be reluctant to entrust their telecommunications requirements to
new operators notwithstanding their desire to explore alternatives to the
public telecommunications operator.
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FRANCE
We expect that our principal competitor in France will be France
Telecom. France Telecom is generally considered to be one of the most
technically competent public telecommunications operators in Western Europe.
France Telecom has invested heavily in upgrading its network and enjoys
relatively high approval ratings from its customers. We will also face
competition in France from operators of fiber networks such as WorldCom,
COLT, and Cegetel, a consortium of Compagnie Generale des Eaux and British
Telecom. We believe that we can effectively compete in France because most
current competitors seeking to gain market share from France Telecom are
focusing on long distance service instead of local exchange service and have
concentrated their efforts on the most competitive high volume areas in and
around Paris such as the business district of La Defense. We are not
initially targeting the La Defense district and we do not expect to encounter
significant local exchange competition other than from France Telecom as we
begin to deploy our networks in France.
GERMANY
The German local exchange market continues to be dominated by the
incumbent public telecommunications operator, Deutsche Telekom, with limited
competition from WorldCom, COLT, and various local city networks. We believe
that attractive opportunities exist to invest in the development of local
exchange infrastructure to provide enhanced services that have not been
aggressively pursued by Deutsche Telekom or by other new entrants. We also
believe that these factors make Germany an attractive market for local
exchange, facilities-based providers.
UNITED KINGDOM
The United Kingdom implemented liberalization of its telecommunications
market before any other country included in our initial target market
deployment plan. It already has a significant number of operators competing
with the incumbent public telecommunications operator, British Telecom. We
expect that our primary competition in the United Kingdom local exchange
market, in addition to British Telecom, will be from existing United Kingdom
cable operators, such as TeleWest and Cable & Wireless Communications, and
also from WorldCom, COLT, Energis plc and resellers such as Teleglobe Inc.,
Global One, and Esprit Telecom Group plc. We believe, however, that a number
of markets in central London and south and east of London offer significant
opportunities for local exchange service and have not yet experienced high
levels of competition from these existing competitors. Fixed operators are
required to implement number portability and allow for carrier preselection.
Both concepts are expected to facilitate easy use of telecommunications by a
customer who would not need to remain contractually bound to any one
provider. The high level of infrastructure competition is likely to be
offset by increasing levels of service competition as operators and providers
jostle for market share.
REGULATION
OVERVIEW
National and local laws and regulations governing the provision of
telecommunications services differ significantly among the countries in which
we intend to operate. The interpretation and enforcement of such laws and
regulations varies and could limit our ability to provide various
telecommunications services in different markets. We also intend to provide
certain services in the United States. To enable us to provide international
telecommunications services in the United States, we have been granted
authority under Section 214 of the Communications Act that permits us to
provide international basic telecommunications services in the United States.
Deregulation of telecommunications is a relatively new phenomenon in
Europe and there is little history to guide competitive entrants.
Relationships between European Union member governments and the European
Union's central agencies are evolving. The degree to which the European Union
telecommunications market will be subject to national or European Union
control remains to be seen. There is little history to provide guidance to
competitive entrants concerning the independence of newly-created regulatory
bodies, nor how vigorously or efficiently such bodies will adopt and enforce
regulations or rules. Existing or future regulatory, judicial, legislative or
political
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considerations may prevent us from offering to residents of Western European
countries all or any of our services or adversely affect our business in
other ways.
EUROPEAN UNION
The European Union consists of the following member states: Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, The Netherlands, Portugal, Spain, Sweden and the United Kingdom.
The European Union member states are required to implement directives issued
by the European Commission and the European Council by passing national
legislation. If a European Union member state fails to effect such directives
with national or other appropriate legislation or fails to render the
provisions of such directives effective within its territory, the European
Commission may take action against the European Union member state, including
in proceedings before the European Court of Justice, to enforce the
directives. Private parties may also bring actions against European Union
member states for failures to implement such legislation.
The European Commission and the European Council have issued a number of
key directives establishing basic principles for the liberalization of the
European Union telecommunications market. The European Union's objective is
to create a free and open market for telecommunications. Although the
European Union set January 1, 1998 as the deadline for mandatory
liberalization of the provision of voice telephony services throughout the
European Union, each European Union member state had to enact its own laws to
implement the European Union's mandate. Greece, Portugal, Ireland, Spain and
Luxembourg have been granted additional implementation periods. Each member
country is required to make the minimum changes necessary to comply with the
European Union directives, but the actual implementation of European Union
directives varies from country to country. Not every European Union member
state has enacted laws that implement the directives within the time frame
set by the European Union or in a way that complies or will comply with the
intent and spirit of the directives within such time frame or at all. There
can be no assurance that all European Union member states will enact laws
which fully comply with the intent and spirit of the Directives within any
given time frame or at all. The European Commission has initiated legal
action against Belgium, Denmark, Germany, Greece, Italy, Luxembourg and
Portugal for not implementing the directive on full voice telephony
competition adequately. If the European Commission is not satisfied with the
explanation given by these countries for their delay it may take action that
ultimately could result in a decision by the European Court of Justice
whether these countries have violated the directive. Although Switzerland is
not a member of the European Union, it has adopted legislation which complies
with the spirit and intent of the directives.
In 1990, the "Services Directive" required member states to abolish all
exclusive and special rights for the provision of all telecommunication
services other than for public switched voice telephone service and public
telecommunications networks. Since that first phase of activity, further
legislative initiatives have been designed to provide full liberalization of
the telecommunications sector, including notably the adoption of:
- THE REVISED OPEN NETWORK PROVISION DIRECTIVE, which member states were
required to implement by June 30, 1998, aims to ensure the
availability of quality public telephone services and to define the
services to which all users should have access in the context of
universal service at an affordable price.
- THE FULL COMPETITION DIRECTIVE, which required member states to
abolish exclusive and special rights for the provision of public voice
telephone services and to allow the provision of public
telecommunications networks by January 1, 1998. The full competition
directive also abolished special and exclusive rights regarding the
self-provision of infrastructure, the use of infrastructure operated
by third parties and the use of shared infrastructure for the
provision of services other than public voice telephony.
- THE LICENSING DIRECTIVE, which established 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 European Union-
wide market for telecommunications and establish a common framework
for national authorization regimes and seeks to facilitate
cross-border networks and services.
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- THE INTERCONNECTION DIRECTIVE, which mandates that each member state
ensure that the historical public telecommunications operators and
operators with "significant market power"
-- provide interconnection to other operators under terms and
conditions that are cost-oriented, non-discriminatory, objective
and transparent;
-- publish by July 1, 1997, their "unbundled" interconnection terms
and conditions;
-- negotiate access agreements and specific terms of
interconnection, subject to the intervention of the member
state's regulatory authority in case of a breakdown in the
negotiations; and
-- adopt transparent accounting methods for each cost component.
Members states are also required to adopt a "quick, cheap and effective"
procedure to solve interconnection disputes in order to prevent the
historical operator from maintaining its dominant position through litigation
and other delaying tactics. The interconnection directive is expected to be
amended to provide for carrier pre-selection, enabling subscribers to choose
an alternative carrier to convey their long distance calls, with the
possibility of overriding their choice on a call-by-call basis. In addition,
the interconnection directive is expected to be amended to require number
portability, enabling subscribers, while remaining at a specific location, to
retain their telephone number despite switching network operators. Number
portability must be made available to all subscribers on public fixed
networks by January 1, 2000. Carrier pre-selection must be made available by
January 1, 2000, by operators with significant market power; member states
may also decide to apply this requirement to other operators.
FRANCE
In July 1996, France enacted legislation amending the French Code de
Postes et Telecommunications, abolishing France Telecom's legal monopoly and
providing for the immediate liberalization of all telecommunications
activities in France, but maintaining a partial exception for the provision
of voice telephony. Voice telephony was subsequently fully liberalized
(including carrier pre-selection) on January 1, 1998. French law allows
market participants to build and operate public telecommunications networks
or offer services following receipt of a license. Interconnection is
available as a matter of right to all licensed operators.
Licenses are granted by the Secretaire d'Etat a l'Industrie (the
"Telecommunications Ministry") in charge of telecommunications upon
recommendation of France's new independent regulatory authority, the Autorite
de Regulation des Telecommunications (the "ART"). The ART has broad
rule-making and adjudicatory powers and is administratively independent from
the Telecommunications Ministry. Among other things, the ART has the power to
approve interconnection rates, arbitrate interconnection disputes and to
exercise oversight powers and punish regulatory infractions (through
suspensions or revocations of licenses or through fines based on a percentage
of the violator's revenues).
France is one of the European Union member states that differentiates
between interconnection for public telecommunications network operators and
for voice telephony service providers. The published interconnection tariffs
of France Telecom, which have been approved by the ART, provide substantially
more favorable interconnection rates for public telecommunications network
operators than for voice telephony service providers that use third-party
operators' transmission facilities.
In May 1998, we filed a joint application for a license as a public
telecommunications network operator and provider of voice telephony services
to the public in the 10 regions in France that we intend to target, including
our four initial French target markets. On December 13, 1998, the
Telecommunications Ministry, based on the recommendation of the ART, awarded
us these licenses. The authorization entitles our French subsidiary to, among
other things, obtain rights-of-way for the establishment of network
infrastructure along public roads, certain rights on private property,
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numbering resources and preferential wholesale interconnection from France
Telecom. We entered into an interconnect agreement with France Telecom on
December 18, 1998. In June 1999, the ART awarded us an experimental license
through December 31, 1999 to operate point-to-multipoint wireless links in a
portion of Marseilles.
As a public network operator and service provider in France, we must
provide non-discriminatory treatment of customers and we must accept
reasonable requests for interconnection from other operators of networks open
to the public and from voice telephony and mobile telephony providers. In
addition, we are required to notify ART of interconnection agreements and to
make contributions to finance universal service by paying supplementary
charges for interconnection to France Telecom as well as making payments to a
universal service fund based on our volume of activity. The amounts of
universal service contributions are set annually by the French
Telecommunications Ministry as proposed by the ART. In addition, we must
spend 5% of our revenues to support research and development in France.
GERMANY
The German Telecommunications Act of July 25, 1996, ended the legal
monopoly of Deutsche Telekom AG for the provision of voice telephony and
public telecommunications networks, and immediately liberalized all
telecommunications activities in Germany, but postponed effective
liberalization of voice telephony until January 1, 1998. Since January 1,
1998 the German telecommunications market has been completely open to
competition and a new regulatory authority, the Regulierungsbehorde fur
Telekommunikation und Post ("RTP"), has been installed.
Under the German regulatory scheme, the RTP grants licenses in four
license classes. A license is required for operation of transmission lines
that extend beyond the limits of a property and that are used to provide
telecommunications services for the general public. This infrastructure
license is divided into 3 classes: mobile radio license (class 1); satellite
license (class 2); and general infrastructure license, also applicable for
mobile and satellite infrastructure (class 3). In addition to the
infrastructure licenses, a license is required for operation of voice
telephony services based on self-operated telecommunications networks (class
4). A class 4 license does not include the right to operate transmission
lines and a class 3 license does not include the right to provide voice
telephony services. Licensees under class 1, 2 and 3 have the right to
install transmission lines on, in and above public trafficways such as public
roads, squares, bridges and public waterways without payment; however, when
installing transmission lines permission must be obtained from the relevant
authorities. In general, this permission cannot be refused, however,
municipalities may issue an order that a public road can only be dug out once
every 30 years. Public operators have to coordinate and cooperate with each
other or risk losing the right to dig out the same public road for as long as
30 years. The RTP establishes license fees, and the level of fees imposed on
licensees is the subject of several complaints to the RTP and German courts.
A company that operates a public telecommunications network has the
right to receive favorable interconnection rates from Deutsche Telekom, the
former incumbent public telecommunications operator. Deutsche Telekom filed a
request with the RTP to offer more favorable interconnection rates to
competitors that maintain a higher number of interconnection points with
Deutsche Telekom's network and less favorable interconnection rates to
competitors that maintain a smaller number of interconnection points which
would have effected the operation of smaller networks in terms of
interconnection pricing. For the time being, RTP has rejected the request.
A telecommunications provider that does not agree with the offered rates or
is refused interconnection by Deutsche Telekom can take the case to the RTP
who may order interconnection at specific rates. To date, interconnection
has been the source of major dispute between Deutsche Telekom and its
competitors. Several complaints currently pending before the RTP and German
courts concern the content of the standard interconnection offer of Deutsche
Telekom. Although RTP has established standard interconnection rates,
Deutsche Telekom and some of its major competitors have been unable to reach
agreement on other aspects of interconnection such as rates for unbundled
local loops. Rates for unbundled access to the customer line have been
considered and rates have been set by the RTP which Deutsche Telekom's
competitors generally regard as too high and anti-competitive. Other pending
disputes concern the costs of billing services provided by Deutsche Telekom
to other carriers and rates for direct access to the end-user lines of
Deutsche Telekom.
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RTP intends to review the entire interconnection regime by January 2000.
The review may result in changes to the interconnection rates and the terms
and conditions of the interconnection agreements. In particular, RTP intends
to review the requirement for providing a certain number of points of
interconnection, in particular if a certain amount of traffic is generated at
one point of interconnection. This might have a substantial impact on the
costs for interconnection with Deutsche Telekom's network and accordingly
might have a negative impact on the business development of competitors to
Deutsche Telekom.
UNITED KINGDOM
The Telecommunications Act of 1984 provides a licensing and regulatory
framework for telecommunications activities in the United Kingdom. The
Secretary of State for Trade and Industry at the Department of Trade and
Industry (the "Secretary of Trade") is responsible for granting licenses and
for overseeing telecommunications policy, while the Director General of
Telecommunications (the "Director General") is responsible for enforcing the
terms of such licenses. The Director General will recommend the grant of a
license to operate a telecommunications network to any applicant that the
Director General believes has satisfied the licensing direction and United
Kingdom regulations, has a reasonable business plan, has the necessary
financial resources and where there are no other overriding considerations
against the grant of a license.
Individual licenses are granted for the construction and operation of
public networks, and class (or general) licenses are granted for systems
comprising equipment at a single site, self-provided non-public networks, or
limited public networks. To construct and provide services over its networks
in the United Kingdom, we have obtained an individual Public
Telecommunications Operator license. To provide international services in
the United Kingdom, we have also obtained an International Simple Voice
Resale license. To provide international facilities (I.E., network build as
opposed to resale), we would not need a separate license. After July 1,
1999, the Public Telecommunications Operator license also will license
operations of international facilities. We also plan to provide some
services under a Telecommunications Services License, a class license that
allows us to provide a number of services other than those requiring
individual licenses. United Kingdom licenses impose certain requirements on
us, including but not limited to the requirements that we provide end-users
and other network operators with reasonable and nondiscriminatory access to
our system and that we provide directory assistance services. Licenses may
otherwise limit the types of services that may be operated over the licensed
system.
The Director General may modify the license conditions either with
agreement of the licensee or following a statutory period of consultation or
following a report of the Monopolies and Mergers Commission. This procedure
is intended to make it easier for the Director General to modify licenses,
subject to the usual rights of review and appeal. Licenses are not
transferable, but a change of control of a license may be permitted subject
to compliance with a notification requirement, provided the proposed change
is not, in the opinion of the Secretary for Trade, against the interests of
national security or relations with the government of a country outside the
United Kingdom.
The focus of deregulation in the United Kingdom has been to encourage
new entrants to build competitive networks. Only network providers currently
have the right to require interconnection with British Telecom, the incumbent
public telecommunications operator, above the level of the network
termination point and to obtain favorable wholesale interconnection rates. A
recent regulation allows several other categories of operators and service
providers to obtain interconnection on these favorable terms. All
interconnecting operators are required to offer interconnection to similarly
situated operators and providers. At present, competitors to British Telecom
generally cannot obtain unbundled local loops. In this way, network providers
have been favored over services providers. The regulatory authorities in the
United Kingdom are in the process of revising the regulatory framework to
meet the detailed requirements of the various European Union
telecommunications directives. Initially, we expect these changes to enhance
the competitive position of resellers and other service providers by lowering
their costs of access to the British Telecom network. Number portability is
currently required, and according to a recent regulatory proposal, carrier
preselection over British Telecom's network may be available for national or
international calls by late 2000 and for all local, national and
international calls during 2001.
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RECENT ACQUISITIONS
On March 24, 1999, we acquired all of the outstanding stock of Acces
Internet et Solutions S.A.R.L. ("ASI"), an Internet service provider based in
Lyon, France, for $2.1 million. ASI, established in 1995, provides a broad
range of Internet services to an established base of business and government
customers located primarily in the Lyon area. Its services include dial-up
access, domain registraztion, Web hosting, leased lines, network and server
consulting, and network installation and maintenance services.
On June 11, 1999, we acquired all of the outstanding stock of Web
International Networks Limited (doing business as iPeople), an Internet
service provider based in London, for an initial purchase price of L200,000
and contingent consideration of up to L137,811 to be paid in three
installments based on quarterly revenues through March 2000. We intend to
record the transaction under the purchase method of accounting and amortize
the goodwill, using the straight-line method, over a ten-year period.
EMPLOYEES
As of May 31, 1999, we had 167 full-time employees of whom 158 were
employed by CompleTel Europe and its subsidiaries. Of CompleTel Europe's
employees, 44 were sales and marketing employees. We believe that our future
success will depend on our continued ability to attract and retain highly
skilled and qualified employees. Our employees are not covered by any
collective bargaining agreement. We believe that we enjoy good relationships
with our employees.
PROPERTIES
Our European operations are headquartered in Paris, France. We lease
offices and space in a number of locations. The table below lists our current
leased facilities:
<TABLE>
<CAPTION>
APPROXIMATE LEASE FIRST ANNUAL
FACILITY SQUARE METERS EXPIRATION RENTAL PAYMENT
-------- ------------- ---------- --------------
<S> <C> <C> <C>
European headquarters in Paris, France . . . 617 November 30, 2007 FF 1,300,000
National service center and Paris switch site
in Nanterre, France . . . . . . . . . . 2,638 November 14, 2010 FF 2,000,000
Sales office in Paris, France . . . . . . . . 594 December 31, 2007 FF 1,100,000
Switch site in Lyon, France . . . . . . . . . 434 October 31, 2010 FF 195,000
Sales office in Lyon, France . . . . . . . . 421 March 31, 2008 FF 396,000
Switch site in Marseilles, France . . . . . . 1828 February 28, 2001 FF 260,000
Sales office in Marseilles, France . . . . . 346 May 31, 2008 FF 308,000
Switch site in Lille, France . . . . . . . . 684 May 24, 2011 FF 265,000
Sales office in Lille, France . . . . . . . . 237 March 30, 2011 FF 190,000
</TABLE>
The annual rental payments, in some instances, increase over the life of
the lease, and all leases are subject to adjustment based on a
cost-of-construction index.
We believe that our lease facilities are adequate to meet our current
needs and that additional facilities are currently available to meet our
development and expansion needs in existing and projected target markets.
LEGAL PROCEEDINGS
We are not party to any pending legal proceedings that we believe would,
individually or in the aggregate, have a material adverse effect on our
financial condition or results of operations.
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GENERAL CORPORATE INFORMATION
CompleTel Europe was incorporated on December 14, 1998 as a Netherlands
public company with limited liability ("NAAMLOZE VERNOOTSCHAP") and its
registered office is located at Drentestaete, Drentestraat 24, 1083 HK,
Amsterdam, The Netherlands. CompleTel Europe is registered with the Trade
Register of the Amsterdam Chamber of Commerce under number 34108119 and with
the Ministry of Justice under number 1.055.197.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS, AND OTHER SIGNIFICANT EMPLOYEES
The following table sets forth certain information concerning our
directors, executive officers, and other significant employees, including
their ages as of May 31, 1999. For purposes of this prospectus, (i)
"directors" includes members of the board of managers of CompleTel LLC, the
Company's ultimate parent entity, and (ii) "employees" includes employees of
CableTel Management, Inc. ("Management Company"), a wholly owned subsidiary
of CompleTel LLC, who are "seconded" to CompleTel LLC, CompleTel Europe and
their operating subsidiaries pursuant to certain agreements with Management
Company.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION(s)
- ---- --- -----------
<S> <C> <C>
James E. Dovey(1) . . . . . . . . 55 Chairman of the Board and Chief
Executive Officer
William H. Pearson . . . . . . . 43 President of European Operations and
Director
Richard N. Clevenger . . . . . . 52 Senior Vice President and Chief
Technology Officer
David E. Lacey . . . . . . . . . 52 Senior Vice President and Chief
Financial Officer
James C. Allen(3) . . . . . . . . 52 Director
Royce J. Holland(3) . . . . . . . 50 Director
Lawrence F. DeGeorge(1)(2)(3) . . 54 Director
Paul J. Finnegan(1) . . . . . . . 46 Director
James H. Kirby(2) . . . . . . . . 31 Director
James N. Perry, Jr. . . . . . . . 38 Director
</TABLE>
- -----------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
OTHER SIGNIFICANT EMPLOYEES
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
John M. Hugo . . . . . . . . . . 38 Corporate Controller and Chief
Accounting Officer
John T. Puhl . . . . . . . . . . 49 Chief Information Officer
Jerome de Vitry . . . . . . . . . 38 President of CompleTel S.A.S.
Hansjorg Rieder . . . . . . . . . 57 Managing Director of CompleTel GmbH
Ian Sexton . . . . . . . . . . . 39 Managing Director of CompleTel UK
Limited
</TABLE>
JAMES E. DOVEY, CompleTel's Chairman of the Board and Chief Executive
Officer, has over 30 years' experience in the telecommunications industry. In
1987, Mr. Dovey founded United Cable International, a joint venture between
United Cable and United Artists, where he served as CEO until 1990 when that
company (by then renamed TCI International) merged with the United Kingdom
assets of U S WEST Inc. to form TeleWest Communications, plc. Mr. Dovey
continued to serve as CEO of TeleWest until his return to the U.S. in late
1992. From 1992 to 1994, Mr. Dovey acted as a private consultant on a variety
of U.S. and international telecommunications and cable television projects
for TCI, U S WEST Inc., and other clients. From 1992 to 1995, Mr. Dovey
served as Deputy Chairman for the United Kingdom communications company, IVS
Cable International, which developed switched voice and data services in
areas such as Oxford, Salisbury, and Andover until the business was sold in
1995. In 1994, Mr. Dovey co-founded SPD CableTel Management, Inc., where he
actively explored various entrepreneurial opportunities in the U.S. for
providing converged cable and telephony services prior to co-founding
CompleTel in January 1998.
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WILLIAM H. PEARSON is a co-founder of CompleTel and has served as
President of European Operations since its inception. In 1994, Mr. Pearson
co-founded SPD CableTel Management, Inc. with Mr. Dovey. Between 1980 and
1994, Mr. Pearson held a variety of senior management positions with U S WEST
Inc. From 1983 to 1989, Mr. Pearson worked in U S WEST's cellular division,
including starting up its marketing department in 1983, becoming head of
strategic planning in 1986, and managing the Rocky Mountain region from 1987
to 1988. In 1989, Mr. Pearson relocated to the United Kingdom, and he served
as Senior Vice President of Marketing and Planning for TeleWest from 1990 to
1992 (where he worked to develop U S WEST's cable telephony strategy) and as
Executive Director of Business Development for U S WEST International from
1993 to 1994 (where he evaluated numerous local loop opportunities in Western
Europe and Latin America). In 1992, Mr. Pearson was an adjunct professor of
graduate-level marketing at the University of Wisconsin--Madison School of
Business.
RICHARD N. CLEVENGER, CompleTel's Senior Vice President and Chief
Technology Officer, has served in various market development and technology
management positions in domestic and international telecommunications for
over 30 years. Prior to co-founding CompleTel in 1998, Mr. Clevenger worked
from 1996 to 1997 as an independent management consultant on several business
strategy, technology, and implementation matters relating to cable
television, wireless cable, business and residential telephony, and business
video, including for SPD CableTel Management, Inc. (which he joined full time
in 1997). Mr. Clevenger served as Senior Vice President and Chief Technology
Officer for KBLCOM, Inc. from 1987 to 1995, during which time his duties
included (i) serving as President and Chief Operating Officer of KBLCOM's
business services subsidiary, Paragon Business Systems; (ii) working as Vice
President of Market Development for KBLCOM's cable television subsidiary, KBL
Ventures; and (ii) founding and serving as President and Chief Operating
Officer of the KBLCOM subsidiary, FIBRCOM, a successful competitive access
provider. From 1982 to 1987, Mr. Clevenger was Vice President of Engineering
and Technology for Cox Cable Communications, Inc. From 1973 to 1982, Mr.
Clevenger served as Vice President of Engineering for United Cable Television
of Colorado. From 1968 to 1973, Mr. Clevenger held a variety of positions at
Cablecom General, Inc., including Division Engineer, General Manager, and
Vice President of Engineering.
DAVID E. LACEY, CompleTel's Chief Financial Officer, joined CompleTel in
December 1998. Prior to joining CompleTel, Mr. Lacey served in a variety of
positions for Storage Technology Corp., including from June 1996 to December
1998 as Executive Vice President and Chief Financial Officer, from February
1995 to May 1996 as Interim Chief Financial Officer and Corporate Vice
President, and from October 1989 to February 1995 as Corporate Controller.
JAMES C. ALLEN was elected as a Director of CompleTel LLC in December
1998. From March 1993 to January 1998, Mr. Allen was the CEO and
Vice-Chairman of Brooks Fiber Properties, Inc. Since June 1998, Mr. Allen
has acted as investment director and member of the general partner of
Meritage Private Equity Fund, an investment group that specializes in
investing in communications companies. Mr. Allen also presently serves on the
boards of directors of MCI WorldCom Inc., a publicly traded U.S. and
international telecommunications company that may compete with CompleTel, and
Verio Inc., a publicly traded Internet and Web hosting company. Mr. Allen
also serves on the board of directors of David Lipscomb University in
Nashville, Tennessee.
ROYCE J. HOLLAND, who was elected as a Director of CompleTel LLC in
August 1998, is a co-founder and the Chairman and CEO of Allegiance Telecom,
Inc. Prior to founding Allegiance Telecom, Inc., Mr. Holland was one of
several co-founders of MFS Communications Company, Inc., where he served as
President and Chief Operating Officer from April 1990 until September 1996
and as Vice Chairman from September 1996 to February 1997. In January 1993,
Mr. Holland was appointed by President George Bush to the National Security
Telecommunications Advisory Committee. Mr. Holland also presently serves on
the boards of directors of Allegiance Telecom, Inc., CSG Systems, Open Port
Technologies, WNP Communications and Avesta Technologies.
LAWRENCE F. DEGEORGE was elected as a Director of CompleTel LLC in May
1998. Mr. DeGeorge is a private investor who has managed and participated in
a number of principal equity investments in technology and communications
companies, including, since December 1995, as President and Chief Executive
Officer of LPL Investment Group, Inc., LPL Management Group, Inc., and
DeGeorge Holdings Ltd. From June 1987 to January 1991, Mr. DeGeorge held
various positions
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with Amphenol Corporation, including serving as President from May 1989 to
January 1991, as Executive Vice President and Chief Financial Officer from
June 1987 to May 1989, and as a director from June 1987 until January 1991.
Mr. DeGeorge also presently serves as a director of United International
Holdings, Inc., an international provider of multi-channel television
services and Advanced Display Technologies.
PAUL J. FINNEGAN, who was elected as a Director of CompleTel LLC in May
1998, is a Managing Director of Madison Dearborn Partners, Inc., a
Chicago-based private equity investing firm, where he specializes in
investing in companies in the communications industry. Mr. Finnegan has been
a Managing Director of Madison Dearborn since 1993. Mr. Finnegan also
presently serves on the boards of directors of Allegiance Telecom, Inc. and
Focal Communications Corporation.
JAMES H. KIRBY, who was elected as a Director of CompleTel LLC in May
1998, is a Director of Madison Dearborn Partners, Inc. where he has been an
investment professional since June 1996. Prior to joining Madison Dearborn
Partners, Inc., Mr. Kirby was an Associate of The Beacon Group LLC, a private
investment and investment banking firm from June 1995 until June 1996. From
June 1993 until June 1995, Mr. Kirby was an Associate of Lazard Freres & Co.
LLC, an investment banking firm. Mr. Kirby also presently serves on the
board of directors of Wireless One Network L.P., a private cellular telephone
service provider, and Reimen Publications, a publisher of consumer magazines.
JAMES N. PERRY, JR., who was elected as a Director of CompleTel LLC in
May 1998, is a Managing Director of Madison Dearborn Partners, Inc. Since
1984, Mr. Perry has been a venture capital investor and, since 1993, a
Managing Director of Madison Dearborn. Mr. Perry also presently serves on the
boards of directors of Allegiance Telecom, Inc., Focal Communications
Corporation, Omnipoint Corporation, and Clearnet Communications, a Canadian
publicly traded company.
JOHN M. HUGO, CompleTel's Corporate Controller and Chief Accounting
Officer, joined CompleTel as Corporate Controller in April 1999. Prior to
joining CompleTel, Mr. Hugo was the Assistant Corporate Controller for Jones
Intercable, Inc. from 1994 to 1999. From 1988 to 1993, Mr. Hugo was employed
with Arthur Andersen LLP's audit and business advisory services division. Mr.
Hugo is a certified public accountant in the state of Colorado.
JOHN T. PUHL has been CompleTel Europe's Chief Information Officer since
September 1998. Prior to joining CompleTel Europe, Mr. Puhl worked from
December 1996 to September 1998 as Managing Director and Vice President of
Tanning Technology Europe, a telephony consultant. From May 1995 to November
1996, Mr. Puhl was Managing Director and Vice President of SageComm
International, a telephony consultant. From February 1992 to March 1995, Mr.
Puhl was Vice President of AT&T Europe.
JEROME DEVITRY joined the company in February 1999 and has been the
President of CompleTel S.A.S. since March 1999. Prior to joining CompleTel
S.A.S., Mr. deVitry was a Vice President of Alcatel from January 1991 until
December 1998.
HANSJORG RIEDER has been with the company since January 1999 and was
appointed Managing Director of CompleTel GmbH in April 1999. Prior to
joining CompleTel GmbH, Mr. Rieder was a Managing Director of COLT Telecom
GmbH from March 1997 until March 1999. Mr. Rieder was the Chief Executive
Officer and a Managing Director of GLOBEX GmbH and the Chief Executive
Officer of Jorg Rieder Consulting from January 1993 until March 1997. From
April 1972 until December 1992, Mr. Rieder was a Vice President and Managing
Director - Germany for Digital Equipment.
IAN SEXTON has been Managing Director of CompleTel UK Limited since
December 1998, when he joined the company. Prior to joining CompleTel UK,
from January 1992 until December 1998, Mr. Sexton was employed by General
Cable Ltd. firstly as Director of Business Operations for the Cable
Corporation, a subsidiary of General Cable, and then as Managing Director of
General Telecommunications Ltd., the business to business subsidiary of the
same company.
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ELECTION OF DIRECTORS; VOTING AGREEMENT; EXECUTIVE AUDIT, AND COMPENSATION
COMMITTEES
CompleTel LLC's board consists of eight members. There are currently no
vacancies on the board. CompleTel LLC's limited liability company agreement
provides that representatives serving on CompleTel LLC's board will be
appointed and removed by a majority vote of CompleTel LLC's equity holders
(without cumulative voting).
Pursuant to a voting agreement, the current equity holders of CompleTel
LLC have each agreed to vote all of their interests in CompleTel LLC in such
a manner as to elect the following persons to serve as Directors:
- four representatives designated by Madison Dearborn Partners,
- two representatives designated by LPL Investment Group, Inc.,
- one representative designated by the holders of a majority of the
common interests of CompleTel LLC held by members of our management
that continue to be employees of CompleTel LLC, to whom we refer to as
our "management investors," and
- one outside representative designated by our management investors.
The number of representatives designated by Madison Dearborn Partners will be
reduced
- to three representatives if Madison Dearborn Partners ceases to hold a
majority of CompleTel LLC's preferred equity but continues to hold at
least 70% of its original position,
- to two if it holds less than 70% but at least 55% of its original
position,
- to one if it holds less than 55% but at least 40% of its original
position, and
- to none if it ceases to hold at least 40% of its original position.
The number of representatives designated by LPL Investment Group's will be
reduced
- to one representative if LPL Investment Group holds less than 70% but
at least 40% of its original position, and
- to none if it ceases to hold at least 40% of its original position.
Upon a reduction in the number of representatives designated by Madison
Dearborn Partners from four to three as described above, the vacancy will not
be filled and the board will be reduced to seven representatives. Any other
vacancies created by reductions in the number of representatives that Madison
Dearborn Partners or LPL Investment Group are entitled to designate will be
filled by the holders of a majority of the preferred equity. Under the terms
of the voting agreement and the limited liability company agreement of
CompleTel LLC, the four representatives designated by Madison Dearborn
Partners are entitled to five votes so that such representatives possess a
majority of the voting power of all of the representatives on the board.
This additional voting power will cease when Madison Dearborn Partners no
longer has the right to designate four representatives.
COMMITTEES OF THE BOARD OF COMPLETEL LLC
CompleTel LLC's board has three committees:
- the Executive Committee;
- the Audit Committee; and
- the Compensation Committee.
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THE EXECUTIVE COMMITTEE. The members of the Executive Committee are
James E. Dovey, Paul J. Finnegan and Lawrence F. DeGeorge. The Executive
Committee acts as the board of directors of CompleTel LLC's operating
subsidiaries. In addition, the Executive Committee is authorized to take
certain actions on behalf of the board, but such actions must be approved
unanimously by the members of the Executive Committee or they will be
referred to the full board.
THE AUDIT COMMITTEE. The members of the Audit Committee are James H.
Kirby and Lawrence F. DeGeorge. The Audit Committee is responsible for
making recommendations to the board regarding the selection of independent
auditors, reviewing the results and scope of the audit and other services
provided by CompleTel LLC's independent accountants and reviewing and
evaluating CompleTel LLC's audit and control functions and year 2000 issues.
THE COMPENSATION COMMITTEE. The members of the Compensation Committee
are Paul J. Finnegan, James C. Allen, Lawrence F. DeGeorge, and Royce J.
Holland. The Compensation Committee is responsible for reviewing, and as it
deems appropriate, recommending to the board, policies, practices and
procedures relating to the compensation of the officers and other managerial
employees of CompleTel and the establishment and administration of employee
benefit plans. The Compensation Committee exercises all authority under any
director or employee stock option, stock purchase or other rights plans of
CompleTel, unless the board appoints any other committee to exercise such
authority, and advises and consults with the officers of CompleTel as may be
requested regarding managerial personnel policies.
MANAGING DIRECTOR OF COMPLETEL EUROPE
ING Trust (Netherlands) B.V. has been the sole managing director of
CompleTel Europe since its inception. CompleTel Europe and CompleTel LLC are
parties to a management agreement with ING Trust, dated as of March 24, 1998,
whereby ING Trust has agreed to act as the sole manager of CompleTel Europe
and to manage CompleTel Europe in the manner directed by CompleTel LLC's
board as described in the management agreement. Under the management
agreement, CompleTel LLC compensates ING Trust for its services according to
established rates. CompleTel Europe is in the process of implementing a
board of managing directors.
COMPENSATION OF DIRECTORS
CompleTel LLC or CompleTel Europe will reimburse CompleTel LLC's
directors for their reasonable out-of-pocket expenses incurred in connection
with attending board or committee meetings for CompleTel LLC or any of its
subsidiaries, including CompleTel Europe. Additionally, CompleTel LLC and its
subsidiaries, including CompleTel Europe, have agreed to maintain existing
levels of directors' and officers' indemnity insurance coverage. CompleTel
LLC's directors receive no other compensation for services provided as a
director of CompleTel LLC, as a member of the board of any of CompleTel LLC's
subsidiaries, or as a member of any board committee.
EXECUTIVE COMPENSATION
The following table sets forth in summary form all compensation paid
during the year ended December 31, 1998, to the Chief Executive Officer of
CompleTel LLC and each Executive Officer of CompleTel LLC whose annual salary
and bonus exceeded $100,000 during such year:
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Other Annual
Compensation
Name and Principal Position(1) Fiscal Year Salary ($) Bonus ($) ($)(2)
----------- ---------- --------- ------------
<S> <C> <C> <C> <C>
James E. Dovey . . . . . . . . . . . . . . . . 1998 $175,000 $95,000 ---
Chairman of the Board and Chief Executive
Officer
William H. Pearson . . . . . . . . . . . . . . 1998 $175,000 $95,000 $45,407
President of European Operations
Richard N. Clevenger . . . . . . . . . . . . . 1998 $150,000 $82,500 $32,987
Senior Vice President and Chief Technology
Officer
</TABLE>
- -----------------
(1) Does not include David E. Lacey, who joined CompleTel as its Chief
Financial Officer in December 1998 and, therefore, did not have salary and
bonus in excess of $100,000 for the fiscal year ended December 31, 1998.
During CompleTel's fiscal year ending December 31, 1999, Mr. Lacey expects
to earn a salary at an annual rate of $170,000.
(2) Includes perquisites and other benefits paid in excess of 10% of the total
annual salary and bonus received by such officer during the last fiscal
year. These amounts consist of housing allowances, moving expenses and
travel expenses associated with the relocation of these executives to Paris
and their ongoing foreign service.
EMPLOYMENT AGREEMENTS
In May 1998, CompleTel LLC's wholly owned subsidiary, CableTel
Management Inc., entered into employment agreements with each of James E.
Dovey, William H. Pearson, and Richard N. Clevenger, including, among others,
the following terms:
SALARY. During the course of their employment, Mr. Dovey and Mr.
Pearson are to receive an annual base salary of $175,000, and Mr. Clevenger
is to receive an annual base salary of $150,000. These salaries may be
adjusted upward by the board.
BONUS. At the end of each calendar year, each of Messrs. Dovey,
Pearson, and Clevenger will be entitled to receive an incentive bonus of up
to 55% of his annual salary if CompleTel achieves during the year certain
performance benchmarks set by the board.
TAX EQUALIZATION. As expatriates, Messrs. Pearson and Clevenger will be
subject to additional taxes and different taxes than if they lived and worked
in the United States. Consequently, their employment agreements contain tax
equalization provisions designed to ensure that they will be placed in
substantially the same economic position as if they were employed in the U.S.
SEVERANCE. Messrs. Dovey, Pearson, and Clevenger's employment
agreements provide them with severance benefits if their employment is
terminated due to death, disability, or nonperformance. In that case, he or
his estate will receive severance equal to his base salary and benefits for
six months, in Mr. Dovey's case, or nine months, in Messrs. Pearson and
Clevenger's case. The employee is entitled to receive severance equal to his
base salary and benefits for 24 months after the date of termination if he is
terminated without cause or if he is terminated or constructively terminated
within six months after a change in control. If the employee resigns or is
terminated for cause, he will not be entitled to severance benefits.
In December 1998, CableTel Management Inc. entered into an Employment
Agreement with David E. Lacey including, among others, the following terms:
SALARY. During the course of his employment, Mr. Lacey is to receive an
annual base salary of $170,000, which salary may be adjusted upward by the
board.
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<PAGE>
BONUS. At the end of each calendar year, beginning in 1999, Mr. Lacey
will be entitled to receive an incentive bonus of up to 50% of his annual
salary if he achieves during the year certain performance benchmarks set by
the board.
SEVERANCE. Mr. Lacey's employment provides for severance benefits if his
employment is
- terminated due to his death or disability
- terminated without cause, or is
- terminated or constructively terminated within six months after a
change of control.
In that case, Mr. Lacey or his estate will receive severance equal to his base
salary and benefits for three months. If his employment is terminated for cause
or he resigns, he will be entitled to no severance.
EXECUTIVE SECURITIES AGREEMENTS
GENERAL. In May 1998, CompleTel LLC entered into executive securities
agreements with Mr. Dovey, Mr. Pearson and Mr. Clevenger including, among
others, the following terms:
(1) TIME VESTING. Each executive's common ownership interest in CompleTel LLC
vests over a four-year period. 30% vested on the date of grant and 17.5%
vests on each of the first four anniversaries of the date of grant. Time
vesting would be accelerated by one year upon an initial public offering of
equity of CompleTel. In addition, 100% of each executive's common
ownership interest in CompleTel LLC will vest
- upon a sale of CompleTel where at least 50% of the consideration for
such sale consists of cash or marketable securities,
- upon any other sale of CompleTel if the executive is not afforded a
comparable time-vesting arrangement in the surviving entity, and
- if the executive is terminated by CompleTel other than for cause or
nonperformance.
(2) PARTIAL PERFORMANCE VESTING. Pursuant to the performance vesting agreement
described below, a portion of the executive's common ownership interest in
CompleTel LLC is, in addition to time vesting, subject to performance
vesting based upon the valuation of CompleTel LLC's equity implied by an
initial public offering of equity of CompleTel or by actual sales of
CompleTel LLC securities by Madison Dearborn Partners. The percentage of
that portion of the executive's common ownership interest eligible to vest
in any performance-vesting event is based on factors set out in the
performance vesting agreement.
(3) REPURCHASE OF SECURITIES. If the executive's employment is terminated for
any reason, CompleTel LLC or its assignees, or, in limited circumstances,
LPL and the other founding management investors, will have the right to
repurchase all the executive's interests that have vested based on time at
fair market value, and all other interests held by the executives at
original cost.
(4) RESTRICTIONS ON TRANSFER AND RELATED AGREEMENTS. The executive's common
and preferred interest in CompleTel LLC are subject to various restrictions
on transferability, to holdback periods in the event of a public offering
of CompleTel LLC's or CompleTel Europe's securities and to provisions
requiring the holder of such securities to approve, and if requested by
CompleTel LLC to sell its securities in, any sale of CompleTel LLC or
CompleTel Europe approved by the holders of a majority of CompleTel LLC's
equity.
(5) NONCOMPETITION AND NONSOLICITATION AGREEMENTS. During the period of his
employment and for two years thereafter, the executive has agreed:
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<PAGE>
- not to hire or in any other way interfere with the CompleTel's
employee, customer and other business relations; and
- not to participate in any business or enterprise that competes with
CompleTel Europe in any geographical area in which CompleTel Europe
then operates or in good faith proposes to operate.
DAVID E. LACEY EXECUTIVE SECURITIES AGREEMENT. In December 1998, CompleTel
LLC and Mr. Lacey entered into an executive securities agreement, containing
substantially the same terms as the executive securities agreements described
above, except that Mr. Lacey's agreement includes a modified time vesting
schedule:
- at the end of the year in which he was hired, a portion vested in an
amount equal to 25% divided by the number of months from the month of
hire until the end of the year of hire;
- additional 25% will vest on the last day of each of the next three
calendar years; and
- the remainder will vest on the fourth anniversary of the date of hire.
EXECUTIVE SECURITIES AGREEMENTS ENTERED INTO BY OTHER MANAGEMENT
INVESTORS. Each other member of CompleTel's senior management who purchases
or has purchased common ownership interests in CompleTel LLC must enter into
an executive securities agreement. In general, these executive securities
agreements have substantially similar terms as Mr. Lacey's executive
securities agreement described above, except for the omission of terms
relating to the preferred ownership interests in CompleTel LLC.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to 1999, CompleTel did not have a Compensation Committee and the
compensation of executive officers and other significant employees was
determined by CompleTel LLC's board. James E. Dovey, our Chairman and Chief
Executive Officer, and William H. Pearson, our President of European
Operations, are both currently members of CompleTel LLC's board. In 1999, the
board established a Compensation Committee consisting of four of the
non-employee members, which is responsible for decisions regarding salaries,
incentive compensation, stock option grants and other matters regarding
executive officers and key employees and regarding director compensation and
stock option grants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPLETEL LLC LIMITED LIABILITY COMPANY AGREEMENT
CompleTel LLC's equity investors have entered into a limited liability
company agreement, dated as of May 18, 1998 and amended and restated as of
January 28, 1999, that governs the affairs of CompleTel LLC. The limited
liability company agreement includes, among others, the following terms:
CAPITAL STRUCTURE. The limited liability company agreement authorized
the issuance of (i) 65,750 convertible preferred ownership interests, (ii)
107,500 common ownership interests, and (iii) certain other interests
issuable only in limited circumstances. The 65,750 preferred interests have
been issued to the management investors under the executive securities
agreements. Of the 107,500 common interests, 82,500 are reserved for issuance
upon conversion of the preferred interests, and 25,000 have been issued, or
are reserved for issuance, to the management investors and key employees
under the executive securities agreements. Of the 25,000 common ownership
interests issued or issuable to the management investors, 7,500 are subject
to performance vesting under the performance vesting agreement. Up to 7,500
of the common ownership interests issuable upon conversion of the preferred
interests are subject to forfeiture in a one-for-one ratio with the
performance vesting of common ownership interests issued to management.
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<PAGE>
TERMS OF THE PREFERRED INTERESTS. The preferred interests accrue a
preferred yield at the rate of 8% per year of the sum of the liquidation
value thereof and all accumulated and unpaid preferred yield thereon.
"Liquidation value" for any preferred interest is equal to
(1) the initial price paid to CompleTel LLC for such preferred interest on
its date of issuance, PLUS
(2) the aggregate contributions to the capital of CompleTel LLC made
pursuant to the equity purchase agreement with respect to such
preferred interest after its date of issuance, MINUS
(3) all distributions constituting a return of capital with respect to
such preferred interest after its date of issuance.
The indenture restricts the ability of CompleTel Europe to make dividends to
CompleTel LLC in order to pay the preferred yield on the preferred interests.
No distributions out of earnings and profits may be made to the common
interests unless CompleTel LLC has first made distributions to the holders of
preferred interests to pay the full amount of accrued preferred yield on the
preferred interests. Upon any liquidation, dissolution, or winding up of
CompleTel LLC (whether voluntary or involuntary), each holder of preferred
interests will be entitled to receive, before any distribution is made with
respect to any other class of CompleTel LLC's equity, distributions in cash
equal to the aggregate liquidation value of all preferred interests held by
such holder plus all accrued and unpaid preferred yield thereon.
The preferred interests are convertible at any time and from time to
time into common interests at the election of the holder thereof. In
addition, all holders of preferred interests will be required to convert
their preferred interests into common interests upon (i) a significant
initial public offering of CompleTel LLC's common equity or (ii) the
affirmative vote of the holders of a majority of the outstanding preferred
interests. Upon any conversion of preferred interests, the holder thereof has
the right to receive a distribution in cash equal to the amount of accrued
but unpaid preferred yield on the preferred interests being converted, except
that, if the conversion occurs in connection with an initial public offering
of CompleTel LLC's common equity, the converting holder may elect to receive
such payment in the form of CompleTel LLC securities at the public offering
price. The 65,750 outstanding preferred interests are currently convertible
into 82,500 common interests. The conversion ratio is subject to adjustment
on a weighted-average basis upon any issuance or deemed issuance of common
interests, or securities convertible into or exercisable for common
interests, that otherwise would dilute the economic interests of the holders
of preferred interests. The holders of preferred interests are entitled to
vote their preferred interests with the holders of common interests on an
as-if-converted basis on all matters submitted to a vote of the members.
TERMS OF THE COMMON INTERESTS. The holders of common interests are
entitled to one vote for each common interest held on all matters submitted
to a vote of the members. Holders of common interests are entitled, subject
to the preferences of the preferred interests, to receive such distributions,
if any, as may be declared by CompleTel LLC's board out of profits allocated
to the members. In the event of a liquidation, dissolution, or winding up of
CompleTel LLC, the holders of common interests are entitled to share ratably
in the assets of CompleTel LLC which are available for distribution, if any,
remaining after the payment of all debts and liabilities of CompleTel LLC and
the liquidation preference of any outstanding preferred interests.
CONVERSION OF COMPLETEL LLC INTO A SUBCHAPTER C CORPORATION. Upon the
affirmative vote of CompleTel LLC's board and the holders of a majority of
the common and preferred interests, CompleTel LLC will be converted into a
corporation, as that term is used in Subchapter C of the Internal Revenue
Code. In connection with such conversion, each holder of preferred interests
or common interests of CompleTel LLC will receive comparable equity
securities of such corporation on the terms set forth in the LLC Agreement.
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<PAGE>
EQUITY PURCHASE AGREEMENT
In May 1998, CompleTel's equity investors, including the management
investors, and CompleTel LLC entered into an equity purchase agreement,
subsequently amended and restated in January 1999.
RESTRICTIVE COVENANTS. The private equity investors have the right to
approve or disapprove CompleTel LLC's or CompleTel Europe's taking or
agreeing to take certain actions, including, among other things,
(1) making distributions with respect to, redeeming, or issuing any equity
securities, any securities convertible into or exercisable for equity
securities, or any debt with equity features,
(2) loaning monies,
(3) disposing of significant assets,
(4) making acquisitions or entering into joint ventures,
(5) entering into any merger, consolidation, liquidation,
recapitalization, or reorganization,
(6) entering into transactions with affiliated persons,
(7) incurring significant indebtedness, and
(8) entering into or modifying any employment arrangement with CompleTel's
Chief Executive Officer.
The private equity investors have approved CompleTel's consummation of the
exchange offer.
CONTRACTUAL PREEMPTIVE RIGHTS. Prior to an initial public offering or a
sale of CompleTel LLC or CompleTel Europe, the private equity investors and
the management investors have the right to participate pro rata in any
issuance of common interests, or any securities convertible into or
exercisable for common interests, other than issuances as part of a pro rata
stock split or stock dividend, upon the conversion or exercise of other
CompleTel LLC securities, of securities reserved for issuance to management
investors, as part of the financing for an acquisition, to a lender in
connection with its loan to CompleTel LLC or CompleTel Europe, or in an
initial public offering.
PUT RIGHTS. If a significant initial public offering or a sale of
CompleTel LLC or CompleTel Europe has not occurred by May 18, 2005, each
holder of preferred interests, or securities issued upon exercise thereof or
otherwise in connection therewith, will have the right to require CompleTel
LLC to take all actions necessary to purchase such interests or other
securities held by such holder for fair market value (or, in the case of
preferred interests to be repurchased, the greater of fair market value and
the liquidation value, together with all accrued but unpaid preferred yield
thereon). The indenture limits CompleTel Europe's ability to pay dividends
and take other action that may be required to effect the repurchase.
PERFORMANCE VESTING AGREEMENT
In May 1998, the private equity investors, the management investors, and
CompleTel LLC entered into a performance vesting agreement, which was amended
in January 1999. Under the performance vesting agreement, 7,500 of the 25,000
common interests issued or reserved for issuance to the management investors
are subject to performance vesting based upon the valuation of CompleTel
LLC's equity implied by an initial public offering of equity or by actual
sales of CompleTel LLC securities by Madison Dearborn Partners. In addition,
up to 7,500 of the common interests issuable to the management investors upon
conversion of the preferred interests are subject to forfeiture if and when
common interests subject to performance vesting vest. As a result, depending
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upon the percentage of the common interests subject to performance vesting
that ultimately vest, and the corresponding percentage of common interests
issuable upon conversion of the preferred interests that are ultimately
forfeited, the allocation of total equity ownership of CompleTel LLC between
the holders of preferred interests on an as-if-converted basis and the
holders of common interests will range between 82.5%/17.5% and 75.0%/25.0%,
assuming no other issuances of CompleTel LLC securities.
SECURITYHOLDERS AGREEMENT
In May 1998, the private equity investors, the management investors, and
CompleTel LLC entered into a securityholders agreement, which was amended in
January 1999, that prohibits the management investors from transferring any
preferred interests, or securities convertible into or exercisable for
preferred interests, as opposed to their common interests, prior to May 18,
2000, other than to their affiliates, family members, or estate planning
entities, or as part of a sale of CompleTel LLC. Transfers of any such
preferred securities by private equity investors and by management investors
after May 18, 2000, other than transfers to affiliates, family members, or
estate planning entities, to the public, or as part of a sale of CompleTel
LLC, are subject to first refusal rights in favor of the other holders of
preferred securities, and to "tag-along" rights of the holders of preferred
securities and of the management investors with respect to their common
interests that have both time vested and, if applicable, performance vested,
to participate pro rata in such transfer. In the event a sale of CompleTel
LLC or CompleTel Europe is approved by the holders of a majority of the
preferred securities, each of the private equity investors and management
investors has agreed to approve such sale and, if requested, to sell its
CompleTel LLC securities in such sale.
REGISTRATION AGREEMENT
The private equity investors, the management investors, and CompleTel
LLC are parties to a registration agreement that provides the holders of a
majority of the preferred securities to require CompleTel LLC to consummate
an initial public offering. After CompleTel LLC's initial public equity
offering, the private equity investors are entitled to demand up to three
additional registrations on Form S-1, or its successor, under the Securities
Act, and the holders of at least 10% of the outstanding preferred securities
may request unlimited short-form registrations. In addition, the private
equity investors and the management investors are entitled to "piggyback" on
primary or secondary registered public offerings of CompleTel LLC's
securities. Each private equity investor and management investor is subject
to holdback restrictions in the event of an initial public offering or other
public offering of CompleTel LLC securities.
RESTRUCTURING TRANSACTIONS
In February 1999, CompleTel Europe, CompleTel Holdings and CompleTel
(N.A.) N.V. entered into a subscription agreement pursuant to which CompleTel
(N.A.) N.V. purchased 7.0% of the common interests of CompleTel Europe on a
fully diluted basis and issued a corresponding percentage of its equity
interests to CompleTel Holdings for the capital accounts of the holders of
Class B interests of CompleTel Holdings.
The subscription agreement imposes a number of covenants on CompleTel
Europe and CompleTel (N.A.) N.V. for the benefit of CompleTel Holdings,
including:
(1) providing certain financial information concerning CompleTel Europe
and its subsidiaries that CompleTel Holdings is required to provide to
its members;
(2) subject to debt instruments to which CompleTel Europe is a party,
distributing cash to CompleTel Holdings in an amount that is intended
to approximate its members' U.S. federal, state and local income tax
liability on the net income allocated to its members for U.S. income
tax purposes by CompleTel Holdings;
(3) creating a sponsored American Depositary Receipt program for the
Common Shares that will be in effect on or prior to the occurrence of
a liquidation event; and
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(4) notifying CompleTel Holdings at the appropriate time that there is no
material likelihood that CompleTel Europe should be considered a
"passive foreign investment company" for U.S. federal income tax
purposes for its current or any future taxable year.
Pursuant to the subscription agreement, CompleTel Europe has agreed that
all future transactions between CompleTel Europe and its officers, directors,
principal shareholders or their respective affiliates, will be on terms no
less favorable to CompleTel Europe than can be obtained from unaffiliated
third parties.
UNITS OFFERING
In February 1999, CompleTel Europe and CompleTel Holdings issued 147,000
units, each unit consisting of $1,000 principal amount at maturity of 14%
senior discount notes of CompleTel Europe due 2009 and 10 non-voting class B
membership interests of CompleTel Holdings, in an offering under Rule 144A of
the Securities Act. Mr. DeGeorge, one of CompleTel LLC's directors,
purchased 4,000 units in the offering on the same terms as the other
purchasers.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of CompleTel Europe's issued and paid-up shares of capital are owned
by CompleTel Holdings (indirectly through its wholly owned subsidiary,
CompleTel (N.A.) N.V.). CompleTel LLC owns all of the Class A equity
interests of CompleTel Holdings which represent 93% of CompleTel Holdings'
total equity. The remaining 7% is represented by the non-voting Class B
Interests included in the units purchased by the holders of the old notes.
The power of CompleTel LLC to vote and dispose of its equity interests in
CompleTel Holdings is exercised by CompleTel LLC's board, which is elected by
the holders of CompleTel LLC's preferred interests and common interests, and
the power of CompleTel Holdings to vote and dispose of the outstanding
capital stock of CompleTel Europe is exercised by CompleTel Holdings' board
of managers, which is elected by CompleTel LLC as the sole owner of the
voting interests in CompleTel Holdings. CompleTel LLC's board and CompleTel
Holdings' board of managers have the same composition. Thus, the holders of
preferred and common interests in CompleTel LLC could be deemed to be
beneficial owners of the equity interests of CompleTel Holdings owned by
CompleTel LLC and the capital stock of CompleTel Europe indirectly owned by
CompleTel Holdings. None of the holders of the Class B interests of CompleTel
Holdings hold interests representing more than 5% of the outstanding common
equity interests of CompleTel Holdings.
The following table sets forth certain information regarding the
beneficial ownership of the equity securities of CompleTel LLC by:
(1) each of the directors and the named executive officers;
(2) all directors and executive officers as a group;
(3) each owner of more than 5% of the equity securities of CompleTel LLC
("5% Owners").
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<TABLE>
<CAPTION>
COMPLETEL LLC
-------------
PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON UNITS(1) COMMON UNITS(2)
------------------------------------ --------------- ---------------
<S> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
James E. Dovey(3) . . . . . . . . . . . . . . . . . . 6,564 6.1%
William H. Pearson(4)(5) . . . . . . . . . . . . . . 6,731 6.3%
Richard N. Clevenger(5)(6) . . . . . . . . . . . . . 5,760 5.4%
James C. Allen(7) . . . . . . . . . . . . . . . . . . 627 *
Royce J. Holland(8) . . . . . . . . . . . . . . . . . 627 *
Lawrence F. DeGeorge(9)(11) . . . . . . . . . . . . . 23,292 21.7%
Paul J. Finnegan . . . . . . . . . . . . . . . . . . -- --
James H. Kirby . . . . . . . . . . . . . . . . . . . -- --
James N. Perry, Jr. . . . . . . . . . . . . . . . . . -- --
All Directors and executive officers as a group
(11 persons) . . . . . . . . . . . . . . . . . . . . 44,748 41.6%
5% OWNERS:
Madison Dearborn Partners(10) . . . . . . . . . . . . 56,470 52.5%
DeGeorge Holdings(11) . . . . . . . . . . . . . . . . 23,292 21.7%
</TABLE>
- -------------------
* Less than 1%
(1) All information with respect to ownership of common interests is presented
on a fully diluted basis assuming the conversion of all outstanding
preferred interests and including all common interests subject to
performance vesting, but does not give effect to any forfeiture of
preferred interests upon performance vesting of such performance vesting
interests under the performance vesting agreement. The preferred interests
of CompleTel LLC are currently convertible into common interests of
CompleTel LLC at a rate of approximately 1.25475 common interests for each
preferred interest converted.
(2) Calculated on a fully diluted basis assuming the conversion of all
outstanding preferred interests and including all common interests subject
to performance vesting, but not giving effect to any forfeiture of
preferred interests upon performance vesting of such performance vesting
interests under the performance vesting agreement.
(3) These common interests are held by Mr. Dovey, Dovey Company LLC and Dovey
Family Partners LLP. 2,025 of such common interests are subject to
performance vesting under the performance vesting agreement. Approximately
60.46 of such common interests issuable upon conversion of preferred
interests are subject to forfeiture in the event of performance vesting of
management common interests under the performance vesting agreement. All of
such common interests, other than those issuable upon conversion of
preferred interests, held directly and indirectly by Mr. Dovey are subject
to time vesting, with 30% vested on May 18, 1998, and 17.5% vesting on each
of the first four anniversaries thereof. Mr. Dovey's address is c/o
CompleTel LLC, 6300 South Syracuse Way, Suite 355, Englewood, Colorado
80111.
(4) 2,287 of the common interests held by Mr. Pearson are subject to
performance vesting under the performance vesting agreement. Approximately
6.05 of the common interests issuable upon conversion of the preferred
interests held by Mr. Pearson are subject to forfeiture in the event of
performance vesting of management common interests under the performance
vesting agreement. All of the common interests, other than those issuable
upon conversion of preferred interests, held by Mr. Pearson are subject to
time vesting, with 30% vested on May 18, 1998, and 17.5% vesting on each of
the first four anniversaries thereof.
(5) The address for Mr. Pearson and Mr. Clevenger is c/o CompleTel Europe,
Washington Plaza--Immeuble Artois, 44 rue Washington, 75008 Paris CEDEX 08,
France.
(6) 1,045 of the common interests held by Mr. Clevenger are subject to
performance vesting under the performance vesting agreement. Approximately
42.32 of the common interests issuable upon conversion of the preferred
interests held by Mr. Clevenger are subject to forfeiture in the event of
performance vesting of management common interests under the performance
vesting agreement. All of the common interests, other than those issuable
upon conversion of preferred interests, held by Mr. Clevenger are subject
to time vesting, with 30% vested on May 18, 1998, and 17.5% vesting on each
of the first four anniversaries thereof.
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(7) Approximately 57.03 of these common interests are subject to forfeiture in
the event of performance vesting of management common interests under the
performance vesting agreement.
(8) Approximately 57.03 of these common interests are subject to forfeiture in
the event of performance vesting of management common interests under the
performance vesting agreement.
(9) Mr. DeGeorge is the Chairman and Chief Executive Officer of LPL Investment
Group, Inc., the general partner of DeGeorge Holdings Limited Partnership,
and his address is c/o LPL Investment Group, Inc., 140 Intracoastal Pointe,
Suite 410, Jupiter, Florida 33477.
(10) These common interests are held by Madison Dearborn Capital Partners II,
L.P. Approximately 5,133.65 of these common interests are subject to
forfeiture in the event of performance vesting of management common
interests under the performance vesting agreement. The address of Madison
Dearborn Partners, Inc. is Three First National Plaza, Suite 3800, Chicago,
Illinois 60602.
(11) These common interests are held by DeGeorge Holdings Limited Partnership.
Approximately 2,117.45 of these common interests are subject to forfeiture
in the event of performance vesting of management common interests under
the performance vesting agreement. DeGeorge Holdings Limited Partnership
also holds 40,000 Class B interests of CompleTel Holdings, representing
approximately 2.7% of the outstanding Class B interests. The address of
DeGeorge Holdings Limited Partnership is Investment Group, Inc., 140
Intracostal Pointe, Suite 410, Jupiter, Florida 33477. Mr. DeGeorge has
sole voting and investment power over the units owned by DeGeorge Holdings
Limited Partnership.
DESCRIPTION OF CERTAIN INDEBTEDNESS
We have received a commitment from Nortel to provide $20 million of
vendor financing and from Paribas for a senior credit facility of
approximately $90 million, of which we expect to use approximately $20
million to repay the vendor financing provided by Nortel. These senior
credit facilities will be used primarily to finance the deployment of our
networks in France.
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DESCRIPTION OF THE NOTES
The new notes, like the old notes will be issued under the indenture,
dated as of February 16,1999, between CompleTel Europe, as issuer, CompleTel
ECC B.V., as former escrow guarantor, and U.S. Bank Trust National
Association, as trustee (the "Trustee"). On April 25, 1999, CompleTel ECC
B.V. was released from its obligations under the Indenture. References in
this "Description of the Notes" to the "Company" refer to CompleTel Europe
alone and not to its subsidiaries. References in this "Description of the
Notes" to "CompleTel LLC" refer to CompleTel LLC alone and not to its
subsidiaries.
The following description of the terms of the indenture is a summary.
It does not restate the indenture and excludes certain of the definitions and
complex legal terminology contained in the indenture. While we believe this
summary contains the information about the indenture which is important to
your decision to exchange old notes for new notes, it does not include all of
the provisions of the indenture that you may feel are important. The
indenture, and not this summary, defines your rights as a note holder. The
indenture and its associated documents contain the full legal text of the
matters described in this section. A copy of the indenture has been filed
with the SEC as part of our registration statement of which this prospectus
forms a part. See "Available Information" on the inside front cover of the
prospectus for information on how to obtain a copy.
GENERAL
The notes:
- will be unsecured unsubordinated obligations of CompleTel Europe;
- will be limited to $147,500,000 aggregate principal amount at
maturity; and
- will mature on February 15, 2009.
Cash interest will not be payable on the notes prior to February 15, 2004.
Until, February 15, 2004, a significant amount of original issue discount
will be recognized by each owner of notes as such discount accrues from the
date of issuance of the old notes. From and after February 15, 2004, cash
interest on the notes will accrue at a rate of 14% per annum from February
15, 2004 or from the most recent interest payment date to which interest has
been paid or provided for. Cash interest will be payable semi-annually on
February 15 and August 15 of each year, commencing August 15, 2004. Interest
payments will be made to the registered owner of each note at the close of
business on the February 1 or August 1 immediately preceding the interest
payment date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. If any additional interest (in addition to the stated
interest on the notes) becomes payable on the notes, it will be payable in
cash semi-annually on February 15 and August 15 of each year.
The notes will be issued only in fully registered form, without coupons,
in minimum denominations of $100,000 principal amount at maturity. Any notes
issued in denominations in excess of $100,000 will be issued in increments of
$1,000 principal amount at maturity. No service charge will be made for any
registration of transfer or exchange of notes, but CompleTel Europe may
require payment of a sum sufficient to cover any transfer tax or other
similar governmental charge payable in connection therewith.
METHOD OF RECEIVING PAYMENT
Principal of, premium, if any, and interest on the notes will be
payable, and the notes may be exchanged or transferred, at the office or
agency of CompleTel Europe in the Borough of Manhattan, the City of New York
(which initially will be in each case the corporate trust office of the
Trustee (the "Paying Agent") at 100 Wall Street, 20th Floor, New York, New
York 10005); PROVIDED that, at the option of CompleTel Europe, payment of
interest may be made by check mailed to the registered owners of the notes at
their registered addresses.
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ADDITIONAL AMOUNTS
All payments made by CompleTel Europe or CompleTel LLC under the notes
will be made free and clear of, and without withholding or deduction for any
present or future tax or other government charge (including penalties and
interest) imposed by or on behalf of the government of the Netherlands or any
political subdivision or taxing authority or agency thereof or therein or any
other jurisdiction in which CompleTel Europe is organized or engaged in
business for tax purposes ("Taxes"), unless CompleTel Europe or CompleTel LLC
is required to withhold or deduct Taxes by law or by the interpretation or
administration thereof. If CompleTel Europe or CompleTel LLC is required to
withhold or deduct any amount for or on account of Taxes, from any payment
made under the notes, CompleTel Europe or CompleTel LLC will pay such
additional amounts ("Additional Amounts") as may be necessary so that the net
amount received by each owner of notes after such withholding or deduction
will equal or exceed the amount the owner would have received if such Taxes
had not been withheld or deducted. CompleTel Europe's obligation to pay
Additional Amounts does not apply to
- any Taxes that would not have been imposed but for the existence of
any present or former connection between the relevant holder and the
Netherlands or any political subdivision or taxing authority or agency
thereof or therein or any other jurisdiction in which CompleTel Europe
is organized or engaged in business for tax purposes (other than the
mere receipt of such payment or the ownership or holding outside of
the Netherlands or such other jurisdiction of such Note);
- any estate, inheritance, gift, sales, transfer, personal property tax
or similar tax, assessment or governmental charge; or
- any Taxes payable otherwise than by deduction or withholding from
payments of principal of (or premium, if any, on) or interest on such
Note.
CompleTel Europe also will not be required to pay Additional Amounts if the
payment could have been made without such deduction or withholding if the
beneficiary of the payment had presented the note for payment within 30 days
after the date on which such payment or such note became due and payable or
the date on which payment thereof is duly provided for. In addition,
CompleTel Europe is not required to pay Additional Amounts with respect to
any payment of principal of (or premium, if any, on) or interest on such note
to any Holder who is a fiduciary or partnership or any person other than the
sole beneficial owner of such payment, to the extent that a beneficiary or
settlor with respect to such fiduciary, a member of such a partnership or the
beneficial owner of such payment would not have been entitled to the
Additional Amounts had such beneficiary, settlor, member or beneficial owner
been the actual Holder of such Note.
If CompleTel Europe conducts business in any jurisdiction (the "Taxing
Jurisdiction") other than the Netherlands in a manner which causes Holders to
be liable for taxes on payments under the notes for which they would not have
been so liable but for such conduct of business in the Taxing Jurisdiction,
"Taxes" shall include taxes imposed by way of deduction or withholding by
such Taxing Jurisdiction and CompleTel Europe's and CompleTel LLC's
obligations to pay Additional Amounts shall apply without regard to whether
Holders or beneficial owners have a present or former connection with such
Taxing Jurisdiction or any prefecture or territory thereof. CompleTel Europe
or CompleTel LLC will furnish to the Holders of the notes, within 30 days
after the date the payment of any Taxes so deducted or withheld is due
pursuant to applicable law, certified copies of tax receipts evidencing such
payment by CompleTel Europe or CompleTel LLC.
Whenever in the indenture or in this "Description of the Notes" there is
mentioned, in any context, the payment of principal, premium, if any,
interest or of any other amount payable under or with respect to any Note,
such mention shall be deemed to include mention of the payment of Additional
Amounts to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof. The foregoing obligations relating to
Additional Amounts shall survive any termination, defeasance or discharge of
the indenture.
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COMPLETEL LLC GUARANTEE
CompleTel LLC has unconditionally guaranteed, on a senior unsecured
basis, the full and prompt performance of CompleTel Europe's obligations
under the indenture and the notes, including the payment of principal,
premium, if any, interest, and Additional Amounts, if any, on the notes.
The indenture does not restrict any activities of CompleTel LLC,
including the ability of CompleTel LLC to incur indebtedness, and all future
debt and other liabilities of CompleTel LLC's subsidiaries, if any, other
than CompleTel Europe or its subsidiaries, will be effectively senior to the
obligations of CompleTel LLC under the guarantee.
CompleTel LLC is a holding company with no material business operations,
sources of income, or other assets other than its interests in CompleTel
Europe and CompleTel Europe's subsidiaries. Accordingly, if CompleTel Europe
is unable to satisfy its obligations under the indenture and the notes, it is
unlikely that CompleTel LLC will have sufficient funds available to satisfy
its obligations under the Guarantee.
OPTIONAL REDEMPTION
CompleTel Europe may redeem the notes at its option, in whole or in
part, at any time or from time to time, on or after February 15, 2004. The
notes may be redeemed at the redemption prices, expressed in percentages of
principal amount at maturity, set forth below, plus accrued and unpaid
interest, if any, to the redemption date, subject to the right of Holders on
the relevant Regular Record Date that is on or prior to the Redemption Date
to receive interest due on an Interest Payment Date, if redeemed during the
12-month period commencing February 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PRICE
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004 . . . . . . . . . . . . . . . . . . . . . . . 107.000
2005 . . . . . . . . . . . . . . . . . . . . . . . 104.667
2006 . . . . . . . . . . . . . . . . . . . . . . . 102.333
2007 and thereafter. . . . . . . . . . . . . . . . 100.000%
</TABLE>
In addition, at any time prior to February 15, 2002, CompleTel Europe
may, at its election and on one or more occasions, redeem up to (i) 33 1 3%
of the principal amount at maturity of the notes originally issued with the
proceeds of one or more public equity offerings, at CompleTel Europe's
option, at a redemption price of 114% of the accreted value on the redemption
date plus accrued and unpaid interest, if any, to the redemption date;
PROVIDED that (i) at least $98,334,000 aggregate principal amount at maturity
of the notes remains outstanding after each such redemption.
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES
If as a result of any change in or amendment to any laws or regulations
CompleTel Europe becomes required to pay any Additional Amounts and the
payment of such Additional Amounts cannot reasonably be avoided by CompleTel
Europe, the notes may be redeemed at the option of CompleTel Europe, in whole
but not in part, at any time prior to the second interest payment date after
such change or amendment at a redemption price equal to 100% of the accreted
value of the notes to the redemption date, plus any accrued and unpaid
interest and any Additional Amounts then due.
SELECTION AND NOTICE OF REDEMPTION
To redeem the notes, we must give you not less than 30 nor more than 60
days' prior notice which we must mail to you by first class mail to your last
address as it appears in the security register. Notice of any redemption
relating to a public equity offering must be mailed within 60 days after such
public equity offering.
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In the case of any partial redemption, the trustee will select the notes
for redemption:
- in compliance with the requirements of the principal national
securities exchange, if any, on which the notes are listed, or
- if the notes are not listed on a national securities exchange, PRO
RATA, by lot or by such other method as the trustee in its sole
discretion will deem to be fair and appropriate; or
- in the case of a partial redemption following a public equity
offering, PRO RATA.
No note of $1,000 in principal amount or less will be redeemed in part.
If any note is to be redeemed in part only, the notice of redemption relating
to such note will state the portion of the principal amount of such note to
be redeemed. A new note in principal amount equal to the unredeemed portion
of a note will be issued in the name of the holder of the note upon
cancellation of the original note.
SINKING FUND
There will be no sinking fund payments for the notes.
RANKING
The notes are unsubordinated obligations of CompleTel Europe and will
have the same right of payment as all other existing and future unsecured
unsubordinated indebtedness of CompleTel Europe. The notes are senior in
right of payment to all subordinated indebtedness of CompleTel Europe.
CompleTel Europe is a holding company with limited assets and no business
operations of its own. CompleTel Europe operates its business through its
subsidiaries. Any right of CompleTel Europe and its creditors, including
owners of the notes, to participate in the assets of any of CompleTel
Europe's subsidiaries upon any liquidation or administration of any such
subsidiary will be subject to the prior claims of the subsidiary's creditors,
including trade creditors.
CERTAIN DEFINITIONS
The following are significant terms defined in the indenture. You
should review the indenture to see full disclosure of all terms that are
defined in the indenture.
"Accreted Value" means, for any Specified Date, the amount provided
below for each $1,000 principal amount at maturity of notes:
(1) if the Specified Date occurs on one of the following dates (each a
"Semi-Annual Accrual Date") the Accreted Value will equal the amount
set forth below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
------------------------ --------------
<S> <C>
August 15, 1999. . . . . . . . . . . . . . . . . . $ 543.93
February 15, 2000. . . . . . . . . . . . . . . . . 582.01
August 15, 2000. . . . . . . . . . . . . . . . . . 622.75
February 15, 2001. . . . . . . . . . . . . . . . . 666.34
August 15, 2001. . . . . . . . . . . . . . . . . . 712.99
February 15, 2002. . . . . . . . . . . . . . . . . 762.90
August 15, 2002. . . . . . . . . . . . . . . . . . 816.30
February 15, 2003. . . . . . . . . . . . . . . . . 873.44
August 15, 2003. . . . . . . . . . . . . . . . . . 934.58
February 15, 2004. . . . . . . . . . . . . . . . . $1,000.00
</TABLE>
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(2) if the Specified Date occurs before the first Semi-Annual Accrual
Date, the Accreted Value of the notes, will equal the sum of
(a) $508.54; and (b) an amount equal to the product of
(x) the applicable Accreted Value for the first Semi-Annual Accrual
Date less $508.54, MULTIPLIED by
(y) a fraction, the numerator of which is the number of days from
February 16, 1999 to the Specified Date, using a 360-day year of
twelve 30-day months, and the denominator of which is the number
of days from February 16, 1999 to the first Semi-Annual Accrual
Date, using a 360-day year of twelve 30-day months;
(3) if the Specified Date occurs between two Semi-Annual Accrual Dates,
the Accreted Value will equal the sum of
(a) the applicable Accreted Value for the Semi-Annual Accrual Date
immediately preceding such Specified Date and
(b) an amount equal to the product of
(x) the applicable Accreted Value for the immediately following
Semiannual Accrual Date less the Accreted Value for the
immediately preceding Semi-Annual Accrual Date MULTIPLIED by
(y) a fraction, the numerator of which is the number of days from the
immediately preceding Semi-Annual Accrual Date to the Specified
Date, using a 360-day year of twelve 30-day months, and the
denominator of which is 180; or
(4) if the Specified Date occurs after February 15, 2004, the Accreted
Value will equal $1,000.
"Acquired Indebtedness" means Indebtedness of a person existing at the
time it becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary and not incurred in connection
with, or in anticipation of, such person becoming a Restricted Subsidiary or
such Asset Acquisition.
"Adjusted Consolidated Net Income" means, for any period, the aggregate
net income or loss of CompleTel Europe and its Restricted Subsidiaries for
such period determined in conformity with GAAP. The following items,
however, are excluded in computing Adjusted Consolidated Net Income:
(1) the net income or loss of any person that is not a Restricted
Subsidiary, except
(a) with respect to net income, to the extent of the amount of
dividends or other distributions actually paid to CompleTel
Europe or any of the Restricted Subsidiaries by such person and
(b) with respect to net losses, to the extent of the amount of
Investments made by CompleTel Europe or any Restricted Subsidiary
in such person;
(2) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary out of such net income is not at the time
permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary;
PROVIDED that solely for the purposes of calculating the Consolidated
Leverage Ratio, the exclusion of net income of a Restricted Subsidiary
pursuant to this clause (F) will not give rise to any restrictions on
the declaration or payment of dividends or other distributions which
are permitted pursuant to clause (6) of the second paragraph under of
the "Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries"covenant described below;
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(3) any gains or losses, on an after-tax basis, attributable to Asset
Sales;
(4) except for purposes of calculating the amount of Restricted Payments
that may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described below, any
amount paid or accrued as dividends on preferred stock of CompleTel
Europe or any Restricted Subsidiary owned by persons other than
CompleTel Europe and any of the Restricted Subsidiaries;
(5) all extraordinary gains and extraordinary losses;
(6) any compensation expense paid or payable solely with Capital Stock
(other than Disqualified Stock) of CompleTel Europe; and
(7) net income or loss of any person combined with CompleTel Europe or any
Restricted Subsidiary on a "pooling of interests" basis attributable
to any period commencing prior to the date of combination.
"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" and the
correlative meanings of the terms "controlling," "controlled by" and "under
common control with" means 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.
"Approved Jurisdiction" means any state of the United States or the
District of Columbia, The Netherlands or any other member state of the
European Community in respect of which CompleTel Europe delivers an Opinion
of Counsel to the effect that the laws of such jurisdiction will not
adversely affect the registered owners of the notes.
"Asset Acquisition" means:
(1) an investment by CompleTel Europe or any of the Restricted
Subsidiaries in any other person pursuant to which such person becomes
a Restricted Subsidiary or is merged into or consolidated with
CompleTel Europe or any of the Restricted Subsidiaries; or
(2) an acquisition by CompleTel Europe or any of the Restricted
Subsidiaries of the property and assets of any person other than
CompleTel Europe or any of the Restricted Subsidiaries that constitute
substantially all of a division or line of business of such person or
which is otherwise outside of the ordinary course of business.
"Asset Disposition" means the sale or other disposition by CompleTel
Europe or any of the Restricted Subsidiaries to a person other than CompleTel
Europe or another Restricted Subsidiary of
(1) Capital Stock of any Restricted Subsidiary,
(2) all or substantially all of the assets that constitute a division or
line of business of CompleTel Europe or any of the Restricted
Subsidiaries or
(3) its assets outside of the ordinary course of business.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one
transaction or a series of related transactions by CompleTel Europe or any of
the Restricted Subsidiaries to any person other than CompleTel Europe or any
of the Restricted Subsidiaries of :
(1) all or any of the Capital Stock of any Restricted Subsidiary;
(2) all or substantially all of the property and assets of an operating
unit or business of CompleTel Europe or any of the Restricted
Subsidiaries; or
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(3) any other property and assets, other than the Capital Stock or other
Investment in an Unrestricted Subsidiary, of CompleTel Europe or any
of the Restricted Subsidiaries that is outside the ordinary course of
business and that is not governed by the provisions of the indenture
applicable to mergers, consolidations and sales of all or
substantially all of the assets of CompleTel Europe.
The term "Asset Sale," however, does not include:
(1) sales or other dispositions of inventory, receivables and other
current assets;
(2) sales, transfers or other dispositions of assets constituting a
Restricted Payment permitted to be made under the "Limitation on
Restricted Payments" covenant described below; or
(3) sales, transfers or other dispositions of assets with a fair market
value not in excess of $2 million (or the U.S. dollar equivalent) in
any transaction or series of related transactions.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing
(1) the sum of the products of (x) the number of years from such date of
determination to the dates of each successive scheduled principal
payment of such debt security and (y) the amount of such principal
payment by
(2) the sum of all such principal payments.
"Board of Directors" means, prior to the occurrence of a Public Market,
the board of directors of CompleTel LLC or any committee of such board of
directors duly authorized to act under the indenture, and following the
occurrence of a Public Market, the board of directors of CompleTel Europe or
any committee of such board of directors duly authorized to act under the
indenture.
"Capital Stock" means, with respect to any person, any and all voting or
non-voting shares, interests, participations, rights in or other equivalents,
however designated, of such person's capital stock, whether outstanding on
the date the notes were originally issued or issued thereafter, and any and
all rights other than any evidence of indebtedness, warrants or options
exchangeable for or convertible into such capital stock.
"Capitalized Lease" means, as applied to any person, any lease of any
property, whether real, personal or mixed, of which the discounted present
value of the rental obligations of such person as lessee, in conformity with
GAAP, is required to be capitalized on such person's balance sheet.
"Capitalized Lease Obligations" means the discounted present value of
the rental obligations under a Capitalized Lease.
"Change of Control" means such time as:
(1) (a) prior to the occurrence of a Public Market, a person or group,
other than a person or group controlled exclusively by the Equity
Investors, becomes the ultimate beneficial owner, of Voting Stock
representing a greater percentage of the total voting power of
the Voting Stock of (x) CompleTel LLC, on a fully diluted basis,
than is beneficially owned by the Equity Investors on such date
or (y) CompleTel Europe, on a fully diluted basis, than is
beneficially owned by the Existing Stockholders on such date; and
(b) after the occurrence of a Public Market, a person or group, other
than a person or group controlled exclusively by the Equity
Investors, becomes the ultimate beneficial owner of more than 35%
of the total voting power of the Voting Stock of CompleTel Europe
on a fully diluted basis and such ownership represents a greater
percentage of the total voting power of the Voting Stock of
CompleTel Europe, on a fully diluted basis, than is held by the
Existing Stockholders on such date; or
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(2) CompleTel Europe consolidates with, or merges with or into, another
person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges with or into, CompleTel
Europe, in any such event pursuant to a transaction in which the
outstanding Voting Stock of CompleTel Europe is converted into or
exchanged for cash, securities or other property, other than any such
transaction where
(a) the outstanding Voting Stock of CompleTel Europe is converted
into or exchanged for
(i) Voting Stock (other than Disqualified Stock) of the
surviving or transferee corporation or its CompleTel LLC
corporation and/or
(ii) cash, securities and other property in an amount which could
be paid by CompleTel Europe as a Restricted Payment under
the indenture, and
(b) immediately after such transaction no person or group, other than
a person or group controlled exclusively by the Equity Investors,
is the beneficial owner, directly or indirectly, of more than 35%
of the total Voting Stock of the surviving or transferee
corporation or its parent corporation, as applicable and is the
beneficial owner of a greater percentage of such Voting Stock
than the Equity Investors; or
(3) following the occurrence of a Public Market, individuals who on the
date of occurrence of a Public Market constitute the Board of
Directors cease for any reason to constitute a majority of the members
of the Board of Directors then in office. For this purpose, a director
is treated as being on the Board of Directors on the date of
occurrence of the Public Market if such director's election by the
Board of Directors or whose nomination by the Board of Directors for
election by CompleTel Europe's stockholders was approved by a vote of
at least two-thirds of the members of the Board of Directors then in
office who themselves were members of the Board of Directors on
February 16, 1999, or whose election or nomination for election was
previously so approved.
For the purposes of the definition of "Change of Control" the terms "person"
and "group" are used with the same meaning as those terms are used in
Sections 13(d) and 14(d)(2) of the Securities and Exchange Act of 1934. In
addition, the term "beneficial owner" is used as defined in Rules 13d-3 and
13d-5 under the Securities and Exchange Act of 1934, except that a person is
considered to have "beneficial ownership" of all securities that such person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time.
"Common Stock" means, with respect to any person, any and all voting or
nonvoting shares, interests or other participations in, and other
equivalents, however designated, of such person's common equity whether or
not outstanding on the date the notes were originally issued or issued
thereafter, and includes, without limitation, all series and classes of such
common equity.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income:
(1) Consolidated Interest Expense;
(2) income taxes (other than income taxes (either positive or negative)
attributable to extraordinary and nonrecurring gains or losses or
sales of assets);
(3) depreciation expense;
(4) amortization expense; and
(5) all other non-cash items reducing Adjusted Consolidated Net Income,
other than items that will require cash payments and for which an
accrual or reserve is, or is required by GAAP to be, made, less all
non-cash items increasing Adjusted Consolidated Net Income.
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Consolidated EBITDA is determined on a consolidated basis for CompleTel
Europe and the Restricted Subsidiaries in conformity with GAAP. However, if
any Restricted Subsidiary is not a wholly owned Restricted Subsidiary,
Consolidated EBITDA will be reduced, to the extent not otherwise reduced in
accordance with GAAP, by an amount equal to:
(1) the amount of the Adjusted Consolidated Net Income attributable to
such Restricted Subsidiary MULTIPLIED by
(2) the percentage ownership interest in the income of such Restricted
Subsidiary not owned on the last day of such period by CompleTel
Europe or any of the Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid,
accrued or scheduled to be paid or to be accrued by CompleTel Europe and the
Restricted Subsidiaries during such period, all as determined on a
consolidated basis in conformity with GAAP, but without taking into account
Unrestricted Subsidiaries. Consolidated Interest Expense is defined to
include:
(1) amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting;
(2) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
(3) the net costs associated with Interest Rate Agreements; and
(4) interest in respect of Indebtedness that is Guaranteed or secured by
CompleTel Europe or any of the Restricted Subsidiaries.
Consolidated Interest Expense is defined to exclude:
(A) any amount of such interest of any Restricted Subsidiary if the net
income of such Restricted Subsidiary is excluded in the calculation of
Adjusted Consolidated Net Income pursuant to clause (2) of the
definition thereof, but only in the same proportion as the net income
of such Restricted Subsidiary is excluded from the calculation of
Adjusted Consolidated Net Income pursuant to clause (3) of the
definition thereof; and
(B) any premiums, fees and expenses, and any amortization thereof, payable
in connection with the offering of the notes.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(1) the aggregate amount of Indebtedness of CompleTel Europe and the
Restricted Subsidiaries on a consolidated basis outstanding on such
Transaction Date to
(2) the aggregate amount of Consolidated EBITDA for the then most recent
four fiscal quarters, or since inception of CompleTel Europe, if less
than four fiscal quarters (the "Four Quarter Period"), for which
financial statements of CompleTel Europe have been filed with the
Commission or provided to the Trustee pursuant to the "Commission
Reports and Reports to Holders" covenant described below.
The calculation of the Consolidated Leverage Ratio,
(A) gives pro forma effect to any Indebtedness to be incurred or repaid on
the Transaction Date;
(B) gives pro forma effect to Asset Dispositions and Asset Acquisitions
(including giving pro forma effect to the application of proceeds of
any Asset Disposition) that occur from the beginning of the Four
Quarter Period through the Transaction Date (the "Reference
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Period") as if they had occurred and such proceeds had been applied
on the first day of such Reference Period;
(C) gives pro forma effect to asset dispositions and asset acquisitions
(including giving pro forma effect to the application of proceeds of
any asset disposition) that have been made by any person that has
become a Restricted Subsidiary or has been merged with or into
CompleTel Europe or any Restricted Subsidiary during such Reference
Period and that would have constituted Asset Dispositions or Asset
Acquisitions had such transactions occurred when such person was a
Restricted Subsidiary as if such asset dispositions or asset
acquisitions were Asset Dispositions or Asset Acquisitions that
occurred on the first day of such Reference Period;
(D) includes in the aggregate amount of Indebtedness outstanding as of the
end of the Reference Period, the total amount of funds outstanding
and/or available on the Transaction Date under any revolving credit or
similar facilities of CompleTel Europe or the Restricted Subsidiaries;
and
(5) (a) treats any Subsidiary of CompleTel Europe that is a Restricted
Subsidiary on the Transaction Date as having been a Restricted
Subsidiary at all times during the Reference Period and
(b) treats any Subsidiary of CompleTel Europe that is not a
Restricted Subsidiary on the Transaction Date as not having been
a Restricted Subsidiary at any time during the Reference Period.
If clause (B) or (C) of the definition of "Consolidated Leverage Ratio"
requires that pro forma effect be given to an Asset Acquisition or Asset
Disposition, such pro forma calculation will be based upon the four full
fiscal quarters immediately preceding the Transaction Date of the person, or
division or line of business of the person, that is acquired or disposed of
for which financial information is available.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of CompleTel Europe and its Restricted
Subsidiaries. Such balance sheet must be as of a date not more than 90 days
prior to the date of such computation and it cannot take into account
Unrestricted Subsidiaries. For this purpose, stockholders' equity as shown on
such balance sheet is reduced by:
(1) any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness;
(2) the cost of treasury stock; and
(3) the principal amount of any promissory notes receivable from the sale
of the Capital Stock of CompleTel Europe of any of its Restricted
Subsidiaries.
Each item is determined in conformity with GAAP, excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards
Board Statement of Financial Accounting Standards No.52.
"Cumulative Available Cash Flow" means, as of any date of determination,
the positive cumulative Consolidated EBITDA realized during the period
commencing on the first day of the fiscal quarter which includes the date on
which the notes were originally issued and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been
filed with the Commission or provided to the Trustee pursuant to the
"Commission Reports and Reports to Holders" covenant or, if such cumulative
Consolidated EBITDA for such period is negative, the amount by which
cumulative Consolidated EBITDA is less than zero.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
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"Debt Securities" means any bonds, notes, debentures or other similar
instruments issued by CompleTel Europe or by any Restricted Subsidiary,
including by means of any Guaranty of CompleTel Europe or of any Restricted
Subsidiary of securities of another person, whether in a public offering or
private placement. The term "Debt Securities" excludes, however:
(1) any Capitalized Lease Obligations; and
(2) any notes, bankers' acceptances or other instruments evidencing
commercial loans or equipment financing made by, and bills of exchange
drawn on, banks, other financial lending institutions or equipment
vendors.
"Deeply Subordinated Shareholder Indebtedness" means indebtedness of
CompleTel Europe, not to exceed $100 million in aggregate principal amount at
maturity outstanding at any time, borrowed from and held by an Existing
Stockholder, which indebtedness by its terms, or by the terms of any
agreement or instrument pursuant to which such indebtedness is incurred,
(1) is expressly made subordinate in right of payment and postponed as to
all payments of principal, interest and Additional Amounts in respect
of the notes and
(2) provides that no payment of principal, premium or interest on, or any
other payment with respect to, such indebtedness may be made prior to
the earlier of
(x) the indefeasible payment in full in cash of all of CompleTel
Europe's obligations under the notes and
(y) the 92nd day after the final maturity of the notes.
Such indebtedness may provide for and be repaid at any time from the proceeds
of a capital contribution or the sale of Capital Stock (other than
Disqualified Stock) of CompleTel Europe after the incurrence of such
indebtedness. In addition, the subordination terms of such indebtedness must
be substantially in the form provided for in the indenture and CompleTel
Europe receives an Opinion of Counsel as to the validity and enforceability
of such subordination terms. Any event resulting in an Existing Stockholder
ceasing to hold such indebtedness is treated as an incurrence of Indebtedness
and such Indebtedness will cease to be Deeply Subordinated Shareholder
Indebtedness.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any class or series of Capital Stock of any
person that by its terms or otherwise is:
(1) required to be redeemed prior to the Stated Maturity of the notes;
(2) redeemable at the option of the holder of such class or series of
Capital Stock at any time prior to the Stated Maturity of the notes;
or
(3) convertible into or exchangeable for Capital Stock referred to in
clause (i) or (ii) above or Indebtedness having a scheduled maturity
prior to the Stated Maturity of the notes.
Any Capital Stock that constitutes Disqualified Stock only because the
holders thereof have the right to require such person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the notes does not
constitute Disqualified Stock if:
(A) the "asset sale" or "change of control" provisions applicable to such
Capital Stock are no more favorable to the holders of such Capital
Stock than the provisions contained in the "Limitation on Asset Sales"
and "Repurchase of notes upon a Change of Control" covenants described
below; and
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(B) such Capital Stock, or the agreements or instruments governing the
redemption rights thereof, specifically provides that such person will
not repurchase or redeem any such stock under such provision prior to
CompleTel Europe's repurchase of such notes as are required to be
repurchased pursuant to the "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants described
below.
"Equity Investors" means Madison Dearborn Partners, Inc. and LPL
Investment Group, Inc., and their respective Affiliates.
"Existing Stockholders" means (i) the Equity Investors and (ii)
CompleTel LLC and its successors, so long as the Equity Investors, in the
aggregate, beneficially own a majority of the Voting Stock of any such
person.
"fair market value" means the price that would be paid in an arm's
length transaction between an informed and willing seller under no compulsion
to sell and an informed and willing buyer under no compulsion to buy, as
determined in good faith by the Board of Directors, whose determination shall
be conclusive if evidenced by a Board Resolution. For purposes of the
definition of "Total Incremental Equity," however,
(1) the fair market value of any security registered under the Exchange
Act shall be the average of the closing prices, regular way, of such
security for the 20 consecutive trading days immediately preceding the
sale of Capital Stock and
(2) in the event the aggregate fair market value of any other property
(other than cash or cash equivalents) received by CompleTel Europe
exceeds $10 million (or the U.S. dollar equivalent), the fair market
value of such property shall be determined by an internationally
recognized investment banking firm and set forth in their written
opinion delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date on which the notes were
originally isled, including, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting
profession. All ratios and computations contained or referred to in the
indenture shall be computed in conformity with GAAP applied on a consistent
basis.
"Guaranty" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Indebtedness of any other person.
This term includes, for example, any obligation, direct or indirect,
contingent or otherwise, of such person:
(1) to purchase or pay, or advance or supply funds for the purchase or
payment of, Indebtedness of such other person, whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, unless such purchase
arrangements are on arm's-length terms and are entered into in the
ordinary course of business, to take-or-pay, or to maintain financial
statement conditions or otherwise; or
(2) entered into for purposes of assuring in any other manner the obligee
of such Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part).
The term "Guaranty", however, does not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to,
or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "incurrence" of Acquired Indebtedness. Neither the
accrual of interest nor the accretion of original issue discount, however, is
considered an incurrence of Indebtedness.
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"Indebtedness" means, with respect to any person at any date of
determination:
(1) all indebtedness of such person for borrowed money;
(2) all obligations of such person evidenced by bonds, debentures, notes
or other similar instruments;
(3) all obligations, including reimbursement obligations, of such person
in respect of letters of credit or other similar instruments;
(4) all obligations of such person to pay the deferred and unpaid purchase
price of property or services, which purchase price is due more than
six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services,
except trade payables;
(5) all Capitalized Lease Obligations of such person;
(6) all Indebtedness of other persons secured by a Lien on any asset of
such person, whether or not such Indebtedness is assumed by such
person;
(7) all Indebtedness of other persons Guaranteed by such person to the
extent such Indebtedness is Guaranteed by such person;
(8) all Disqualified Stock valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued dividends; and
(9) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any person at any date shall be the outstanding
balance at such date (or, in the case of a revolving credit or other similar
facility, the total amount of funds outstanding and/or available on the date
of determination) of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation. For the
purposes of this definition, the amount of any Indebtedness under clause (6)
is the lesser of (x) the fair market value of such asset at such date of
determination and (y) the amount of such Indebtedness. In addition,
(A) the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of
such Indebtedness at the time of its issuance as determined in
conformity with GAAP.
(B) money borrowed and set aside at the time of the incurrence of any
Indebtedness in order to prefund the payment of the interest on such
Indebtedness is not "Indebtedness" so long as such money is held to
secure the payment of such interest.
(C) "Indebtedness" excludes any liability for federal, state, local or any
other applicable taxes.
(D) "Indebtedness" also excludes obligations with respect to letters of
credit, including trade letters of credit, securing obligations (other
than obligations described in clauses (1), (2), (5), (6), (7) or (8)
above) entered into in the ordinary course of business to the extent
such letters of credit are not drawn upon or, if drawn upon, to the
extent such drawing is reimbursed no later than the third business day
following receipt of a demand for reimbursement.
(E) Deeply Subordinated Shareholder Indebtedness does not constitute
"Indebtedness" unless the holder thereof or another party commences
proceedings or otherwise seeks to invalidate the subordination terms
of the Deeply Subordinated Shareholder Indebtedness.
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"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any person means:
(1) any direct or indirect advance, loan or other extension of credit,
including by way of Guaranty or similar arrangement, but excluding
advances to customers in the ordinary course of business that are, in
conformity with GAAP, recorded as accounts receivable on the balance
sheet of CompleTel Europe or the Restricted Subsidiaries; or
(2) capital contribution to such person, by means of any transfer of cash
or other property, other than Capital Stock that is not Disqualified
Stock to others or any payment for property or services for the
account or use of others, or any purchase or acquisition of Capital
Stock, bonds, notes, debentures or other similar instruments issued by
such person.
The term "Investment" includes:
(A) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary; and
(B) the fair market value of the Capital Stock or any other Investment
held by CompleTel Europe or any of the Restricted Subsidiaries of or
in any person that has ceased to be a Restricted Subsidiary,
including, without limitation, by reason of any transaction permitted
by clause (3) of the "Limitation on the Issuance and Sale of Capital
Stock of Restricted Subsidiaries" covenant.
For purposes of the definition of "Unrestricted Subsidiary" and the
"Limitation on Restricted Payments" covenant:
(1) "Investment" includes the fair market value of the assets, net of
liabilities other than liabilities to CompleTel Europe or any of the
Restricted Subsidiaries, of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary;
(2) the fair market value of the assets, net of liabilities other than
liabilities to CompleTel Europe or any of the Restricted Subsidiaries,
of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary is considered a
reduction in outstanding Investments; and
(3) any property transferred to or from an Unrestricted Subsidiary is
valued at its fair market value at the time of such transfer.
In no event shall any issuance of Capital Stock (other than Disqualified
Stock) of CompleTel Europe in exchange for Capital Stock, property or assets
of another person constitute an Investment by CompleTel Europe in such other
person.
"Issue Date" means February 16, 1999, the date on which the notes are
originally issued under the indenture.
"Leveraged Subsidiary" means any Subsidiary Guarantor that has incurred
Indebtedness (other than Acquired Indebtedness) pursuant to the first
paragraph of the "Limitation on Indebtedness" covenant or any Refinancings
thereof incurred under clause (2) of the second paragraph of the "Limitation
on Indebtedness" covenant for so long as any such Indebtedness, or any
Refinancing thereof, is outstanding.
"License" means authorization or renewal authorization from the
applicable federal or national level governmental agency or authority to
construct and operate a local switched network providing wireline
telecommunications services.
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"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind, including any conditional sale or other title
retention agreement or lease in the nature of a security interest or any
agreement to give any security interest.
"Management Services Agreements" means agreements pursuant to which
CableTel Management Inc. provides management services to CompleTel Europe or
a Restricted Subsidiary. The maximum fee payable by any person pursuant to
any such agreement may not exceed 105% of the costs, expenses, charges and
disbursements allocated to such person and incurred by CableTel Management
Inc. in connection with its performance of such agreement.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means:
(1) with respect to any Asset Sale, the proceeds of such Asset Sale in the
form of cash or cash equivalents, including payments in respect of
deferred payment obligations, to the extent corresponding to the
principal, but not interest, component of such obligations, when
received in the form of cash or cash equivalents, except to the extent
such obligations are financed or sold with recourse to CompleTel
Europe or any Restricted Subsidiary, and proceeds from the conversion
of other property received when converted to cash or cash equivalents,
net of:
(a) brokerage commissions and other fees and expenses, including fees
and expenses of counsel and investment bankers;
(b) provisions for all taxes, whether or not such taxes will actually
be paid or are payable, as a result of such Asset Sale without
regard to the consolidated results of operations of CompleTel
Europe and the Restricted Subsidiaries, taken as a whole;
(c) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that is either secured
by a Lien on the property or assets sold or required to be paid
as a result of such sale; and
(d) appropriate amounts to be provided by CompleTel Europe or any
Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including pension and other
postemployment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in
conformity with GAAP; and
(2) with respect to any issuance or sale of Capital Stock, the proceeds of
such issuance or sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations, to the
extent corresponding to the principal, but not interest, component of
such obligations, when received in the form of cash or cash
equivalents, except to the extent such obligations are financed or
sold with recourse to CompleTel Europe or any Restricted Subsidiary,
and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts
or commissions and brokerage, consultant and other fees incurred in
connection with such issuance or sale and net of taxes paid or payable
as a result of such conversion.
"Offer to Purchase" means an offer to purchase notes by CompleTel
Europe, or, in the event of a Change of Control, by a third party, from the
holders of the notes commenced by mailing a notice to the Trustee and each
holder stating:
(1) the covenant pursuant to which the offer is being made and that all
notes validly tendered will be accepted for payment on a pro rata
basis;
(2) the purchase price and the date of purchase (the "payment date"),
which shall be a business day no earlier than 30 days nor later than
60 days from the date such notice is mailed;
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(3) that any note not tendered will continue to accrue interest or
original issue discount pursuant to its terms;
(4) that, unless there is a default in the payment of the purchase price,
any note accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest or original issue discount on and after the
payment date;
(5) that holders electing to have a note purchased pursuant to the Offer
to Purchase will be required to surrender the note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse
side of the note completed, to the paying agent at the address
specified in the notice prior to the close of business on the business
day immediately preceding the payment date;
(6) that holders will be entitled to withdraw their election if the paying
agent receives, not later than the close of business on the third
business day immediately preceding the payment date, a telegram,
facsimile transmission or letter setting forth the name of the
withdrawing holder, the principal amount at maturity of notes
delivered for purchase and a statement that such holder is withdrawing
his election to have such notes purchased; and
(7) that holders whose notes are being purchased only in part will be
issued new notes equal in principal amount to the unpurchased portion
of the notes surrendered.
"Pari Passu Debt" means Pari Passu Debt Securities of CompleTel Europe
or of any Subsidiary Guarantor the terms of which require that Net Cash
Proceeds be used to permanently reduce, and thereby also reduce commitments
relating to, such Indebtedness.
"Pari Passu Debt Securities" means any Debt Securities of CompleTel
Europe or any Subsidiary Guarantor that ranks pari passu in right of payment
with the notes and any Subsidiary Guaranties, as applicable.
"Pari Passu Pro Rata Share" means a fraction
(1) the numerator of which is the aggregate principal amount of Pari Passu
Debt outstanding on the date Net Cash Proceeds are received and
(2) the denominator of which is the sum of (x) the aggregate principal
amount of notes outstanding on such date and (y) the aggregate
principal amount of any Pari Passu Debt on such date.
"Permitted Investment" means:
(1) an Investment in CompleTel Europe or a Restricted Subsidiary or a
person that is primarily engaged in a Telecommunications Business and
that will, upon the making of such Investment, become a Restricted
Subsidiary or be merged or consolidated with or into, or transfer or
convey all or substantially all its assets to, CompleTel Europe or a
Restricted Subsidiary;
(2) Temporary Cash Investments;
(3) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as
expenses in accordance with GAAP;
(4) stock, obligations or securities received in satisfaction of
judgments;
(5) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and worker's compensation, performance
and other similar deposits;
(6) Interest Rate Agreements and Currency Agreements designed solely to
protect CompleTel Europe or any Restricted Subsidiary, as the case may
be, against fluctuations in interest rates or foreign currency
exchange rates; and
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(7) loans or advances to officers or employees of CompleTel Europe or any
Restricted Subsidiary that do not in the aggregate exceed $5 million
(or the U.S. dollar equivalent) at any time outstanding.
"Public Equity Offering" means an underwritten primary public offering
of Common Stock of CompleTel Europe pursuant to
(1) an effective registration statement under the Securities Act or
(2) a prospectus prepared in connection with the listing of shares of
Common Stock covered thereby on the London Stock Exchange.
A "Public Market" will exist if:
(1) a Public Equity Offering has been consummated and
(2) at least 15% of the total issued and outstanding Common Stock of
CompleTel Europe has been distributed pursuant to
(a) an effective registration statement under the Securities Act or
sales pursuant to Rule 144 under the Securities Act or
(b) a prospectus prepared in connection with the listing of shares of
Common Stock covered thereby on the London Stock Exchange.
"Refinancing" means any refinancing, whether by amendment, renewal,
extension, refunding or defeasance, of outstanding Indebtedness of CompleTel
Europe and/or of any Restricted Subsidiary.
"Refinancing Indebtedness" means
(1) Indebtedness of CompleTel Europe to the extent the proceeds thereof
are used to refinance, whether by amendment, renewal, extension,
refunding or defeasance, Indebtedness of CompleTel Europe or any of
the Restricted Subsidiaries, in each such event, incurred under the
first paragraph of the "Limitation on Indebtedness"covenant described
below or clause (4)(a) or (6) of the second paragraph of such covenant
or otherwise outstanding on the date the notes were originally issued,
and
(2) Indebtedness of any Restricted Subsidiary to the extent the proceeds
thereof are used to refinance, whether by amendment, renewal,
extension, refunding or defeasance, Indebtedness of a Restricted
Subsidiary, in each such event, incurred under the first paragraph of
the "Limitation on Indebtedness"covenant described below or clause
(4)(b) of the second paragraph of such covenant or otherwise
outstanding on the date the notes were originally issued;
The principal amount of Refinancing Indebtedness incurred or, if such
Refinancing Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration of
the maturity thereof, the accreted value of such Refinancing Indebtedness,
may not exceed the principal amount or accreted value, as the case may be, of
the Indebtedness refinanced, plus the amount of any premium required to be
paid in connection with such refinancing or the amount of any premium
reasonably determined by the Board of Directors as necessary to accomplish
such refinancing by means of a tender offer or privately negotiated purchase,
plus the amount of reasonable expenses in connection therewith. In addition,
Refinancing Indebtedness
(A) may not have a scheduled principal payment prior to the final maturity
of the Indebtedness being refinanced and
(B) shall have an Average Life equal to or greater than the shorter of
(i) the Average Life of the Indebtedness refinanced or
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(ii) the remaining Average Life of the notes.
If the Indebtedness to be refinanced is Subordinated Indebtedness, the
Refinancing Indebtedness to be incurred must also be Subordinated
Indebtedness of the person whose Indebtedness is to be refinanced on terms no
less favorable in any material respect to the holders of the notes than the
Indebtedness being refinanced.
"Replacement Assets" means property or assets, other than current
assets, of a nature or type or that are used or useful in a business, or in a
company having property and assets of a nature or type, or engaged in a
business, similar or related to the nature or type of the property and assets
of, or the business of, CompleTel Europe and the Restricted Subsidiaries
existing on the date such Replacement Assets are acquired, as determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution.
"Restricted Subsidiary" means any Subsidiary of CompleTel Europe other
than an Unrestricted Subsidiary.
"Senior Credit Facility" means any senior commercial term loan and/or
revolving credit facility, including any letter of credit subfacility, or
vendor financing facility entered into principally with commercial banks or
other financial institutions typically party to commercial loan or vendor
financing agreements.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of CompleTel Europe, accounted for more than 10% of the
consolidated revenues of CompleTel Europe and the Restricted Subsidiaries or
(ii) as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of CompleTel Europe and the Restricted Subsidiaries, all
as set forth on the most recently available consolidated financial statements
of CompleTel Europe for such fiscal year.
"S&P" means Standard & Poor's Ratings Services and its successors.
"Specified Date" means any Redemption Date, any Payment Date for an
Offer to Purchase or any date on which the notes first become due and payable
after an Event of Default.
"Stated Maturity" means,
(1) with respect to any debt security, the date specified in such debt
security as the fixed date on which the final installment of principal
of such debt security is due and payable, and
(2) with respect to any scheduled installment of principal of or interest
on any debt security, the date specified in such debt security as the
fixed date on which such installment is due and payable.
"Subordinated Indebtedness" means any Indebtedness of CompleTel Europe
or any Restricted Subsidiary which is expressly subordinated in right of
payment in any manner to any other Indebtedness of CompleTel Europe or such
Restricted Subsidiary, as the case may be.
"Subsidiary" means, with respect to any person, any corporation,
association or other business entity of which more than 50% of the voting
power of the outstanding Voting Stock is owned, directly or indirectly, by
such person and one or more other Subsidiaries of such person.
"Subsidiary Guaranty" means a guaranty of the notes issued pursuant to
the terms of the indenture.
"Subsidiary Guarantor" means any issuer of a Subsidiary Guaranty for so
long as such Subsidiary Guaranty remains outstanding.
"Target Market" means any of the Paris, Lyon, Marseilles, Lille, London
or Berlin metropolitan markets.
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"Telecommunications Business" means the development, ownership or operation
of one or more telephone, telecommunications or information systems or the
provision of telephony, telecommunication or information services and any
related, ancillary or complementary business.
"Temporary Cash Investment" means any of the following:
(1) direct obligations of the United States of America or any agency
thereof or the Netherlands, the United Kingdom, France, Germany or any
other member of the European Economic Community rated at least "A" by
S&P or "A" by Moody's ("Government Securities") or obligations
guaranteed by the United States of America or any agency thereof or
the Netherlands, the United Kingdom, France, Germany or any other
member of the European Economic Community rated at least "A" by S&P or
"A" by Moody's with a term of not more than one year; PROVIDED that
money borrowed and set aside at the time of incurrence of Indebtedness
in order to prefund the payment of interest on such Indebtedness may
be invested in Government Securities with a term in excess of one year
but in no event with a term in excess of the period for which interest
has been prefunded with respect to such Indebtedness;
(2) time deposit accounts, certificates of deposit and money market
deposits maturing within one year of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of
the United States of America or any state thereof, the Netherlands,
the United Kingdom, France, Germany or any other member of the
European Economic Community and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of
$250 million, or the foreign currency equivalent of $250 million, and
has outstanding debt which is rated "A" by S&P or "A" by Moody's;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in
clause (ii) above;
(4) commercial paper, maturing not more than one year after the date of
acquisition, issued by a corporation, other than an Affiliate of
CompleTel Europe, organized and in existence under the laws of the
United States of America or any state thereof, the Netherlands, the
United Kingdom, France, Germany or any other member of the European
Economic Community, with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's
or "A-l" (or higher) according to S&P; and
(5) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any
state, commonwealth or territory of the United States of America, the
Netherlands, the United Kingdom, France, Germany or any other member
of the European Economic Community, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by
Moody's.
"Total Incremental Equity" means, at any time of determination, the sum of,
without duplication,
(1) the aggregate Net Cash Proceeds and fair market value of property
determined as of the date of receipt of such property received by
CompleTel Europe from capital contributions in respect of existing
Capital Stock, other than Disqualified Stock, or the issuance or sale
of Capital Stock, other than Disqualified Stock but including Capital
Stock issued upon the conversion of convertible Indebtedness or from
the exercise of options, warrants or rights to purchase Capital Stock,
other than Disqualified Stock, subsequent to the Issue Date, other
than to a Subsidiary of CompleTel Europe, PLUS
(2) the aggregate cash proceeds received by CompleTel Europe or any
Restricted Subsidiary from the sale, disposition or repayment, in
whole or in part, of any Investment that is or was made after the
original date of issuance of the notes and that constitutes a
Restricted Payment that has been deducted from Total Incremental
Equity pursuant to clause (3) below in an amount equal to the lesser
of
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(a) the return of capital with respect to the applicable portion of
such Investment and
(b) the cost of the applicable portion of such Investment, in either
case, less the cost of the disposition of such Investment, MINUS
(3) the aggregate amount of all Restricted Payments declared or made on
and after the Issue Date (other than a Restricted Payment made
pursuant to clause (II) of the second paragraph of the "Limitation on
Restricted Payments" covenant described below.
"Transaction Date" means, with respect to the incurrence of any
Indebtedness by CompleTel Europe or any of the Restricted Subsidiaries, the date
such Indebtedness is to be incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of CompleTel Europe that at the time of determination
has been designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Restricted Subsidiary, including any
newly acquired or newly formed Subsidiary of CompleTel Europe, to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, CompleTel Europe or any Restricted
Subsidiary. In addition,
(A) any Guaranty by CompleTel Europe or any Restricted Subsidiary of any
Indebtedness of the Subsidiary being so designated shall be deemed an
"incurrence" of such Indebtedness and an "Investment" by CompleTel
Europe or such Restricted Subsidiary, or both, at the time of such
designation;
(B) either (i) the Subsidiary to be so designated has total assets of
$1,000 (or the U.S. dollar equivalent) or less or (ii) if such
Subsidiary has assets greater than $1,000 (or the U.S. dollar
equivalent), such designation would be permitted under the "Limitation
on Restricted Payments"covenant described below;
(C) if applicable, the incurrence of Indebtedness and the Investment
referred to in clause (A) above would be permitted under the
"Limitation on Indebtedness" and "Limitation on Restricted Payments"
covenants described below; and
(D) except in the case of an Investment made pursuant to clause (IV) of
the second paragraph of the "Limitation on Restricted Payments"
covenant described below, immediately after giving effect to such
designation, CompleTel Europe would be able to incur $1.00 of
Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant described below.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary if:
(1) no Default has occurred and is continuing at the time of or after
giving effect to such designation; and
(2) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately after such designation would, if incurred at such time,
have been permitted to be incurred, and shall be deemed to have been
incurred, for all purposes of the indenture.
CompleTel Europe must file with the Trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
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"Voting Stock" means, with respect to any person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
person.
SUMMARY OF OPERATING COVENANTS
In the indenture, CompleTel Europe agreed to certain restrictions that
limit its and its Restricted Subsidiaries' ability, among other things, to:
- incur indebtedness
- pay dividends
- repurchase capital stock or subordinated indebtedness
- make investments
- limit the ability of any Restricted Subsidiary to pay dividends or
otherwise provide funds to Allegiance Telecom, Inc.
- issue capital stock of Restricted Subsidiaries
- have Restricted Subsidiaries issue guarantees
- engage in transactions with stockholders and affiliates
- incur liens
- engage in sale-leaseback transactions
- sell assets
- effect mergers.
In addition, if a Change of Control occurs, each holder of notes will have
the right to require CompleTel Europe to repurchase all or part of such
holder's notes at a price equal to 101% of the accreted value of the notes on
the repurchase date plus accrued interest and Additional Amounts, if any, to
the date of purchase.
COVENANTS
LIMITATION ON INDEBTEDNESS
CompleTel Europe will not, and will not permit any of the Restricted
Subsidiaries to, incur any Indebtedness, other than the notes and
Indebtedness existing on the Issue Date, except that CompleTel Europe and any
Subsidiary Guarantor may incur Indebtedness, including Acquired Indebtedness,
and any Restricted Subsidiary may incur Acquired Indebtedness, if, in either
case, after giving effect to the incurrence of such Indebtedness and the
receipt and application of the proceeds therefrom, the Consolidated Leverage
Ratio would be greater than zero and less than 6:1.
This restriction does not apply to the following:
(1) Indebtedness
(a) of any Restricted Subsidiary owed to CompleTel Europe evidenced
by a promissory note or
(b) of CompleTel Europe or any Restricted Subsidiary to any
Restricted Subsidiary
except that, in the case of clause (b) above, any event which results in
any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or, in
the case of clause (a) and (b) above, any subsequent transfer of such
Indebtedness, other than to CompleTel Europe or another Restricted
Subsidiary, shall be deemed, in each case, to constitute an incurrence of
such Indebtedness not permitted by this clause (1);
(2) Refinancing Indebtedness;
(3) Indebtedness of CompleTel Europe or any Restricted Subsidiary
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(a) in respect of performance, surety or appeal bonds provided in the
ordinary course of business,
(b) under Currency Agreements and Interest Rate Agreements, but only
if such agreements:
(i) are designed solely to protect CompleTel Europe or any
Restricted Subsidiary against fluctuations in foreign
currency exchange rates or interest rates;
(ii) do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or
interest rates or by reason of fees, indemnities and
compensation payable thereunder; and
(iii) arise from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or
from Guaranties or letters of credit, surety bonds or
performance bonds securing any obligations of CompleTel
Europe or any Restricted Subsidiary pursuant to such
agreements, in any case incurred in connection with the
disposition of any business, assets or Restricted
Subsidiary, other than Guaranties of Indebtedness
incurred by any person acquiring all or any portion of
such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition, in an amount not
to exceed the gross proceeds actually received by
CompleTel Europe or any Restricted Subsidiary in
connection with such disposition;
(4) Indebtedness represented by (a) the notes, (b) Guaranties of the notes
and (c) Guaranties by any Restricted Subsidiary of Indebtedness of
CompleTel Europe that is otherwise permitted under this covenant and
by, and made in accordance with, the "Limitation on Issuance of
Guaranties by Restricted Subsidiaries" covenant described below;
(5) Indebtedness
(a) of CompleTel Europe which, if such Indebtedness constitutes Debt
Securities, does not mature as to principal or become mandatorily
redeemable prior to the Stated Maturity of the notes; or
(b) of any Restricted Subsidiary, other than Debt Securities,
incurred to finance the cost, including the cost of design,
development, acquisition, construction, installation, improvement,
transportation or integration, to acquire equipment, inventory or
network assets, including acquisitions by way of Capitalized Leases
and acquisitions of the Capital Stock of a person that becomes a
Restricted Subsidiary to the extent of the fair market value of the
equipment, inventory or network assets of such person so acquired, by
CompleTel Europe or a Restricted Subsidiary after the date of the
original issuance of the notes for application or use in a
Telecommunications Business in an aggregate principal amount not to
exceed $225 million (or the U.S. dollar equivalent) at any one time
outstanding;
(6) Indebtedness of CompleTel Europe such that, after giving effect to the
incurrence thereof, the total aggregate principal amount of
Indebtedness incurred under this clause (6) and any Refinancings
thereof otherwise incurred in compliance with the indenture would not
exceed 200% of Total Incremental Equity;
(7) Indebtedness of CompleTel Europe and its Subsidiaries incurred under
one or more Senior Credit Facilities in an aggregate principal amount
not to exceed $170 million (or the U.S. dollar equivalent) at any time
outstanding; and
(8) Indebtedness, in addition to Indebtedness permitted under clauses
(1) through (7) above, outstanding at any time in an aggregate
principal amount not to exceed $25 million (or the U.S. dollar
equivalent).
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The maximum amount of Indebtedness that CompleTel Europe or a Restricted
Subsidiary may incur pursuant to this "Limitation on Indebtedness" covenant
will not be deemed to be exceeded, with respect to any outstanding
Indebtedness, solely as the result of fluctuations in the exchange rates of
currencies.
For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, CompleTel Europe, in its sole discretion, shall classify, and from
time to time may reclassify, such item of Indebtedness and only be required
to include the amount and type of such Indebtedness in one of such clauses.
LIMITATION ON RESTRICTED PAYMENTS
The indenture restricts the ability of CompleTel Europe and the
Restricted Subsidiaries, directly or indirectly, to:
(1) declare or pay any dividend or make any distribution on or with
respect to its Capital Stock, other than
(a) dividends or distributions payable solely in its Capital Stock
(other than Disqualified Stock) and
(b) pro rata dividends or distributions on Common Stock of Restricted
Subsidiaries) held by persons other than CompleTel Europe or any
of the Restricted Subsidiaries;
(2) purchase, redeem, retire or otherwise acquire for value any Capital
Stock of
(a) CompleTel Europe or an Unrestricted Subsidiary held by any person
or
(b) a Restricted Subsidiary held by any Affiliate of CompleTel
Europe, other than a Restricted Subsidiary, or any holder, or any
Affiliate of such holder, of 5% or more of any class of Capital
Stock of CompleTel Europe;
(3) make any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance, or other acquisition or
retirement for value prior to any scheduled mandatory payment date, of
Subordinated Indebtedness; or
(4) make any Investment, other than a Permitted Investment, in any person.
Such payments or any other actions described in clauses (1) through (4) above
are collectively "Restricted Payments." CompleTel Europe will not, and will
not permit any Restricted Subsidiary to, make any Restricted Payment if, at
the time of, and after giving effect to, the proposed Restricted Payment:
(A) a Default shall have occurred and be continuing;
(B) CompleTel Europe could not incur at least $1.00 of Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant; or
(C) the aggregate amount of all Restricted Payments (the amount, if other
than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a
Board Resolution) made after the Issue Date shall exceed the sum of
(i) the amount of (x) Cumulative Available Cash Flow determined
at the time of such Restricted Payment less (y) 150% of the
cumulative Consolidated Interest Expense determined for the
period commencing on the first day of the fiscal quarter
which includes the Issue Date and ending on the last day of
the last fiscal quarter preceding the Transaction Date for
which reports have been filed with the Commission or
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provided to the applicable Trustee pursuant to the
"Commission Reports and Reports to Holders" covenant PLUS
(ii) the aggregate Net Cash Proceeds received by CompleTel Europe
after the date of original issuance of the notes as a
capital contribution or from the issuance and sale of its
Capital Stock, other than Disqualified Stock, to a person
who is not a Subsidiary of CompleTel Europe, including an
issuance or sale permitted by the applicable indenture of
Indebtedness of CompleTel Europe for cash subsequent to the
Issue Date upon the conversion of such Indebtedness into
Capital Stock, other than Disqualified Stock, of CompleTel
Europe, PLUS
(iii) an amount equal to the net reduction in Investments
constituting Restricted Payments resulting from payments of
interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to
CompleTel Europe or any Restricted Subsidiary, or from the
Net Cash Proceeds from the sale of any such Investment less
the cost of the disposition of such Investment, except, in
each case, to the extent any such payment or proceeds are
included in the calculation of Adjusted Consolidated Net
Income, or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries, valued in each case as provided
in the definition of "Investments", not to exceed, in each
case, the amount of such Investment, MINUS
(iv) 50% of the then outstanding principal amount of any
Indebtedness incurred pursuant to clause (6) of the second
paragraph of the "Limitation on Indebtedness" covenant and
any Refinancings thereof (regardless of any subsequent
reclassification of any such Indebtedness).
The foregoing provision shall not be violated by reason of:
(I) the payment of any dividend within 60 days after the date of
declaration thereof if, at the date of declaration, such
payment would comply with the foregoing paragraph;
(II) so long as no Default shall have occurred and be continuing,
the redemption, repurchase, defeasance or other acquisition
or retirement for value of Subordinated Indebtedness
including premium, if any, and accrued and unpaid interest,
with the proceeds of, or in exchange for, Indebtedness
incurred under clause (2) of the second paragraph of the
"Limitation on Indebtedness" covenant;
(III) the repurchase, redemption or other acquisition of Capital
Stock of CompleTel Europe or a Subsidiary of CompleTel
Europe in exchange for, or out of the proceeds of a capital
contribution or a substantially concurrent offering of,
Capital Stock, other than Disqualified Stock, of CompleTel
Europe;
(IV) so long as no Default shall have occurred and be continuing,
the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for
value of Subordinated Indebtedness in exchange for, or out
of the proceeds of a capital contribution or a substantially
concurrent offering of, the Capital Stock, other than
Disqualified Stock, of CompleTel Europe;
(V) payments or distributions to dissenting stockholders
pursuant to applicable law, pursuant to or in connection
with a consolidation, merger or transfer of assets that
complies with the provisions of the indenture applicable to
mergers, consolidations and transfers of all or
substantially all of the property and assets of CompleTel
Europe;
(VI) so long as no Default shall have occurred and be continuing,
any Investment in any person primarily engaged in a
Telecommunications Business on the date of such Investment;
PROVIDED that after giving effect to the proposed
Investment, the aggregate amount of Investments made
pursuant to this clause (6) does not then exceed the sum of
(a) $25 million (or the U.S. dollar equivalent) PLUS (b) the
amount then available for the making of Restricted Payments
pursuant to clause (C) of the preceding paragraph without
giving effect to subclause (i) of such clause (C); or
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(VII) prior to the occurrence of a Public Market, dividends or
distributions to CompleTel LLC in respect of the purchase,
redemption, retirement or other acquisition for value of
Capital Stock of CompleTel LLC held by managers, directors,
employees or officers, or former managers, directors,
employees or officers, of CompleTel LLC, Cable Tel
Management, Inc. CompleTel Europe or a Restricted Subsidiary
or their estates or beneficiaries under their estates, upon
the death, disability, retirement, termination of employment
or pursuant to the terms of any agreement under which such
Capital Stock was issued; if that the aggregate
consideration paid for such purchase, redemption, retirement
or other acquisition for value of such Capital Stock after
the Issue Date does not exceed $5 million (or the U.S.
dollar equivalent) in the aggregate, unless such repurchases
are made with the proceeds of insurance policies and the
Capital Stock is purchased from the executors,
administrators, testamentary trustees, heirs, legatees or
beneficiaries.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (II) thereof) and
the proceeds from any capital contribution or any issuance of Capital Stock
referred to in clauses (III) and (IV) thereof shall be included in
calculating whether the conditions of clause (C) of the first paragraph of
this "Limitation on Restricted Payments" covenant have been met with
respect to any subsequent Restricted Payments.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
CompleTel Europe will not, and will not permit any Restricted Subsidiary
to, create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to
(1) pay dividends or make any other distributions permitted by applicable
law on any Capital Stock of such Restricted Subsidiary owned by
CompleTel Europe or any other Restricted Subsidiary,
(2) pay any Indebtedness owed to CompleTel Europe or any other Restricted
Subsidiary,
(3) make loans or advances to CompleTel Europe or any other Restricted
Subsidiary or
(4) transfer any of its property or assets to CompleTel Europe or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(A) existing on the date of the original issuance of the notes in the
indenture or any other agreements in effect on such date, and any
extensions, refinancings, renewals or replacements of such agreements
if such encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the holders of the notes than those encumbrances
or restrictions that are then in effect and that are being extended,
refinanced, renewed or replaced;
(B) existing under or by reason of applicable law;
(C) existing with respect to any person or the property or assets of such
person acquired by CompleTel Europe or any Restricted Subsidiary,
existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not
applicable to any person or the property or assets of any person other
than such person or the property or assets of such person so acquired;
(D) in the case of clause (4) of the first paragraph of this "Limitation
on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant,
(i) that restrict in a customary manner the subletting, assignment
or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset,
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(ii) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or
assets of CompleTel Europe or any Restricted Subsidiary not
otherwise prohibited by the indenture or
(iii) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or
in the aggregate, detract from the value of property or assets
of CompleTel Europe or any Restricted Subsidiary in any manner
material to CompleTel Europe or any Restricted Subsidiary;
(E) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of
all or substantially all of the Capital Stock of, or property and
assets of, such Restricted Subsidiary; or
(F) contained in the terms of any Indebtedness or any agreement pursuant
to which such Indebtedness was issued if
(i) either (x) the encumbrance or restriction applies only in the
event of and during the continuance of a payment default or a
default with respect to a financial covenant contained in such
Indebtedness or agreement, or (y) CompleTel Europe determines
at the time any such Indebtedness is incurred (and at the time
of any modification of the terms of any such encumbrance or
restriction) that any such encumbrance or restriction will not
materially affect CompleTel Europe's ability to make principal
or interest payments on the notes and
(ii) the encumbrance or restriction is not materially more
disadvantageous to the Holders of the notes than is customary
in comparable financings or agreements (as determined by
CompleTel Europe in good faith).
Nothing contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant will prevent CompleTel Europe or any
Restricted Subsidiary from restricting the sale or other disposition of property
or assets of CompleTel Europe or any Restricted Subsidiary that secure
Indebtedness of CompleTel Europe or any such Restricted Subsidiary.
LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
CompleTel Europe will not sell, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any Capital Stock of a
Restricted Subsidiary except
(1) to CompleTel Europe or a Restricted Subsidiary;
(2) issuances of director's qualifying shares or issuances of Capital
Stock to nationals of the jurisdiction of organization of a Restricted
Subsidiary, to the extent required by applicable law;
(3) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such person remaining after giving
effect to such issuance or sale would have been permitted to be made
under the "Limitation on Restricted Payments" covenant if made on the
date of such issuance or sale; or
(4) issuances or sales of Common Stock of a Restricted Subsidiary.
In order to be entitled to the foregoing exceptions, CompleTel Europe or such
Restricted Subsidiary must apply the Net Cash Proceeds, if any, of any such sale
in accordance with clause (i), (ii) or (iii) of the "Limitation on Asset Sales"
covenant described below.
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LIMITATION ON ISSUANCES OF GUARANTIES AND INCURRENCE OF CERTAIN
INDEBTEDNESS BY RESTRICTED SUBSIDIARIES
CompleTel Europe will not permit any Restricted Subsidiary, directly or
indirectly, to
(1) Guaranty any Subordinated Indebtedness or Debt Securities of CompleTel
Europe or
(2) incur any Indebtedness under or in respect of Debt Securities or
Subordinated Indebtedness under clause (2) or (5) of the second
paragraph of the "Limitation on Indebtedness" covenant ("Guaranteed
Indebtedness"), unless
(a) such Restricted Subsidiary simultaneously executes and
delivers supplemental indenture to the indentures providing
for a Guaranty of payment of the notes by such Restricted
Subsidiary and
(b) such Restricted Subsidiary waives, and will not in any manner
whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other
rights against CompleTel Europe or any other Restricted
Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guaranty.
The foregoing restrictions are not applicable to any Guaranty of any Restricted
Subsidiary that existed at the time such person became a Restricted Subsidiary
and that was not incurred in connection with, or in contemplation of, such
person becoming a Restricted Subsidiary. If the Guaranteed Indebtedness is
(1) not Subordinated Indebtedness, then the Guaranty of such Guaranteed
Indebtedness shall be PARI PASSU with, or subordinated to, the
Subsidiary Guaranty or
(2) Subordinated Indebtedness, then the Guaranty of such Guaranteed
Indebtedness shall be subordinated to the Subsidiary Guaranty at least
to the extent that the Guaranteed Indebtedness is subordinated to the
notes.
Notwithstanding the foregoing, any Subsidiary Guaranty by a Restricted
Subsidiary will provide by its terms that it shall be automatically and
unconditionally released and discharged upon any sale, exchange or transfer, to
any person not a holder of 5% or more of any class of Capital Stock of CompleTel
Europe or an Affiliate of CompleTel Europe or any Restricted Subsidiary, of all
of CompleTel Europe's and each Restricted Subsidiary's Capital Stock in, or all
or substantially all the assets of, such Subsidiary Guarantor, if
(1) such sale, exchange or transfer is not otherwise prohibited by the
indenture, and
(2) no Indebtedness under any Debt Securities or Subordinated Indebtedness
of such Subsidiary Guarantor is being assumed by the person to whom
such sale or disposition is made.
In addition, if no Default exists or would exist under the indenture, at the
request of CompleTel Europe, a Subsidiary Guarantor that is not a Leveraged
Subsidiary will be released from all obligations under its Subsidiary Guaranty
if the Subsidiary Guarantors have been unconditionally released from their
obligations under all Debt Securities and Subordinated Indebtedness.
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
CompleTel Europe will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction,
including, without limitation, the purchase, sale, lease or exchange of property
or assets, or the rendering of any service, with any holder or any Affiliate of
any holder of 5% or more of any class of Capital Stock of CompleTel Europe or
with any Affiliate of CompleTel Europe or any Restricted Subsidiary, except upon
fair and reasonable terms no less favorable to CompleTel Europe or such
Restricted Subsidiary than could be obtained, at the time of such transaction,
or if such transaction is pursuant to a written agreement, at the time of the
execution
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of the agreement providing therefor, in a comparable arm's-length transaction
with a person that is not such a holder or an Affiliate.
This limitation does not apply to:
(1) transactions that are either
(a) approved by a majority of the disinterested members of the
Board of Directors as being on fair and reasonable terms no
less favorable to CompleTel Europe or such Restricted
Subsidiary than could be obtained, at the time of such
transaction or, if such transaction is pursuant to a written
agreement, at the time of the execution of the agreement
providing therefor, in a comparable arm's-length transaction
with a person that is not such a holder or an Affiliate or
(b) for which CompleTel Europe or a Restricted Subsidiary delivers
to the applicable Trustee a written opinion of an
internationally recognized investment banking firm stating
that the transaction is fair to CompleTel Europe or such
Restricted Subsidiary from a financial point of view;
(2) any transaction solely between CompleTel Europe and any of its wholly
owned Restricted Subsidiaries or solely between wholly owned
Restricted Subsidiaries;
(3) the payment of reasonable and customary regular fees to directors of
CompleTel Europe who are not employees of CompleTel Europe and the
entering into indemnification or similar arrangements with respect to
officers and directors of CompleTel Europe in their capacities as
such;
(4) any payments or other transactions pursuant to any tax-sharing
agreement between CompleTel Europe and any other person with which
CompleTel Europe files a consolidated tax return or with which
CompleTel Europe is part of a consolidated group for tax purposes;
(5) any Restricted Payments not prohibited by the "Limitation on
Restricted Payments" covenant;
(6) issuances of Capital Stock (other than Disqualified Stock) of
CompleTel Europe; and
(7) the payment of fees and expenses pursuant to the Management Services
Agreement.
Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this "Limitation on Transactions with
Shareholders and Affiliates" covenant and not exempted by clauses (2) through
(5) of this paragraph, the aggregate amount of which exceeds $10 million (or the
U.S. dollar equivalent) in value, must be approved or determined to be fair in
the manner provided for in clause (1)(a) or (b) above.
LIMITATION ON LIENS SECURING CERTAIN INDEBTEDNESS
CompleTel Europe will not, and will not permit any Restricted Subsidiary
to, create, incur, assume or suffer to exist any Liens of any kind against or
upon any of its property or assets, or any proceeds therefrom, that secure
either
(1) Subordinated Indebtedness of CompleTel Europe or any Restricted
Subsidiary, unless the notes are secured by a Liens on such property,
assets or proceeds that is senior in priority to the Liens securing
such Subordinated Indebtedness, or
(2) Pari Passu Debt Securities, unless the notes are equally and ratably
secured with the Liens securing such Pari Passu Debt Securities.
Any Lien granted to secure the notes under this covenant must be discharged at
the same time as the discharge of the Lien that gave rise to the obligation to
so secure the notes. Notwithstanding the
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foregoing, CompleTel Europe may incur and allow to exist Liens securing Debt
Securities that exclusively consist of Liens on (x) Government Securities
purchased at the time such Debt Securities are sold with the proceeds
therefrom or (y) cash provided by the sale of such Debt Securities, in either
case to the extent that the proceeds used to purchase any such Government
Securities or providing any such cash constitute a prefunding of the payment
of interest on the Debt Securities Secured thereby and are set aside in an
escrow account or similar arrangement to be applied for such purpose.
LIMITATION ON ASSET SALES
CompleTel Europe will not, and will not permit any Restricted Subsidiary
to, consummate any Asset Sale, unless
(1) the consideration received by CompleTel Europe or such Restricted
Subsidiary is at least equal to the fair market value of the assets
sold or disposed of and
(2) at least 75% of the consideration received consists of cash, Temporary
Cash Investments or Replacement Assets.
In the event and to the extent that CompleTel Europe and/or the Restricted
Subsidiaries receive Net Cash Proceeds from one or more Asset Sales occurring on
or after the Issue Date, then CompleTel Europe shall or shall cause the relevant
Restricted Subsidiary to:
(A) within 12 months after the date Net Cash Proceeds are so received
(i) apply such excess Net Cash Proceeds to repay Indebtedness (other
than Pari Passu Debt and Subordinated Indebtedness of CompleTel Europe
or Subordinated Indebtedness of any Subsidiary Guarantor which is
subordinated in right of payment to a Subsidiary Guaranty of such
Subsidiary Guarantor) of CompleTel Europe or a Restricted Subsidiary
and elect to permanently reduce the commitments thereunder by the
amount of such Indebtedness so repaid and/or (ii) apply no more than
the Pari Passu Pro Rata Share of such Net Cash Proceeds to repay, and
permanently reduce any commitments relating to, Pari Passu Debt and/or
(iii) invest the amount not so applied pursuant to clauses (i) or
(ii) (or enter into a definitive agreement committing to so invest
within 12 months after the date of such agreement), in Replacement
Assets and
(B) apply, within 12 months after the date such Net Cash Proceeds are
received, such Net Cash Proceeds, to the extent not applied pursuant
to clause (A), as provided in the following paragraph of this
"Limitation on Asset Sales" covenant.
The amount of such Net Cash Proceeds required to be applied, or to be committed
to be applied, during the 12-month period after the date such Net Cash Proceeds
are received of the preceding sentence and not applied as so required by the end
of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $15 million (or the U.S.
dollar equivalent), CompleTel Europe must commence, not later than the fifteenth
Business Day of such month, and consummate an Offer to Purchase from the holders
on a pro rata basis an aggregate Accreted Value of notes equal to the Excess
Proceeds on such date, at a purchase price equal to 100% of the Accreted Value
of the notes on the relevant Payment Date, plus, in each case, accrued interest
(if any) to the payment date.
LIMITATION ON STATUS AS INVESTMENT COMPANY.
CompleTel Europe will not, and will not permit any of its Subsidiaries or
controlled Affiliates to, conduct its business in a fashion that would cause
CompleTel Europe to be required to register as an "investment company" under the
Investment Company Act of 1940, as amended, or otherwise to become subject to
regulation under the Investment Company Act. For purposes of establishing
CompleTel Europe's compliance with this provision, any exemption that is or
would become available under Section 3(c)(1) or Section 3(c)(7) of the
Investment Company Act will be disregarded.
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REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
CompleTel Europe or a third party must commence, within 30 days of the
occurrence of a Change of Control, and consummate an Offer to Purchase for
all notes then outstanding, at a purchase price equal to 101% of the Accreted
Value thereof on the relevant payment date, PLUS accrued interest (if any) to
the payment date. On the payment date, CompleTel Europe must:
(1) accept for payment on a pro rata basis as among holders notes or
portions thereof tendered pursuant to an Offer to Purchase;
(2) deposit with the paying agent money sufficient to pay the purchase
price of all notes or portions thereof so accepted; and
(3) deliver, or cause to be delivered, to the Trustee all notes or
portions thereof so accepted together with an officers' certificate
specifying the notes or portions thereof accepted for payment.
The Trustee will act as the paying agent for an Offer to Purchase. The
paying agent will mail to the holders of notes so accepted payment in an
amount equal to the purchase price, and the Trustee will authenticate and, if
necessary, mail to each holder a replacement note equal in principal amount
at maturity to any unpurchased portion of the note surrendered. Each note
purchased and each replacement note issued must be in a principal amount at
maturity of $1,000, or integral multiples thereof and the principal amount at
maturity of any notes left outstanding will not be less than $100,000.
CompleTel Europe will publicly announce the results of an Offer to
Purchase as soon as practicable after the payment date. CompleTel Europe will
comply with Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable, in the event that CompleTel Europe is required to repurchase
notes pursuant to an Offer to Purchase.
There can be no assurance that CompleTel Europe will have sufficient
funds available at the time of any Change of Control to make payments
required to repurchase the notes. If CompleTel Europe is required to
repurchase the notes upon a Change of Control,
(A) the indenture requires CompleTel Europe to repay all indebtedness then
outstanding which by its terms would prohibit such note repurchase,
either prior to or concurrently with such note repurchase, unless
consents from the lenders of such indebtedness are obtained, and
(B) the requirement to repurchase the notes will likely result in an event
of default under CompleTel Europe's senior financing facilities.
COMMISSION REPORTS AND REPORTS TO HOLDERS
At all times from and after the date of the commencement of an exchange
offer or the effectiveness of a shelf registration statement relating to the
notes, whether or not CompleTel Europe is then required to file reports with
the Commission, CompleTel Europe will file with the Commission all such
reports and other information as it would be required to file with the
Commission by Sections 13(a) or 15(d) under the Securities Exchange Act of
1934 if it were subject thereto. CompleTel Europe will, at its cost, supply
the Trustee and each holder of notes or shall supply to the Trustee for
forwarding to each such holder, copies of such reports and other information.
In addition, at all times prior to the date of any such registration,
CompleTel Europe will, at its cost, deliver to each holder of notes quarterly
and annual reports substantially equivalent to those which would be required
by the Exchange Act. In addition, at all times prior to such registration,
upon the request of any holder of notes or any prospective purchaser of notes
designated by a holder of notes, CompleTel Europe will supply to such holder
or prospective purchaser the information required under Rule 144A under the
Securities Act.
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EVENTS OF DEFAULT
The following events are defined as "Events of Default" with respect to
the notes under the indenture:
(1) default in the payment of principal of (or premium, if any, on) any
note when the same becomes due and payable at maturity, upon
acceleration, upon mandatory redemption, upon an optional redemption
or otherwise;
(2) default in the payment of interest on any note when the same becomes
due and payable, and such default continues for a period of 30 days;
(3) default in the performance or breach of the provisions of the
indenture applicable to mergers, consolidations and transfers of all
or substantially all of the assets of CompleTel Europe or the failure
to make or consummate an Offer to Purchase in accordance with the
"Limitation on Asset Sales" or "Repurchase of Notes upon a Change of
Control" covenant;
(4) CompleTel Europe defaults in the performance of or breaches any other
covenant or agreement of CompleTel Europe in the indenture, under the
notes or in the escrow agreement (other than a default specified in
clause (1), (2) or (3) above) and such default or breach continues for
a period of 30 consecutive days after written notice by the Trustee or
the holders of 25% or more in aggregate principal amount at maturity
of the notes;
(5) there occurs with respect to any issue or issues of Indebtedness of
CompleTel Europe or any Restricted Subsidiary having an outstanding
principal amount of $10 million (or the U.S. dollar equivalent) or
more in the aggregate for all such issues of all such persons, whether
such Indebtedness now exists or shall hereafter be created,
(a) an event of default that has caused the holder thereof to
declare such Indebtedness to be due and payable prior to its
Stated Maturity and such Indebtedness has not been discharged
in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or
(b) the failure to make a principal payment at the Stated Maturity
and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default;
(6) any final judgment or order, that is not covered by insurance, for the
payment of money in excess of $10 million (or the U.S. dollar
equivalent) in the aggregate for all such final judgments or orders
against all such persons, treating any deductibles, self-insurance or
retention as not so covered, shall be rendered against CompleTel
Europe or any Restricted Subsidiary and shall not be paid or
discharged, and there shall be any period of 30 consecutive days
following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding
and not paid or discharged against all such persons to exceed
$10 million (or the U.S. dollar equivalent) during which a stay of
enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(7) certain events of bankruptcy, insolvency or reorganization affecting
CompleTel Europe or any Significant Subsidiary shall occur;
(8) any License permitting CompleTel Europe and/or any Significant
Subsidiary to operate in a Target Market shall be revoked, after all
due process expressly provided under applicable law with respect to
the revocation of any such License, or shall no longer be in effect or
shall not be renewed.
If an Event of Default, other than an Event of Default specified in
clause (7) above that occurs with respect to CompleTel Europe, occurs and is
continuing under the indenture, the Trustee may, or the holders of at least
25% in aggregate principal amount at maturity of the notes, then outstanding,
by
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written notice to CompleTel Europe (and to the Trustee if such notice is
given by the holders) may, and the Trustee at the request of such holders
shall, declare the Accreted Value of, premium, if any, and accrued interest
on the notes to be immediately due and payable. Upon a declaration of
acceleration, such Accreted Value of, premium, if any, and accrued interest
shall be immediately due and payable. In the event of a declaration of
acceleration because an Event of Default set forth in clause (5) above has
occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (5) is remedied or cured by CompleTel
Europe or the relevant Restricted Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration
with respect thereto. If an Event of Default specified in clause (7) above
occurs with respect to CompleTel Europe, the Accreted Value of, premium, if
any, and accrued interest on the notes then outstanding shall IPSO FACTO
become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any holder. The holders of at least a
majority in principal amount at maturity of the outstanding notes by written
notice to CompleTel Europe and the Trustee, may waive all past defaults and
rescind and annul a declaration of acceleration and its consequences if
(A) all existing Events of Default, other than the nonpayment of the
Accreted Value of, premium, if any, and interest on the notes that
have become due solely by such declaration of acceleration, have been
cured or waived and
(B) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction.
The holders of at least a majority in aggregate principal amount at
maturity of the outstanding notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or the indenture,
that may involve the Trustee in personal liability, or that the Trustee
determines in good faith may be unduly prejudicial to the rights of holders
not joining in the giving of such direction and may take any other action it
deems proper that is not inconsistent with any such direction received from
holders described above. A holder may not pursue any remedy with respect to
the indenture or the notes unless:
(i) the holder gives the Trustee written notice of a continuing
Event of Default;
(ii) the holders of at least 25% in aggregate principal amount at
maturity of outstanding notes make a written request to the
Trustee to pursue the remedy;
(iii) such holder or holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or
expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the holders of a majority in
aggregate principal amount at maturity of the outstanding
notes do not give the Trustee a direction that is inconsistent
with the request.
However, such limitations do not apply to the right of any holder of a note
to receive payment of the Accreted Value of, premium, if any, or interest on,
such note or to bring suit for the enforcement of any such payment, on or
after the due date expressed in the notes, which right shall not be impaired
or affected without the consent of the holder.
CompleTel Europe must provide an officer's certificate, within 90 days
after the end of each fiscal year, certifying that a review has been
conducted of the activities of CompleTel Europe and the Restricted
Subsidiaries and CompleTel Europe's and the Restricted Subsidiaries'
performance under the indenture and that CompleTel Europe has fulfilled all
obligations thereunder, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default and the nature and status
thereof. CompleTel Europe will also be obligated to notify the Trustee of any
default or defaults in the performance of any covenants or agreements under
the indenture.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
CompleTel Europe will not
(1) consolidate or combine with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of
its property and assets (as an entirety or substantially an entirety
in one transaction or a series of related transactions) or
(2) permit any of the Restricted Subsidiaries to enter into any such
transaction or series of transactions if it would result in the
disposition of all or substantially all of the properties or assets of
CompleTel Europe and the Restricted Subsidiaries on a consolidated
basis,
unless the following conditions are met:
(a) CompleTel Europe shall be the continuing person, or the person,
if other than CompleTel Europe, formed by such consolidation or
into which CompleTel Europe is merged or that acquired or leased
such property and assets of CompleTel Europe shall be a
corporation organized and validly existing under the laws of an
Approved Jurisdiction and shall expressly assume, by supplemental
indenture, executed and delivered to the Trustee, all of the
obligations of CompleTel Europe on all of the notes and under the
indenture;
(b) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing;
(c) CompleTel Europe delivers to the Trustee an opinion of counsel to
the effect that the transaction will not result in the surviving
entity being required to make any deduction or withholding in
amounts greater than CompleTel Europe would otherwise be required
to make on account of Netherlands taxes, from any payments in
respect of the notes or otherwise which would adversely affect
holders of the notes from the standpoint of the enforceability of
the notes or the indenture or service of process or against
CompleTel Europe;
(d) immediately after giving effect to such transaction on a pro
forma basis, CompleTel Europe or any person becoming the
successor obligor of the notes shall have a Consolidated Net
Worth equal to or greater than Consolidated Net Worth of
CompleTel Europe immediately prior to such transaction;
(e) immediately after giving effect to such transaction on a pro
forma basis CompleTel Europe, or any person becoming the
successor obligor of the notes, as the case may be, could incur
at least $1.00 of Indebtedness under the first paragraph of the
"Limitation on Indebtedness" covenant; except that this clause
(e) shall not apply to a consolidation, combination, merger or
sale of all or substantially all of the assets of CompleTel
Europe if immediately after giving effect to such transaction on
a pro forma basis, CompleTel Europe or any person becoming the
successor obligor of the notes shall have a Consolidated Leverage
Ratio equal to or less than the Consolidated Leverage Ratio of
CompleTel Europe immediately prior to such transaction; and
(f) CompleTel Europe delivers to the Trustee an officers'
certificate, attaching the arithmetic computations to demonstrate
compliance with clauses (d) and (e) above, and opinion of
counsel, in each case stating that such consolidation,
combination, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent
provided for herein relating to such transaction have been
complied with.
Clauses (c), (d) and (e) above do not apply if, in the good faith
determination of the Board of Directors, whose determination shall be
evidenced by a Board Resolution, the principal purpose of such transaction is
to change the jurisdiction of incorporation of CompleTel Europe, and any such
transaction may not have as one of its purposes the evasion of the foregoing
limitations.
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Upon any merger, consolidation, combination or any transfer of all or
substantially all of the assets of CompleTel Europe in accordance with the
foregoing, in which CompleTel Europe or the Restricted Subsidiary, as the
case may be, is not the continuing corporation, the successor corporation
formed by such a consolidation or combination, or into which CompleTel Europe
or such Restricted Subsidiary is merged, or to which such transfer is made,
shall succeed to, and be substituted for, and may exercise every right and
power of, CompleTel Europe under the indenture with the same effect as if
such successor corporation had been named as CompleTel Europe therein. Solely
for purposes of computing Cumulative Available Cash Flow and cumulative
Consolidated Interest Expense for purposes of clause (C)(i) of the first
paragraph of the "Limitation on Restricted Payments" covenant, however, the
Cumulative Available Cash Flow and cumulative Consolidated Interest Expense
of any persons other than CompleTel Europe and the Restricted Subsidiaries,
determined prior to the effective time of such consolidation, merger or
transfer of all or substantially all of the assets of CompleTel Europe, shall
only be included for periods subsequent to the effective time of such merger,
consolidation, combination or transfer of assets.
DEFEASANCE
DEFEASANCE AND DISCHARGE.
CompleTel Europe will be deemed to have paid and will be discharged from
any and all obligations in respect of the notes on the 92nd day after the
deposit referred to below, and the provisions of the indenture will no longer
be in effect with respect to the notes, except for, among other matters,
certain obligations to register the transfer or exchange of the notes to
replace stolen, lost or mutilated notes to maintain paying agencies and to
hold monies for payment in trust, if, among other things,
(1) CompleTel Europe has deposited with the Trustee, in trust cash in U.S.
dollars, certain U.S. government obligations or a combination thereof
that through the payment of interest and principal in respect thereof
in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued
interest on the notes on the Stated Maturity of such payments in
accordance with the terms of the indenture and the notes,
(2) CompleTel Europe has delivered to the Trustee
(a) either (x) an opinion of counsel to the effect that holders will
not recognize income, gain or loss for U.S. federal income tax
purposes as a result of CompleTel Europe's exercise of its option
under this "Defeasance" provision and will be subject to U.S.
federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred, which opinion of
counsel must be based upon (and accompanied by a copy of) a
ruling of the Internal Revenue Service to the same effect unless
there has been a change in applicable U.S. federal income tax law
after the date of original issuance of the notes such that a
ruling is no longer required or (y) a ruling directed to the
applicable Trustee received from the Internal Revenue Service to
the same effect as the aforementioned opinion of counsel and
(b) an opinion of counsel to the effect that (x) the creation of the
defeasance trust does not violate the Investment Company Act of
1940, (y) the deposit of the trust funds will not constitute a
fraudulent conveyance or preferential transfer under any
applicable bankruptcy, insolvency, reorganization or similar law
affecting creditors' rights generally under any Netherlands or
U.S. Federal or state law or the laws of any other applicable
jurisdiction, and that the Trustee has a perfected security
interest in such trust fund for the ratable benefit of the
holders of the notes and (z) payments from the defeasance trust
will be free and exempt from any and all withholding and other
income taxes of whatever nature imposed or levied by or on behalf
of the Netherlands or any political subdivision thereof or
therein having the power to tax;
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(3) immediately after giving effect to such deposit on a pro forma basis,
no Default shall have occurred and be continuing on the date of such
deposit and such deposit shall not result in a breach or violation of,
or constitute a default under, any other agreement or instrument to
which CompleTel Europe or any of its Subsidiaries is a party or by
which CompleTel Europe or any of its Subsidiaries is bound and
(4) if at such time the notes are listed on a national securities
exchange, CompleTel Europe has delivered to the Trustee an opinion of
counsel to the effect that the notes will not be delisted as a result
of such deposit, defeasance and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT.
The provisions of the indenture will no longer be in effect with respect
to clauses (d) and (e) under "Consolidation, Merger and Sale of Assets" and
all the covenants described herein under "Covenants," clause (3) under
"Events of Default" with respect to such clauses (d) and (e) under
"Consolidation, Merger and Sale of Assets," clause (4) under "Events of
Default" with respect to such other covenants and clauses (5) and (6) under
"Events of Default" shall be deemed not to be Events of Default upon, among
other things, the deposit with the Trustee, in trust, of cash in U.S.
dollars, certain U.S. government obligations or a combination thereof that
through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of, premium, if any, and accrued interest on the notes on the
Stated Maturity of such payments in accordance with the terms of the
indenture notes the satisfaction of the provisions described in clauses
(2)(b), (3) and (4) of the preceding paragraph and the delivery by CompleTel
Europe to the Trustee of an opinion of counsel to the effect that, among
other things, the holders will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such deposit and defeasance of
certain covenants and Events of Default and will be subject to U.S. federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit and defeasance had not occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT.
In the event CompleTel Europe exercises its option to omit compliance
with certain covenants and provisions of the indenture with respect to the
notes as described in the immediately preceding paragraph and the notes are
declared due and payable because of the occurrence of an Event of Default
that remains applicable, the amount of cash in U.S. dollars and/or U.S.
government obligations on deposit with the Trustee will be sufficient to pay
amounts due on the notes at the time of their Stated Maturity but may not be
sufficient to pay amounts due on the notes at the time of the acceleration
resulting from such Event of Default. CompleTel Europe will, however, remain
liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the indenture may be made by CompleTel
Europe and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount at maturity of the outstanding notes,
EXCEPT that no such modification or amendment may, without the consent of
each holder affected thereby
(1) change the Stated Maturity of the principal of, or any installment of
interest on, any note,
(2) reduce the Accreted Value of, or premium, if any, or interest on, any
note,
(3) change the place or currency of payment of principal of, or premium,
if any, or interest on, any note,
(4) impair the right to institute suit for the enforcement of any payment
on or after the Stated Maturity (or, in the case of a redemption, on
or after the Redemption Date) of any note,
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(5) reduce the above-stated percentage of outstanding notes the consent of
whose holders is necessary to modify or amend the applicable
indenture,
(6) waive a default in the payment of principal of, premium, if any, or
interest on the notes,
(7) reduce the percentage or aggregate principal amount at maturity of
outstanding notes which are required to consent to a waiver of
compliance with certain provisions of the indenture or for waiver of
certain defaults,
(8) make any change that would result in CompleTel Europe being required
to make any deduction or withholding from payments made in respect of
the notes
(9) release any Subsidiary Guarantor from any of its obligations under its
Subsidiary Guaranty or the indenture or release the Escrow Guaranty
from any of its obligations under the indenture, in each case other
than in accordance with the terms of the indenture,
(10) release any Lien securing the notes other than in accordance with the
terms of the indenture and the escrow agreement,
(11) affect the ranking of the notes in a manner adverse to the holders of
the notes or
(12) make any change to the indenture or the notes that would adversely
affect the rights of holders to receive Additional Amounts.
Without the consent of any holder, CompleTel Europe and the Trustee may
amend the indenture to cure any ambiguity, omission, defect or inconsistency,
to provide for the assumption by a successor corporation of the obligations
of CompleTel Europe under the applicable indenture, to add Guaranties with
respect to the notes to secure the notes to add to the covenants of CompleTel
Europe for the benefit of the holders or to surrender any right or power
conferred upon CompleTel Europe, to comply with any requirement of the
Commission in connection with the qualification of the indenture under the
Trust Indenture Act, to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee or to make any change that does
not adversely affect the rights of any holder in any material respect.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of CompleTel Europe or CompleTel LLC in the
indenture, or in any of the notes or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer, director, manager, employee or controlling person of
either CompleTel Europe or CompleTel LLC or of any successor person thereof.
Each holder, by accepting the notes, waives and releases all such liability.
CONCERNING THE TRUSTEE
The indenture provides that, except during the continuance of a Default,
the Trustee will not be liable, except for the performance of such duties as
are specifically set forth in the indenture. If an Event of Default has
occurred and is continuing, the Trustee will use the same degree of care and
skill in its exercise of the rights and powers vested in it under the
indenture as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The indenture and provisions of the Trust indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights
of the Trustee, should it become a creditor of CompleTel Europe, to obtain
payment of claims in certain cases or to realize on certain property received
by it in respect of any such claims, as security or otherwise. The Trustee is
permitted to
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engage in other transactions. If the Trustee acquires any conflicting
interest, it must eliminate such conflict or resign.
NOTICES
Any notice or communication to holders of the notes will be in writing
and delivered in person or mailed by first class mail, postage prepaid,
addressed to the holders at their respective addresses as they appear on the
registration books of the registrar under the indenture and shall be
sufficiently given if so mailed within the time prescribed. If a notice or
communication is mailed in the manner provided above, it is duly given,
whether or not received by the addressee.
GOVERNING LAW AND SUBMISSION TO JURISDICTION
The indenture, the notes and the CompleTel LLC Guaranty will be governed
by, and construed in accordance with, the laws of the State of New York
without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be
required thereby.
CompleTel Europe has submitted to the jurisdiction of the U.S. Federal
and New York State courts located in the Borough of Manhattan, City and State
of New York for purposes of all legal actions and proceedings instituted in
connection with the notes and the indenture. CompleTel Europe has appointed
as its authorized agent upon which process may be served in any such actions.
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DESCRIPTION OF THE SHARE CAPITAL
AND CORPORATE STRUCTURE OF COMPLETEL EUROPE
GENERAL
CompleTel Europe was incorporated under Dutch law on December 14, 1998,
as a public limited company (NAAMLOZE VENNOOTSCHAP, N.V.).
CompleTel Europe has its corporate seat and registered office in
Amsterdam, the Netherlands and is registered at the Trade Register of the
Chamber of Commerce and Industries for Amsterdam under No. 34108119 and is
known at the Dutch Ministery of Justice under number NV 1.055.197.
Set out below is a summary of certain relevant provisions of the
Articles of Association and of certain provisions of Dutch company law. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Articles of Association and Dutch law. The full Dutch text
of the Articles of Association is available at the registered office of
CompleTel Europe. An English translation has been filed as an exhibit to the
registration statement of which this prospectus is part.
SHARE CAPITAL STRUCTURE
The authorized share capital of CompleTel Europe amounts to 3,159,924
Netherlands guilders with a nominal value per share of NLG.03. As of the
date of this prospectus 21,071,429 shares have been issued with a share
capital of NLG632,143.
SHARES
The Articles of Association of CompleTel Europe provide that shares
shall be indivisible and shall be numbered consecutively from one upwards.
The shares can be either registered or bearer shares. The board of management
of CompleTel Europe shall decide in the event shares are issued in which form
the new shares shall be issued. Once a share is issued the board of
management of CompleTel Europe can, at the request of a shareholder, change a
fully paid-up registered share into a bearer share and vice versa. Share
certificates shall be issued in respect of bearer shares in the capital of
CompleTel Europe.
CompleTel Europe maintains a shareholders' register for the outstanding
registered shares, which is available for inspection by the shareholders at
the registered office of CompleTel Europe. A right of pledge or a right of
usufruct may be established on the shares. The board of management shall,
upon notification thereof, note the establishment of such restricted right to
a share in the shareholders' register. Whether the voting rights with respect
to the underlying shares transfer to the pledgee or usufructuary will be
determined at the time when the usufruct or pledge is established.
The transfer of a registered share or the establishment of a right of
pledge or a right of usufruct with respect to a registered share shall
require a Dutch notarial deed.
Depository receipts (CERTIFICATEN VAN AANDELEN) may be issued with
respect to shares in CompleTel Europe's capital, subject to prior approval by
the general meeting of shareholders of CompleTel Europe.
VOTING RIGHTS
All shareholders and other persons entitled to vote have the right to
attend general meetings of shareholders, either in person or represented by a
person holding a written proxy, to address the meeting and to exercise voting
rights, subject to the provisions of the Articles of Association. Each
ordinary share carries the right to cast one vote. Resolutions will be passed
by a simple majority of the votes validly cast, except where Dutch law or the
Articles of Association provide otherwise.
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PRE-EMPTIVE RIGHTS
In respect of the issue of shares, each existing shareholder will have
pre-emptive rights in proportion to its existing shareholding, save in the
event that shares are issued to employees of CompleTel Europe or of an
affiliated company or to a person who exercises a previously acquired right
to subscribe for shares. This pre-emptive right also applies in respect of
shares issued in consideration for a contribution in kind. The general
meeting of shareholders or another body of CompleTel Europe, thereto
designated by the general meeting of shareholders, is authorized to restrict
or exclude there pre-emptive rights.
AMENDMENT OF THE ARTICLES OF ASSOCIATION, MERGER AND DIVISION
The general meeting of shareholders may resolve to amend the Articles of
Association or to enter into a merger or a division by means of a resolution
adopted by a two-thirds majority at a meeting where at least half of the
issued share capital is represented.
DISSOLUTION AND LIQUIDATION
The general meeting of shareholders may resolve to dissolve CompleTel
Europe by a resolution adopted by a two-thirds majority at a meeting where at
least half of the issued share capital is represented. In the event of the
dissolution and the liquidation of CompleTel Europe the assets remaining
after payment of all debts are to be distributed to the holders of CompleTel
Europe's shares in proportion to the nominal value of their shareholdings,
provided always that, to the extent that shares have not been fully paid up,
only the paid-up amount shall be taken into account. If CompleTel Europe is
dissolved pursuant to a resolution adopted by the general meeting of
shareholders, liquidation shall take place in accordance with Dutch law.
ANNUAL ACCOUNTS AND PROFITS DISTRIBUTION
The financial year of CompleTel Europe is concurrent with the calendar
year. Annually, within five months after the expiry of CompleTel Europe's
financial year, save where this period is extended by a maximum of six months
by the general meeting of shareholders on account of special circumstances,
the board of management will draw up the annual accounts and make them from
available for inspection by the shareholders at CompleTel Europe's office.
The general meeting of shareholders shall determine the amounts of the
profits that CompleTel Europe shall reserve shall reserve on the basis of the
adopted profit and loss account and the allocation of distributable profits.
CompleTel Europe may only make distributions to its shareholders and to
others entitled to receive part of the distributable profits if this payment
does not reduce the shareholders equity below the sum of the called and
paid-up share capital and any reserves required to be maintained by Dutch law
or the Articles of Association. Any dividends shall be made pace and/or date
as the general meeting of shareholders may decide. The board of management
may, subject to the requirements of Dutch law and the approval of the general
meeting of shareholders, make interim dividends payable.
DESCRIPTION OF EQUITY REGISTRATION AND OTHER RIGHTS
We have entered into an Equity Registration Rights Agreement, dated
February 16, 1999, which provides registration rights under the Securities
Act of 1933 to the holders of common shares of CompleTel Europe (or any
American Depositary Receipts or similar depositary receipts issued upon
deposit thereof) and the holders of Class B Interests of CompleTel Holdings
LLC, which is an intermediate holding company that indirectly owns 100% of
CompleTel Europe.
The equity registration rights agreement provides the holders of the
common shares of CompleTel Europe and the Class B interests of CompleTel
Holdings with the right to demand registration of such securities at any time
after we engage in an initial public equity offering, we are subject to a
change of control, certain liquidation events happen with respect to
CompleTel Holdings, or February 16, 2004.
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Holders of securities subject to the equity registration rights
agreement will also have the right to include such securities in registration
statements under the Securities Act covering equity securities of CompleTel
LLC or CompleTel Europe filed for either their own accounts or for the
account of any of their respective securityholders for sale on the same terms
and conditions as the securities of those companies or any other selling
securityholder included in such registration statements. Holders of
securities subject to the equity registration rights agreement will not have
such "Piggyback Registration" rights in respect of an initial public equity
offering in which no shareholder or member, as the case may be, of any of the
Issuers is a participant or in respect of registration statements relating to
employee benefit plans or business combination transactions.
CompleTel LLC and its equity investors have agreed not to allow CompleTel
Holdings or CompleTel Europe to make a public offering of any class of capital
stock or other equity interests unless, prior to commencing such public
offering, any necessary changes are made to provide that Class B Interests in
CompleTel Holdings are convertible into such class of capital stock or other
equity interests of CompleTel Holdings or CompleTel Europe, as applicable, on a
share-for-share basis and that rights, conditions and privileges attaching to
such class of capital stock or other equity interests are not adverse to holders
of the Class B Interests as compared with the terms of Class A Interests (except
with respect to voting rights). CompleTel LLC has also agreed not to make, and
not to allow any of its direct or indirect subsidiaries other than CompleTel
Holdings or CompleTel Europe to make, a Public Offering of any class of capital
stock for so long as any securities registrable under the equity registration
rights agreement are outstanding.
REGISTRATION RIGHTS AGREEMENT
BACKGROUND
In a registration rights agreement relating to the existing notes, we
have agreed with the initial purchasers that we will, at our cost
- file an exchange offer registration statement with the SEC no
later than 150 days after February 16, 1999, the original issue
date of the existing notes to exchange the existing notes for new
notes having terms substantially identical in all material
respects to the existing notes, and
- use our best efforts to cause the exchange offer registration
statement to become effective under the Securities Act no later
than 240 days after February 16, 1999.
Upon the effectiveness of the exchange offer registration statement, we
will promptly offer the new notes in exchange for surrender of the existing
notes. We have agreed to keep the exchange offer open for at least 30 days, or
longer if required by applicable law, after the date that notice of the exchange
offer is mailed to holders of the existing notes.
The summary in this prospectus of the registration rights agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by all the provisions of the registration rights agreement, a copy of which is
filed as an exhibit to this exchange offer registration statement.
TERMS OF THE EXCHANGE
For each existing note surrendered to us pursuant to the exchange offer,
the holder of an existing note will receive a new note having a principal
amount equal to that of the surrendered existing note. Interest on each new
note will accrue from the last interest payment date on which interest was
paid on the existing note surrendered in exchange offer, or, if no interest
has been paid on the existing note, from February 15, 2004.
Based on interpretations by the staff of the SEC, we believe that the new
notes would be freely transferable by holders of the new notes after the
exchange offer without further registration under the Securities Act if:
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(1) the holder acquires the new notes in the ordinary course of its
business,
(2) the holder has no arrangement or understanding with any person to
participate in the distribution of the new notes, and
(3) the holder is not an affiliate of CompleTel Europe, as that term is
interpreted by the SEC.
A holder of existing notes (other than certain specified holders of existing
notes) who wishes to exchange its existing notes for new notes in the
exchange offer will be required to make representations to this effect. If a
holder of existing notes is an affiliate of CompleTel Europe, the holder will
be required to make a representation that it will comply with the
registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
Each broker-dealer receiving new notes in the exchange offer will be
required to deliver a prospectus with respect to resales of the new notes.
The SEC has taken the position that a participating broker-dealer may fulfill
their prospectus delivery requirements with respect to new notes (other than
a resale of an unsold allotment from the original sale of the existing notes)
with the prospectus contained in the exchange offer registration statement.
We will make available to participating broker-dealers and other persons with
similar prospectus delivery requirements the prospectus contained in the
exchange offer registration statement in connection with the resale of new
notes for a specified period of time.
SHELF REGISTRATION STATEMENT
If one of the following events occurs
(1) applicable law or interpretations of the staff of the SEC do not
permit us to effect a exchange offer,
(2) for any other reason the exchange offer is not consummated within
180 days after the February 16, 1999,
(3) the initial purchasers so request with respect to existing notes not
eligible to be exchanged for new notes in the exchange offer, or
(4) any holder of existing notes is not eligible to participate in the
exchange offer or participates in but does not receive freely
tradeable (except for prospectus delivery requirements) new notes in
the exchange offer,
then, we will, at our cost,
- as promptly as practicable, file a shelf registration statement
covering resales of the existing notes or the new notes, as the
case may be,
- use our best efforts to cause the shelf registration statement to
become effective under the Securities Act, and
- keep the shelf registration statement effective until two years
after its effective date (or shorter period that will terminate
when all existing notes or new notes, as the case may be, covered
by the self registration statement have been sold pursuant to the
shelf registration statement).
If a shelf registration statement is filed, we will provide to each holder
for whom the shelf registration statement was filed copies of the prospectus
which is a part of the shelf registration statement, notify each holder when
the shelf registration statement has become effective, and take certain other
actions as are required to permit unrestricted resales of the Notes or the
new notes, as the case may be.
A holder selling existing notes or new notes under the shelf registration
statement generally would be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus
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to purchasers, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by
the provisions of the registration rights agreement which are applicable to
such holder (including certain indemnification obligations).
LIQUIDATED DAMAGES
If we fail to comply with certain provisions of the registration rights
agreement, then, as liquidated damages, additional interest shall become
payable in respect of the existing notes as follows:
(1) If (a) neither an exchange offer registration statement nor a
shelf registration statement is filed with the SEC on or prior to the 150th
day after February 16, 1999, or (b) even though we have filed an exchange
offer registration statement, we are required to file a shelf registration
statement and the shelf registration statement is not filed on or prior to
the date required by the registration rights agreement, then beginning on
the day after either such required filing date, liquidated damages shall
accrue on the existing notes over and above the stated interest, at a rate
per annum of 0.50% of the Accreted Value of the existing notes on the
preceding Semi-Annual Accrual Date of the existing notes for the first 90
days immediately following each such required filing date, the liquidated
damages rate increasing by an additional 0.25% of the Accreted Value of the
existing notes on the preceding Semi-Annual Accrual Date of the existing
notes at the beginning of each subsequent 90-day period;
(2) if (A) neither an exchange offer registration statement nor a
shelf registration statement becomes effective on or prior to the 210th day
after February 16, 1999 or (B) even though we have caused an exchange offer
registration statement to become effective, we are required to file and
cause to become effective a shelf registration statement and the shelf
registration statement has not become effective on or prior to the 60th day
following the date such shelf registration statement was filed, then,
beginning on the 211th day after February 16, 1999 (in the case of (A)
above) or beginning on the 61st day after the filing date (in the case of
(B) above), liquidated damages shall accrue on the existing notes over and
above the stated interest, at a rate per annum of 0.50% of the Accreted
Value of the existing notes on the preceding Semi-Annual Accrual Date of
the existing notes for the first 90 days immediately following each such
required effective date, the liquidated damages increasing by an additional
0.25% of the Accreted Value of the existing notes on the preceding
Semi-Annual Accrual Date of the existing notes at the beginning of each
subsequent 90-day period; and
(3) if (A) we have not exchanged new notes for all existing notes
validly tendered in accordance with the terms of the exchange offer within
60 days after the effectiveness of the exchange offer registration
statement or (B) the exchange offer registration statement or the shelf
registration statement has become effective and that registration statement
ceases to be effective at any time during the periods specified in the
registration rights agreement, unless all the existing notes have
previously been sold or exchanged, as the case may be, then liquidated
damages shall accrue (over and above any interest) at a rate per annum if
0.50% of the Accreted Value on the preceding Semi-Annual Accrual Date of
such affected notes for the first 90 days commencing on (x) the 61st day
after such effective date with respect to the existing notes validly
tendered and not exchanged by us, in the case of (A) above or (y) the day
the registration statement ceases to be effective in the case of (B) above,
such liquidated damages rate increasing by an additional 0.25% of the
Accreted Value on the preceding Semi-Annual Accrual Date of such affected
notes at the beginning of each such subsequent 90-day period (it being
understood and agreed that, in the case of (B) above, so long as any
existing note is then covered by an effective shelf registration statement,
no liquidated damages shall accrue on the existing note).
The liquidated damages rate on any affected note may not exceed at any one time
in the aggregate 2.00% per annum of the Accreted Value of the affected note.
Upon curing the applicable default pursuant to paragraphs (1), (2) or (3) which
caused the liquidated damages, liquidated damages on the affected notes as a
result of such paragraph, as the case may be, shall cease to accrue.
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Any amounts of liquidated damages due pursuant to paragraphs (1), (2) or
(3) above will be payable to the holders of affected notes on each February
15 and August 15, beginning on the first such date occurring after any
liquidated damages begin to accrue.
The new notes may not be offered, transferred or sold as part of their
initial distribution or at any time thereafter, to any persons (including
legal entities) established, domiciled, settled or ordinarily resident in The
Netherlands. These restrictions shall no longer apply from the date on which
the Securities Board of The Netherlands (STICHTING TOEZICHT EFFECTENVERKEER)
has granted a dispensation on the offering of the new notes pursuant to the
exchange offer registration statement in connection with the exchange offer
to exchange the existing notes for the new notes.
BOOK-ENTRY; DELIVERY AND FORM
The new notes initially will be represented by one or more permanent
global certificates in definitive, fully registered form. The global notes
will be deposited upon issuance with Depository Trust Company and registered
in the name of a nominee of Depository Trust Company.
DEPOSITORY PROCEDURES
We expect that pursuant to procedures established by Depository Trust
Company:
(1) upon the issuance of the global notes, Depository Trust Company or its
custodian will credit, on its internal system, the principal amount of the
individual beneficial interests represented by the global notes to the
respective accounts of persons who have accounts with the depository, and
(2) ownership of beneficial interests in the global notes will be shown
on, and the transfer of ownership will be effected only through, records
maintained by Depository Trust Company or its nominee, with respect to
interests of participants, and the records of participants, with respect to
interests of persons other than participants.
Ownership of beneficial interests in the global notes will be limited to persons
who have accounts with Depository Trust Company or persons who hold interests
through participants.
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the notes represented by the
global notes to these persons may be limited. In addition, because Depository
Trust Company can act only on behalf of its participants, who in turn act on
behalf of persons who hold interests through the participants, the ability of a
person having an interest in the notes represented by the global notes to pledge
or transfer such interest to persons or entities that do not participate in
Depository Trust Company's system, or to otherwise take actions in respect of
such interest, may be affected by the lack of a physical definitive security in
respect of such interest.
So long as Depository Trust Company or its nominee is the registered owner
or holder of the new notes, Depository Trust Company (or the nominee) will be
considered the sole owner or holder of the new notes represented by the global
notes for all purposes under the indenture. No beneficial owner of an interest
in the global notes will be able to transfer that interest except in accordance
with Depository Trust Company's procedures.
PAYMENTS ON THE GLOBAL SECURITIES
Payments of interest, principal and other amounts due on the global notes
will be made to Depository Trust Company or its nominee as the registered owner.
None of CompleTel Europe, CompleTel LLC, the trustee or any paying agent will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the global
notes or for maintaining, supervising or reviewing any records relating to this
beneficial ownership interest.
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We expect that Depository Trust Company or its nominee, upon receipt of
any payment of interest, principal or other amounts due on the global notes,
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the global notes as shown on the
records of Depository Trust Company. We also expect that payments by
participants to owners of beneficial interests in the global notes held
through such participants will be governed by standing instructions and
customary practice, as is the case with securities held for the accounts of
customers registered in the names of nominees for those customers. These
payments will be the responsibility of the participants.
INFORMATION CONCERNING DEPOSITORY TRUST COMPANY
Depository Trust Company has advised us that it is:
- a limited purpose trust company organized under the laws of the
State of New York,
- a member of the Federal Reserve System,
- a "clearing corporation" within the meaning of the Uniform
Commercial Code, and
- a "Clearing Agency" registered under the provisions of Section
17A of the Exchange Act.
Depository Trust Company was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to Depository Trust Company system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Transfers between participants in Depository Trust Company will be
effected in the ordinary way through Depository Trust Company's settlement
system in accordance with Depository Trust Company rules and will be settled
in same day funds.
We expect that Depository Trust Company will take any action permitted
to be taken by a holder of new notes, including the presentation of new notes
for exchange as described below, only at the direction of a participant to
whose account Depository Trust Company interests in the global notes are
credited. Further, Depository Trust Company will take action only as to such
portion of the notes as to which the participant has given such direction.
However, if there is an Event of Default under the indenture, Depository
Trust Company will exchange the global notes for certificated notes, which it
will distribute to its participants.
The descriptions of the operations and procedures of Depository Trust
Company described above are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the settlement
system, and are subject to change from time to time. Neither CompleTel
Europe, CompleTel LLC or the trustee takes any responsibility for these
operations or procedures, and investors are urged to contact the Depository
Trust Company or its participants directly to discuss these matters.
CERTIFICATED SECURITIES.
If Depository Trust Company is at any time unwilling or unable to
continue as a depository for the global notes and a successor depository is
not appointed by CompleTel Europe within 90 days, certificated notes will be
issued in exchange for the global notes.
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CERTAIN TAX CONSIDERATIONS
The following is a general discussion of the material U.S. federal
income tax consequences and the material Dutch tax consequences, under
current law, regarding the exchange of old notes for new notes and the
ownership and disposition of new notes. This discussion does not address the
income taxes imposed by any political subdivision of the United States or The
Netherlands or any tax imposed by any other jurisdiction. This discussion
does not address the tax consequences for any person who does not hold old
notes as capital assets or who will not hold new notes as capital assets or
every aspect of taxation that may be relevant to a particular taxpayer under
special circumstances or who is subject to special treatment under applicable
law and is not intended to be applicable in all respects to all categories of
investors. For example, certain types of investors, such as:
- insurance companies,
- tax-exempt persons,
- financial institutions,
- regulated investment companies
- retirement accounts,
- dealers in securities, and
- persons who hold notes as part of a hedging, straddle, constructive
sale or conversion transaction
may be subject to different tax rules not discussed below.
The laws on which this opinion is based are subject to change, perhaps with
retroactive effect. A change to such laws may invalidate a part or all of this
opinion, which will NOT be updated to reflect changes in laws.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT THEIR TAX ADVISER REGARDING THE
PARTICULAR TAX CONSEQUENCES TO SUCH PURCHASER OF THE EXCHANGE OF OLD NOTES FOR
NEW NOTES, AND OF OWNING AND DISPOSING OF NEW NOTES, INCLUDING THE APPLICABILITY
OF ANY FEDERAL ESTATE OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS,
ANY CHANGES IN APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR
REGULATIONS.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
This discussion applies only to a beneficial owner of an old note who
acquired an old note at the original offering price and who is
- an individual citizen or resident of the United States,
- a corporation organized under the laws of the United States or any
state of the United States, or
- any other person whose worldwide income is subject to U.S. federal
income taxation on a net income basis, (each a "U.S. holder").
Non-U.S. holders are subject to substantially different rules, not described
below.
EXCHANGE OFFER
Although there is no direct authority addressing the U.S. federal income
tax consequences of the exchange of old notes for new notes, in the opinion of
Holme Roberts & Owen, LLP, counsel to the CompleTel Europe, the exchange of old
notes for new notes should not be treated as a taxable exchange for U.S. federal
income tax purposes because the new notes will not differ materially from the
old notes and because the exchange will occur by operation of the original terms
of the old notes. As a result, U.S. holders who exchange their old notes for
new notes should not recognize any income, gain or loss for U.S. federal income
tax purposes. A U.S. holder should have the same adjusted tax basis and holding
period in the new notes immediately after the exchange as it had in the old
notes immediately before the exchange.
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ALLOCATION OF PURCHASE PRICE BETWEEN NOTES AND CLASS B INTERESTS
Each note was issued as part of a unit with 10 non-voting Class B
membership interests of CompleTel Holdings LLC. CompleTel Europe allocated
the total purchase price of each unit between the note and the Class B
membership interests on the basis of their relative fair market values. The
amount allocated to the note, $478.18, is both a U.S. holder's initial tax
basis in the note and the issue price of the note. This allocation is
binding on a U.S. holder unless the U.S. holder properly discloses to the IRS
that it is taking a contrary position. The IRS may dispute CompleTel
Europe's allocation, which could require a reallocation of purchase price
between the Class B interests and the note, which in turn would impact the
amount and the character of the income a U.S. holder would recognize with
respect to a note.
INTEREST AND ORIGINAL ISSUE DISCOUNT
U.S. holders generally will have to include original issue discount ("OID")
in income as interest as it accrues. OID is defined as the excess of a note's:
- stated redemption price at maturity, over
- its issue price.
A note's "stated redemption price at maturity" is the sum of all payments
to be made on such note, other than payments of qualified stated interest.
"Qualified stated interest" is interest which is unconditionally payable at
least annually at a fixed rate during the entire term of the note. Because
there will not be any payment of interest on the notes until August 15, 2005,
the cash interest payments that will be made on the notes are not qualified
stated interest and are therefore included in the note's stated redemption price
at maturity. The "issue price" of a note is the first price, or allocable share
thereof, at which a substantial amount of the notes is sold to the public for
cash, excluding sales to bond houses, brokers or similar persons or
organizations acting in the capacity as underwriters, placement agents or
wholesalers.
The amount of accrued OID that a U.S. holder must include in gross income
for a taxable year equals the sum of the daily portions of OID for each day
during the taxable year on which the U.S. holder owns the note. Calculation of
the daily portions of OID requires four steps:
(1) Calculate the yield on the note to maturity by determining the
discount rate that results in a present value for all principal and
interest payments equal to the issue price.
(2) Determine the accrual period which will generally be the semi-annual
period between interest payment dates.
(3) Determine the OID allocable to each accrual period by first
multiplying the yield determined under step one by the note's adjusted
issue price at the beginning of the period, which equals the issue
price plus OID previously included in gross income less payments
previously made on the debt instrument.
(4) Determine the daily portions of OID by dividing the OID amount for the
accrual period by the number of days in the accrual period.
Because U.S. holders generally will have to include accrued OID in income using
the methodology described above, a U.S. holder will include OID in gross income
in advance of the receipt of cash attributable to such income. However, U.S.
holders will not be required to include separately in income cash payments made
on the notes, even if denominated as interest, to the extent such payment
constitute OID previously included in gross income.
DISPOSITION OF THE NOTES
Upon the sale, exchange, retirement at maturity or other disposition of a
note (collectively, a "disposition"), a U.S. holder generally will recognize
capital gain or capital loss equal to the difference between
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- the amount realized by such holder (net of accrued but unpaid stated
interest, which will be treated as ordinary interest income), and
- such holder's adjusted tax basis in the note.
A U.S. holder's adjusted tax basis in a note will be its allocable share of
the initial cost of a unit, to such holder as discussed above, increased by any
OID included in income and reduced by any cash payments made on the note through
the date of disposition. Such capital gain or capital loss will be long-term
capital gain or capital loss if the holding period for the note exceeds one year
at the time of the disposition. In general, the maximum federal income tax rate
applicable to long-term capital gains derived by individuals is 20%. Deductions
for capital losses are subject to certain limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain non-corporate U.S. holders may be subject to backup withholding at
a rate of 31% on payments of principal, interest and OID, and to the proceeds of
certain sales of notes. In general, backup withholding will be imposed only if
the U.S. holder
- fails to furnish its taxpayer identification number ("TIN"), which,
for an individual, would be his or her Social Security number,
- furnishes an incorrect TIN,
- is notified by the IRS that it has failed to report payments of
interest or dividends or
- under certain circumstances, fails to certify, under penalty of
perjury, that it has furnished a correct TIN and has been notified by
the IRS that it is subject to backup withholding tax for failure to
report interest or dividend payments.
Any amounts withheld will be allowed as a credit against the U.S. holder's
U.S. federal income tax liability and may entitle the U.S. holder to a refund,
provided the required information is furnished to the IRS. Payments of
principal, interest and OID to U.S. holders will also be subject to information
reporting. U.S. holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption, if applicable.
CERTAIN NETHERLANDS INCOME TAX CONSEQUENCES
This discussion applies only to a beneficial owner of an old note who is
not, or is not deemed to be, a resident of The Netherlands for the purpose of
the relevant tax laws and does not have or will not obtain a substantial
interest, as defined below, in CompleTel Europe N.V. (a "non-resident holder").
SUBSTANTIAL INTEREST
A shareholder that owns, either via shares or options, directly or
indirectly, 5% or more of any class of shares, or 5% or more of the total issued
share capital of a company resident in The Netherlands (a "Substantial
Interest") is subject to special rules. Profit participation rights which give
the holder rights to 5% or more of the annual profit or 5% or more of the
liquidation proceeds of the company will also qualify as a substantial interest.
With respect to individuals, certain attribution rules exist in determining the
presence of a Substantial Interest.
EXCHANGE OFFER
The conditions of the new notes will not differ materially from the old
notes, except the new notes will be registered. The amount of a new note, its
interest percentage and repayment schedule will not differ from an old note.
Therefore, the exchange of old notes for new notes will not have Dutch fiscal
consequences for the holders of the old notes.
NETHERLANDS WITHHOLDING TAX
123
<PAGE>
As under the old notes, all payments under the new notes may be made free
of withholding or deduction for or on account of any taxes imposed, levied,
withheld or assessed by The Netherlands or any political subdivision or taxing
authority thereof or therein.
TAXES ON INCOME AND CAPITAL GAINS
A non-resident holder of new notes who derives income from the notes or who
realizes capital gains on the sale, exchange or redemption of the notes, will
not be subject to Netherlands Corporate Income Tax or Netherlands Individual
Income Tax, provided the non-resident holder
(1) does not have or will not obtain an enterprise or an interest in an
enterprise which, in whole or in part, is carried on through a
permanent establishment or a permanent representative in The
Netherlands and to which enterprise or part of an enterprise the notes
are attributable; and
(2) is not directly entitled (the term directly means, in this context,
not through the beneficial ownership of shares or similar securities)
to all or a share of the profits of an enterprise that is managed and
controlled in The Netherlands while the notes form part of the assets
of, or are otherwise attributable to, such enterprise; and
(3) does not carry out and has not carried out employment activities in
the territory of The Netherlands, or as director or board member of an
entity resident in The Netherlands or a civil servant of a Netherlands
public body with which the holding of the notes is connected.
A non-resident holder of notes may be eligible for an exemption from
Netherlands taxes on the abovementioned income and/or capital gain under a
treaty for the avoidance of double taxation that is in effect between the
country of residence of the holder of the notes and The Netherlands.
NET WEALTH TAX
A non-resident holder of the notes will not be subject to Netherlands net
wealth tax if the holder of the notes is not an individual. An individual will
not be subject to Netherlands net wealth tax provided that:
(1) the non-resident holder does not have an enterprise or an interest in
an enterprise that is, in whole or in part, carried on through a
permanent establishment or a permanent representative in The
Netherlands and to which enterprise or part of an enterprise the notes
are attributable; and
(2) such non-resident holder is not directly entitled (the term directly
means, in this context, not through the beneficial ownership of shares
or similar securities) to all or a share of the profits of an
enterprise that is managed and controlled in The Netherlands while the
notes from part of the assets of, or are otherwise attributable to,
such enterprise.
GIFT OR INHERITANCE TAXES
No Netherlands gift or inheritance taxes will arise in The Netherlands
in respect of the transfer of a note by way of a gift by, or on the death of
a non-resident holder, provided that:
(1) the transfer is not construed as an inheritance or gift made by or on
behalf of a person who is a resident or a deemed resident of The
Netherlands; and
(2) the note does not form part of the assets of, and is not otherwise
attributable to, an enterprise owned by the donor or the deceased or
in which the donor or the deceased owned an interest and which in
whole or in part is carried on through a permanent establishment or a
permanent representative in The Netherlands; and
(3) the note does not form part of the assets of, and is not otherwise
attributable to an enterprise that is managed and controlled in The
Netherlands and to which all or a share of
124
<PAGE>
the profits thereof the holder of a note is directly entitled (the
term directly means, in this context, not as the beneficial owner of
shares or similar securities).
For the purpose of Netherlands gift and inheritance tax, an individual
with Netherlands nationality is deemed to be a resident of The Netherlands if
he has been a resident of The Netherlands at any time during the ten years
preceding the time of gift or death. For the purpose of Netherlands gift
tax, a person is deemed to be a resident of The Netherlands if he has been a
resident of The Netherlands in the twelve months preceding the time of the
gift.
125
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. A broker-dealer may use this
prospectus, as it may be amended or supplemented from time to time, by in
connection with resales of new notes received in exchange for old notes where
the old notes were acquired as a result of market-making activities or other
trading activities. We have agreed that for a period of one year after
closing of the exchange offer, we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
the resale.
We will not receive any proceeds from any sale of new notes by any
broker-dealer. New notes received by broker-dealers for their own account in
the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the
writing of options on the new notes or a combination of the methods of
resale, at market prices prevailing at the time of resale, at prices related
to the prevailing market prices or negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from the broker-dealer
and/or the purchasers of the new notes. Any broker-dealer that resells new
notes that were received by it for its own account in the exchange offer and
any broker or dealer that participates in a distribution of the new notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any resale of new notes and any commissions or concessions
received by those persons may be deemed to be underwriting compensation under
the Securities Act. The letter of transmittal states that by acknowledging
that it will deliver and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of one year after closing of the exchange offer, we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests the
documents in the letter of transmittal. We have agreed to pay all expenses
incident to the performance of, our obligations under, the Registration
Agreement and all expenses incident to the exchange offer, including the
expenses of one counsel for the holders of the old notes but excluding
commissions or concessions of any brokers or dealers, and will indemnify the
holders, including any broker-dealers, and certain parties related to the
holders against certain liabilities, including liabilities under the
Securities Act.
We have not entered into any arrangements or understandings with any
person to distribute the new notes to be received in the exchange offer.
126
<PAGE>
LEGAL MATTERS
The validity of the new notes offered in the exchange offer will be
passed upon for CompleTel Europe by Nauta Dutilh Amsterdam, The Netherlands.
Certain tax matters will be passed upon for CompleTel Europe by Holme Roberts
& Owen LLP, Denver, Colorado and Arthur Andersen Belastingadviseurs,
Amsterdam, The Netherlands.
EXPERTS
The consolidated balance sheet of CompleTel Europe N.V. and subsidiaries
as of December 31, 1998, and the related consolidated statements of
operations, shareholder's equity (deficit), and cash flows for the period
from commencement of operations (January 8, 1998) to December 31, 1998, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto appearing elsewhere in this
prospectus, and such financial statements are included herein in reliance
upon the authority of said firm as experts in giving such report.
The consolidated balance sheet of CompleTel LLC as of December 31, 1998,
and the related consolidated statements of operations, members' deficit, and
cash flows for the period from commencement of operations (January 8, 1998)
to December 31, 1998, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto
appearing elsewhere in this prospectus, and such financial statements are
included herein in reliance upon the authority of said firm as experts in
giving such report.
The balance sheet of Acces et Solutions Internet S.A.R.L. as of December
31, 1998, and the related statements of operations and cash flows for the
year then ended, have been audited by Barbier Frinault & Associes (Arthur
Andersen), independent public accountants, as indicated in their report with
respect thereto appearing elsewhere in this prospectus, and such financial
statements are included herein in reliance upon the authority of said firm as
experts in giving such report.
127
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
I. COMPLETEL EUROPE N.V. (A Company in the Development Stage)
Report of Independent Public Accountants F-3
Consolidated Balance Sheets as of March 31, 1999 (unaudited) and December 31, 1998 F-4
Consolidated Statements of Operations for the Period from Commencement of
Operations (January 8, 1998) to December 31, 1998, the Three Months
Ended March 31, 1999 (unaudited), the Period from Commencement of
Operations (January 8, 1998) to March 31, 1998 (unaudited) and for the
Period from Commencement of Operations (January 8, 1998) to March 31,
1999 (unaudited) F-5
Consolidated Statements of Shareholders' Equity (Deficit) for the Period
from Commencement of Operations (January 8, 1998) to December 31, 1998
and for the Three Months Ended March 31, 1999 (unaudited) F-6
Consolidated Statements of Cash Flows for the Period from Commencement of
Operations (January 8, 1998) to December 31, 1998, the Three Months
Ended March 31, 1999 (unaudited), the Period from Commencement of
Operations (January 8, 1998) to March 31, 1998 (unaudited) and for the
Period from Commencement of Operations (January 8, 1998) to March 31,
1999 (unaudited) F-7
Notes to Consolidated Financial Statements F-8
II. COMPLETEL LLC (A Company in the Development Stage)
Report of Independent Public Accountants F-21
Consolidated Balance Sheets as of March 31, 1999 (unaudited) and December 31, 1998 F-22
Consolidated Statements of Operations for the Period from Commencement of
Operations (January 8, 1998) to December 31, 1998, the Three Months
Ended March 31, 1999 (unaudited), the Period from Commencement of
Operations (January 8, 1998) to March 31, 1998 (unaudited) and for the
Period from Commencement of Operations to March 31, 1999 (unaudited) F-23
</TABLE>
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C>
Consolidated Statements of Members' Deficit for the Period from
Commencement of Operations (January 8, 1998) to December 31, 1998 and
for the Three Months Ended
March 31, 1999 (unaudited) F-24
Consolidated Statements of Cash Flows for the Period from Commencement of
Operations (January 8, 1998) to December 31, 1998, the Three Months
Ended March 31, 1999 (unaudited), the Period from Commencement of
Operations (January 8, 1998) to March 31, 1998 (unaudited) and for the
Period from Commencement of Operations (January 8, 1998) to March 31,
1999 (unaudited) F-25
Notes to Consolidated Financial Statements F-27
III. ACCES INTERNET ET SOLUTIONS S.A.R.L.
Report of Independent Public Accountants F-48
Balance Sheet as of December 31, 1998 F-49
Statement of Operations for the year ended December 31, 1998 F-50
Statement of Cash Flows for the year ended December 31, 1998 F-51
Notes to Financial Statements F-52
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CompleTel Europe N.V.:
We have audited the accompanying consolidated balance sheets of COMPLETEL
EUROPE N.V. (an N.V. registered in the Netherlands in the developmental
stage) and subsidiaries (the "Company") as of December 31, 1998 and the
related consolidated statements of operations, shareholder's equity (deficit)
and cash flows for the period from commencement of operations (January 8,
1998) to December 31, 1998 (after corporate reorganization -- see Note 1).
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 audit.
We conducted our audit in accordance with 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
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CompleTel Europe N.V. and
subsidiaries as of December 31, 1998 and the results of their operations and
their cash flows for the period from the commencement of operations (January
8, 1998) to December 31, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
April 20, 1999.
F-3
<PAGE>
COMPLETEL EUROPE N.V. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of U.S. Dollars)
(After Corporate Reorganization - See Note 1)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 36,974 $ 1,718
Restricted cash and cash equivalents (Note 4) 73,133 -
Receivables 2,123 527
Prepaid expenses 495 179
--------- ---------
Total current assets 112,725 2,424
--------- ---------
LONG-TERM ASSETS:
Property and equipment, net (Note 2) 14,203 3,371
Deferred financing costs 4,537 869
Licenses and other intangibles 2,991 950
Other assets 307 256
--------- ---------
Total long-term assets 22,038 5,446
--------- ---------
TOTAL ASSETS $ 134,763 $ 7,870
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Trade accounts payable $ 7,816 $ 1,959
Accrued liabilities 757 1,453
Affiliate payables 5,466 10,470
--------- ---------
Total current liabilities 14,039 13,882
--------- ---------
LONG-TERM DEBT 71,834 -
--------- ---------
SHAREHOLDER'S EQUITY (DEFICIT):
Common shares, $.016 par value (converted from NLG .03), 105,330,800 shares
authorized, 21,071,433 and 4,888,964 shares issued and outstanding 337 78
Additional paid-in capital 64,845 2,195
Deferred compensation (905) (540)
Other comprehensive loss (1,907) (160)
Deficit accumulated during the development stage (13,480) (7,585)
--------- ---------
TOTAL SHAREHOLDER'S EQUITY (DEFICIT) 48,890 (6,012)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) $ 134,763 $ 7,870
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
F-4
<PAGE>
COMPLETEL EUROPE N.V. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of U.S. Dollars, except share and per share amounts)
(After Corporate Reorganization - See Note 1)
<TABLE>
<CAPTION>
Commencement Commencement Commencement
of Operations Three of Operations of Operations
(January 8, Months (January 8, (January 8,
1998) to Ended 1998) to 1998) to
December 31, March 31, March 31, March 31,
1998 1999 1998 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ -
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Network costs - 134 - 134
Selling, general and administrative 4,552 3,911 280 8,463
Management fees to affiliate 2,963 960 - 3,923
Depreciation and amortization 46 138 1 184
------------ ------------ ------------ ------------
Total operating expenses 7,561 5,143 281 12,704
------------ ------------ ------------ ------------
OPERATING LOSS (7,561) (5,143) (281) (12,704)
OTHER INCOME (EXPENSE)
Interest income - 561 - 561
Interest expense - (1,313) - (1,313)
------------ ------------ ------------ ------------
Total other income (expense) - (752) - (752)
------------ ------------ ------------ ------------
NET LOSS BEFORE INCOME TAXES (7,561) (5,895) (281) (13,456)
INCOME TAX PROVISION - - - -
------------ ------------ ------------ ------------
NET LOSS $ (7,561) $ (5,895) $ (281) $ (13,456)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (1.55) $ (0.39) $ (0.06) $ (1.93)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 4,888,964 15,244,875 4,888,964 6,969,393
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
COMPLETEL EUROPE N.V. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(Stated in thousands of U.S. Dollars, except share and per share amounts)
(Information for the quarter ended March 31, 1999 is unaudited)
(After Corporate Reorganization - See Note 1)
<TABLE>
<CAPTION>
Common Additional
Shares Paid-in Deferred
Number Amount Capital Compensation
--------- ------ ---------- ------------
<S> <C> <C> <C> <C>
BALANCE, January 8, 1998 - $ - $ - $ -
Deemed issuance of common shares at $.016
(Converted from NLG .03) per share, net
of $54 subscription receivable, January 8, 1998 4,888,964 24 - -
Cash contributions by Parent - - 1,464 -
Payment on subscription receivable on
December 14, 1998 - 54 - -
Deemed contribution by Parent related to
allocation of non-cash compensation charges - - 731 (604)
Amortization of deferred compensation - - - 64
Cumulative translation adjustment - - - -
Net loss - - - -
---------- ---------- ---------- ----------
BALANCE, December 31, 1998 4,888,964 $ 78 $ 2,195 $ (540)
Issuance of common shares in connection with
corporate reorganization (Note 1) 14,666,891 235 57,810 -
Issuance of common shares in connection with
the Units Offering (Notes 1 and 4) 1,515,578 24 4,454 -
Deemed contribution by Parent related to allocation
of non-cash compensation charges - - 386 (386)
Amortization of deferred compensation - - - 21
Cumulative translation adjustment - - - -
Net loss - - - -
---------- ---------- ---------- ----------
BALANCE, March 31, 1999 (unaudited) 21,071,433 $ 337 $ 64,845 $ (905)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
Deficit
Accumulated
Other During the Total
Comprehensive Development Comprehensive
Loss Stage Loss Total
------------- ----------- ------------- -------
<S> <C> <C> <C> <C>
BALANCE, January 8, 1998 $ - $ - $ - $ -
Deemed issuance of common shares at $.016
(Converted from NLG .03) per share, net
of $54 subscription receivable, January 8, 1998 - (24) - -
Cash contributions by Parent - - - 1,464
Payment on subscription receivable on
December 14, 1998 - - - 54
Deemed contribution by Parent related to
allocation of non-cash compensation charges - - - 127
Amortization of deferred compensation - - - 64
Cumulative translation adjustment (160) - (160) (160)
Net loss - (7,561) (7,561) (7,561)
---------- ---------- ---------- ----------
BALANCE, December 31, 1998 $ (160) $ (7,585) $ (7,721) $ (6,012)
----------
----------
Issuance of common shares in connection with
corporate reorganization (Note 1) - - - 58,045
Issuance of common shares in connection with
the Units Offering (Notes 1 and 4) - - - 4,478
Deemed contribution by Parent related to allocation
of non-cash compensation charges - - - -
Amortization of deferred compensation - - - 21
Cumulative translation adjustment (1,747) - (1,747) (1,747)
Net loss - (5,895) (5,895) (5,895)
---------- ---------- ---------- ----------
BALANCE, March 31, 1999 (unaudited) $ (1,907) $ (13,480) $ (7,642) $ 48,890
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
COMPLETEL EUROPE N.V. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of U.S. Dollars)
(After Corporate Reorganization - See Note 1)
<TABLE>
<CAPTION>
Commencement Commencement Commencement
of Operations Three of Operations of Operations
(January 8, Months (January 8, (January 8,
1998) to Ended 1998) to 1998) to
December 31, March 31, March 31, March 31,
1998 1999 1998 1999
------------- ----------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (7,561) $ (5,895) $ (280) $ (13,456)
Adjustments to reconcile net loss to
cash used by operating activities-
Depreciation and amortization 46 138 - 184
Non-cash compensation expense 191 35 - 226
Accretion of senior notes - 1,302 - 1,302
Changes in assets and liabilities-
Increase in receivables (527) (1,596) - (2,123)
Increase in prepaid expenses (179) (316) - (495)
Increase in other assets (256) (51) (2) (307)
Increase in trade accounts
payable 1,959 5,857 - 7,816
Increase (decrease) in
accrued liabilities 1,453 (696) 8 757
Increase (decrease) in
affiliate payables 10,470 (5,004) - 5,466
--------- --------- --------- ---------
Net cash provided by (used by)
operating activities 5,596 (6,226) (274) (630)
--------- --------- --------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment (3,418) (10,969) (11) (14,387)
Purchase of licenses and other intangibles (950) (2,041) - (2,991)
Offering proceeds and investment earnings
placed in escrow - (73,133) - (73,133)
--------- --------- --------- ---------
Net cash used by investing
activities (4,368) (86,143) (11) (90,511)
--------- --------- --------- ---------
FINANCING ACTIVITIES:
Gross proceeds from senior notes - 70,532 - 70,532
Proceeds from issuance of common shares
and subsequent capital contributions 1,518 62,523 469 64,041
Deferred financing costs (869) (3,668) - (4,537)
--------- --------- --------- ---------
Net cash provided by financing
activities 649 129,387 469 130,036
--------- --------- --------- ---------
Effect of exchange rates on cash (159) (1,762) - (1,921)
--------- --------- --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,718 35,256 184 36,974
CASH AND CASH EQUIVALENTS,
beginning of period - 1,718 - -
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS,
end of period $ 1,718 $ 36,974 $ 184 $ 36,974
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE>
COMPLETEL EUROPE N.V. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED) AND DECEMBER 31, 1998
(Information as of, and for the quarter ended,
March 31, 1999 is unaudited)
(After Corporate Reorganization - See Note 1)
(1) ORGANIZATION AND NATURE OF OPERATIONS
CompleTel Europe N.V. ("CompleTel Europe") (together with its wholly-owned
subsidiaries, the "Company") is a Dutch holding company formed on December
14, 1998 for the purpose of completing a Rule 144A offering (the "Offering")
(see Note 4) to finance its planned operations.
The Company seeks to be a leading facilities-based provider of switched local
telecommunications and related services to business, carrier, Internet
service provider and government end-users in targeted metropolitan areas
across Western Europe, with an initial focus on network deployment in France,
Germany and the United Kingdom ("UK"). CompleTel Europe is an indirect
majority owned subsidiary of CompleTel LLC ("Parent"), a Delaware limited
liability company. An indirect 7% interest in CompleTel Europe was acquired
by purchasers of units in the Offering (see Note 4). CompleTel LLC was known
as CableTel Delaware LLC ("CableTel Delaware") from its formation on January
8, 1998 through May 18, 1998, when it was reorganized and renamed as CableTel
Europe LLC in connection with the admission of a new member. Effective August
20, 1998, CableTel Europe LLC changed its name to CompleTel LLC.
As of December 31, 1998, Parent's other direct and indirect wholly-owned
subsidiaries consisted of CableTel Management Inc. ("Management Co."),
CompleTel Holding I B.V. ("BVI"), CompleTel Holding II B.V. ("BVII"), its
French operating subsidiary, CompleTel SAS ("CompleTel France") (formerly
known as CompleTel S.A.R.L.), its UK operating subsidiary, CompleTel UK
Limited ("CompleTel UK"), and its German operating subsidiary, CompleTel GmbH
("CompleTel Germany"). As of December 31, 1998, Parent's operating companies
were held indirectly through BVI and BVII. CompleTel Europe had no material
assets or operations as of December 31, 1998.
In January 1999, Parent formed CompleTel Holdings LLC ("CompleTel Holdings"),
CompleTel ECC B.V. ("CompleTel ECC"), CompleTel N.A. (N.V.) ("NANV") and
CompleTel UK SPC ("CompleTel SPC"). CompleTel Holdings was formed to issue
the equity component of the Offering (see Note 4). CompleTel ECC was formed
to be the group's European corporate center and to hold the proceeds of the
Offering, through an escrow account, until the Company received aggregate
financing commitments of at least $90 million (see Note 4). Through a series
of transactions in the restructuring, CompleTel LLC contributed approximately
$58 million of equity, consisting of cash of approximately $52 million and
accounts receivable of approximately $6 million,
F-8
<PAGE>
to CompleTel France through CompleTel SPC. Also, through a series of
restructuring transactions, CompleTel SPC became a wholly-owned subsidiary of
BVI, BVI was contributed to CompleTel Europe in exchange for the issuance of
14,666,891 additional common shares and CompleTel Europe became a
wholly-owned subsidiary of NANV. Furthermore, CompleTel LLC contributed its
100% interest in NANV to CompleTel Holdings in exchange for all 19,596,429
Class A Membership Interests in CompleTel Holdings. The Non-Voting Class B
Membership Interests (aggregating 1,475,000) in CompleTel Holdings were
issued substantially to unrelated parties in connection with the Offering
(Note 4). In connection with this issuance by CompleTel Holdings of its
Non-Voting Class B Membership Interests, CompleTel Europe issued 1,515,578
additional common shares to NANV and NANV issued additional common shares to
CompleTel Holdings in consideration of a cash contribution to CompleTel
Europe totaling approximately $4.5 million. The corporate reorganization has
been accounted for as a reorganization of entities under common control,
similar to a pooling of interests. Accordingly, the accompanying financial
statements retroactively reflect the new corporate organizational structure
of CompleTel Europe as if CompleTel Europe had been formed as of January 8,
1998. The formation is reflected through a deemed issuance, on January 8,
1998, of 4,888,964 shares of CompleTel Europe in exchange for a subscription
receivable from Parent of approximately $54,000, which was paid on December
14, 1998. Furthermore, the accompanying consolidated financial statements
have been prepared as though CompleTel Europe had performed all competitive
local exchange carrier ("CLEC") related development activities in Western
Europe since the inception of Parent. The accompanying consolidated financial
statements of CompleTel Europe include its direct and indirect wholly-owned
subsidiaries consisting of BVI, BVII, CompleTel France, CompleTel Germany,
CompleTel UK, CompleTel ECC and CompleTel SPC.
The Company is in the development stage and has generated no revenues to
date. Since commencement of operations (January 8, 1998), the Company has
incurred net losses totaling approximately $12.1 million as of March 31,
1998. CompleTel Europe's subsidiaries have been principally engaged in
developing its business plans, applying for and procuring regulatory and
government authorizations, raising capital, hiring management and other key
personnel, working on the design and development of the Company's fiber optic
networks and operation support systems ("OSS"), negotiating equipment and
facilities agreements, and negotiating interconnection agreements and certain
right-of-way agreements. As a result of its development stage activities, the
Company has experienced significant operating losses and negative cash flows
from operations. The Company expects to continue to generate negative cash
flows from operations in each market while it emphasizes development,
construction, and expansion of its business and until the Company establishes
a sufficient revenue generating customer base in that market. The Company
also expects to experience increasing operating losses and negative cash
flows from operations as it expands its operations and enters new markets,
even if and after it achieves positive cash flow from operations in its
initial markets.
The Company's ultimate success will be affected by the problems, expenses and
delays encountered in connection with the formation of any new business and
by the competitive environment in which the Company intends to operate.
Initially, the Company plans to deploy networks in four metropolitan markets
in France (Paris, Lyon, Lille and Marseilles), and in one market in each of
Germany and the UK (Berlin and London). The Company's performance will
further be affected by its ability to obtain licenses, properly assess
potential markets, secure financing or raise additional capital, design
networks, acquire right-of-way and building access rights, implement
interconnection
F-9
<PAGE>
with incumbent public telecommunications operators ("PTOs"), lease adequate
trunking capacity from PTOs, purchase and install switches in additional
markets, implement efficient OSS and other back office systems, develop a
sufficient customer base, and attract, retain and motivate qualified
personnel. Delays or failure in receiving required regulatory approvals or
the enactment of new adverse regulations or regulatory requirements may have
a material adverse effect upon the Company. Although management believes that
the Company will be able to successfully mitigate these risks, there is no
assurance that the Company will be able to do so or that the Company will
ever operate profitably.
The actual amount and timing of the Company's future capital requirements may
differ materially from the Company's current estimates, and additional
financing may be required in the event of departures from the Company's
business plans and projections, including those caused by unforeseen delays,
cost overruns, engineering design changes, demand for the Company's services
that varies from that expected by the Company, and adverse regulatory,
technological or competitive developments. The Company may also require
additional capital (or require financing sooner than anticipated) if it
alters the schedule or targets of its roll-out plan in response to
regulatory, technological or competitive developments (including additional
market developments and new opportunities in and outside of its target
markets). The Company intends to evaluate potential joint ventures, strategic
alliances, and acquisition opportunities on an ongoing basis as they arise,
and the Company may require additional financing if it elects to pursue any
such opportunities. The Company also will be required to seek additional
financing if it elects to deploy networks in other Western European markets
beyond its target markets. Sources of additional financing may include
commercial bank borrowings, vendor financing and/or the private or public
sale of equity or debt securities. There can be no assurance that the Company
will be able to fund its network deployment and operations in any or all of
its initial markets to the point of operating profitably with its currently
anticipated capital resources, and there can be no assurance that any
additional financing will be available on terms acceptable to the Company or
at all.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements as of March 31,
1999, the three months ended March 31, 1999 and for the periods from
commencement of operations (January 8, 1998) to March 31, 1999 and 1998, have
been prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and are in the form prescribed
by the Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for
the three months ended March 31, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999.
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 expenses during the reporting period. Actual results
could differ from those estimates. The Company has adopted a calendar fiscal
year.
F-10
<PAGE>
STOCK SPLIT
In April 1999, the Company executed a stock-split through which its 431
shares then outstanding were converted into 21,071,433 shares of the
Company's common stock. Additionally, the Company increased its authorized
shares of common stock to 105,330,800. This stock-split has been
retroactively reflected in the accompanying consolidated financial statements
for all periods.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
CompleTel Europe and its majority-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all marketable
securities and commercial paper with maturities of ninety days or less at
acquisition as cash equivalents.
PREPAID EXPENSES
Prepaid expenses consist of prepaid rent and prepaid insurance. Prepayments
are amortized on a straight-line basis over the life of the underlying
agreements.
PROPERTY AND EQUIPMENT
Property and equipment includes office furniture and equipment, computer
equipment and software, leasehold improvements and construction in progress.
These assets are stated at cost and are being depreciated over the estimated
useful lives of the related assets as follows:
<TABLE>
<CAPTION>
Estimated
Useful Life
-------------
<S> <C>
Office furniture and equipment 5 years
Computer equipment and software 3 to 5 years
Leasehold improvements 9 to 12 years
</TABLE>
Office furniture and equipment, leasehold improvements and computer software
are depreciated using the straight-line method. Computer equipment is
depreciated using an accelerated depreciation method.
F-11
<PAGE>
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Office furniture and equipment $ 260 $ 129
Computer equipment and software 1,792 608
Leasehold improvements 353 24
-------- --------
Property and equipment, in service 2,405 761
Less: accumulated depreciation (184) (46)
-------- --------
Property and equipment, in service, net 2,221 715
Construction in progress 11,982 2,656
-------- --------
Property and equipment, net $ 14,203 $ 3,371
-------- --------
-------- --------
</TABLE>
COMPUTER SOFTWARE COSTS
The American Institute of Certified Public Accountants ("AICPA") recently
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), which provides
guidance on accounting for the costs of computer software developed or
obtained for internal use. SOP 98-1 identifies the characteristics of
internal-use software and provides examples to assist in determining when
computer software is for internal use. SOP 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998, for projects
in progress and prospectively, with earlier application encouraged. This
statement was adopted at commencement of operations.
START-UP COSTS
The Company expenses all start-up and organization costs as incurred, in
accordance with the provisions of recently issued AICPA Statement of Position
98-5, "Reporting on the Costs of Start-up Activities" ("SOP 98-5").
DEFERRED FINANCING COSTS
Costs to obtain debt financing are capitalized and will be amortized over the
life of the related debt facility using the effective interest method.
LICENSE COSTS AND OTHER INTANGIBLES
The Company capitalizes all third-party direct costs associated with
obtaining licenses. Capitalized license costs will be amortized over the life
of the related license and other intangible assets.
F-12
<PAGE>
RECOVERABILITY OF LONG-LIVED ASSETS
The Company evaluates the carrying value of its long-lived assets whenever
events or circumstances indicate the carrying value of assets may exceed
their recoverable amounts. An impairment loss is recognized when the
estimated future cash flows (undiscounted and without interest) expected to
result from the use of an asset are less than the carrying amount of the
asset. If an asset which is expected to be held and used is determined to be
impaired, then the asset would be written down to its fair market value based
on the present value of the discounted cash flows related to such asset.
Measurement of an impairment loss for an asset held for sale would be based
on its fair market value less the estimated costs to sell.
STOCK-BASED COMPENSATION
The Company's Parent accounts for stock-based compensation to employees using
the intrinsic value method prescribed in Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees." Such non-cash
compensation is pushed down from Parent to the Company as a deemed capital
contribution.
INCOME TAXES
The Company accounts for income taxes under the asset and liability method
which requires recognition of deferred tax assets and liabilities for the
expected future income tax consequences of transactions which have been
included in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the differences
between the financial statement and income tax basis of assets, liabilities
and carryforwards using enacted tax rates in effect for the year in which the
differences are expected to reverse or the carryforwards are expected to be
utilized. Net deferred tax assets are then reduced by a valuation allowance
if management believes it is more likely than not they will not be realized.
COMPREHENSIVE LOSS
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," ("SFAS 130") requires that an enterprise (i) classify items of other
comprehensive income by their nature in the financial statements and (ii)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
balance sheet. The Company's other comprehensive loss, as set forth in the
accompanying consolidated statement of shareholder's deficit, includes
cumulative translation adjustments.
BASIC AND DILUTED LOSS PER SHARE
The Company computes earnings (loss) per share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
Under SFAS 128, "Basic earnings (loss) per share" is determined by dividing
net income (loss) by the weighted-average number of common shares outstanding
during each period. "Diluted earnings (loss) per share" includes the effects
of potentially issuable common shares, but only if dilutive. Because the
Company had no potentially issuable shares for the three months ended March
31, 1999, or for the year ended December 31, 1998, and because any such
shares would be antidilutive, there are no differences
F-13
<PAGE>
between basic and diluted loss per common share for the Company. The weighted
average common shares outstanding for the period assumes the initial
capitalization of the Company (4,888,964 common shares) occurred as of
January 8, 1998.
FOREIGN OPERATIONS AND FOREIGN EXCHANGE RATE RISK
The functional currency for the Company's international operations is the
applicable local currency for the affiliate company. Assets and liabilities
of foreign subsidiaries for which the functional currency is the local
currency are translated at exchange rates in effect at period-end, and the
statements of operations are translated at the average exchange rates during
the period. Exchange rate fluctuations on translating foreign currency
financial statements into U.S. dollars that result in unrealized gains or
losses are referred to as translation adjustments. Cumulative translation
adjustments are recorded as a separate component of shareholders' deficit.
Transactions denominated in currencies other than the local functional
currency of the Company's operating subsidiaries, including U.S. dollar
denominated intercompany accounts and notes payable to Parent and Management
Co., are recorded based on exchange rates at the time such transactions
arise. Subsequent changes in exchange rates result in transaction gains and
losses which are reflected in income as unrealized (based on period-end
translations) or realized upon settlement of the transactions.
The Company's international subsidiaries can have payables that are
denominated in a currency other than their own functional currency. The
Company has not historically hedged foreign currency denominated transactions
for receivables or payables related to current operations. The terms of the
Senior Credit Facility commitment (see Note 4) would require the Company to
enter into and maintain hedging arrangements in an attempt to reduce its
exposure to currency fluctuations with respect to the dollar denominated
Notes issued in the Offering (see Note 4); however, there can be no assurance
that any such hedging transactions would be successful and that the exchange
rate fluctuations would not have a material adverse effect on the Company.
Accordingly, the Company may experience economic loss and a negative impact
on earnings and equity with respect to its holdings solely as a result of
foreign currency exchange rate fluctuations, which include foreign currency
devaluation against the dollar.
The functional currency of the Company's subsidiaries could change in the
future, depending on the denomination of certain planned financing
transactions and the nature of subsequent investment and operating activities.
SEGMENT REPORTING
SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance.
F-14
<PAGE>
The Company is currently in the development stage and has yet to commence its
planned principal operations. Through March 31, 1999, the significant portion
of the Company's expenditures were associated with its development efforts in
France. The Company expects to incur significant costs associated with the
expansion of its development efforts into Germany and the United Kingdom.
Thus, the Company has not disclosed segment information as it is not
meaningful.
NEW ACCOUNTING STANDARD
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities,"
establishes accounting and reporting standards for derivative instruments,
including certain instruments embedded in other contracts, and for hedging
activities. SFAS 133 requires that an entity recognize all derivatives as
either assets or liabilities and measure those instruments at fair value. It
also specifies the accounting for changes in the fair value of a derivative
instrument depending on the intended use of the instrument and whether (and
how) it is designated as a hedge. SFAS 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. Subsequent to April
20, 1999 (date of Auditors' Report), the Financial Accounting Standards Board
issued SFAS 137 which delayed the effective date of SFAS No. 133 until
all fiscal quarters of fiscal years beginning after June 15, 2000.
(3) RELATED PARTY TRANSACTIONS
RIGHTS OF PARENT'S UNITHOLDERS
If a Qualified Public Offering or Sale of Parent, as defined in the Equity
Purchase Agreement between Parent and certain of its unitholders, has not
occurred by May 18, 2005, each holder of Parent's Preferred Units or Common
Units issued or issuable upon conversion of the Preferred Units ("Purchaser
Securities") will have the right to require Parent to take all actions
necessary to purchase the Purchaser Securities held by such holder for fair
market value (or, in the case of Preferred Units to be repurchased, the
greater of fair market value and the Liquidation Value (together with all
accrued but unpaid preferred yield) of such Preferred Units). Fair market
value is defined as the amount agreed to by the holders of the Preferred
Units to be repurchased and the holders of Parent's Common Units, excluding
Unvested Performance Units. If mutual agreement can not be reached within
twenty days of the issuance of the repurchase notice, the fair market value
for (a) publicly traded securities generally means the average of the closing
prices of such securities for the 21 day period preceding the filing of the
repurchase notice and (b) non-publicly traded securities a valuation
determined by an appraisal mechanism. In the event the repurchase options are
exercised, Parent is obligated to do everything within its power to satisfy
its repurchase obligations, which may involve the sale of some or all of its
subsidiaries, or a portion or all of its assets. The Indenture related to the
Offering limits the ability of the Company to pay dividends or take certain
other actions that may be necessary to effectuate the repurchase of any such
securities.
MANAGEMENT AGREEMENT
During 1998, Parent and CableTel Management Inc. (dba CompleTel), a Colorado
corporation ("Management Co."), executed a management services agreement (as
amended, the "Management Agreement"), pursuant to which Management Co. performs
certain services for Parent and Parent's direct and indirect subsidiaries,
including CompleTel Europe. The Management Agreement provides
F-15
<PAGE>
for reimbursement in an amount of 105% (103% prior to January 30, 1999) of
all costs, expenses, charges and disbursements incurred by Management Co. in
the performance of the Management Agreement. Through December 31, 1998 and
March 31, 1999, the Company recorded approximately $3 million and $4 million,
respectively for billings under the Management Agreement.
(4) INDEBTEDNESS
In February 1999, the Company completed an Offering of 147,500 units (the
"Units") consisting of $147.5 million aggregate principal amount of 14%
Senior Discount Notes due 2009 (the "Notes") issued by CompleTel Europe and
1,475,000 non-voting Class B Membership Interests of CompleTel Holdings.
CompleTel Europe issued the Notes at a substantial discount from their
principal amount at maturity. A principal investor in Parent acquired 400
Units in the offering. The proceeds of the Offering, net of offering fees and
costs, were approximately $70.5 million and were held in an escrow account
until CompleTel Europe received a minimum commitment of $90 million in senior
credit facilities, which was received in April 1999. The net proceeds of the
Offering held in escrow and the related interest received are presented as
restricted cash and cash equivalents in the accompanying balance sheet as of
March 31, 1999. To comply with Netherlands laws, the Notes are guaranteed by
Parent on a senior unsecured basis. As Parent is a holding company with no
operations other than the operations to be conducted by CompleTel Europe and
its subsidiaries, it is unlikely that Parent would have sufficient funds to
satisfy CompleTel Europe's obligations on the Notes if CompleTel Europe is
unable to satisfy its own obligation on the Notes. Of the $75 million gross
proceeds from the Offering, approximately $70.5 million was attributed to the
Notes and approximately $4.5 million was attributed to the 1,475,000 Class B
Membership Interests of CompleTel Holdings.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
14% Senior Discount Notes, face amount $147.5 million, due 2009, effective interest rate
of 15.31%, at accreted value $71,834 $ -
----------- ------------
----------- ------------
</TABLE>
BANK FINANCING COMMITMENT
The Company's French subsidiaries, CompleTel SAS and CompleTel Services SAS
(the "Borrowers"), have received commitments for senior secured credit
facilities (the "Facilities") of $90 million from Paribas and from Nortel
Networks ("Nortel") to finance the Company's deployment of its networks in
France. The terms of the Facilities provide that the borrowings of up to the
first $20 million will be provided solely by the Nortel senior secured credit
facility. Additional borrowings from Paribas under the Paribas senior credit
facility (the "Paribas Facility") and other lenders (the "Senior Lenders")
would first be used to retire indebtedness from Nortel, who would lend up to
$20 million as part of the Paribas Facility, along with the other Senior
Lenders. The Paribas Facility is comprised of two Tranches. Borrowings under
Tranche A would be available through March 31, 2002, and subject to a maximum
of $80 million. On March 31, 2002, this
F-16
<PAGE>
revolving credit facility would convert to a term loan facility, payable
quarterly, in increasing increments commencing December 31, 2002. Borrowings
under Tranche B would be subject to an initial maximum amount of $10 million,
with the available commitment decreasing quarterly commencing with the fourth
quarter of 2002. The Paribas Facility would mature on December 31, 2006 and
would bear interest at the rate of LIBOR plus a margin ranging from 1.25% to
3.50% based upon the Company's ratio of total debt to annualized earnings
before interest, taxes, depreciation and amortization ("EBITDA").
The final implementation of the Facilities remains subject to the
satisfaction of a number of conditions, including preparation of definitive
documentation, obtaining all regulatory approvals and completion of due
diligence. In addition, the availability of credit under the Facilities would
be contingent on a number of conditions precedent, including the Borrowers
achieving a minimum number of business access lines in service and maximum
ratios of senior debt to the number of access lines in service. The Paribas
Facility would be secured by all of the Borrowers' assets as well as a pledge
of the stock of the Borrowers and assignment of inter-affiliate loans and all
licenses and material contracts.
(5) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has entered into various operating lease agreements for office space
and employee residences. Future minimum lease obligations related to the
Company's operating leases are as follows for the 12-month periods subsequent to
March 31, 1999 and December 31, 1998, respectively (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
March, 31 2000 and December 31, 1999 $ 941 $ 855
March 31, 2001 and December 31, 2000 1,055 966
March 31, 2002 and December 31, 2001 1,058 974
March 31, 2003 and December 31, 2002 963 955
March 31, 2004 and December 31, 2003 925 948
Thereafter 4,793 4,975
------- -------
Total $9,735 $9,673
------- -------
------- -------
</TABLE>
Total rent expense for the period from commencement of operations (January 8,
1998) through December 31, 1998 was approximately $120,000 and for the three
months ended March 31, 1999 was approximately $176,000.
F-17
<PAGE>
MANAGEMENT EMPLOYMENT AGREEMENTS
Certain employees of Management Co. that have been seconded to CompleTel
Europe's subsidiaries are parties to employment agreements. The agreements
generally provide for a specified base salary, as well as a bonus set as a
specified percentage of the base salary. The bonus is based on attainment of
certain identified performance measures. The employment agreements generally
provide for cost of living differentials, relocation and moving expenses,
automobile allowances and income tax equalization payments, if necessary, to
keep the employee's tax liability the same as it would be in the United
States.
FRENCH SERVICE LICENSE
On December 13, 1998 the Secretaire d'Etat a l'Industrie ("the Ministry"),
based on the recommendation of the Autorite de Regulation des
Telecommunications ("ART"), awarded the Company an L.33-1 fixed wireline
license and an L.34-1 service license for network deployment and the
provision of services in 10 regions in France that the Company intends to
target. The Company's business plan forming the basis for the issuance of the
French licenses contemplates the Company's deploying networks in 16 French
markets and raising sufficient financing to fund such deployment. The amount
of the proceeds from the Offering and the funds available under the Senior
Credit Facility (see Note 4) are less than the amount of financing required
for the Company to deploy and operate networks in all of the markets
contemplated by this business plan, and the Company intends to continue to
seek additional financing in order to fund its business plan beyond
deployment of networks in its initial target markets. The Company has been
advised that this does not, by itself, constitute a violation of CompleTel
France's requirements under the French licenses. However, the ART may take
this into account, together with any other relevant items, when assessing
whether there exists a material adverse variation to the financial and/or
technical capacity of CompleTel France. If and to the extent that the ART
were to determine that the Company has materially and adversely deviated from
its business plan or that the Company lacks the financial capacity to
implement this plan, the ART could seek to modify or revoke the licenses in
whole or in part.
(6) INCOME TAXES
NETHERLANDS
In general, a Dutch holding company may benefit from the so-called
"participation exemption." The participation exemption is a facility in Dutch
corporate tax law which allows a Dutch company to exempt from Dutch income
tax any dividend income and capital gains in relation to its participation in
subsidiaries which are legal entities residing in a foreign country. Capital
losses are also exempted, apart from liquidation losses (under stringent
conditions). Any costs in relation to participations, to the extent these
participations do not realize Dutch taxable profit are not deductible. These
costs include costs to finance such participation.
For Dutch income tax purposes, net operating loss ("NOL") carryforwards may
be carried forward indefinitely.
F-18
<PAGE>
FRANCE
The majority of the Company's approximately $3.7 million of NOL carryforwards
for income tax purposes at December 31, 1998, were generated by CompleTel
France. For French income tax purposes NOL carryforwards may generally be
carried forward for a period of up to five years. Start-up costs will be
capitalized for French tax purposes. The Company considers the majority of
these costs as eligible for the deferred depreciation regime for French tax
purposes, resulting in an indefinite carryforward life of the corresponding
amortization expense. The Company has recorded a valuation allowance equal to
the net deferred tax assets December 31, 1998, due to the uncertainty of
future operating results. The valuation allowance will be reduced at such
time as management believes it is more likely than not that the net deferred
tax assets will be realized. Any reductions in the valuation allowance will
reduce future provisions for income tax expense.
The difference between income tax expense provided in the consolidated
financial statements and the expected income tax benefit at statutory rates
related to the Company's corporate and foreign subsidiary operations for the
period from commencement of operations (January 8, 1998) to December 31,
1998, is reconciled as follows:
<TABLE>
<CAPTION>
Commencement
of Operations
(January 8, 1998)
to December 31,
1998
-----------------
<S> <C>
Expected income tax benefit at the
applicable statutory rate of 33.33% $ 2,520
Non-deductible expenses (64)
Valuation allowance (2,456)
-------
Total income tax benefit $ -
-------
-------
</TABLE>
Deferred tax assets at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Deferred tax assets-
Operating loss carryforwards $1,205
Capitalized start-up costs 1,214
Net unrealized foreign exchange gain 20
Deferred depreciation 16
Other 1
--------
Total deferred tax assets 2,456
Less valuation allowance (2,456)
--------
Net deferred taxes $ -
--------
--------
</TABLE>
F-19
<PAGE>
(7) SUBSEQUENT EVENT
ASI ACQUISITION
On March 24, 1999, CompleTel SAS acquired all of the outstanding stock of
Acces Internet et Solutions ("ASI"), an Internet service provider based in
Lyon, for approximately $2.1 million. The transaction was recorded under the
purchase method of accounting as of March 31, 1999. The purchase price was
first allocated to the fair value of the net tangible assets acquired of
$73,000. The resulting excess cost over the fair value of tangible net assets
acquired, or goodwill, was recorded in the amount of approximately $2.0
million and is being amortized under the straight-line method over a ten year
period.
The following unaudited pro forma condensed consolidated operating results
for the period from commencement of operations (January 8, 1998) to December
31, 1998, and for the three months ended March 31, 1999, reflect the pro
forma effects of the ASI acquisition as if the acquisition occurred on
January 8, 1998. For purposes of the pro forma condensed consolidated
operating results, the acquisition is assumed to have been financed through
an equity contribution from Parent.
The unaudited pro forma condensed consolidated operating results are based on
the historical consolidated financial statements of the Company and ASI,
giving effect to certain assumptions and adjustments that management believes
are reasonable based upon currently available information. This pro forma
condensed consolidated financial data is presented for illustrative purposes
and does not purport to represent what the Company's results of operations
would actually have been if the acquisition had been consummated as of
January 8, 1998.
<TABLE>
<CAPTION>
For the Period from
Commencement of
Operations
(January 8, 1998) to For the Three Months Ended
December 31, 1998 March 31, 1999
----------------------------- ----------------------------
Historical Pro Forma Historical Pro Forma
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenues $ - $ 1,020 $ - $ 257
Net Loss $ (7,561) $ (7,699) $ (5,895) $ (5,992)
----------- ------------ ---------- ------------
----------- ------------ ---------- ------------
Basic and diluted loss
per share $ (1.55) $ (1.57) $ (0.39) $ (0.39)
----------- ------------ ---------- ------------
----------- ------------ ---------- ------------
Weighted average number of
common shares outstanding 4,888,964 4,888,964 15,244,875 15,244,875
----------- ------------ ---------- ------------
----------- ------------ ---------- ------------
</TABLE>
F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CompleTel LLC:
We have audited the accompanying consolidated balance sheets of COMPLETEL LLC (a
Delaware limited liability company in the development stage) and subsidiaries
(the "Company") as of December 31, 1998 (after corporate reorganization - see
Note 1) and the related consolidated statements of operations, members' deficit
and cash flows for the period from commencement of operations (January 8, 1998)
to December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with 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 financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CompleTel LLC and subsidiaries
as of December 31, 1998 and the results of their operations and their cash flows
for the period from commencement of operations (January 8, 1998) to December 31,
1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
April 20, 1999.
F-21
<PAGE>
COMPLETEL LLC AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of U.S. Dollars)
(After Corporate Reorganization - See Note 1)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
------ ---------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 38,028 $ 3,744
Restricted cash and cash equivalents (Note 5) 73,133 -
Receivables 2,133 537
Prepaid expenses 514 214
--------- ---------
Total current assets 113,808 4,495
--------- ---------
LONG-TERM ASSETS:
Property and equipment, net (Note 2) 14,272 3,441
Deferred financing costs 4,537 869
Licenses and other intangibles 2,991 950
Other assets 338 287
--------- ---------
Total long-term assets 22,138 5,547
--------- ---------
TOTAL ASSETS $ 135,946 $ 10,042
========= =========
LIABILITIES AND MEMBERS' DEFICIT
--------------------------------
CURRENT LIABILITIES:
Trade accounts payable $ 7,816 $ 1,964
Accrued liabilities 3,916 3,308
--------- ---------
Total current liabilities 11,732 5,272
--------- ---------
LONG-TERM DEBT 71,834 -
--------- ---------
MINORITY INTEREST 3,780 -
--------- ---------
REDEEMABLE CUMULATIVE CONVERTIBLE
PREFERRED UNITS:
No par value, 65,750 and 61,950 units authorized, issued
and outstanding, respectively 67,085 13,188
--------- ---------
MEMBERS' DEFICIT:
Common units, no par value, 107,500 units authorized,
16,496 and 16,385 units issued and outstanding, respectively 1,834 737
Deferred compensation (905) (540)
Other comprehensive loss (4,132) (160)
Deficit accumulated during the development stage (15,282) (8,455)
--------- ---------
TOTAL MEMBERS' DEFICIT (18,485) (8,418)
--------- ---------
TOTAL LIABILITIES AND MEMBERS' DEFICIT $ 135,946 $ 10,042
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
F-22
<PAGE>
COMPLETEL LLC AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of U.S. Dollars, except unit and per unit amounts)
(After Corporate Reorganization - See Note 1)
<TABLE>
<CAPTION>
Commencement of Commencement of Commencement of
Operations Three Operations Operations
(January 8, Months (January 8, (January 8,
1998) to Ended 1998) to 1998) to
December 31, March 31, March 31, March 31,
1998 1999 1998 1999
-------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ -
-------- -------- -------- --------
OPERATING EXPENSES:
Network costs - 134 - 134
Selling, general and administrative 8,044 4,835 570 12,879
Depreciation and amortization 59 145 1 204
-------- -------- -------- --------
Total operating expenses 8,103 5,114 571 13,217
-------- -------- -------- --------
OPERATING LOSS (8,103) (5,114) (571) (13,217)
OTHER INCOME (EXPENSE)
Interest income 11 561 3 572
Interest expense - (1,302) - (1,302)
-------- -------- -------- --------
Total other income (expense) 11 (741) 3 (730)
-------- -------- -------- --------
NET LOSS BEFORE INCOME TAXES (8,092) (5,855) (568) (13,947)
INCOME TAX PROVISION - - - -
-------- -------- -------- --------
NET LOSS (8,092) (5,855) (568) (13,947)
-------- -------- -------- --------
ACCRETION OF REDEEMABLE
CUMULATIVE CONVERTIBLE
PREFERRED UNITS (363) (972) - (1,335)
-------- -------- -------- --------
NET LOSS APPLICABLE TO
COMMON UNITS $ (8,455) $ (6,827) $ (568) $(15,282)
======== ======== ======== ========
BASIC AND DILUTED LOSS PER
COMMON UNIT $ (1,940) $ (1,617) $ (237) $ (4,554)
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
NON-FORFEITABLE COMMON
UNITS OUTSTANDING 4,359 4,222 2,400 3,356
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-23
<PAGE>
COMPLETEL LLC AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF MEMBERS' DEFICIT
(Stated in thousands of U.S. Dollars, except unit and per unit amounts)
(After Corporate Reorganization - See Note 1)
<TABLE>
<CAPTION>
Common Units
--------------------- Deferred
Number Amount Compensation
-------- ------- ------------
<S> <C> <C> <C>
BALANCE AT COMMENCEMENT OF OPERATIONS: - $ - $ -
Deemed issuance of Common Units at formation
(actual issuance May 18, 1998) 2,400 - -
Issuance of common units at May 18, 1998 for services provided 2,925 115 -
Issuance of forfeitable common units at May 18, 1998 7,175 267 (267)
Issuance of common units at August 24, 1998 for services provided 263 13 -
Issuance of forfeitable common units at August 24, 1998 1,556 81 (78)
Issuance of forfeitable common units at November 5, 1998 720 84 (83)
Issuance of forfeitable common units at November 12, 1998 200 23 (23)
Issuance of forfeitable common units at December 2, 1998 700 94 (93)
Issuance of forfeitable common units at December 8, 1998 111 15 (15)
Issuance of forfeitable common units at December 21, 1998 225 30 (30)
Issuance of forfeitable common units at December 28, 1998 110 15 (15)
Amortization of deferred compensation - - 64
Accretion of redeemable cumulative convertible preferred units - - -
Cumulative translation adjustments - - -
Net loss - - -
-------- -------- --------
BALANCE, December 31, 1998 16,385 737 (540)
Issuance of forfeitable common units at January 20, 1999 111 13 (13)
Cancellation of units deemed issued at formation and
units issued for services provided (2,250) - -
Issuance of forfeitable common units at January 22, 1999
to management investor 2,250 386 (386)
Gain on issuance of equity at subsidiary - 698 -
Amortization of deferred compensation - - 34
Accretion of redeemable cumulative convertible preferred units - - -
Cumulative translation adjustments - - -
Net loss - - -
-------- -------- --------
BALANCE, March 31, 1999 (unaudited) 16,496 $ 1,834 $ (905)
======== ======== ========
<CAPTION>
Deficit
Accumulated
Other During the Total
Comprehensive Development Comprehensive
Loss Stage Loss Total
------------- ------------ -------------- --------
<S> <C> <C> <C> <C>
BALANCE AT COMMENCEMENT OF OPERATIONS: $ - $ - $ - $ -
Deemed issuance of Common Units at formation
(actual issuance May 18, 1998) - - - -
Issuance of common units at May 18, 1998 for services provided - - - 115
Issuance of forfeitable common units at May 18, 1998 - - - -
Issuance of common units at August 24, 1998 for services provided - - - 13
Issuance of forfeitable common units at August 24, 1998 - - - 3
Issuance of forfeitable common units at November 5, 1998 - - - 1
Issuance of forfeitable common units at November 12, 1998 - - - -
Issuance of forfeitable common units at December 2, 1998 - - - 1
Issuance of forfeitable common units at December 8, 1998 - - - -
Issuance of forfeitable common units at December 21, 1998 - - - -
Issuance of forfeitable common units at December 28, 1998 - - - -
Amortization of deferred compensation - - 64
Accretion of redeemable cumulative convertible preferred units - (363) - (363)
Cumulative translation adjustments (160) - (160) (160)
Net loss - (8,092) (8,092) (8,092)
-------- -------- -------- --------
BALANCE, December 31, 1998 (160) (8,455) $ (8,252) (8,418)
========
Issuance of forfeitable common units at January 20, 1999 - - - -
Cancellation of units deemed issued at formation and
units issued for services provided - - - -
Issuance of forfeitable common units at January 22, 1999
to management investor - - - -
Gain on issuance of equity at subsidiary - - - 698
Amortization of deferred compensation - - - 34
Accretion of redeemable cumulative convertible preferred units - (972) - (972)
Cumulative translation adjustments (3,972) - (3,972) (3,972)
Net loss - (5,855) (5,855) (5,855)
-------- -------- -------- --------
BALANCE, March 31, 1999 (unaudited) $ (4,132) $(15,282) $ (9,827) $(18,485)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-24
<PAGE>
COMPLETEL LLC AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of U.S. Dollars)
(After Corporate Reorganization - See Note 1)
<TABLE>
<CAPTION>
Commencement of Commencement of Commencement of
Operations Three Operations Operations
(January 8, Months (January 8, (January 8,
1998) to Ended 1998) to 1998) to
December 31, March 31, March 31, March 31,
1998 1999 1998 1999
-------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (8,092) $ (5,855) $ (568) $(13,947)
Adjustments to reconcile net
loss to cash used by operating
activities-
Depreciation and
amortization 59 145 1 204
Non-cash compensation
expense 192 35 - 227
Accretion of senior notes - 1,302 - 1,302
Changes in assets and
liabilities-
Increase in receivables (537) (1,596) - (2,133)
Increase in prepaid
expenses (214) (300) (7) (514)
Increase in other assets (287) (51) (2) (338)
Increase in trade
accounts payable 1,964 5,852 - 7,816
Increase (decrease)
in accrued
liabilities 2,971 (645) 33 2,326
-------- -------- -------- --------
Net cash provided by
(used by)
operating activities (3,944) (1,113) (543) (5,057)
-------- -------- -------- --------
INVESTING ACTIVITIES:
Purchase of property and
equipment (3,485) (10,976) (32) (14,461)
Purchase of licenses and other
intangibles (950) (2,041) - (2,991)
Offering proceeds and investment earnings
placed in escrow - (73,133) - (73,133)
-------- -------- -------- --------
Net cash used by
investing activities (4,435) (86,150) (32) (90,585)
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-25
<PAGE>
COMPLETEL LLC AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of U.S. Dollars)
(After Corporate Reorganization - See Note 1)
<TABLE>
<CAPTION>
Commencement of Commencement of Commencement of
Operations Three Operations Operations
(January 8, Months (January 8, (January 8,
1998) to Ended 1998) to 1998) to
December 31, March 31, March 31, March 31,
1998 1999 1998 1999
----------------- ----------- -------------- -------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES:
Issuance of Redeemable
Cumulative Convertible Preferred
Units, net $ 12,113 $ 52,580 $ - $ 64,693
Gross proceeds from senior notes - 70,532 - 70,532
Issuance of equity in subsidiary - 4,478 - 4,478
Loan from member 1,300 - 1,300 1,300
Payment on loan from member (266) - - (266)
Issuance of common units 5 - - 5
Deferred financing costs (869) (3,668) - (4,537)
--------- --------- --------- ---------
Net cash provided by
financing activities 12,283 123,922 1,300 136,205
--------- --------- --------- ---------
Effect of exchange rates on cash (160) (2,375) (7) (2,535)
--------- --------- --------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 3,744 34,284 718 38,028
CASH AND CASH EQUIVALENTS,
beginning of period - 3,744 - -
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS,
end of period $ 3,744 $ 38,028 $ 718 $ 38,028
========= ========= ========= =========
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of member loan
to preferred units $ 1,034 $ - $ - $ 1,034
========= ========= ========= =========
Accretion of Redeemable
Cumulative Convertible
Preferred Units $ 363 $ 972 $ - $ 1,335
========= ========= ========= =========
SAB No. 51 gain related to
issuance of equity in
subsidiary $ - $ 698 $ - $ 698
========= ========= ========= =========
Accrued financing costs $ 322 $ - $ - $ -
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-26
<PAGE>
COMPLETEL LLC AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED) AND DECEMBER 31,
1998 (Information as of, and for the quarter ended, March
31, 1999 is unaudited)
(1) ORGANIZATION AND NATURE OF OPERATIONS
CompleTel LLC ("Parent") (together with its majority-owned subsidiaries, the
"Company") is a Delaware limited liability company. CompleTel LLC was known as
CableTel Delaware LLC ("CableTel Delaware") from its formation on January 8,
1998 through May 18, 1998, when it was reorganized and renamed as CableTel
Europe LLC in connection with the admission of a new member. Effective August
20, 1998, CableTel Europe LLC changed its name to CompleTel LLC. The Company
seeks to be a leading facilities-based provider of switched local
telecommunications and related services to business, carrier, Internet service
provider and government end-users in targeted metropolitan areas across Western
Europe, with an initial focus on network deployment in France, Germany and the
United Kingdom ("UK").
As of December 31, 1998, the accompanying consolidated financial statements
include Parent's direct and indirect wholly-owned subsidiaries consisting of
CableTel Management Inc. ("Management Co."), CompleTel Europe N.V. ("CompleTel
Europe"), CompleTel Holding I B.V. ("BVI"), CompleTel Holding II B.V. ("BVII"),
its French operating subsidiary, CompleTel SAS ("CompleTel France") (formerly
known as CompleTel S.A.R.L.), its UK operating subsidiary, CompleTel UK Limited
("CompleTel UK"), and its German operating subsidiary, CompleTel GmbH
("CompleTel Germany"). CompleTel Europe was formed in December 1998 for the
purpose of completing a Rule 144A Offering (the "Offering") (see Note 5) to
finance the development of its switched local telecommunications network and
related services throughout France and Western Europe. As of December 31, 1998,
Parent's operating companies were held indirectly through BVI and BVII.
CompleTel Europe held no material assets or operations as of December 31, 1998.
In January 1999, Parent formed CompleTel Holdings LLC ("CompleTel Holdings"),
CompleTel ECC B.V. ("CompleTel ECC"), CompleTel N.A. (N.V.) ("NANV") and
CompleTel UK SPC ("CompleTel SPC"). CompleTel Holdings was formed to issue the
equity component of the Offering. CompleTel ECC was formed to be the group's
European corporate center and to hold the proceeds of the Offering, through an
escrow account, until CompleTel Europe received aggregate financing commitments
of at least $90 million (see Note 5). Through a series of transactions in the
restructuring, CompleTel LLC contributed approximately $58 million of equity,
consisting of cash of approximately $52 million and accounts receivable of
approximately $6 million, to CompleTel France. Also, through a series of
restructuring transactions, CompleTel SPC became a wholly-owned subsidiary of
BVI, BVI was contributed to CompleTel Europe, and CompleTel Europe
F-27
<PAGE>
became a wholly-owned subsidiary of NANV. Furthermore, CompleTel LLC
contributed its 100% interest in NANV to CompleTel Holdings in exchange for
all 19,596,429 Class A Membership Interests in CompleTel Holdings. The
Non-Voting Class B Membership Interests (aggregating 1,475,000) in CompleTel
Holdings were issued substantially to unrelated parties in connection with
the Offering (see Note 5). The restructuring was accounted for as a
reorganization of entities under common control, similar to a pooling of
interests.
The Company is in the development stage and has generated no revenues to date.
Since commencement of operations, the Company has incurred net losses totaling
approximately $12.6 million through March 31, 1999. Parent's subsidiaries have
been principally engaged in developing its business plans, applying for and
procuring regulatory and government authorizations, raising capital, hiring
management and other key personnel, working on the design and development of the
Company's fiber optic networks and operation support systems ("OSS"),
negotiating equipment and facilities agreements, and negotiating interconnection
agreements and certain right-of-way agreements. As a result of its
development-stage activities, the Company has experienced significant operating
losses and negative cash flows from operations. The Company expects to continue
to generate negative cash flows from operations in each market while it
emphasizes development, construction and expansion of its business and until the
Company establishes a sufficient revenue generating customer base in that
market. The Company also expects to experience increasing operating losses and
negative cash flows from operations as it expands its operations and enters new
markets, even if and after it achieves positive cash flow from operations in its
initial markets.
The Company's ultimate success will be affected by the problems, expenses and
delays encountered in connection with the formation of any new business and
by the competitive environment in which the Company intends to operate.
Initially, the Company plans to deploy networks in four metropolitan markets
in France (Paris, Lyon, Lille and Marseilles), and in one market in each of
Germany and the UK (Berlin and London). The Company's performance will
further be affected by its ability to properly assess potential markets,
secure financing or raise additional capital, design networks, acquire
right-of-way and building access rights, implement interconnection with
incumbent public telecommunications operators ("PTO"), lease adequate
trunking capacity from PTO's, purchase and install switches in additional
markets, implement efficient OSS and other back office systems, develop a
sufficient customer base, and attract, retain and motivate qualified
personnel. Delays or failure in receiving required regulatory approvals
beyond the initial markets or the enactment of new adverse regulations or
regulatory requirements may have a material adverse effect upon the Company.
Although management believes that the Company will be able to successfully
mitigate these risks, there is no assurance that the Company will be able to
do so or that the Company will ever operate profitably.
The actual amount and timing of the Company's future capital requirements may
differ materially from the Company's current estimates, and additional financing
may be required in the event of departures from the Company's business plans and
projections, including those caused by unforeseen delays, cost overruns,
engineering design changes, demand for the Company's services that varies from
that expected by the Company, and adverse regulatory, technological or
competitive developments. The Company may also require additional capital (or
require financing sooner than anticipated) if it alters the schedule or targets
of its roll-out plan in response to regulatory, technological or competitive
developments (including additional market developments
F-28
<PAGE>
and new opportunities in and outside of its target markets). The Company
intends to evaluate potential joint ventures, strategic alliances and
acquisition opportunities on an ongoing basis as they arise, and the Company
may require additional financing if it elects to pursue any such
opportunities. The Company also will be required to seek additional financing
if it elects to deploy networks in other Western European markets beyond its
target markets. Sources of additional financing may include commercial bank
borrowings, vendor financing and/or the private or public sale of equity or
debt securities. There can be no assurance that the Company will be able to
fund its network deployment and operations in any or all of its initial
markets to the point of operating profitably with its current and anticipated
capital resources, and there can be no assurance that any additional
financing will be available on terms acceptable to the Company or at all.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements as of March 31,
1999, the three months ended March 31, 1999 and for the periods from
commencement of operations (January 8, 1998) to March 31, 1999 and 1998 have
been prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and are in the form prescribed by
the Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three months ended March 31, 1999 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1999.
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 expenses during the reporting period. Actual results
could differ from those estimates. The Company has adopted a calendar fiscal
year.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Parent and its majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all marketable
securities and commercial paper with maturities of ninety days or less at
acquisition as cash equivalents.
PREPAID EXPENSES
Prepaid expenses consist of prepaid rent and prepaid insurance. Prepayments are
amortized on a straight-line basis over the life of the underlying agreements.
F-29
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment includes office furniture and equipment, computer
equipment and software, leasehold improvements and construction in progress.
These assets are stated at cost and are being depreciated over the estimated
useful lives of the related assets as follows:
<TABLE>
<CAPTION>
Estimated
Useful Life
-------------
<S> <C>
Office furniture and equipment 5 years
Computer equipment and software 3 to 5 years
Leasehold improvements 9 to 12 years
</TABLE>
Office furniture and equipment, leasehold improvements and computer software are
depreciated using the straight-line method. Computer equipment is depreciated
using an accelerated depreciation method.
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -------------
(Unaudited)
<S> <C> <C>
Office furniture and equipment $ 265 $ 132
Computer equipment and software 1,876 688
Leasehold improvements 353 24
-------- --------
Property and equipment, in service 2,494 844
Less: accumulated depreciation (204) (59)
-------- --------
Property and equipment, in service, net 2,290 785
Construction in progress 11,982 2,656
-------- --------
Property and equipment, net $ 14,272 $ 3,441
======== ========
</TABLE>
COMPUTER SOFTWARE COSTS
The American Institute of Certified Public Accountants ("AICPA") recently
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), which provides
guidance on accounting for the costs of computer software developed or
obtained for internal use. SOP 98-1 identifies the characteristics of
internal-use software and provides examples to assist in determining when
computer software is for internal use. SOP 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998, for projects
in progress and
F-30
<PAGE>
prospectively, with earlier application encouraged. This statement was
adopted at commencement of operations.
START-UP COSTS
The Company expenses all start-up and organization costs as incurred, in
accordance with the provisions of the recently issued AICPA Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities" ("SOP 98-5").
DEFERRED FINANCING COSTS
Costs to obtain debt financing are capitalized and amortized over the life of
the related debt facility using the effective interest method.
LICENSE AND OTHER INTANGIBLES
The Company capitalizes all third-party direct costs associated with obtaining
licenses. Capitalized license costs are amortized over the life of the related
license and other intangible assets.
RECOVERABILITY OF LONG-LIVED ASSETS
The Company evaluates the carrying value of its long-lived assets whenever
events or circumstances indicate the carrying value of assets may exceed
their recoverable amounts. An impairment loss is recognized when the
estimated future cash flows (undiscounted and without interest) expected to
result from the use of an asset are less than the carrying amount of the
asset. If an asset which is expected to be held and used is determined to be
impaired, then the asset would be written down to its fair market value based
on the present value of the discounted cash flows related to such asset.
Measurement of an impairment loss for an asset held for sale would be based
on its fair market value less the estimated costs to sell.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation to employees using the
intrinsic value method prescribed in Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees."
INCOME TAXES
No provision has been made for federal, state or local income taxes related
to the Parent because they are the responsibility of the individual members.
Certain subsidiaries of the Parent are subject to corporate income tax
requirements and, accordingly, the Company accounts for income taxes under
the asset and liability method which requires recognition of deferred tax
assets and liabilities for the expected future income tax consequences of
transactions which have been included in the financial statements or tax
returns. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statement and
income tax basis of assets, liabilities and carryforwards using
F-31
<PAGE>
enacted tax rates in effect for the year in which the differences are
expected to reverse or the carryforwards are expected to be utilized. Net
deferred tax assets are then reduced by a valuation allowance if management
believes it is more likely than not they will not be realized.
BASIC AND DILUTED LOSS PER COMMON UNIT
The Company computes earnings (loss) per common unit in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). Under SFAS 128, "Basic earnings (loss) per common unit" is
determined by dividing net income (loss) available to common unitholders by
the weighted-average number of common units outstanding during each period.
"Diluted earnings (loss) per common unit" includes the effects of potentially
issuable common units, but only if dilutive. Because the Company's nonvested
common units and redeemable cumulative convertible preferred units would be
antidilutive, there are no differences between basic and diluted loss per
common unit for the Company. The weighted average common units outstanding
for the period assumes the initial capitalization of the Company (2,400
common units) occurred as of January 8, 1998.
COMPREHENSIVE LOSS
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), requires that an enterprise (i) classify items of other
comprehensive income by their nature in the financial statements and (ii)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
balance sheet. The Company's other comprehensive loss, as set forth in the
accompanying consolidated statement of members' deficit, includes cumulative
translation adjustments.
FOREIGN OPERATIONS AND FOREIGN EXCHANGE RATE RISK
The functional currency for the Company's international operations is the
applicable local currency for the affiliate company. Assets and liabilities
of foreign subsidiaries for which the functional currency is the local
currency are translated at exchange rates in effect at period-end, and the
statements of operations are translated at the average exchange rates during
the period. Exchange rate fluctuations on translating foreign currency
financial statements into U.S. dollars that result in unrealized gains or
losses are referred to as translation adjustments. Cumulative translation
adjustments are recorded as a separate component of members' deficit.
Transactions denominated in currencies other than the local functional
currency of the Company's operating subsidiaries, including U.S. dollar
denominated intercompany accounts and notes payable to Parent and Management
Co., are recorded based on exchange rates at the time such transactions
arise. Subsequent changes in exchange rates result in transaction gains and
losses which are reflected in income as unrealized (based on period-end
translations) or realized upon settlement of the transactions.
The Company's international subsidiaries can have payables that are
denominated in a currency other than their own functional currency. The
Company has not historically hedged foreign currency denominated transactions
for receivables or payables related to current operations. The terms of the
Senior Credit Facility commitment (see Note 5) would require the Company to
enter
F-32
<PAGE>
into and maintain hedging arrangements in an attempt to reduce its exposure
to currency fluctuations with respect to the dollar denominated Notes issued
in the Offering (see Note 5); however, there can be no assurance that any
such hedging transactions would be successful and that the exchange rate
fluctuations would not have a material adverse effect on the Company.
Accordingly, the Company may experience economic loss and a negative impact
on earnings and equity with respect to its holdings solely as a result of
foreign currency exchange rate fluctuations, which include foreign currency
devaluation against the dollar.
The functional currency of Parent's subsidiaries could change in the future,
depending on the denomination of certain planned financing transactions and the
nature of subsequent investment and operating activities.
SEGMENT REPORTING
SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. Operating segments
are components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
The Company is currently in the development stage and has yet to commence its
planned principal operations. Through March 31, 1999, the significant portion of
the Company's expenditures were associated with its development efforts in
France. The Company expects to incur significant costs associated with the
expansion of its development efforts into Germany and the United Kingdom. Thus,
the Company has not disclosed segment information as it is not meaningful.
NEW ACCOUNTING STANDARD
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities,"
establishes accounting and reporting standards for derivative instruments,
including certain instruments embedded in other contracts, and for hedging
activities. SFAS 133 requires that an entity recognize all derivatives as
either assets or liabilities and measure those instruments at fair value. It
also specifies the accounting for changes in the fair value of a derivative
instrument depending on the intended use of the instrument and whether (and how)
it is designated as a hedge. SFAS 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Subsequent to April 20, 1999
(date of Auditor's Report), the Financial Accounting Standards Board issued SFAS
137 which delayed the effective date of SFAS 133 until all fiscal
quarters of fiscal years beginning after June 15, 2000.
SAB NO. 51 ACCOUNTING POLICY--SALE OF STOCK BY COMPLETEL
HOLDINGS LLC (SUBSIDIARY)
The Company has adopted a policy of recording all gains attributable to
subsidiary common equity sales in the statement of operations, except for gains
on subsidiary equity sale transactions which must be recorded directly in equity
in accordance with the provisions of Staff Accounting Bulletin
F-33
<PAGE>
Number 51 ("SAB No. 51.") In February 1999, as part of the Company's Senior
Discount Notes and Class B Membership Interests Offering, the gross proceeds
of approximately $75 million were allocated approximately $70.5 million to
the Notes (issued by CompleTel Europe) and approximately $4.5 million to the
Class B Interests (in CompleTel Holdings LLC) representing a 7% interest in
CompleTel Holdings LLC. This resulted in a $698,000 SAB No. 51 gain recorded
directly in equity in accordance with SAB No. 51.
(3) CAPITALIZATION
LLC AGREEMENT
On May 18, 1998, an affiliate of Madison Dearborn Partners, Inc. ("Madison
Dearborn Partners"), an affiliate of LPL Investment Group, Inc. ("LPL")(together
with Madison Dearborn Partners, the "Private Equity Investors") and certain
members of management (the "Management Investors") entered into an amended and
restated limited liability company agreement (the "LLC Agreement"), amending and
restating the original limited liability agreement of CableTel Delaware dated
January 8, 1998. The LLC Agreement, as amended, authorized the issuance of (i)
61,950 redeemable cumulative convertible preferred ownership interests (the
"Preferred Units"), (ii) 107,500 common ownership interests (the "Common
Units"), and (iii) certain other units (Class A Senior Units, Class B Senior
Units and Class C Senior Units) issuable only in limited circumstances and only
in exchange for other Units. The initial 61,950 Preferred Units were issued to
the Private Equity Investors and Management Investors under an Equity Purchase
Agreement (the "Equity Purchase Agreement") (see Note 4). Of the 107,500 Common
Units, 82,500 are reserved for issuance upon conversion of the Preferred Units
and 25,000 were issued, or are reserved for issuance, to the Management
Investors under executive securities agreements (the "Executive Securities
Agreements"). Of the 25,000 Common Units issued or issuable to the Management
Investors, 17,500 (the "Non-Performance Vesting Units") are subject to vesting
only through the passage of time under the Executive Securities Agreements and
7,500 (the "Performance Vesting Units") are subject to time vesting and to
performance vesting under a performance vesting agreement (the "Performance
Vesting Agreement"). Of the 25,000 Common Units issued or issuable to the
Management Investors, 2,250 were issued to LPL under the LPL Investor Purchase
Agreement. On January 22, 1999, the 2,250 immediately vested common units
previously issued to LPL were canceled. These units were then issued to one of
the Management Investors as additional Non-Performance Vesting Units. No Class A
Senior Units, Class B Senior Units or Class C Senior Units had been issued as of
March 31, 1999. On January 28, 1999, the LLC Agreement was amended and restated,
increasing the authorized Preferred Units to 65,750 (see Note 4).
COMMON UNITS
The holders of Common Units are entitled to one vote for each Common Unit held
on all matters submitted to a vote of the members. Holders of Common Units are
entitled, subject to the preferences of the Preferred Units, to receive such
distributions, if any, as may be declared by Parent's Board of Directors out of
profits allocated to the members. The Indenture related to the Offering
restricts the ability of CompleTel Europe to pay dividends to Parent in order to
pay distributions with respect to the Common Units. In addition, Parent may not
make any distributions with respect to the Common Units without the prior
consent of the Private Equity Investors. In the event of a liquidation,
dissolution, or winding up of Parent, the holders of
F-34
<PAGE>
Common Units are entitled to share ratably in the assets of Parent which are
available for distribution, if any, after the payment of all debts and
liabilities of Parent and the liquidation preference of any outstanding
Preferred Units.
Upon the affirmative vote of Parent's Board and the holders of a majority of the
Common Units (including the Preferred Units, on an as-if-converted basis),
Parent will be converted into a corporation (as that term is used in Subchapter
C of the Internal Revenue Code). In connection with such conversion, each holder
of Preferred Units or Common Units of Parent will receive comparable equity
securities of such corporation on the terms set forth in the LLC Agreement.
Upon the initial formation of CableTel Delaware on January 8, 1998, the founding
members of CableTel Delaware each received a 25% member interest in CableTel
Delaware. The founding members were comprised of three of the Management
Investors and LPL. As part of the reorganization on May 18, 1998, the founding
members of CableTel Delaware were deemed to have received Common Units of Parent
in exchange for their interests in CableTel Delaware. For accounting purposes, a
portion of the fully vested Common Units (2,400 units) of Parent received by the
founders under the Executive Securities Agreements and the LPL Investor Purchase
Agreement were deemed to have been issued in exchange for their prior member
interests in CableTel Delaware. The remaining fully vested Common Units (2,925
units) received by the founders were deemed to have been issued in consideration
for prior services provided. The intrinsic value of the Common Units deemed
received for prior services totaling approximately $115,000 was charged to
general and administrative expense in the accompanying consolidated statement of
operations.
As of March 31, 1999 and December 31, 1998, 13,158 and 10,797 Non-Performance
Vesting Units had been issued to the Management Investors and other employees,
respectively. The Non-Performance Vesting Units issued to the Management
Investors vest ratably on each anniversary of the Executive Securities
Agreements over a four-year period. The Non-Performance Vesting Units issued to
other employees generally vest ratably over a four year period on each December
31, with pro rata vesting in the year of employment and final vesting on the
fourth anniversary date of the applicable Employee Securities Agreement. Vesting
ceases upon the termination of employment with the Company, for any reason, and
the related Common Units are subject to repurchase by Parent at fair value for
vested Common Units and at original cost for nonvested Common Units. Vesting for
Non-Performance Vesting Units is accelerated upon a Qualified Public Offering or
a Qualified Sale of Parent, as defined in the Executive Securities Agreements.
The Non-Performance Vesting Units are accounted for as issued Common Units,
subject to forfeiture, until vested. Accordingly, the intrinsic value of the
Non-Performance Vesting Units was accounted for at issuance as additional
paid-in capital, with an offsetting entry to deferred compensation. The
intrinsic value of the Common Units issued subject to forfeiture totaled
approximately $617,000 and $604,000 for the Non-Performance Vesting Units issued
through March 31, 1999 and December 31, 1998. This deferred compensation is
being amortized over the four year vesting period. As of March 31, 1999 and
December 31, 1998, 12,274 and 10,588 of the issued Non-Performance Vesting Units
are subject to forfeiture, respectively. The status of the issued
Non-Performance Vesting Units as of March 31, 1999 and December 31, 1998 are as
follows.
F-35
<PAGE>
As of March 31, 1999 (Unaudited):
<TABLE>
<CAPTION>
Vested Nonvested
Total Units (1) Units Units
--------------- ------- ---------
<S> <C> <C> <C>
Units issued to founders upon formation 1,800 1,800 -
Units issued for services provided 2,213 2,213 -
Units issued subject to forfeiture 12,483 209 12,274
------ ----- ------
Total 16,496 4,222 12,274
====== ===== ======
</TABLE>
(1) Reflects the January 22, 1999 cancellation of the 2,250
immediately vested common units previously issued to LPL and the
issuance of those units to one of the Management Investors as
Non-Performance Vesting Units. Of the 2,250 units issued to LPL,
600 were deemed issued upon formation and 1,650 were issued for
services provided.
As of December 31, 1998:
<TABLE>
<CAPTION>
Total Units Vested Units Nonvested Units
----------- ------------ ---------------
<S> <C> <C> <C>
Units issued upon formation 2,400 2,400 -
Units issued for services provided 3,188 3,188 -
Units issued subject to forfeiture 10,797 209 10,588
------ ----- ------
Total 16,385 5,797 10,588
====== ===== ======
</TABLE>
PERFORMANCE VESTING AGREEMENT
The Private Equity Investors, the Management Investors, and Parent entered into
the Performance Vesting Agreement originally dated May 18, 1998 and amended and
restated January 28, 1999. Under the Performance Vesting Agreement, 7,500 of the
25,000 Common Units issued or reserved for issuance to the Management Investors
(the "Performance Vesting Units") are, in addition to time vesting, subject to
performance vesting according to certain multiple-of-invested-capital tests
calculated based upon the valuation of Parent's equity implied by a Qualified
Public Offering and/or by actual sales of Parent's securities by Madison
Dearborn Partners. If any Performance Vesting Units remain unvested on May 18,
2005, there shall be deemed to have occurred a sale of the Parent's securities
by Madison Dearborn Partners at fair market value. Any Performance Vesting Units
that do not vest upon such a deemed sale will be forfeited. In addition, up to
7,500 of the Common Units issuable upon conversion of the Preferred Units (see
Note 4) are subject to forfeiture if and when Performance Vesting Units
performance vest under the terms of the Performance Vesting Agreement. As a
result, depending upon the percentage of the Performance Vesting Units that are
ultimately performance vested (and the corresponding percentage of Common Units
issuable upon conversion of the Preferred Units that are ultimately forfeited),
the allocation of total equity ownership of CompleTel between the holders of
Preferred Units (on an as-if-converted basis) and the holders of Common Units
(assuming no other issuances of Parent's securities) will range between
82.5%/17.5% and 75.0%/25.0%.
F-36
<PAGE>
For financial reporting periods ending prior to final determination of the
number of Performance Vesting Units that will vest, compensation cost will be
recorded based upon management's estimate of the number of such units that would
vest and the fair market value of those units as of the end of the reporting
period. As of March 31, 1999 and December 31, 1998, 7,029 and 6,981 Performance
Vesting Units had been issued, respectively. As of March 31, 1999 and December
31, 1998, no compensation cost has been recorded related to the Performance
Vesting Units as the number of units that will vest is not yet reasonably
determinable.
SECURITYHOLDERS AGREEMENT
The Private Equity Investors, the Management Investors and Parent are parties to
a securityholders agreement dated May 18, 1998 (the "Securityholders
Agreement"). The Securityholders Agreement established the size of Parent's
Board of Directors at six and established a voting agreement among the investors
with respect to the election of the members of that board (the Executive
Committee of which acts as the board of directors of certain of Parent's
subsidiaries). On January 28, 1999, the Securityholders Agreement was amended
and restated to increase the size of Parent's Board of Directors to eight and
make corresponding changes in the voting agreement among the investors. Pursuant
to the terms of the Securityholders Agreement, the Private Equity Investors may
not transfer any Preferred Units (or securities issued upon exercise thereof or
otherwise in connection therewith) ("Preferred Securities") prior to May 18,
1999, other than to their affiliates or as part of a sale of Parent. The
Management Investors may not transfer any Preferred Securities prior to May 18,
2000, other than to their affiliates, family members or estate planning
entities, or as part of a sale of Parent. Transfers of Preferred Securities by
the Private Equity Investors after May 18, 1999, and by the Management Investors
after May 18, 2000, (in each case other than to their affiliates, family members
or estate planning entities, to the public, or as part of a sale of Parent) are
subject to first refusal rights in favor of the other holders of Preferred
Securities, and to pro rata participation in such transfer, under "tag-along"
rights, by the holders of Preferred Securities and of the Management Investors
with respect to their Common Units that have vested under the Executive
Securities Agreements and (if applicable) performance vested under the Equity
Purchase Agreement. In the event a sale of Parent is approved by the holders of
a majority of the Preferred Securities (which currently is held by Madison
Dearborn Partners), each of the Private Equity Investors and Management
Investors (and their transferees) agrees to approve and, if requested, sell its
Parent securities in such sale.
REGISTRATION RIGHTS AGREEMENT
The Private Equity Investors, the Management Investors and Parent are parties to
a registration rights agreement originally dated May 18, 1998 and amended and
restated January 28, 1999 (the "Registration Agreement"). Under the terms of the
Registration Agreement, the holders of a majority of the Preferred Securities
(which currently is held by Madison Dearborn Partners) may require Parent to
consummate an initial public offering. After Parent's initial public offering,
Madison Dearborn Partners is entitled to demand two long-form registrations, LPL
is entitled to demand one long-form registration, and the holders of at least
10% of the Preferred Securities then outstanding may request unlimited
short-form registrations. In addition, the Private Equity Investors and the
Management Investors are entitled to "piggyback" on primary or secondary
registered public offerings of Parent's securities. Each Private Equity Investor
and Management
F-37
<PAGE>
Investor is subject to holdback restrictions in the event of an initial
public offering or other public offering of Parent securities.
(4) REDEEMABLE CUMULATIVE CONVERTIBLE PREFERRED UNITS
On May 18, 1998, the Private Equity Investors, the Management Investors and
Parent entered into the Equity Purchase Agreement. Under the Equity Purchase
Agreement, the Private Equity Investors purchased 60,000 Preferred Units for an
initial aggregate purchase price of $3.5 million and a commitment to make
subsequent capital contributions to Parent of up to an additional $56.5 million
(for a total commitment of $60 million) on the terms and conditions set forth in
the Equity Purchase Agreement. Certain of the Management Investors purchased 750
Preferred Units for an initial aggregate purchase price of $44,000 and a
commitment to make capital contributions to Parent of up to an additional
$706,000 (for a total commitment of $750,000) on the terms and conditions set
forth in the Equity Purchase Agreement. As of July 15, 1998, Parent entered into
Additional Investor Equity Purchase and Joinder and Rights Agreements for the
issuance of 500 Preferred Units in exchange for a capital commitment of $500,000
by each of two new investors. As of November 11, 1998, Parent entered into an
Additional Preferred Units Purchase Agreement with one of the Management
Investors for the issuance of an additional 150 Preferred Units in exchange for
a capital commitment of $150,000. On December 2, 1998, Parent entered into an
Additional Investor Equity Purchase and Joinder and Rights Agreement with a new
management investor for the issuance of 50 Preferred Units in exchange for a
capital commitment of $50,000. On January 28, 1999, the Equity Purchase
Agreement was amended and restated to supersede the Equity Purchase Agreement
and the agreements referred to above dated July 15, 1998, November 11, 1998 and
December 2, 1998 and to admit the new management investor (included together
with other "Management Investors") and other investors (included together with
Madison Dearborn Partners and LPL as the "Private Equity Investors"). The First
Amended and Restated Equity Purchase Agreement increased the total number of
Preferred Units to 64,743 and 1,007, and total equity commitments to $64.7
million and $1 million, by the Private Equity Investors and the Management
Investors, respectively. Additionally, Parent's Board approved the drawdown of
the remaining commitment under the Equity Purchase Agreement, which was funded
in connection with, and as a condition to the closing of the Offering.
The Preferred Units accrue a preferred yield at a per-annum rate of 8% of the
sum of the Liquidation Value thereof and all accumulated and unpaid preferred
yield thereon. "Liquidation Value" for any Preferred Unit is equal to (i) the
initial price paid to Parent for such Preferred Unit on its date of issuance,
plus (ii) the aggregate contributions to the capital of Parent made pursuant to
the Equity Purchase Agreement with respect to such Preferred Unit after its date
of issuance, minus (iii) all distributions constituting a return of capital with
respect to such Preferred Unit after its date of issuance. The Indenture related
to the Offering restricts the ability of CompleTel Europe to pay dividends to
Parent in order to pay the preferred yield on the Preferred Units.
No distributions out of earnings and profits may be made to the holders of
Common Units unless Parent has first made distributions to the holders of
Preferred Units to pay the full amount of accrued preferred yield on the
Preferred Units. Upon any liquidation, dissolution or winding up of Parent
(whether voluntary or involuntary), each holder of Preferred Units will be
entitled to receive, before any distribution is made with respect to any other
class of Parent's equity,
F-38
<PAGE>
distributions in cash equal to the aggregate Liquidation Value of all
Preferred Units held by such holder plus all accrued and unpaid preferred
yield thereon.
The Preferred Units are convertible at any time and from time to time into
Common Units at the election of the holder thereof. In addition, all holders of
Preferred Units will be required to convert their Preferred Units into Common
Units upon (i) a Qualified Public Offering of Parent's common equity, as
defined, or (ii) the affirmative vote of the holders of a majority of the
outstanding Preferred Units. Upon any conversion of Preferred Units, the holder
thereof has the right to receive a distribution in cash equal to the amount of
accrued but unpaid preferred yield on the Preferred Units being converted
(provided that if the conversion occurs in connection with an initial public
offering of Parent's common equity, the converting holder may elect to receive
such payment in the form of Parent securities at the initial public offering
price). The 65,750 currently outstanding Preferred Units are convertible into
82,500 Common Units (7,500 of which are subject to forfeiture upon the vesting
of the Performance Vesting Units - see Note 3), which conversion ratio is also
subject to adjustment on a weighted-average basis upon any issuance or deemed
issuance of Common Units (or securities convertible into or exercisable for
Common Units) that otherwise would dilute the economic interests of the holders
of Preferred Units. The holders of Preferred Units are entitled to vote their
Preferred Units with the holders of Common Units on an as-if-converted basis on
all matters submitted to a vote of the members.
The Equity Purchase Agreement provides the Private Equity Investors with certain
restrictive covenants. The Private Equity Investors have the right to approve or
disapprove Parent's taking or agreeing to take certain actions, including, among
other things, (i) making distributions with respect to redeeming, or issuing any
equity securities, any securities convertible into or exercisable for equity
securities, or any debt with equity features, (ii) loaning monies, (iii)
disposing of significant assets, (iv) making acquisitions or entering into joint
ventures, (v) entering into any merger, consolidation, liquidation,
recapitalization or reorganization, (vi) entering into transactions with
affiliated persons, (vii) incurring significant indebtedness, and (viii)
entering into or modifying any employment arrangement with Parent's Chief
Executive Officer. The Private Equity Investors have approved the Company's
consummation of the Senior Credit Facility and the Offering (see Note 5).
The Equity Purchase Agreement also provides the Private Equity Investors and the
Management Investors with certain anti-dilutive rights prior to consummation of
a Qualified Public Offering or a Sale of Parent, as defined in the Equity
Purchase Agreement.
If a Qualified Public Offering or Sale of Parent has not occurred by May 18,
2005, each holder of Preferred Units or Common Units issued or issuable upon
conversion of the Preferred Units ("Purchaser Securities") will have the right
to require Parent to take all actions necessary to purchase the Purchaser
Securities held by such holder for fair market value (or, in the case of
Preferred Units to be repurchased, the greater of fair market value and the
Liquidation Value (together with all accrued but unpaid preferred yield) of such
Preferred Units). Fair market value is defined as the amount agreed to by the
holders of the Preferred Units to be repurchased and the holders of the Parent's
Common Units, excluding Unvested Performance Units. If mutual agreement can not
be reached within twenty days of the issuance of the repurchase notice, the fair
market value for (a) publicly traded securities generally means the average of
the closing prices of such securities for the 21 day period preceding the filing
of the repurchase notice and (b) non-
F-39
<PAGE>
publicly traded securities generally means a valuation determined by an
appraisal mechanism. The Indenture related to the Offering limits the ability
of CompleTel Europe to pay dividends or take certain other actions that may
be necessary to effectuate the repurchase of any such securities.
In the event the repurchase options are exercised, Parent is obligated to do
everything within its power to satisfy its repurchase obligations, which may
involve the sale of some or all of its subsidiaries, or a portion or all of its
assets. Accordingly, as required by the Securities and Exchange Commission
("SEC") accounting standards, the Company is recognizing the accretion of the
value of the Preferred Units to reflect the estimated future redemption value of
the Preferred Units payable in the event the repurchase provisions are
exercised. Due to the significant uncertainty regarding the market value of the
Preferred Units on May 18, 2005, the Preferred Units are being accreted using
the 8% per annum preferred yield. The accretion rate will be adjusted
prospectively through May 18, 2005 (the earliest redemption date) upon any event
reasonably indicating a higher fair value as of that date. The accretion is
recorded each period as an increase in the balance of Preferred Units
outstanding and a non-cash increase in the net loss applicable to common units.
As of March 31, 1999 and December 31, 1998, the value of the Preferred Units has
been accreted approximately $1,335,000 and $363,000, respectively.
Upon a Qualified Public Offering, the Preferred Units would automatically
convert to Common Units and the amounts accreted would be adjusted to the
indicated fair value as a non-cash increase in the net loss applicable to common
units and the carrying value of the Redeemable Cumulative Convertible Preferred
Units would be reclassified as a component of additional paid-in capital in the
members' deficit section of the consolidated balance sheet.
(5) INDEBTEDNESS
UNITS OFFERING
In February 1999, the Company completed an Offering of 147,500 units (the
"Units") consisting of $147.5 million aggregate principal amount of 14% Senior
Discount Notes due 2009 (the "Notes") issued by CompleTel Europe (a wholly owned
subsidiary of the Company) and 1,475,000 non-voting Class B Membership Interests
of CompleTel Holdings LLC (a wholly owned subsidiary of the Company). CompleTel
Europe issued the Notes at a substantial discount from their principal amount at
maturity. A principal investor in Parent acquired 400 Units in the Offering. The
proceeds of the Offering, net of offering fees and costs, were approximately
$70.5 million and were held in an escrow account until CompleTel Europe received
a minimum commitment of $90 million in senior credit facilities, which was
received in April 1999. The net proceeds of the Offering held in escrow and the
related interest received are presented as restricted cash and cash equivalents
in the accompanying balance sheet as of March 31, 1999. To comply with
Netherlands laws, the Notes are guaranteed by Parent on a senior unsecured
basis. As Parent is a holding company with no operations other than the
operations to be conducted by CompleTel Europe and its subsidiaries, it is
unlikely that Parent would have sufficient funds to satisfy CompleTel Europe's
obligations on the Notes if CompleTel Europe is unable to satisfy its own
obligation on the Notes. Of the $75 million gross proceeds from the Offering,
approximately $70.5 million was attributed to the Notes and approximately $4.5
million was attributed to the 1,475,000 Class B Membership Interests of
CompleTel Holdings LLC.
F-40
<PAGE>
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
14% Senior Discount Notes, face amount $147.5 million,
due 2009, effective interest rate
of 15.31%, at accreted value $71,834 $ -
=========== ============
</TABLE>
BANK FINANCING COMMITMENT
The Company's French subsidiaries, CompleTel SAS and CompleTel Services SAS (the
"Borrowers"), have received commitments for senior secured credit facilities
(the "Facilities") of $90 million from Paribas and from Nortel Networks
("Nortel") to finance the Company's deployment of its networks in France. The
terms of the Facilities provide that the borrowings of up to the first $20
million will be provided solely by the Nortel senior secured credit facility.
Additional borrowings from Paribas under the Paribas senior credit facility (the
"Paribas Facility") and other lenders (the "Senior Lenders") would first be used
to retire indebtedness from Nortel, who would lend up to $20 million as part of
the Paribas Facility, along with the other Senior Lenders. The Paribas Facility
is comprised of two Tranches. Borrowings under Tranche A would be available
through March 31, 2002, and subject to a maximum of $80 million. On March 31,
2002, this revolving credit facility would convert to a term loan facility,
payable quarterly, in increasing increments commencing December 31, 2002.
Borrowings under Tranche B would be subject to an initial maximum amount of $10
million, with the available commitment decreasing quarterly commencing with the
fourth quarter of 2002. The Paribas Facility would mature on December 31, 2006
and would bear interest at the rate of LIBOR plus a margin ranging from 1.25% to
3.50% based upon the Company's ratio of total debt to annualized earnings before
interest, taxes, depreciation and amortization ("EBITDA").
The final implementation of the Facilities remains subject to the satisfaction
of a number of conditions, including preparation of definitive documentation,
obtaining all regulatory approvals and completion of due diligence. In addition,
the availability of credit under the Facilities would be contingent on a number
of conditions precedent, including the Borrowers achieving a minimum number of
business access lines in service and maximum ratios of senior debt to the number
of access lines in service. The Paribas Facility would be secured by all of the
Borrowers' assets as well as a pledge of the stock of the Borrowers and
assignment of inter-affiliate loans and all licenses and material contracts.
F-41
<PAGE>
(6) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has entered into various operating lease agreements, for office
space and employee residences. Future minimum lease obligations related to the
Company's operating leases for the 12-month periods subsequent to March 31,
1999 and December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
March 31, 2000 and December 31, 1999 $ 1,062 $ 976
March 31, 2001 and December 31, 2000 1,176 1,087
March 31, 2002 and December 31, 2001 1,091 1,037
March 31, 2003 and December 31, 2002 963 955
March 31, 2004 and December 31, 2003 925 948
Thereafter 4,793 4,975
------- -------
Total $10,010 $9,978
======= ======
</TABLE>
Total rent expense for the period from January 8, 1998 through December 31, 1998
was approximately $160,000 and for the three months ended March 31, 1999 was
$191,000.
MANAGEMENT EMPLOYMENT AGREEMENTS
Certain employees of Management Co. that have been seconded to Parent's
subsidiaries are parties to employment agreements. The agreements generally
provide for a specified base salary, as well as a bonus set as a specified
percentage of the base salary. The bonus is based on attainment of certain
identified performance measures. The employment agreements generally provide for
cost of living differentials, relocation and moving expenses, automobile
allowances and income tax equalization payments, if necessary, to keep the
employee's tax liability the same as it would be in the United States.
FRENCH SERVICE LICENSE
On December 13, 1998 the Secretaire d'Etat a l'Industrie ("the Ministry"), based
on the recommendation of the Autorite de Regulation des Telecommunications
("ART"), awarded CompleTel France an L.33-1 fixed wireline license and an L.34-1
service license for network deployment and the provision of services in 10
regions in France that the Company intends to target. The Company's business
plan forming the basis for the issuance of the French licenses contemplates the
Company's deploying networks in 16 French markets and raising sufficient
financing to fund such deployment. The amount of the proceeds from the Offering
and the funds expected to be available under the Senior Credit Facility (see
Note 5) are less than the amount of financing required for the Company to deploy
and operate networks in all of the markets contemplated by this business plan,
and the Company intends to continue to seek additional financing in order to
fund its business plan beyond deployment of networks in its initial target
F-42
<PAGE>
markets. The Company has been advised that this does not, by itself, constitute
a violation of CompleTel France's requirements under the French licenses.
However, the ART may take this into account, together with any other relevant
items, when assessing whether there exists a material adverse variation to the
financial and/or technical capacity of CompleTel France. If and to the extent
that the ART were to determine that the Company has materially and adversely
deviated from its business plan or that the Company lacks the financial capacity
to implement this plan, the ART could seek to modify or revoke the licenses in
whole or in part.
(7) INCOME TAXES
United States
In general, a United States limited liability company, treated as a partnership
for U.S. federal income tax purposes, will not be subject to U.S. federal income
tax. Instead, the income, gain, and loss (including Subpart F income or foreign
personal holding company income recognized) will be allocated to its members.
Any direct foreign income taxes paid on the remittance of dividends from its
foreign subsidiaries will likewise pass to Parent's members. The LLC Agreement
provides for distributions to its members to cover income taxes in the event
Parent recognizes any income or gain (including Subpart F income or foreign
personal holding company income). Such distribution would be contingent upon a
distribution of cash from its foreign subsidiaries.
Netherlands
As of December 31, 1998, the Company held all operating subsidiaries indirectly
through BVI. In general, a Dutch holding company may benefit from the so-called
"participation exemption". The participation exemption is a facility in Dutch
corporate tax law which allows a Dutch company to exempt from Dutch income tax
any dividend income and capital gains in relation to its participation in
subsidiaries which are legal entities residing in a foreign country. Capital
losses are also exempted, apart from liquidation losses (under stringent
conditions). Any costs in relation to participations, to the extent these
participations do not realize Dutch taxable profit are not deductible. These
costs include costs to finance such participation.
For Dutch income tax purposes, net operating loss ("NOL") carryforwards may be
carried forward indefinitely.
France
The majority of the Company's approximately $3.8 million of NOL carryforwards
for income tax purposes at December 31, 1998, were generated by CompleTel
France. For French income tax purposes, NOL carryforwards may generally be
carried forward for a period of up to five years. Start-up costs will be
capitalized for French tax purposes. The Company considers the majority of these
costs as eligible for the deferred depreciation regime for French tax purposes,
resulting in an indefinite carryforward life of the corresponding amortization
expense. The Company has recorded a valuation allowance equal to the net
deferred tax assets at December 31, 1998 due to the uncertainty of future
operating results. The valuation allowance will be reduced at such time as
management believes it is more likely than not that the net deferred tax assets
will be realized. Any reductions in the valuation allowance will reduce future
provisions for income tax expense.
F-43
<PAGE>
The difference between the income tax provision in the consolidated financial
statements and the expected income tax benefit at statutory rates related to the
Company's corporate and foreign subsidiary operations for the period from
commencement of operations (January 8, 1998) to December 31, 1998, is reconciled
as follows (in thousands):
<TABLE>
<CAPTION>
Commencement of
Operations (January 8,
1998) to December 31,
1998
---------------------
<S> <C>
Expected income tax benefit at the U.S.
statutory rate of 38.25% $ 3,095
Parent operating losses passed through
to its members (153)
International rate differences (369)
Non-deductible expenses (99)
Valuation allowance (2,474)
-------
Total income tax benefit $ -
=======
</TABLE>
Deferred tax assets and liabilities at December 31, 1998 are as follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Deferred tax assets-
Operating loss carryforwards $ 1,222
Capitalized start-up costs 1,214
Net unrealized foreign exchange gain 20
Deferred depreciation 16
Other 2
-------
Total deferred tax assets 2,474
Less valuation allowance (2,474)
-------
Net deferred taxes $ -
=======
</TABLE>
F-44
<PAGE>
(8) PARENT COMPANY ONLY FINANCIAL INFORMATION
The following financial information reflects the parent company only condensed
statement of operation data, condensed balance sheet data, and condensed cash
flows data.
<TABLE>
<CAPTION>
Commencement
of Operations
(January 8, 1998) to
December 31, 1998
--------------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Interest income $ 11
General and administrative expense (400)
Equity in losses of subsidiaries (7,703)
--------
Net Loss $ (8,092)
========
</TABLE>
<TABLE>
<CAPTION>
December 31,
1998
--------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,743
Receivables from affiliates 9,492
Other current assets 42
--------
Total current assets 11,277
Investments in subsidiaries (6,185)
--------
Total assets $ 5,092
========
</TABLE>
<TABLE>
<CAPTION>
December 31,
1998
--------------
<S> <C>
Current liabilities $ 322
--------
Redeemable cumulative convertible preferred units:
No par value, 61,950 units authorized, issued and outstanding 13,188
--------
Common units, no par value, 106,750 units authorized, 16,385
units issued and outstanding 737
Deferred compensation (540)
Other comprehensive loss (160)
Deficit accumulated during the developmental stage (8,455)
--------
Total members' deficit (8,418)
--------
Total liabilities and members' deficit $ 5,092
========
</TABLE>
F-45
<PAGE>
<TABLE>
<CAPTION>
Commencement of Operations
(January 8, 1998) to
December 31, 1998
---------------------------
<S> <C>
Cash Flows Data:
Cash flows from operating activities:
Net loss $ (8,092)
Equity in losses of subsidiaries 7,703
Changes in-
Other current assets (10)
Receivables from affiliates (9,492)
--------
Net cash used in operating activities (9,891)
--------
Cash flows from investing activities:
Investment in subsidiaries (1,518)
--------
Net cash from investing activities (1,518)
--------
Cash flows from financing activities:
Issuance of redeemable cumulative convertible preferred units 12,113
Loan from member 1,300
Payment of loan from member (266)
Issuance of common units 5
--------
Net cash from financing activities 13,152
--------
Net increase in cash and cash equivalents 1,743
Cash and cash equivalents, beginning of period -
--------
Cash and cash equivalents, end of period $ 1,743
========
</TABLE>
(9) SUBSEQUENT EVENT
ASI ACQUISITION
On March 24, 1999, CompleTel SAS acquired all of the outstanding stock of Acces
Internet et Solutions ("ASI"), an Internet service provider based in Lyon, for
approximately $2.1 million. The transaction was recorded under the purchase
method of accounting as of March 31, 1999. The Purchase Price was first
allocated to the fair value of the net tangible assets acquired $73,000. The
resulting excess of cost over the fair value of tangible net assets acquired, or
goodwill, was recorded in the amount of approximately $2.0 million and is being
amortized under the straight-line method over a ten-year period.
The following unaudited pro forma condensed consolidated operating results for
the period from commencement of operations (January 8, 1998) to December 31,
1998, and for the three months ended March 31, 1999, reflect the pro forma
effects on operations of the ASI acquisition as if the acquisition occurred on
January 8, 1998. For purposes of the pro forma condensed consolidated
F-46
<PAGE>
operating results, the acquisition is assumed to have been financed through
an equity contribution from the Company.
The unaudited pro forma condensed consolidated operating results are based on
the historical consolidated financial statements of the Company and ASI, giving
effect to certain assumptions and adjustments that management believes are
reasonable based upon currently available information. This pro forma condensed
consolidated financial data is presented for illustrative purposes and does not
purport to represent what the Company's results of operations would actually
have been if the acquisition had been consummated as of January 8, 1998.
<TABLE>
<CAPTION>
For the Period from
Commencement of
Operations For the Three Months
(January 8, 1998) to Ended
December 31, 1998 March 31, 1999
------------------------ ----------------------
Historical Pro Forma Historical Pro Forma
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ - $ 1,020 $ - $ 257
Net loss applicable to common
units $(8,455) $(8,583) $(6,827) $(6,917)
======= ======= ======= =======
Basic and diluted loss
per common unit $(1,940) $(1,969) $(1,617) $(1,638)
======= ======= ======= =======
Weighted average number of
non-forfeitable common units
outstanding 4,359 4,359 4,222 4,222
======= ======= ======= =======
</TABLE>
F-47
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of CompleTel S.A.S.:
We have audited the accompanying balance sheet of Acces et Solutions Internet
S.A.R.L. ("the Company") (a wholly-owned subsidiary of CompleTel S.A.S. since
March 24, 1999) as of December 31, 1998 and the related statements of operations
and cash flows for the year 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in France, which are substantially the same as those generally accepted in the
United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Acces et Solutions Internet
S.A.R.L. as of December 31, 1998, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles in France.
BARBIER FRINAULT & ASSOCIES
ARTHUR ANDERSEN
Paris, France,
June 24, 1999.
F-48
<PAGE>
ACCES ET SOLUTIONS INTERNET S.A.R.L
BALANCE SHEET
DECEMBER 31, 1998
(Stated in thousands of U.S. Dollars)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $211
Receivables 400
Inventory 6
Prepaid expenses 12
----
Total current assets 629
----
FIXED ASSETS:
Property and equipment, net 70
Licenses and other intangibles 2
Financial assets 15
----
Total fixed assets 87
----
TOTAL ASSETS $716
====
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 94
Accrued liabilities 241
Deferred income 238
----
Total current liabilities 573
----
LONG-TERM DEBT 28
STOCKHOLDERS' EQUITY:
Common stock at historical rate 25
Reserves and translation adjustment 3
Retained earnings prior year 25
Result for the year at average rate through year end 62
----
TOTAL STOCKHOLDERS' EQUITY 115
----
Total liabilities and stockholders' equity $716
====
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-49
<PAGE>
ACCES ET SOLUTIONS INTERNET S.A.R.L
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Stated in thousands of U.S. Dollars)
<TABLE>
<S> <C>
REVENUES $ 1,020
OPERATING EXPENSES:
Network costs and cost of goods sold 324
Selling, general and administrative 551
Depreciation and amortization 35
-------
Total operating expenses 910
-------
OPERATING RESULT 110
OTHER INCOME (EXPENSE):
Interest income 2
Interest expense (2)
-------
Total other income (expense) -
-------
NET RESULT BEFORE INCOME TAXES 110
INCOME TAX PROVISION 48
-------
NET PROFIT $ 62
=======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-50
<PAGE>
ACCES ET SOLUTIONS INTERNET S.A.R.L
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Stated in thousands of U.S. Dollars)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net profit $ 62
Add-
Depreciation and amortization 60
Increase in receivables (76)
Inventory (4)
Increase in trade accounts payable 16
Increase in accrued liabilities 16
Increase in prepaid expenses (5)
Increase in deferred income 158
-----
Net increase in working capital 105
-----
Net cash provided by operating activities 227
-----
INVESTING ACTIVITIES:
Purchase of property and equipment (54)
Purchase of licenses and other intangibles (3)
Purchase of financial assets (6)
-----
Net cash used by investing activities (63)
-----
FINANCING ACTIVITIES:
Loan 34
Loan repayment (6)
-----
Net cash provided by financing activities 28
-----
Effect of exchange rates on cash flow 10
NET INCREASE IN CASH AND CASH EQUIVALENTS 202
CASH AND CASH EQUIVALENTS, opening 9
-----
CASH AND CASH EQUIVALENTS, closing $ 211
=====
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-51
<PAGE>
ACCES ET SOLUTIONS INTERNET S.A.R.L
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
(1) DESCRIPTION OF THE BUSINESS AND ORGANIZATION
ASI is an Internet Services Provider. The company was incorporated in September
1995 as a limited liability company (French S.A.R.L.).
(2) ACCOUNTING RULES AND METHODS
(Decree no. 83 - 1020 of November 11, 1983 - Articles 7, 21, 24 beginning,
24-1,24-2 and 24-3) The accounting period is 12 months and covers the period
from January 1, 1998 to December 31, 1998.
Generally accepted accounting principles have been applied in line with the
prudence principle, in accordance with the basic assumptions of:
- going concern status,
- consistency in accounting methods from one accounting period to
another,
- the matching concept,
and in accordance with the general accounting rules and presentation of the
annual accounts applicable in France.
The accompanying financial statements result from the translation of the French
Financial Statements of the company. The conversion from French francs to US
Dollars was performed with the following exchange rates :
- Balance sheet : closing rate as of December 31, 1998 ( 1 USD =
5.6221) except for the following items in stockholders' equity:
Common stock (historical rate as of December 31, 1995 : 1 USD =
5.0525 FRF) and Result for the year (average rate for the year
1998 : 1 USD = 5.8993 FRF).
- Statement of operations and statement of cash flows (average rate
for the year 1998 : 1 USD = 5.8993 FRF).
The adjustments which would be necessary to convert the financial statements
from French to US GAAP are as follows:
F-52
<PAGE>
- No deferred tax has been calculated, since it would result in a
net deferred tax asset of USD 22,000 that the company would have
fully reserved for on a prudence basis.
- No provision for pension/retirement leave-pay commitments has been
calculated, given that, the age profile of the employees is young,
there are a small number of employees and management have become
employees of CompleTel S.A.S. since the takeover of the company.
- Intangible assets amounting to USD 268 are not amortized.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles in France. The preparation of financial
statements in conformity with French 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 expenses during the reporting period.
Actual results could differ from those estimates.
(3) INTANGIBLE FIXED ASSETS
Expenses for registering trademarks are not amortized. Registered trademarks
amounting to USD 268 are recorded on the balance sheet as intangible fixed
assets.
Computer software acquired from outside companies is capitalized and
systematically amortized over one year on a straight-line basis.
(4) TANGIBLE FIXED ASSETS
Fixed assets are valued at their acquisition cost (purchase price and associated
costs). Depreciation costs are calculated using the straight-line method,
according to the forecast useful life.
<TABLE>
<S> <C>
- Machinery and equipment 3 years
- Miscellaneous fixtures and fittings 5 years
- Office equipment Between 3 and 5 years
</TABLE>
As of December 31, 1998, breakdown of fixed assets is as follows:
<TABLE>
<CAPTION>
Description Gross Value Accumulated Depreciation Net Book Value
----------- ------------ ------------------------ ---------------
(USD'000) (USD'000) (USD'000)
<S> <C> <C> <C>
Tangible 135 65 70
Intangible 4 2 2
Financial 15 - 15
</TABLE>
F-53
<PAGE>
(5) FINANCIAL ASSETS
Financial assets include the acquisition cost of securities acquired by the
company to the extent that the amount of the equity investments represent at
least 10% of the capital of the target companies.
No dividends have been distributed on these investments.
A provision for depreciation is set aside when the value-in-use of the
securities is less than their historical value.
(6) INVENTORIES
Inventories are valued using the "first in - first out" method.
The gross value of goods and supplies includes the purchase price and associated
costs.
A reserve for depreciation of inventories is booked to the extent that the gross
value calculated according to the method indicated above is superior to the
current purchase price and associated costs.
(7) RECEIVABLES
Receivables are valued at their face value.
As of December 31, 1998, accounts receivable were as follows:
<TABLE>
<CAPTION>
A/R (Gross) Reserve A/R (Net)
------------ ---------- -----------
(USD'000) (USD'000) (USD'000)
<S> <C> <C>
466 66 400
</TABLE>
(8) RESERVES FOR CONTINGENCIES AND LOSSES
A reserve for contingency loss amounting to USD 8,000 has been provided in
order to cover the possible consequences of a legal dispute between the
company and one of its customers, ISICOM. This provision corresponds to the
maximum costs which the company would be required to bear in this matter (USD
44,000) less an accrued contingent gain (USD 36,000) representing the
insurance cover with respect to the matter in litigation.
F-54
<PAGE>
In addition, a reserve for contingency loss has been accrued for an amount of
USD 19,000 with respect to social security charges concerning trainees, those
not having been filed to the French tax administration.
(9) CHANGE IN METHODS
No change in method took place with respect to the methods used in the previous
period.
(10) SHARE CAPITAL
The share capital of the company is FRF 125,000 (USD 25,000) and is made up of
125 shares each with a par value of FRF 1,000 (USD 200). It can be broken down
as follows as of December 31, 1998, prior to takeover by CompleTel SAS in
March 1999:
<TABLE>
<CAPTION>
Number of shares % shares
---------------- ---------
<S> <C> <C>
Mr. Michel Cerdini 40 32.00%
Mr. Samuel Triolet 30 24.00%
Ms. Christiane Cerdini 20 16.00%
Ms. Pascale Cerdini 10 8.00%
Mr. Patrick Kuchard 10 8.00%
Mr. Philippe Duby 10 8.00%
Mr. Jean Daniel Pauget 2 1.60%
Mr. Marc Jouineau 3 2.40%
--- -------
Total 125 100.00%
=== =======
</TABLE>
(11) CASH AND CASH EQUIVALENTS
There are no restrictions on the bank balances of USD 211,000 as of December 31,
1998.
(12) REVENUE RECOGNITION
Customers are invoiced as they are connected. They are invoiced for periods of
3, 6 or 12 months. The company defers revenue on that part of turnover properly
relating to the period post balance sheet date.
(13) DEBT FINANCING ARRANGEMENTS
ASI borrowed a sum of USD 34,000 from the bank CIC in July 1998 for 36 months,
bearing an annual interest rate of 5.9%.
F-55
<PAGE>
(14) RELATED PARTY ASSETS AND LIABILITIES
There are no material transactions, assets, or liabilities as of December 31,
1998 between the company and its future shareholder CompleTel SAS or between the
company and its existing stockholders as of December 31, 1998.
(15) LEASING ARRANGEMENTS
The company does not have any material leasing arrangements.
(16) CORPORATION TAX
The income tax provision corresponds to the calculation as per the French
corporation tax law. As indicated in Note 1, the company has not calculated and
accounted for deferred tax at December 31, 1998. The calculation of deferred tax
would give rise to a deferred tax asset amounting to USD 22,000, which would
have been immediately fully reserved for.
(17) STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Common Translation
Stock Retained Earnings Adjustments Total
--------- ----------------- ------------- ---------
USD'000 USD'000 USD'000 USD'000
<S> <C> <C> <C>
Balance, December 31, 1997 25 25 - 50
Net earnings - 62 - 62
Translation adjustments - - 3 3
--- --- -- ----
Balance, December 31, 1998 25 87 3 115
=== === ==
</TABLE>
F-56
<PAGE>
"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."
[LOGO]
COMPLETEL EUROPE N.V.
$147,500,000 14% Series B Senior Discount Notes due 2009
_____
PROSPECTUS
Dated ___________, 1999
_____
The exchange offer will expire at 5:00 p.m., New York City time, on ___________,
1999, unless we extend it.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
COMPLETEL LLC
GENERAL LIMITED LIABILITY COMPANY LAW
CompleTel LLC is organized under the limited liability company laws of the
State of Delaware. Section 18-108 of the Delaware Limited Liability Company Act
(the "Act") permits a limited liability company to indemnify and hold harmless
any member, manager or other person from and against any and all claims and
demands whatsoever, subject to standards and restrictions if any set forth in
its limited liability company agreement.
LIMITED LIABILITY COMPANY AGREEMENT
CompleTel LLC's Limited Liability Company Agreement provides for CompleTel
LLC to indemnify and hold harmless any person to the fullest extent permitted by
the Act, against all expenses, liabilities and losses (including attorney fees,
judgments, fines, excise taxes or penalties) reasonably incurred or suffered by
such person because such person is or was a member or was serving as a
representative, officer, employee or agent of CompleTel LLC or of another
partnership, corporation, joint venture, limited liability company, trust or
other enterprise at the request of CompleTel LLC. Indemnification is not
permitted, unless the Board of Managers consents, for any expenses, liabilities,
and losses suffered that are attributable to such persons gross negligence,
willful misconduct or knowing violation of law. Indemnification also is not
permitted, unless the Board of Managers consents, for any breaches of any
representations, warranties or covenants by a person contained in any agreement
with the company. The company will pay expenses, including attorney fees,
incurred in defending a proceeding in advance of the final disposition only if
the company has received an undertaking by the indemnified person to repay all
amounts advanced if ultimately the person is not entitled to indemnification.
Any indemnification is limited to the extent of company assets. No member has
personal liability for any indemnification.
COMPLETEL EUROPE N.V.
PARENT COMPANY UNDERTAKING
CompleTel LLC, as the ultimate parent of CompleTel Europe N.V., has
undertaken to hold the managing director free and harmless against any claim
which may be made upon the managing director arising from or connected with the
managing director's performance of its duties to manage the company. CompleTel
LLC has agreed to reimburse the managing director for any costs and expenses,
including attorney fees, incurred in connection with any claim except in the
event of wilful misconduct or gross negligence committed by the managing
director.
ITEM 21. EXHIBITS AND FINANCIAL DATA SCHEDULES.
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
<TABLE>
<S> <C>
3.1 Amended and Restated Certificate of Formation of CompleTel
LLC
3.2 Second Amended and Restated Limited Liability Company
Agreement of CompleTel LLC dated January 28, 1999
3.3 Articles of Association of CompleTel Europe N.V.
4.1 Purchase Agreement, dated February 8, 1999 among CompleTel
Europe N.V., CompleTel Holdings LLC and the Initial
Purchasers.
4.2 Note Registration Rights Agreement, dated as of February 16,
1999 among CompleTel Europe N.V. and the Initial Purchasers.
II-1
<PAGE>
4.3 Indenture, dated as of February 16, 1999, among CompleTel
Europe N.V., CompleTel ECC B.V. and the Trustee.
4.4 Form of 14% Senior Discount Notes due 2009 of CompleTel
Europe N.V.
4.5* Form of 14% Series B Senior Discount Notes due 2009 of
CompleTel Europe N.V.
5.1* Opinion of Nauta Dutilh regarding the legality of the 14%
Series B Discount Notes due 2009.
8.1* Opinion of Holme Roberts & Owen LLP regarding certain United
States federal income tax matters.
8.2* Opinion of Arthur Andersen Belastingadviseurs regarding
certain Netherlands tax matters.
10.1 Employment Agreement by and between CableTel Management,
Inc. and James E. Dovey, dated as of May 18, 1998.
10.2 Employment Agreement by and between CableTel Management,
Inc. and Richard N. Clevenger, dated as of May 18, 1998.
10.3 Employment Agreement by and between CableTel Management,
Inc. and William H. Pearson, dated as of May 18, 1998.
10.4 Employment Agreement by and between CableTel Management,
Inc. and David Lacey dated as of December 16, 1998.
10.5 Executive Securities Agreement by and between CableTel
Europe LLC and James E. Dovey, dated as of May 18, 1998
10.6 First Amended and Restated Executive Securities Agreement by
and between CableTel Europe LLC and Richard N. Clevenger,
dated as of January 28, 1999
10.7 Executive Securities Agreement by and between CableTel
Europe LLC and William H. Pearson, dated as of May 18, 1998
10.8 Executive Securities Agreement by and between CompleTel LLC
and David Lacey dated as of December 2, 1998
10.9 Joinder and Rights Agreement by and between CompleTel LLC
and David Lacey dated as of December 2, 1998
10.10 Equity Registration Rights Agreement, dated as of February
16, 1999 among CompleTel LLC, CompleTel Holdings LLC,
CompleTel (N.A.) N.V., CompleTel Europe N.V., the
Shareholders named therein, the Initial Purchasers and U.S.
Bank Trust National Association, as Transfer Agent.
10.11 CompleTel LLC Guaranty Agreement, dated as of February 16,
1999, by CompleTel LLC in favor of the Noteholders.
10.12 First Amended and Restated Equity Purchase Agreement, dated
as of January 28, 1999, by and among CompleTel LLC and
Madison Dearborn Capital Partners II, LP, DeGeorge Holdings
Limited Partnership, James C. Allen, Royce J. Holland,
George T. Laub, Reed E. Hundt, Dovey Company LLC, William H.
Pearson, Richard Clevenger and David A. Lacey.
10.13 First Amended and Restated Securityholders Agreement dated
as of January 28, 1999, by and among CompleTel LLC and
Madison Dearborn Capital Partners II, LP, DeGeorge Holdings
Limited Partnership, James C. Allen, Royce J. Holland,
George T. Laub, Reed E. Hundt, Dovey Company LLC, William H.
Pearson, Richard Clevenger and David A. Lacey.
10.14 First Amended and Restated Performance Vesting Agreement
dated as of January 28, 1999, by and among CompleTel LLC and
Madison Dearborn Capital Partners II, LP, DeGeorge Holdings
Limited Partnership, James C. Allen, Royce J. Holland,
George T. Laub, Reed E. Hundt, Dovey Company LLC, William H.
Pearson, Richard Clevenger and David A. Lacey.
10.15 First Amended and Restated Registration Agreement dated as
of January 28, 1999, by and among CompleTel LLC and Madison
Dearborn Capital Partners II, LP, DeGeorge Holdings Limited
Partnership, James C. Allen, Royce J. Holland, George T.
Laub, Reed E. Hundt, Dovey Company LLC, William H. Pearson,
Richard Clevenger and David A. Lacey.
10.16 Form of Executive Securities Agreement
10.17 Form of Joinder Agreement
10.18 Arrete dated November 17, 1998 authorising CompleTel SARL to
set up and operate a telecommunication Network open to the
public and to supply the public with the telephone service.
II-2
<PAGE>
10.19 Licence dated January 11, 1999 granted by the Secretary of
State for Trade and Industry to CompleTel UK Limited under
Section 7 of the Telecommunications Act 1984.
10.20* German Telecom License dated March 8, 1999 granted to
CompleTel GmbH.
10.21 Management Agreement, dated as of February 25, 1999, by and
between ING Trust, CompleTel Europe N.V. and CompleTel LLC.
10.22 Supply Agreement dated January 8, 1999, between CompleTel
SAS and Matra Nortel Communications.
12.1 Statement Regarding Computation of Ratios of Earnings to
Fixed Charges.
21.1 Subsidiaries
23.1 Consent of Arthur Andersen LLP on CompleTel N.V. and
CompleTel LLC.
23.2 Consent of Barbier, Frinault & Associes (Arthur Andersen)
on Acces Internet et Solutions S.A.R.L.
23.3* Consent of Nauta Dutilh (included in the opinion filed as
Exhibit 5.1 to this Registration Statement).
23.4* Consent of Holme Roberts & Owen LLP (included in the opinion
filed as Exhibit 8.1 to this Registration Statement).
23.5* Consent of Arthur Andersen Belastingadviseurs (included in
the opinion filed as Exhibit 8.2 to this Registration
Statement).
24.1 Power of Attorney from officers and directors (included on
the signature page hereof).
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule for CompleTel Europe N.V.
27.2 Financial Data Schedule for CompleTel LLC.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
----------------------
* To be filed by amendment
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned Company hereby undertakes:
(1) That prior to any public refereeing of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), the issuer undertakes that such refereeing prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415 under the Securities Act, will be filed as a part
of an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceedings) 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 indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
(c) The undersigned Company hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned Company hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned Company hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement 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.
(f) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of Prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
CompleTel LLC, has duly caused this registration statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the city of Denver,
State of Colorado, on July 2, 1999.
COMPLETEL LLC,
a Delaware limited liability company
By: /s/ James E. Dovey
-----------------------------
Name: James E. Dovey
Title: Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned constitutes and appoints James E. Dovey and David
E. Lacey, and each of them, as attorneys for him and in his name, place, and
stead, and in his capacity as a director, officer, or both, of CompleTel LLC, to
execute and file any amended registration statement or statements or supplements
thereto, with all exhibits thereto and other documents in connection therewith,
with the Securities Exchange Commission, hereby giving and granting to said
attorneys full power and authority to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he or she might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed by the following
persons in the capacities indicated.
REGISTRANT OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
REGISTRANT OFFICERS & DIRECTORS POSITION WITH REGISTRANT DATE
<S> <C> <C>
/s/ James E. Dovey Chairman of the Board and July 2, 1999
- ------------------------ Chief Executive Officer
James E. Dovey
/s/ David E. Lacey Senior Vice President and July 2, 1999
- ------------------------ Chief Financial Officer
David E. Lacey
/s/ John M. Hugo Corporate Controller, July 2, 1999
- ------------------------ Principal Accounting
John M. Hugo Officer
/s/ William H. Pearson President of European July 2, 1999
- ------------------------- Operations and Director
William H. Pearson
/s/ James C. Allen Director July 2, 1999
- -------------------------
James C. Allen
II-5
<PAGE>
/s/ Royce J. Holland Director July 2, 1999
- -------------------------
Royce J. Holland
/s/ Lawrence E. DeGeorge Director July 2, 1999
- --------------------------
Lawrence F. DeGeorge
/s/ Paul J. Finnegan Director July 2, 1999
- --------------------------
Paul J. Finnegan
/s/ James H. Kirby Director July 2, 1999
- --------------------------
James H. Kirby
/s/ James N. Perry, Jr. Director July 2, 1999
- --------------------------
James N. Perry, Jr.
</TABLE>
II-6
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF FORMATION
OF
CABLETEL (DELAWARE) LLC
Pursuant to Section 18-208 of the Limited Liability Company Act of
Delaware, James E. Dovey hereby certifies on behalf of CableTel (Delaware)
LLC, a Delaware Limited Liability Company (the "Company") the following:
The original name of the Company was CableTel (Delaware) LLC and the date
of filing the original Certificate of Formation of CableTel (Delaware) LLC was
January 8, 1998.
The Certificate of Formation of the Company is amended and restated to read
as follows:
1. The name of the Company is CableTel Europe LLC.
2. The address of the Company's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
3. Management of the Company shall be vested in managers.
This Amended and Restated Certificate of Formation of CableTel (Delaware)
LLC is duly executed in accordance with ss.18-208 of the Limited Liability Act
of Delaware this 16th day of May, 1998
/s/ James E. Dovey
------------------------
James E. Dovey
<PAGE>
AMENDMENT TO
THE AMENDED AND RESTATED CERTIFICATE OF FORMATION
OF
CABLETEL EUROPE LLC
Pursuant to Section 18-202 of the Limited Liability Company Act of
Delaware, James E. Dovey hereby certifies on behalf of CableTel Europe LLC a
Delaware Limited Liability Company (the "Company") the following:
Article First of the Amended and Restated Certificate of Formation of the
Company filed May 18, 1998 is amended to read in its entirety as follows:
First. The name of the Company is CompleTel LLC.
This Amendment to the Amended and Restated Certificate of Formation of
CableTel Europe LLC is duly executed this 28th day of August, 1998
/s/ James E. Dovey
---------------------------------------
James E. Dovey, Chief Executive Officer
<PAGE>
EXHIBIT 3.2
--------------------------------------------------
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
COMPLETEL LLC
--------------------------------------------------
- 1 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
ARTICLE I
GENERAL PROVISIONS; DEFINITIONS........................................ 2
Section 1.1 Formation of the Company; Term......................... 2
Section 1.2 Limited Liability Company Agreement.................... 2
Section 1.3 Name................................................... 3
Section 1.4 Purpose and Powers..................................... 3
Section 1.5 Principal Office; Registered Office and Agent.......... 3
Section 1.6 No State-Law Partnership............................... 3
Section 1.7 No UBTI................................................ 3
Section 1.8 Definitions............................................ 4
ARTICLE II
CAPITAL CONTRIBUTIONS AND ACCOUNTS..................................... 13
Section 2.1 Authorized Units....................................... 13
Section 2.2 Capital Contributions and Issuance of Units............ 13
Section 2.3 Capital Accounts....................................... 16
Section 2.4 Negative Capital Accounts.............................. 17
Section 2.5 No Interest............................................ 17
Section 2.6 No Withdrawal.......................................... 17
ARTICLE III
DISTRIBUTIONS AND ALLOCATIONS.......................................... 17
Section 3.1 Distributions.......................................... 17
Section 3.2 Allocations............................................ 20
Section 3.3 Special Allocations.................................... 21
Section 3.4 Tax Allocations........................................ 22
Section 3.5 Curative Allocations................................... 23
ARTICLE IV
THE PREFERRED UNITS.................................................... 24
Section 4.1 Conversion............................................. 24
Section 4.2 Purchase Rights........................................ 31
Section 4.3 Acceleration upon Occurrence of Certain Proceedings.... 31
ARTICLE V
MANAGEMENT............................................................. 32
Section 5.1 Management Authority................................... 32
</TABLE>
- i -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
Section 5.2 Delegation of Authority................................ 32
Section 5.3 Composition; Meetings; Actions......................... 32
Section 5.4 Indemnification of Members, Representatives, Officers,
and Others ........................................... 33
ARTICLE VI
MEMBERS................................................................ 34
Section 6.1 Limitation of Liability................................ 34
Section 6.2 Lack of Authority of Individual Members................ 35
Section 6.3 Transfer of Company Interests; Withdrawal and Removal.. 35
Section 6.4 No Right of Partition.................................. 36
Section 6.5 Indemnification and Reimbursement for Payments
on Behalf of a Member.................................. 36
Section 6.6 Certain Duties of Representatives and Officers......... 36
Section 6.7 Confidentiality........................................ 37
Section 6.8 Voting Rights.......................................... 38
ARTICLE VII
DISSOLUTION AND LIQUIDATION............................................ 38
Section 7.1 Dissolution............................................ 38
Section 7.2 Liquidation of Company Interests....................... 38
Section 7.3 Valuation.............................................. 40
ARTICLE VIII
BOOKS OF ACCOUNT....................................................... 41
Section 8.1 Records and Accounting................................. 41
Section 8.2 Bank Accounts.......................................... 41
Section 8.3 Fiscal Year............................................ 41
Section 8.4 Tax Elections.......................................... 41
Section 8.5 Tax Reports............................................ 41
Section 8.6 Tax Controversies...................................... 41
Section 8.7 Subpart F Income....................................... 42
ARTICLE IX
POWER OF ATTORNEY...................................................... 42
ARTICLE X
MISCELLANEOUS.......................................................... 42
Section 10.1 Conversion of the Company into a "C" Corporation....... 42
</TABLE>
- ii -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
Section 10.2 Further Action......................................... 44
Section 10.3 Title to Company Assets................................ 44
Section 10.4 Creditors.............................................. 44
Section 10.5 Amendments, Modifications, or Waivers.................. 45
Section 10.6 Successors and Assigns................................. 45
Section 10.7 Remedies............................................... 45
Section 10.8 Governing Law.......................................... 45
Section 10.9 Severability........................................... 45
Section 10.10 Counterparts........................................... 45
Section 10.11 Descriptive Headings; Interpretation................... 46
Section 10.12 Notices................................................ 46
Section 10.13 Complete Agreement..................................... 48
Section 10.14 Business Days.......................................... 48
Section 10.15 Opt-in to Article 8 of the Uniform Commercial Code..... 48
Section 10.16 Delivery by Facsimile.................................. 48
Section 10.17 Effectiveness of Agreement............................. 48
</TABLE>
- iii -
<PAGE>
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
COMPLETEL LLC
THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
(this "AGREEMENT") is made as of January 28, 1999, by and among the Persons
listed as Members on the signature pages hereto, as well as each other Person
hereafter admitted as a Member (as defined herein) pursuant to the terms of this
Agreement. Certain capitalized terms used herein are defined in Section 1.8.
Lawrence F. DeGeorge ("DEGEORGE"), James E. Dovey ("DOVEY"), William
H. Pearson ("PEARSON"), and Richard N. Clevenger ("CLEVENGER") were originally
parties to a Limited Liability Company Agreement, dated as of January 8, 1998
(the "PRIOR AGREEMENT"), governing the affairs and the conduct of business of a
limited liability company (the "COMPANY") in accordance with the terms of the
Act. On May 18, 1998, DeGeorge, Dovey, Pearson, Clevenger, and Madison Dearborn
Capital Partners II, L.P. ("MDCP") entered into an Amended and Restated Limited
Liability Company Agreement of CableTel Europe LLC (as amended from time to time
in accordance with its terms, the "FIRST AMENDED AGREEMENT"), pursuant to which
MDCP was admitted as a Member of the Company and the Prior Agreement was amended
and restated in its entirety as set forth in the First Amended Agreement.
Pursuant to an Assignment and Substitution dated June 3, 1998 (the
"DEGEORGE ASSIGNMENT"), DeGeorge transferred all of his Preferred Units and
Common Units in the Company to DeGeorge Holdings Limited Partnership ("DEGEORGE
HOLDINGS") as of the date of the DeGeorge Assignment, and in connection
therewith DeGeorge Holdings became a Member of the Company in accordance with
the terms of the First Amended Agreement.
As of July 15, 1998, the Members amended the First Amended Agreement
in order to increase the total number of authorized Preferred Units and to admit
James C. Allen ("ALLEN") and Royce J. Holland ("HOLLAND") as Members of the
Company.
Pursuant to an Assignment and Purchase Agreement dated as of
November 11, 1998, and a Substitution Agreement dated as of November 11, 1998
(collectively, the "DOVEY ASSIGNMENT"), Dovey transferred all of his Preferred
Units in the Company to Dovey Company LLC ("DOVEY LLC") and certain of his
Common Units in the Company to Dovey Family Partners LLLP ("DOVEY LLLP" and,
collectively with Dovey and Dovey LLC, the "DOVEY HOLDERS"). In connection
therewith, Dovey LLC and Dovey LLLP became Members of the Company in accordance
with the terms of the First Amended Agreement, and the Members amended the First
Amended Agreement in order to increase the total number of authorized Preferred
Units (to accommodate additional Preferred Units issued to Dovey LLC).
<PAGE>
As of December 2, 1998, the Members amended the First Amended
Agreement in order to increase the total number of authorized Preferred Units
and to admit David E. Lacey ("LACEY") as a Member of the Company.
During the period from the date of the First Amended Agreement to
the date hereof, each of the other Persons shown on the attached SCHEDULE OF
INITIAL UNITS as holding Common Units became a Member of the Company in
accordance with the terms of the First Amended Agreement.
As of the date hereof, the Members shown on the attached SCHEDULE OF
INITIAL UNITS as holding Preferred Units have amended and restated the Equity
Purchase Agreement, pursuant to which amendment such Members (including George
T. Laub ("LAUB") and Reed E. Hundt ("HUNDT")) will purchase additional Preferred
Units of the Company on the terms and conditions set forth in the Equity
Purchase Agreement. The parties hereto desire that, effective as of the date
hereof, each of Laub and Hundt shall be admitted as a Member of the Company and
the First Amended Agreement shall be amended and restated in its entirety as set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises made herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
GENERAL PROVISIONS; DEFINITIONS
Section 1.1 FORMATION OF THE COMPANY; TERM. The Company was formed
as of January 8, 1998, by the execution and filing of a certificate of formation
of the Company with the Secretary of State of the State of Delaware setting
forth the information required by the Act (the "CERTIFICATE"). The term of the
Company commenced upon the filing of the Certificate and shall continue in
perpetuity until the dissolution and termination of the Company in accordance
with the provisions of ARTICLE VII hereof.
Section 1.2 LIMITED LIABILITY COMPANY AGREEMENT. The Members have
entered into this Agreement for the purpose of establishing the affairs of the
Company and the conduct of its business in accordance with the provisions of the
Act. The Members hereby agree that during the term of the Company set forth in
SECTION 1.1 the rights and obligations of the Members with respect to the
Company will be determined in accordance with the terms and conditions of this
Agreement and, except where the Act provides that such rights and obligations
specified in the Act shall apply "unless otherwise provided in a limited
liability company agreement" or words of similar effect and such rights and
obligations are set forth in this Agreement, the Act. The Members hereby
incorporate Section 18-210 of the Act (entitled "Contractual Appraisal Rights")
such that dissenting Members shall have contractual appraisal rights in
accordance with such Section with respect to any merger or consolidation in
which the Company is a constituent party to the merger or consolidation or any
sale of all or substantially all of the Company's assets.
- 2 -
<PAGE>
Section 1.3 NAME. The name of the Company shall be "CompleTel LLC"
or such other name or names as may from time to time be designated by the Board
of Managers. The Company's business may be conducted under its name and/or any
other name or names as the Board of Managers may deem advisable.
Section 1.4 PURPOSE AND POWERS. The Company is organized for the
object and purpose of engaging in all such lawful transactions and business
activities as may be determined by the Board of Managers. The Company shall have
any and all powers necessary or desirable to carry out the purposes and business
of the Company, to the extent that the same may be lawfully exercised by limited
liability companies under the Act.
Section 1.5 PRINCIPAL OFFICE; REGISTERED OFFICE AND AGENT.
(a) The principal office of the Company shall be located at 6300
Syracuse Way, Suite 355, Englewood, Colorado 80111, or at such other place
(whether inside or outside the State of Delaware) as the Board of Managers may
from time to time designate. The Company may have such other offices (whether
inside or outside the State of Delaware) as the Board of Managers may from time
to time designate.
(b) The registered office of the Company in the State of Delaware is
located at 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The registered agent of the Company for service of process at
such address is The Corporation Trust Company. The Board of Managers may, in its
discretion, change the registered office and/or registered agent from time to
time by (i) filing the address of the new registered office and/or the name of
the new registered agent with the Secretary of State of the State of Delaware
pursuant to the Act and (ii) giving notice of such change to each of the
Members.
Section 1.6 NO STATE-LAW PARTNERSHIP. The Members intend that the
Company not be a partnership (including, without limitation, a limited
partnership) or joint venture, and that no Member be a partner or joint venturer
of any other Member by virtue of this Agreement, for any purposes other than as
set forth in the immediately following sentence, and neither this Agreement nor
any document entered into by the Company or any Member shall be construed to
suggest otherwise. The Members intend that the Company shall be treated as a
partnership for federal and, if applicable, state or local income tax purposes,
and the Company and each Member shall file all tax returns and shall otherwise
take all tax and financial reporting positions in a manner consistent with such
treatment.
Section 1.7 NO UBTI. Notwithstanding anything herein to the
contrary, the Company shall not, and no Member or Representative (or delegate
thereof) shall (or shall have the power or authority to) cause, permit, or
suffer the Company to: (i) invest directly in any Person considered a
flow-through entity for federal income tax purposes (other than an intermediate
holding company where such investment would not cause any Tax Exempt Partner to
recognize UBTI); (ii) create, incur, assume or suffer to exist any Indebtedness
of the Company; or (iii) knowingly enter into any other transaction that could
cause a Tax Exempt Partner to recognize UBTI as a result of
- 3 -
<PAGE>
its investment in any Member, PROVIDED, HOWEVER, that if such a transaction is
specifically contemplated by this Agreement or the Equity Purchase Agreement or
any of the other agreements contemplated by the exhibits thereto to which the
Company is a party, the Members agree to amend this Agreement or such other
agreements (to the extent they are parties thereto) to the extent necessary to
avoid causing a Tax Exempt Partner to recognize UBTI.
Section 1.8 DEFINITIONS. Capitalized terms used but not otherwise
defined herein shall have the following meanings:
"ACT" means the Delaware Limited Liability Company Act, 6 Del.L.
Section 18-101, ET SEQ., as it may be amended from time to time, and any
successor thereto.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Capital
Account as of the end of any Taxable Year, the amount by which the balance in
such Capital Account is less than zero. For this purpose, such Person's Capital
Account balance shall be
(i) reduced for any items described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6), and
(ii) increased for any amount such Person is obligated to
contribute or is treated as being obligated to contribute to
the Company pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a
partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to
minimum gain).
"AFFILIATE" of any particular Person means (i) any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, by contract or otherwise, and (ii) if such Person (other than
the Company) is a partnership, any partner thereof.
"AGREEMENT" has the meaning set forth with respect thereto in the
preamble.
"ALLEN" has the meaning set forth with respect thereto in the
preamble.
"BOARD OF MANAGERS" means the board of managers of the Company
described in ARTICLE V.
"BOOK VALUE" means, with respect to any Company property, the
Company's adjusted basis for federal income tax purposes, adjusted from time to
time to reflect the adjustments required or permitted (in the case of permitted
adjustments, to the extent the Company makes such permitted adjustments) by
Treasury Regulation Section 1.704-1(b)(2)(iv)(d)-(g).
"CAPITAL ACCOUNT" has the meaning set forth with respect thereto in
SECTION 2.3(a).
- 4 -
<PAGE>
"CAPITAL CONTRIBUTIONS" means any cash, cash equivalents, promissory
obligations, or the Fair Market Value of other property which a Member
contributes or is deemed to have contributed to the Company with respect to the
issuance of any Unit pursuant to SECTION 2.2, or (in the case of any Preferred
Units) pursuant to the Equity Purchase Agreement, or (in the case of any Senior
Units) pursuant to the Executive Securities Agreements, the Performance Vesting
Agreement, or the Equity Purchase Agreement.
"CERTIFICATE" has the meaning set forth with respect thereto in
SECTION 1.1.
"CLASS A SENIOR UNIT" means a Unit representing a fractional part of
the Members' interests in the Profits, Losses, and Distributions of the Company
and having the rights and obligations specified with respect to Class A Senior
Units in this Agreement.
"CLASS B SENIOR UNIT" means a Unit representing a fractional part of
the Members' interests in the Profits, Losses, and Distributions of the Company
and having the rights and obligations specified with respect to Class B Senior
Units in this Agreement.
"CLASS B SENIOR VALUE" of any Class B Senior Unit as of any
particular date shall be equal to (i) the aggregate Liquidation Value of the
Preferred Unit(s) (including fractional Units) in respect of the forfeiture of
which under the Performance Vesting Agreement such Class B Senior Unit was
issued, as in effect on the date of such forfeiture, MINUS (ii) the aggregate
Distributions of Class B Senior Value made pursuant to SECTIONS 3.1(c)(ii) and
3.1(f)(ii) with respect to such Class B Senior Unit from the date of issuance
prior to such particular date.
"CLASS B SENIOR YIELD," with respect to each Class B Senior Unit,
shall accrue on a daily basis at the rate of 8% per annum of the sum of the
Class B Senior Value plus all accumulated (as provided below) and unpaid Class B
Senior Yield thereon from and including the date of issuance of such Class B
Senior Unit (and with respect to accumulated Class B Senior Yield, from and
including the Yield Reference Dates on which such Class B Senior Yield was
accumulated) to and including the date on which the Class B Senior Value of such
Class B Senior Unit (plus all accrued but unpaid Class B Senior Yield thereon)
is paid. The date on which the Company initially issues any Class B Senior Unit
shall be deemed its "date of issuance" regardless of the number of times
transfer of such Class B Senior Unit is made on the records of the Company and
regardless of the number of certificates (if any) which may be issued to
evidence such Class B Senior Unit. To the extent not distributed on March 31,
June 30, September 30, and December 31 of each year, commencing after the date
of issuance, (the "YIELD REFERENCE DATES"), all Class B Senior Yield which has
accrued on each Class B Senior Unit outstanding during the three-month period
ending on such Yield Reference Date and, with respect to the first Yield
Reference Date, during the period from the date of issuance of each Class B
Senior Unit through such first Yield Reference Date, shall be accumulated (and
shall be referred to herein as "accumulated Class B Senior Yield") and shall
remain accumulated Class B Senior Yield with respect to such Class B Senior Unit
until paid.
- 5 -
<PAGE>
"CLASS C SENIOR UNIT" means a Unit representing a fractional part of
the Members' interests in the Profits, Losses, and Distributions of the Company
and having the rights and obligations specified with respect to Class C Senior
Units in this Agreement.
"CLEVENGER" has the meaning set forth with respect thereto in the
preamble.
"CODE" means the United States Internal Revenue Code of 1986, as
amended. Such term shall, at the Board of Managers' sole discretion, be deemed
to include any future amendments to the Code and any corresponding provisions of
succeeding Code provisions (whether or not such amendments and corresponding
provisions are mandatory or discretionary; PROVIDED, however, that if they are
discretionary, the term "Code" shall not include them if including them would
have a material adverse effect on any Member).
"COMMON UNIT" means a Unit representing a fractional part of the
Members' interests in the Profits, Losses, and Distributions of the Company and
having the rights and obligations specified with respect to Common Units in this
Agreement; PROVIDED that with respect to ARTICLE IV hereof, "Common Units" shall
include any securities of any class of the Company's equity securities hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value with respect to the rights of the holders thereof to participate in
dividends or other interim distributions or in the distribution of assets upon
any liquidation, dissolution or winding up of the Company.
"COMMON UNITS DEEMED OUTSTANDING" means, at any given time, the
number of Common Units actually outstanding at such time, plus the number of
Common Units deemed to be outstanding pursuant to SECTION 4.1(c)(i) and (ii),
whether or not the Options or Convertible Securities are actually exercisable or
convertible at such time, in each case, without duplication.
"COMPANY" has the meaning set forth with respect thereto in the
preamble, and, where the context requires, any successor entity described in
SECTION 10.1.
"CONFIDENTIAL INFORMATION" has the meaning set forth with respect
thereto in SECTION 6.7.
"CONVERSION PRICE" means the conversion price of the Preferred Units
as determined pursuant to SECTION 4.1.
"CONVERSION SECURITY" means a Common Unit of the Company; PROVIDED
that if there is a change such that the securities issuable upon conversion of
the Preferred Units are issued by an entity other than the Company or there is a
change in the type or class of securities so issuable, then the term "Conversion
Security" shall mean one share of the security issuable upon conversion of the
Preferred Units if such security is issuable in shares, or shall mean the
smallest unit in which such security is issuable if such security is not
issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Units.
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"CURRENT PRICE" means, as of any given date, the highest Liquidation
Value of any Preferred Unit outstanding as of such date.
"DEGEORGE" has the meaning set forth with respect thereto in the
preamble.
"DEGEORGE ASSIGNMENT" has the meaning set forth with respect thereto
in the preamble.
"DEGEORGE HOLDINGS" has the meaning set forth with respect thereto
in the preamble.
"DISTRIBUTION" means each distribution made by the Company to a
Member, whether in cash, property or securities of the Company and whether by
liquidating distribution, redemption, repurchase or otherwise; PROVIDED that a
Distribution shall not include any recapitalization or exchange of securities of
the Company, or any subdivision (by Unit split or otherwise) or any combination
(by reverse Unit split or otherwise) of any outstanding Units.
"DOVEY" has the meaning set forth with respect thereto in the
preamble.
"DOVEY ASSIGNMENT" has the meaning set forth with respect thereto in
the preamble.
"DOVEY HOLDERS" has the meaning set forth with respect thereto in
the preamble.
"DOVEY LLC" has the meaning set forth with respect thereto in the
preamble.
"DOVEY LLLP" has the meaning set forth with respect thereto in the
preamble.
"EQUITY PURCHASE AGREEMENT" means that certain equity purchase
agreement dated the date of the First Amended Agreement (and amended and
restated as of the date hereof), by and between the Company, the Investors, and
the other Persons listed on the signature pages thereto as amended from time to
time in accordance with its terms.
"EVENT OF WITHDRAWAL" means the death, retirement, resignation,
expulsion, bankruptcy or dissolution of a Member or the occurrence of any other
event that terminates the continued membership of a Member in the Company.
"EXECUTIVE SECURITIES AGREEMENTS" has the meaning ascribed to such
term in the Equity Purchase Agreement.
"EXECUTIVES" means the Original Executives, Lacey, and each other
holder of the Company's Common Units issued pursuant to the Executive Securities
Agreements.
"FAIR MARKET VALUE" means, with respect to any asset, its fair
market value determined according to SECTION 7.3.
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"FIRST AMENDED AGREEMENT" has the meaning set forth with respect
thereto in the preamble.
"FISCAL PERIOD" means any interim accounting period within a Taxable
Year established by the Board of Managers and which is permitted or required by
Code Section 706.
"FISCAL YEAR" means the Company's annual accounting period
established pursuant to SECTION 8.3.
"HOLLAND" has the meaning set forth with respect thereto in the
preamble.
"HUNDT" has the meaning set forth with respect thereto in the
preamble.
"INDEBTEDNESS" means at a particular time, without duplication, (i)
any indebtedness for borrowed money or indebtedness issued in substitution for
or exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced
by any note, bond, debenture or other debt security, (iii) any indebtedness for
the deferred purchase price of property or services with respect to which a
Person is liable, contingently or otherwise, as obligor or otherwise (other than
trade payables and other current liabilities incurred in the ordinary course of
business which are not more than six months past due), and (iv) any commitment
by which a Person assures a creditor against loss (including, without
limitation, contingent reimbursement obligations with respect to letters of
credit).
"INDEMNIFIED PERSON" has the meaning set forth with respect thereto
in SECTION 5.4.
"INVESTORS" has the meaning set forth with respect thereto in the
Equity Purchase Agreement.
"KEY EMPLOYEE" has the meaning set forth with respect thereto in
SECTION 2.2(c)(ii).
"LACEY" has the meaning set forth with respect thereto in the
preamble.
"LAUB" has the meaning set forth with respect thereto in the
preamble.
"LIQUIDATING DISTRIBUTIONS" has the meaning set forth with respect
thereto in SECTION 3.1(c).
"LIQUIDATION VALUE" of any Preferred Unit as of any particular date
shall be equal to (i) the initial price paid to the Company for such Preferred
Unit on its date of issuance, PLUS (ii) the aggregate additional Capital
Contributions to the Company made pursuant to the provisions of the Equity
Purchase Agreement with respect to such Preferred Unit from the date of issuance
until and including such particular date, and MINUS (iii) the aggregate
Distributions of Liquidation Value made pursuant to SECTIONS 3.1(c)(ii) and
3.1(f)(ii) with respect to such Preferred Unit from the date of issuance prior
to such particular date.
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"LOSSES" means items of Company loss and deduction determined in
accordance with SECTION 2.3(b).
"MDCP" has the meaning set forth with respect thereto in the
preamble.
"MEMBER" means each of the Persons listed on the signature pages
hereto as Members and each Person who is admitted to the Company as a Member
pursuant to SECTION 6.3 or SECTION 2.2, in each case so long as such Person
continues to hold any Units.
"MINIMUM GAIN" means the partnership minimum gain determined
pursuant to Treasury Regulation Section 1.704-2(d).
"NON-PERFORMANCE-VESTING SECURITIES" means Common Units other than
Performance Vesting Securities.
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Units or Convertible Securities.
"ORGANIC CHANGE" has the meaning set forth with respect thereto in
SECTION 4.1(e).
"ORIGINAL EXECUTIVES" means Dovey, Pearson, and Clevenger.
"OTHER BUSINESS" has the meaning set forth with respect thereto in
SECTION 6.6.
"PEARSON" has the meaning set forth with respect thereto in the
preamble.
"PERFORMANCE VESTING AGREEMENT" means that certain performance
vesting agreement dated the date of the First Amended Agreement (and amended and
restated as of the date hereof), by and between the Company, the Investors, and
certain of the Executives, as amended from time to time in accordance with its
terms.
"PERFORMANCE-VESTING SECURITIES" means Common Units of the Company
that are subject to performance vesting under the provisions of the Performance
Vesting Agreement.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED UNIT" means a Unit representing a fractional part of the
Members' interests in the Profits, Losses, and Distributions of the Company and
having the rights and obligations specified with respect to Preferred Units in
this Agreement.
"PREFERRED YIELD," with respect to each Preferred Unit, shall accrue
on a daily basis at the rate of 8% per annum of the sum of the Liquidation Value
plus all accumulated (as provided
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below) and unpaid Preferred Yield thereon from and including the date of
issuance of such Preferred Unit (and with respect to accumulated Preferred
Yield, from and including the Yield Reference Dates on which such Preferred
Yield was accumulated) to and including the date on which the Liquidation Value
of such Preferred Unit (plus all accrued but unpaid Preferred Yield thereon) is
paid. The date on which the Company initially issues any Preferred Unit shall be
deemed its "date of issuance" regardless of the number of times transfer of such
Preferred Unit is made on the records of the Company and regardless of the
number of certificates (if any) which may be issued to evidence such Preferred
Unit. To the extent not distributed on March 31, June 30, September 30, and
December 31 of each year, commencing after the date of issuance (the "YIELD
REFERENCE DATES"), all Preferred Yield which has accrued on each Preferred Unit
outstanding during the three-month period ending on such Yield Reference Date
and, with respect to the first Yield Reference Date, during the period from the
date of issuance of each Preferred Unit through such first Yield Reference Date,
shall be accumulated (and shall be referred to herein as "accumulated Preferred
Yield") and shall remain accumulated Preferred Yield with respect to such
Preferred Unit until paid.
"PRIOR AGREEMENT" has the meaning set forth with respect thereto in
the preamble.
"PROCEEDINGS" has the meaning set forth with respect thereto in
SECTION 4.3.
"PROFITS" means items of Company income and gain determined
according to SECTION 2.3(b).
"PUBLIC OFFERING" means any underwritten sale of the Company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1 (or
a successor form adopted by the Securities and Exchange Commission); PROVIDED
that the following shall not be considered a Public Offering: (i) any issuance
of common stock as consideration for a merger or acquisition, and (ii) any
issuance of common stock or rights to acquire common stock to existing
securityholders or to employees of the Company or its Subsidiaries on Form S-4
or Form S-8 (or a successor form adopted by the Securities and Exchange
Commission) or otherwise.
"PURCHASE RIGHTS" has the meaning set forth with respect thereto in
SECTION 4.2.
"QUALIFIED PUBLIC OFFERING" means a Public Offering where both (i)
the proceeds (net of underwriting discounts and commissions) received by the
Company in exchange for its issuance of shares of common stock in such Public
Offering equal or exceed $60 million, AND (ii) the price per share of common
stock paid to the Company in such Public Offering equals or exceeds the product
of (x) 3.0 TIMES (y) the quotient of (A) the aggregate capital contributions to
the Company under the Equity Purchase Agreement (including the initial purchase
price and all "Subsequent Contributions") made on or prior to the date of such
Public Offering with respect to all "Purchaser Securities" then outstanding,
DIVIDED BY (B) the number of shares of the Company's common stock represented by
all "Purchaser Securities" (on a fully diluted, as-if-converted basis)
outstanding immediately prior to the consummation of such Public Offering. For
purposes of this definition,
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"Subsequent Contributions" and "Purchaser Securities" have the meanings set
forth with respect thereto in the Equity Purchase Agreement.
"REGULATORY ALLOCATIONS" has the meaning ascribed to such term in
SECTION 3.5.
"REPRESENTATIVE" means a representative duly elected to the Board of
Managers as provided in SECTION 5.3.
"REQUIRED VOTE" shall mean the affirmative vote of the holders of a
majority of the Common Units (including the Preferred Units, on an
as-if-converted basis) outstanding as of the record date for such vote.
"SALE OF THE COMPANY" means the arm's length sale of the Company to
a third party or group of third parties acting in concert, pursuant to which
such party or parties acquire (i) equity securities of the Company possessing
the voting power under normal circumstances to control the Company, or (ii) all
or substantially all of the Company's assets determined on a consolidated basis
(in either case, whether by merger, consolidation, sale or transfer of the
Company's equity securities, or sale or transfer of the Company's consolidated
assets).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
applicable rules and regulations thereunder, and any successor to such statute,
rules or regulations. Any reference herein to a specific section of, or any
rule, regulation, or form promulgated under, the Securities Act shall be deemed
to include any corresponding provisions of future law.
"SECURITIES AND EXCHANGE COMMISSION" means the U.S. Securities and
Exchange Commission and any successor governmental agency or regulatory body.
"SECURITYHOLDERS AGREEMENT" means that certain securityholders
agreement dated the date of the First Amended Agreement (and amended and
restated as of the date hereof), by and between the Company and certain of its
securityholders, as amended from time to time in accordance with its terms.
"SENIOR UNITS" means the Class A Senior Units, the Class B Senior
Units, and the Class C Senior Units.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity (other than
a corporation), a majority of partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed
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to have a majority ownership interest in a limited liability company,
partnership, association or other business entity (other than a corporation) if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity. For
purposes hereof, references to a "SUBSIDIARY" of any Person shall be given
effect only at such times that such Person has one or more Subsidiaries, and,
unless otherwise indicated, the term "SUBSIDIARY" refers to a Subsidiary of the
Company.
"TAX EXEMPT PARTNER" means any equityholder of a Member (or, with
respect to any equityholder of a Member that is taxed as a partnership for
federal income tax purposes (a "flow-through entity"), any equityholder of such
flow-through entity) which is exempt from income taxation under Section 501(a)
of the Code.
"TAX MATTERS MEMBER" has the meaning set forth with respect thereto
in SECTION 8.6.
"TAXABLE YEAR" means the Company's accounting period for federal
income tax purposes determined pursuant to SECTION 8.4.
"TRANSFER" has the meaning set forth with respect thereto in
SECTION 6.3.
"TREASURY REGULATIONS" means the income tax regulations promulgated
under the Code and effective as of the date hereof. Such term shall, at the
Board of Managers' sole discretion, be deemed to include any future amendments
to such regulations and any corresponding provisions of succeeding regulations
(whether or not such amendments and corresponding provisions are mandatory or
discretionary; PROVIDED, however, that if they are discretionary, the term
"Treasury Regulations" shall not include them if including them would have a
material adverse effect on any Member).
"UBTI" means unrelated business taxable income as defined in
Section 512 and Section 514 of the Code.
"UNIT" means a Member's interest in the Profits, Losses and
Distributions of the Company representing a fractional part of the aggregate
interests in the Profits, Losses, and Distributions of the Company of all
Members and shall include Common Units, Preferred Units, and Senior Units;
PROVIDED that any class or group of Units issued shall have the relative rights,
powers, duties, and obligations specified with respect to such class or group of
Units in this Agreement, and the interest of such class or group of Units in the
Profits, Losses, and Distributions of the Company shall be determined in
accordance with such relative rights, powers, duties, and obligations.
"UNIT OWNERSHIP LEDGER" has the meaning set forth with respect
thereto in SECTION 2.2(f).
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ARTICLE II
CAPITAL CONTRIBUTIONS AND ACCOUNTS
Section 2.1 AUTHORIZED UNITS. The total authorized Units which the
Company has authority to issue consist of:
(a) 65,750 Preferred Units;
(b) 107,500 Common Units;
(c) an unlimited number of Class A Senior Units, PROVIDED that all
authorized but unissued Class A Senior Units shall be reserved for issuance in
exchange for other Units pursuant to the terms of the Executive Securities
Agreements, and such Class A Senior Units may be issued only in exchange for
other Units pursuant to the terms of the Executive Securities Agreements and
under no other circumstances;
(d) an unlimited number of Class B Senior Units, PROVIDED that all
authorized but unissued Class B Senior Units shall be reserved for issuance in
exchange for other Units pursuant to the terms of the Performance Vesting
Agreement, and such Class B Senior Units may be issued only in exchange for
other Units pursuant to the terms of the Performance Vesting Agreement and under
no other circumstances; and
(e) an unlimited number of Class C Senior Units, PROVIDED that all
authorized but unissued Class C Senior Units shall be reserved for issuance in
exchange for other Units pursuant to the terms of the Equity Purchase Agreement,
and such Class C Senior Units may be issued only in exchange for other Units
pursuant to the terms of the Equity Purchase Agreement and under no other
circumstances.
Section 2.2 CAPITAL CONTRIBUTIONS AND ISSUANCE OF UNITS.
(a) INITIAL ISSUANCES OF COMMON UNITS. Prior to or contemporaneously
with the execution of this Agreement, each Member set forth on the attached
SCHEDULE OF INITIAL UNITS as holding Common Units has, pursuant to the Prior
Agreement, the First Amended Agreement, and/or an Executive Securities Agreement
entered into between the Company and such Member, made Capital Contributions to
the Company in the aggregate amount set forth opposite such Member's name on the
attached SCHEDULE OF INITIAL UNITS in exchange for, and the Company has issued
to such Member, the number of Common Units set forth opposite such Member's name
on the attached SCHEDULE OF INITIAL UNITS.
(b) INITIAL ISSUANCES OF PREFERRED UNITS. Prior to or
contemporaneously with the execution of this Agreement, each Member set forth on
the attached SCHEDULE OF INITIAL UNITS as holding Preferred Units has, pursuant
to the Equity Purchase Agreement, made Capital Contributions to the Company in
the aggregate amounts set forth opposite such Member's name on the attached
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SCHEDULE OF INITIAL UNITS with respect to, and the Company has issued to such
Member, the number of Preferred Units set forth opposite such Member's name on
the attached SCHEDULE OF INITIAL UNITS.
(c) ADDITIONAL ISSUANCES OF COMMON UNITS TO KEY EMPLOYEES.
(i) 1,475 of the Company's authorized but unissued Common
Units (471 of which shall be Performance-Vesting Securities and 1,004 of
which shall be Non-Performance-Vesting Securities) are reserved for
issuance pursuant to this SECTION 2.2(c).
(ii) From time to time on or after the date hereof, the Board
of Managers may approve the offer and issuance of such authorized but
unissued Common Units to management or other key employees (each a "KEY
EMPLOYEE") of the Company and its Subsidiaries. The Company's senior
management shall make recommendations to the Board of Managers concerning,
and the Board of Managers shall have sole and complete power and
discretion to approve and determine, which Key Employees shall be offered
such Common Units, the number of Common Units to be offered and issued to
each such purchasing Key Employee, and the purchase price to be paid for
the Common Units issued to each such purchasing Key Employee. None of the
Common Units reserved for issuance pursuant to this SECTION 2.2(c) shall
be offered or issued to any Person without the prior approval of the Board
of Managers; PROVIDED that the Board of Managers shall not cause or suffer
the Company to issue any of such Common Units to any Person other than a
Key Employee of the Company or its Subsidiaries.
(iii) If at any time after the date hereof (A) the Board of
Managers determines in its sole discretion that the Company and its
Subsidiaries have hired a complete management team and that no further
Common Units are required for issuance to additional Key Employees of the
Company and its Subsidiaries, and (B) there exist as of the date of such
determination any Common Units reserved for issuance pursuant to this
SECTION 2.2(c) that remain authorized and unissued, then (I) there shall
be issued to all Original Executives that continue to be Key Employees of
the Company and its Subsidiaries as of the date of such determination (pro
rata among such Original Executives based on the number of Common Units
held by each such Original Executive) a number of such reserved Common
Units equal to the sum of (1) the lesser of (x) the number (if any) of
Non-Performance-Vesting Securities reserved for issuance pursuant to this
SECTION 2.2(c) that remain authorized and unissued as of the date of such
determination and (y) 1,050 of the number of Non-Performance-Vesting
Securities set forth in SECTION 2.2(c)(i), PLUS (2) the lesser of (x) the
number (if any) of Performance-Vesting Securities reserved for issuance
pursuant to this SECTION 2.2(c) that remain authorized and unissued as of
the date of such determination and (y) 450 of the number of
Performance-Vesting Securities set forth in SECTION 2.2(c)(i), and (II)
any authorized but unissued Common Units reserved for issuance pursuant to
this SECTION 2.2(c) that are not issued pursuant to clause (I) shall as of
the date of such determination be canceled and shall no longer be
considered authorized Common Units for any purpose. For purposes of the
above calculations, each of the numbers of Common Units set forth in this
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paragraph (iii) shall be equitably adjusted for any securities splits,
securities dividends, securities combinations, recapitalizations, or
reorganizations affecting the Common Units.
(iv) In connection with any issuance of Common Units to a Key
Employee of the Company and its Subsidiaries pursuant to this
SECTION 2.2(c) (including any issuance to an Original Executive pursuant
to paragraph (iii)), (A) such purchasing Key Employee shall make Capital
Contributions to the Company in exchange for such purchased Common Units
in the aggregate amount equal to the purchase price therefor (as
determined by the Board of Managers); (B) such Key Employee shall execute
a counterpart hereto (or joinder and rights agreement) accepting and
agreeing to be bound by all of the terms and conditions hereof, and shall
enter into such other documents and instruments to effect such purchase as
are required by the Board of Managers (including, without limitation, an
Executive Securities Agreement, a joinder and rights agreement (pursuant
to which such purchasing Key Employee shall become a party to the
Securityholders Agreement, the Registration Agreement, and the Performance
Vesting Agreement), and such other documents, instruments, or certificates
as are determined by the Board of Managers); and (C) such Key Employee's
Executive Securities Agreement shall specify which portion of the Common
Units issued to such Key Employee shall constitute Performance-Vesting
Securities and which portion shall constitute Non-Performance-Vesting
Securities, and the Performance-Vesting Securities shall be subject to
performance vesting under the terms of the Performance Vesting Agreement
(it being understood that in general such Common Units will be issued in
"strips" consisting of Non-Performance-Vesting Securities and
Performance-Vesting Securities in the ratio of 7:3, but that the Board of
Managers may decide to issue such Common Units in such other amounts or
ratios as it shall determine in its sole discretion). Any Common Units
issued to the Original Executives pursuant to SECTION 2.2(c)(iii) above
shall be subject to time vesting under the Executive Securities Agreements
and subject to performance vesting under the Performance Vesting Agreement
in the same manner as the Common Units issued to the Original Executives
under SECTION 2.2(a), and such Common Units issued pursuant to
SECTION 2.2(c)(iii) shall be deemed time vested under the Executive
Securities Agreements and performance vested (or, if applicable,
forfeited) under the Performance Vesting Agreement in the same proportion
as if such Common Units had been issued to the Original Executives on the
date of the First Amended Agreement pursuant to SECTION 2.2(a).
(d) ADDITIONAL ISSUANCES OF UNITS. Subject to the reservation of
Units pursuant to the terms of this Agreement or pursuant to any resolution of
the Board of Managers and to the other restrictions on issuance set forth herein
and in the other agreements to which the Company is a party (including, without
limitation, in Section 6J (Preemptive Rights) of the Equity Purchase Agreement),
the Company shall issue authorized but unissued Units at such times and from
time to time, to such Persons, in such amounts, at such price and on such other
terms and conditions as shall be determined and approved by the Board of
Managers in its sole discretion. If any Units are repurchased, redeemed, or
otherwise reacquired by the Company, such Units shall be returned to authorized
but unissued Units, and such Units shall be available for reissuance in
accordance with
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the terms of this SECTION 2.2(d). Other than as set forth in this SECTION 2.2,
the Company shall not offer or issue any Units to any Person.
(e) CERTIFICATES. All Units issued hereunder shall be
uncertificated; PROVIDED that the Board of Managers may approve a specie form of
certificate and issue to the Members such certificates specifying the number and
type of Units held by each such Member.
(f) UNIT OWNERSHIP LEDGER. The Company shall create and maintain a
ledger (the "UNIT OWNERSHIP LEDGER") setting forth the name of each Member and
the number of each class of Units held by each such Member. Upon any change in
the number or ownership of outstanding Units (whether upon an issuance of Units,
a transfer of Units, a cancellation of Units or otherwise), the Company shall
amend and update the Unit Ownership Ledger and shall deliver a copy of such
updated ledger to each holder of Units. The requirements of this paragraph (f)
shall terminate upon a Public Offering.
Section 2.3 CAPITAL ACCOUNTS.
(a) The Company shall establish and maintain a separate "CAPITAL
ACCOUNT" for each Member according to the rules of Treasury Regulation Section
1.704-1(b)(2)(iv). For this purpose, the Company may (in the discretion of the
Board of Managers), upon the occurrence of the events specified in Treasury
Regulation Section 1.704-1(b)(2)(iv)(f), increase or decrease the Capital
Accounts in accordance with the rules of such regulation and Treasury Regulation
Section 1.704- 1(b)(2)(iv)(g) to reflect a revaluation of Company property.
(b) For purposes of computing the amount of any item of Company
income, gain, loss or deduction to be allocated pursuant to Article III and to
be reflected in the Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for U.S. federal income tax purposes (including
any method of depreciation, cost recovery or amortization used for this
purpose), PROVIDED THAT:
(i) The computation of all items of income, gain, loss and
deduction shall include those items described in Code Section 705(a)(l)(B)
or Code Section 705(a)(2)(B) and Treasury Regulation Section
1.704-1(b)(2)(iv)(i), without regard to the fact that such items are not
includable in gross income or are not deductible for federal income tax
purposes.
(ii) If the Book Value of any Company property is adjusted
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f), the
amount of such adjustment shall be taken into account as gain or loss from
the disposition of such property.
(iii) Items of income, gain, loss or deduction attributable to
the disposition of Company property having a Book Value that differs from
its adjusted basis for tax purposes shall be computed by reference to the
Book Value of such property.
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(iv) Items of depreciation, amortization and other cost
recovery deductions with respect to Company property having a Book Value
that differs from its adjusted basis for tax purposes shall be computed by
reference to the property's Book Value in accordance with Treasury
Regulation Section 1.704-1(b)(2)(iv)(g).
(v) To the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Sections 732(d), 734(b) or 743(b) is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis).
(vi) Items of income, gain, loss and deduction of the Company
shall be computed as if the Company had sold any property distributed to a
Member on the date of such distribution at a price equal to its Fair
Market Value at that date.
Section 2.4 NEGATIVE CAPITAL ACCOUNTS. No Member shall be required
to pay to any other Member or the Company any deficit or negative balance which
may exist from time to time in such Member's Capital Account (including upon and
after dissolution of the Company).
Section 2.5 NO INTEREST. Except as otherwise expressly provided
herein, no Member shall be entitled to receive interest from the Company in
respect of any positive balance in its Capital Account, and no Member shall be
liable to pay interest to the Company in respect of any negative balance in its
Capital Account.
Section 2.6 NO WITHDRAWAL. No Person shall be entitled to withdraw
any part of such Person's Capital Contributions or Capital Account or to receive
any Distribution from the Company, except as expressly provided in this
Agreement.
ARTICLE III
DISTRIBUTIONS AND ALLOCATIONS
Section 3.1 DISTRIBUTIONS
(a) Except as otherwise provided herein, the Company shall make
Distributions to the Members in respect of their Units at any time and from time
to time as determined by the Board of Managers in its sole discretion.
(b) The Company shall distribute to each Member within 75 days after
the close of each Taxable Year (or at such earlier times and in such amounts as
determined in good faith by the Board of Managers to be appropriate to enable
such Member to pay estimated income tax liabilities) an amount equal to the
anticipated taxes payable on the share of taxable income allocated
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to such Member for such Taxable Year (after taking into account such Member's
share of income, credits, deductions and other items as reported on such Members
Schedule K-1 (Form 1065)), assuming for such determination the highest
applicable marginal United States federal, state, and local income tax rates
applicable to any Member; PROVIDED that such distributions shall be subject to
the availability of cash after the setting aside by the Board of Managers of
appropriate reserves for anticipated or contingent obligations, losses and
commitments of the Company. Tax distributions to a Member pursuant to this
Section 3.1(b) shall be treated as an advance on distributions to which such
Member is entitled under Section 3.1 (other than this Section 3.1(b)) and
Section 7.2, and shall be offset against and reduce the amounts that such Member
would otherwise receive under the provisions of Section 3.1 (other than Section
3.1(b)) and Section 7.2 in the order that such amounts would otherwise be
received.
(c) All Distributions in connection with the liquidation,
dissolution or winding up of the Company ("LIQUIDATING DISTRIBUTIONS") shall be
made to the Members in the following order of priority:
(i) first, to the holders of Class A Senior Units (pro rata
among such holders based upon the aggregate Capital Contributions made in
respect of all Class A Senior Units held by each such holder immediately
prior to such Liquidating Distribution (together with simple yield thereon
at a rate of 8% per annum from the date of issuance to the date of such
Distribution)), until the aggregate amount distributed pursuant to this
subparagraph (i) with respect to the Class A Senior Units is equal to the
aggregate Capital Contributions made in respect of all Class A Senior
Units outstanding immediately prior to such Distribution (together with
simple yield thereon at a rate of 8% per annum from the date of issuance
to the date of such Distribution);
(ii) second, to the holders of Preferred Units and the holders
of Class B Senior Units (pro rata among such holders based on the
aggregate Liquidation Value (together with all accrued but unpaid
Preferred Yield thereon) and Class B Senior Value (together with all
accrued but unpaid Class B Senior Yield thereon) of all Preferred Units
and Class B Senior Units held by each such holder immediately prior to
such Liquidating Distribution), until the aggregate amount distributed
pursuant to this paragraph (ii) is equal to the aggregate Liquidation
Value (together with all accrued but unpaid Preferred Yield thereon) and
Class B Senior Value (together with all accrued but unpaid Class B Senior
Yield thereon) of all Preferred Units and Class B Senior Units outstanding
immediately prior to such Liquidating Distribution;
(iii) third, to the holders of Class C Senior Units (pro rata
among such holders based upon the aggregate Capital Contributions made in
respect of all Class C Senior Units held by each such holder immediately
prior to such Liquidating Distribution (together with simple yield thereon
at a rate of 8% per annum from the date of issuance to the date of such
Distribution)), until the aggregate amount distributed pursuant to this
subparagraph (iii) with respect to the Class C Senior Units is equal to
the aggregate Capital Contributions made in respect of all Class C Senior
Units outstanding immediately prior to such Distribution
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(together with simple yield thereon at a rate of 8% per annum from the
date of issuance to the date of such Distribution);
(iv) fourth, to the holders of Common Units (pro rata among
such holders based on the total number of Common Units held by each such
holder immediately prior to such Liquidating Distribution).
(d) The Company shall be required to redeem each Class A Senior Unit
upon the first to occur of a Qualified Public Offering, a Sale of the Company,
or the fourth anniversary of the issuance of such Class A Senior Unit, for an
amount equal to the aggregate Capital Contributions made in respect of such
Class A Senior Unit on or prior to the date of such redemption (together with
simple yield thereon at a rate of 8% per annum from the date of issuance to the
date of such Distribution). After such Distribution has been paid in redemption
of such Class A Senior Unit, such Class A Senior Unit shall be retired by the
Company, and the holder thereof shall have no further rights (including any
rights to receive Profits, Losses, or Distributions from the Company) with
respect to such Class A Senior Unit. Except as set forth in this SECTION 3.1(d)
or with respect to Liquidating Distributions under SECTION 3.1(c)(i) or with
respect to tax distributions under SECTION 3.1(b), no Distributions shall be
made by the Company with respect to any Class A Senior Units.
(e) The Company shall be required to redeem each Class C Senior Unit
upon the first to occur of a Qualified Public Offering, a Sale of the Company,
or the fifth anniversary of the issuance of such Class C Senior Unit, for an
amount equal to the aggregate Capital Contributions made in respect of such
Class C Senior Unit on or prior to the date of such redemption (together with
simple yield thereon at a rate of 8% per annum from the date of issuance to the
date of such Distribution); PROVIDED that no such redeeming Distribution shall
be paid in respect of any Class C Senior Unit until after the full amount of the
aggregate Liquidation Value (plus all accrued Preferred Yield thereon) and Class
B Senior Value (plus all accrued Class B Senior Yield thereon) of all Preferred
Units and Class B Senior Units has been paid. After such Distribution has been
paid in redemption of such Class C Senior Unit, such Class C Senior Unit shall
be retired by the Company, and the holder thereof shall have no further rights
(including any rights to receive Profits, Losses, or Distributions from the
Company) with respect to such Class C Senior Unit. Except as set forth in this
SECTION 3.1(e) or with respect to Liquidating Distributions under
SECTION 3.1(c)(iii) or with respect to tax distributions under SECTION 3.1(b),
no Distributions shall be made by the Company with respect to any Class C
Senior Units.
(f) All Distributions (other than Liquidating Distributions, tax
distributions made pursuant to Section 3.1(b), or redemptions of Class B Senior
Units pursuant to SECTION 4.1(a)) with respect to the Preferred Units and the
Class B Senior Units shall be made to all holders of Preferred Units and Class B
Senior Units: (i) first, pro rata among such holders based on the total accrued
but unpaid Preferred Yield and Class B Senior Yield on all Preferred Units and
Class B Senior Units held by each such holder on the record date for such
Distribution, until the full amount of accrued Preferred Yield and Class B
Senior Yield on all Preferred Units and Class B Senior Units then outstanding
has been paid, and (ii) after all accrued Preferred Yield and Class B Senior
Yield has been paid, pro rata among such holders based on the aggregate
Liquidation Value and Class B Senior
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Value of all Preferred Units and Class B Senior Units held by each such holder
on the record date for such Distribution.
(g) All Distributions (other than Liquidating Distributions and tax
distributions made pursuant to Section 3.1(b)) with respect to the Common Units
shall be made to all holders of Common Units, pro rata among such holders based
on the total number of Common Units held by each such holder on the record date
for such Distribution; PROVIDED that no Distributions shall be made with respect
to any Common Units if at the time of or immediately after any such Distribution
the Company has failed to pay the full amount of accrued Preferred Yield and
Class B Senior Yield on the Preferred Units and Class B Senior Units or make any
redemption of Preferred Units or Class B Senior Units required hereunder.
(h) The Members shall look solely to the assets of the Company for
any Distributions, whether Liquidating Distributions or otherwise. If the assets
of the Company remaining after the payment or discharge, or the provision for
payment or discharge, of the debts, obligations, and other liabilities of the
Company are insufficient to make any Distributions, no Member shall have any
recourse against the separate assets of any other Member (except as otherwise
expressly provided herein).
(i) If the Company has, pursuant to any clear and manifest
accounting or similar error, paid any Member an amount in excess of the amount
to which it is entitled pursuant to this ARTICLE III, such Member shall
reimburse the Company to the extent of such excess, without interest, within 30
days after demand by the Company. The Company may set off and apply any amount
otherwise payable to a Member against the amounts due from the Member under this
SECTION 3.1(i).
Section 3.2 ALLOCATIONS.
(a) Except as otherwise provided in SECTION 3.3, Profits and Losses
for any Fiscal Year shall be allocated among the Members in such a manner that,
as of the end of such Fiscal Year, the sum of (i) the Capital Account of each
Member, (ii) such Member's share of Minimum Gain (as determined according to
Treasury Regulation Section 1.704-2(g)), and (iii) such Member's partner
nonrecourse debt minimum gain (as defined in Treasury Regulation Section
1.704-2(i)(3)) shall be equal to the respective net amounts, positive or
negative, which would be distributed to them or for which they would be liable
to the Company under the Act, determined as if the Company were to (i) liquidate
the assets of the Company for an amount equal to their Book Value and (ii)
distribute the proceeds of such liquidation pursuant to SECTION 7.2.
(b) For purposes of this SECTION 3.2, if Profits exceed Losses for a
Fiscal Year, (i) Losses shall first be allocated to Members whose Capital
Accounts are reduced as a result of the allocations under SECTION 3.2(a), in an
amount equal to the amount by which such Capital Accounts have been reduced and
(ii) Profits and any remaining Losses shall be allocated to Members whose
Capital Accounts are increased as a result of the allocations under
SECTION 3.2(a), in the proportion that the amount of the increase in such
Member's Capital Accounts as a result of the allocations
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under SECTION 3.2(a) bears to the aggregate amount of the increase in all such
Members' Capital Accounts as a result of the allocations under SECTION 3.2(a).
(c) For purposes of this SECTION 3.2, if Losses exceed Profits for a
Fiscal Year, (i) Profits shall first be allocated to Members whose Capital
Accounts are increased as a result of the allocations under SECTION 3.2(a), in
an amount equal to the amount by which such Capital Accounts have been increased
and (b) Losses and any remaining Profits shall be allocated to Members whose
Capital Accounts are reduced as a result of the allocations under SECTION
3.2(a), in the proportion that the amount of the reduction in such Member's
Capital Accounts as a result of the allocations under SECTION 3.2(a) bears to
the aggregate amount of the reduction in all such Members' Capital Accounts as a
result of the allocations under SECTION 3.2(a).
(d) If deemed appropriate by the Board of Managers in its
discretion in order to cause the allocations pursuant to this SECTION 3.2 to
more closely reflect the actual economic arrangement among the Members, all
Preferred Units shall be treated as converted under SECTION 4.1(a) (and all
Class B Senior Units shall be treated as being entitled to their redemption
proceeds under SECTION 4.1(a)) immediately prior to any hypothetical
liquidation of the Company under SECTION 3.2(a) if such conversion (and
related redemption of Class B Senior Units) would entitle the holders of the
Preferred Units to receive a larger hypothetical distribution (in respect of
the Preferred Units, the Class B Senior Units, and the Conversion Securities
into which such Preferred Units are deemed converted) in connection with such
hypothetical liquidation of the Company (such hypothetical liquidation
determined according to SECTION 3.2(a) as if the Company were to (i)
liquidate the assets of the Company for an amount equal to their Book Value
and (ii) distribute the proceeds of such liquidation pursuant to SECTION
7.2). Whether the Preferred Units shall be treated as converted (and the
Class B Senior Units redeemed) shall be determined separately by the Board of
Managers any time an allocation is required under this SECTION 3.2.
Section 3.3 SPECIAL ALLOCATIONS.
(a) Losses attributable to partner nonrecourse debt (as defined in
Treasury Regulation Section 1.704-2(b)(4)) shall be allocated in the manner
required by Treasury Regulation Section 1.704-2(i). If there is a net decrease
during a Taxable Year in partner nonrecourse debt minimum gain (as defined in
Treasury Regulation Section 1.704-2(i)(3)), Profits for such Taxable Year (and,
if necessary, for subsequent Taxable Years) shall be allocated to the Members in
the amounts and of such character as determined according to Treasury Regulation
Section 1.704-2(i)(4).
(b) Nonrecourse deductions (as determined according to Treasury
Regulation Section 1.704-2(b)(1)) for any Taxable Year shall be allocated to
each Member ratably among such Members based upon the number of outstanding
Units held by each such Member immediately prior to such allocation. Except as
otherwise provided in Section 4.3(a), if there is a net decrease in the Minimum
Gain during any Taxable Year, each Member shall be allocated Profits for such
Taxable Year (and, if necessary, for subsequent Taxable Years) in the amounts
and of such character as determined according to Treasury Regulation Section
1.704-2(f). This Section 3.3(b) is intended to
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be a minimum gain chargeback provision that complies with the requirements of
Treasury Regulation Section 1.704-2(f), and shall be interpreted in a manner
consistent therewith.
(c) If any Member that unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6) has an Adjusted Capital Account Deficit as
of the end of any Taxable Year, computed after the application of Sections
3.3(a) and 3.3(b) but before the application of any other provision of this
Article III, then Profits for such Taxable Year shall be allocated to such
Member in proportion to, and to the extent of, such Adjusted Capital Account
Deficit. This Section 3.3(c) is intended to be a qualified income offset
provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted in a manner consistent therewith.
(d) Profits and Losses described in Section 2.3(b)(v) shall be
allocated in a manner consistent with the manner that the adjustments to the
Capital Accounts are required to be made pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(j), (k) and (m).
(e) If, and to the extent that, any Member is deemed to recognize
any item of income, gain, loss, deduction or credit as a result of any
transaction between such Member and the Company pursuant to Code Sections
1272-1274, 7872, 483, 482, 83 or any similar provision now or hereafter in
effect, and the Board of Managers determines that any corresponding Profit or
Loss of the Company should be allocated to the Members who recognized such item
in order to reflect the Members' economic interests in the Company, then the
Company may so allocate such Profit or Loss.
Section 3.4 TAX ALLOCATIONS
(a) Except as provided in SECTIONS 3.4(b), (c) and (d), the income,
gains, losses, deductions and credits of the Company will be allocated, for
federal, state and local income tax purposes, among the Members in accordance
with the allocation of such income, gains, losses, deductions and credits among
the Members for computing their Capital Accounts; except that if any such
allocation is not permitted by the Code or other applicable law, the Company's
subsequent income, gains, losses, deductions and credits will be allocated among
the Members so as to reflect as nearly as possible the allocation set forth
herein in computing their Capital Accounts.
(b) Items of Company taxable income, gain, loss and deduction with
respect to any property contributed to the capital of the Company shall be
allocated among the Members in accordance with Code Section 704(c) so as to take
account of any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its Book Value.
(c) If the Book Value of any Company asset is adjusted pursuant to
the requirements of Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f),
subsequent allocations of items of taxable income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Book Value in the
same manner as under Code Section 704(c).
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<PAGE>
(d) Allocations of tax credits, tax credit recapture, and any items
related thereto shall be allocated to the Members according to their interests
in such items as determined by the Board of Managers taking into account the
principles of Treasury Regulation Section 1.704-1(b)(4)(ii).
(e) Allocations pursuant to this SECTION 3.4 are solely for purposes
of federal, state and local taxes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of Profits,
Losses, Distributions or other Company items pursuant to any provision of this
Agreement.
(f) The Board of Managers may, but shall not be obligated to, elect
to adjust the basis of the assets of the Company for federal income tax purposes
in accordance with Code Section 754.
Section 3.5 CURATIVE ALLOCATIONS. The allocations set forth in
SECTION 3.3 (the "REGULATORY ALLOCATIONS") are intended to comply with
certain requirements of Sections 1.704-1(b) and 1.704-2 of the Treasury
Regulations. The Regulatory Allocations may not be consistent with the manner
in which the Members intend to allocate Profit and Loss of the Company or
make Company distributions. Accordingly, notwithstanding the other provisions
of this Article III, but subject to the Regulatory Allocations, income, gain,
deduction, and loss shall be reallocated among the Members so as to eliminate
the effect of the Regulatory Allocations and thereby cause the respective
Capital Accounts of the Members to be in the amounts (or as close thereto as
possible) they would have been if Profit and Loss (and such other items of
income, gain, deduction and loss) had been allocated without reference to the
Regulatory Allocations. In general, the Members anticipate that this will be
accomplished by specially allocating other Profit and Loss (and such other
items of income, gain, deduction and loss) among the Members so that the net
amount of the Regulatory Allocations and such special allocations to each
such Member is zero. In addition, if in any Taxable Year or Fiscal Period
there is a decrease in partnership minimum gain, or in partner nonrecourse
debt minimum gain, and application of the minimum gain chargeback
requirements set forth in SECTION 3.3(a) or SECTION 3.3(b) would cause a
distortion in the economic arrangement among the Members, the Members may, if
they do not expect that the Company will have sufficient other income to
correct such distortion, request the Internal Revenue Service to waive either
or both of such minimum gain chargeback requirements. If such request is
granted, this Agreement shall be applied in such instance as if it did not
contain such minimum gain chargeback requirement.
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ARTICLE IV
THE PREFERRED UNITS
Section 4.1 CONVERSION.
(a) CONVERSION PROCEDURE.
(i) At any time and from time to time, any holder of Preferred
Units may convert all or any portion of the Preferred Units (including any
fraction of a Unit) held by such holder into a number of Conversion
Securities computed by multiplying the number of Preferred Units to be
converted by $1,000 and dividing the result by the Conversion Price then
in effect.
(ii) If any converting holder holds any Class B Senior Units,
a portion of such Class B Senior Units shall be redeemed simultaneously
with, and contingent upon, the consummation of a conversion of Preferred
Units by such holder equal to the product of (x) the number of Class B
Senior Units held by such converting holder immediately prior to such
conversion TIMES (y) the percentage of the Preferred Units held by such
converting holder immediately prior to such conversion that are being
converted in such conversion, at a price per Class B Senior Unit equal to
the accrued but unpaid Class B Senior Yield on such Class B Senior Unit
(which price shall be paid pursuant to SECTION 4.1(a)(v)(B)).
(iii) Except as otherwise provided herein, each conversion of
Preferred Units shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing
the Preferred Units to be converted have been surrendered for conversion
(or, if none, the date on which a written notice of such conversion has
been presented) at the principal office of the Company. At the time any
such conversion has been effected, the rights of the holder of the
Preferred Units converted as a holder of Preferred Units shall cease and
the Person or Persons in whose name or names any certificate or
certificates for Conversion Securities are to be issued (or, if none, in
whose name or names such Conversion Securities are to be recorded in the
Company's records) upon such conversion shall be deemed to have become the
holder or holders of record of the Conversion Securities represented
thereby.
(iv) Notwithstanding any other provision hereof, if a
conversion of Preferred Units is to be made in connection with any
transaction or proposed transaction affecting the Company (including,
without limitation, a public offering of the Company's securities, change
of control, or a liquidation or dissolution), the conversion of any
Preferred Units may, at the election of the holder thereof, be conditioned
upon the consummation of such transaction, in which case such conversion
shall be deemed to be effective upon the consummation of such transaction
or immediately prior thereto (at the election of such holder).
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(v) As soon as possible after a conversion has been effected
(but in any event within five business days in the case of subparagraph
(A) below), the Company shall deliver to the converting holder:
(A) if the Conversion Securities are certificated, a
certificate or certificates representing the number of Conversion
Securities issuable by reason of such conversion in such name or
names and such denomination or denominations as the converting
holder has specified;
(B) payment in cash of an amount equal to all accrued
but unpaid Preferred Yield with respect to each Preferred Unit
converted (plus, if applicable, the accrued but unpaid Class B
Senior Yield with respect to each Class B Senior Unit redeemed in
connection with such conversion); PROVIDED that if such conversion
is in connection with a public offering of the Company's equity
securities, all or any portion of such Preferred Yield (and, if
applicable, Class B Senior Yield) may at the option of the
converting holder be payable in the form of a number of Common Units
(or equivalent common equity securities of the Company) equal to the
quotient of (x) the amount of Preferred Yield (and, if applicable,
Class B Senior Yield) to be paid in the form of Common Units (or
other common equity securities), DIVIDED BY (y) the gross offering
price per Common Unit (or equivalent common equity security) in such
public offering); and
(C) if the Preferred Units are certificated, a
certificate representing any Preferred Units which were represented
by the certificate or certificates delivered to the Company in
connection with such conversion but which were not converted (and,
if the Class B Senior Units are certificated and any Class B Senior
Units are redeemed in connection with such conversion, a certificate
representing any Class B Senior Units which were represented by the
certificate or certificates delivered to the Company in connection
with such redemption but which were not redeemed).
(vi) The issuance of certificates (if any) for Conversion
Securities upon conversion of Preferred Units shall be made without charge
to the holders of such Preferred Units for any issuance tax in respect
thereof or other cost incurred by the Company in connection with such
conversion and the related issuance of Conversion Securities. Upon
conversion of each Preferred Unit, the Company shall take all such actions
as are necessary in order to insure that the Conversion Securities
issuable with respect to such conversion shall be validly issued, fully
paid and nonassessable, free and clear of all taxes, liens, charges and
encumbrances with respect to the issuance thereof.
(vii) The Company shall not close its books against the
transfer of Preferred Units or of Conversion Securities issued or issuable
upon conversion of Preferred Units in any manner which interferes with the
timely conversion of the Preferred Units. The Company shall assist and
cooperate with any holder of Preferred Units required to make any
governmental filings or obtain any governmental approval prior to or in
connection with any
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conversion of Preferred Units hereunder (including, without limitation,
making any filings required to be made by the Company).
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Conversion
Securities, solely for the purpose of issuance upon the conversion of the
Preferred Units, such number of Conversion Securities issuable upon the
conversion of all outstanding Preferred Units. All Conversion Securities
which are so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges.
The Company shall take all such actions as may be necessary to assure that
all such shares of Conversion Securities may be so issued without
violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which Conversion
Securities may be listed (except for official notice of issuance which
shall be immediately delivered by the Company upon each such issuance).
The Company shall not take any action which would cause the number of
authorized but unissued Conversion Securities to be less than the number
of such securities required to be reserved hereunder for issuance upon
conversion of the Preferred Units.
(b) CONVERSION PRICE.
(i) The initial Conversion Price shall be $796.97. In order to
prevent dilution of the conversion rights granted under this SECTION 4.1,
the Conversion Price shall be subject to adjustment from time to time
pursuant to this SECTION 4.1(b).
(ii) If and whenever the Company issues or sells, or in
accordance with SECTION 4.1(c) is deemed to have issued or sold, any
Common Units for a consideration per Unit less than the Current Price in
effect as of the date of such issue or sale, then immediately upon such
issue or sale or deemed issue or sale the Conversion Price shall be
reduced to a new Conversion Price determined by multiplying (A) the
Conversion Price in effect immediately prior to such issue or sale, TIMES
(B) a fraction, the numerator of which shall be the sum of (1) the number
of Common Units Deemed Outstanding immediately prior to such issue or sale
MULTIPLIED BY the Current Price in effect as of the date of such issue or
sale, PLUS (2) the consideration, if any, received by the Company upon
such issue or sale, and the denominator of which shall be the product of
the Current Price in effect as of the date of such issue or sale
MULTIPLIED BY the number of Common Units Deemed Outstanding immediately
after such issue or sale.
(iii) If at any time the Current Price is increased as a
result of a Subsequent Contribution (as defined in the Equity Purchase
Agreement), such higher Current Price shall be retroactively effective as
of the date of the First Amended Agreement for all purposes of this
SECTION 4.1, and the Conversion Price then in effect shall be recalculated
and adjusted to the Conversion Price that would have been determined
pursuant to this SECTION 4.1 (including, without limitation, in connection
with issuances and deemed issuances of Common Units from the date of the
First Amended Agreement until and including the date of such Subsequent
Contribution) had the Current Price been such amount from the date of
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the First Amended Agreement until and including the date of such
Subsequent Contribution (as such amount shall be equitably adjusted to
reflect any stock splits, stock dividends, stock combinations, or
recapitalizations during such period).
(iv) Notwithstanding the foregoing, there shall be no
adjustment to the Conversion Price hereunder with respect to (A) the
issuance of Common Units pursuant to SECTION 2.2(a) or (c) hereof, or (B)
the granting of securities to Key Employees of the Company and its
Subsidiaries, or the issuance of Common Units upon exercise thereof,
pursuant to the Company's Permitted Securities Plan (as defined in the
Equity Purchase Agreement).
(c) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Conversion Price under SECTION 4.1(b), the following
shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner grants or sells any Options and the price per Unit for which Common
Units are issuable upon the exercise of such Options, or upon conversion
or exchange of any Convertible Securities issuable upon exercise of such
Options, is less than the Current Price in effect immediately prior to the
time of the granting or sale of such Options, then the total maximum
number of Common Units issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to
be outstanding and to have been issued and sold by the Company at the time
of the granting or sale of such Options for such price per Unit. For
purposes of this paragraph, the "price per Unit for which Common Units are
issuable" shall be determined by dividing (A) the total amount, if any,
received or receivable by the Company as consideration for the granting or
sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such Options,
plus in the case of such Options which relate to Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the issuance or sale of such Convertible Securities
and the conversion or exchange thereof, by (B) the total maximum number of
Common Units issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion
Price shall be made when Convertible Securities are actually issued upon
the exercise of such Options or when Common Units are actually issued upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities and the price per Unit
for which Common Units are issuable upon conversion or exchange thereof is
less than the Current Price in effect immediately prior to the time of
such issue or sale, then the maximum number of Common Units issuable upon
conversion or exchange of such Convertible Securities shall be deemed to
be outstanding and to have been issued and sold by the Company at the time
of the issuance or sale of such Convertible Securities for such price per
Unit. For the purposes of
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this paragraph, the "price per Unit for which Common Units are issuable"
shall be determined by dividing (A) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (B) the total maximum number of Common Units issuable
upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price shall be made when Common Units
are actually issued upon the conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities
is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions
of this SECTION 4.1, no further adjustment of the Conversion Price shall
be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the
purchase price provided for in any Options, the additional consideration,
if any, payable upon the conversion or exchange of any Convertible
Securities or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Units changes at any time, the Conversion
Price in effect at the time of such change shall be immediately adjusted
to the Conversion Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold For
purposes of this SECTION 4.1(c), if the terms of any Option or Convertible
Security which was outstanding as of the date of issuance of the Preferred
Units are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common Units
deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change; PROVIDED that no
such change shall at any time cause the Conversion Price hereunder to be
increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder
shall be adjusted immediately to the Conversion Price which would have
been in effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding immediately
prior to such expiration or termination, never been issued. For purposes
of this SECTION 4.1(c), the expiration or termination of any Option or
Convertible Security which was outstanding as of the date of issuance of
the Preferred Units shall not cause the Conversion Price hereunder to be
adjusted unless, and only to the extent that, a change in the terms of
such Option or Convertible Security caused it to be deemed to have been
issued after the date of issuance of the Preferred Units.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Unit,
Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company
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therefor (net of discounts, commissions and related expenses). If any
Common Unit, Option or Convertible Security is issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the Fair Market Value of such
consideration. If any Common Unit, Option or Convertible Security is
issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of
consideration therefor shall be deemed to be the Fair Market Value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such Common Unit, Option or Convertible Security, as the
case may be. The Fair Market Value of such consideration shall be
determined in accordance with the provisions of SECTION 7.3.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together constituting one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option shall be deemed to have been issued without consideration.
(vii) TREASURY SECURITIES. The number of Common Units
outstanding at any given time shall not include securities owned or held
by or for the account of the Company or any Subsidiary, and the
disposition of any Units so owned or held shall be considered an issue or
sale of Common Units.
(viii) RECORD DATE. If the Company takes a record of the
holders of Common Units for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Units, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Units,
Options or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the Common Units deemed to have
been issued or sold upon the declaration of such dividend or upon the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(d) SUBDIVISION OR COMBINATION OF COMMON UNITS. If the Company at
any time subdivides (by any securities split, securities dividend,
recapitalization or otherwise) one or more classes of its outstanding Common
Units into a greater number of Units, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and if the Company
at any time combines (by reverse securities split, securities combination or
otherwise) one or more classes of its outstanding Common Units into a smaller
number of Units, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(e) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction,
in each case which is effected in such a manner that the holders of Common Units
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Units, is
referred to herein as an "ORGANIC CHANGE". Prior to the consummation of any
Organic Change, the Company shall make
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appropriate provisions (in form and substance satisfactory to the holders of a
majority of the Preferred Units then outstanding, in their good faith judgment)
to insure that each of the holders of Preferred Units shall thereafter have the
right to acquire and receive, in lieu of or in addition to (as the case may be)
the Conversion Securities immediately theretofore acquirable and receivable upon
the conversion of such holder's Preferred Units, such shares of stock,
securities or assets as such holder would have received in connection with such
Organic Change if such holder had converted its Preferred Units immediately
prior to such Organic Change. In each such case, the Company shall also make
appropriate provisions (in form and substance satisfactory to the holders of a
majority of the Preferred Units then outstanding, in their good faith judgment)
to insure that the provisions of this SECTION 4.1 and SECTION 4.2 hereof shall
thereafter be applicable to the Preferred Units (including, in the case of any
such consolidation, merger or sale in which the successor entity or purchasing
entity is other than the Company, an immediate adjustment of the Conversion
Price to a value equal to the product of (x) the Conversion Price then in effect
TIMES (y) a fraction, the numerator of which is the value for the Common Units
reflected by the terms of such consolidation, merger or sale, and the
denominator of which is the Current Price then in effect, and a corresponding
immediate adjustment in the number of Conversion Securities acquirable and
receivable upon conversion of Preferred Units, if the value so reflected is less
than the Current Price in effect immediately prior to such consolidation, merger
or sale). The Company shall not effect any such consolidation, merger or sale,
unless prior to the consummation thereof the successor entity (if other than the
Company) resulting from consolidation or merger or the entity purchasing such
assets assumes by written instrument (in form and substance satisfactory to the
holders of a majority of the Preferred Units then outstanding, in their good
faith judgment) the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
(f) CERTAIN EVENTS. If any event occurs of the type contemplated by
the provisions of this SECTION 4.1, but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Board of Managers shall make an appropriate adjustment in the Conversion Price
so as to protect the rights of the holders of Preferred Units; PROVIDED that no
such adjustment shall increase the Conversion Price as otherwise determined
pursuant to this SECTION 4.1 or decrease the number of Conversion Securities
issuable upon conversion of each Preferred Unit.
(g) NOTICES.
(i) Immediately upon any adjustment of the Conversion Price,
the Company shall give written notice thereof to all holders of Preferred
Units, setting forth in reasonable detail and certifying the calculation
of such adjustment.
(ii) The Company shall give written notice to all holders of
Preferred Units at least 20 days prior to the date on which the Company
closes its books or takes a record (a) with respect to any Distribution
upon Common Units, (b) with respect to any pro rata subscription offer to
holders of Common Units, or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
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(iii) The Company shall also give written notice to the
holders of Preferred Units at least 20 days prior to the date on which any
Organic Change shall take place.
(h) NO AVOIDANCE. If the Company shall enter into any transaction
for the purpose of avoiding the application of the provisions of this
SECTION 4.1, the benefits provided by such provisions shall nevertheless apply
and be preserved.
(i) MANDATORY CONVERSION. All holders of Preferred Units shall be
required to convert the Preferred Units held by each such holder in accordance
with the provisions of this SECTION 4.1 (A) contemporaneously with any Qualified
Public Offering, or (B) upon the affirmative vote of the holders of a majority
of the Preferred Units then outstanding. Any mandatory conversion under clause
(A) of the immediately preceding sentence shall only be effected at the time of
and subject to the closing of the sale of shares pursuant to such Qualified
Public Offering and upon written notice of such mandatory conversion delivered
by the Company to all holders of Preferred Units at least seven days prior to
such closing.
Section 4.2 PURCHASE RIGHTS. If at any time the Company grants,
issues, distributes or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Units (the "PURCHASE RIGHTS"), then each holder
of Preferred Units shall be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of Conversion Securities acquirable
upon conversion of such holder's Preferred Units immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or if no such record is taken, the date as of which the record holders of Common
Units are to be determined for the grant, issue or sale of such Purchase Rights.
Section 4.3 ACCELERATION UPON OCCURRENCE OF CERTAIN PROCEEDINGS.
The Preferred Units and the Class B Senior Units shall not be redeemable,
except as set forth in this SECTION 4.3 (and, in the case of Class B Senior
Units, SECTION 4.1). If at any time the Company makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Company bankrupt or insolvent; or any order for relief with
respect to the Company is entered under the Federal Bankruptcy Code; or the
Company petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Company or of any
substantial part of the assets of the Company, or commences any proceeding
(other than a proceeding for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Company under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law
of any jurisdiction; or any such petition or application is filed, or any
such proceeding is commenced, against the Company and either (a) the Company
or any such Subsidiary by any act indicates its approval thereof, consent
thereto or acquiescence therein or (b) such petition, application or
proceeding is not dismissed within 60 days (any of the foregoing, a
"PROCEEDING"), then the holders of a majority of the Preferred Units then
outstanding may demand (by written notice delivered to the Company) immediate
redemption of all or any portion of the Preferred Units and Class B Senior
Units owned by such holders at a price
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per Unit equal to the Liquidation Value (or Class B Senior Value, as applicable)
thereof (plus all accrued and unpaid Preferred Yield (or Class B Senior Yield,
as applicable) thereon).
ARTICLE V
MANAGEMENT
THE PROVISIONS OF THIS ARTICLE V ARE SUBJECT TO CERTAIN VOTING
AGREEMENTS AND PROVISIONS RELATING TO THE COMPOSITION OF, AND
THE ELECTION, TERM, RESIGNATION, REMOVAL, AND
REPLACEMENT OF REPRESENTATIVES TO, THE BOARD OF MANAGERS
AND OTHER MATTERS SET FORTH IN THE
SECURITYHOLDERS AGREEMENT (AS DEFINED HEREIN).
Section 5.1 MANAGEMENT AUTHORITY. Except as otherwise expressly
provided in this Agreement, (i) the Board of Managers shall conduct, direct, and
exercise full control over all activities of the Company, (ii) all management
powers over the business and affairs of the Company shall be exclusively vested
in the Board of Managers, and (iii) the Board of Managers shall have the sole
power to bind or take any action on behalf of the Company, or to exercise any
rights and powers (including, without limitation, the rights and powers to take
certain actions, give or withhold certain consents or approvals, or make certain
determinations, opinions, judgments, or other decisions) granted to the Company
under this Agreement or any other agreement, instrument, or other document to
which the Company is a party. No Representative shall individually have the
authority to bind the Company in any way, to take any action that would be (or
could be construed as) binding on the Company, or to make any expenditures on
behalf of the Company, unless such authority has been granted to such
Representative by the Board.
Section 5.2 DELEGATION OF AUTHORITY. The Board of Managers may, from
time to time, (i) appoint one or more Persons to be officers of the Company and
may assign such titles and functions, and delegate such authority and duties, to
such officers as it shall deem necessary or desirable, (ii) appoint, employ or
otherwise contract with such other Persons for the transaction of the business
of the Company or the performance of services for or on behalf of the Company as
it shall determine in its sole discretion, and (iii) delegate to any Person
(including any Member or officer of the Company or any Representative, and
including through the creation of one or more committees) such authority and
powers to act on behalf of the Company as it shall deem advisable in its sole
discretion. Any appointment, employment, or other delegation pursuant to this
SECTION 5.2 may be revoked at any time and for any or no reason by the Board of
Managers in its sole discretion.
Section 5.3 COMPOSITION; MEETINGS; ACTIONS.
(a) The number of Representatives which shall constitute the Board
of Managers as of the date of execution of this Agreement shall be eight (8).
Thereafter, the number of Representatives shall be established from time to time
by a Required Vote. The Representatives shall be elected to the Board of
Managers by a Required Vote. Each Representative shall hold office until a
successor is appointed or until his or her earlier death, resignation or removal
as herein
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provided. Any Representative or the entire Board of Managers may be removed at
any time, with or without cause, by a Required Vote. Vacancies and newly created
Representative positions resulting from any increase in the authorized number of
Representatives may be filled as determined by a Required Vote. Each
Representative so chosen shall hold office until a successor is appointed or
until his or her earlier death, resignation or removal as herein provided.
(b) A majority of the total number of Representatives present in
person or by proxy shall constitute a quorum for the transaction of business.
The vote of a majority of the Representatives present in person or by proxy at a
meeting of the Board of Managers at which a quorum is present shall be the act
of the Board of Managers. Each Representative shall be entitled to one vote on
all matters submitted to a vote of the Board of Managers; PROVIDED that so long
as (and solely to the extent) required by the terms of the Securityholders
Agreement, one of the MDCP Representatives (as such term is defined in the
Securityholders Agreement) (which MDCP Representative shall be designated from
among the MDCP Representations present in person or by proxy for such vote by
the MDCP Representatives present in person (or, if none, by proxy) for such
vote) shall be entitled to two votes (and, during such time as such MDCP
Representative is entitled to two votes, a "majority" of the Representatives
shall for all purposes (including determinations hereunder of the existence of a
quorum or of a majority vote required for action by the Board of Managers) mean
Representatives entitled to cast a majority of the total votes that may be cast
by all Representatives). Notice shall be given at least 48 hours prior to any
meeting of the Board of Managers. Notice may be waived before or after a meeting
or by attendance at such meeting without protest as to the adequacy of notice.
Notice shall be given in the manner described in SECTION 10.12 and shall be
deemed received as provided in SECTION 10.12. Representatives may participate in
a meeting of the Board of Managers by means of a telephone or other
teleconferencing or videoconferencing equipment, and such participation shall
constitute presence in person at such meeting. Any action required or permitted
to be taken by the Board of Managers at a meeting may be taken without a meeting
with the unanimous written consent of all Representatives serving thereon. The
Board of Managers may adopt such other procedures governing meetings and the
conduct of business as it shall deem appropriate.
Section 5.4 INDEMNIFICATION OF MEMBERS, REPRESENTATIVES, OFFICERS,
AND OTHERS.
(a) The Company hereby agrees to indemnify and hold harmless any
Person (each an "INDEMNIFIED PERSON") to the fullest extent permitted under the
Act, as the same now exists or may hereafter be amended, substituted or replaced
(but, in the case of any such amendment, substitution or replacement only to the
extent that such amendment, substitution or replacement permits the Company to
provide broader indemnification rights than the Company is providing immediately
prior to such amendment), against all expenses, liabilities and losses
(including attorney fees, judgments, fines, excise taxes or penalties)
reasonably incurred or suffered by such Person (or one or more of such Person's
Affiliates) by reason of the fact that such Person is or was a Member or is or
was serving as a Representative, officer, employee or agent of the Company or is
or was serving at the request of the Company as a representative, officer,
director, principal, member, employee or agent of another partnership,
corporation, joint venture, limited liability company, trust or other
enterprise; PROVIDED THAT (unless the Board of Managers otherwise consents) no
Indemnified Person
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shall be indemnified for any expenses, liabilities and losses suffered that are
attributable to such Indemnified Person's or its Affiliates' gross negligence,
willful misconduct or knowing violation of law, or for any present or future
breaches of any representations, warranties or covenants by such Indemnified
Person or its Affiliates contained herein or in any other agreement with the
Company, or for any Losses incurred by the Company. Expenses, including attorney
fees, incurred by any such Indemnified Person in defending a proceeding shall be
paid by the Company in advance of the final disposition of such proceeding,
including any appeal therefrom, upon receipt of an undertaking by or on behalf
of such Indemnified Person to repay such amount if it shall ultimately be
determined that such Indemnified Person is not entitled to be indemnified by the
Company.
(b) The right to indemnification and the advancement of expenses
conferred in this SECTION 5.4 shall not be exclusive of any other right which
any Person may have or hereafter acquire under any statute, agreement, by-law,
vote of Representatives or otherwise.
(c) The Company may maintain insurance, at its expense, to protect
any Indemnified Person against any expense, liability or loss described in
paragraph (a) above whether or not the Company would have the power to indemnify
such Indemnified Person against such expense, liability or loss under the
provisions of this SECTION 5.4.
(d) Notwithstanding anything contained herein to the contrary
(including in this SECTION 5.4), any indemnity by the Company relating to the
matters covered in this SECTION 5.4 shall be provided out of and to the extent
of Company assets only and no Member (unless such Member otherwise agrees in
writing or is found in a final decision by a court of competent jurisdiction to
have personal liability on account thereof) shall have personal liability on
account thereof or shall be required to make additional Capital Contributions to
help satisfy such indemnity of the Company.
(e) If this SECTION 5.4 or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify and hold harmless each Indemnified Person pursuant to
this SECTION 5.4 to the fullest extent permitted by any applicable portion of
this SECTION 5.4 that shall not have been invalidated and to the fullest extent
permitted by applicable law.
ARTICLE VI
MEMBERS
Section 6.1 LIMITATION OF LIABILITY. Except as otherwise provided by
applicable laws, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Member or Representative shall be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a Member or acting as a Representative of the Company;
PROVIDED THAT a Member shall be required to return to the Company any
Distribution made to it in clear and manifest accounting or similar error. The
immediately preceding sentence shall constitute a compromise to
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which all Members have consented within the meaning of the Act. Notwithstanding
anything contained herein to the contrary, the failure of the Company to observe
any formalities or requirements relating to the exercise of its powers or
management of its business and affairs under this Agreement or the Act shall not
be grounds for imposing personal liability on the Members for liabilities of the
Company.
Section 6.2 LACK OF AUTHORITY OF INDIVIDUAL MEMBERS. Unless
delegated such power in accordance with SECTION 5.2, no Member shall in its
capacity as such have the authority or power to act for or on behalf of the
Company in any manner, to do any act that would be (or could be construed as)
binding on the Company, or to make any expenditures on behalf of the Company,
and the Members hereby consent to the exercise by the Board of Managers of the
powers and rights conferred upon it by law and this Agreement.
Section 6.3 TRANSFER OF COMPANY INTERESTS; WITHDRAWAL AND REMOVAL.
(a) THE TRANSFER OF INTERESTS IN THE COMPANY ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER CONTAINED IN THE EQUITY PURCHASE AGREEMENT, THE
SECURITYHOLDERS AGREEMENT, THE PERFORMANCE VESTING AGREEMENT, AND THE EXECUTIVE
SECURITIES AGREEMENTS. IN ADDITION, NO MEMBER MAY TRANSFER ALL OR ANY PORTION OF
SUCH MEMBER'S INTEREST IN THE COMPANY WITHOUT THE PRIOR WRITTEN CONSENT OF THE
BOARD OF MANAGERS (WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD) IF SUCH
TRANSFER WOULD CAUSE THE COMPANY TO HAVE MORE THAN 100 PARTNERS WITHIN THE
MEANING OF TREASURY REGULATION 1.7704-1(h).
(b) No Member may sell, assign, pledge, transfer or otherwise
dispose of all or any portion of such Member's Units (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
(a "TRANSFER"), unless (i) such Transfer complies with the relevant provisions
of any agreements to which the Company and such Member are parties, and (ii) the
transferee furnishes to all Members (A) a letter of acceptance, in form
reasonably satisfactory to the Board of Managers, of all the terms and
conditions of this Agreement and (B) such other documents, instruments, or
certificates as shall in good faith be deemed necessary or appropriate by the
Board of Managers in order to effect such Person's admission as a Member.
(c) Any attempted Transfer which violates the provisions of this
SECTION 6.3 shall be void and the purported buyer, assignee, transferee,
pledgee, mortgagee or other recipient shall have no interest in or rights to
Company assets, profits, losses or distributions, and neither the Members nor
the Company shall be required to recognize any such interest or rights.
(d) A Transfer permitted under this SECTION 6.3 shall be effective
as of the date of assignment and compliance with the conditions to such Transfer
set forth herein, and such Transfer shall be shown on the books and records of
the Company. Profits, Losses, and other Company items shall be allocated between
the transferor and the transferee according to Code Section 706. Distributions
made with respect to the transferred Units before the effective date of
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such Transfer shall be paid to the transferor, and Distributions made with
respect to such transferred Units after such date shall be paid to the
transferee.
(e) Any Member who shall transfer any Units shall cease to be the
holder of such Units and, if such Units constitute all of such Member's Company
interests, shall cease to be a Member, and such transferring Member shall no
longer have any rights or privileges hereunder with respect to such transferred
Units; PROVIDED that (i) the applicable provisions of SECTIONS 5.4 and 6.1 shall
continue to inure to such Person's benefit, (ii) such Person shall not be
relieved of any liability of such Person to the Company or the other Members
with respect to the transferred Units that may exist on the transfer date or
that is otherwise specified in the Act and incorporated into this Agreement or
for any present or future breaches of any representations, warranties, or
covenants by such Person contained herein or in the other agreements to which
such Person and the Company are parties.
(f) No Member may, or may be required to, withdraw from the Company,
except upon a Transfer of such Member's Units in accordance with this SECTION
6.3 or upon a permitted repurchase or redemption of such Member's Units pursuant
to the provisions of this Agreement or any other agreement to which the Company
and such Member are parties.
(g) No Person shall be admitted as a Member of the Company, except
upon a Transfer of Units to such Person in accordance with this SECTION 6.3 or
upon the issuance of Units to such Person in accordance with the provisions of
SECTION 2.2.
Section 6.4 NO RIGHT OF PARTITION. No current or former Member shall
have the right to seek or obtain partition by court decree or operation of law
of any Company property, or the right to own or use particular or individual
assets of the Company.
Section 6.5 INDEMNIFICATION AND REIMBURSEMENT FOR PAYMENTS ON BEHALF
OF A MEMBER. Subject to the provisions of the Employment Agreements, if the
Company is obligated to pay any amount to a governmental body (or otherwise
makes a payment) because of a Member's status or otherwise specifically
attributable to a Member (including, without limitation, federal withholding
taxes with respect to foreign members, state personal property taxes, state
unincorporated business taxes, etc.), then such Member shall indemnify the
Company in full for the entire amount paid (including, without limitation, any
interest, penalties and expenses associated with such payments). The Board of
Managers may offset Distributions to which a Member is otherwise entitled under
this Agreement against such Person's obligation to indemnify the Company under
this section.
Section 6.6 CERTAIN DUTIES OF REPRESENTATIVES AND OFFICERS.
(a) Except as otherwise specifically provided in this Agreement or
in the other agreements contemplated hereby, each of the Company's
Representatives and officers shall owe to the Company and the Members the same
duties and obligations that would be owed to a corporation organized under the
Delaware General Corporation Law by its directors and officers (as such duties
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and obligations are defined, described, and explained under the laws of the
State of Delaware); PROVIDED that, to the fullest extent permitted by the
Delaware General Corporation Law as the same exists or may hereafter be amended,
a Representative or officer shall not be liable to the Company or its Members
for monetary damages for any breach of fiduciary duty as a Representative or
officer, and any repeal or modification of this Section 6.6 shall not adversely
affect any right or protection of a Representative or officer of the Company
existing at the time of such repeal or modification.
(b) To the extent that any Representative or officer or Member has
duties (including fiduciary duties) and liabilities relating thereto to the
Company or to any Member, (i) any such Representative, officer or Member acting
under this Agreement shall not be liable to the Company or to any Member for
such Person's good faith reliance on the provisions of this Agreement, the
records of the Company, and such information, opinions, reports, or statements
presented to the Company by any of the Company's officers or employees, by
committees of the Board of Managers, or by any other Person as to matters such
Representative, officer, or Member reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, and (ii) the Representative's,
officer's, or Member's duties and liabilities are restricted by the provisions
of this Agreement to the extent that such provisions restrict the duties and
liabilities of the Representatives, officers, or Members otherwise existing at
law or in equity.
Section 6.7 CONFIDENTIALITY. Each Member recognizes and acknowledges
that it may receive certain confidential and proprietary information and trade
secrets of the Company and its Subsidiaries, including but not limited to
confidential information of the Company and its Subsidiaries regarding
identifiable, specific and discrete business opportunities being pursued by the
Company or its Subsidiaries (the "CONFIDENTIAL INFORMATION"). Each Member (on
behalf of itself and, to the extent that such Member would be responsible for
the acts of the following persons under principles of agency law, its directors,
officers, shareholders, partners, employees, agents and members) agrees that it
will not, during or after the term of this Agreement, whether through an
Affiliate or otherwise, take commercial or proprietary advantage of or profit
from any Confidential Information or disclose Confidential Information to any
Person for any reason or purpose whatsoever, except (i) to authorized
representatives and employees of the Company or its Subsidiaries and as
otherwise may be proper in the course of performing such Member's obligations,
or enforcing such Member's rights, under this Agreement; (ii) as part of such
Member's normal reporting or review procedure, or in connection with such
Member's or its Affiliates' normal fund raising, marketing, informational or
reporting activities, or to such Member's (or any of its Affiliates') auditors,
attorneys or other agents; (iii) to any bona fide prospective purchaser of the
equity or assets of such Member or its Affiliates or the Units held by such
Member, or prospective merger partner of such Member or its Affiliates, PROVIDED
that such purchaser or merger partner agrees to be bound by the provisions of
this SECTION 6.7; or (iv) as is required to be disclosed by order of a court of
competent jurisdiction, administrative body or governmental body, or by
subpoena, summons or legal process, or by law, rule or regulation, PROVIDED that
the Member required to make such disclosure shall provide to the Board of
Managers prompt notice of any such disclosure. For purposes of this Section,
"Confidential Information" shall not include any information: (x) of which such
Person (or its Affiliates) became aware prior to its affiliation with the
Company, (y) of which
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such Person (or its Affiliates) learns from sources other than the Company or
its Subsidiaries, whether prior to or after such information is actually
disclosed by the Company or its Subsidiaries, or (z) which is disclosed in a
prospectus or other documents available for dissemination to the public. Nothing
in this SECTION 6.7 shall in any way limit or otherwise modify any
confidentiality covenants entered into by any Member pursuant to any other
agreement to which such Member and the Company or any of its Subsidiaries are
parties.
Section 6.8 VOTING RIGHTS. On all matters which are required
pursuant to this Agreement or the Act or other applicable law to be voted on by
the Company's Members, the holders of Common Units and the holders of Preferred
Units shall be entitled to vote on all such matters voting together as a single
class, with each Common Unit entitled to one vote per Common Unit and each
Preferred Unit entitled to one vote for each Common Unit issuable upon
conversion of such Preferred Unit as of the record date for such vote (or, if no
record date is specified, as of the date of such vote). Except with respect to
the proviso in SECTION 10.5 or as otherwise required by law, the holders of
Senior Units shall have no right to vote such Units on any matter submitted to
the Company's Members for a vote.
ARTICLE VII
DISSOLUTION AND LIQUIDATION
Section 7.1 DISSOLUTION. The Company shall be dissolved, and its
affairs shall be wound up and terminated, upon:
(a) the affirmative vote of the Board of Managers, together with a
Required Vote of the Members, approving such dissolution and liquidation; or
(b) an administrative dissolution or the entry of a decree of
judicial dissolution of the Company under Section 18-802 of the Act.
Except as set forth above or as otherwise required by law, the Company is
intended to have perpetual existence. The Company shall not be dissolved by the
admission of additional or substitute Members or by an Event of Withdrawal, and
upon and after any such admission or event the Company shall continue in
existence subject to the terms and conditions of this Agreement.
Section 7.2 LIQUIDATION OF COMPANY INTERESTS.
(a) Upon dissolution, the Company shall be liquidated in an orderly
manner. The Board of Managers shall act (or it may appoint one or more Members,
Representatives, officers, or other Persons to act) as the liquidators to wind
up the affairs of the Company pursuant to this Agreement and terminate the
Company. The costs of liquidation shall be borne by the Company. Prior to final
distribution and termination, the liquidators shall continue to operate the
Company and its assets with all of the power and authority of the Board. The
steps to be accomplished by the liquidators are as follows:
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(i) the liquidators shall pay, satisfy and discharge all
debts, obligations, and other liabilities of the Company to its creditors
(including, without limitation, all sales commissions or other expenses
incurred in liquidation) or otherwise make adequate provision for payment
and discharge thereof (including, without limitation, establishing cash
reserves to be held in escrow for contingent or unforeseen liabilities of
the Company, in such amounts and for such holding periods as the
liquidators may reasonably determine); and
(ii) after payment or provision for payment of all of the
Company's liabilities has been made in accordance with subparagraph (i),
(A) a final performance vesting determination shall be made under the
Performance Vesting Agreement, if it remains in effect, (B) a final
allocation of all items of income, gain, loss, and expense shall be made
in accordance with SECTION 3.2 hereof, and (C) all remaining assets of the
Company shall be distributed to the Members in accordance with SECTION
3.1(c). Any non-cash assets distributed to the Members shall first be
written up or down to their Fair Market Value, thus creating Profit or
Loss (if any), which shall be allocated in accordance with SECTION 3.2.
(b) In making distributions, the liquidators shall allocate each
type of Company assets among the Members ratably based upon the aggregate
amounts to be distributed with respect to the Units held by each such Member.
(c) The distribution of cash and/or property to a Member in
accordance with the provisions of this SECTION 6.2 constitutes a complete return
to such Member of its Capital Contributions and a complete distribution to the
Member of its interest in the Company and the Company's property. This paragraph
constitutes a compromise to which all Members have consented within the meaning
of the Act.
(d) Upon completion of the distribution of the Company's assets as
provided herein, the Company shall be terminated (and the Company shall not be
terminated prior to such time), and the Board of Managers (or such other Person
or Persons as the Act may require or permit) shall file a certificate of
cancellation with the Secretary of State of Delaware, cancel any other filings
made pursuant to this Agreement that are or should be canceled and take all such
other actions as may be necessary to terminate the Company. The Company shall be
deemed to continue in existence for all purposes of this Agreement until it is
terminated pursuant to this SECTION 7.2(d).
(e) A reasonable time shall be allowed for the orderly winding up of
the business and affairs of the Company and the liquidation of its assets
pursuant to this SECTION 7.2 in order to minimize any losses otherwise attendant
upon such winding up.
(f) The liquidators shall not be personally liable for the return of
Capital Contributions or any portion thereof to any Member (it being understood
that any such return shall be made solely from Company assets).
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Section 7.3 VALUATION.
(a) The "FAIR MARKET VALUE" of any assets to be valued under this
Agreement shall be determined in accordance with this SECTION 7.3.
(b) The Fair Market Value of any asset constituting cash or cash
equivalents shall be equal to the amount of such cash or cash equivalents.
(c) The Fair Market Value of any asset constituting publicly traded
securities shall be the average, over a period of 21 days consisting of the date
of valuation and the 20 consecutive business days prior to that date, of the
average of the closing prices of the sales of such securities on the primary
securities exchange on which such securities may at that time be listed, or, if
there have been no sales on such exchange on any day, the average of the highest
bid and lowest asked prices on such exchanges at the end of such day, or, if on
any day such securities are not so listed, the average of the representative bid
and asked prices quoted in the Nasdaq System as of 4:00 P.M., New York time, or,
if on any day such securities are not quoted in the Nasdaq System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization.
(d) The Fair Market Value of any assets other than cash, cash
equivalents, or publicly traded securities shall be the fair value of such
assets, determined on the basis of an orderly, arm's length sale (structured to
produce the highest price for such assets) to a willing, unaffiliated buyer (or
to a willing affiliated strategic buyer, PROVIDED that Fair Market Value shall
not include any premium that such an affiliated strategic buyer would be willing
to pay to the extent such premium is attributable solely to such Person's
then-current affiliation, unless such Person has made a fully financed, firm
commitment offer (with no material conditions) to purchase such assets at a
price that includes such premium), taking into account all relevant factors
determinative of value. Such fair value shall be determined jointly by the
Company, the holders of a majority of the Preferred Units then outstanding, and
the holders of a majority of the Common Units then outstanding. If such parties
are unable to reach agreement within a reasonable period of time, such fair
value shall be determined by an independent appraiser experienced in valuing the
type of assets to be valued, which appraiser shall be jointly selected by the
Company, the holders of a majority of the Preferred Units then outstanding, and
the holders of a majority of the Common Units then outstanding. The
determination of such appraiser shall be final and binding on all parties, and
the fees and expenses of such appraiser shall be borne by the Company.
ARTICLE VIII
BOOKS OF ACCOUNT
Section 8.1 RECORDS AND ACCOUNTING. The Company shall maintain
complete and accurate books of account of the Company's affairs at the Company's
principal office, which books
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shall be open to inspection by any Member (or such Member's authorized
representative) at any time during ordinary business hours.
Section 8.2 BANK ACCOUNTS. The Company may establish accounts for
the deposit of Company funds, in such types and at such institutions, as shall
be determined from time to time by the Board of Managers.
Section 8.3 FISCAL YEAR. The Fiscal Year of the Company shall be the
12-month period ending on December 31 of each calendar year, or such other
annual accounting period as may be established by the Board of Managers.
Section 8.4 TAX ELECTIONS. The Taxable Year of the Company shall be
the same as the Company's Fiscal Year, unless the Board of Managers shall
determine otherwise in its sole discretion and in compliance with applicable
laws. The Board of Managers shall in its sole discretion determine whether to
make or revoke any available election pursuant to the Code. Each Member will
upon request supply any information necessary to give proper effect to any such
election.
Section 8.5 TAX REPORTS. The Company shall provide to each Member
within 75 days after the end of each Taxable Year, the Company's tax return and
form K-1 for such Taxable Year, and such other information as may be necessary
for the preparation of each such Member's United States federal and state income
tax returns.
Section 8.6 TAX CONTROVERSIES. The Member having the right to cast
the greatest number of votes in any vote of the Members pursuant to SECTION 6.8
shall be designated the Tax Matters Member and shall be authorized and required
to represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Company funds for
professional services and other expenses reasonably incurred in connection
therewith. Each Member agrees to cooperate with the Company and to do or refrain
from doing any or all things reasonably requested by the Company with respect to
the conduct of such proceedings. The Tax Matters Member shall keep all Members
fully informed of the progress of any examinations, audits or other proceedings,
and all Members shall have the right to participate in any such examinations,
audits or other proceedings. Notwithstanding the foregoing, the Tax Matters
Member shall not settle or otherwise compromise any issue in any such
examination, audit or other proceeding without first obtaining approval of the
Board of Managers.
Section 8.7 SUBPART F INCOME. The Company shall use its reasonable
best efforts to cause its Subsidiaries to avoid recognizing income that would be
includible by the Company and its Members under Code Section 951; PROVIDED THAT
the Company and its Subsidiaries shall be free to take actions which will result
in income includible by the Company and its Members so long as the Company pays
tax distributions to the Members with respect to such income under
Section 3.1(b).
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<PAGE>
ARTICLE IX
POWER OF ATTORNEY
Each of the undersigned does hereby constitute and appoint each
Representative and liquidator with full power to act without the others (subject
to the provisions of ARTICLE V hereof), as such Member's true and lawful
representative and attorney-in-fact, in such Member's name, place and stead, to
make, execute, sign, acknowledge and deliver or file in such form and substance
as is approved by the Board of Managers (a) all instruments, documents and
certificates which may from time to time be required by any law to effectuate,
implement and continue the valid and subsisting existence of the Company, or to
qualify or continue the qualification of the Company in the State of Delaware
and in all jurisdictions in which the Company may conduct business or own
property, and any amendment to, modification to, restatement of or cancellation
of any such instrument, document or certificate, (b) all instruments which the
Board of Managers shall deem appropriate to reflect any amendment, change,
modification, or restatement of this Agreement approved in accordance with the
terms hereof, (c) all conveyances and other instruments, documents and
certificates which may be required to effectuate the dissolution and termination
of the Company, and (d) all instruments relating to the admission, withdrawal,
or substitution of any Member in accordance with the terms hereof; PROVIDED,
HOWEVER, that the foregoing power of attorney is limited to the performance of
ministerial acts only and shall not extend to material matters of governance or
economic substance. The powers of attorney granted herein shall be deemed to be
coupled with an interest, shall be irrevocable, and shall survive the death,
disability, incompetency, bankruptcy, insolvency or termination of any Member
and the Transfer of all or any portion of such Member's Company interest, and
shall extend to such Member's heirs, successors, assigns, and personal
representatives.
ARTICLE X
MISCELLANEOUS
Section 10.1 CONVERSION OF THE COMPANY INTO A "C" CORPORATION. At
any time after the date hereof, upon the affirmative vote of the Board of
Managers and the Required Vote of the Members, the Company will be converted
(whether by merger, consolidation, or otherwise) into a corporation (as such
term is used in Subchapter C of the Code, Sections 301, ET SEQ.). Pursuant to
such conversion:
(i) each holder of Preferred Units shall receive in exchange
for such Preferred Units a number of shares of convertible preferred stock
of the Company (having rights and preferences substantially identical to
the Preferred Units) equal to the product of (x) the total number of
shares of convertible preferred stock issued in such conversion TIMES (y)
a fraction, the numerator of which is the number of Preferred Units held
by such holder immediately prior to such conversion, and the denominator
of which is the total number of Preferred Units outstanding immediately
prior to such conversion. Each share of convertible preferred stock
received in such conversion shall, as of immediately after such
conversion,
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be deemed to have accrued, paid, unpaid, and accumulated dividends thereon
equal to the respective accrued, paid, unpaid, and accumulated Preferred
Yield existing as of immediately prior to such conversion with respect to
the Preferred Units exchanged in such conversion for such share of
preferred stock;
(ii) each holder of Common Units shall receive in exchange for
such Common Units a number of shares of common stock of the Company
(having rights and preferences substantially identical to the Common
Units) equal to the product of (x) the total number of shares of common
stock issued in such conversion TIMES (y) a fraction, the numerator of
which is the number of Common Units held by such holder immediately prior
to such conversion, and the denominator of which is the total number of
Common Units outstanding immediately prior to such conversion;
(iii) each holder of Class A Senior Units shall receive in
exchange for such Class A Senior Units a promissory note of the Company
with the following terms: (A) an aggregate principal amount equal to the
aggregate Capital Contributions made in respect of all Class A Senior
Units held by such holder immediately prior to such conversion, (B)
accruing simple interest at a rate of 8% per annum, (C) all principal and
accrued interest payable upon the first to occur of a Qualified Public
Offering, a Sale of the Company, or the fourth anniversary of the issuance
of such Class A Senior Units, (D) liquidation rights junior to all senior
debt obligations of the Company, and (E) such other terms and conditions
as are substantially identical to the rights and preferences of the Class
A Senior Units hereunder. Each promissory note received in such conversion
shall, as of immediately after such conversion, be deemed to have accrued
and unpaid interest thereon in an amount equal to simple interest on the
aggregate Capital Contributions made in respect of all Class A Senior
Units exchanged in such conversion for such promissory note, at a rate of
8% per annum, from the date of issuance of such Class A Senior Units to
the date of such conversion);
(iv) each holder of Class B Senior Units shall receive in
exchange for such Class B Senior Units a promissory note of the Company
with the following terms: (A) an aggregate principal amount equal to the
aggregate Class B Senior Value of all Class B Senior Units held by such
holder immediately prior to such conversion, (B) accruing interest in the
same manner and at the same times as the Class B Senior Yield would accrue
on the exchanged Class B Senior Units, (C) principal and accrued interest
payable in the same manner and at the same times as the exchanged Class B
Senior Units would be redeemed pursuant to SECTION 4.1(a)(ii) and would
receive distributions pursuant to SECTIONS 3.1(c) and (f), (D) liquidation
rights junior to all senior debt obligations of the Company and the
promissory notes issued in exchange for the Class A Senior Units, and PARI
PASSU with the payment of the Liquidation Value (and all accrued but
unpaid dividends thereon) of the Company's convertible preferred stock,
and (E) such other terms and conditions as are substantially identical to
the rights and preferences of the Class B Senior Units hereunder. Each
promissory note received in such conversion shall, as of immediately after
such conversion, be deemed to have accrued, paid, unpaid, and accumulated
interest thereon in an amount equal to the accrued, paid, unpaid, and
accumulated Class B Senior Yield,
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<PAGE>
respectively, existing as of immediately prior to such conversion with
respect to all Class B Senior Units exchanged in such conversion for such
promissory note;
(v) each holder of Class C Senior Units shall receive in
exchange for such Class C Senior Units a promissory note of the Company
with the following terms: (A) an aggregate principal amount equal to the
aggregate Capital Contributions made in respect of all Class C Senior
Units held by such holder immediately prior to such conversion, (B)
accruing simple interest at a rate of 8% per annum, (C) all principal and
accrued interest payable upon the first to occur of a Qualified Public
Offering, a Sale of the Company, or the fifth anniversary of the issuance
of such Class C Senior Units, (D) liquidation rights junior to all senior
debt obligations of the Company, the promissory notes issued in exchange
for Class A Senior Units, the promissory notes issued in exchange for
Class B Senior Units, and the payment of the Liquidation Value (and all
accrued but unpaid dividends thereon) of the Company's convertible
preferred stock, and (E) such other terms and conditions as are
substantially identical to the rights and preferences of the Class C
Senior Units hereunder. Each promissory note received in such conversion
shall, as of immediately after such conversion, be deemed to have accrued
and unpaid interest thereon in an amount equal to simple interest on the
aggregate Capital Contributions made in respect of all Class C Senior
Units exchanged in such conversion for such promissory note, at a rate of
8% per annum, from the date of issuance of such Class C Senior Units to
the date of such conversion).
Section 10.2 FURTHER ACTION. The parties shall execute and deliver
all documents, instruments, and certificates, provide all information, and take
or refrain from taking all such further actions as may be necessary or
appropriate to achieve the purposes of this Agreement and effect the provisions
hereof, as determined in good faith by the Board of Managers.
Section 10.3 TITLE TO COMPANY ASSETS. The Company's assets will be
deemed to be owned by the Company as an entity, and no Member, individually or
collectively, will have any ownership interest in any Company asset or any
portion thereof.
Section 10.4 CREDITORS. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any creditors of the Company or
any of its Affiliates, and no creditor who makes a loan to the Company or any of
its Affiliates may have or acquire at any time as a result of making the loan
any direct or indirect interest in Company Profits, Losses, Distributions,
capital or property other than as a creditor.
Section 10.5 AMENDMENTS, MODIFICATIONS, OR WAIVERS. Any provision of
this Agreement may be amended, modified or waived upon the prior written
approval of the Members by a Required Vote; PROVIDED that any amendment,
modification, or waiver which adversely affects any Member's rights or
obligations hereunder relative to the Members voting in favor thereof, such
amendment, modification, or waiver shall also require the written consent of
such Member so adversely affected; AND PROVIDED FURTHER that if any such
amendment, modification, or waiver is to a provision in this Agreement that
requires a specific vote to take an action thereunder or to take an action with
respect to the matters described therein, such amendment, modification, or
waiver shall
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<PAGE>
not be effective unless such vote is obtained with respect to such amendment,
modification or waiver.
Section 10.6 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall inure to the benefit of and be binding upon the
Members and their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns, whether so expressed or not.
Section 10.7 REMEDIES. Each Member shall have all rights and
remedies set forth in this Agreement and all rights and remedies which such
Person has been granted at any time under any other agreement or contract and
all of the rights which such Person has under any law. Any Person having any
rights under any provision of this Agreement or any other agreements
contemplated hereby shall be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
granted by law. No failure by any party to insist upon the strict performance of
any covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute a waiver of
any such breach or any other covenant, duty, agreement or condition.
Section 10.8 GOVERNING LAW. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by, and construed in accordance with, the laws of the State of
Delaware, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of Delaware.
Section 10.9 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
Section 10.10 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more separate counterparts, any one of which need not
contain the signatures of more than one party, but each of which will be an
original and all of which together shall constitute one and the same agreement
binding on all the parties hereto.
Section 10.11 DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a substantive part of this Agreement. Whenever required by the
context, any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns, pronouns
and verbs shall include the plural and vice versa. The use of the word
"including" in this Agreement shall be by way of example rather than by
limitation. Reference to any agreement, document or
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<PAGE>
instrument means such agreement, document or instrument as amended or otherwise
modified from time to time in accordance with the terms thereof, and if
applicable hereof. The use of the words "or," "either" and "any" shall not be
exclusive. The parties hereto have participated jointly in the negotiation and
drafting of this Agreement. If an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
Section 10.12 NOTICES. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when (a) delivered
personally to the recipient, (b) telecopied to the recipient (with hard copy
sent to the recipient by reputable overnight courier service (charges prepaid)
that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a
business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by reputable overnight courier service
(charges prepaid). Such notices, demands and other communications shall be sent
to the following Persons at the following addresses:
TO MDCP:
Three First National Plaza, Suite 3800
Chicago, Illinois 60670
Attention: Paul J. Finnegan
James N. Perry, Jr.
James H. Kirby
Telephone: (312) 895-1000
Telecopy: (312) 895-1001
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey W. Richards, Esq.
Telephone: (312) 861-2473
Telecopy: (312) 861-2200
TO DEGEORGE OR DEGEORGE HOLDINGS:
3127 Casseekey Island Road
Jupiter, Florida 33477
Telephone: (561) 747-8277
Telecopy: (561) 575-1760
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<PAGE>
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Jonathan Dodge, Esq.
Vice President, Secretary, and General Counsel
DeGeorge Financial Corporation
591 Park Avenue
New York, New York 10021-7361
Telephone: (212) 371-9777
Telecopy: (212) 688-5233
TO ANY EXECUTIVE: at the Company's address, to the attention of
such Executive
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Holme Roberts & Owen LLP
1700 Lincoln Street
Suite 4100
Denver, Colorado 80203
Attention: W. Dean Salter, Esq.
Telephone: (303) 866-0245
Telecopy: (303) 866-0200
TO ANY OTHER MEMBER: at the address for such Member listed in the
Company's records
TO THE COMPANY:
6300 Syracuse Way , Suite 355
Englewood, Colorado 80111
Attention: Chief Executive Officer
Telephone: (303) 741-4788
Telecopy: (303) 741-4823
or to such other address or facsimile number or to the attention of such other
Person as the recipient party has specified by prior written notice to the
sending party.
Section 10.13 COMPLETE AGREEMENT. This Agreement, the documents
expressly referred to herein, and related documents of even date herewith and
therewith embody the complete agreement and understanding among the parties and
terminate, supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way (including, without limitation, the
Prior Agreement and the First Amended Agreement).
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<PAGE>
Section 10.14 BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday, or legal
holiday in the State of Colorado, the Republic of France, or the jurisdiction in
which the Company's principal office is located, the time period shall
automatically be extended to the business day immediately following such
Saturday, Sunday, or legal holiday.
Section 10.15 OPT-IN TO ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE.
The Members hereby agree that the Units shall be securities governed by Article
8 of the Uniform Commercial Code of the State of Delaware (and the Uniform
Commercial Code of any other applicable jurisdiction).
Section 10.16 DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.
Section 10.17 EFFECTIVENESS OF AGREEMENT. This Agreement shall be
valid, binding, and effective against each Member (including Laub and Hundt)
when it has been signed by such Member. Pursuant to Section 10.5 of the First
Amended Agreement, this Agreement amending and restating the First Amended
Agreement shall be valid, binding, and effective against all Members when it has
been signed by Members constituting a Required Vote.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amended and Restated Limited Liability Company Agreement to be signed as of the
date first above written.
MEMBERS:
DEGEORGE HOLDINGS LIMITED PARTNERSHIP
By LPL Investment Group, Inc.,
its general partner
By /s/ Lawrence F. DeGeorge
----------------------------------------
Lawrence F. DeGeorge, its Chairman
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P.,
its general partner
By Madison Dearborn Partners, Inc.,
its general partner
By /s/ Paul J. Finnegan
----------------------------------------
Its Managing Director
----------------------------------------
DOVEY COMPANY LLC
By /s/ James E. Dovey
----------------------------------------
James E. Dovey, its manager
DOVEY FAMILY PARTNERS LLLP
By /s/ James E. Dovey
----------------------------------------
James E. Dovey, its general partner
/s/ James E. Dovey
--------------------------------------------
James E. Dovey
(Signature Page for Second Amended and Restated LLC Agreement)
<PAGE>
/s/ William H. Pearson
--------------------------------------------
William H. Pearson
/s/ Richard N. Clevenger
--------------------------------------------
Richard N. Clevenger
/s/ David E. Lacey
--------------------------------------------
David E. Lacey
/s/ James C. Allen
--------------------------------------------
James C. Allen
/s/ Royce J. Holland
--------------------------------------------
Royce J. Holland
/s/ George T. Laub
--------------------------------------------
George T. Laub
/s/ Reed E. Hundt
--------------------------------------------
Reed E. Hundt
(Signature Page for Second Amended and Restated LLC Agreement)
<PAGE>
OTHER MEMBERS (SIGNATURES OF WHOM ARE NOT
INCLUDED) WHO ARE PARTY TO THIS AGREEMENT
PURSUANT TO THEIR EXECUTIVE SECURITIES
AGREEMENTS (AND/OR JOINDER AGREEMENTS
ENTERED INTO IN CONNECTION THEREWITH):
--------------------------------------------
Richard Folliot
Anna Lascar
Jean-Marie Le Monze
Charles Menatti
John Seder
Alexandre Westphalen
Nicolas Pitance
Claude LeMaire
Michel Picariello
Frank Lauterslager
John Puhl
Harold F. Carey, Jr.
Guy Gensollen
Pierre Wattelier
Hansjorg Rieder
Ian Sexton
Jean-Francois Golhen
Jerome de Vitry
Martine Clarkson
Chantal Lebon
Marie LeCocq
Anne-Catherine Nicosia
Valerie Hotte
Marie-Christine Boudin
Van-Linh Siharath
Isabelle Dubien
Nadege Griffit
Gregory Burlinchon
Cecile Affret
Jean Rodriguez
Catherine Grosjean
Christy Canterbury
Kathleen Hanlon
(Signature Page for Second Amended and Restated LLC Agreement)
<PAGE>
Informal translation in the English language of the substance of the original
notarial deed of [NAME COMPANY] in the Dutch language. In this translation
an attempt has been made to be as literal as possible, without
jeopardising the overall continuity. Inevitably, differences
may occur in the translation, and if so, the Dutch
text will govern.
INFORMAL TRANSLATION
OF THE SUBSTANCE OF THE ORIGINAL DUTCH NOTARIAL DEED CONCERNING THE
ARTICLES OF ASSOCIATION OF COMPLETEL EUROPE N.V.
ARTICLE 1: NAME AND OFFICIAL SEAT
1. The name of the Company is: CompleTel Europe N.V.
2. It has its official seat in Amsterdam and may have branch offices elsewhere.
ARTICLE 2: OBJECTS
1. The objects for which the Company is established are:
(a) to finance companies and other enterprises, to borrow, to lend and
to raise funds, to participate in all types of financial
transactions, including the issue of bonds, promissory notes or
other securities or evidences of indebtedness, to invest in
securities in the widest sense of the word, to grant guarantees, to
bind the company and to grant security over its assets for the
obligations of companies and other enterprises with which it forms a
group and of third parties;
(b) to enter into additional financial and other agreements (including
swaps and other derivatives transactions) in relation to the
activities named under a above;
(c) to incorporate and to participate in any way whatsoever in, to
manage, to supervise and to co-operate with companies and other
enterprises, to acquire, to keep, to alienate or in any other manner
to manage all sorts of participations and interests in other
companies and other enterprises, to enter into joint ventures with
other companies and enterprises;
(d) to acquire, to manage, to operate, to encumber and to alienate
personal and real property and any right to or interest in personal
and real property; and
(e) to obtain, to exploit and to alienate patents and other intellectual
property rights, to acquire and to grant licences, sub-licences and
similar rights of whatever name and description and if necessary, to
protect rights derived from patents and other intellectual property
rights, licences, sub-licences and similar rights against
infringement by third parties.
2. The objects specified in the preceding paragraph shall be construed in
the widest sense so as to include any activity or purpose which is related,
incidental, or conducive thereto.
3. In pursuing its objects, the Company shall also take into account the
interests of the group of companies and enterprises with which it is
affiliated.
ARTICLE 3: DURATION
The Company has been established to operate for an indefinite period of time.
ARTICLE 4: CAPITAL AND SHARES
1. The authorised capital of the company is three million one hundred fifty
nine thousand
<PAGE>
nine hundred and twenty four Netherlands Guilders and nine Guilder cents
(NLG 3,159,924.09) divided into one hundred five million three hundred
thirty thousand eight hundred and three (105,330,803) shares, of three
Guilder cents (NLG 0.03) each.
2. The Board of Management shall decide in the event shares are issued
whether shares will be registered or bearer. The Board of Management
shall at the request of a shareholder change a fully paid up registered
share to a bearer share and vice versa.
3. Shares not yet issued shall be issued at such price, upon such conditions
and at such times as the General Meeting of Shareholders shall determine,
provided that the shares shall not be issued at a price below par value,
without prejudice to the provisions of Article 2:80 paragraph 2 of the
Netherlands' Civil Code. The General Meeting of Shareholders may
designate another body of the Company which in its place is authorised to
decide upon the issue of new shares. Such designation shall be valid for
a limited period of time which shall not exceed five years. The
designation shall specify the class and the number of shares of each
class that may be issued. The designation may be extended for periods not
exceeding five years each, and unless the designation states otherwise,
it cannot be revoked.
4. Without prejudice to the next paragraph, in the event of new shares being
issued each existing shareholder shall have a preferential right to
subscribe for these shares in proportion to his existing shareholding,
save to the extent that shares are issued to employees of the Company or
of an affiliated company or to a person who exercises a previously
acquired right to subscribe for shares. This preferential right applies
also in respect of shares issued in consideration for contribution in
kind. The Company shall announce the issuance with preferential rights
and the period during which such rights can be exercised to the
shareholders at the addresses notified to the Company and if bearer
shares have been issued, a notice shall be published by the company in
the State Gazette and in a national daily newspaper. The period during
which the preferential rights can be exercised shall not be less than
four (4) weeks after sending the announcement to the Shareholders or the
announcement in the national newspaper. If the terms do not correspond,
the longest period shall apply.
5. When new shares are issued, the preferential rights of the existing
shareholders referred to in the previous paragraph may, in each case in
respect of one particular issue, be restricted or excluded pursuant to a
resolution of the General Meeting of Shareholders. The General Meeting of
Shareholders may delegate its authority in this respect to another body
of the Company if that body has also been designated by it pursuant to
paragraph 3 of this Article. The provisions and conditions of that
paragraph shall apply mutatis mutandis in that case.
6. The Board of Management shall, within 8 days after each issuance of
shares, notify the aforementioned Commercial Register, stating the number
and kind of shares issued.
7. Paragraphs 2 to 6 (inclusive) shall apply correspondingly in respect of
the Company granting rights to subscribe for shares.
8. Share certificates shall be issued in respect of bearer shares in the
capital of the Company. The share certificates shall be in such form and
shall be numbered in such manner as shall be designated by the Board of
Management.
9. Collective share certificates will be issued for the total number of
shares held by a shareholder. Such collective certificates shall, at the
request of the holder thereof be exchanged for certificates representing
one single share or certificates representing several shares and vice
versa.
10. If there is one Managing Director in office, the share certificates shall
be signed by this
<PAGE>
Managing Director. If the Board of Management consists of more than one
Managing Director, the share certificates shall be signed by two Managing
Directors of the Company.
11. In the event of the loss, theft, destruction of or damage to share
certificates, the Board of Management may issue duplicate certificates.
The Board of Management may impose conditions on duplicating share
certificates, including a requirement for the recipient to submit a
guarantee in respect of claimants who may come forward and to compensate
all the costs incurred.
12. By the issue of a duplicate certificate the original share certificate
shall become of no value vis-a-vis the Company. The new share certificate
shall state that it is a duplicate.
13. The company will only co-operate with the issuance of depositary receipts
in its capital, if this has been approved by the General Meeting of
Shareholders. Where in these Articles "depositary receipts" is mentioned
this refers to depositary receipts of shares which have been issued with
co-operation of the company and where "holder of depositary receipts" is
mentioned, this refers to the holders of depositary receipts which have
been issued with co-operation of the Company, unless the context
indicates otherwise.
ARTICLE 5: ACQUISITION BY THE COMPANY OF ITS OWN SHARES
1. Any acquisition by the Company of shares in its own capital which are not
fully paid-up shall be null and void.
2. The Company may acquire fully paid-up shares in its own capital for no
consideration or, provided that:
(a) its shareholders' equity, reduced by the acquisition price, is not
less than the paid-up share capital (including calls made) together
with the amount of such reserves as it is required by Statute or by
these Articles of Association to maintain; and
(b) the aggregate nominal value of the shares to be acquired and the
shares in its capital which the Company holds, holds as pledgee, or
which are held by its subsidiaries does not exceed one tenth of the
issued capital of the Company.
3. The Board of Management can acquire shares in the company after being
authorised by the General Meeting of Shareholders. The general meeting
must specify in the authorisation the number of shares which may be
acquired, the manner in which they may be acquired and the limits within
which the price must be set.
4. The validity of an acquisition by the Company of shares in its own
capital shall, with a view to the requirement set out in paragraph 2(a)
above, be decided on the basis of the shareholders' equity in the Company
as shown in its most recently adopted balance sheet, less the aggregate
of the acquisition price of shares in the capital of the Company and
distributions of profits or reserves to third parties which became due by
the Company and its subsidiaries after the balance sheet date. In the
event that more than six months of a financial year have passed without
the annual accounts having been adopted for the previous financial year,
the Company shall not be allowed to acquire its own shares in accordance
with this Article.
5. No dividends shall be distributed on shares in the capital of the Company
which are held by the Company itself or by its subsidiaries, and such
shares shall not be taken into account in determining the allocation of
profits.
6. Paragraphs 1 to 4 (inclusive) of this Article shall not apply in respect
of shares which the Company shall acquire by universal succession of
title.
<PAGE>
7. The term shares, where used in this Article, shall be deemed to include
depositary receipts of shares.
ARTICLE 6: REGISTER OF SHAREHOLDERS
1. The Board of Management shall keep a register in which the name and
address of each holder of registered shares shall be recorded, together
with the amount paid up on each share.
2. The register shall also record the names and addresses of persons
notified to the Company to have a right of pledge or a right of usufruct
on those shares, indicating whether the voting rights attaching to the
shares or the statutory rights of the holders of depositary receipts of
shares are vested in such persons.
3. Each holder, pledgee and usufructuary shall be required to ensure that
his or her address is known to the Company.
4. The Board of Management shall ensure that the register is kept up to date
at all times. All entries shall be signed by a member of the Board of
Management or by a person authorised to do so by the Board of Management.
5. At the request of a shareholder, a pledgee, a usufructuary or a holder of
depositary receipts, the Board of Management shall supply free of charge
extracts from the share register relating to the shares to which the
applicant has rights. If the shares are the subject of usufruct or pledge
the extract shall state who has the rights set forth in paragraphs 8 and
9 hereof.
6. The register shall be made available by the Board of Management at the
head office of the Company for inspection by the shareholders, by
pledgees and usufructuaries who have been granted the rights set forth in
paragraphs 8 and 9 hereof.
7. Shares may be the subject of usufruct.
8. A shareholder who has no voting rights and a usufructuary who does have
voting rights, shall have all such rights as Statute grants to the
holders of depositary receipts. An usufructuary who has no voting rights
shall not have the aforesaid rights.
9. Shares may be the subject of a pledge. The provisions of paragraph 8
shall apply correspondingly.
10. Without prejudice to Article 4 paragraph 13, wherever these Articles of
Association shall hereafter mention "holders of depositary receipts",
this shall mean the holders of registered depositary receipts issued for
shares with the co-operation of the Company as well as pledgees and
usufructuaries who possess the rights specified in paragraph 8 above.
ARTICLE 7: MULTIPLE BENEFICIARIES
If a share, or a registered depositary receipt issued with the co-operation
of the Company, or a right under a pledge or usufruct is owned by more than
one person, such joint owners may only be represented towards the Company by
one person appointed by them for that purpose. Notice of such appointment
shall be given forthwith to the Board of Management in writing.
ARTICLE 8: TRANSFER OF SHARES
1. The transfer of a registered share or the establishment of a limited
right attaching to a registered share shall require a notarial deed
taking into account the provisions of Articles 2:86, 86a and 86b of the
Netherlands' Civil Code.
2. The provisions of the previous paragraph apply correspondingly to a right
of pledge on
<PAGE>
shares other than as referred to in Article 3:259 of the Netherlands'
Civil Code, to the grant of a right of usufruct in respect of shares and
to the apportionment of shares on the division of any jointly held
property.
3. In the event shares or certificates of shares are officially listed on a
regulated stock exchange as described in article 86c Book 2 of the Dutch
Civil Code or if such listing shall soon take place, the transfer of
registered shares shall, contrary to paragraph 1 of this article, take
place in accordance with article 86c Book 2 of the Dutch Civil Code by
way of a deed accompanied by a written confirmation of the transfer by
the Company.
ARTICLE 9: MANAGEMENT
1. The Company shall be managed by a Board of Management (Directie)
consisting of one or more members, appointed by the General Meeting of
Shareholders.
2. The General Meeting of Shareholders shall be entitled to suspend or
dismiss one or more managing directors at a Meeting where least half of
the issued share capital is represented.
3. Where a quorum under paragraph 2 is required but not present, a further
Meeting shall be convened, to be held no more than four weeks yet no
sooner than fifteen days after the first Meeting, which shall be
entitled, irrespective of the share capital represented, to pass a
resolution in regard of the suspension or dismissal.
4. A legal entity may be a member of the Board of Management.
5. The remuneration of the members of the Board of Management, any rights to
bonuses and the further terms of appointment shall be determined by the
General Meeting of Shareholders for each member of the Board of
Management individually.
ARTICLE 10: DECISION-MAKING OF THE BOARD OF MANAGEMENT
1. If the Board of Management consists of more than one member, this Article
shall apply to the manner in which it makes decisions.
2. Resolutions of the Board of Management are adopted by absolute majority
of the votes validly cast.
3. Meetings of the Board of Management can be convened by any of its members
giving notice to all other members of the Board in writing, at least
three days prior to the date of the meeting. Resolutions can be validly
adopted at a meeting so convened, regardless of the number of members
present.
4. A member of the Board of Management can be represented at the meeting by
one of his fellow members pursuant to a written power of attorney. Such
power of attorney may be in respect of only one specifically designated
meeting as stated therein.
5. Resolutions can be adopted by the Board of Management outside a formal
meeting, provided that all of its members have been consulted in writing,
that they have expressed in writing their opinion on the intended
resolution and that a majority of them is in favour of the particular
resolution.
6. For the application of the provisions of this Article, references to
"written" and "in writing" shall mean by letter, cable, telex or
facsimile.
<PAGE>
ARTICLE 11: POWERS AND DUTIES OF THE BOARD OF MANAGEMENT
1. The Board of Management shall be responsible for the management and
administration of the Company. The General Meeting of Shareholders may
give instructions to the Board of Management regarding the general
directions of the financial, social, economic and personnel policies to
be pursued. The Board of Management shall act in accordance with such
instructions.
2. The Board of Management represents the company. If the Board of
Management consists of more than one Managing Director, any two Managing
Directors acting jointly shall also be authorised to represent the
Company. The Board of Management may grant a power of attorney to any one
Managing Director individually empowering him to represent the Company
within the limits set forth in such power of attorney. The above shall
apply equally in the event of a conflict of interest; in any transaction
with or legal procedure against a Managing Director in person or against
any legal entity in which a Managing Director has, in person, effective
control, the Company shall be represented by a person appointed by the
General Meeting of Shareholders.
3. The General Meeting of Shareholders may designate certain executive
decisions for which the Board of Management shall require its prior
approval. The relevant executive decisions shall be described in detail
in the resolution adopted by the General Meeting of Shareholders and the
Board of Management shall be informed of the adoption of such resolution
forthwith.
4. In the event that one or more members of the Board of Management are
absent or unable to act, the General Meeting of Shareholders may appoint
a substitute or substitutes for each of those absent or unable to act,
and the remaining member(s) together with the substitute(s) so appointed
shall be temporarily entrusted with the management of the Company. In the
event that all members or the only member of the Board of Management are
absent or unable to act, the management of the Company shall be
temporarily entrusted to a person who shall be appointed for this purpose
by the General Meeting of Shareholders.
5. Transactions between the Company and the holder of all shares in the
issued share capital of the Company or between the Company and the spouse
of such shareholder, if all shares are subject to a community of
property, must be recorded in writing. For the purposes of this provision
shares held by the Company in its own capital or shares held by a
subsidiary of the Company, are not taken into account. If the provision
set out in the first sentence is not complied with, the relevant
transaction is voidable in favour of the Company.
6. The provision of the previous paragraph does not apply to transactions
falling within the ordinary course of business of the Company.
ARTICLE 12: GENERAL MEETING OF SHAREHOLDERS
All powers not entrusted to the Board of Management or to others shall vest
in the General Meeting of Shareholders within the limits defined by Statute
and these Articles of Association.
ARTICLE 13: ANNUAL MEETINGS
1. The Annual General Meeting of Shareholders shall be held not later than
six months after the end of each financial year.
2. In addition to the meeting referred to in paragraph 1 of this Article,
Extraordinary
<PAGE>
General Meetings of Shareholders may be held.
ARTICLE 14: PLACE AND CONVOCATION
1. General Meetings of Shareholders may be held in The Netherlands in the
municipality where the Company has its official seat, as well as in the
municipalities of Rotterdam, The Hague and Haarlemmermeer. Resolutions
can only be validly adopted in a General Meeting of Shareholders held
elsewhere if the entire issued capital is represented.
2. General Meetings of Shareholders shall be convened by means of notices
sent not later than fifteen days prior to the meeting by a Managing
Director to the shareholders and holders of depositary receipts at the
addresses specified in the register referred to in Article 6 and if
bearer shares have been issued, a notice shall be published by the
company in a national daily newspaper. The convening notices shall state
the business to be discussed, without prejudice to the provisions of
Article 22 concerning proposals to amend these Articles of Association or
to wind up the Company.
3. At Meetings of Shareholders that have been convened without due
observance of the formalities mentioned in paragraph 2 of this Article,
no resolution may be validly adopted unless it is adopted unanimously and
the entire issued capital is represented at the Meeting.
ARTICLE 15: CHAIRMAN
1. General Meetings of Shareholders shall be chaired by the person appointed
for that purpose by the Meeting. The Chairman shall then appoint a
Secretary for that meeting, which person need not be a shareholder.
2. All matters regarding the admittance to the General Meeting of
Shareholders, the exercise of voting rights and the result of votings, as
well as any other matters regarding the affairs at the General Meeting
shall be decided upon by the chairman of that Meeting, with due
observance of the provisions of Article 2:13 of the Netherlands' Civil
Code.
3. The Chairman or the Board of Management may instruct a civil law notary
to draw up an official record of the Meeting at the expense of the
Company.
4. Unless an official record of the Meeting is drawn up by a civil law
notary, minutes shall be drawn up at the Meeting. The Minutes shall be
adopted and signed by the Chairman and the Secretary of the appropriate
Meeting in witness thereof, or shall be adopted by the next General
Meeting of Shareholders and in witness thereof signed by the Chairman and
Secretary of that meeting.
5. The Board of Management shall keep a written record of all resolutions.
Such records will be held available for inspection by the Shareholders
and holder of depositary receipts of shares at the office of the company.
Copies or extracts of such records will be provided to the shareholders
or holders of depositary receipt free of charge or at cost price.
ARTICLE 16: VOTING RIGHTS
1. Subject to paragraphs 3 and 4 of this Article, each share carries the
right to one vote. All Shareholders and other persons entitled to vote
are entitled to attend, to address and to vote at the General Meeting of
Shareholders. Holders of depositary receipts are entitled to attend and
address the General Meeting of Shareholders.
<PAGE>
2. Shareholders and other persons entitled to vote may be represented at
Meetings by a proxy appointed by an instrument in writing.
3. Shares held by the Company or by a subsidiary carry no right to vote in a
General Meeting of Shareholders. The same applies to depositary receipts
of shares held by one of them. However, usufructuaries and pledge's of
shares held by the Company or by a subsidiary may exercise their right to
vote if such right was created prior to the moment that the shares were
held by the Company or by a subsidiary. The Company or a subsidiary may
not cast votes in respect of shares in respect of which the Company or a
subsidiary of the Company possesses a pledge or usufruct.
4. In determining what proportion of shareholders exercise their votes, are
present or represented, or what proportion of the share capital is
provided or represented, the shares in respect of which no voting rights
can be exercised pursuant to Statute shall not be taken into account.
ARTICLE 17: VOTING PROCEDURE
1. Unless the Netherlands' Civil Code or these Articles of Association
provide for a larger majority, all resolutions of the General Meeting of
Shareholders shall be adopted by a simple majority of the votes validly
cast. Blank and invalid votes shall not be counted.
2. If an absolute majority is not obtained after two polls, the proposed
resolution is rejected, unless it concerns the election of persons, in
which case a further vote shall be taken between the two persons who
obtained the largest number of votes at the second poll. If the votes
remain equal at such further vote, a drawing of lots shall decide which
of the two persons who obtained the largest number of votes shall be
elected.
3. Voting shall take place orally, or if requested by a person entitled to
vote, voting shall be by a secret ballot. Voting in any other manner, for
example by acclamation, shall be permissible unless a person entitled to
vote objects thereto.
ARTICLE 18: RESOLUTIONS ADOPTED OUTSIDE A MEETING
Provided there are no shares in bearer form and there are no holders of
depositary receipts, any resolution that the Shareholders would have been
able to adopt in a General Meeting, may be adopted without such a Meeting
taking place provided that all shareholders entitled to vote have voted in
writing (including telefax) in favour of such resolution.
ARTICLE 19: FINANCIAL YEAR AND ANNUAL ACCOUNTS
1. The financial year of the Company shall be the calendar year.
2. Within five months after the end of the financial year, save where this
period is extended by a maximum of six months by the General Meeting of
Shareholders on account of special circumstances, the Board of Management
shall draw up the annual accounts, consisting of a balance sheet and a
profit and loss account with explanatory notes thereon, which shall be
available at the office of the Company for inspection by the
shareholders. The Board of Management shall also draw up the annual
reports within this term, unless Article 2:403 of the Netherlands' Civil
Code applies to the Company.
3. The annual accounts shall be signed by all members of the Board of
Management and shall be submitted to the General Meeting of Shareholders
for adoption. If the signature of one or more of the members of the Board
of Management is missing, this fact and the reason for such absence shall
be stated.
<PAGE>
4. The auditors of the Company, if required, shall be appointed by the
General Meeting of Shareholders, or if she refrains from doing so,
management, in accordance with Article 2:393 of the Netherlands' Civil
Code.
5. The appointment of the accountant can at all times be withdrawn by the
General Meeting of Shareholders or, if the appointment was made by the
Board of Management, by the Board of Management.
ARTICLE 20: INSPECTION OF ANNUAL ACCOUNTS AND DISCHARGE
1. From the day on which notice is given of the General Meeting of
Shareholders in which the annual accounts are to be dealt with until the
end of that Meeting, the annual accounts, the annual report and any other
information required under Article 2:392 of the Netherlands' Civil Code
shall be available at the Company's offices for inspection by the
shareholders and the holders of such rights which the Netherlands' Civil
Code grants to the holders of depositary receipts.
2. Free copies of the documents referred to in this Article shall be sent by
the Company to the Shareholders and the holders of such rights which the
Netherlands' Civil Code grants to the holders of depositary receipts.
Holders of shares issued in bearer form can obtain a free copy of the
documents at the Company's office. Once the documents referred to in this
Article are deposited with the Chamber of Commerce, this paragraph no
longer applies.
3. Adoption by the General Meeting of Shareholders of the annual accounts
shall fully discharge the Board of Management from liability in respect
of the exercise of their duties during the financial year concerned,
unless a proviso is made by the General Meeting of Shareholders, and
without prejudice to the statute.
ARTICLE 21: DISTRIBUTION OF PROFITS
1. The General Meeting of Shareholders shall, on a proposal of the Board of
Management or otherwise, determine the amounts of the profits as
determined by the adopted profit and loss account, if any, that the
Company shall reserve.
2. The remainder shall be the distributable profits, the appropriation of
which shall be determined by the General Meeting of Shareholders.
3. The Company may only make distributions to its shareholders and to others
entitled to receive part of its distributable profits, if and to the
extent that the Company's shareholders' equity exceeds the aggregate of
its paid up share capital (including calls made) and the amount of such
reserves as it is required by statute or by these Articles of Association
to maintain.
4. Insofar as the Company makes a profit, and subject to the approval of the
General Meeting of Shareholders, the Board of Management may decide to
pay an interim dividend, provided always that such dividend payment
complies with paragraph 3 of this Article and Article 2:105 paragraph 4
of the Netherlands' Civil Code.
5. Dividends (including interim dividends for the purposes of this and the
next paragraph) shall be made payable at the Company's offices from the
date the dividend is declared, unless the resolution concerned shall
provide for a different date or place.
6. If shares in bearer form are issued, notice of distributions and of the
dates and places referred to in the preceding paragraphs of this Article
shall at least be published in one national daily newspaper.
7. Dividends that have not been claimed within five years of becoming
payable shall be
<PAGE>
forfeited and shall accrue to the benefit of the Company.
ARTICLE 22: AMENDMENT OF ARTICLES OF ASSOCIATION, WINDING-UP, MERGER AND
DIVISION
1. If resolutions to amend these Articles of Association, to wind up the
Company, to enter into a Statutory Merger or a Statutory Division shall
be proposed to the General Meeting, the intention to propose such
resolution must be stated in the relevant notice convening the General
Meeting of Shareholders.
2. Any person who issues such a notice containing reference to an amendment
of the Articles of Association must at the same time deposit a copy of
the relevant motion, in which the proposed amendment is quoted verbatim,
at the Company's offices and such motion shall be made available for
inspection by each shareholder or holder of depositary receipts until the
end of the Meeting.
3. Between the day of deposit of the motion, referred to in the previous
paragraph, and the day of the General Meeting of Shareholders, the
shareholders and holders of depositary receipts shall be given an
opportunity to obtain a copy of such motion from the Company free of
charge.
4. A resolution of the General Meeting of Shareholders to amend these
Articles of Association, to wind up the Company or to enter into a merger
or division, can only be validly adopted by a resolution adopted with a
two thirds majority at a Meeting where at least half of the issued share
capital is represented.
5. Unless at least half of the issued share capital is represented at the
Meeting, the motion shall be decided at a second meeting to be held not
less than fifteen days but not more than four weeks after the first
Meeting. At that second Meeting a majority of at least two thirds of the
votes cast shall again be required for the adoption of the resolution,
regardless of the number of shares represented at that Meeting.
6. The notices convening the second Meeting shall be despatched after the
first Meeting has been held, such notice to be given in the same manner
as the notice which convened the first Meeting, provided that the notice
of the second Meeting must mention that a resolution may be adopted
irrespective of the proportion of the capital which is represented at the
Meeting and the reason for this. The provisions of paragraph 2 and 3 of
this Article shall fully apply in respect of the second Meeting.
ARTICLE 23: LIQUIDATION
1. In the event of the winding-up of the Company its liquidation shall be
carried out by the Board of Management, unless the General Meeting of
Shareholders, in it's resolution to wind-up the Company or later,
determines otherwise.
2. During the liquidation the provisions of these Articles of Association
shall remain in force as far as possible. The financial year during which
the General Meeting of Shareholders resolves to dissolve the Company
shall end on the date on which the Plan of Distribution (PLAN VAN
UITKERING) becomes irrevocable.
3. The balance remaining after liquidation shall first be applied towards
payments to the shareholders in proportion to the nominal value of their
shareholdings, provided always that, to the extent that shares have not
been fully paid-up, only the paid-up amount shall be taken into account.
4. After completion of the liquidation, the accounts and records of the
dissolved Company shall, during the period of time prescribed by statute,
remain in the custody of the liquidator unless the General Meeting of
Shareholders, in the winding-up resolution or later, determines otherwise.
<PAGE>
===============================================================================
CompleTel Europe N.V.
and
CompleTel Holdings LLC
147,500 Units Consisting of
US$147,500,000 Principal Amount at Maturity of
14% Senior Discount Notes due 2009
and
1,475,000 Non-Voting Class B Membership Interests
PURCHASE AGREEMENT
Dated as of February 8, 1999
==============================================================================
<PAGE>
CompleTel Europe N.V.
CompleTel Holdings LLC
147,500 Units Consisting of
US$147,500,000 Principal Amount at Maturity of
14% Senior Discount Notes due 2009
and
1,475,000 Non-Voting Class B Membership Interests
PURCHASE AGREEMENT
February 8, 1999
Salomon Smith Barney Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
TD Securities (USA) Inc.
Paribas Corporation
c/o Salomon Smith Barney Inc.
as Representative of the Initial Purchasers
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
CompleTel Europe N.V., a Netherlands public company with
limited liability (the "Company"), and CompleTel Holdings LLC, a Delaware
limited liability company ("CompleTel Holdings," and, together with the
Company, the "Issuers"), propose to issue and sell to the several parties
named on Schedule I hereto (the "Initial Purchasers") for whom Salomon Smith
Barney Inc. (the "Representative") is acting as representative, 147,500 units
(the "Units"), consisting of an aggregate of US$147,500,000 principal amount
at maturity of the Company's 14% Senior Discount Notes due 2009 (the "Notes")
and an aggregate of
<PAGE>
-2-
1,475,000 Non-Voting Class B Membership Interests of CompleTel Holdings
(each, a "Class B Interest"). Each Unit will consist of US$1,000 principal
amount of Notes and 10 Class B Interests. The Units, Notes and Class B
Interests are hereinafter referred to collectively as the "Securities."
The Notes are to be issued under an indenture (the
"Indenture") dated as of February 16, 1999 between the Company, CompleTel ECC
B.V. ("CompleTel ECC") and U.S. Bank Trust National Association, as trustee
(the "Trustee"). The Notes will be guaranteed (the "Subsidiary Guarantee") by
CompleTel ECC and will be guaranteed (the "Parent Guarantee") by CompleTel
LLC (the "Parent").
On the Closing Date (as defined herein) and simultaneously
with delivery and payment pursuant to Section 3 hereof, CompleTel ECC will
place $72,571,893 (representing the net proceeds (before expenses) from the
sale of the Securities) (the "Initial Escrow Amount") into a collateral
account and will pledge such account to the Trustee, for the benefit of the
holders of the Notes and the Trustee (in its capacity as such under the
Indenture) pursuant to the Escrow Agreement, dated as of February 16, 1999
(the "Escrow Agreement") among CompleTel ECC, the Company, U.S. Bank Trust
National Association, as escrow agent (the "Escrow Agent"), and the Trustee,
pending release in accordance with the terms of the Escrow Agreement.
The Initial Purchasers and the direct and indirect
transferees of the Notes will be entitled to the benefits of a Registration
Rights Agreement (the "Registration Rights Agreement") dated as of February
16, 1999, between the Company and the Initial Purchasers, pursuant to which
the Company will agree to register the Notes under the Act subject to the
terms and conditions therein specified. The Initial Purchasers and the direct
and indirect transferees of the Class B Interests will be entitled to the
benefits of an Equity Registration Rights Agreement (the "Equity Registration
Rights Agreement"), dated as of February 16, 1999, by and among the Company,
CompleTel Holdings, CompleTel (N.A.) N.V., the Parent, the Shareholders (as
defined therein), the Initial Purchasers and U.S. Bank Trust National
Association, pursuant to which holders of the Class B Interests will have (i)
certain rights to Demand Registrations (as defined therein) or Piggy-Back
Registrations (as defined therein), (ii) a Tag-Along Right (as defined
therein) and (iii) a requirement to sell Class B Interests or other
Registrable Securities (as defined therein), in each case, in accordance with
the provisions of the Equity Registration Rights Agreement.
Pursuant to an agreement between the Company, CompleTel
Holdings and CompleTel (N.A.) N.V. to be dated February 16, 1999 (the
"Subscription Agreement"), 31 common shares of the Company, 1,000 Netherland
Guilders each (the "Common Shares"), representing in the aggregate
approximately 7% of the issued share capital of the Company, will be issued
and delivered by the Company to CompleTel (N.A.) N.V., indirectly for the
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capital accounts of the holders of Class B Interests issued as a part of the
Units. On the Closing Date, the Class B Interests will be issued under a
limited liability company agreement dated as of February 16, 1999 (the "LLC
Agreement") among the members from time to time of CompleTel Holdings. After
the Closing Date, the Company will consummate a stock split of its Common
Shares such that each Common Share will be split into 48,889.62645012 Common
Shares, 0.03 Netherland Guilders each. After the consummation of the stock
split, CompleTel (N.A.) N.V. will own (indirectly for the capital accounts of
the holders of the Class B Interests) 1,475,000 Common Shares, representing
7% of the issued share capital of the Company.
The sale of the Securities to the Initial Purchasers will
be made without registration of the Securities under the Act in reliance upon
exemptions from the registration requirements of the Act. In connection with
the sale of the Securities, the Issuers have prepared a preliminary offering
memorandum, dated December 29, 1998 (including any and all exhibits thereto
and any information incorporated by reference therein, the "Preliminary
Memorandum"), and a final offering memorandum, dated February 8, 1999,
(including any and all exhibits thereto and any information incorporated by
reference therein, the "Final Memorandum"). Each of the Preliminary
Memorandum and the Final Memorandum sets forth certain information concerning
the Issuers and the Securities. Each of the Issuers hereby confirms that it
has authorized the use of the Preliminary Memorandum and the Final
Memorandum, and any amendment or supplement thereto, in connection with the
offer and sale of the Securities by the Initial Purchasers.
The Issuers understand that the Initial Purchasers propose
to make an offering of the Securities only on the terms and in the manner set
forth in the Final Memorandum and herein as soon as the Initial Purchasers
deem advisable after this Agreement has been executed and delivered, to
persons in the United States whom the Initial Purchasers reasonably believe
to be qualified institutional buyers ("QIBs") as defined in Rule 144A under
the Act, as such rule may be amended from time to time ("Rule 144A"), in
transactions under Rule 144A, and outside the United States to certain
persons in reliance on Regulation S under the Act.
This Agreement (this "Agreement"), the Indenture, the
Securities, the Parent Guarantee, the Subsidiary Guarantee, the Exchange
Securities (as defined in the Registration Rights Agreement), the LLC
Agreement, the Subscription Agreement, the Registration Rights Agreement, the
Equity Registration Rights Agreement and the Escrow Agreement are referred to
collectively as the "Operative Documents." The term "you" as used herein
shall mean the Representative and the term "Initial Purchasers" as used
herein shall mean the Initial Purchasers listed on Schedule I. Certain terms
used herein are defined in Section 20 hereof and certain other terms used
herein and not otherwise defined have the meanings ascribed to such terms in
the Final Memorandum.
<PAGE>
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1. REPRESENTATIONS AND WARRANTIES. The Issuers, jointly and
severally, represent and warrant to and agree with each Initial Purchaser
that:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Final
Memorandum (as supplemented or amended) does not, and at the Closing Date
will not, contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the Issuers make no representation or warranty as to the
information contained in or omitted from the Preliminary Memorandum or
the Final Memorandum, or any amendment or supplement thereto, in reliance
upon and in conformity with information furnished in writing to the
Issuers by or on behalf of the Initial Purchasers specifically for
inclusion therein.
(b) None of the Issuers or any of their respective Affiliates, or
any person acting on their behalf has, directly or indirectly, made offers
or sales of any security, or solicited offers to buy any security, which is
or will be integrated with the sale of the Securities in a manner that
would require the registration of the Securities under the Act.
(c) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Act.
(d) None of the Issuers or any of their respective Affiliates or
any person (other than the Initial Purchasers, as to which the Issuers make
no representation) acting on the Issuers' behalf has engaged, in connection
with the offering of the Securities, (A) in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under
the Act, (B) in any directed selling efforts within the meaning of Rule 902
under the Act in the United States in connection with the Securities being
offered and sold pursuant to Regulation S under the Act, (C) in any manner
involving a public offering within the meaning of Section 4(2) of the Act
or (D) in any action which would require the registration of the offering
and sale of the Securities pursuant to this Agreement or which would
violate applicable state "blue sky" laws.
(e) Assuming that the representations and warranties of the
Initial Purchasers contained in Section 4 are true, correct and complete,
and assuming compliance by the Initial Purchasers with their covenants in
Section 4, and assuming that the representations and warranties deemed to
be made by non-U.S. persons and QIBs purchasing Securities are true and
correct as of the Closing Date, it is not necessary in
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connection with the offer, sale and delivery of the Securities to the
Initial Purchasers in the manner contemplated by, or in connection with
the initial resale of such Securities by the Initial Purchasers in
accordance with, this Agreement to register the Securities under the Act
or to qualify the Indenture under the Trust Indenture Act.
(f) Neither the Company nor CompleTel Holdings is, and after
giving effect to the Offering and sale of the Securities and the
application of the proceeds therefrom as described in the Final Memorandum
neither will be, an "investment company" or a company "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act; neither the Company nor CompleTel Holdings is otherwise subject to
regulation or registration under the Investment Company Act nor would
either the Company or CompleTel Holdings be subject to regulation or
registration under the Investment Company Act in the absence of Section
3(c)(1) or Section 3(c)(7) of the Investment Company Act.
(g) The Issuers have not paid or agreed to pay to any person any
compensation for soliciting another to purchase any of the Securities
(except as contemplated by this Agreement).
(h) The Issuers have not taken, directly or indirectly, any
action designed to cause or to result in, or that has constituted or that
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Issuers to facilitate the
sale or resale of the Securities.
(i) The only subsidiaries (direct and indirect) of the Parent on
the Closing Date will be those listed on SCHEDULE II hereto (other than the
Issuers, each of such subsidiaries are referred to herein as the
"Subsidiaries"). Each of the Issuers, the Parent and the Subsidiaries has
been duly incorporated or otherwise organized and is validly existing and
(insofar as applicable in the respective jurisdiction) in good standing as
a corporation, limited liability company or unlimited company, as the case
may be, under the laws of its jurisdiction of incorporation or
organization, as the case may be. Each of the Issuers, the Parent and the
Subsidiaries has full requisite corporate or other power and authority to
own, lease and operate its properties and conduct its business as described
in the Final Memorandum, and (insofar as the concept is applicable in the
respective jurisdiction) is duly qualified to do business as a foreign
corporation, limited liability company or unlimited company, as the case
may be, in good standing under the laws of each jurisdiction where the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified
could not reasonably be expected to have a material adverse effect on (i)
the business, condition (financial or otherwise), assets, earnings, results
of operations, business affairs or business prospects of the Issuers, the
Parent and
<PAGE>
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the Subsidiaries, taken as a whole or (ii) the ability of each of the
Issuers, CompleTel (N.A.) N.V., CompleTel ECC and the Parent to duly and
punctually perform any of its obligations under the Operative Documents
or to consummate the transactions contemplated hereby and thereby (a
"Material Adverse Effect"); and, to the knowledge of the Issuers, no
revocation or limitation or variation of any such authorization or
approval, is threatened.
(j) As of the Closing Date, after giving effect to the
consummation of the transactions contemplated by the Operative Documents,
the issued and outstanding capital stock, share capital or equity
interests, as the case may be, of each of the Parent, the Company and the
Subsidiaries will be as set forth on Schedule III hereto. All the
outstanding shares of capital stock, capital shares or equity interests, as
the case may be, of the Parent, the Company and the Subsidiaries have been
duly and validly authorized and issued and are fully paid and (insofar as
the concept is applicable in the respective jurisdiction) nonassessable,
and were not issued in violation of preemptive or similar rights and,
except as otherwise set forth in the Final Memorandum, all outstanding
shares of capital stock, capital shares or equity interests, as the case
may be, of the Subsidiaries are owned by the Company or CompleTel Holdings,
directly or through wholly owned subsidiaries, free and clear of any
security interests, claims, liens, encumbrances or restrictions on
transferability (other than those imposed by the Act, state securities or
"Blue Sky" laws and other similar laws of the relevant jurisdiction of
incorporation or organization) or voting. Except as set forth in the Final
Memorandum, no options, warrants or other rights to purchase, agreements or
other obligations to issue, or other rights to convert any obligation into,
or exchange any securities for, shares of capital stock or equity interests
of the Parent, the Company or any Subsidiary are outstanding and no holder
of securities of the Parent, the Company or any Subsidiary is entitled to
have such securities registered under the Act.
(k) On the Closing Date, upon execution and delivery of the LLC
Agreement, the capitalization of CompleTel Holdings will consist solely of
Class A Membership Interests ("Class A Interests") and Class B Interests.
On the Closing Date, upon issuance and delivery of the Class B Interests as
contemplated by this Agreement and the consummation of the transactions
contemplated by the other Operative Documents there will be 19,596,429
Class A Interests and 1,475,000 Class B Interests issued and outstanding.
On the Closing Date, the Class A Interests will have been duly authorized
and validly issued, will be fully paid and non-assessable and such
membership interests will not have been issued in violation of any
preemptive or similar rights. Except as set forth in the Equity
Registration Rights Agreement, there are no outstanding options, warrants
or other rights to purchase, agreements or other
<PAGE>
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obligations to issue or other rights to convert any obligation into, or
exchange any securities for, equity interests of CompleTel Holdings and no
holder of securities of CompleTel Holdings is entitled to have such
securities registered under the Act.
(l) As of the Closing Date, the Company will have the authorized,
issued and outstanding capitalization set forth in the Final Memorandum
under the heading "Capitalization"; the Common Shares conform to the
descriptions thereof in the Final Memorandum.
(m) The Company has the requisite corporate power and authority
to execute, deliver and perform its obligations under the Notes and the
Exchange Securities. The Notes and the Exchange Securities have been duly
and validly authorized by the Company for issuance. The Notes, when
executed, authenticated and issued in accordance with the provisions of the
Indenture, and delivered to and paid for by the Initial Purchasers in
accordance with the terms hereof, will have been duly executed, issued and
delivered and (assuming the due authentication by the Trustee) will
constitute valid and legally binding obligations of the Company, entitled
to the benefits of the Indenture and enforceable against the Company in
accordance with their terms, and the Exchange Securities, when executed,
authenticated, issued and delivered in the manner contemplated by the
Registration Rights Agreement and the Indenture, will have been duly
executed, issued and delivered and (assuming the due authentication by the
Trustee) will constitute valid and legally binding obligations of the
Company, entitled to the benefits of the Indenture and enforceable against
the Company in accordance with their terms, except, in each case, that the
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
(and judicially developed doctrines in the area such as substantive
consolidation or equitable subordination) now or hereafter in effect
relating to or affecting creditors' rights generally, or (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought (regardless of whether such enforcement
is considered in a proceeding at law or in equity) (collectively, the
"Enforceability Limitations"). The Notes are in the form contemplated by
the Indenture.
(n) The Parent has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Parent Guarantee.
The Parent Guarantee has been duly and validly authorized by the Parent.
The Parent Guarantee, upon execution and delivery by the Parent will
constitute a valid and legally binding obligation of the Parent,
enforceable against the Parent in accordance with its terms, except that
the enforcement thereof may be limited by the Enforceability Limitations.
<PAGE>
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(o) CompleTel ECC has the requisite corporate power and authority
to execute, deliver and perform its obligations under the Subsidiary
Guarantee. The Subsidiary Guarantee has been duly and validly authorized by
CompleTel ECC. The Subsidiary Guarantee, upon execution and delivery by
CompleTel ECC will constitute a valid and legally binding obligation of
CompleTel ECC, enforceable against CompleTel ECC in accordance with its
terms, except that the enforcement thereof may be limited by the
Enforceability Limitations.
(p) CompleTel Holdings has the requisite power and authority to
issue the Class B Interests. The Class B Interests have been duly and
validly authorized for issuance by CompleTel Holdings and, when delivered
to and paid for by the Initial Purchasers in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable and will not
have been issued in violation of any preemptive or similar rights. The
Class B Interests are in the form contemplated by the LLC Agreement and are
entitled to the benefits of the LLC Agreement; no holder of a Class B
Interest will be subject to personal liability solely by reason of being
such a holder. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of the Class B
Interests are valid, binding and enforceable in accordance with the terms
of the LLC Agreement.
(q) Each of the Company and CompleTel ECC has the requisite
corporate power and authority to execute, deliver and perform its
obligations under the Indenture. The Indenture has been duly and validly
authorized by the Company and CompleTel ECC and, when executed and
delivered by each of the Company and CompleTel ECC (assuming the due
authorization, execution and delivery by the Trustee), will constitute a
valid and legally binding agreement of each of the Company and CompleTel
ECC, enforceable against each of the Company and CompleTel ECC in
accordance with its terms, except that the enforcement thereof may be
limited by the Enforceability Limitations.
(r) Each of the Issuers has the requisite corporate or other
power and authority to execute, deliver and perform its obligations under
this Agreement. This Agreement has been duly and validly authorized,
executed and delivered by the Issuers and (assuming the due authorization,
execution and delivery by the Initial Purchasers) constitutes a valid and
legally binding agreement of the Issuers, enforceable against the Issuers
in accordance with its terms, except that the enforcement thereof may be
limited by the Enforceability Limitations.
(s) Each of the Issuers, the Parent and CompleTel (N.A.) N.V. has
the requisite corporate or other power and authority to execute, deliver
and perform its obligations under the Equity Registration Rights Agreement.
The Equity Registration
<PAGE>
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Rights Agreement has been duly and validly authorized by the Issuers, the
Parent and CompleTel (N.A.) N.V. and, when executed and delivered by the
Issuers, the Parent and CompleTel (N.A.) N.V., (assuming the due
authorization, execution and delivery by the Initial Purchasers, the
Shareholders and U.S. Bank Trust National Association) will constitute a
valid and legally binding agreement of the Issuers, the Parent and
CompleTel (N.A.) N.V., enforceable against each of them in accordance with
its terms, except that the enforcement thereof may be limited by the
Enforceability Limitations.
(t) The Company has the requisite corporate power and authority
to execute, deliver and perform its obligations under the Registration
Rights Agreement. The Registration Rights Agreement has been duly and
validly authorized by the Company and, when executed and delivered by the
Company (assuming the due authorization, execution and delivery by the
Initial Purchasers), will constitute a valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its
terms, except that the enforcement thereof may be limited by the
Enforceability Limitations.
(u) Each of the Issuers and CompleTel (N.A.) N.V. has the
requisite corporate or other power and authority to execute, deliver and
perform its obligations under the Subscription Agreement. The Subscription
Agreement has been duly and validly authorized and, when executed and
delivered by each of the Issuers and CompleTel (N.A.) N.V., will constitute
a valid and legally binding agreement of each of the Issuers and CompleTel
(N.A.) N.V., enforceable against each of them in accordance with its terms,
except that the enforcement thereof may be limited by the Enforceability
Limitations.
(v) CompleTel ECC and the Company has the requisite corporate
power and authority to execute, deliver and perform its obligations under
the Escrow Agreement. The Escrow Agreement has been duly and validly
authorized by CompleTel ECC and, when executed and delivered by CompleTel
ECC, the Company, the Escrow Agent and the Trustee, will constitute a valid
and legally binding agreement of each of CompleTel ECC and the Company,
enforceable against CompleTel ECC and the Company in accordance with its
terms, except that the enforcement thereof may be limited by the
Enforceability Limitations.
(w) The Securities, the Exchange Securities, the Parent
Guarantee, the Subsidiary Guarantee, the Indenture, the Escrow Agreement,
the Equity Registration Rights Agreement, the LLC Agreement, the limited
liability company agreement of the Parent (the "Parent LLC Agreement"), the
Subscription Agreement, the Registra-
<PAGE>
-10-
tion Rights Agreement, the Class B Interests and the Common Shares conform
in all material respects to the descriptions thereof in the Final
Memorandum.
(x) No consent, waiver, approval, authorization, license,
qualification, registration, filing with or order of any court or
governmental agency or body, (whether domestic or foreign), is required in
connection with the issuance and sale of the Securities or the Exchange
Securities or the performance by the Issuers, CompleTel (N.A.) N.V.,
CompleTel ECC or the Parent of their respective obligations under the
Operative Documents, or for the consummation of any of the transactions
contemplated hereby or thereby, except (i) as has already been acquired or
as of the Closing Date will be acquired or (ii) except such as may be
required (A) in connection with the registration under the Act of the
Exchange Securities or the Class B Interests, pursuant to the Registration
Rights Agreement or the Equity Registration Rights Agreement, as
applicable, (B) in order to qualify the Indenture under the Trust Indenture
Act or (C) by state securities or "blue sky" laws in connection with the
offer and sale of the Securities or the registration thereof or of the
Exchange Securities pursuant to the Registration Rights Agreement or the
Equity Registration Rights Agreement, as applicable; all consents, waivers,
approvals, authorizations, licenses, qualifications, registrations,
filings, or orders which are required to be obtained by the Closing Date,
will be obtained by such date and will be in full force and effect on the
Closing Date.
(y) Neither the execution, delivery or performance of the
Operative Documents by the Issuers, CompleTel (N.A.) N.V., CompleTel ECC or
the Parent, nor the consummation of any of the transactions contemplated by
the Operative Documents (including the use of the proceeds from the sale of
the Securities as described under the caption "Use of Proceeds" in the
Final Memorandum), nor the fulfillment of the terms hereof or thereof will
conflict with, or result in a breach or violation or default (or an event
that, with notice or lapse of time or both, would constitute a breach or
default) or imposition of any lien, charge or encumbrance upon any property
or assets of the Issuers, the Parent or the Subsidiaries pursuant to, (i)
the certificate of incorporation or bylaws (or similar organizational
documents) of the Issuers, the Parent or any of the Subsidiaries, (ii) the
terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement, note or other agreement, obligation, condition,
covenant, license, permit or instrument to which the Issuers, the Parent or
any of the Subsidiaries is a party or bound or to which their property is
subject or (iii) any statute, law, rule, regulation, judgment, order or
decree applicable to Issuers, the Parent or any of the Subsidiaries of any
court, regulatory body, administrative agency, governmental body,
arbitrator or other authority (whether foreign or
<PAGE>
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domestic) having jurisdiction over the Issuers, the Parent or any of the
Subsidiaries or any of their properties.
(z) At the time of deposit with the Escrow Agent of the Initial
Escrow Amount, no Lien (as such term is defined in the Indenture) exists
upon such Collateral (as such term is defined in the Escrow Agreement) and
no right or option to acquire the same exists in favor of any other person
or entity, except for the pledge and security interest in favor of the
Trustee for the benefit of the holders of the Securities and the Trustee
(in its capacity as such under the Indenture) to be created or provided for
in the Escrow Agreement, which pledge and security interest shall
constitute a first priority perfected pledge and security interest in and
to all of the Collateral.
(aa) The consolidated historical financial statements and
schedules of the Parent and its consolidated subsidiaries included in the
Final Memorandum present fairly in all material respects the financial
condition, results of operations and cash flows of the Parent and its
consolidated subsidiaries as of the dates and for the periods indicated,
and have been prepared in conformity with generally accepted accounting
principles in the United States ("GAAP"), applied on a consistent basis
throughout the periods involved (except as otherwise noted therein); the
selected financial data set forth under the captions "Selected Consolidated
Financial Data" and "Capitalization" in the Final Memorandum fairly
present, on the basis stated in the Final Memorandum, the information
included therein. Arthur Andersen LLP, which has examined such financial
statements, as set forth in the report included in the Final Memorandum, is
an independent public accounting firm with respect to the Parent, the
Issuers and the Subsidiaries within the meaning of Regulation S-X under the
Act.
(bb) No legal action, suit or proceeding, inquiry or
investigation by or before any court or governmental agency, authority or
body or any arbitrator (whether domestic or foreign) involving the Issuers,
the Parent or any of the Subsidiaries or its or their property is pending
or, to the knowledge of the Issuers, threatened against the Issuers, the
Parent or any of the Subsidiaries that (i) could reasonably be expected to
have a material adverse effect on the performance of the Operative
Documents, or the consummation of any of the transactions contemplated
hereby or thereby or (ii) could reasonably be expected to have a Material
Adverse Effect.
(cc) None of the Issuers, the Parent or any Subsidiary is in
violation or default of (i) any provision of its articles of incorporation
or bylaws (or other similar organizational documents); (ii) the terms of
any indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement, note or other agreement, obligation, condition, covenant,
license, permit or instrument to which it is a party or bound or to which
its property is subject; or (iii) any statute, law, rule, regulation,
judgment, order
<PAGE>
-12-
or decree (whether foreign or domestic) applicable to the Issuers, the
Parent or any of the Subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority
(whether domestic or foreign) having jurisdiction over the Issuers, the
Parent or any of the Subsidiaries or any of their properties except, in
each case, as would not be reasonably expected to have a Material Adverse
Effect.
(dd) Except as set forth in the Final Memorandum or would not be
reasonably expected to have a Material Adverse Effect, each of the Issuers,
the Parent and the Subsidiaries has obtained all consents, approvals,
orders, licenses, certificates, permits and other authorizations
(collectively, the "Licenses") issued by the appropriate Federal, state or
foreign national governmental or regulatory authorities necessary to own,
lease, license and use its properties and assets to conduct its businesses
in the manner described in the Final Memorandum. None of the Issuers, the
Parent or the Subsidiaries has received any notice of proceedings relating
to the revocation or modification of any License which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
could have a Material Adverse Effect and no event has occurred which
allows, or after notice or lapse of time, or both, would allow, revocation
or termination thereof or result in any other material impairment of the
rights of the holder of any such License, except where such revocation or
termination could not, singly or in the aggregate, reasonably be expected
to have or result in a Material Adverse Effect; and the Licenses referred
to above place no restrictions on the Issuers, the Parent or any of the
Subsidiaries that are not described in the Final Memorandum, except where
such restrictions could not, singly or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect.
(ee) Each of the Issuers, the Parent and the Subsidiaries has
filed all foreign, federal, state and local tax returns that are required
to be filed or has requested extensions thereof (except in any case in
which the failure so to file would not have a Material Adverse Effect),
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Final Memorandum
and has paid all taxes required to be paid by it and any other assessment,
fine or penalty levied against it, to the extent that any of the foregoing
is due and payable, except for any such assessment, fine or penalty that is
currently being contested in good faith or as would not have a Material
Adverse Effect, except as set forth in or contemplated in the Final
Memorandum.
(ff) No labor problem or dispute with the employees of the
Issuers, the Parent or any of the Subsidiaries exists or, to the knowledge
of the Issuers, is threatened or imminent, and the Issuers are not aware of
any existing or imminent labor disturbance by the employees of any of the
Subsidiaries' principal suppliers, contractors or customers, whether or not
arising from transactions in the ordinary course of
<PAGE>
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business, except, in each case, as set forth in or contemplated in the
Final Memorandum or as would not reasonably be expected to have a Material
Adverse Effect.
(gg) All descriptions in the Final Memorandum of contracts and
other documents to which any of the Issuers or any of the Subsidiaries are
a party are accurate in all material respects; there are no contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments
that would be required to be described in Part I of a registration
statement on Form F-1 under the 1933 Act that are not described or referred
to in the Final Memorandum and listed on Schedule IV hereto.
(hh) Neither the Company nor any of its subsidiaries has violated
any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS") or any provisions of the Employee Retirement Income Security Act of
1974, as amended, or the rules and regulations promulgated thereunder or
any comparable foreign law, except for such violations which, individually
or in the aggregate, would not have a Material Adverse Effect.
(ii) There are no costs and liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, individually or in the aggregate, have a Material
Adverse Effect.
(jj) Except as described in the Final Memorandum, including the
financial statements and notes thereto included therein, each of the
Issuers, the Parent and the Subsidiaries has good and marketable title to
all real and personal property described in the Final Memorandum as being
owned by it and (assuming good title by the lessor) good title to a
leasehold estate in the real and personal property described in the Final
Memorandum as being leased by it pursuant to leases that are in full force
and effect, free and clear of all liens, charges, encumbrances or
restrictions, except to the extent the failure to have such title or the
existence of such liens, charges, encumbrances or restrictions could not,
individually or in the aggregate, reasonably be expected to have or result
in a Material Adverse Effect.
(kk) Each of the Issuers, the Parent and the Subsidiaries has
insurance in such amounts and covering such risks and liabilities as are in
accordance with normal industry practice for the business in which they are
engaged.
<PAGE>
-14-
(ll) The statistical and market-related data included in the
Final Memorandum are based on or derived from independent sources which the
Issuers believe to be reliable and accurate in all material respects or
represent the Issuers' good faith estimates that are made on the basis of
data derived from such sources.
(mm) None of the Issuers, the Parent nor any of the Subsidiaries
nor any agent thereof acting on behalf of them has taken, and none of them
will take, any action that might cause this Agreement or the issuance or
sale of the Securities to violate Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System.
(nn) None of the Issuers, the Parent or the Subsidiaries or any
of their properties or assets has immunity from the jurisdiction of any
court or from any legal process (whether through service or notice,
attachment in aid of execution, executing or otherwise) under the laws of
the Netherlands or other applicable laws.
(oo) To ensure the legality, validity, enforceability or
admissibility into evidence of the Operative Documents or any other
document to be furnished thereunder, it is not necessary that the Operative
Documents, or any other document be filed or recorded with any court or
other authority in the Netherlands or any other jurisdiction.
(pp) None of (a) the Operative Documents, (b) the issuance, sale
and delivery of the Securities to the Initial Purchasers upon payment
therefor as contemplated in this Agreement, (c) the issuance of the
Exchange Securities as contemplated in the Registration Rights Agreement
and the Indenture, (d) the issuance of the Common Shares to CompleTel
(N.A.) N.V. pursuant to the Subscription Agreement or (e) the distribution
of the Common Shares of the Company to holders of the Class B Interests
upon a Liquidation Event (as defined in the LLC Agreement), in each case as
contemplated in the Operative Documents are subject to any registration
tax, stamp duty or similar tax, duty, impost or levy imposed by the
Netherlands or any political subdivision thereof or any other jurisdiction.
(qq) Each of the Company, CompleTel (N.A.) N.V. and CompleTel ECC
has the power to submit and on the Closing Date will have taken all
necessary corporate action to submit to the non-exclusive jurisdiction of
the federal and state courts in New York City, New York, and to waive
immunity in respect of the applicable Operative Documents and such
submission will be binding upon the Company, CompleTel (N.A.) N.V. and
CompleTel ECC.
Any certificate signed by any officer or authorized signatory of
the Issuers and delivered to any of the Initial Purchasers or counsel for the
Initial Purchasers in connection
<PAGE>
-15-
with the offering of the Securities shall be deemed a representation and
warranty by the Issuers as to matters covered thereby, to each Initial
Purchaser.
2. PURCHASE AND SALE. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Issuers agree to sell to the Initial Purchasers, and each Initial Purchaser
agrees, severally and not jointly, to purchase from the Issuers, at an
aggregate purchase price of US$72,571,893, representing approximately US$492
per Unit, the respective number of Units set forth on Schedule I opposite
such Initial Purchaser's name.
3. DELIVERY AND PAYMENT. Delivery of and payment for the
Securities shall be made at 9:00 A.M., New York City time, on February 16,
1999, or at such time on such later date (not later than two (2) Business
Days thereafter) as the Initial Purchasers shall designate, which date and
time may be postponed by agreement between the Initial Purchasers and the
Issuers or as provided in Section 9 hereof (such date and time of delivery
and payment for the Securities being herein called the "Closing Date").
Delivery of the Securities shall be made to the Initial Purchasers for the
respective accounts of the several Initial Purchasers against payment by the
several Initial Purchasers of the purchase price thereof by wire transfer of
immediately available funds in accordance with the Escrow Agreement. Delivery
of the Securities in definitive form shall be made at such location as the
Initial Purchasers shall reasonably designate at least one Business Day in
advance of the Closing Date. Certificates for the Securities shall be
registered in such names and in such denominations as the Initial Purchasers
may request not less than two full Business Days in advance of the Closing
Date.
4. OFFERING BY INITIAL PURCHASERS. The Initial Purchasers have
advised the Issuers that they propose to offer the Securities for resale upon
the terms and conditions set forth in this Agreement and in the Final
Memorandum. Each Initial Purchaser, severally and not jointly, represents and
warrants to and agrees with the Issuers that:
(a) It has not offered or sold, and will not offer or sell, any
Securities except (i) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Act) and that, in
connection with each such sale, it has taken or will take reasonable steps
to ensure that the purchaser of such Securities is aware that such sale is
being made in reliance on Rule 144A or (ii) in accordance with the
restrictions set forth in Exhibit A hereto.
(b) Neither it nor any person acting on its behalf has made or
will make offers or sales of the Securities in the United States by means
of any form of general solicitation or general advertising (within the
meaning of Regulation D) in the United States or by means of any directed
selling efforts (as defined in Rule 902 under the Securities Act) in the
United States in connection with the Securities being offered
<PAGE>
-16-
and sold pursuant to Regulation S or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act prior
to the effectiveness of a registration statement with respect to the
Securities.
(c) Each Initial Purchaser will deliver at or prior to the
Closing Date to each purchaser of the Securities from such Initial
Purchaser, in connection with its original distribution of the Securities,
a copy of the Final Memorandum, as amended and supplemented at the date of
such delivery.
(d) Each Initial Purchaser severally and not jointly represents
and warrants to, and agrees with, the Issuers that it is a "qualified
institutional buyer" within the meaning of Rule 144A under the Act (a
"Qualified Institutional Buyer").
5. AGREEMENTS OF THE ISSUERS. The Issuers agree with each Initial
Purchaser that:
(a) The Issuers will furnish to each Initial Purchaser and to
counsel for the Initial Purchasers, without charge, during the period
referred to in paragraph (c) below, as many copies of the Final Memorandum
and any amendments and supplements thereto as each Initial Purchaser and
counsel for the Initial Purchasers may reasonably request.
(b) The Issuers will not at any time make any amendment or
supplement to the Preliminary Memorandum or the Final Memorandum without
the prior written consent of the Initial Purchasers.
(c) The Issuers will immediately notify each Initial Purchaser
and confirm such notice in writing of (x) any filing made by the Issuers
relating to the offering of the Securities with any securities exchange or
any other regulatory body in the United States or any other jurisdiction
and (y) prior to the completion of the placement of the Securities by the
Initial Purchasers as evidenced by a notice in writing from the Initial
Purchasers to the Issuers, any event as a result of which the Final
Memorandum would include any untrue statements of material fact or omit to
state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
if it is necessary to amend or supplement the Final Memorandum to comply
with applicable law. In such event or if at any time prior to completion of
the distribution of the Securities by the Initial Purchasers to purchasers
who are not its affiliates (as determined by the Initial Purchasers) any
other event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of the Initial Purchasers or counsel for the
Initial Purchasers, to amend or supplement the Final Memorandum in order
that the Final Memorandum, as then
<PAGE>
-17-
amended or supplemented, will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time
it is delivered to a purchaser, not misleading or if in the opinion of the
Initial Purchasers or counsel for the Initial Purchasers, such amendment
or supplement is necessary to comply with applicable law, the Issuers will,
subject to paragraph (b) of this Section 5, promptly prepare, at their own
expense, such amendment or supplement as may be necessary to correct such
untrue statement or omission or to effect such compliance (in form and
substance agreed upon by the Initial Purchasers and counsel for the
Initial Purchasers), so that as so amended or supplemented, the statements
in the Final Memorandum will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time
it is delivered to a purchaser, not misleading or so that such Final
Memorandum as so amended or supplemented will comply with applicable law,
as the case may be, and furnish to the Initial Purchasers such number of
copies of such amendment or supplement as the Initial Purchasers may
reasonably request. The Issuers agree to notify the Initial Purchasers in
writing to suspend use of the Final Memorandum as promptly as practicable
after the occurrence of an event specified in this paragraph (c), and the
Initial Purchasers hereby agree upon receipt of such notice from the
Issuers to suspend use of the Final Memorandum until the Issuers have
amended or supplemented the Final Memorandum to correct such misstatement
or omission or to effect such compliance.
(d) Neither the Issuers nor any of their Affiliates will solicit
any offer to buy or offer or sell the Securities or the Exchange Securities
by means of any form of general solicitation or general advertising (as
such terms are used in Regulation D under the Securities Act), or by means
of any directed selling efforts (as defined in Rule 902 under the
Securities Act) in the United States in connection with the Securities
being offered and sold pursuant to Regulation S or in any manner involving
a public offering within the meaning of Section 4(2) of the Securities Act
prior to the effectiveness of a registration statement with respect to the
Securities or the Exchange Securities, as applicable.
(e) Neither the Issuers nor any of their Affiliates will offer,
sell or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) which could be integrated with
the sale of the Securities in a manner that would require the registration
of the Securities under the Securities Act.
(f) The Company (A) will, so long as the Notes are outstanding,
furnish to the Trustee and the holders of the Notes, the reports and other
information required to be furnished in accordance with the Indenture,
whether or not the Company has a
<PAGE>
-18-
class of securities registered under the Exchange Act, and (B) will
furnish to the Initial Purchasers copies of all such reports and
information, together with such other documents, reports and information
as shall be furnished by the Company to the holders of the Securities or
to the Trustee.
(g) At all times prior to the registration of the Securities
under the Act, so long as the Securities are outstanding, the Issuers will
furnish to holders of Securities and prospective purchasers of Securities
designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Act to permit compliance with Rule 144A in
connection with resales of the Securities.
(h) The Issuers will use their reasonable best efforts to cause
and maintain the eligibility of the Securities for clearance and settlement
through DTC, the Euroclear System and Cedelbank.
(i) Prior to the Closing Date, the Company will furnish to each
Initial Purchaser, if and as soon as they have been prepared, a copy of any
unaudited interim consolidated financial statements of the Company and the
Parent for any period subsequent to the period covered by the most recent
financial statements of the Company and the Parent appearing in the Final
Memorandum which have been prepared in the ordinary course of business.
(j) The Issuers will use their best efforts to arrange for the
registration and qualification of the Securities for offering and sale
under the applicable securities or "blue sky" laws of such states and other
jurisdictions as the Initial Purchasers may reasonably designate in
connection with the resale of the Securities as contemplated by this
Agreement and the Final Memorandum and to continue such qualifications in
effect for as long as may be necessary to complete the distribution of the
Securities; PROVIDED that in no event shall either of the Issuers be
obligated to (i) qualify as a foreign corporation or as a dealer
in securities in any jurisdiction where it would not otherwise be required
to so qualify but for this Section 5(j), (ii) file any general consent to
service of process in any jurisdiction where it is not at the Closing Date
then so subject or (iii) subject itself to taxation in any such
jurisdiction if it is not so subject. The Issuers will file such statements
and reports as may be required by the laws of each jurisdiction in which
the Securities have been qualified as above provided. The Issuers shall
promptly advise the Initial Purchasers of the receipt by the Issuers of any
notification with respect to the suspension of the qualification or
exemption from qualification of the Securities for offering or sale in any
jurisdiction or the institution, threatening or contemplation of any
proceeding for such purpose.
<PAGE>
-19-
(k) Subject to the provisions of the Escrow Agreement, the
Company will use the proceeds received from the Offering in the manner
specified in the Final Memorandum under the heading "Use of Proceeds."
(l) The Company will not, and will not permit any of its
Affiliates to, resell any Securities that have been acquired by any of
them.
(m) The Issuer will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected
to cause or result, under the Exchange Act or otherwise, in stabilization
or manipulation of the price of any security of the Issuers to facilitate
the sale or resale of the Securities.
(n) Except as would not have an adverse effect on the holders of
the Class B Interests, CompleTel Holdings shall comply with all of its
obligations under the LLC Agreement, including but not limited to (i) its
obligation pursuant to Section 7.3 thereof, (ii) its obligation to maintain
a calendar year as its fiscal year and (iii) obtaining the consent of the
holders of Class B Interests with respect to amendments of the LLC
Agreement to the extent set forth in Section 12.3 thereof.
(o) Pursuant to the Escrow Agreement, the Issuers will cause
CompleTel ECC to deposit the Initial Escrow Amount into a collateral
account and will cause CompleTel ECC to take all actions necessary to
pledge, assign and set over to the Trustee, for the benefit of the holders
of the Securities and the Trustee (in its capacity as such under the
Indenture), and irrevocably grant to the Trustee for the benefit of the
holders of the Securities and the Trustee (in its capacity as such under
the Indenture) a first priority perfected security interest in, all of its
respective right, title and interest in such collateral account, all funds
held therein and all other Collateral (as such term is defined in the
Escrow Agreement) held by the Escrow Agent or on its behalf, in order to
secure the obligations under the Escrow Agreement and the Securities.
(p) Whether or not any sale of the Securities is consummated, the
Issuers agree, jointly and severally, to pay and bear all costs and
expenses incident to the performance of all of their obligations under this
Agreement, including (i) the preparation and printing of the Preliminary
Memorandum, the Final Memorandum and any amendments or supplements thereto
and the cost of furnishing copies thereof to the Initial Purchasers, (ii)
the preparation, issuance, printing and distribution of the Operative
Documents, (iii) the delivery to the Initial Purchasers of the Securities,
including any stamp or other taxes in connection with the original issuance
and sale of the Securities, (iv) the fees and disbursements of the Issuers'
counsel and accountants, (v) the qualification of the Securities under the
applicable state securities or "blue sky" laws in accordance with the
provisions of Section 5(j) hereof including filing
<PAGE>
-20-
fees and reasonable fees and disbursements of counsel to the Initial
Purchasers in connection therewith and in connection with the preparation
of any survey of state securities or "blue sky" laws or legal investment
memoranda, (vi) any fees charged by rating agencies for rating the
Securities, (vii) any fees associated with establishing or maintaining the
escrow account in connection with the Escrow Agreement, (viii) the fees
and expenses of the Trustee, the Transfer Agent, the Escrow Agent and any
paying agent, including the fees and disbursements of their counsel, (ix)
all expenses (including travel expenses) of the Issuers in connection with
any meetings with prospective investors in the Securities (other than
expenses for meeting facilities for the road show) and (x) all expenses and
listing fees in connection with the application for designation of the
Securities as PORTAL securities and the eligibility of the Units, the
Notes, the Exchange Securities, and the Class B Interests for clearance
through The Depository Trust Company, the Euroclear System and Cedelbank.
Notwithstanding any of the foregoing, it is understood that except as
expressly set forth in subclause (v) of this clause (p), the Initial
Purchasers shall pay all fees and expenses of the Initial Purchasers' legal
counsel and all of the Initial Purchasers' travel (excluding any chartered
jet), stabilization and other out-of-pocket expenses, including meeting
facilities for the road show.
(q) Within 60 days from the Closing Date, the Company will
consummate a stock split such that each Common Share of the Company will be
split into 48,991.0714286 Common Shares of the Company.
6. CONDITIONS TO THE OBLIGATIONS OF THE INITIAL PURCHASERS.
The obligations of the Initial Purchasers to purchase the Securities shall be
subject to the accuracy of the representations and warranties on the part of
the Issuers contained herein on the date hereof and on the Closing Date, to
the accuracy of the statements of the Issuers made in any certificates
pursuant to the provisions hereof, to the performance by the Issuers of their
respective obligations hereunder and to the following additional conditions:
(a) On the Closing Date, the Initial Purchasers shall have
received the opinion of Holme Roberts & Owen LLP, United States counsel for
the Issuers, dated as of the Closing Date in form and substance reasonably
satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers, substantially to the effect that:
(i) each of the Parent, CompleTel Holdings and CableTel
Management Inc. ("CableTel") has been duly incorporated, formed or
otherwise organized and is validly existing and in good standing as a
corporation or limited liability company, as the case may be, under
the laws of its jurisdiction of incorporation, formation or
organization, as the case may be; each of the Parent, CompleTel
Holdings and CableTel has full requisite power and authority
<PAGE>
-21-
to own, lease and operate its properties and conduct its business as
described in the Final Memorandum, and is duly qualified to do
business as a foreign corporation, or limited liability company, as
the case may be, in good standing under the laws of each jurisdiction
where the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be
so qualified could not reasonably be expected to have a Material
Adverse Effect;
(ii) the authorized, issued and outstanding equity interests of
each of the Parent and CompleTel Holdings is as set forth in this
Agreement; all the outstanding equity interests of CompleTel Holdings
have been duly and validly authorized and issued and are fully paid
and nonassessable with no personal liability attaching to any holder
thereof by virtue of the ownership thereof, and were not issued in
violation of any preemptive or similar rights;
(iii) to the knowledge of such counsel, except as set forth in
the Final Memorandum, no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to
convert any obligation into, or exchange any securities for, shares of
equity interests of CompleTel Holdings are outstanding;
(iv) CompleTel Holdings has the requisite power and authority to
execute, deliver and perform its obligations under this Agreement;
this Agreement has been duly and validly authorized, executed and
delivered by CompleTel Holdings;
(v) CompleTel Holdings has the requisite power and authority to
issue the Class B Interests; the issuance of the Class B Interests has
been duly and validly authorized;
(vi) CompleTel Holdings has the requisite power and authority to
execute, deliver and perform its obligations under the Subscription
Agreement and the LLC Agreement; each of the Subscription Agreement
and the LLC Agreement has been duly and validly authorized, executed
and delivered by CompleTel Holdings;
(vii) each of CompleTel Holdings and the Parent has the requisite
power and authority to execute, deliver and perform its obligations
under the Equity Registration Rights Agreement; the Equity
Registration Rights Agreement has been duly and validly authorized,
executed and delivered by each of CompleTel Holdings and the Parent;
<PAGE>
-22-
(viii) the Parent has the requisite power and authority to
execute, deliver and perform its obligations under the Parent
Guarantee; the Parent Guarantee has been duly and validly authorized,
executed and delivered by the Parent;
(ix) to the actual knowledge of such counsel, no legal action,
suit or proceeding, inquiry or investigation by or before any Colorado
or United States federal court or governmental agency, authority or
body or any arbitrator is pending or threatened to which any of the
Issuers, the Parent or any Subsidiary is a party or to which any of
its or their property is subject that if determined adversely to any
such party might reasonably be expected to have a Material Adverse
Effect or which might reasonably be expected to affect the
consummation or performance by the Issuers, the Parent or any
Subsidiary of the Operative Documents;
(x) to the actual knowledge of such counsel, except as could
not be reasonably expected to have a Material Adverse Effect, neither
CompleTel Holdings nor the Parent is in violation or default of (i)
any provision of its articles of incorporation or bylaws (or similar
organizational document); (ii) any statute, law, rule, regulation,
judgment, order or decree applicable to the CompleTel Holdings or the
Parent of any Colorado or United States federal court, regulatory
body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over CompleTel Holdings or the Parent or
any of their properties;
(xi) to the actual knowledge of such counsel, except as could
not be reasonably expected to have Material Adverse Effect, neither
the Company nor the Subsidiaries is in violation or default of the
terms of any judgment, order or decree applicable to the Company or
the Subsidiaries of any Colorado or United States federal court,
regulatory body, administrative agency, governmental body, arbitrator
or other authority having jurisdiction over the Company or the
Subsidiaries or any of their properties;
(xii) neither the execution, delivery or performance by
CompleTel Holdings or the Parent of the Operative Documents to
which CompleTel Holdings or Parent are parties, nor the consummation
of any of the transactions contemplated by such Operative Documents
by CompleTel Holdings and Parent nor the fulfillment of the terms
thereof by CompleTel Holdings or Parent will conflict with, or result
in a breach or violation or default of (or an event that, with notice
or lapse of time or both, would constitute a breach or default) or
imposition of any lien, charge or encumbrance upon any property
<PAGE>
-23-
or assets of CompleTel Holdings or the Parent pursuant to, (i) the
certificate of incorporation or bylaws (or similar organizational
documents) of CompleTel Holdings or the Parent, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement, note or other agreement, obligation, condition,
covenant, license, permit or instrument listed on Schedule IV hereto
or (iii) to the knowledge of such counsel, any judgment, order or
decree applicable to CompleTel Holdings or the Parent of any Colorado
or United States federal court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having
jurisdiction over CompleTel Holdings or the Parent or any of their
properties;
(xiii) neither the execution, delivery or performance by the
Company, CompleTel (N.A.) N.V. and CompleTel ECC of the Operative
Documents to which the Company, CompleTel (N.A.) N.V. and CompleTel
ECC are parties, nor the consummation of any of the transactions
contemplated by such Operative Documents by the Company, CompleTel
(N.A.) N.V. and CompleTel ECC nor the fulfillment of the terms thereof
by the Company, CompleTel (N.A.) N.V. and CompleTel ECC will conflict
with, or result in a breach or violation or default of (or an event
that, with notice or lapse of time or both, would constitute a breach
or default) or imposition of any lien, charge or encumbrance upon any
property or assets of CompleTel (N.A.) N.V., the Company or CompleTel
ECC pursuant to (i) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement, note or other
agreement, obligation, condition, covenant, license, permit or
instrument listed on Schedule IV hereto or (ii) to the knowledge of
such counsel, any judgment, order or decree applicable to the Company,
CompleTel (N.A.) N.V. or CompleTel ECC of any Colorado or United
States federal court, regulatory body, administrative agency,
arbitrator or other authority having jurisdiction over the Company,
CompleTel (N.A.) N.V. or CompleTel ECC or any of their properties;
(xiv) to the knowledge of such counsel, no holder of any
securities of the Parent, the Company or CompleTel Holdings is
entitled to have such securities (other than the Notes, the Exchange
Securities, the Class B Interests and the Registrable Securities as
provided in the Operative Documents) registered under the Act, except
to the extent expressly set forth in the Final Memorandum;
(xv) the statements in the Final Memorandum under the headings
"Risk Factors-- Lack of Voting Rights of Class B Interests; Potential
Lack of Limited Liability to Members," "--Potential Inability of
CompleTel Holdings
<PAGE>
-24-
to Make Tax Distributions," "Management -- Employment Agreements" and
"-- Executive Securities Agreements," "Certain Relationships and
Related Transactions," "Security Ownership of Certain Beneficial
Owners and Management" and "Description of Certain Indebtedness,"
insofar as such statements are descriptions of contracts, agreements
or other legal documents or refer to statements of law or legal
conclusions, provide a fair summary of the information disclosed
therein in all material respects; and
(xvi) On the Closing Date after giving effect to the transactions
contemplated by the Operative Documents, CompleTel Holdings will be
treated for federal income tax purposes as a partnership and it will
not be classified as a publicly traded partnership that is treated as
a corporation under Section 7704(a) of the Code.
In addition, such counsel shall state that such counsel has
participated in conferences with representatives of the Initial Purchasers,
counsel for the Initial Purchasers, officers and other representatives of
the Parent and Issuers and representatives of the independent certified
accountants of the Parent and Issuers, at which conferences the contents of
the Preliminary Memorandum and Final Memorandum and the business and
affairs of the Parent, the Issuers and the Subsidiaries were discussed, and
although such counsel has not independently verified and does not pass upon
or assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Final Memorandum (except and only to the
extent set forth in subclauses (xiv) and (xv) above), on the basis of such
participation (relying as to materiality to the extent such counsel deemed
appropriate upon the representations, statements and opinions of officers
and other representatives of the Issuer and the Subsidiaries), no facts
have come to the attention of such counsel which lead such counsel to
believe that the Final Memorandum at the date thereof or as of the Closing
Date, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need not express any
comment with respect to the financial statements, including the notes
thereto and supporting schedules, or any other financial, accounting or
statistical data set forth or referred to in the Final Memorandum).
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other
than the Federal law of the United States, the General Corporation Law of
the State of Delaware and the laws of the State of Colorado, (B) may rely,
as to matters of fact, to the extent such counsel deems proper on
representations or certificates of responsible officers of the Issuers,
certificates of public officials and representations contained in the
Operative Docu-
<PAGE>
-25-
ments and (C) may include such assumptions and qualifications as such
counsel deems reasonably necessary in order to deliver such opinion, so
long as the opinion, together with the assumptions and qualifications,
is in form and substance reasonably satisfactory to the Initial Purchasers
and counsel to the Initial Purchasers. Such opinion shall not state that
it is to be governed or qualified by, or that it is otherwise subject to,
any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section
of Business Law (1991).
(b) On the Closing Date, the Initial Purchasers shall have received
the opinion of Kirkland & Ellis, special United States securities counsel
for the Issuers, dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers, substantially to the effect that:
(i) the Notes are in the form contemplated by the Indenture and
(I) when the Notes are authenticated by the Trustee in accordance with
the provisions of the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the Trustee) and delivered
and paid for in accordance with the terms of this Agreement, holders
of the Notes will be entitled to the benefits of holders of the Notes
under the Indenture and the Notes will constitute the valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms, (II) when the Exchange Securities are
authenticated and delivered in exchange for the Notes in the manner
contemplated by the Registration Rights Agreement and the Indenture,
holders of the Exchange Securities will be entitled to the benefits of
holders of the Exchange Securities under the Indenture and the
Exchange Securities will constitute the valid and binding obligations
of the Company enforceable against the Company in accordance with
their terms, (III) each of the Indenture, the Registration Rights
Agreement, the Equity Registration Rights Agreement, the Escrow
Agreement and the Subscription Agreement constitutes a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, (IV) when the Securities are delivered and
paid for in accordance with this Agreement, the Class B Interests will
be validly issued, fully paid and non-assessable and the holders
thereof will be entitled to the benefits of holders of the Class B
Interests under the LLC Agreement and no holder will be subject to
personal liability by reason of being such a holder, (V) each of the
Subscription Agreement, the LLC Agreement and the Equity Registration
Rights Agreement constitutes a valid and binding obligation of
CompleTel Holdings, enforceable against CompleTel Holdings in
accordance with its terms, (VI) the Parent Guarantee will constitute a
valid and binding obligation of the Parent, enforceable against the
Par-
<PAGE>
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ent in accordance with its terms, (VII) the Subsidiary Guarantee
will constitute a valid and binding obligation of CompleTel ECC,
enforceable against CompleTel ECC in accordance with its terms, (VIII)
the Indenture will constitute a valid and binding obligation of
CompleTel ECC, enforceable against CompleTel ECC in accordance with
its terms, (IX) the Escrow Agreement will constitute a valid and
binding obligation of CompleTel ECC, enforceable against CompleTel ECC
in accordance with its terms, (X) the Equity Registration Rights
Agreement constitutes a valid and binding obligation of Parent,
enforceable against the Parent in accordance with its terms, and (XI)
each of the Subscription Agreement and the Equity Registration Rights
Agreement constitutes a valid and binding obligation of CompleTel
(N.A.) N.V., enforceable against CompleTel (N.A.) N.V. in accordance
with its terms, except, in each case, other than clause (IV) above,
that the enforcement thereof may be limited by (x) the Enforceability
Limitations and (y) such counsel need express no opinion concerning
the enforceability of, or the enforceability under law under certain
circumstances of, the indemnification or contribution provisions of
the Registration Rights Agreement or the Equity Registration Rights
Agreement with respect to a liability where such indemnification is
contrary to public policy;
(ii) no consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of
the United States of America or the State of New York is required for
the execution and delivery by the Company, CompleTel Holdings, the
Parent, CompleTel (N.A.) N.V. and CompleTel ECC of the Operative
Documents to which they are parties or the consummation by the
Company, CompleTel Holdings, the Parent, CompleTel (N.A) N.V. and
CompleTel ECC, of any of the transactions contemplated in such
Operative Documents, except (i) as have already been acquired or as of
the Closing Date will be acquired or (ii) except such as may be
required (A) in connection with the registration under the Act of the
Exchange Securities or the Class B Interests, pursuant to the
Registration Rights Agreements or the Equity Registration Rights
Agreement, as applicable, (B) in order to qualify the Indenture under
the Trust Indenture Act or (C) by state securities or "blue sky" laws
in connection with the offer and sale of the Securities or the
registration thereof or of the Exchange Securities pursuant to the
Registration Rights Agreement or the Equity Registration Rights
Agreement, as applicable;
(iii) the execution, delivery and performance by the Company,
CompleTel Holdings, the Parent, CompleTel (N.A.) N.V. and CompleTel
ECC, of the Operative Documents to which they are parties will not
conflict
<PAGE>
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with, or result in a violation of any of the terms or provisions of,
any statute, law, rule or regulation, under Federal law, the General
Corporation Law of the State of Delaware and the laws of the State of
New York applicable to any of the Issuers, the Parent, CompleTel
(N.A.) N.V. or CompleTel Holdings, or any judgment, order or decree
known to such counsel of any government, governmental instrumentality
or court located in the United States having jurisdiction over the
Company, CompleTel Holdings, the Parent, CompleTel (N.A.) N.V. or
CompleTel ECC or any of their properties or assets;
(iv) the Escrow Agreement creates a valid security interest in
favor of the Trustee in all right, title and interest of CompleTel ECC
in and to the Escrow Account and the Collateral (such counsel need not
express an opinion as to the perfection or priority of the security
interest in the collateral created by the Escrow Agreement);
(v) the statements in the Final Memorandum under the headings
"Summary -- The Offering," "Description of the Units," "Description of
the Notes," "Description of the Class B Interests," "Exchange Offer;
Registration Rights" and "Description of Equity Registration and Other
Rights," insofar as such statements purport to summarize certain
provisions of the Units, the Notes, the Exchange Securities, the Class
B Interests, the Indenture, the Registration Rights Agreement, the LLC
Agreement, the Escrow Agreement and the Equity Registration Rights
Agreement, provide a fair summary in all material respects of such
provisions of such agreements and instruments;
(vi) the statements in the Final Memorandum under the heading
"Risk Factors -- Investment Company Act Considerations," to the extent
they summarize Federal laws, rules or regulations, provide a fair
summary in all material respects of the information disclosed therein;
(vii) assuming the Securities are issued and sold under the
circumstances contemplated by this Agreement and the representations
and warranties of the Issuers and the Initial Purchasers set forth
herein are true and correct, it is not necessary in connection with
the offer, sale and delivery of the Securities to the Initial
Purchasers in the manner contemplated by this Agreement or in
connection with the initial resale of the Securities by the Initial
Purchasers in accordance with this Agreement to register the
Securities under the Act or to qualify the Indenture under the Trust
Indenture Act;
(viii) assuming the Company invests the net proceeds of the
Offering as described under "Use of Proceeds" in the Final Memorandum,
neither the
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Company nor CompleTel Holdings is an "investment company" or an
entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act nor is the Company or CompleTel
Holdings subject to regulation or registration under the Investment
Company Act; without relying on the availability of any exemption
under Section 3(c)(1) or 3(c)(7) of the Investment Company Act;
(ix) when the Securities are issued and delivered pursuant to
this Agreement, such Securities will not be of the same class (within
the meaning of Rule 144A under the Act) as securities of either of the
Issuers which are listed on a national securities exchange registered
under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system;
(x) the statements in the Final Memorandum under the caption
"Certain Tax Considerations -- Certain U.S. Federal Income Tax
Considerations" fairly summarize the material United States Federal
income tax consequences of acquiring, owning and disposing of the
Units, the Notes, the Exchange Securities and the Class B Interests;
and
(xi) Madison Dearborn Capital Partners II, L.P. ("MDP") has all
requisite power and authority to execute, deliver and perform their
obligations under the Equity Registration Rights Agreement and such
execution and delivery has been duly authorized by MDP and the Equity
Registration Rights Agreement constitutes a valid and binding
agreement of MDP, enforceable against MDP in accordance with its
terms.
In addition, such counsel shall state that such counsel has
participated in conferences with representatives of the Initial Purchasers,
counsel for the Initial Purchasers, officers and other representatives of
the Parent and the Issuers and representatives of the independent certified
accountants of the Parent and the Issuers, at which conferences the
contents of the Preliminary Memorandum and Final Memorandum and the
business and affairs of the Issuers, the Parent and the Subsidiaries were
discussed, and although such counsel has not independently verified and
does not pass upon or assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Final
Memorandum (except and only to the extent set forth in subclauses (v), (vi)
and (x) above), on the basis of such participation (relying as to
materiality to the extent such counsel deemed appropriate upon the
representations, statements and opinions of officers and other
representatives of the Issuers and the Subsidiaries), no facts have come to
the attention of such counsel which lead such counsel to believe that the
Final Memorandum at the date thereof or as of the Closing Date, contained
or contains an untrue statement of a material fact or omitted or omits to
state a
<PAGE>
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material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading (it being
understood that such counsel need not express any comment with respect to
the financial statements, including the notes thereto and supporting
schedules, or any other financial, accounting or statistical data set
forth or referred to in the Final Memorandum).
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other
than the Federal law of the United States, the General Corporation Law of
the State of Delaware, the Limited Liability Company Act of the State of
Delaware and the laws of the State of New York and (B) may rely, as to
matters of fact, to the extent such counsel deems proper on representations
or certificates of responsible officers of the Issuers, certificates of
public officials and representations contained in the Operative Documents
and (C) may include such assumptions and qualifications as such counsel
deems reasonably necessary in order to deliver such opinion, so long as the
opinion, together with the assumptions and qualifications, is in form and
substance reasonably satisfactory to the Initial Purchasers and counsel for
the Initial Purchasers. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including,
without limitation, the Legal Opinion Accord of the ABA Section of Business
Law (1991).
(c) On the Closing Date, the Initial Purchasers shall have received
the opinion of Clifford Chance, Dutch Counsel to the Company and its Dutch
Subsidiaries, dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers.
(d) On the Closing Date, the Initial Purchasers shall have received
the opinion of Smeets Thesseling Van Bokhorst Spigt, Netherlands Antilles
counsel to CompleTel (N.A.) N.V., dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers and counsel to
the Initial Purchasers.
(e) On the Closing Date, the Initial Purchasers shall have received
the opinion of Clifford Chance, French counsel to the Issuers, dated on the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers.
(f) On the Closing Date, the Initial Purchasers shall have received
the opinion of Oppenhoff & Radler, German counsel to the Issuers, dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers.
<PAGE>
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(g) On the Closing Date, the Initial Purchasers shall have received
the opinion of Charles Russell, English corporate counsel to the Issuers,
dated the Closing Date, in form and substance reasonably satisfactory to
the Initial Purchasers and counsel to the Initial Purchasers.
(h) On the Closing Date, the Initial Purchasers shall have received
the opinion of Denton Hall, English regulatory counsel to the Issuers,
dated the Closing Date, in form and substance reasonably satisfactory to
the Initial Purchasers and counsel to the Initial Purchasers.
(i) On the Closing Date, the Initial Purchasers shall have received
the opinion of PriceWaterhouseCoopers, dated the Closing Date, with respect
to Netherlands Antilles tax consequences and in form and substance
reasonably satisfactory to the Initial Purchasers and counsel to the
Initial Purchasers.
(j) The Initial Purchasers shall have received an opinion from Cahill
Gordon & Reindel, United States counsel for the Initial Purchasers, dated
the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers.
(k) The following conditions contained in clause (i) and (ii) of this
subsection (k) shall have been satisfied at and as of the Closing Date, and
the Issuers shall have furnished to the Initial Purchasers a certificate of
the Issuers, signed by two authorized signatories of the Company and by two
authorized signatories of CompleTel Holdings, dated the Closing Date, to
the effect that the signers of such certificate have carefully examined the
Final Memorandum, any amendment or supplement to the Final Memorandum and
this Agreement and that:
(i) the representations and warranties of the Issuers in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date,
and the Issuers have complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date; and
(ii) since the date of the most recent financial statements
included in the Final Memorandum (exclusive of any amendment or
supplement thereto), there has been no material adverse change in the
condition (financial or otherwise), prospects, earnings, business or
properties of the Issuers and the Subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated by the Final
Memorandum (exclusive of any amendment or supplement thereto).
<PAGE>
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(l) The Securities shall have been (i) designated as PORTAL-eligible
securities in accordance with the rules and regulations of the NASD and
(ii) declared eligible for clearance and settlement through The Depository
Trust Company, the Euroclear System and Cedelbank.
(m) On the date hereof and at the Closing Date, Arthur Andersen LLP
shall have furnished to the Initial Purchasers a letter or letters, dated
respectively as of the date hereof and as of the Closing Date, in form and
substance satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers, confirming that they are independent accountants within the
meaning of Rule 101 of the Code of Professional Conduct of the American
Institute of Certified Public Accountants and containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to Initial Purchasers with respect to financial statements and
certain financial information contained in the Final Memorandum.
(n) Subsequent to the date hereof or, if earlier, the dates as of
which information is given in the Final Memorandum (exclusive of any
amendment or supplement thereto), there shall not have been any change, or
any development involving a prospective change, in or affecting the
business or properties of the Issuers or the Subsidiaries the effect of
which is, in the reasonable judgment of the Representative, so material and
adverse as to make it impractical or inadvisable to proceed with the
purchase and the delivery of the Securities as contemplated by the Final
Memorandum (exclusive of any amendment or supplement thereto).
(o) All government authorizations required in connection with the
issue and sale of the Securities as contemplated under this Agreement and
the performance of the Issuers' respective obligations hereunder and under
the Operative Documents shall be in full force and effect and the Issuers
shall deliver copies of such authorizations to the Initial Purchasers.
(p) Each of the Operative Documents shall have been executed and
delivered by each of the parties thereto.
(q) The Company shall have delivered evidence of the appointment of CT
Corporation System as its agent pursuant to Section 14 hereof and, to the
extent applicable, each of the Company, CompleTel ECC and CompleTel (N.A.)
N.V. shall have delivered evidence of the appointment of CT Corporation
System as its agent as provided in the Indenture, the Registration Rights
Agreement, the Escrow Agreement, and the Equity Registration Rights
Agreement.
<PAGE>
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(r) Prior to the Closing Date, the Issuers shall have furnished to the
Initial Purchasers such further information, certificates and documents as
the Initial Purchasers may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representative and counsel for the
Initial Purchasers, this Agreement and all obligations of the Initial
Purchasers hereunder may be canceled at, or at any time prior to, the Closing
Date by the Representative. Notice of such cancellation shall be given to the
Issuers in writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of counsel for the Initial Purchasers, at Cahill
Gordon & Reindel, 80 Pine Street, New York, New York 10005, on the Closing
Date.
7. REIMBURSEMENT OF EXPENSES. If the sale of the Securities
provided for herein is not consummated because any condition to the
obligations of the Initial Purchasers set forth in Section 6 hereof is not
satisfied or because of any refusal, inability or failure on the part of
either of the Issuers to perform any agreement herein or comply with any
provision hereof other than by reason of a default by any of the Initial
Purchasers, the Issuers will reimburse the Initial Purchasers on demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities. If the sale of the Securities
provided for herein is not consummated because of any termination pursuant to
Section 10 hereof, the Issuers and the Initial Purchasers will be responsible
for their respective out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Securities.
8. INDEMNIFICATION AND CONTRIBUTION. (a) Each Issuer jointly and
severally agrees to indemnify and hold harmless each Initial Purchaser, the
directors, officers, employees and agents of each Initial Purchaser and each
person who controls any Initial Purchaser within the meaning of either the
Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other Federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Memorandum, the Final Memorandum
(as supplemented or amended) or any information provided by the Company to
any holder or prospective purchaser of Securities pursuant to Section 5(g)
(as supplemented or amended), or
<PAGE>
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arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Issuers will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information
furnished to the Issuers by or on behalf of any Initial Purchasers
specifically for inclusion therein; PROVIDED, FURTHER, HOWEVER, that the
Issuers will not be liable to any Initial Purchaser with respect to any
losses, claims, damages or liabilities that resulted from the fact that such
Initial Purchaser sold Securities to a person to whom such Initial Purchaser
failed to send or give, at or prior to the Closing Date, a copy of the Final
Memorandum, as then amended or supplemented, if the Issuers have previously
furnished copies thereof (sufficiently in advance of the Closing Date to
allow for distribution by the Closing Date) to the Initial Purchasers and the
loss, liability, claim, damage or expense of such Initial Purchaser resulted
from an untrue statement or omission or alleged untrue statement or omission
of a material fact contained in or omitted from the Preliminary Memorandum
that was corrected in the Final Memorandum or, if applicable, amended or
supplemented prior to the Closing Date. This indemnity agreement will be in
addition to any liability which the Issuers may otherwise have.
(b) Each Initial Purchaser severally, and not jointly, agrees to
indemnify and hold harmless the Issuers, each of their directors, each of its
officers, and each person who controls either of the Issuers within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Issuers to each Initial Purchaser, but only with
reference to written information relating to such Initial Purchaser furnished
to the Issuers by or on behalf of such Initial Purchaser specifically for
inclusion in the Preliminary Memorandum or the Final Memorandum (or in any
amendment or supplement thereto). This indemnity agreement will be in
addition to any liability which any Initial Purchaser may otherwise have. The
Issuers acknowledge that the statements set forth in the table, fifth
paragraph, seventh paragraph, tenth paragraph, eleventh paragraph and the
last paragraph under the heading "Plan of Distribution," constitute the only
information furnished in writing by or on behalf of the Initial Purchasers
for inclusion in the Preliminary Memorandum or the Final Memorandum (or in
any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemni-
<PAGE>
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fying party in writing of the commencement thereof; but the failure so to
notify the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not otherwise
learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses; and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (in
addition to local counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel if and only if
(i) the use of counsel chosen by the indemnifying party to represent the
indemnified party would present such counsel with a conflict of interest;
(ii) the actual or potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party; (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action; or (iv) the indemnifying
party shall authorize in writing the indemnified party to employ separate
counsel at the expense of the indemnifying party. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate counsel (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such counsel shall be designated in writing by Salomon Smith Barney
Inc. in the case of parties indemnified pursuant to Section 8(a) above, and
by the Company, in the case of parties indemnified pursuant to Section 8(b).
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. An indemnifying party
will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim or
action) unless such settle-
<PAGE>
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ment, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit
or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Issuers on the one hand and the Initial
Purchasers on the other agree to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
"Losses") to which the Issuers or one or more of the Initial Purchasers, as
applicable, may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Issuers on the one hand and by the
Initial Purchasers on the other from the offering of the Securities;
PROVIDED, HOWEVER, that in no case shall any Initial Purchaser be responsible
for any amount in excess of the purchase discount or commission applicable to
the Securities purchased by such Initial Purchaser hereunder. If the
allocation provided by the immediately preceding sentence is unavailable for
any reason, the Issuers and the Initial Purchasers shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Issuers on the one hand and of the Initial
Purchasers on the other in connection with the statements or omissions which
resulted in such Losses, as well as any other relevant equitable
considerations. Benefits received by the Issuers shall be deemed to be equal
to the total net proceeds from the offering (before deducting expenses)
received by the Company, and benefits received by the Initial Purchasers
shall be deemed to be equal to the total purchase discounts and commissions
received by the Initial Purchasers from the Issuer in connection with the
purchase of the Securities hereunder. Relative fault shall be determined by
reference to whether any untrue or any alleged untrue statement or the
omission or alleged omission to state a material fact relates to information
provided by the Issuers on the one hand or the Initial Purchasers on the
other. The Issuers and the Initial Purchasers agree that it would not be just
and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 8, each person who controls an Initial Purchaser
within the meaning of either the Act or the Exchange Act and each director,
officer, employee and agent of an Initial Purchaser shall have the same
rights to contribution as such Initial Purchaser, and each person who
controls the Issuers within the meaning of either the Act or the Exchange Act
and each officer and director of the Issuers shall have the same rights to
contribution as the Issuers, subject in each case to the applicable terms and
conditions of this paragraph (d).
9. DEFAULT BY AN INITIAL PURCHASER. If any one or more of the
Initial Purchasers shall fail to purchase and pay for any of the Securities
agreed to be purchased by such
<PAGE>
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Initial Purchaser hereunder and such failure to purchase shall constitute a
default in the performance of its or their obligations under this Agreement,
the remaining Initial Purchasers shall be obligated severally to take up and
pay for (in the respective proportions which the principal number of Units
set forth opposite their names in Schedule I hereto bears to the aggregate
number of Units set forth opposite the names of all the remaining Initial
Purchasers) the Securities which the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase; PROVIDED, HOWEVER, that in the
event that the aggregate number of Units which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase shall exceed
10% of the aggregate number of Units set forth in Schedule I hereto, the
remaining Initial Purchasers shall have the right to purchase all, but shall
not be under any obligation to purchase any, of the Securities, and if such
nondefaulting Initial Purchasers do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Initial
Purchaser or the Issuers. In the event of a default by any Initial Purchaser
as set forth in this Section 9, the Closing Date shall be postponed for such
period, not exceeding five Business Days, as the Initial Purchasers shall
determine in order that the required changes in the Final Memorandum or in
any other documents or arrangements that may be effected. Nothing contained
in this Agreement shall relieve any defaulting Initial Purchaser of its
liability, if any, to the Issuers or any nondefaulting Initial Purchaser for
damages occasioned by its default hereunder.
10. TERMINATION. This Agreement shall be subject to termination in
the absolute discretion of the Representative, by notice given to the Issuers
prior to delivery of and payment for the Securities, if at any time prior to
such time (i) a banking moratorium shall have been declared either by Federal
or New York State authorities or any authority in the Netherlands or (ii)
there shall have occurred any material adverse change in the financial
markets in the United States or the Netherlands or any outbreak or escalation
of hostilities, national or international emergency or war or other calamity
or crisis, or any change or development involving a change in national or
international political, financial or economic conditions, the effect of
which on financial markets is such as to make it, in the sole judgment of the
Representative, impracticable or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Final Memorandum (exclusive
of any amendment or supplement thereto).
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of
the Issuers and their officers and of the Initial Purchasers set forth in or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Initial
Purchasers or the Issuers or any of the officers, directors or controlling
persons, referred to in Section 8 hereof, and will survive delivery of and
payment for the Securities. The provi-
<PAGE>
-37-
sions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. NOTICES. All communications hereunder will be in writing and
effective only on receipt and should be mailed and delivered. Notices to the
Initial Purchasers shall be directed to Salomon Smith Barney Inc., Seven
World Trade Center, New York, New York 10048 Attention: General Counsel; and
notices to the Issuers shall be directed to CompleTel Holdings LLC, 6300
Syracuse Way, Suite 355, Englewood, Colorado 80111 Attention: Chief Executive
Officer, and CompleTel Europe N.V., Prinses Irenestraat 61, 1077 WV
Amsterdam, The Netherlands, Attention: Managing Director, with a copy to
Holme Roberts & Owen LLP, 1700 Lincoln, Suite 4100, Denver, Colorado 80203,
Attention: W. Dean Salter and with a copy to ING Trust (Nederland) B.V., P.O.
Box 2838 1000 CV Amsterdam, The Netherlands, Attention: Paul van Witteveen.
13. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8
hereof, and, except as expressly set forth in Section 5(h) hereof, no other
person will have any right or obligation hereunder.
14. AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF
IMMUNITIES. By the execution and delivery of this Agreement, the Company (i)
acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System, 1633 Broadway, New York, NY 10019 ("CT
Corporation System") (and any successor entity), as its authorized agent upon
which process may be served in any suit or proceeding arising out of or
relating to this Agreement that may be instituted in any federal or state
court in The City of New York, Borough of Manhattan, State of New York or
brought under federal or state securities laws, and acknowledge that CT
Corporation System has accepted such designation, (ii) submits to the
jurisdiction of any such court in any such suit or proceeding and (iii)
agrees that service of process upon CT Corporation System and written notice
of said service to the Company in accordance with Section 14 shall be deemed
in every respect effective service of process upon the Company, in any such
suit or proceeding. The Company further agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment
of CT Corporation System in full force and effect so long as any of the
Securities or the Exchange Securities shall be outstanding; PROVIDED that the
Company may and to the extent CT Corporation System ceases to be able to be
served on the basis contemplated herein shall, by written notice to the
Initial Purchasers, designate such additional or alternative agent for
service of process under this Section 14 that (i) maintains an office located
in the Borough of Manhattan, City of New York, State of New York and (ii) is
either (x) counsel for the Company or (y) a corporate service company which
acts as agent for service of process for other persons in the ordinary course
of its business. Such written notice shall identify the name of such agent
for service of
<PAGE>
-38-
process and the address of the office of such agent for service of process in
the Borough of Manhattan, City of New York, State of New York.
15. APPLICABLE LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
16. JUDGMENT CURRENCY. The Company hereby agrees to indemnify each
Initial Purchaser and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
and each of their respective officers, directors, employees and agents
against any loss incurred by such party as a result of any judgment or order
being given or made for any U.S. dollar amount due under this Agreement and
such judgment or order being expressed and paid in a currency (the "Judgment
Currency") other than United States dollars and as a result of any variation
as between (i) the rate of exchange at which the United States dollar amount
is converted into the Judgment Currency for the purpose of such judgment or
order and (ii) the spot rate of exchange in The City of New York at which
such party on the date of payment of such judgment or order is able to
purchase United States dollars with the amount of the Judgment Currency
actually received by such party. The foregoing indemnity shall continue in
full force and effect notwithstanding any such judgment or order as
aforesaid. The term "spot rate of exchange" shall include any premiums and
costs of exchange payable in connection with the purchase of, or conversion
into, United States dollars.
17. WAIVER OF IMMUNITY. To the extent that the Company has or
hereafter may acquire any immunity (sovereign or otherwise) from any legal
action, suit or proceeding, from jurisdiction of any court or any legal
process (whether service or notice, attachment in aid of execution or
otherwise) with respect to itself or any of its property, the Company hereby
irrevocably waives and agrees not to plead or claim such immunity in respect
of its obligations under this Agreement.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
19. HEADINGS. The section headings used herein are for convenience
only and shall not affect the construction hereof.
20. DEFINITIONS. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Affiliate" shall have the meaning specified in Rule 501(b) of
Regulation D.
<PAGE>
-39-
"Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a Sunday
or a legal holiday or a day on which banking institutions or trust companies
are authorized or obligated by law to close in The City of New York.
"Commission" shall mean the Securities and Exchange Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended, and the rules and regulations of the Commission thereunder.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Regulation D" shall mean Regulation D under the Act.
"Regulation S" shall mean Regulation S under the Act.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
<PAGE>
-40-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding
agreement between each of the Issuers and the several Initial Purchasers.
Very truly yours,
COMPLETEL EUROPE N.V.
By /s/ James E. Dovey
--------------------------------------
Name: James E. Dovey
Title: Attorney-in-Fact
COMPLETEL HOLDINGS LLC
By /s/ James E. Dovey
--------------------------------------
Name: James E. Dovey
Title: Manager
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
TD SECURITIES (USA) INC.
PARIBAS CORPORATION
By: SALOMON SMITH BARNEY INC.
By /s/ Christopher Clipper
--------------------------------------
Name: Christopher Clipper
Title: Vice President
<PAGE>
===============================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of February 16, 1999
Among
COMPLETEL EUROPE N.V.
as Issuer
and
SALOMON SMITH BARNEY INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
MORGAN & STANLEY & CO. INCORPORATED,
TD SECURITIES (USA) INC.
and
PARIBAS CORPORATION
as Initial Purchasers
14% Senior Notes due 2009
===============================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is
dated as of February 16, 1999, among COMPLETEL EUROPE N.V., a Netherlands
public company with limited liability (the "COMPANY"), as issuer, and SALOMON
SMITH BARNEY INC., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, MORGAN
STANLEY & CO. INCORPORATED, TD SECURITIES (USA) INC. and PARIBAS CORPORATION,
as Initial Purchasers (the "INITIAL PURCHASERS").
This Agreement is entered into in connection with the
Purchase Agreement, dated as of February 16, 1999, among the Company, and
CompleTel Holdings, LLC ("Holdings"), as issuers, and the Initial Purchasers
(the "PURCHASE AGREEMENT"), which provides for, among other things, the sale
by the Company and Holdings to the Initial Purchasers of 147,500 Units (the
"Units") consisting of an aggregate of $147,500,000 principal amount at
maturity of the Company's 14% Senior Discount Notes Due 2009 (the
"Securities") and 1,475,000 Non-Voting Class B Membership Interests (the
"Class B Interests") of Holdings. In order to induce the Initial Purchasers
to enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement for the benefit of the
Initial Purchasers and any subsequent holder or holders of each of the
Securities. The execution and delivery of this Agreement is a condition to
the Initial Purchasers' obligation to purchase the Units under the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ACCRETED VALUE: Shall have the meaning set forth in the
Indenture.
ADVICE: See Section 5 hereof.
AGREEMENT: See the introductory paragraphs hereto.
APPLICABLE PERIOD: See Section 2 hereof.
COMPANY: See the introductory paragraph hereto.
<PAGE>
-2-
EFFECTIVENESS DATE: The 240th day after the Issue Date;
PROVIDED, HOWEVER, that with respect to any Shelf Registration (other than a
Shelf Registration if no Exchange Offer Registration Statement has been
filed), the Effectiveness Date shall be the 30th day after the applicable
Registration Statement with respect thereto is filed.
EFFECTIVENESS PERIOD: See Section 3 hereof.
EVENT DATE: See Section 4 hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCHANGE OFFER: See Section 2 hereof.
EXCHANGE OFFER REGISTRATION STATEMENTS: See Section 2 hereof.
EXCHANGE SECURITIES: See Section 2 hereof.
FILING DATE: (i) with respect to the Exchange Offer
Registration Statement, the 150th day after the Issue Date and (ii) with
respect to any Shelf Registration Statement, (A) if no Exchange Offer
Registration Statement has been filed by the Company pursuant to this
Agreement, the 150th day after the Issue Date and (B) in each other case
(which may be applicable notwithstanding the consummation of the Exchange
Offer), the 30th day after the delivery of a Shelf Notice.
HOLDER: Any holder of a Registrable Security.
INDEMNIFIED PERSON: See Section 7(c) hereof.
INDEMNIFYING PERSON: See Section 7(c) hereof.
INDENTURE: The Indenture, dated as of February 16, 1999, among
the Company, CompleTel ECC B.V., as guarantor, and U.S. Bank Trust National
Association, as Trustee, pursuant to which the Securities are being issued,
as the same may be amended or supplemented from time to time in accordance
with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraphs hereto.
INITIAL SHELF REGISTRATION: See Section 3(a) hereof.
<PAGE>
-3-
INSPECTORS: See Section 5(m) hereof.
ISSUE DATE: February 16, 1999, the date of original issuance of
the Securities.
LIQUIDATED DAMAGES: See Section 4 hereof.
NASD: See Section 5(s) hereof.
OFFERING MEMORANDUM: The final offering memorandum of the
Company and Holdings dated February 16, 1999, in respect of the offering of
the Units.
PARTICIPANT: See Section 7(a) hereof.
PARTICIPATING BROKER-DEALER: See Section 2 hereof.
PERSON: An individual, trustee, corporation, partnership, joint
stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
PRIVATE EXCHANGE: See Section 2 hereof.
PRIVATE EXCHANGE SECURITIES: See Section 2 hereof.
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A promulgated under the Securities Act and any term
sheet filed pursuant to Rule 434 under the Securities Act), as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference
in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs hereto.
RECORDS: See Section 5(m) hereof.
REGISTRABLE SECURITIES: Each Security upon its original
issuance and at all times subsequent thereto, each Exchange Security as to
which Section 2(c)(iv) hereof is applicable upon original issuance and at all
times subsequent thereto and each Private Exchange Security upon original
issuance
<PAGE>
-4-
thereof and at all times subsequent thereto, until (i) a Registration
Statement (other than, with respect to any Exchange Security as to which
Section 2(c)(iv) hereof is applicable, the Exchange Offer Registration
Statement) covering such Security, Exchange Security or Private Exchange
Security has been declared effective by the SEC and such Security, Exchange
Security or such Private Exchange Security, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii)
such Security has been exchanged pursuant to the Exchange Offer for an
Exchange Security or Exchange Securities that may be resold without complying
with the prospectus delivery requirements under the Securities Act, (iii)
such Security, Exchange Security or Private Exchange Security, as the case
may be, ceases to be outstanding for purposes of the Indenture or (iv) such
Security, Exchange Security or Private Exchange Security, as the case may be,
may be resold without restriction pursuant to Rule 144 under the Securities
Act.
REGISTRATION STATEMENT: Any registration statement of the
Company that covers any of the Securities, the Exchange Securities or the
Private Exchange Securities, filed with the SEC under the Securities Act,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all
material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the SEC providing for offers
and sales of securities made in compliance therewith resulting in offers and
sales by subsequent holders that are not affiliates of the issuer of such
securities being free of the registration and prospectus delivery
requirements of the Securities Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES: See the introductory paragraphs hereto.
<PAGE>
-5-
SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
SEMI-ANNUAL ACCRUAL DATE: Shall have the meaning set forth in
the Indenture.
SHELF NOTICE: See Section 2 hereof.
SHELF REGISTRATION: See Section 3(b) hereof.
SUBSEQUENT SHELF REGISTRATION: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and the trustee under
any indenture governing the Exchange Securities and Private Exchange
Securities.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an underwriter
for reoffering to the public.
2. EXCHANGE OFFER
(a) The Company shall file with the SEC, no later than the
Filing Date with respect to the Exchange Offer Registration Statement, a
Registration Statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on the
appropriate registration form with respect to the registered offer (the
"EXCHANGE OFFER") to exchange any and all of each of the Registrable
Securities for a like aggregate principal amount of Securities (the "EXCHANGE
SECURITIES") of the Company that are identical in all material respects to
the Securities, except that the Exchange Securities shall contain no
restrictive legend thereon other than in the case of Private Exchange
Securities. The Exchange Securities shall be entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with the TIA) and which, in either
case, has been qualified under the TIA. The Exchange Offer shall comply with
all applicable tender offer rules and regulations under the Exchange Act and
other applicable law. The Company shall use its reasonable best efforts to
(x) cause each Exchange Offer Registration Statement to be declared effective
under the Securities Act on or before the Effectiveness Date; (y) keep each
Exchange
<PAGE>
-6-
Offer open for at least 30 days (or longer if required by applicable law)
after the date that notice of the Exchange Offer is mailed to Holders; and
(z) consummate the Exchange Offer on or prior to the 30th day following the
date on which the applicable Exchange Offer Registration Statement is
declared effective by the SEC. If, after an Exchange Offer Registration
Statement is initially declared effective by the SEC, that Exchange Offer or
the issuance of the Exchange Securities thereunder is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, that Exchange Offer Registration Statement
shall be deemed not to have become effective for purposes of this Agreement.
Except for Initial Purchasers receiving Private Exchange
Securities, if any, each Holder that participates in an Exchange Offer will
be required, as a condition to its participation in the Exchange Offer, to
represent to the Company in writing (which may be contained in the applicable
letter of transmittal) that any Exchange Securities to be received by it will
be acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the
Exchange Securities in violation of the provisions of the Securities Act,
that such Holder is not an affiliate of the Company within the meaning of the
Securities Act and that such Holder reasonably believes such Holder is not
acting on behalf of any Person that could not truthfully make the foregoing
representations.
Upon consummation of an Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, MUTATIS
MUTANDIS, solely with respect to Registrable Securities that are Private
Exchange Securities, Exchange Securities as to which Section 2(c)(iv) is
applicable and Exchange Securities held by Participating Broker-Dealers (as
defined), and the Company shall have no further obligation to register
Registrable Securities (other than Private Exchange Securities and other than
in respect of any Exchange Securities as to which clause 2(c)(iv) hereof
applies) pursuant to Section 3 hereof.
No securities other than the Exchange Securities shall be
included in the Exchange Offer Registration Statement.
(b) The Company shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to
<PAGE>
-7-
the Initial Purchasers, which shall contain a summary statement of the
positions taken or policies made by the staff of the SEC with respect to the
potential "underwriter" status of any broker-dealer that is the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of any Exchange
Securities received by such broker-dealer in any Exchange Offer (a
"PARTICIPATING BROKER-DEALER"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also expressly permit, to the extent permitted by
applicable policies and regulations of the SEC, the use of the Prospectus by
all Persons subject to the prospectus delivery requirements of the Securities
Act, including, to the extent permitted by applicable policies and
regulations of the SEC, all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may
resell the Exchange Securities in compliance with the Securities Act.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement
the Prospectus contained therein in order to permit such Prospectus to be
lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as is necessary to
comply with applicable law in connection with any resale of the Exchange
Securities covered thereby; PROVIDED, HOWEVER, that such period shall not
exceed 210 days after consummation of the Exchange Offer (or such longer
period if extended by the last paragraph of Section 5 herein)) (the
"APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Securities acquired by them that have, or that are
reasonably likely to be determined to have, the status of an unsold allotment
in an initial distribution, the Company upon the request of the Initial
Purchasers shall simultaneously with the delivery of the Exchange Securities
in the Exchange Offer, issue and deliver to the Initial Purchasers, in
exchange (the "PRIVATE EXCHANGE") for such Securities held by the Initial
Purchasers, a like principal amount of Exchange Securities (the "PRIVATE
EXCHANGE SECURITIES") that are identical in all material respects to the
other Exchange Securities except for the placement of a restrictive legend on
such Private Exchange Securities. The Private Exchange Securities shall be
issued pursuant to the same indenture as the other Exchange Securities and
shall be considered Exchange Securities entitled to the full benefit thereof
for all purposes except as set forth in this paragraph. Each of the Private
Exchange Se-
<PAGE>
-8-
curities shall bear the same CUSIP number as the other Exchange Securities.
Interest on the Exchange Securities (including the Private
Exchange Securities) will accrue from (A) the later of (i) the last interest
payment date on which interest was paid on the Securities surrendered in
exchange therefor or (ii) if the Securities are surrendered for exchange on a
date in a period which includes the record date for an interest payment date
to occur on or after the date of such exchange and as to which interest will
be paid, the date on such interest payment date or (B), if no interest has
been paid on the Securities, from the Issue Date.
In connection with each of the Exchange Offer, the Company
shall:
(1) mail, or cause to be mailed, to each Holder of record entitled
to participate in the Exchange Offer a copy of the Prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) use their best efforts to keep the Exchange Offer open for not
less than 20 business days after the date that notice of the Exchange
Offer is mailed to Holders (or longer if required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(4) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Company shall:
(1) accept for exchange all Registrable Securities validly
tendered and not validly withdrawn pursuant to the Exchange Offer and
the Private Exchange, if any;
<PAGE>
-9-
(2) deliver to the Trustee for cancellation all Registrable
Securities so accepted for exchange and cause the Trustee to
authenticate and deliver promptly to each Holder Registrable
Securities, Exchange Securities or Private Exchange Securities, as the
case may be, equal in principal amount to the securities of such Holder
so accepted for exchange.
The Exchange Offer and Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange,
as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall
have been instituted or threatened in any court or by any governmental agency
which might materially impair the ability of the Company to proceed with the
Exchange Offer or the Private Exchange, and no material adverse development
shall have occurred in any existing action or proceeding with respect to the
Company and (iii) all governmental approvals shall have been obtained, which
approvals the Company deems necessary for the consummation of the Exchange
Offer or Private Exchange.
The Exchange Securities and the Private Exchange Securities
shall be issued under (i) the Indenture or (ii) an indenture identical in all
material respects to the Indenture and which, in either case, has been
qualified under the TIA or is exempt from such qualification and shall
provide that (a) the Exchange Securities (other than the Private Exchange
Securities) shall not be subject to the transfer restrictions set forth in
the Indenture and (b) the Private Exchange Securities shall be subject to the
transfer restrictions set forth in such indenture. The Indenture or such
indenture shall provide that the Exchange Securities, the Private Exchange
Securities and the Securities shall vote and consent together on all matters
as one class and that none of the Exchange Securities, the Private Exchange
Securities or the Securities will have the right to vote or consent as a
separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Company is not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not
consummated within 270 days of the Issue Date, (iii) any holder of any
Private Exchange Securities so requests in writing to the Company within 60
days after the consummation of the Exchange Offer, or (iv) in the case of any
Holder that is not eligible to participate in the Exchange Offer or that
participates in the Exchange Offer and such Holder
<PAGE>
-10-
does not receive Exchange Securities on the date of the exchange that may be
sold without restriction under state and federal securities laws (other than
due solely to the status of such Holder as an affiliate of the Company within
the meaning of the Securities Act), then in the case of each of clauses (i)
to and including (iv) of this sentence, the Company shall promptly deliver to
the Holders and the Trustee written notice thereof (the "SHELF NOTICE") and
shall file a Shelf Registration pursuant to Section 3 hereof.
3. SHELF REGISTRATION
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) SHELF REGISTRATION. The Company shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Registrable Securities not exchanged
in the Exchange Offer, Private Exchange Securities and Exchange Securities as
to which Section 2(c)(iv) is applicable (the "INITIAL SHELF REGISTRATION").
The Company shall use its best efforts to file with the SEC the Initial Shelf
Registration on or before the applicable Filing Date. The Initial Shelf
Registration shall be on the appropriate form permitting registration of such
Registrable Securities 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
Registrable Securities to be included in the Initial Shelf Registration or
any Subsequent Shelf Registration (as defined below).
The Company shall use their reasonable best efforts to cause
the Initial Shelf Registration to be declared effective under the Securities
Act on or prior to the Effectiveness Date and to keep the Initial Shelf
Registration continuously effective under the Securities Act until the date
which is two years from the Issue Date (the "EFFECTIVENESS PERIOD"), or such
shorter period ending when (i) all Registrable Securities covered by the
Initial Shelf Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Registrable Securities covered by and not
sold under the Initial Shelf Registration or an earlier Subsequent Shelf
Registration has been declared effective under the Securities Act; PROVIDED,
HOWEVER, that the Effectiveness Period in respect of the Initial Shelf
Registration shall be extended to the extent required to permit dealers to
comply with the applicable pro-
<PAGE>
-11-
spectus delivery requirements of Rule 174 under the Securities Act and as
otherwise provided herein.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration 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 their best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 30 days
of such cessation of effectiveness amend the Initial Shelf Registration in a
manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to
Rule 415 covering all of the Registrable Securities covered by and not sold
under the Initial Shelf Registration or an earlier Subsequent Shelf
Registration (each, a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf
Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective under the Securities
Act as soon as practicable after such filing and to keep such subsequent
Shelf Registration continuously effective for the remainder of the
Effectiveness Period. As used herein the term "SHELF REGISTRATION" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement or by any
underwriter of such Registrable Securities.
4. LIQUIDATED DAMAGES
(a) The Company and the Initial Purchasers agree that the Holders
will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, additional interest on the Securities ("LIQUIDATED
DAMAGES") under the circumstances and to the extent set forth below (each of
which shall be given independent effect):
<PAGE>
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(i) if (A) neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration has been filed on or prior to the applicable
Filing Date or (B) notwithstanding that the Company has filed an Exchange
Offer Registration Statement, the Company is required to file a Shelf
Registration and such Shelf Registration is not filed on or prior to the
Filing Date applicable thereto, then commencing on the day after any such
Filing Date, Liquidated Damages shall accrue on the Accreted Value of the
Securities as of the most recent Semi-Annual Accrual Date at a rate of .50%
per annum for the first 90 days immediately following each such Filing
Date, such Liquidated Damages increasing by an additional .25% per annum at
the beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration is declared effective by the SEC on or prior
to the relevant Effectiveness Date or (B) notwithstanding that the Company
has caused an Exchange Offer Registration Statement to be declared
effective by the SEC, the Company is required to file a Shelf Registration
and such Shelf Registration is not declared effective by the SEC on or
prior to the Effectiveness Date in respect of such Shelf Registration,
then, commencing on the day after the applicable Effectiveness Date,
Liquidated Damages shall accrue on the Accreted Value of the Securities as
of the most recent Semi-Annual Accrual Date at a rate of .50% per annum for
the first 90 days immediately following the day after such Effectiveness
Date, such Liquidated Damages increasing by an additional .25% per annum at
the beginning of each subsequent 90-day period; or
(iii) if (A) the Company has not exchanged Exchange Securities for
all Securities validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 30th day after the date on which the
Exchange Offer Registration Statement relating thereto was declared
effective or (B) the Exchange Offer Registration Statement or the Shelf
Registration has been declared effective and such Registration Statement
ceases to be effective at any time during the Effectiveness Period (other
than such time as all Securities have been disposed of thereunder) in the
case of a Shelf Registration or during the Applicable Period in the case of
an Exchange Offer Registration Statement, then Liquidated Damages shall
accrue on the Accreted Value of the Securities as of the most recent
Semi-Annual
<PAGE>
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Accrual Date at a rate of .50% per annum for the first 90 days
commencing on the (x) 31st day after such effective date, in the case of
(A) above, or (y) the day such Registration Statement ceases to be
effective in the case of (B) above, such Liquidated Damages shall increase
by an additional .25% per annum at the beginning of each such subsequent
90-day period (it being understood and agreed that, notwithstanding any
provision to the contrary, so long as any Security that is the subject of a
Shelf Notice is then covered by an effective Shelf Registration, no
Liquidated Damages shall accrue or accumulate on such Securities);
PROVIDED, HOWEVER, that the rate of Liquidated Damages that shall accrue on
the Securities may not exceed in the aggregate 2.0% per annum Accreted Value
of the Securities as of the most recent Semi-Annual Accrual Date; PROVIDED,
FURTHER, HOWEVER, that (1) upon the filing of the applicable Exchange Offer
Registration Statement or the applicable Shelf Registration as required
hereunder (in the case of clause (i) above of this Section 4(a)), (2) upon
the effectiveness of the applicable Exchange Offer Registration Statement or
the applicable Shelf Registration Statement as required hereunder (in the
case of clause (ii) of this Section 4(a)), or (3) upon the exchange of the
applicable Exchange Securities for all Securities tendered (in the case of
clause (iii)(A) of this Section 4(a), or upon the effectiveness of the
applicable Registration Statement which had ceased to remain effective (in
the case of (iii)(B) of this Section 4(a)), Liquidated Damages on the
Securities in respect of which such events relate as a result of such clause
(or the relevant subclause thereof), as the case may be, shall cease to
accrue or accumulate, as the case may be.
(b) The Company shall notify the Trustee (who shall be acting
under and protected by the terms of the Indenture) within three business days
after each and every date on which an event occurs in respect of which
Liquidated Damages are required to be paid (an "EVENT DATE"). Any amounts of
Liquidated Damages due pursuant to (a)(i), (a)(ii) or (a)(iii) of this
Section 4 shall be payable in cash semiannually on each February 15 and
August 15 (to the holders of record on the February 1 and August 1
immediately preceding such dates), commencing with the first such date
occurring after any such Liquidated Damages commences to accrue. The amount
of Liquidated Damages will be determined by multiplying the applicable rate
of Liquidated Damages by the Accreted Value of the Registrable Securities as
of the most recent Semi-Annual accrual date preceding the date of payment,
multiplied by a fraction, the numerator of
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which is the number of days such rate of Liquidated Damages was applicable
during such period (determined on the basis of a 360-day year comprised of
twelve 30-day months and, in the case of a partial month, the actual number
of days elapsed), and the denominator of which is 360.
5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Company shall effect such
registrations to permit the sale of the securities covered thereby in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by
the Company hereunder, the Company shall:
(a) Prepare and file with the SEC prior to the applicable
Filing Date, a Registration Statement or Registration Statements as
prescribed by Sections 2 or 3 hereof, and use their reasonable best efforts
to cause each such Registration Statement to become effective and remain
effective as provided herein; PROVIDED, HOWEVER, that, if (1) such filing is
pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange
Offer Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Securities during the Applicable Period relating
thereto, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall furnish to and afford
the Holders of the Registrable Securities included in such Registration
Statement or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be
filed (in each case at least five days prior to such filing, or such later
date as is reasonable under the circumstances). The Company shall not file
any Registration Statement or Prospectus or any amendments or supplements
thereto if the Holders of a majority in aggregate principal amount of the
Registrable Securities included in such Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object on a timely basis.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may
<PAGE>
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be, as may be necessary to keep such Registration Statement continuously
effective for the Effectiveness Period or the Applicable Period, as the case
may be; cause the related Prospectus to be supplemented by any prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; and comply with the provisions of the Securities
Act and the Exchange Act applicable to it with respect to the disposition of
all securities covered by such Registration Statement as so amended or in
such Prospectus as so supplemented and with respect to the subsequent resale
of any securities being sold by a Participating Broker-Dealer covered by any
such Prospectus. The Company shall be deemed not to have used their best
efforts to keep a Registration Statement effective during the Effectiveness
Period or the Applicable Period, as the case may be, relating thereto if the
Company voluntarily takes any action that would result in selling Holders of
the Registrable Securities covered thereby or Participating Broker-Dealers
seeking to sell Exchange Securities not being able to sell such Registrable
Securities or such Exchange Securities during that period unless such action
is required by applicable law or permitted by this Agreement.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period relating thereto from whom
the Company has received written notice that it will be a Participating
Broker-Dealer in the applicable Exchange Offer, notify the selling Holders of
Registrable Securities or each such Participating Broker-Dealer, as the case
may be, their counsel and the managing underwriters, if any, promptly (but in
any event within 2 business days), and confirm such notice in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any Holder
may, upon request, obtain, at the sole expense of the Company, one conformed
copy of such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus or
the initiation of any proceedings for that
<PAGE>
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purpose, (iii) if at any time when a prospectus is required by the Securities
Act to be delivered in connection with sales of the Registrable Securities or
resales of Exchange Securities by Participating Broker-Dealers the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 5(l) hereof
cease to be true and correct in all material respects, (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or
any of the Registrable Securities or the Exchange Securities to be sold by
any Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or written threat of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration Statement
or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and that
in the case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (vi) of the
Company's determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, use its reasonable best
efforts to prevent the issuance of any order suspending the effectiveness of
a Registration Statement or of any order preventing or suspending the use of
a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Securities or the Exchange
Securities to be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use its reasonable best
efforts to obtain the withdrawal of any such order at the earliest possible
moment.
<PAGE>
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(e) If a Shelf Registration is filed pursuant to Section 3 and
if reasonably requested by the managing underwriter or underwriters (if any),
the Holders of a majority in aggregate principal amount of the Registrable
Securities being sold in connection with an underwritten offering (i) as
promptly as practicable incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters (if any), such Holders, or counsel for any of them determine is
reasonably necessary to be included therein, (ii) make all required filings
of such prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment, and
(iii) supplement or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, furnish to each selling
Holder of Registrable Securities and to each such Participating Broker-Dealer
who so requests and to their respective counsel and each managing
underwriter, if any, at the sole expense of the Company, one conformed copy
of the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, deliver to each selling
Holder of Registrable Securities or each such Participating Broker-Dealer, as
the case may be, their respective counsel, and the underwriters, if any, at
the sole expense of the Company, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each
amendment or supplement thereto and any documents incorporated by reference
therein as such Persons may reasonably request; and, subject to the last
paragraph of this Section 5, the Company hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders of Registrable Securities or each such Participating Broker-Dealer,
as the
<PAGE>
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case may be, and the underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Securities covered
by, or the sale by Participating Broker-Dealers of the Exchange Securities
pursuant to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities or
any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, use its reasonable best efforts to
register or qualify, and to cooperate with the selling Holders of Registrable
Securities or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters reasonably request in writing; provided,
however, that where Exchange Securities held by Participating Broker-Dealers
or Registrable Securities are offered other than through an underwritten
offering, the Company agrees to cause its counsel to perform Blue Sky
investigations and file registrations and qualifications required to be filed
pursuant to this Section 5(h), keep each such registration or qualification
(or exemption therefrom) effective during the period such Registration
Statement is required to be kept effective and do any and all other acts or
things reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange held by Participating Broker-Dealers or the
Registrable Securities covered by the Registration Statement; provided,
however, that the Company shall not be required to (A) qualify generally to
do business in any jurisdiction where it is not then so qualified, (B) take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction where
it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository
<PAGE>
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Trust Company; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request.
(j) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the SEC,
at the sole expense of the Company, a supplement or post-effective amendment
to the applicable Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein
by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold
thereunder or to the purchasers of the Exchange Securities to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, the Company shall not be
required to amend or supplement a Registration Statement, any related
Prospectus or any document incorporated therein by reference, in the event
that, and for a period not to exceed an aggregate of 60 days in any calendar
year if, (i) an event occurs and is continuing as a result of which a Shelf
Registration would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and (ii) (a) the Company determines in
its good faith judgment that the disclosure of such event at such time would
have a material adverse effect on the business, operations or prospects of
the Company's or (b) the disclosure otherwise relates to a pending material
business transaction that has not yet been publicly disclosed.
(k) Prior to the effective date of the first Registration
Statement relating to the Registrable Securities, (i) provide the Trustee with
certificates for the Registrable Securities in a form eligible for deposit with
The Depository
<PAGE>
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Trust Company and (ii) provide a CUSIP number for the Registrable Securities.
(l) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Securities being sold,
or each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Securities, if any, and
any attorney, accountant or other agent retained by any such selling Holder
or each such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "INSPECTORS"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent
corporate documents and instruments of the Company and subsidiaries of the
Company (collectively, the "RECORDS") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities, and
cause the officers, directors and employees of the Company and any of their
subsidiaries to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement and Prospectus. Each
Inspector shall agree in writing that it will keep the Records confidential
and that it will not disclose any of the Records that the Company determines,
in good faith, to be confidential and notify the Inspectors in writing are
confidential unless (i) the disclosure of such Records is necessary to avoid
or correct a material misstatement or material omission in such Registration
Statement or Prospectus, (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction, or (iii)
the information in such Records has been made generally available to the
public; provided, however, that prior notice shall be provided as soon as
practicable to the Company of the potential disclosure of any information by
such Inspector pursuant to clauses (i) or (ii) of this sentence to permit the
Company to obtain a protective order (or waive the provisions of this
paragraph (m)) and that such Inspector shall take such actions as are
reasonably necessary to protect the confidentiality of such information (if
practicable) to the extent such action is otherwise not inconsistent with, an
impairment of or in derogation of the rights and interests of the Holder or
any Inspector.
(m) Provide an indenture trustee for the Registrable Securities or
the Exchange Securities, as the case may be, and
<PAGE>
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cause the Indenture or the trust indenture provided for in Section 2(a)
hereof, as the case may be, to be qualified under the TIA not later than the
effective date of the first Registration Statement relating to the
Registrable Securities; and in connection therewith, cooperate with the
trustee under any such indenture and the Holders of the Registrable
Securities, to effect such changes to such indenture as may be required for
such indenture to be so qualified in accordance with the terms of the TIA;
and execute, and use their reasonable best efforts to cause such trustee to
execute, all documents as may be required to effect such changes, and all
other forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(n) Comply with all applicable rules and regulations of the SEC
and make generally available to their securityholders with regard to any
applicable Registration Statement, a consolidated earnings statement
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no
later than 45 days after the end of any twelve-month period (or 90 days after
the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which any Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(o) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company addressed to the
Trustee for the benefit of all Holders of Registrable Securities
participating in the Exchange Offer or Private Exchange, as the case may be,
that the Exchange Securities (including the Private Exchange Securities, if
any), and the related indenture constitute legal, valid and binding
obligations of the Company, enforceable against them in accordance with their
respective terms subject to customary exceptions and qualifications.
(p) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be, the
Company shall mark, or cause to be marked, on such Registrable Securities that
such Registrable Securities are being canceled in ex-
<PAGE>
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change for the Exchange Securities or the Private Exchange Securities, as the
case may be; PROVIDED that in no event shall such Registrable Securities be
marked as paid or otherwise satisfied.
(q) Cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(r) Use their best efforts to take all other steps reasonably
necessary to effect the registration of the applicable Registrable Securities
covered by a Registration Statement contemplated hereby.
The Company may require each seller of any Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding such seller and the distribution of such
Registrable Securities as the Company may, from time to time, reasonably
request. The Company may exclude from such registration the Registrable
Securities of any seller for so long as such seller fails to furnish such
information within a reasonable time after receiving such request and in such
event shall have no further obligation under this Agreement (including
without limitation the obligation under Section 4) with respect to such
seller or any subsequent holder of such Registrable Securities. Each seller
as to which any Shelf Registration is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such seller not
materially misleading.
If any such Registration Statement refers to any Holder by name
or otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force,
the deletion of the reference to such Holder in any amendment or supplement
to the applicable Regis-
<PAGE>
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tration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Securities or
Exchange Securities, as the case may be, to be sold by such Participating
Broker-Dealer, as the case may be, that, upon actual receipt of any notice
from the Company of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder or
Participating Broker-Dealer, as the case may be, will forthwith discontinue
disposition of such Registrable Securities or Exchange Securities, as the
case may be, covered by such Registration Statement or Prospectus until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof, or
until it is advised in writing (the "ADVICE") by the Company that the use of
the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event that the Company shall give
any such notice, the Applicable Period shall be extended by the number of
days during such periods from and including the date of the giving of such
notice to and including the date when each seller of Registrable Securities
covered by such Registration Statement or Exchange Securities to be sold by
such Participating Broker-Dealer, as the case may be, shall have received (x)
the copies of the supplemented or amended Prospectus contemplated by Section
5(j) hereof or (y) the Advice.
6. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company (other than any underwriting
discounts or commissions) shall be borne by the Company whether or not the
Exchange Offer Registration Statements or any Shelf Registration is filed or
becomes effective or the Exchange Offer is consummated, including, without
limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD in connection with an underwritten offering and (B) reasonable fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Securities or
Exchange Securities and determination of the eligibility of the Registrable
Securities or Exchange Securities for investment under the laws of such
jurisdictions (x) where the holders of Registrable Securities or Exchange
Securities, as the case
<PAGE>
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may be, are located, or (y) as provided in Section 5(h) hereof, in the case
of Registrable Securities or Exchange Securities, as the case may be, to be
sold by a Participating Broker-Dealer during the Applicable Period)), (ii)
printing expenses, including, without limitation, expenses of printing
certificates for Registrable Securities or Exchange Securities in a form
eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Securities included in any
Registration Statement or to be sold by any Participating Broker-Dealer, as
the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees
and disbursements of counsel for the Company and reasonable fees and
disbursements of one special counsel for all of the sellers of each of the
Registrable Securities (exclusive of any counsel retained pursuant to Section
7 hereof), (v) reasonable fees and disbursements of all independent certified
public accountants referred to in Section 5(l)(iii) hereof (including,
without limitation, the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), (vi) Securities Act
liability insurance, if the Company desires such insurance, (vii) fees and
expenses of all other Persons retained by the Company, (viii) internal
expenses of the Company (including, without limitation, all salaries and
expenses of officers and employees of the Company performing legal or
accounting duties), (ix) the expense of any annual audit, (x) any fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, and the obtaining of a rating of the
securities, in each case, if applicable, and (xi) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, indentures and any other documents necessary in
order to comply with this Agreement.
7. INDEMNIFICATION AND CONTRIBUTION
(a) The Company agrees to indemnify and hold harmless each Holder
of the Registrable Securities and each Participating Broker-Dealer selling the
Exchange Securities during the Applicable Period, the affiliates, officers and
directors of each such Person, and each Person, if any, who controls any such
Person within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act (each, a "PARTICIPANT"), from and against any and all
losses, claims, damages, judgments, liabilities and expenses (including, without
limitation, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding
<PAGE>
-25-
or any claim asserted) caused by, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) or Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by, arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in the case of the Prospectus in light of the circumstances under
which they were made, not misleading, EXCEPT insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Participant furnished to the Company in
writing by such Participant expressly for use therein and with respect to any
preliminary Prospectus, to the extent that any such loss, claim, damage or
liability arises solely from the fact that any Participant sold Registrable
Securities or Exchange Securities to a person to whom there was not sent or
given a copy of the Prospectus (as amended or supplemented) at or prior to
the written confirmation of such sale if the Company shall have previously
furnished copies thereof to the Participant in accordance herewith and the
Prospectus (as amended or supplemented) would have corrected any such untrue
statement or omission.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Company, the affiliates, officers and
directors of the Company and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
to the same extent (but on a several, and not joint, basis) as the foregoing
indemnity from the Company to each Participant, but only with reference to
information relating to such Participant furnished to the Company in writing
by or on behalf of such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any
preliminary prospectus. The liability of any Participant under this paragraph
shall in no event exceed the proceeds received by such Participant from sales
of Registrable Securities or Exchange Securities giving rise to such
obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "INDEMNIFIED PERSON") shall promptly
notify the Persons against whom such indemnity
<PAGE>
-26-
may be sought (the "INDEMNIFYING PERSONS") in writing, and the Indemnifying
Persons, upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Persons may reasonably
designate in such proceeding and shall pay the fees and expenses actually
incurred by such counsel related to such proceeding; PROVIDED, HOWEVER, that
the failure to so notify the Indemnifying Persons will not relieve it from
any liability under paragraph (a) or (b) above unless and to the extent such
failure results in the forfeiture by the Indemnifying Person of substantial
rights and defenses and the Indemnifying Person was not otherwise aware of
such action or claim. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Persons and the Indemnified Person shall have mutually agreed to
the contrary, (ii) the Indemnifying Persons shall have failed within a
reasonable period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both any Indemnifying Person and
the Indemnified Person or any affiliate thereof and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying
Persons shall not, in connection with such proceeding or separate but
substantially similar related proceedings in the same jurisdiction arising
out of the same general allegations, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed
promptly as they are incurred. Any such separate firm for the Participants
and such control Persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Securities and
Exchange Securities sold by all such Participants and shall be reasonably
acceptable to the Company, and any such separate firm for the Company, their
affiliates, officers, directors, representatives, employees and agents and
such control Persons of the Company shall be designated in writing by the
Company and shall be reasonably acceptable to the Holders.
The Indemnifying Persons shall not be liable for any settlement
of any proceeding effected without its prior written consent (which consent
shall not be unreasonably withheld or delayed), but if settled with such
consent or if there be a final non-appealable judgment for the plaintiff for
which the Indemnified Person is entitled to indemnification pursuant to
<PAGE>
-27-
this Agreement, each of the Indemnifying Persons agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without
the prior written consent of the Indemnified Persons (which consent shall not
be unreasonably withheld or delayed), effect any settlement or compromise of
any pending or threatened proceeding in respect of which any Indemnified
Person is or could have been a party, or indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement (A) includes an
unconditional written release of such Indemnified Person, in form and
substance reasonably satisfactory to such Indemnified Person, from all
liability on claims that are the subject matter of such proceeding and (B)
does not include any statement as to an admission of fault, culpability or
failure to act by or on behalf of such Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or
insufficient to hold harmless, an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraphs, in lieu of indemnifying such
Indemnified Person thereunder and in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or liabilities
in such proportion as is appropriate to reflect (i) the relative benefits
received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the
applicable Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative
benefits but also the relative fault of the Indemnifying Person or Persons on
the one hand and the Indemnified Person or Persons on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or such Participant or
such other Indemnified Person, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.
<PAGE>
-28-
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Person as a result of
the losses, claims, damages, judgments, liabilities and expenses referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any reasonable legal or other expenses
actually incurred by such Indemnified Person in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any
amount in excess of the amount by which proceeds received by such Participant
from sales of Registrable Securities or Exchange Securities, as the case may
be, exceeds the amount of any damages that such Participant has otherwise
been required to pay or has paid by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
The Company covenants and agrees that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and
the rules and regulations adopted by the SEC thereunder in a timely manner in
accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time the Company is not required to file such reports, will,
upon the request of any Holder or beneficial owner of Registrable Securities,
make available such information necessary to permit sales pursuant to Rule
144A under the Securities Act. The Company further covenants and agrees, for
so long as any Registrable Securities remain outstanding that it will take
such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder
to sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144(k) and Rule
144A un-
<PAGE>
-29-
der the Securities Act, as such Rules may be amended from time to time, or
(b) any similar rule or regulation hereafter adopted by the SEC.
9. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. The Company has not, as of the
date hereof, and the Company shall not, after the date of this Agreement,
enter into any agreement with respect to any of their securities that is
inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. The
rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements. The
Company will not enter into any agreement with respect to any of their
securities which will grant to any Person piggy-back registration rights with
respect to any Registration Statement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
shall not, directly or indirectly, take any action with respect to the
Registrable Securities that would adversely affect the ability of the Holders
of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, otherwise than with the prior
written consent of (I) the Company and (II)(A) the Holders of not less than a
majority in aggregate principal amount of the then outstanding Registrable
Securities and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal, as the case may be, of the Exchange
Securities held by all Participating Broker-Dealers; PROVIDED, HOWEVER, that
Section 7 and this Section 10(c) may not be amended, modified or supplemented
without the prior written consent of each Holder and each Participating
Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Securities or Exchange Securities, as the case may
be, disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Securities whose
<PAGE>
-30-
securities are being sold pursuant to a Registration Statement and that does
not directly or indirectly affect, impair, limit or compromise the rights of
other Holders of Registrable Securities may be given by Holders of at least a
majority in aggregate principal of the Registrable Securities being sold
pursuant to such Registration Statement.
(d) NOTICES. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee)
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or facsimile:
(i) if to a Holder of Registrable Securities or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, the Exchange Indenture or of the Company, as
appropriate.
(ii) if to the Company, at the address as follows:
Prinses Irenstraat 61
1077 WV Amsterdam
The Netherlands
Attention: Managing Director
with copy to:
CompleTel Europe N.V.
c/o CompleTel LLC
4700 South Syracuse Street
Suite 1050
Denver, Colorado 80237
Attention: Chief Financial Officer
and with a copy to:
ING Trust (Nederland) B.V.
P.O. Box 2838
1000 CV Amsterdam, The Netherlands
Attention: Paul van Witteveen
<PAGE>
-31-
and with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
Attention: W. Dean Salter
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one
business day after being timely delivered to a next-day air courier; and when
receipt is acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in the Indenture if such communication
relates to the Securities, Exchange Securities or Private Exchange Securities.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties hereto, the Holders and the Participating Broker-Dealers; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be binding
upon a successor of assign of a Holder or a Participating Broker-Dealer
unless and to the extent such successor or assign holds Registrable
Securities.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES
TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>
-32-
(i) SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(j) SECURITIES HELD BY THE COMPANY OR THEIR AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company
or their affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
(k) THIRD-PARTY BENEFICIARIES. Holders of Registrable Securities,
and Participating Broker-Dealers are intended third-party beneficiaries of
this Agreement, and this Agreement may be enforced by such Persons.
(l) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Indenture are intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the
Holders on the one hand and the Company on the other, or between or among any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof
and thereof are merged herein and replaced hereby.
(m) By the execution and delivery of this Agreement, the Company (i)
acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System (the "PROCESS AGENT"), 1633 Broadway, New York,
New York 10019, United States, as its authorized agent upon which process may be
served in any suit, action or proceeding arising out of or
<PAGE>
-33-
relating to this Agreement that may be instituted in any Federal or state
court in the State of New York, The City of New York, the Borough of
Manhattan, or brought under Federal or state securities laws or brought by
the Holders, and acknowledges that the Process Agent has accepted such
designation, (ii) submits to the jurisdiction of any such court in any such
suit, action or proceeding and (iii) agrees that service of process upon the
Process Agent and written notice of said service to it at its principal
office in accordance with Section 9(d) hereof, shall be deemed in every
respect effective service of process upon it in any such suit or proceeding.
The Company further agrees to take any and all action, including the
execution and filing of any and all such documents and instruments as may be
necessary to continue such designation and appointment of the Process Agent
in full force and effect so long as the Securities, Exchange Securities or
Private Exchange Securities shall be outstanding; PROVIDED that the Company
may (and shall, to the extent the Process Agent ceases to be able to be
served on the basis contemplated herein) by written notice to the Trustee,
designate such additional or alternative agents for service of process under
this Section 9(m) that (i) maintains an office located in the Borough of
Manhattan, The City of New York in the State of New York, (ii) are either (x)
counsel for the Company or (y) a corporate service company which acts as
agent for service of process for other Persons in the ordinary course of its
business and (iii) agrees to act as agent for service of process in
accordance with this Section 9(d). Such notice shall identify the name of
such agent for process and the address of such agent for process in the
Borough of Manhattan, The City of New York, State of New York.
Notwithstanding the foregoing, there shall, at all times, be at least one
agent for service of process for the Company appointed and acting in
accordance with this Section 9(d).
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, it
hereby irrevocably waives such immunity in respect of its obligations under
the above-referenced documents, to the extent permitted by law.
(n) JUDGMENT CURRENCY. The Company hereby agrees, to indemnify each
Holder against any loss incurred by any of them as a result of any judgment or
order being given or made for any amount due under this Agreement and such
judgment or order being expressed and paid in a currency (the "JUDGMENT
<PAGE>
-34-
CURRENCY") other than United States dollars and as result of any variation as
between (i) the rate of exchange at which the United States dollars amount is
converted into the Judgment Currency for the purpose of such judgment or
order and (ii) the spot rate of exchange in The City of New York at which any
such person on the date of payment of such judgment or order is able to
purchase United States dollars with the amount of the Judgment Currency
actually received by such person. The foregoing indemnity shall continue in
full force and effect notwithstanding any such judgment or order as
aforesaid. The term "spot rate of exchange" shall include any premiums and
costs of exchange payable in connection with the purchase of, or conversion
into, United States dollars.
<PAGE>
-35-
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
COMPLETEL EUROPE N.V.
By: /s/ James E. Dovey
---------------------------
Name: James E. Dovey
Title: Attorney-in-Fact
<PAGE>
-36-
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
SALOMON SMITH BARNEY INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED,
TD SECURITIES (USA) INC.
and PARIBAS CORPORATION
as Initial Purchasers
By: SALOMON SMITH BARNEY INC.
By: /s/ Christopher Clipper
------------------------------------
Name: Christopher Clipper
Title: Vice President
<PAGE>
===============================================================================
COMPLETEL EUROPE N.V.,
as Issuer
COMPLETEL ECC B.V.,
as Guarantor
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
--------------------------------
Indenture
Dated as of February 16, 1999
--------------------------------
$147,500,000
14% Senior Discount Notes due 2009
===============================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ ------------------
<S> <C>
Section 3.10(a)(1) 7.10
(a)(2) 7.10
(b) 7.03; 7.08
Section 3.11 7.03
Section 3.13(a) 7.06
(c) 7.05, 7.06; 10.02
Section 3.14(a) 4.17; 10.02
(a)(4) 4.16; 10.02
(c)(1) 10.03
(c)(2) 10.03
(e) 10.04
Section 3.15(a) 7.02
(b) 7.02; 7.05; 10.02
(c) 7.02
(d) 7.02
Section 3.16(a) 6.05; 6.06
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(b) 6.07
Section 3.17(a)(1) 6.08
(a)(2) 6.09
Section 3.18(a) 10.01
(c) 10.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE.......................................................2
SECTION 1.01. Definitions...............................................................2
SECTION 1.02. Incorporation by Reference of Trust Indenture Act........................32
SECTION 1.03. Rules of Construction....................................................32
ARTICLE TWO THE NOTES.......................................................................................33
SECTION 2.01. Form and Dating..........................................................33
SECTION 2.02. Restrictive Legends......................................................35
SECTION 2.03. Execution, Authentication and Denominations..............................37
SECTION 2.04. Registrar and Paying Agent...............................................38
SECTION 2.05. Paying Agent to Hold Money in Trust......................................39
SECTION 2.06. Transfer and Exchange....................................................40
SECTION 2.07. Book-Entry Provisions for Global Notes...................................41
SECTION 2.08. Registration of Transfers and exchanges..................................42
SECTION 2.09. Replacement Notes........................................................47
SECTION 2.10. Outstanding Notes........................................................47
SECTION 2.11. Temporary Notes..........................................................48
SECTION 2.12. Cancellation.............................................................49
SECTION 2.13. CUSIP Numbers............................................................49
SECTION 2.14. Defaulted Interest.......................................................49
ARTICLE THREE REDEMPTION....................................................................................50
SECTION 3.01. Right of Redemption......................................................50
SECTION 3.02. Notices to Trustee.......................................................51
SECTION 3.03. Selection of Notes to Be Redeemed........................................51
SECTION 3.04. Notice of Redemption.....................................................52
SECTION 3.05. Effect of Notice of Redemption...........................................53
SECTION 3.06. Deposit of Redemption Price..............................................53
SECTION 3.07. Payment of Notes Called for Redemption...................................53
SECTION 3.08. Notes Redeemed in Part...................................................54
ARTICLE FOUR COVENANTS......................................................................................54
SECTION 4.01. Payment of Notes.........................................................54
SECTION 4.02. Maintenance of Office or Agency..........................................54
-i-
<PAGE>
SECTION 4.03. Limitation on Indebtedness...............................................55
SECTION 4.04. Limitation on Restricted Payments........................................57
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries....................................61
SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries..............................................62
SECTION 4.07. Limitation on Issuances of Guaranties and Incurrence of
Certain Indebtedness by Restricted Subsidiaries......................62
SECTION 4.08. Limitation on Transactions with Shareholders and Affiliates..............63
SECTION 4.09. Limitation on Liens Securing Certain Indebtedness........................64
SECTION 4.10. Limitation on Asset Sales................................................65
SECTION 4.11. Limitation on Status as Investment Company...............................66
SECTION 4.12. Repurchase of Notes upon a Change of Control.............................66
SECTION 4.13. Existence................................................................66
SECTION 4.14. Payment of Taxes and Other Claims........................................67
SECTION 4.15. Maintenance of Properties and Insurance..................................67
SECTION 4.16. Notice of Defaults.......................................................68
SECTION 4.17. Compliance Certificates..................................................68
SECTION 4.18. Commission Reports and Reports to Holders................................69
SECTION 4.19. Waiver of Stay, Extension or Usury Laws..................................69
SECTION 4.20. Calculation of Original Issue Discount...................................70
SECTION 4.21. Payment of Additional Amounts............................................70
SECTION 4.22. Escrow Account; Mandatory Redemption.....................................72
ARTICLE FIVE SUCCESSOR CORPORATION..........................................................................74
SECTION 5.01. When Company May Merge, Etc..............................................74
SECTION 5.02. Successor Substituted....................................................76
ARTICLE SIX DEFAULT AND REMEDIES............................................................................76
SECTION 6.01. Events of Default........................................................76
SECTION 6.02. Acceleration.............................................................79
SECTION 6.03. Other Remedies...........................................................79
SECTION 6.04. Waiver of Past Defaults..................................................80
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<PAGE>
Page
----
SECTION 6.05. Control by Majority......................................................80
SECTION 6.06. Limitation on Suits......................................................80
SECTION 6.07. Rights of Holders to Receive Payment.....................................81
SECTION 6.08. Collection Suit by Trustee...............................................81
SECTION 6.09. Trustee May File Proofs of Claim.........................................82
SECTION 6.10. Priorities...............................................................82
SECTION 6.11. Undertaking for Costs....................................................83
SECTION 6.12. Restoration of Rights and Remedies.......................................83
SECTION 6.13. Rights and Remedies Cumulative...........................................83
SECTION 6.14. Delay or Omission Not Waiver.............................................84
ARTICLE SEVEN TRUSTEE.......................................................................................84
SECTION 7.01. General..................................................................84
SECTION 7.02. Certain Rights of Trustee................................................84
SECTION 7.03. Individual Rights of Trustee.............................................86
SECTION 7.04. Trustee's Disclaimer.....................................................86
SECTION 7.05. Notice of Default........................................................86
SECTION 7.06. Reports by Trustee to Holders............................................86
SECTION 7.07. Compensation and Indemnity...............................................87
SECTION 7.08. Replacement of Trustee...................................................87
SECTION 7.09. Successor Trustee by Merger, Etc.........................................89
SECTION 7.10. Eligibility..............................................................89
SECTION 7.11. Money Held in Trust......................................................89
SECTION 7.12. Withholding Taxes........................................................89
ARTICLE EIGHT DISCHARGE OF INDENTURE........................................................................90
SECTION 8.01. Termination of Company's Obligations.....................................90
SECTION 8.02. Defeasance and Discharge of Indenture....................................91
SECTION 8.03. Defeasance of Certain Obligations........................................94
SECTION 8.04. Application of Trust Money...............................................95
SECTION 8.05. Repayment to Company.....................................................96
SECTION 8.06. Reinstatement............................................................96
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS............................................................97
SECTION 9.01. Without Consent of Holders...............................................97
SECTION 9.02. With Consent of Holders..................................................97
SECTION 9.03. Revocation and Effect of Consent.........................................99
SECTION 9.04. Notation on or Exchange of Notes........................................100
SECTION 9.05. Trustee to Sign Amendments, Etc.........................................100
SECTION 9.06. Conformity with Trust Indenture Act.....................................100
ARTICLE TEN ESCROW GUARANTEE OF SECURITIES.................................................................101
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SECTION 10.01. Escrow Guaranty.........................................................101
SECTION 10.02. Execution and Delivery of the Escrow Guaranty...........................102
SECTION 10.03. Release of the Escrow Guarantor.........................................103
SECTION 10.04. Waiver of Subrogation...................................................103
SECTION 10.05. Immediate Payment.......................................................104
SECTION 10.06. No Set-Off..............................................................104
SECTION 10.07. Obligations Absolute....................................................104
SECTION 10.08. Obligations Continuing..................................................104
SECTION 10.09. Obligations Not Reduced.................................................105
SECTION 10.10. Obligations Reinstated..................................................105
SECTION 10.11. Obligations Not Affected................................................105
SECTION 10.12. Waiver..................................................................107
SECTION 10.13. No Obligation to Take Action Against Company............................107
SECTION 10.14. Dealing with the Company and Others.....................................107
SECTION 10.15. Default and Enforcement.................................................108
ARTICLE ELEVEN COLLATERAL AND SECURITY.....................................................................109
SECTION 11.01. Escrow Agreement........................................................109
SECTION 11.02. Recording and Opinions..................................................109
SECTION 11.03. Release of Collateral...................................................110
SECTION 11.04. Certificates of the Escrow Guarantor....................................111
SECTION 11.05. Authorization of Actions To Be Taken by the Trustee Under
the Escrow Agreement................................................111
SECTION 11.06. Authorization of Receipt of Funds by the Trustee Under the
Escrow Agreement....................................................112
SECTION 11.07. Termination of Security Interest........................................112
ARTICLE TWELVE MISCELLANEOUS...............................................................................112
SECTION 12.01. Trust Indenture Act of 1939.............................................112
SECTION 12.02. Notices.................................................................112
SECTION 12.03. Certificate and Opinion as to Conditions Precedent......................113
SECTION 12.04. Statements Required in Certificate......................................114
SECTION 12.05. Rules by Trustee, Paying Agent or Registrar.............................114
SECTION 12.06. Payment Date Other Than a Business Day..................................114
SECTION 12.07. Governing Law...........................................................115
SECTION 12.08. No Adverse Interpretation of Other Agreements...........................115
SECTION 12.09. No Recourse Against Others..............................................115
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SECTION 12.10. Successors..............................................................115
SECTION 12.11. Duplicate Originals.....................................................115
SECTION 12.12. Separability............................................................116
SECTION 12.13. Table of Contents, Headings, Etc........................................116
SECTION 12.14. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities..........................................................116
SECTION 12.15. Judgment Currency.......................................................117
EXHIBIT A - Form of Note
EXHIBIT B - Certificate to be Delivered Upon Exchange or Registration of Notes
EXHIBIT C - Form of Certificate to be Delivered in Connection with Transfers to Institutional
Accredited Investors
EXHIBIT D - Form of Certificate to be Delivered in Connection with Transfers Pursuant to
Regulation S
EXHIBIT E - Terms of Subsidiary Guaranty
EXHIBIT F - Form of Subsidiary Guaranty
EXHIBIT G - Form of Subordination for Deeply Subordinated Indebtedness
EXHIBIT H - Form of Escrow Guaranty
EXHIBIT I - Escrow Agreement
</TABLE>
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<PAGE>
INDENTURE, dated as of February 16, 1999, between COMPLETEL
EUROPE N.V., a Netherlands public company with limited liability (the
"Company"), CompleTel ECC B.V., a Netherlands private company with limited
liability (the "Escrow Guarantor") and U.S. BANK TRUST NATIONAL ASSOCIATION,
a national banking corporation (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery
of this Indenture to provide for the issuance of $147,500,000 aggregate
principal amount at maturity of the Company's 14% Senior Discount Notes due
2009 (the "Notes") issuable as provided in this Indenture. The Notes were
issued and sold in connection with the issue and sale of an aggregate of
147,500 Units (the "Units"), consisting of $147,500,000 principal amount at
maturity Notes and an aggregate of 1,475,000 Non-Voting Class B Membership
Interests of CompleTel Holdings LLC (each a "Class B Interest"). Each Unit
consists of a $1,000 principal amount at maturity Note and 10 Class B
Interests. The Notes and the Class B Interests constituting the Units will
not be separately transferable until the earliest of (i) six months after the
Issue Date (as defined herein), (ii) the effective date of the shelf
registration statement (as defined herein) or the consummation of an exchange
offer pursuant to the Notes Registration Rights Agreement(as defined herein),
(iii) the occurrence of an Event of Default (as defined herein), (iv) the
occurrence of a Change of Control (as defined herein) or (v) such earlier
date as determined by Salomon Smith Barney Inc. in its sole discretion;
PROVIDED that in no event will the Notes and Class B Interests become
separately transferable prior to the release of funds from the Escrow Account
(as defined herein), as provided in the Escrow Agreement (as defined herein)
(the date of the occurrence of an event specified in clauses (i) through (v),
the "Separability Date"). All things necessary to make this Indenture a valid
agreement of the Company and the Escrow Guarantor, in accordance with its
terms, have been done, and the Company has done all things necessary to make
the Notes, when executed by the Company and the Escrow Guaranty, when
endorsed by the Escrow Guarantor and the Notes, when authenticated and
delivered by the Trustee hereunder and duly issued by the Company, the valid
obligations of the Company and the Escrow Guaranty, when endorsed by the
Escrow Guarantor as hereinafter provided. By separate agreement dated the
date hereof, CompleTel LLC entered into a guaranty agreement providing for an
unconditional and irrevocable guaranty of the Indenture Obligations and the
Notes (as defined herein).
I-1
<PAGE>
This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act of 1939, as amended, that are required
to be a part of and to govern indentures qualified under the Trust Indenture
Act of 1939, as amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase
of the Notes by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Accreted Value" means, for any Specified Date, the amount
provided below for each $1,000 principal amount at maturity of Notes:
(i) if the Specified Date occurs on one of the following
dates (each a "Semi-Annual Accrual Date"), the Accreted Value will
equal the amount set forth below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
- ------------------------ --------------
<S> <C>
August 15, 1999 $543.93
February 15, 2000 582.01
August 15, 2000 622.75
February 15, 2001 666.34
August 15, 2001 712.99
February 15, 2002 762.90
August 15, 2002 816.30
February 15, 2003 873.44
August 15, 2003 934.58
February 15, 2004 $1,000.00
</TABLE>
(ii) if the Specified Date occurs before the first
Semi-Annual Accrual Date, the Accreted Value of the Notes will equal
the sum of (a) $508.54 and (b) an amount equal to the product of (1)
the applicable Accreted Value for the first Semi-Annual Accrual Date
less $508.54, MULTIPLIED by (2) a fraction, the numerator of which is
the
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<PAGE>
number of days from the Issue Date to the Specified Date, using a
360-day year of twelve 30-day months, and the denominator of which is
the number of days from the Issue Date to the first Semi-Annual Accrual
Date, using a 360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual
Accrual Dates, the Accreted Value will equal the sum of (a) the
applicable Accreted Value for the Semi-Annual Accrual Date immediately
preceding such Specified Date and (b) an amount equal to the product of
(1) the applicable Accreted Value for the immediately following
Semi-Annual Accrual Date less the Accreted Value for the immediately
preceding Semi-Annual Accrual Date MULTIPLIED by (2) a fraction, the
numerator of which is the number of days from the immediately preceding
Semi-Annual Accrual Date to the Specified Date, using a 360-day year of
twelve 30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual
Accrual Date, the Accreted Value will equal $1,000.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or assumed
in connection with an Asset Acquisition by a Restricted Subsidiary and not
Incurred in connection with, or in anticipation of, such Person becoming a
Restricted Subsidiary or such Asset Acquisition.
"Additional Amounts" has the meaning provided in Section 4.21.
"Adjusted Consolidated Net Income" means, for any period,
the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period determined in conformity with GAAP; PROVIDED
that the following items shall be excluded in computing Adjusted Consolidated
Net Income (without duplication): (i) the net income (or loss) of any Person
that is not a Restricted Subsidiary, except (x) with respect to net income,
to the extent of the amount of dividends or other distributions actually paid
to the Company or any of the Restricted Subsidiaries by such Person during
such period and (y) with respect to net losses, to the extent of the amount
of Investments made by the Company or any Restricted Subsidiary in such
Person; (ii) the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary out of such
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<PAGE>
net income is not at the time permitted by the operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to such Restricted Subsidiary; PROVIDED
that solely for the purposes of calculating the Consolidated Leverage Ratio,
any determination as to the exclusion of net income of a Restricted
Subsidiary pursuant to this clause (ii) shall not give effect to any
restrictions on the declaration or payment of dividends or other
distributions which are permitted pursuant to clause (vi) of the second
paragraph under Section 4.05; (iii) any gains or losses (on an after-tax
basis) attributable to Asset Sales; (iv) except for purposes of calculating
the amount of Restricted Payments that may be made pursuant to clause (C) of
the first paragraph of Section 4.04, any amount paid or accrued as dividends
on Preferred Stock of the Company or any Restricted Subsidiary owned by
Persons other than the Company and any of the Restricted Subsidiaries; (v)
all extraordinary gains and extraordinary losses; (vi) any compensation
expense paid or payable solely with Capital Stock (other than Disqualified
Stock) of the Company; and (vii) net income (or loss) of any Person combined
with the Company or any Restricted Subsidiary on a "pooling of interests"
basis attributable to any period commencing prior to the date of combination.
"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,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, authenticating
agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.07(a).
"Approved Jurisdiction" means any state of the United
States or the District of Columbia, The Netherlands or any other Member State
(as defined in the Mastricht Treaty) of the European Community in respect of
which the Company delivers an Opinion of Counsel to the effect that the laws
of such jurisdiction will not adversely affect the Holders of the Notes.
-4-
<PAGE>
"Asset Acquisition" means (i) an investment by the Company
or any of the Restricted Subsidiaries in any other Person pursuant to which
such Person shall become a Restricted Subsidiary or shall be merged into or
consolidated with the Company or any of the Restricted Subsidiaries or (ii)
an acquisition by the Company or any of the Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of the
Restricted Subsidiaries that constitute substantially all of a division or
line of business of such Person or which is otherwise outside of the ordinary
course of business.
"Asset Disposition" means the sale or other disposition by
the Company or any of the Restricted Subsidiaries (other than to the Company
or another Restricted Subsidiary) of (i) Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the assets that constitute a
division or line of business of the Company or any of the Restricted
Subsidiaries or (iii) its assets outside of the ordinary course of business.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transaction) in
one transaction or a series of related transactions by the Company or any of
the Restricted Subsidiaries to any Person other than the Company or any of
the Restricted Subsidiaries of (i) all or any of the Capital Stock of any
Restricted Subsidiary, (ii) all or substantially all of the property and
assets of an operating unit or business of the Company or any of the
Restricted Subsidiaries or (iii) any other property and assets (other than
the Capital Stock or other Investment in an Unrestricted Subsidiary) of the
Company or any of the Restricted Subsidiaries outside the ordinary course of
business of the Company or such Restricted Subsidiary and, in each case, that
is not governed by the provisions of this Indenture applicable to mergers,
consolidations and sales of all or substantially all of the assets of the
Company; PROVIDED that "Asset Sale" shall not include (a) sales or other
dispositions of inventory, receivables and other current assets, (b) sales,
transfers or other dispositions of assets constituting a Restricted Payment
permitted to be made under Section 4.04, or (c) sales, transfers or other
dispositions of assets with a fair market value (as certified in an Officers'
Certificate) not in excess of $2 million (or, to the extent non-U.S. dollar
denominated, the U.S. Dollar Equivalent thereof) in any transaction or series
of related transactions.
"Available Escrow Proceeds" has the meaning provided in the
Escrow Agreement.
-5-
<PAGE>
"Average Life" means, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from such date of determination to
the dates of each successive scheduled principal payment of such debt
security and (b) the amount of such principal payment by (ii) the sum of all
such principal payments.
"Board of Directors" means, prior to the occurrence of a
Public Market, the board of directors of Parent or any committee of such
board of directors duly authorized to act under this Indenture and following
the occurrence of a Public Market, the board of managing directors of the
Company or any committee of such board of directors duly authorized to act
under this Indenture.
"Business Day" means any day except Saturday, Sunday or
other day on which commercial banks in The City of New York, or the city of
the Corporate Trust Office are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and
all shares, interests, participations, rights in or other equivalents
(however designated, whether voting or non-voting) of such Person's capital
stock, whether outstanding on the Issue Date or issued thereafter, and any
and all rights (other than any evidence of Indebtedness), warrants or options
exchangeable for or convertible into such capital stock.
"Capitalized Lease" means, as applied to any Person, any
lease of any property (whether real, personal or mixed) of which the
discounted present value of the rental obligations of such Person as lessee,
in conformity with GAAP, is required to be capitalized on the balance sheet
of such Person.
"Capitalized Lease Obligations" means the discounted
present value of the rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) (a) prior to the
occurrence of a Public Market, a "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act), other than a person or
group controlled exclusively by the Equity Investors, becomes the ultimate
"beneficial owner" (as defined in Rules l3d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately
-6-
<PAGE>
or only after the passage of time) of Voting Stock representing a greater
percentage of the total voting power of the Voting Stock of (x) CompleTel
LLC, on a fully diluted basis, than is beneficially owned by the Equity
Investors on such date or (y) the Company, on a fully diluted basis, than is
beneficially owned by the Existing Stockholders on such date and (b) after
the occurrence of a Public Market, a "person" or "group" (within the meaning
of Sections 13(d) and 14(d)(2) of the Exchange Act), other than a person or
group controlled exclusively by the Equity Investors, becomes the ultimate
"beneficial owner" (as defined in Rules l3d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time) of more than
35% of the total voting power of the Voting Stock of the Company on a fully
diluted basis and such ownership represents a greater percentage of the total
voting power of the Voting Stock of the Company, on a fully diluted basis,
than is held by the Existing Stockholders on such date; or (ii) the Company
consolidates with, or merges with or into, another person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all
of its assets to any person, or any person consolidates with, or merges with
or into, the Company, in any such event pursuant to a transaction in which
the outstanding Voting Stock of the Company is converted into or exchanged
for cash, securities or other property, other than any such transaction where
(a) the outstanding Voting Stock of the Company is converted into or
exchanged for (1) Voting Stock (other than Disqualified Stock) of the
surviving or transferee corporation or its parent corporation and/or (2)
cash, securities and other property in an amount which could be paid by the
Company as a Restricted Payment under this Indenture and (b) immediately
after such transaction no "person" or "group" (as such terms are used in
Section 13(d) and 14(d) of the Exchange Act), other than a person or group
controlled exclusively by the Equity Investors, is the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 35% of the total Voting Stock of the surviving or transferee
corporation or its parent corporation, as applicable and is the beneficial
owner of a greater percentage of such Voting Stock than the Equity Investors;
or (iii) following the occurrence of a Public Market, individuals who on the
date of occurrence of a Public Market constitute the Board of Directors
(together with any thereafter
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<PAGE>
elected directors whose election by the Board of Directors or whose
nomination by the Board of Directors for election by the Company's
stockholders was approved by a vote of at least two-thirds of the members of
the Board of Directors then in office who either were members of the Board of
Directors on the occurrence of a Public Market Date or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in office.
"Class B Interest" has the meaning provided in the recitals
to this Indenture.
"Collateral" has the meaning provided in the Escrow
Agreement.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act or, if at
any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the TIA, then the
body performing such duties at such time.
"Common Stock" means, with respect to any person, any and
all shares, interests or other participations in, and other equivalents
(however designated and whether voting or nonvoting) of such person's common
equity whether or not outstanding at the Issue Date, and includes, without
limitation, all series and classes of such common equity.
"Company" means the party named as such in the first
paragraph of this Indenture until a successor replaces it pursuant to Article
Five of this Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in
the name of the Company (i) by its Managing Director or (ii) by two
authorized signatories (by virtue of a power of attorney or other similar
instrument) and delivered to the Trustee.
"Consolidated EBITDA" means, for any period, Adjusted
Consolidated Net Income for such period plus, to the extent such amount was
deducted in calculating such Adjusted Consolidated Net Income, (i)
Consolidated Interest Expense, (ii) income taxes (other than income taxes
(either positive or negative) attributable to extraordinary and nonrecurring
gains or losses or sales of assets), (iii) depreciation expense, (iv)
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<PAGE>
amortization expense and (v) all other non-cash items reducing Adjusted
Consolidated Net Income (other than items that will require cash payments and
for which an accrual or reserve is, or is required by GAAP to be, made), less
all non-cash items increasing Adjusted Consolidated Net Income, all as
determined on a consolidated basis for the Company and the Restricted
Subsidiaries in conformity with GAAP; PROVIDED that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with
GAAP) by an amount equal to (A) the amount of the Adjusted Consolidated Net
Income attributable to such Restricted Subsidiary multiplied by (B) the
percentage ownership interest in the income of such Restricted Subsidiary not
owned on the last day of such period by the Company or any of the Restricted
Subsidiaries.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including, without
limitation, amortization of original issue discount on any Indebtedness and
the interest portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting; all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing; the net costs associated with Interest
Rate Agreements, and Indebtedness that is Guaranteed or secured by the
Company or any of the Restricted Subsidiaries) and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid,
accrued or scheduled to be paid or to be accrued by the Company and the
Restricted Subsidiaries during such period; EXCLUDING, HOWEVER, (i) any
amount of such interest of any Restricted Subsidiary if the net income of
such Restricted Subsidiary is excluded in the calculation of Adjusted
Consolidated Net Income pursuant to clause (ii) of the definition thereof
(but only in the same proportion as the net income of such Restricted
Subsidiary is excluded from the calculation of Adjusted Consolidated Net
Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in
connection with the Offering of the Notes, all as determined on a
consolidated basis (without taking into account Unrestricted Subsidiaries) in
conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction
Date, the ratio of (i) the aggregate amount of Indebtedness of the Company
and the Restricted Subsidiaries on a consolidated basis outstanding on such
Transaction Date to (ii) the aggregate amount of Consolidated EBITDA for the
then most
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<PAGE>
recent four fiscal quarters (or since inception of the Company, if less than
four fiscal quarters) for which financial statements of the Company have been
filed with the Commission or provided to the Trustee pursuant to Section 4.18
(such period being the "Four Quarter Period"); PROVIDED that, in making the
foregoing calculation, (A) PRO FORMA effect shall be given to any
Indebtedness to be Incurred or repaid on the Transaction Date; (B) PRO FORMA
effect shall be given to Asset Dispositions and Asset Acquisitions (including
giving PRO FORMA effect to the application of proceeds of any Asset
Disposition) that occur from the beginning of the Four Quarter Period through
the Transaction Date (the "Reference Period") as if they had occurred and
such proceeds had been applied on the first day of such Reference Period; (C)
PRO FORMA effect shall be given to asset dispositions and asset acquisitions
(including giving PRO FORMA effect to the application of proceeds of any
asset disposition) that have been made by any Person that has become a
Restricted Subsidiary or has been merged with or into the Company or any
Restricted Subsidiary during such Reference Period and that would have
constituted Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period;
PROVIDED that to the extent that clause (B) or (C) of this sentence requires
that PRO FORMA effect be given to an Asset Acquisition or Asset Disposition,
such PRO FORMA calculation shall be based upon the four full fiscal quarters
immediately preceding the Transaction Date of the Person, or division or line
of business of the Person, that is acquired or disposed of for which
financial information is available; (D) the aggregate amount of Indebtedness
outstanding as of the end of the Reference Period will be deemed to include
the total amount of funds outstanding and/or available on the Transaction
Date under any revolving credit or similar facilities of the Company or the
Restricted Subsidiaries; and (E) (i) any Subsidiary of the Company that is a
Restricted Subsidiary on the Transaction Date shall be deemed to have been a
Restricted Subsidiary at all times during the Reference Period and (ii) any
Subsidiary of the Company that is not a Restricted Subsidiary on the
Transaction Date shall be deemed not to have been a Restricted Subsidiary at
any time during the Reference Period.
"Consolidated Net Worth" means, at any date of
determination, stockholders' equity as set forth on the most recently
available quarterly or annual consolidated balance sheet
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<PAGE>
of the Company and its Restricted Subsidiaries (which shall be as of a date
not more than 90 days prior to the date of such computation, and which shall
not take into account Unrestricted Subsidiaries), less any amounts
attributable to Disqualified Stock or any equity security convertible into or
exchangeable for Indebtedness, the cost of treasury stock and the principal
amount of any promissory notes receivable from the sale of the Capital Stock
of the Company or any of its Restricted Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular
time, be principally administered, which office is, at the date of this
Indenture, located at 180 East 5th Street, St. Paul, Minnesota 55101,
Attention: Corporate Trust Department, except for purposes of Section 2.04
and Section 4.02. For purposes of such sections, such office is located at
100 Wall Street, 20th Floor, New York, New York 10005, Attention: Corporate
Trust Department.
"Cumulative Available Cash Flow" means, as of any date of
determination, the positive cumulative Consolidated EBITDA realized during
the period commencing on the first day of the fiscal quarter which includes
the Issue Date and ending on the last day of the last fiscal quarter
preceding the Transaction Date for which reports have been filed with the
Commission or provided to the Trustee pursuant to Section 4.18 or, if such
cumulative Consolidated EBITDA for such period is negative, the amount by
which cumulative Consolidated EBITDA is less than zero.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement.
"Debt Securities" means any bonds, notes, debentures or
other similar instruments (excluding, in any event, (i) any Capitalized Lease
Obligations and (ii) any notes, bankers' acceptances or other instruments
evidencing commercial loans or equipment financing made by, and bills of
exchange drawn on, banks, other financial lending institutions or equipment
vendors) issued by the Company or by any Restricted Subsidiary (including by
means of any Guaranty of the Company or of any Restricted Subsidiary of
securities of another Person), whether in a public offering or private
placement.
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<PAGE>
"Deeply Subordinated Shareholder Indebtedness" means
indebtedness of the Company, not to exceed $100 million in aggregate
principal amount at maturity outstanding at any time, borrowed from and held
by an Existing Stockholder, which indebtedness by its terms, or by the terms
of any agreement or instrument pursuant to which such indebtedness is
incurred, (i) is expressly made subordinate in right of payment and postponed
as to all payments of principal, interest and Additional Amounts in respect
of the Notes and (ii) provides that no payment of principal, premium or
interest on, or any other payment with respect to, such indebtedness may be
made prior to the earlier of (x) the indefeasible payment in full in cash of
all of the Company's obligations under the Notes and (y) the 92nd day after
the final maturity of the Notes; PROVIDED that such indebtedness may provide
for and be repaid at any time from the proceeds of a capital contribution or
the sale of Capital Stock (other than Disqualified Stock) of the Company
after the incurrence of such indebtedness; PROVIDED FURTHER that the
subordination terms of such indebtedness are substantially in the form
attached hereto as Exhibit E and the Company receives an Opinion of Counsel
as to the validity and enforceability of such subordination terms; PROVIDED
FURTHER that any event which results in an Existing Stockholder ceasing to
hold such indebtedness shall be deemed to be an Incurrence of Indebtedness
and thereafter such Indebtedness to cease to be Deeply Subordinated
Shareholder Indebtedness.
"Default" means any event that is, or after notice or
passage of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its
nominees and their respective successors.
"Disqualified Stock" means any class or series of Capital
Stock of any Person that by its terms or otherwise is (i) required to be
redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at any time
prior to the Stated Maturity of the Notes or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the Stated Maturity of the
Notes; PROVIDED that any Capital Stock that would not constitute Disqualified
Stock but for provisions thereof giving holders thereof the right to require
such Person to repurchase or redeem such Capital Stock upon the occurrence of
an "asset sale" or "change of control" occurring prior to the Stated Maturity
of the Notes shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provi-
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sions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions contained in Section 4.10 and
Section 4.12 and such Capital Stock, or the agreements or instruments
governing the redemption rights thereof, specifically provides that such
Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Notes as are required to
be repurchased pursuant to Section 4.10 and Section 4.12.
"Equity Investors" means Madison Dearborn Partners, Inc.
and LPL Investment Group, Inc., and their respective Affiliates.
"Escrow Account" has the meaning provided in the Escrow
Agreement.
"Escrow Agent" has the meaning provided in the Escrow
Agreement.
"Escrow Agreement" means the agreement dated February 16,
1999 among the Company, the Escrow Guarantor, the Trustee, the Escrow Agent
and U.S. Bank Trust National Association, as Unit Agent, attached hereto as
Exhibit I.
"Escrow Guarantor" means CompleTel ECC B.V., a Netherlands
private company with limited liability.
"Escrow Guarantor's Guaranteed Obligations" means the
principal of, premium, if any, interest on, and Additional Amounts, if any,
and all other amounts owing by the Company with respect to (including its
obligations to the Trustee under Section 7.7 of this Indenture), the Notes
under this Indenture and all other indebtedness, liabilities and obligations
of the Company at any time and from time to time existing or arising under
this Indenture.
"Escrow Guaranty" has the meaning provided in 10.02.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.10.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
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<PAGE>
"Exchange Notes" means the 14% Senior Discount Notes due
2009 that are issued and exchanged for the Initial Notes after Registration
pursuant to the Notes Registration Rights Agreement and this Indenture in
substantially the form annexed hereto as Exhibit A, containing the
Netherlands Legend and not containing a Private Placement Legend.
"Existing Stockholders" means (i) the Equity Investors and
(ii) CompleTel LLC and its successors, so long as the Equity Investors, in
the aggregate, beneficially own a majority of the Voting Stock of any such
Person.
"fair market value" means the price that would be paid in
an arm's length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to
buy, as determined in good faith by the Board of Directors, whose
determination shall be conclusive if evidenced by a Board Resolution;
PROVIDED that for purposes of the definition of "Total Incremental Equity,"
(x) the fair market value of any security registered under the Exchange Act
shall be the average of the closing prices, regular way, of such security for
the 20 consecutive trading days immediately preceding the sale of Capital
Stock and (y) in the event the aggregate fair market value of any other
property (other than cash or cash equivalents) received by the Company
exceeds $10 million (or, to the extent non-U.S dollar denominated, the U.S.
Dollar Equivalent thereof), the fair market value of such property shall be
determined by an internationally recognized investment banking firm and set
forth in its written opinion which shall be delivered to the Trustee.
"Financing Condition" has the meaning provided in the
Escrow Agreement.
"GAAP" means generally accepted accounting principles in
the United States of America as in effect as of the Issue Date, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved
by a significant segment of the accounting profession. All ratios and
computations contained or referred to in this Indenture shall be computed in
conformity with GAAP applied on a consistent basis.
"Global Notes" means a security evidencing all or a portion
of the Notes issued to the Depositary or its nominee in
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accordance with Section 2.01 and bearing the legend in the second paragraph
of Section 2.02.
"Guaranteed Indebtedness" has the meaning provided in
Section 4.07.
"Guaranteed Parties" means all the persons who are now or
who hereafter become Holders and the Trustee under this Indenture.
"Guaranty" means any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any Indebtedness of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services (unless such purchase arrangements are on
arm's-length terms and are entered into in the ordinary course of business),
to take-or-pay, or to maintain financial statement conditions or otherwise)
or (ii) entered into for purposes of assuring in any other manner the obligee
of such Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); PROVIDED that the term
"Guaranty" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Holder" or "Noteholder" means the registered holder of any
Note.
"IAI Global Notes" has the meaning provided in Section 2.01.
"Incur" means, with respect to any Indebtedness, to
directly or indirectly incur, create, issue, assume, Guarantee or otherwise
become liable for or with respect to, or become responsible for, the payment
of, contingently or otherwise, such Indebtedness, including an "Incurrence"
of Acquired Indebtedness; PROVIDED that neither the accrual of interest nor
the accretion of original issue discount shall be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person at any
date of determination (without duplication), (i) all indebtedness of such
Person for borrowed money, (ii) all obliga-
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tions of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement obligations with
respect thereto, but excluding obligations with respect to letters of credit
(including trade letters of credit) securing obligations (other than
obligations described in (i) or (ii) above or (v), (vi), (vii) or (viii)
below) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if drawn upon, to the
extent such drawing is reimbursed no later than the third business day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services, except Trade Payables, (v) all
Capitalized Lease Obligations of such Person, (vi) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; PROVIDED that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset
at such date of determination and (B) the amount of such Indebtedness, (vii)
all Indebtedness of other Persons Guaranteed by such Person to the extent
such Indebtedness is Guaranteed by such Person, (viii) all Disqualified Stock
valued at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued dividends, and (ix) to the extent not otherwise
included in this definition, obligations under Currency Agreements and
Interest Rate Agreements. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date (or, in the case of a
revolving credit or other similar facility, the total amount of funds
outstanding and/or available on the date of determination) of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency
giving rise to the obligation, PROVIDED (A) that the amount outstanding at
any time of any Indebtedness issued with original issue discount is the face
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at the time of its issuance as
determined in conformity with GAAP, (B) that money borrowed and set aside at
the time of the Incurrence of any Indebtedness in order to prefund the
payment of the interest on such Indebtedness shall not be deemed to be
"Indebtedness" so long as such money is held to secure the payment of such
interest and (C) that Indebtedness shall not include any liability for
federal, state, local or any other applicable taxes. In no event shall
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Deeply Subordinated Shareholder Indebtedness constitute "Indebtedness" under
this Indenture, unless the holder thereof or another party shall commence
proceedings or otherwise seek to invalidate the subordination terms thereof.
"Indenture" means this Indenture as originally executed or
as it may be amended or supplemented from time to time by one or more
indentures supplemental to this Indenture entered into pursuant to the
applicable provisions of this Indenture.
"Indenture Obligations" has the meaning provided in
Section 10.02.
"Initial Escrow Amount" has the meaning provided in the
Escrow Agreement.
"Initial Notes" means the 14% Senior Discount Notes due
2009, prior to Registration and substantially in the form of Exhibit A and
containing the Private Placement Legend.
"Institutional Accredited Investor" means an institution
that is an "accredited investor" as that term is defined in Rule 501(a)(1),
(2), (3) or(7) under the Securities Act.
"Interest Payment Date" means each semiannual interest
payment date on February 15 and August 15 of each year, commencing August 15,
2004.
"Interest Rate Agreement" means any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate hedge agreement, option or
future contract or other similar agreement or arrangement.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guaranty or similar arrangement; but excluding advances to customers
in the ordinary course of business that are, in conformity with GAAP,
recorded as accounts receivable on the balance sheet of the Company or the
Restricted Subsidiaries) or capital contribution to (by means of any transfer
of cash or other property (other than Capital Stock which is not Disqualified
Stock) to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, bonds,
notes, debentures or other similar instruments issued by, such Person
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<PAGE>
and shall include (i) the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary and (ii) the fair market value of the Capital Stock
(or any other Investment) held by the Company or any of the Restricted
Subsidiaries of (or in) any Person that has ceased to be a Restricted
Subsidiary, including, without limitation, by reason of any transaction
permitted by clause (iii) of Section 4.06. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include
the fair market value of the assets (net of liabilities (other than
liabilities to the Company or any of the Restricted Subsidiaries)) of any
Restricted Subsidiary at the time that such Restricted Subsidiary is
designated an Unrestricted Subsidiary, (ii) the fair market value of the
assets (net of liabilities (other than liabilities to the Company or any of
the Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer. Notwithstanding the foregoing, in
no event shall any issuance of Capital Stock (other than Disqualified Stock)
of the Company in exchange for Capital Stock, property or assets of another
Person constitute an Investment by the Company in such other Person.
"Issue Date" means the date on which the Notes are
originally issued under this Indenture.
"Leveraged Subsidiary" means any Subsidiary Guarantor that
has Incurred Indebtedness (other than Acquired Indebtedness) pursuant to the
first paragraph of Section 4.03 and any Refinancings thereof Incurred under
clause (ii) of the second paragraph of Section 4.03 for so long as any such
Indebtedness, or any Refinancing thereof, is outstanding.
"License" means authorization (or renewal thereof) from the
applicable federal or national level governmental agency or authority to
construct and operate a local switched network providing wireline
telecommunications services.
"Liquidated Damages" has the meaning provided in the Notes
Registration Rights Agreement.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention
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<PAGE>
agreement or lease in the nature thereof or any agreement to give any
security interest).
"Management Services Agreements" means agreements pursuant
to which CableTel Management Inc. provides management services to the Company
or a Restricted Subsidiary; PROVIDED that the maximum fee payable by any
Person pursuant to any such agreement does not exceed 105% of the costs,
expenses, charges and disbursements allocated to such Person and incurred by
CableTel Management Inc. in connection with its performance of such agreement.
"Mandatory Redemption" shall have the meaning provided in
the Escrow Agreement.
"Mandatory Redemption Date" means May 13, 1999.
"Mandatory Redemption Notice" has the meaning set forth in
4.22(b).
"Mandatory Redemption Price" means the Accreted Value of
the Notes on the Mandatory Redemption Date.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means (a) with respect to any Asset
Sale, the proceeds of such Asset Sale in the form of cash or cash
equivalents, including payments in respect of deferred payment obligations
(to the extent corresponding to the principal, but not interest, component
thereof) when received in the form of cash or cash equivalents (except to the
extent such obligations are financed or sold with recourse to the Company or
any Restricted Subsidiary) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of
counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all taxes (whether or not such taxes will actually be paid or are
payable) as a result of such Asset Sale without regard to the consolidated
results of operations of the Company and the Restricted Subsidiaries, taken
as a whole, (iii) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that either (A) is secured by a
Lien on the property or assets sold or (B) is required to be paid as a result
of such sale and (iv) appropriate amounts to be provided by the Company or
any Restricted Subsidiary as a reserve against any liabilities associated
with such Asset Sale, in-
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<PAGE>
cluding, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP, and (b) with respect to any issuance or
sale of Capital Stock, the proceeds of such issuance or sale in the form of
cash or cash equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not interest,
component thereof) when received in the form of cash or cash equivalents
(except to the extent such obligations are financed or sold with recourse to
the Company or any Restricted Subsidiary) and proceeds from the conversion of
other property received when converted to cash or cash equivalents, net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Netherlands Legend" means the legend set forth in the
second and third paragraphs of Section 2.02 of this Indenture.
"Non-U.S. Person" means a person who is not a U.S. person,
as defined in Regulation S.
"Notes" means the Notes, as defined in the first paragraph
of the recitals hereof and any Exchange Notes to be issued and exchanged for
any Notes pursuant to the Notes Registration Rights Agreement and this
Indenture. For purposes of this Indenture, all Notes shall vote together as
one series of Notes under this Indenture.
"Notes Registration Rights Agreement" means the
Registration Rights Agreement, dated February 16, 1999, among the Company and
Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated, TD Securities (USA) Inc. and
Paribas Corporation and certain permitted assigns specified therein.
"Offer to Purchase" means an offer to purchase Notes by the
Company (or, in the event of a Change of Control, by a third party) from the
Holders commenced by mailing a notice to the Trustee and each Holder stating:
(i) the covenant pursuant to which the offer is being made and that all Notes
validly tendered will be accepted for payment on a pro rata basis; (ii) the
purchase price and the date of purchase (which shall be a business day no
earlier than 30 days nor later than 60 days
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<PAGE>
from the date such notice is mailed) (the "Payment Date"); (iii) that any
Note not tendered will continue to accrue interest (or original issue
discount, as the case may be) pursuant to its terms; (iv) that, unless there
is a default in the payment of the purchase price, any Note accepted for
payment pursuant to the Offer to Purchase shall cease to accrue interest (or
original issue discount, as the case may be) on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the Offer to
Purchase will be required to surrender the Note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the business day immediately preceding the
Payment Date; (vi) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the close of business on the
third business day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount at maturity of Notes delivered for purchase and a statement
that such Holder is withdrawing his election to have such Notes purchased;
and (vii) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; PROVIDED that each Note purchased shall be in a principal
amount at maturity of $1,000, or integral multiples thereof; PROVIDED FURTHER
that the principal amount at maturity of any Notes left outstanding will not
be less than $100,000. On the Payment Date, the Company shall (i) accept for
payment on a pro rata basis as among holders Notes or portions thereof
tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof
so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all
Notes or portions thereof so accepted together with an officers' certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted
payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders a new Note equal in principal
amount at maturity to any unpurchased portion of the Note surrendered;
PROVIDED that each Note purchased and each new Note issued shall be an
integral multiple of $1,000, principal amount at maturity. The Company will
publicly announce the results of an Offer to Purchase as soon as practicable
after the Payment Date. The Trustee shall act as the Paying Agent for an
Offer to Purchase. The Company will comply with Rule l4e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent
such laws and
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<PAGE>
regulations are applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase.
"Officer" means, prior to the occurrence of a Public Market
with respect to Parent, (i) the Chairman of the Board, the President, any
Vice President, the Chief Financial Officer, and (ii) the Treasurer or any
Assistant Treasurer, or the Secretary or any Assistant Secretary following
the occurrence of a Public Market with respect to the Company, the Managing
Director or by two authorized signatories (by virtue of a power of attorney
or other similar instrument).
"Officer's Certificate" means a certificate signed by one
Officer listed in clause (i) of the definition thereof and one Officer listed
in clause (ii) of the definition thereof.
"Offshore Global Note" has the meaning provided in
Section 2.01.
"Opinion of Counsel" means a written opinion signed by
legal counsel who may be an employee of or counsel to the Company or the
Escrow Guarantor, as applicable. Each such Opinion of Counsel shall include
the statements provided for in TIA Section 314(e) to the extent required by
law.
"Parent" means CompleTel LLC, a Delaware limited liability
company.
"Pari Passu Debt" means Pari Passu Debt Securities of the
Company or of any Subsidiary Guarantor the terms of which require that Net
Cash Proceeds be used to permanently reduce (and thereby also reduce
commitments relating to) such Indebtedness.
"Pari Passu Debt Securities" means any Debt Securities of
the Company or any Subsidiary Guarantor which rank pari passu in right of
payment with the Notes and any Subsidiary Guaranties, as applicable.
"Pari Passu Pro Rata Share" means a fraction (i) the
numerator of which is the aggregate principal amount of Pari Passu Debt
outstanding on the date Net Cash Proceeds are received and (ii) the
denominator of which is the sum of (x) the aggregate principal amount of
Notes outstanding on such date and (y) the aggregate principal amount of any
Pari Passu Debt on such date.
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<PAGE>
"Paying Agent" has the meaning provided in Section 2.04,
except that, for the purposes of Article Eight, the Paying Agent shall not be
the Company or a Subsidiary of the Company or an Affiliate of any of them.
The term "Paying Agent" includes any additional Paying Agent.
"Payment Date" has the meaning specified in the definition
of "Offer to Purchase."
"Permitted Investment" means (i) an Investment in the
Company or a Restricted Subsidiary or a Person which will, upon the making of
such Investment, become a Restricted Subsidiary or be merged or consolidated
with or into, or transfer or convey all or substantially all its assets to,
the Company or a Restricted Subsidiary; PROVIDED that such Person is
primarily engaged in a Telecommunications Business; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as
expenses in accordance with GAAP; (iv) stock, obligations or securities
received in satisfaction of judgments; (v) Investments in prepaid expenses,
negotiable instruments held for collection and lease, utility and worker's
compensation, performance and other similar deposits; (vi) Interest Rate
Agreements and Currency Agreements designed solely to protect the Company or
any Restricted Subsidiary, as the case may be, against fluctuations in
interest rates or foreign currency exchange rates; and (vii) loans or
advances to officers or employees of the Company or any Restricted Subsidiary
that do not in the aggregate exceed $5 million (or, to the extent non-U.S.
dollar denominated, the U.S. Dollar Equivalent thereof) at any time
outstanding.
"Person" means an individual, a corporation, a partnership,
a limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Physical Notes" means Notes in the form of permanent
certificated notes in registered form, substantially in the form annexed
hereto as Exhibit A.
"Preferred Stock" means, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
Designated, whether voting or nonvoting) of such Person's preferred or
preference stock, whether now outstanding or issued after the date of this
Indenture, including, without limitation, all series and classes of such
preferred or preference stock.
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"Principal" of a debt security, including the Notes, means
the principal amount due on the Stated Maturity as shown on such debt
security.
"Private Placement Legend" means the legend set forth on
the Initial Notes in the form set forth in the first paragraph of Section 2.02.
"Public Equity Offering" means (a) an underwritten primary
public offering of Common Stock of the Company pursuant to an effective
registration statement under the Securities Act or (b) pursuant to a
prospectus prepared in connection with the listing of shares of Common Stock
covered thereby on the London Stock Exchange.
A "Public Market" shall be deemed to exist if (i) a Public
Equity Offering has been consummated and (ii) at least 15% of the total
issued and outstanding Common Stock of the Company has been distributed by
means of (a) an effective registration statement under the Securities Act or
sales pursuant to Rule 144 under the Securities Act or (b) pursuant to a
prospectus prepared in connection with the listing of shares of Common Stock
covered thereby on the London Stock Exchange.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Redemption Date," when used with respect to any note to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Note to
be redeemed, means the price at which such Note is to be redeemed pursuant to
this Indenture.
"Refinancing" means any refinancing (whether by amendment,
renewal, extension, refunding or defeasance) of outstanding Indebtedness of
the Company and/or of any Restricted Subsidiary.
"Refinancing Indebtedness" means (i) Indebtedness of the
Company to the extent the proceeds thereof are used to refinance (whether by
amendment, renewal, extension, refunding or defeasance) Indebtedness of the
Company or any of the Restricted Subsidiaries, in each such event, Incurred
under the first paragraph of the covenant described under Section 4.03 or
clause (iv)(A) or (vi) of the second paragraph of Section 4.03 or otherwise
outstanding on the Issue Date and (ii) Indebted-
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ness of any Restricted Subsidiary to the extent the proceeds thereof are used
to refinance (whether by amendment, renewal, extension, refunding or
defeasance) Indebtedness of a Restricted Subsidiary, in each such event,
incurred under the first paragraph of Section 4.03 or clause (iv)(B) of the
second paragraph of such covenant or otherwise outstanding on the Issue Date;
PROVIDED that for all purposes of this definition (a) the principal amount of
Refinancing Indebtedness incurred pursuant to this definition (or, if such
Refinancing Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration of
the maturity thereof, the accreted value of such Indebtedness) shall not
exceed the principal amount or accreted value, as the case may be, of the
Indebtedness refinanced, plus the amount of any premium required to be paid
in connection with such refinancing pursuant to the terms of such
Indebtedness or the amount of any premium reasonably determined by the Board
of Directors as necessary to accomplish such refinancing by means of a tender
offer or privately negotiated purchase, plus the amount of reasonable
expenses in connection therewith, (b) such Refinancing Indebtedness (x) shall
have no scheduled principal payment prior to the final maturity of the
Indebtedness being refinanced and (y) shall have an Average Life equal to or
greater than the shorter of (1) the Average Life of the Indebtedness
refinanced or (2) the remaining Average Life of the Notes and (c) if the
Indebtedness to be refinanced is Subordinated Indebtedness, the Indebtedness
to be incurred pursuant to this definition shall also be Subordinated
Indebtedness of the person whose Indebtedness is to be refinanced on terms no
less favorable in any material respect to the Holders of the Notes than the
Indebtedness being refinanced.
"Registrar" has the meaning provided in Section 2.04.
"Registration Statement" means the Registration Statement
as defined and described in the Notes Registration Rights Agreement.
"Registration" has the meaning provided in Section 4.18.
"Regular Record Date" for the interest payable on any
Interest Payment Date means the February 1 or August 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
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"Release Date" has the meaning provided in the Escrow
Agreement.
"Replacement Assets" means property or assets (other than
current assets) of a nature or type or that are used or useful in a business
(or in a company having property and assets of a nature or type, or engaged
in a business) similar or related to the nature or type of the property and
assets of, or the business of, the Company and the Restricted Subsidiaries
existing on the date such Replacement Assets are acquired (as determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution).
"Required Date" has the meaning provided in the Escrow
Agreement.
"Responsible Officer," when used with respect to the
Trustee, means the chairman or any vice chairman of the board of directors,
the chairman or any vice chairman of the executive committee of the board of
directors, the chairman of the trust committee, the president, any vice
president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller or any
assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of
his or her knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning provided in
Section 4.04.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" means the Units, including the Notes and the
Class B Interests.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" has the meaning provided in Section 2.04.
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"Semi-Annual Accrual Date" has the meaning specified in the
definition of "Accreted Value."
"Senior Credit Facility" means any senior commercial term
loan and/or revolving credit facility (including any letter of credit
subfacility) and/or vendor financing facility entered into principally with
commercial banks and/or other financial institutions typically party to
commercial loan or vendor financing agreements.
"Separability Date" has the meaning provided in the
recitals to this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Notes Registration Rights Agreement.
"Significant Subsidiary" means, at any date of
determination, any Restricted Subsidiary that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Company, accounted
for more than 10% of the consolidated revenues of the Company and the
Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and the
Restricted Subsidiaries, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year.
"Specified Date" means any Redemption Date, any Payment
Date for an Offer to Purchase or any date on which the Notes first become due
and payable after an Event of Default.
"S&P" means Standard & Poor's Ratings Services and its
successors.
"Stated Maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable
and (ii) with respect to any scheduled installment of principal of or
interest on any debt security, the date specified in such debt security as
the fixed date on which such installment is due and payable.
"Subordinated Indebtedness" means any Indebtedness of the
Company or any Restricted Subsidiary which is expressly subordinated in right
of payment in any manner to any other Indebtedness of the Company or such
Restricted Subsidiary, as the case may be.
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"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of
the voting power of the outstanding Voting Stock is owned, directly or
indirectly, by such Person and one or more other Subsidiaries of such Person.
"Subsidiary Guarantor" means any issuer of a Subsidiary
Guaranty for so long as such Subsidiary Guaranty remains outstanding.
"Subsidiary Guaranty" means a guaranty of the Notes issued
pursuant to Section 4.07 and the Escrow Agreement.
"Target Market" means any of the Paris, Lyon, Marseilles,
Lille, London, or Berlin metropolitan markets.
"Taxes" has the meaning provided in Section 4.21.
"Tax Liabilities" has the meaning provided in Section 4.04.
"Telecommunications Business" means the development,
ownership or operation of one or more telephone, telecommunications or
information systems or the provision of telephony, telecommunication or
information services and any related, ancillary or complementary business.
"Temporary Cash Investment" means any of the following: (i)
direct obligations of the United States of America or any agency thereof or
the Netherlands, the United Kingdom, France, Germany or any other member of
the European Economic Community rated at least "A" by S&P or "A" by Moody's
("Government Securities") or obligations guaranteed by the United States of
America or any agency thereof or the Netherlands, the United Kingdom, France,
Germany or any other member of the European Economic Community rated at least
"A" by S&P or "A" by Moody's with a term of not more than one year; PROVIDED
that money borrowed and set aside at the time of Incurrence of Indebtedness
in order to prefund the payment of interest on such Indebtedness may be
invested in Government Securities with a term in excess of one year but in no
event with a term in excess of the period for which interest has been
prefunded with respect to such Indebtedness, (ii) time deposit accounts,
certificates of deposit and money market deposits maturing within one year of
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America or any state
thereof, the Netherlands, the United Kingdom, France, Germany or any other
member of the
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European Economic Community and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $250 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated
"A" by S&P or "A" by Moody's (iii) repurchase obligations with a term of not
more than 30 days for underlying securities of the types described in clause
(i) above entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) commercial paper, maturing not more than one year
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any state thereof, the Netherlands, the United
Kingdom, France, Germany or any other member of the European Economic
Community, with a rating at the time as of which any investment therein is
made of "P-1" (or higher) according to Moody's or "A-l" (or higher) according
to S&P, and (v) securities with maturities of six months or less from the
date of acquisition issued or fully and unconditionally guaranteed by any
state, commonwealth or territory of the United States of America, the
Netherlands, the United Kingdom, France, Germany or any other member of the
European Economic Community, or by any political subdivision or taxing
authority thereof, and rated at least "A" by S&P or "A" by Moody's.
"TIA" or "Trust Indenture Act" means the Trust Indenture
Act of 1939, as amended (15 U.S. Code Sections 77aaa- 77bbb), as in effect on
the date this Indenture was executed, except as provided in Section 9.06.
"Total Incremental Equity" means, at any time of
determination, the sum of, without duplication, (i) the aggregate Net Cash
Proceeds and fair market value of property (determined as of the date of
receipt of such property) received by the Company from capital contributions
in respect of existing Capital Stock (other than Disqualified Stock) or the
issuance or sale of Capital Stock (other than Disqualified Stock but
including Capital Stock issued upon the conversion of convertible
Indebtedness or from the exercise of options, warrants or rights to purchase
Capital Stock (other than Disqualified Stock)) subsequent to the Issue Date,
other than to a Subsidiary of the Company, PLUS (ii) the aggregate cash
proceeds received by the Company or any Restricted Subsidiary from the sale,
disposition or repayment (in whole or in part) of any Investment that is or
was made after the Issue Date and that constitutes a Restricted Payment that
has been deducted from Total Incremental Equity pursuant to clause (iii)
below in an amount equal to the lesser of (a) the return of capital with
respect to the applicable portion of such Investment and (b) the cost
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of the applicable portion of such Investment, in either case, less the cost
of the disposition of such Investment, MINUS (iii) the aggregate amount of
all Restricted Payments declared or made on and after the Issue Date (other
than a Restricted Payment made pursuant to clause (ii) of the second
paragraph of Section 4.04).
"Trade Payables" means, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation to trade
creditors created, assumed or Guaranteed by such Person or any of its
Subsidiaries arising in the ordinary course of business in connection with
the acquisition of goods or services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Company or any of the Restricted Subsidiaries, the
date such Indebtedness is to be Incurred and, with respect to any Restricted
Payment, the date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first
paragraph of this Indenture until a successor replaces it in accordance with
the provisions of Article Seven of this Indenture and thereafter means such
successor.
"Unit Agent" has the meaning provided in the Escrow
Agreement.
"Units" has the meaning provided in the recitals to this
Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below; and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Restricted Subsidiary (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any Restricted Subsidiary; PROVIDED that (A) any
Guaranty by the Company or any Restricted Subsidiary of any Indebtedness of
the Subsidiary being so designated shall be deemed an "Incurrence" of such
Indebtedness and an "Investment" by the Company or such Restricted Subsidiary
(or both, if applicable) at the time of such designation; (B) either (I) the
Subsidiary to be so designated has total assets of $1,000 (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent thereof) or less
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or (II) if such Subsidiary has assets greater than $1,000 (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent thereof), such
designation would be permitted under Section 4.04; (C) if applicable, the
Incurrence of Indebtedness and the Investment referred to in clause (A) of
this proviso would be permitted under Section 4.03 and Section 4.04; and (D)
except in the case of an Investment made pursuant to clause (vi) of the
second paragraph of Section 4.04 immediately after giving effect to such
designation, the Company would be able to Incur $1.00 of Indebtedness under
Section 4.03. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED FURTHER that (i) no
Default shall have occurred and be continuing at the time of or after giving
effect to such designation and (ii) all Liens and Indebtedness of such
Unrestricted Subsidiary outstanding immediately after such designation would,
if Incurred at such time, have been permitted to be Incurred (and shall be
deemed to have been Incurred) for all purposes of this Indenture. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Dollar Equivalent" means, with respect to any
monetary amount in a currency other than U.S. dollars, at any time for the
determination thereof, the amount of U.S. dollars obtained by converting such
foreign currency involved in such computation into U.S. dollars at the spot
rate for the purchase of U.S. dollars with the applicable foreign currency as
quoted by Reuters at approximately 11:00 a.m. (New York time) on the date two
Business Days prior to such determination.
"U.S. Global Note" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of America, which,
in either case, are not callable or redeemable at the option of the issuer
thereof at any time prior to the Stated Maturity of the Notes, and shall also
include a depository receipt issued by a bank or trust company as custodian
with respect to any such U.S. Government Obligation or a spe-
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cific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a
depository receipt; provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest
on or principal of the U.S. Government Obligation evidenced by such
depository receipt.
"Voting Stock" means, with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote for the
election of directors, managers or other voting members of the governing body
of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any
Person, the ownership of all of the outstanding Capital Stock of such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) by such Person or one or more
Wholly Owned Subsidiaries of such Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE
ACT. Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture notes" means the Notes;
"indenture note holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or
any other obligor on the Notes.
All other TIA terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by a rule
of the Commission and not otherwise defined herein have the meanings assigned
to them therein.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context
otherwise requires:
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(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 GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in
the plural include the singular;
(v) provisions apply to successive events and
transactions;
(vi) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(vii) all ratios and computations based on GAAP contained in
this Indenture shall be computed in accordance with the definition of
GAAP set forth in Section 1.01; and
(viii) all references to Sections or Articles refer to Sections
or Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING. The Notes and the Trustee's
certificate of authentication thereof shall be substantially in the form
annexed hereto as Exhibit A with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture. The Notes may have notations, legends or endorsements required by
law, stock exchange agreements to which the Company is subject or usage. The
Company shall approve the form of the Notes and any notation, legend or
endorsement on the Notes. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the forms of the
Notes annexed hereto as Exhibit A shall constitute, and are hereby expressly
made, a part of this Indenture. The terms and provisions contained in the
form of Escrow Guaranty shall constitute and are expressly made a part of
this Indenture. To the extent applicable, the Company, the Escrow Guarantor
and
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the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.
Initial Notes offered and sold in reliance on Rule 144A
shall be issued initially in the form of one or more permanent global Notes
in registered form, substantially in the form set forth in Exhibit A
(collectively, the "U.S. Global Notes"), deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of the
U.S. Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, as hereinafter provided.
Initial Notes offered and sold in offshore transactions in
reliance on Regulation S shall be issued initially in the form of one or more
permanent Global Notes in registered form substantially in the form set forth
in Exhibit A (collectively, the "Offshore Global Notes") deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Offshore Global Notes may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Initial Notes offered and sold in reliance on Regulation D
to Institutional Accredited Investors under the Securities Act shall be
issued in the form of one or more Global Notes in registered form in
substantially the form set forth in Exhibit A (the "IAI Global Notes"),
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee, as hereinafter provided. The
aggregate principal amount of the IAI Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Upon consummation of the Registration, the Exchange Notes
shall be issued in the form of Global Notes, substantially in the form
annexed hereto as Exhibit A.
The definitive Notes shall be typed, printed, lithographed
or engraved or produced by any combination of these methods or may be
produced in any other manner permitted by the rules of any securities
exchange on which the Notes may be
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listed, all as determined by the Officers executing such Notes, as evidenced
by their execution of such Notes.
SECTION 2.02. RESTRICTIVE LEGENDS. Unless and until an
Initial Note is exchanged for an Exchange Note or sold in connection with an
effective Registration pursuant to the Notes Registration Rights Agreement,
the Initial Notes shall bear the following 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 AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT)
(AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO
REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH
IS TWO YEARS (OR SUCH SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE
144(K) (OR ANY SUCCESSOR PROVISION THEREOF) UNDER THE SECURITIES ACT)
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 OR ANY OF ITS SUBSIDIARIES, (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 INSIDE THE UNITED STATES, 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
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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, PURSUANT TO RULE 904 OF REGULATION S, (E) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES
OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
The Notes (including the Initial Notes and the Exchange
Notes) shall bear the following legend on the face thereof:
THIS SECURITY MAY BE OFFERED IN CERTAIN COUNTRIES EXCLUDING THE
NETHERLANDS.
THIS SECURITY MAY ONLY BE ISSUED IN MINIMUM DENOMINATIONS OF $100,000
PRINCIPAL AMOUNT AT MATURITY AND IN EXCESS OF $100,000 PRINCIPAL AMOUNT
AT MATURITY IN INCREMENTS OF $1,000 PRINCIPAL AMOUNT AT MATURITY.
Each Global Note, whether or not an Exchange Note, shall also
bear the following legend on the face thereof:
THIS SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF
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THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE 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 NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.08 OF THE INDENTURE.
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS.
The Notes shall be executed by the managing director or two authorized
signatories (pursuant to a power of attorney or other similar instrument) of
the Company. The signature of any of such officers (or authorized
signatories) on the Notes shall be by manual signature in the name and on
behalf of the Company.
If an officer whose signature is on a Note no longer holds
that office at the time the Trustee or authenticating agent authenticates the
Note, the Note shall be valid nevertheless.
A Note shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on the
Note. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee or an authenticating agent shall, upon receipt
of a Company Order, authenticate (i) Initial Notes for original issue in the
aggregate principal amount at maturity not to exceed $147,500,000 and (ii)
Exchange Notes from time to
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time only in exchange for a like principal amount at maturity of Initial
Notes in accordance with the Notes Registration Rights Agreement; PROVIDED
that the Trustee shall be entitled to receive an officers' certificate (or
other authorized signatories) and an Opinion of Counsel of the Company in
connection with such authentication of Notes. Such Company Order shall
specify the amount of Notes to be authenticated and the date on which the
original issue of Notes is to be authenticated. The aggregate principal
amount at maturity of Notes outstanding at any time may not exceed
$147,500,000, except as set forth in Section 2.09.
The Trustee may appoint an authenticating agent to
authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such authenticating agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate of the Company.
The Notes shall be issuable only in registered form without
coupons and only in minimum denominations of $100,000 in principal amount at
maturity and any integral multiple of $1,000 in excess thereof.
SECTION 2.04. REGISTRAR AND PAYING AGENT. The Company shall
maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (the "Registrar"), an office or agency where Notes
may be presented for payment (the "Paying Agent") and an office or agency
where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served, which shall be in the Borough of Manhattan, The
City of New York. The Company shall cause the Registrar to keep a register of
the Notes and of their transfer and exchange (the "Security Register"). The
Company may have one or more co-Registrars and one or more additional Paying
Agents.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Company shall give prompt written notice to the Trustee of the name and
address of any such Agent and any change in the address of such Agent. If the
Company fails to maintain a Registrar, Paying Agent and/or agent for service
of notices and demands, the Trustee shall act as such Registrar, Paying Agent
and/or agent for service of notices and demands. The Company may remove any
Agent upon written notice
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to such Agent and the Trustee; provided that no such removal shall become
effective until (i) the acceptance of an appointment by a successor Agent to
such Agent as evidenced by an appropriate agency agreement entered into by
the Company and such successor Agent and delivered to the Trustee or (ii)
notification to the Trustee that the Trustee shall serve as such Agent until
the appointment of a successor Agent in accordance with clause (i) of this
proviso. The Company, any Subsidiary of the Company, or any Affiliate of any
of them may act as Paying Agent, Registrar or co-Registrar, and/or agent for
service of notice and demands.
The Company initially appoints the Trustee as Registrar,
Paying Agent, authenticating Agent and agent for service of notice and
demands. If, at any time, the Trustee is not the Registrar, the Registrar
shall make available to the Trustee on or before each Interest Payment Date
and at such other times as the Trustee may reasonably request, the names and
addresses of the Holders as they appear in the Security Register.
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. Not
later than each due date of the principal, premium, if any, and interest on
any Notes, the Company shall deposit with the Paying Agent money in
immediately available funds sufficient to pay such principal, premium, if
any, and interest so becoming due. The Company shall require each Paying
Agent other than the Trustee to agree in writing that such Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all money held by
the Paying Agent for the payment of principal of, premium, if any, and
interest on the Notes (whether such money has been paid to it by the Company
or any other obligor on the Notes), and such Paying Agent shall promptly
notify the Trustee of any default by the Company (or any other obligor on the
Notes) in making any such payment. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee and account for any
funds disbursed, and the Trustee may at any time during the continuance of
any payment default, upon written request to a Paying Agent, require such
Paying Agent to pay all money held by it to the Trustee and to account for
any funds disbursed. Upon doing so, the Paying Agent shall have no further
liability for the money so paid over to the Trustee. If the Company or any
Subsidiary of the Company or any Affiliate of any of them acts as Paying
Agent, it will, on or before each due date of any principal of, premium, if
any, or interest on the Notes, segregate and hold in a separate trust fund
for the benefit of the Holders a sum of money sufficient to pay such
principal, premium, if any, or interest so becoming due until such sum of
money shall be paid to such Holders or other-
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wise disposed of as provided in this Indenture, and will promptly notify the
Trustee of its action or failure to act.
SECTION 2.06. TRANSFER AND EXCHANGE. The Notes are issuable
only in registered form. The Notes shall initially be issued as part of an
issue of the Units, each Unit consisting of one $1,000 principal amount at
maturity Note and 10 Class B Interests. Prior to the Separability Date, the
Notes may not be transferred or exchanged separately from, but may be
transferred or exchanged only together with, the Class B Interests issued in
connection with the Notes. A Holder may transfer a Note only by written
application to the Registrar stating the name of the proposed transferee and
otherwise complying with the terms of this Indenture. No such transfer shall
be effected until, and such transferee shall succeed to the rights of a
Holder only upon, final acceptance and registration of the transfer by the
Registrar in the Security Register. Prior to the registration of any transfer
by a Holder as provided herein, the Company, the Trustee, and any agent of
the Company shall treat the person in whose name the Note is registered as
the owner thereof for all purposes whether or not the Note shall be overdue,
and neither the Company, the Trustee, nor any such agent shall be affected by
notice to the contrary. Furthermore, any Holder of a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests
in such Global Note may be effected only by the Holder of such Global Note
(or its agent) and that ownership of a beneficial interest in the Note shall
be required to be reflected in a book entry.
Subject to the provisions of 2.07 and 2.08, when Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer or to exchange them for an equal principal amount of Notes of other
authorized denominations (including an exchange of Notes for Exchange Notes),
the Registrar shall register the transfer or make the exchange as requested
if its requirements for such transactions are met; provided that no exchanges
of Initial Notes for Exchange Notes shall occur until a Registration
Statement shall have been declared effective by the Commission and that any
Initial Notes that are exchanged for Exchange Notes shall be canceled by the
Trustee. To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Notes at the Registrar's
request. No service charge shall be made for any registration of transfer or
exchange or redemption of the Notes, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such
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transfer taxes or other similar governmental charge payable upon exchanges
pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register
the transfer of or exchange any Note during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption
of Notes selected for redemption under Section 3.03 and ending at the close
of business on the day of such mailing, or (ii) to register the transfer of
or exchange any Note so selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES. (a)
The Global Notes shall (i) be registered in the name of the Depositary for
such Global Notes or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) prior to the Registration
bear legends as set forth in the second paragraph of Section 2.02.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depositary, or the Trustee as its
custodian, or under the Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Note or all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee, from giving effect to any
written certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
holder of any Note.
(b) Transfers of a Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to the Depositary,
its successors or their respective nominees. Interests of beneficial owners
in a Global Note may be transferred in accordance with the rules and
procedures of the Depositary and the provisions of Section 2.08. In addition,
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in Global Notes only if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Notes and a successor depositary is not appointed by the
Company within 90 days of such notice or (ii) an Event of Default has
occurred
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and is continuing and the Registrar has received a request from the
Depositary to issue Physical Notes.
(c) Any beneficial interest in one of the Global Notes that
is transferred to a person who takes delivery in the form of an interest in
another Global Note will, upon transfer, cease to be an interest in such
Global Note and become an interest in the other Global Note and, accordingly,
will thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Note for
as long as it remains such an interest.
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b) of this Section, the
Global Notes shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall
authenticate and make available for delivery, to each beneficial owner
identified by the Depositary in exchange for its beneficial interest in the
Global Notes an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note delivered in exchange for an interest
in a Global Note pursuant to paragraph (b) of this Section shall, except as
otherwise provided by paragraph (f) of Section 2.08, bear the Private
Placement Legend and the Netherlands Legend.
(f) The registered holder of a Global Note 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 Indenture or the Notes.
SECTION 2.08. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF PHYSICAL NOTES. When
Physical Notes are presented to the Registrar with a request:
(i) to register the transfer of the Notes; or
(ii) to exchange such Physical Notes for an equal principal
amount of Physical Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Indenture as set
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forth in this Section 2.08 for such transactions are met; PROVIDED, HOWEVER,
that the Physical Notes presented or surrendered for registration of transfer
or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar, duly
executed by the Holder thereof or his attorney duly authorized in
writing; and
(II) in the case of Initial Notes, such Physical Notes shall
be accompanied, in the sole discretion of the Company, by the following
additional information and documents, as applicable:
(A) if such Physical Note is being delivered to the
Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from
such Holder to that effect (substantially in the form
of Exhibit B hereto); or
(B) if such Physical Note is being transferred to a QIB
in accordance with Rule 144A, a certification to that
effect (substantially in the form of Exhibit B
hereto); or
(C) if such Physical Note is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the
form of Exhibit B hereto) and a transferee
certificate for Institutional Accredited Investors
substantially in the form of Exhibit C hereto and an
Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(D) if such Physical Note is being transferred in
reliance on Regulation S, delivery of a certification
to that effect (substantially in the form of Exhibit
B hereto) and a transferor certificate for Regulation
S transfers substantially in the form of Exhibit D
hereto and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(E) if such Physical Note is being transferred in
reliance on Rule 144 under the Securities Act,
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delivery of a certification to that effect
(substantially in the form of Exhibit B hereto) and
an Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(F) if such Physical Note is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
B hereto) and an Opinion of Counsel reasonably
acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A PHYSICAL NOTES FOR A
BENEFICIAL INTEREST IN A GLOBAL NOTE. A Physical Note may not be exchanged
for a beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar of a Physical
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Registrar, together with:
(A) in the case of Initial Notes, certification,
substantially in the form of Exhibit B hereto, that
such Physical Note is being transferred (I) to a QIB,
(II) to an Institutional Accredited Investor or (III)
in an offshore transaction in reliance on Regulation
S and, with respect to (II) or (III), an Opinion of
Counsel reasonably acceptable to the Company to the
effect that such transfer is in compliance with the
Securities Act; and
(B) written instructions directing the Registrar to make,
or to direct the Depository to make, an endorsement
on the applicable Global Note to reflect an increase
in the aggregate amount of the Notes represented by
the Global Note,
then the Registrar shall cancel such Physical Note and cause, or direct the
Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Registrar, the principal
amount at maturity of Notes represented by the applicable Global Note to be
increased accordingly. If no Global Note representing Notes held by QIBs,
Institutional Accredited Investors or Persons acquiring Notes in offshore
transactions in reliance on Regulation S, as
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the case may be, is then outstanding, the Company shall issue and the Trustee
shall, upon written instructions from the Company in accordance with Section
2.03, authenticate such a Global Note in the appropriate principal amount at
maturity.
(c) TRANSFER AND EXCHANGE OF GLOBAL NOTES. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the
Depositary therefor. Upon receipt by the Registrar of written instructions,
or such other instruction as is customary for the Depositary, from the
Depositary or its nominee, requesting the registration of transfer of an
interest in a U.S. Global Note, an IAI Global Note or Offshore Global Note,
as the case may be, to another type of Global Note, (or, if the applicable
type of Global Note required to represent the interest as requested to be
transferred is not then outstanding, only the Global Note representing the
interest being transferred), the Registrar shall cancel such Global Notes (or
Global Note) and the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.03, authenticate
new Global Notes of the types so cancelled (or the type so cancelled and
applicable type required to represent the interest as requested to be
transferred) reflecting the applicable increase and decrease of the principal
amount at maturity of Notes represented by such types of Global Notes, giving
effect to such transfer. If the applicable type of Global Note required to
represent the interest as requested to be transferred is not outstanding at
the time of such request, the Company shall issue and the Trustee shall, upon
written instructions from the Company in accordance with Section 2.03,
authenticate a new Global Note of such type in principal amount at maturity
equal to the principal amount at maturity of the interest requested to be
transferred.
(d) RESTRICTIONS ON TRANSFER OF A BENEFICIAL INTEREST IN A
GLOBAL NOTE TO ANOTHER GLOBAL NOTE. A beneficial interest in one Global Note
may not be exchanged for a beneficial interest in another Global Note except
upon satisfaction of the requirements set forth below. Upon receipt by the
Registrar of written instructions, or such other instructions as are
customary for the Depositary in accordance with the customary procedures at
the Depositary, from or on behalf of any Person having a beneficial interest
in a Global Note and upon receipt by the Trustee of a written order or such
other form of instructions as is customary for the Depositary or the Person
designated by the Depositary as having such a beneficial interest containing
registration instructions and, in the case of any such transfer
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or exchange of a beneficial interest in Initial Notes, the following
additional information and documents: a certification, substantially in the
form of Exhibit B hereto, that such transfer is (I) to a QIB, (II) in
reliance on Regulation S or (III) to an Institutional Accredited Investor
and, with respect to (II) and (III), at the option of the Company, an Opinion
of Counsel reasonably acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act; then the Registrar shall
reflect the applicable increase and decrease of the principal amount of Notes
represented by such types of Global Notes, giving effect to such transfer in
accordance with its customary procedures and the procedures of the
Depositary. If the applicable type of Global Note required to represent the
interest as requested to be transferred is not outstanding at the time of
such request, the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.03, authenticate a
new Global Note of such type in principal amount equal to the principal
amount at maturity of the interest requested to be transferred.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES.
Notwithstanding any other provisions of this Indenture, a Global Note may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange
or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar, shall deliver only Notes that bear the
Private Placement Legend unless either (i) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with
the provisions of the Securities Act or (ii) such Note has been sold pursuant
to an effective registration statement under the Securities Act (including
pursuant to a Registration).
(g) GENERAL. By its acceptance of any Note bearing the
Private Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture, the
Private Placement Legend and the Nether-
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lands Legend and agrees that it will transfer such Note only as provided in
this Indenture. The Registrar shall not register a transfer of any Note
unless such transfer complies with the restrictions on transfer of such Note
set forth in this Indenture. In connection with any transfer of Notes, each
Holder agrees by its acceptance of the Notes to furnish the Registrar or the
Company such certifications, legal opinions or other information as either of
them may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that the Registrar
shall not be required to determine (but may rely on a determination made by
the Company with respect to) the sufficiency of any such certifications,
legal opinions or other information.
The Registrar shall retain copies of all letters, notices
and other written communications received pursuant to Section 2.07 or this
Section 2.08. The Company shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Registrar.
SECTION 2.09. REPLACEMENT NOTES. If a mutilated Note is
surrendered to the Trustee or if the Holder claims that the Note has been
lost, destroyed or wrongfully taken, the Company shall issue and the Trustee
shall authenticate a replacement Note of like tenor and amount and bearing a
number not contemporaneously outstanding; provided that the requirements of
this Section 2.09 are met. If required by the Trustee or the Company, an
indemnity bond must be furnished that is sufficient in the judgment of both
the Trustee and the Company to protect the Company, the Trustee or any Agent
from any loss that any of them may suffer if a Note is replaced. The Company
may charge such Holder for its expenses and the expenses of the Trustee in
replacing a Note. In case any such mutilated, lost, destroyed or wrongfully
taken Note has become or is about to become due and payable, the Company in
its discretion may pay such Note instead of issuing a new Note in replacement
thereof.
Every replacement Note is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.10. OUTSTANDING NOTES. Notes outstanding at any
time are all Notes that have been authenticated by the Trustee except for
those cancelled by it, those delivered to it for cancellation and those
described in this Section 2.10 as not outstanding.
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If a Note is replaced pursuant to Section 2.09, it ceases
to be outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate
of the Company) holds on the maturity date money sufficient to pay Notes
payable on that date, then on and after that date such Notes cease to be
outstanding and interest on them shall cease to accrue.
A Note does not cease to be outstanding because the Company
or one of its Affiliates holds such Note, provided, however, that, in
determining whether the Holders of the requisite principal amount of the
outstanding Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Notes owned by the Company or any other
obligor upon the Notes or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be outstanding, except that,
in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver,
only Notes which a Responsible Officer of the Trustee actually knows to be so
owned shall be so disregarded. Notes so owned which have been pledged in good
faith may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Company or any other obligor upon
the Notes or any Affiliate of the Company or of such other obligor.
SECTION 2.11. TEMPORARY NOTES. Until definitive Notes are
ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of definitive Notes but may have insertions, substitutions, omissions
and other variations determined to be appropriate by the officers executing
the temporary Notes, as evidenced by their execution of such temporary Notes.
If temporary Notes are issued, the Company will cause definitive Notes to be
prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 4.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes
the Company shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a like principal amount of
definitive Notes of authorized denominations. Until so exchanged, the
temporary
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Notes shall be entitled to the same benefits under this Indenture as
definitive Notes.
SECTION 2.12. CANCELLATION. The Company at any time may
deliver to the Trustee for cancellation any Notes previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Notes
previously authenticated hereunder which the Company has not issued and sold.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for transfer, exchange or payment. The Trustee shall
cancel all Notes surrendered for transfer, exchange, payment or cancellation
in accordance with its normal procedure.
SECTION 2.13. CUSIP NUMBERS. The Company in issuing the
Notes may use "CUSIP," "CINS" or "ISIN" numbers (if then generally in use),
and the Trustee shall use CUSIP, CINS or ISIN numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders; provided that
any such notice shall state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of redemption or exchange and that reliance may be placed only on
the other identification numbers printed on the Notes, and any such
redemption shall not be affected by any defect or omission of such numbers.
The Company will promptly notify the Trustee of any change in the "CUSIP,"
"CINS" or "ISIN" numbers.
SECTION 2.14. DEFAULTED INTEREST. If the Company defaults
on a payment of interest on the Notes, it shall pay, or shall deposit with
the Paying Agent money in immediately available funds sufficient to pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.14 with respect
to the payment of any defaulted interest, shall mean the 15th day next
preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before
the subsequent special record date, the Company shall mail to each Holder and
to a Responsible Officer of the Trustee a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest to
be paid.
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ARTICLE THREE
REDEMPTION
SECTION 3.01. RIGHT OF REDEMPTION. (a) The Notes may be
redeemed, at the Company's option, in whole or in part, at any time or from
time to time, on or after February 15, 2004 and prior to maturity, upon not
less than 30 nor more than 60 days prior notice mailed by first class mail to
each Holder's last address as it appears in the Security Register, at the
Redemption Prices (expressed in percentages of principal amount at maturity)
set forth below, plus accrued an unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular
Record Date that is on or prior to the Redemption Date to receive interest
due on an Interest Payment Date), if redeemed during the 12-month period
commencing February 15 of the years set forth below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2004 107.000%
2005 104.667%
2006 102.333%
2007 and thereafter 100.0000%
</TABLE>
(b) In addition, upon not less than 30 nor more than 60
days' prior notice mailed by first class mail to each Holder's last address
as it appears in the Security Register, at any time prior to February 15,
2002, the Company may redeem up to 33 1/3% of the principal amount at
maturity of the Notes originally issued with the proceeds of one or more
Public Equity offerings following which there is a Public Market, at the
Company's option, at any time or from time to time in part, at a Redemption
Price (expressed as a percentage of Accreted Value on the Redemption Date) of
114%; PROVIDED that (i) at least $98,334,000 aggregate principal amount at
maturity of Notes remains outstanding after each such redemption and (ii) the
Company mails the notice of redemption required by this paragraph (b) of this
Section 3.01 within 60 days of the receipt of the Public Equity Offering
proceeds to be applied.
(c) If as a result of any change in or amendment to any
laws or regulations or official interpretations or applications thereof which
is announced and becomes effective after the Issue Date, in making any
payment due or to become due under the Notes or this Indenture, the Company
is or would be required on the next succeeding Interest Payment Date to pay
any Additional Amounts and the payment of such Additional Amounts
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cannot be avoided by the use of any reasonable measures available to the
Company (which shall not include any adverse modification of the terms of
this Indenture or the Notes), the Notes may be redeemed at the option of the
Company, in whole but not in part, upon not less than 30 nor more than 60
days' prior notice mailed by first class mail to each Holder's last address
as it appears in the Security Register, at any time prior to the second
succeeding Interest Payment Date following such change or amendment at a
Redemption Price equal to 100% of the Accreted Value thereof, plus accrued
and unpaid interest, if any, thereon to the Redemption Date; PROVIDED the
Company will also pay to Holders of the Notes on the Redemption Date any
Additional Amounts which are then payable.
SECTION 3.02. NOTICES TO TRUSTEE. If the Company elects to
redeem Notes pursuant to Section 3.01(a), Section 3.01(b) or Section 3.01(c),
it shall notify the Trustee in writing of the Redemption Date and the
principal amount of Notes to be redeemed.
The Company shall give each notice provided for in this
Section 3.02 in an Officers' Certificate at least 45 days before the
Redemption Date (unless a shorter period shall be satisfactory to the
Trustee).
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED. In the
case of any partial redemption pursuant to Section 3.01(a) or Section
3.01(b), selection of the Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not
listed on a national securities exchange, PRO RATA, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate; PROVIDED that any partial redemption pursuant to Section 3.01(b)
shall only be selected PRO RATA as among the Holders; PROVIDED FURTHER that
no Note of $1,000, in principal amount at maturity or less shall be redeemed
in part; PROVIDED FURTHER that the principal amount at maturity of any Notes
left outstanding will not be less than $100,000. The Trustee shall make the
selection from the Notes outstanding and not previously called for
redemption. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption. The Trustee
shall notify the Company and the Registrar promptly in writing of the Notes
or portions of Notes to be called for redemption.
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SECTION 3.04. NOTICE OF REDEMPTION. With respect to any
redemption of Notes pursuant to Section 3.01(a), Section 3.01(b) or Section
3.01(c), at least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first class mail to each
Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and
shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to
the Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the Redemption Date and the only remaining right of
the Holders is to receive payment of the Redemption Price plus accrued
interest to the Redemption Date upon surrender of the Notes to the
Paying Agent;
(vi) that, in the case of a redemption pursuant to section
3.01(a) or Section 3.01(b), if any Note is being redeemed in part, the
portion of the principal amount (equal to $1,000 in principal amount at
maturity or any integral multiple thereof) of such Note to be redeemed
and that, on and after the Redemption Date, upon surrender of such
Note, a new Note or Notes in principal amount at maturity equal to the
unredeemed portion thereof will be reissued; and
(vii) that, if any Note contains a CUSIP, CINS or ISIN number
as provided in Section 2.13, no representation is being made as to the
correctness of the CUSIP, CINS or ISIN number either as printed on the
Notes or as contained in the notice of redemption and that reliance may
be placed only on the other identification numbers printed on the
Notes.
At the Company's request (which request may be revoked by
the Company at any time prior to the time at which the
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Trustee shall have given such notice to the Holders), made in writing to the
Trustee at least 30 days (or such shorter period as shall be satisfactory to
the Trustee) before a Redemption Date, the Trustee shall give the notice of
redemption in the name and at the expense of the Company. If, however, the
Company gives such notice to the Holders, the Company shall concurrently
deliver to the Trustee an Officers' Certificate stating that such notice has
been given.
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION. Once notice
of redemption is mailed, Notes called for redemption become due and payable
on the Redemption Date and at the Redemption Price. Upon surrender of any
Notes to the Paying Agent, such Notes shall be paid at the Redemption Price,
plus accrued interest, if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when
mailed, whether or not the Holder receives the notice. In any event, failure
to give such notice, or any defect therein, shall not affect the validity of
the proceedings for the redemption of Notes held by Holders to whom such
notice was properly given.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE. On or prior to
any Redemption Date, the Company shall deposit with the Paying Agent (or, if
the Company is acting as its own Paying Agent, shall segregate and hold in
trust as provided in Section 2.05) money sufficient to pay the Redemption
Price of and accrued interest on all Notes to be redeemed on that date other
than Notes or portions thereof called for redemption on that date that have
been delivered by the Company to the Trustee for cancellation.
SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION. If
notice of redemption has been given in the manner provided above, the Notes
or portion of Notes specified in such notice to be redeemed shall become due
and payable on the Redemption Date at the Redemption Price stated therein,
together with accrued interest to such Redemption Date, and on and after such
date (unless the Company shall default in the payment of such Notes at the
Redemption Price and accrued interest to the Redemption Date, in which case
the principal, until paid, shall bear interest from the Redemption Date at
the rate prescribed in the Notes), such Notes shall cease to accrue interest.
Upon surrender of any Note for redemption in accordance with a notice of
redemption, such Note shall be paid and redeemed by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided that installments
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of interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders registered as such at the close of business on the
relevant Regular Record Date.
SECTION 3.08. NOTES REDEEMED IN PART. Upon surrender of any
Note that is redeemed in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder a new Note equal in principal
amount to the unredeemed portion of such surrendered Note, which shall not,
in any event be less than $100,000 principal amount at maturity.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. The Company shall pay the
principal of, premium, if any, and interest on the Notes on the dates and in
the manner provided in the Notes and this Indenture. An installment of
principal, premium, if any, or interest shall be considered paid on the date
due if the Trustee or Paying Agent (other than the Company, a Subsidiary of
the Company, or any Affiliate of any of them) holds on that date money
designated for and sufficient to pay the installment. If the Company or any
Subsidiary of the Company or any Affiliate of any of them, acts as Paying
Agent, an installment of principal, premium, if any, or interest shall be
considered paid on the due date if the entity acting as Paying Agent complies
with the last sentence of Section 2.05. As provided in Section 6.09, upon an
bankruptcy or reorganization procedure relative to the Company, the Trustee
shall serve as the Paying Agent and conversion agent, if any, for the Notes.
The Company shall pay interest on overdue principal,
premium, if any, and interest on overdue installments of interest, to the
extent lawful, at the rate per annum then borne upon the Notes.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company
will maintain in the Borough of Manhattan, The City of New York, an office or
agency where Notes may be surrendered for registration of transfer or
exchange or for presentation for payment and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served.
The Company will give prompt written notice to the Trustee of the location,
and any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any
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such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
made or served at the address of the Trustee set forth in Section 10.02.
The Company may also from time to time designate one or
more other offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind
such designations; provided that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, The City of New York for such purposes.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee, located in the Borough of Manhattan, The City of New
York, as such office of the Company in accordance with Section 2.04.
SECTION 4.03. LIMITATION ON INDEBTEDNESS. The Company will
not, and will not permit any of the Restricted Subsidiaries to, Incur any
Indebtedness (other than the Notes and Indebtedness existing on the Issue
Date); PROVIDED that the Company and any Subsidiary Guarantor may Incur
Indebtedness (including Acquired Indebtedness), and any Restricted Subsidiary
may incur Acquired Indebtedness, if, in either case, after giving effect to
the Incurrence of such Indebtedness and the receipt and application of the
proceeds therefrom, the Consolidated Leverage Ratio would be greater than
zero and less than 6.0 to 1.0.
Notwithstanding the foregoing, the Company and any
Restricted Subsidiary (except as specified below) may Incur each and all of
the following:
(i) Indebtedness (A) of any Restricted Subsidiary owed to
the Company evidenced by a promissory note or (B) of the Company or any
Restricted Subsidiary to any Restricted Subsidiary; PROVIDED that, in
the case of clause (B) above, any event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or, in the
case of clause (A) and (B) above, any subsequent transfer of such
Indebtedness (other than to the Company or another Restricted
Subsidiary) shall be deemed, in each case, to constitute an Incurrence
of such Indebtedness not permitted by this clause (i);
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(ii) Refinancing Indebtedness;
(iii) Indebtedness of the Company or any Restricted Subsidiary
(A) in respect of performance, surety or appeal bonds provided in the
ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements; PROVIDED that such agreements (a) are designed solely
to protect the Company or any Restricted Subsidiary against
fluctuations in foreign currency exchange rates or interest rates and
(b) do not increase the Indebtedness of the obligor outstanding at any
time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder, and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from Guaranties or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any
Restricted Subsidiary pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or
Restricted Subsidiary (other than Guaranties of Indebtedness Incurred
by any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such acquisition),
in an amount not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary in connection with such
disposition;
(iv) Indebtedness represented by (A) the Notes, (B)
Guaranties of the Notes, and (C) Guaranties by any Restricted
Subsidiary of Indebtedness of the Company otherwise permitted under
this covenant, PROVIDED any Guaranty permitted by this clause (C) is
permitted by and made in accordance Section 4.07;
(v) Indebtedness of the Company (PROVIDED that any such
Indebtedness constituting Debt Securities does not mature as to
principal or become mandatorily redeemable prior to the Stated Maturity
of the Notes) or Indebtedness (other than Debt Securities) of any
Restricted Subsidiary Incurred to finance the cost (including the cost
of design, development, acquisition, construction, installation,
improvement, transportation or integration) to acquire equipment,
inventory or network assets (including acquisitions by way of
Capitalized Lease and acquisitions of the Capital Stock of a Person
that becomes a Restricted Subsidiary to the extent of the fair market
value of the equipment, inventory or network assets of such Person so
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acquired) by the Company or a Restricted Subsidiary after the Issue
Date for application or use in a Telecommunications Business in an
aggregate principal amount not to exceed $225 million (or, to the
extent non-U.S. dollar denominated, the U.S. Dollar Equivalent thereof)
at any one time outstanding;
(vi) Indebtedness of the Company such that, after giving
effect to the Incurrence thereof, the total aggregate principal amount
of Indebtedness Incurred under this clause (vi) and any Refinancings
thereof otherwise Incurred in compliance with this Indenture would not
exceed 200% of Total Incremental Equity;
(vii) Indebtedness the Company and its Subsidiaries incurred
under one or more Senior Credit Facilities in an aggregate principal
amount not to exceed $170 million (or, to the extent non-U.S. dollar
denominated, the U.S. Dollar Equivalent thereof) at any time
outstanding; and
(viii) Indebtedness (in addition to Indebtedness permitted
under clauses (i) through (vii) above) outstanding at any time in an
aggregate principal amount not to exceed $25 million (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent thereof).
Notwithstanding any other provision of this Section 4.03,
the maximum amount of Indebtedness that the Company or a Restricted
Subsidiary may Incur pursuant to this Section 4.03 shall not be deemed to be
exceeded, with respect to any outstanding Indebtedness due solely to the
result of fluctuations in the exchange rates of currencies.
For purposes of determining compliance with this Section
4.03, in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described in the above clauses, the
Company, in its sole discretion, shall classify, and from time to time may
reclassify, such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of such clauses.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. The
Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly,
(i) declare or pay any dividend or make any distribution on
or with respect to its Capital Stock (other than (x) dividends or
distributions payable solely in its Capi-
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tal Stock (other than Disqualified Stock) and (y) pro rata dividends
or distributions on Common Stock of Restricted Subsidiaries) held by
Persons other than the Company or any of the Restricted Subsidiaries,
(ii) purchase, redeem, retire or otherwise acquire for value
any Capital Stock of (A) the Company or an Unrestricted Subsidiary held
by any Person or (B) a Restricted Subsidiary held by any Affiliate of
the Company (other than a Restricted Subsidiary) or any holder (or any
Affiliate of such holder) of 5% or more of any class of Capital Stock
of the Company,
(iii) make any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value prior to any scheduled mandatory
payment date, of Subordinated Indebtedness, or
(iv) make any Investment, other than a Permitted Investment,
in any Person
(such payments or any other actions described in clauses (i) through (iv) above
being collectively "Restricted Payments") if, at the time of, and after giving
effect to, the proposed Restricted Payment:
(A) a Default shall have occurred and be continuing,
(B) the Company could not Incur at least $1.00 of
Indebtedness under the first paragraph of the Section
4.03, or
(C) the aggregate amount of all Restricted Payments (the
amount, if other than in cash, to be determined in good
faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution)
made after the Issue Date shall exceed the sum of (1) the
amount of (x) Cumulative Available Cash Flow determined
at the time of such Restricted Payment less (y) 150% of
the Cumulative Consolidated Interest Expense determined
for the period commencing on the first day of the fiscal
quarter which includes the Issue Date and ending on the
last day of the last fiscal quarter preceding the
Transaction Date for which reports have been filed with
the Commission or provided to the Trustee
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pursuant to Section 4.18 PLUS (2) the aggregate Net Cash
Proceeds received by the Company after the Issue Date as
a capital contribution or from the issuance and sale of
its Capital Stock (other than Disqualified Stock) to a
Person who is not a Subsidiary of the Company, including
an issuance or sale permitted by this Indenture of
Indebtedness of the Company for cash subsequent to the
Issue Date upon the conversion of such Indebtedness into
Capital Stock (other than Disqualified Stock) of the
Company, PLUS (3) an amount equal to the net reduction
in Investments constituting Restricted Payments resulting
from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted
Subsidiary, or from the Net Cash Proceeds from the sale
of any such Investment less the cost of the disposition
of such Investment (except, in each case, to the extent
any such payment or proceeds are included in the
calculation of Adjusted Consolidated Net Income), or
from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided
in the definition of "Investments"), not to exceed, in
each case, the amount of such Investment, MINUS (4) 50%
of the then outstanding principal amount of any
Indebtedness Incurred pursuant to clause (vi) of the
second paragraph of the Section 4.03 and any Refinancings
thereof (regardless of any subsequent reclassification
of any such Indebtedness).
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with the
foregoing paragraph; (ii) so long as no Default shall have occurred and be
continuing, the redemption, repurchase, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness including premium, if any,
and accrued and unpaid interest, with the proceeds of, or in exchange for,
Indebtedness Incurred under clause (ii) of the second paragraph of the
Section 4.03; (iii) the repurchase, redemption or other acquisition of
Capital Stock of the Company or a Subsidiary of the Company in exchange for,
or out of the proceeds of a capital contribution or a substantially
concurrent offering of, Capital Stock (other than Disqualified Stock) of the
Company; (iv) so long as no De-
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fault shall have occurred and be continuing, the making of any principal
payment or the repurchase, redemption, retirement, defeasance or other
acquisition for value of Subordinated Indebtedness in exchange for, or out of
the proceeds of a capital contribution or a substantially concurrent offering
of, the Capital Stock (other than Disqualified Stock) of the Company; (v)
payments or distributions to dissenting stockholders pursuant to applicable
law, pursuant to or in connection with a consolidation, merger or transfer of
assets that complies with the provisions of this Indenture applicable to
mergers, consolidations and transfers of all or substantially all of the
property and assets of the Company; (vi) so long as no Default shall have
occurred and be continuing, any Investment in any Person primarily engaged in
a Telecommunications Business on the date of such Investment; PROVIDED that
after giving effect to the proposed Investment, the aggregate amount of
Investments made pursuant to this clause (vi) does not then exceed the sum of
(a) $25 million (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent thereof) PLUS (b) the amount then available for the making
of Restricted Payments pursuant to clause (C) of the preceding paragraph
without giving effect to subclause (1) thereof; or (vii) prior to the
occurrence of a Public Market, dividends or distributions to Parent in
respect of the purchase, redemption, retirement or other acquisition for
value of Capital Stock of Parent held by managers, directors, employees or
officers, or former managers, directors, employees or officers, of Parent,
CableTel Management, Inc. the Company or a Restricted Subsidiary (or their
estates or beneficiaries under their estates), upon the death, disability,
retirement, termination of employment or pursuant to the terms of any
agreement under which such Capital Stock was issued; PROVIDED that the
aggregate consideration paid for such purchase, redemption, retirement or
other acquisition for value of such Capital Stock after the Issue Date does
not exceed $5 million (or, to the extent non-U.S. dollar denominated, the
U.S. Dollar Equivalent thereof) in the aggregate (unless such repurchases are
made with the proceeds of insurance policies and the Capital Stock is
purchased from the executors, administrators, testamentary trustees, heirs,
legatees or beneficiaries).
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payment referred to in clause (ii)
thereof) and the proceeds from any capital contribution or any issuance of
Capital Stock referred to in clauses (iii) and (iv) thereof shall be included
in calculating whether the conditions of clause (C) of the first paragraph of
this Section 4.04 have been met with respect to any subsequent Restricted
Payments.
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SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and
will not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any Restricted Subsidiary to (i) pay dividends
or make any other distributions permitted by applicable law on any Capital
Stock of such Restricted Subsidiary owned by the Company or any other
Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or
any other Restricted Subsidiary or (iv) transfer any of its property or
assets to the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any
encumbrances or restrictions: (i) existing on the Issue Date on this
Indenture or any other agreements in effect on the Issue Date, and any
extensions, refinancings, renewals or replacements of such agreements;
PROVIDED that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any material
respect to the Holders than those encumbrances or restrictions that are then
in effect and that are being extended, refinanced, renewed or replaced; (ii)
existing under or by reason of applicable law; (iii) existing with respect to
any Person or the property or assets of such Person acquired by the Company
or any Restricted Subsidiary, existing at the time of such acquisition and
not incurred in contemplation thereof, which encumbrances or restrictions are
not applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired; (iv)
in the case of clause (iv) of the first paragraph of this Section 4.05, (A)
that restrict in a customary manner the subletting, assignment or transfer of
any property or asset that is a lease, license, conveyance or contract or
similar property or asset, (B) existing by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary not otherwise
prohibited by this Indenture or (C) arising or agreed to in the ordinary
course of business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property or
assets of the Company or any Restricted Subsidiary in any manner material to
the Company or any Restricted Subsidiary; (v) with respect to a Restricted
Subsidiary and imposed pursuant to an agreement that has been entered into
for the sale or disposition of all or substantially all of the Capital Stock
of, or property and assets of,
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such Restricted Subsidiary; or (vi) contained in the terms of any
Indebtedness or any agreement pursuant to which such Indebtedness was issued
if (A) either (i) the encumbrance or restriction applies only in the event of
and during the continuance of a payment default or a default with respect to
a financial covenant contained in such Indebtedness or agreement, or (ii) the
Company determines at the time any such Indebtedness is Incurred (and at the
time of any modification of the terms of any such encumbrance or restriction)
that any such encumbrance or restriction will not materially affect the
Company's ability to make principal or interest payments on the Notes and (B)
the encumbrance or restriction is not materially more disadvantageous to the
Holders of the Notes than is customary in comparable financings or agreements
(as determined by the Company in good faith). Nothing contained in this
Section 4.05 shall prevent the Company or any Restricted Subsidiary from
restricting the sale or other disposition of property or assets of the
Company or any Restricted Subsidiary that secure Indebtedness of the Company
or any such Restricted Subsidiary.
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF
CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell, and will
not permit any Restricted Subsidiary, directly or indirectly, to issue or
sell, any Capital Stock of a Restricted Subsidiary except (i) to the Company
or a Restricted Subsidiary; (ii) issuances of director's qualifying shares or
issuances of Capital Stock to nationals of the jurisdiction of organization
of a Restricted Subsidiary, to the extent required by applicable law; (iii)
if, immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any
Investment in such Person remaining after giving effect to such issuance or
sale would have been permitted to be made under Section 4.04 if made on the
date of such issuance or sale; or (iv) issuances or sales of Common Stock of
a Restricted Subsidiary, PROVIDED that the Company or such Restricted
Subsidiary applies the Net Cash Proceeds, if any, of any such sale in
accordance with clause (A), (B) or (C) of Section 4.10.
SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTIES AND
INCURRENCE OF CERTAIN INDEBTEDNESS BY RESTRICTED SUBSIDIARIES. The Company
will not permit any Restricted Subsidiary, directly or indirectly, to (i)
Guaranty any Subordinated Indebtedness or Debt Securities of the Company or
(ii) Incur any Indebtedness under or in respect of Debt Securities or
Subordinated Indebtedness under clause (ii), (v) or (ix) of the second
paragraph of Section 4.03 ("Guaranteed Indebtedness"), unless such Restricted
Subsidiary simultaneously executes and delivers
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a supplemental indenture to this Indenture providing for a Guaranty of
payment of the Notes by such Restricted Subsidiary on the terms set forth in
Exhibit E attached hereto; PROVIDED that this paragraph shall not be
applicable to any Guaranty of any Restricted Subsidiary that existed at the
time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. Any such supplemental indenture shall supplement this Indenture
by, among other things, creating an additional Article Eleven applicable to
such Subsidiary Guarantor and any other Subsidiary Guarantors in the form set
forth in Exhibit E hereto and, in connection with the execution and delivery
of the supplemental indenture, such Subsidiary Guarantor shall execute and
deliver a Subsidiary Guaranty substantially in the form of Exhibit F hereto
and, at the time of entering into such supplemental indenture, such
Subsidiary Guarantor shall have furnished to the Trustee an Opinion of
Counsel, in form reasonably satisfactory to the Trustee, to the effect that
such supplemental indenture has been duly authorized, executed and delivered
by, and constitutes a legal, valid and binding obligation of, such Subsidiary
Guarantor and the Company, subject to exceptions and qualifications as are
customary for transactions of such nature. Such Article Eleven shall not
become effective until the provisions of Section 11.3 of such Article Eleven
have been complied with and will be subject to release under the conditions
described in Section 11.5 of such Article Eleven.
If the Guaranteed Indebtedness is (A) not Subordinated
Indebtedness, then the Guaranty of such Guaranteed Indebtedness shall be PARI
PASSU with, or subordinated to, the Subsidiary Guaranty or (B) Subordinated
Indebtedness, then the Guaranty of such Guaranteed Indebtedness shall be
subordinated to the Subsidiary Guaranty at least to the extent that the
Guaranteed Indebtedness is subordinated to the Notes.
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS
AND AFFILIATES. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any
holder (or any Affiliate of such holder) of 5% or more of any class of
Capital Stock of the Company or with any Affiliate of the Company or any
Restricted Subsidiary, except upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary than could be
obtained, at the time of such transaction or, if such transaction is pursuant
to a written agree-
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ment, at the time of the execution of the agreement providing therefor, in a
comparable arm's-length transaction with a Person that is not such a holder
or an Affiliate.
The foregoing limitation does not limit and shall not apply
to (i) transactions (A) approved by a majority of the disinterested members
of the Board of Directors as being on fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary than could be
obtained, at the time of such transaction or, if such transaction is pursuant
to a written agreement, at the time of the execution of the agreement
providing therefor, in a comparable arm's-length transaction with a Person
that is not such a holder or an Affiliate or (B) for which the Company or a
Restricted Subsidiary delivers to the Trustee a written opinion of an
internationally recognized investment banking firm stating that the
transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view; (ii) any transaction solely between the Company and
any of its Wholly Owned Restricted Subsidiaries or solely between Wholly
Owned Restricted Subsidiaries; (iii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company
and the entering into indemnification or similar arrangements with respect to
officers and directors of the Company in their capacities as such; (iv) any
payments or other transactions pursuant to any tax-sharing agreement between
the Company and any other Person with which the Company files a consolidated
tax return or with which the Company is part of a consolidated group for tax
purposes; (v) any Restricted Payments not prohibited by Section 4.04; (vi)
issuances of Capital Stock (other than Disqualified Stock) of the Company;
and (vii) the payment of fees and expenses pursuant to the Management
Services Agreement. Notwithstanding the foregoing, any transaction or series
of related transactions covered by the first paragraph of this Section 4.08
and not covered by clauses (ii) through (v) of this paragraph, the aggregate
amount of which exceeds $10 million (or, to the extent non-U.S. denominated,
the U.S. Dollar Equivalent thereof) in value, must be approved or determined
to be fair in the manner provided for in clause (i)(A) or (B) above.
SECTION 4.09. LIMITATION ON LIENS SECURING CERTAIN
INDEBTEDNESS. The Company will not, and will not permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any Liens of any kind
against or upon any of its property or assets, or any proceeds therefrom,
which secure either (x) Subordinated Indebtedness of the Company or any
Restricted Subsidiary, unless the Notes are secured by a Liens on such
prop-
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erty, assets or proceeds that is senior in priority to the Liens securing
such Subordinated Indebtedness, or (y) Pari Passu Debt Securities, unless the
Notes are equally and ratably secured with the Liens securing such Pari Passu
Debt Securities; PROVIDED that any Lien which is granted to secure the Notes
under this covenant shall be discharged at the same time as the discharge of
the Lien that gave rise to the obligation to so secure the Notes.
Notwithstanding the foregoing, the Company may incur and allow to exist Liens
securing Debt Securities which exclusively consist of Liens on (x) Government
Securities purchased at the time such Debt Securities are sold with the
proceeds therefrom or (y) cash provided by the sale of such Debt Securities,
in either case to the extent that the proceeds used to purchase any such
Government Securities or providing any such cash constitute a prefunding of
the payment of interest on the Debt Securities Secured thereby and are set
aside in an escrow account or similar arrangement to be applied for such
purpose.
SECTION 4.10. LIMITATION ON ASSET SALES. The Company will
not, and will not permit any Restricted Subsidiary to, consummate any Asset
Sale, unless (i) the consideration received by the Company or such Restricted
Subsidiary is at least equal to the fair market value of the assets sold or
disposed of and (ii) at least 75% of the consideration received consists of
(a) cash or Temporary Cash Investments or (b) Replacement Assets. In the
event and to the extent that the Company and/or the Restricted Subsidiaries
receive Net Cash Proceeds from one or more Asset Sales occurring on or after
the Issue Date, then the Company shall or shall cause the relevant Restricted
Subsidiary to (i) within 12 months after the date Net Cash Proceeds are so
received (A) apply such excess Net Cash Proceeds to repay Indebtedness (other
than Pari Passu Debt and Subordinated Indebtedness of the Company or
Subordinated Indebtedness of any Subsidiary Guarantor which is subordinated
in right of payment to a Subsidiary Guaranty of such Subsidiary Guarantor) of
the Company or a Restricted Subsidiary and elect to permanently reduce the
commitments thereunder by the amount of such Indebtedness so repaid and/or
(B) apply no more than the Pari Passu Pro Rata Share of such Net Cash
Proceeds to repay, and permanently reduce any commitments relating to, Pari
Passu Debt Securities and/or (C) invest the amount not so applied pursuant to
clauses (A) or (B) (or enter into a definitive agreement committing to so
invest within 12 months after the date of such agreement), in Replacement
Assets and (ii) apply (no later than the end of the 12-month period referred
to in clause (i)) such Net Cash Proceeds (to the extent not applied pursuant
to clause (i)) as provided in the following paragraph of this Section
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4.10. The amount of such Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause
(i) of the preceding sentence and not applied as so required by the end of
such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the
aggregate amount of Excess Proceeds not theretofore subject to an Offer to
Purchase pursuant to this Section 4.10 totals at least $15 million (or, to
the extent non-U.S. denominated, the U.S. Dollar Equivalent thereof), the
Company must commence, not later than the fifteenth Business Day of such
month, and consummate an Offer to Purchase from the Holders on a pro rata
basis an aggregate Accreted Value of Notes equal to the Excess Proceeds on
such date, at a purchase price equal to 100% of the Accreted Value of the
Notes on the relevant Payment Date, plus, in each case, accrued interest (if
any) to the Payment Date.
SECTION 4.11. LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company will not, and will not permit any of its Subsidiaries or
controlled Affiliates to, conduct its business in a fashion that would cause
the Company to be required to register as an "investment company" (as that
term is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act")), or otherwise to become subject to regulation
under the Investment Company Act. For purposes of establishing the Company's
compliance with this provision, any exemption which is or would become
available under Section 3(c)(1) or Section 3(c)(7) of the Investment Company
Act will be disregarded.
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL.
The Company or a third party must commence, within 30 days of the occurrence
of a Change of Control, and consummate an Offer to Purchase for all Notes
then outstanding, at a purchase price equal to 101% of the Accreted Value
thereof on the relevant Payment Date, PLUS accrued interest (if any) to the
Payment Date.
SECTION 4.13. EXISTENCE. Subject to Articles Four and Five
of this Indenture, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and the
existence of each Restricted Subsidiary in accordance with the respective
organizational documents of the Company and each Restricted Subsidiary and
the rights (whether pursuant to charter, partnership certificate, agreement,
statute or otherwise), material licenses and franchises of the Company and
each Restricted Subsidiary;
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provided that the Company shall not be required to preserve any such right,
license or franchise, or the existence of any Restricted Subsidiary (other
than the Escrow Guarantor, so long as the Escrow Agreement is in effect), if
the maintenance or preservation thereof is no longer desirable in the conduct
of the business of the Company and its Restricted Subsidiaries taken as a
whole.
SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS. The
Company will pay or discharge and shall cause each of its Restricted
Subsidiaries to pay or discharge, or cause to be paid or discharged, before
the same shall become delinquent (i) all material taxes, assessments and
governmental charges levied or imposed upon (a) the Company or any such
Restricted Subsidiary, (b) the income or profits of any such Restricted
Subsidiary which is a corporation or (c) the property of the Company or any
such Restricted Subsidiaries and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid, might by law become a lien upon the
property of the Company or any such Restricted Subsidiary; provided that the
Company shall not be required to pay or discharge, or cause to be paid or
discharged, any such tax, assessment, charge or claim the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate reserves have been established.
SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE. The
Company will cause all properties used or useful in the conduct of its
business or the business of any of its Restricted Subsidiaries, to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly conducted at all times; provided that
nothing in this Section 4.15 shall prevent the Company or any such Restricted
Subsidiary from discontinuing the use, operation or maintenance of any of
such properties or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Company, desirable in the conduct of the
business of the Company or such Restricted Subsidiary.
The Company will provide or cause to be provided, for
itself and its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured
against by corporations similarly situated and owning like properties, with
reputable insurers, in such
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amounts, with such deductibles and by such methods as shall be customary for
businesses similarly situated in the industry in which the Company or such
Restricted Subsidiary, as the case may be, is then conducting business.
SECTION 4.16. NOTICE OF DEFAULTS. In the event that the
Company becomes aware of any Default or Event of Default the Company,
promptly after it becomes aware thereof, will give written notice thereof to
the Trustee.
SECTION 4.17. COMPLIANCE CERTIFICATES. (a) The Company
shall deliver to the Trustee, within 90 days after the end of the last fiscal
quarter of each year, an Officers' Certificate stating whether or not the
signers know of any Default or Event of Default that occurred during such
fiscal quarter. Such certificate shall contain a certification from the
principal executive officer, principal financial officer or principal
accounting officer that a review has been conducted of the activities of the
Company and its Restricted Subsidiaries and the Company's and its Restricted
Subsidiaries' performance under this Indenture and that, to the knowledge of
such Officers, the Company has complied with all conditions and covenants
under this Indenture. For purposes of this Section 4.17, such compliance
shall be determined without regard to any period of grace or requirement of
notice provided under this Indenture. If they do know of such a Default or
Event of Default, the certificate shall describe any such Default or Event of
Default and its status. The first certificate to be delivered pursuant to
this Section 4.17(a) shall be for the first fiscal year beginning after the
execution of this Indenture.
(b) So long as (and to the extent) not prohibited by the
then current recommendations of the American Institute of Certified Public
Accountants, the Company shall deliver to the Trustee, within 90 days after
the end of the Company's fiscal year, a certificate signed by the Company's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the
Notes as they relate to accounting matters, (ii) that they have read the most
recent Officers' Certificate delivered to the Trustee pursuant to paragraph
(a) of this Section 4.17 and (iii) whether, in connection with their audit
examination, anything came to their attention that caused them to believe
that the Company was not in compliance with any of the terms, covenants,
provisions or conditions of Article Four and Section 5.01 of this Indenture
as they pertain to accounting matters and, if any Default or Event of Default
has come to their attention, specifying the nature and period of existence
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thereof; provided that such independent certified public accountants shall
not be liable in respect of such statement by reason of any failure to obtain
knowledge of any such Default or Event of Default that would not come to the
attention of such accountants in the course of an audit examination conducted
in accordance with generally accepted auditing standards in effect at the
date of such examination.
(c) Within 90 days of the end of each of the Company's
fiscal years, the Company shall deliver to the Trustee a list of all
Significant Subsidiaries. The Trustee shall have no duty with respect to any
such list except to keep it on file and available for inspection by the
Holders.
SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS. At
all times from and after the date of the commencement of a registered
exchange offer for the Notes by the Company or the effectiveness of a Shelf
Registration Statement pursuant to and in accordance with the terms of the
Notes Registration Rights Agreement (the "Registration"), whether or not the
Company is then required to file reports with the Commission, the Company
shall file with the Commission all such reports and other information as it
would be required to file with the Commission by Sections 13(a) or 15(d)
under the Securities Exchange Act of 1934 if it were subject thereto. The
Company shall supply the Trustee and each Holder or shall supply to the
Trustee for forwarding to each Holder, without cost to any Holder, copies of
such reports and other information. In addition, at all times prior to the
date of the Registration, the Company shall, at its cost, deliver to each
Holder of the Notes quarterly and annual reports substantially equivalent to
those which would be required by the Exchange Act. In addition, at all times
prior to the Registration, upon the request of any Holder or any prospective
purchaser of the Notes designated by a Holder, the Company shall supply to
such Holder or such prospective purchaser the information required under Rule
144A under the Securities Act.
SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS. The
Company covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of, premium, if any, or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or that may affect the covenants or the performance of this Indenture; and
(to the ex-
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tent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such
law had been enacted.
SECTION 4.20. CALCULATION OF ORIGINAL ISSUE DISCOUNT. The
Company shall file with the Trustee promptly at the end of each calendar year
(i) a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on outstanding Notes as
of the end of such year and (ii) such other specific information relating to
such original issue discount as may then be relevant under the Internal
Revenue Code of 1986, as amended from time to time and requested by the
Trustee.
SECTION 4.21. PAYMENT OF ADDITIONAL AMOUNTS. (a) All
payments made by the Company, the Escrow Guarantor and any Subsidiary
Guarantor with respect to the Notes (including payments in respect of
Liquidated Damages, if any) will be made free and clear of, and without
withholding or deduction for or on account of, any present or future tax,
duty, levy, impost, assessment or other government charge (including
penalties, interest or other liabilities related thereto) imposed or levied
by or on behalf of the government of the Netherlands or any political
subdivision or taxing authority or agency thereof or therein or any other
jurisdiction in which the Company is organized or engaged in business for tax
purposes ("Taxes"), unless the Company, the Escrow Guarantor or any
Subsidiary Guarantor is required to withhold or deduct Taxes by law or by the
interpretation or administration thereof. If the Company, the Escrow
Guarantor or any such Subsidiary Guarantor is required to withhold or deduct
any amount for or on account of Taxes, from any payment made under or with
respect to the Notes, the Company will pay such additional amounts
("Additional Amounts") as may be necessary so that the net amount received by
each Holder of Notes (including Additional Amounts) after such withholding or
deduction will not be less than the amount the Holder would have received if
such Taxes had not been withheld or deducted; PROVIDED that the foregoing
obligation to pay Additional Amounts does not apply to (a) any Taxes that
would not have been so imposed but for the existence of any present or former
connection between the relevant Holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of power over, the
relevant holder, if the relevant holder is an estate, nominee, trust or
corporation) and the Netherlands or any political subdivision or taxing
authority or
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agency thereof or therein or any other jurisdiction in which the Company is
organized or engaged in business for tax purposes (other than the mere
receipt of such payment or the ownership or holding outside of the
Netherlands or such other jurisdiction of such Note); (b) any estate,
inheritance, gift, sales, transfer, personal property tax or similar tax,
assessment or governmental charge; or (c) any Taxes payable otherwise than by
deduction or withholding from payments of principal of (or premium, if any,
on) or interest on such Note; nor will Additional Amounts be paid (i) if the
payment could have been made without such deduction or withholding if the
beneficiary of the payment had presented the Note for payment within 30 days
after the date on which such payment or such Note became due and payable or
the date on which payment thereof is duly provided for, whichever is later
(except to the extent that the Holder would have been entitled to Additional
Amounts had the Note been presented on the last day of such 30 day period),
or (ii) with respect to any payment of principal of (or premium, if any, on)
or interest on such Note to any Holder who is a fiduciary or partnership or
any person other than the sole beneficial owner of such payment, to the
extent that a beneficiary or settlor with respect to such fiduciary, a member
of such a partnership or the beneficial owner of such payment would not have
been entitled to the Additional Amounts had such beneficiary, settlor, member
or beneficial owner been the actual Holder of such Note. If the Company
conducts business in any jurisdiction (the "Taxing Jurisdiction") other than
the Netherlands in a manner which causes Holders to be liable for taxes on
payments under the Notes for which they would not have been so liable but for
such conduct of business in the Taxing Jurisdiction, "Taxes" shall include
taxes imposed by way of deduction or withholding by such Taxing Jurisdiction
and the Company's, the Escrow Guarantor's and any Subsidiary Guarantor's
obligations to pay Additional Amounts shall apply without regard to whether
Holders or beneficial owners have a present or former connection with such
Taxing Jurisdiction or any prefecture or territory thereof.
(b) The foregoing provisions of this Section 4.21 shall
survive any termination or discharge of this Indenture and shall apply
MUTATIS MUTANDIS to any jurisdiction in which any successor Person to the
Company is organized or any political subdivision or taxing authority or
agency thereof or therein.
(c) The Company will also (i) make such withholding or
deduction and (ii) remit the full amount deducted or withheld to the relevant
authority in accordance with applicable
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law. The Company, the Escrow Guarantor or any Subsidiary Guarantor will
furnish to the Holders of the Notes, within 30 days after the date the
payment of any Taxes so deducted or withheld is due pursuant to applicable
law, certified copies of tax receipts evidencing such payment by the Company,
the Escrow Guarantor or any Subsidiary Guarantor.
(d) At least 30 days prior to each date on which any
payment under or with respect to the Notes is due and payable unless such
obligation to pay Additional Amounts arises after the 30th day prior to such
date, in which case it shall be promptly paid thereafter, if the Company, the
Escrow Guarantor or any Subsidiary Guarantor will be obligated to pay
Additional Amounts with respect to such payment, the Company, the Escrow
Guarantor or any Subsidiary Guarantor will deliver to the Trustee and the
Paying Agent an Officers' Certificate stating the fact that such Additional
Amounts will be payable and the amounts so payable and will set forth such
other information necessary to enable the Trustee and the Paying Agent to pay
such Additional Amounts to Holders of Notes on the payment date. Each
Officers' Certificate shall be relied upon until receipt of a further
Officers' Certificate addressing such matters.
(e) Whenever in this Indenture there is mentioned, in any
context, the payment of principal, premium, if any, interest or of any other
amount payable under or with respect to any Note, such mention shall be
deemed to include mention of the payment of Additional Amounts to the extent
that, in such context, Additional Amounts are, were or would be payable in
respect thereof. The foregoing obligations relating to Additional Amounts
shall survive any termination, defeasance or discharge of this Indenture.
(f) The Company will not take any voluntary action that
results in its obligation to pay Additional Amounts.
SECTION 4.22. ESCROW ACCOUNT; MANDATORY REDEMPTION. (a) The
Escrow Guarantor shall apply the Initial Escrow Amount to the Escrow Account
in accordance with the terms of the Escrow Agreement for the benefit of the
Holders and the Trustee and the holders of the Class B Interests and the Unit
Agent.
(b) In the event that on or before the Required Date, the
Available Escrow Proceeds have not been released in accordance with the
requirements of Section 3(a) of the Escrow Agreement, the Company shall
notify the Escrow Agent, the Trustee and the Unit Agent in writing on the
next succeeding Busi-
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ness Day after the Required Date that the Company will consummate a Mandatory
Redemption. The Company shall provide the Escrow Agent, the Unit Agent, and
Trustee with a notice of Mandatory Redemption, which shall govern the terms
of the Mandatory Redemption. Such notice shall include such disclosures as
are required by law and shall state:
(1) that the Mandatory Redemption is being made pursuant to
this Section 4.22, with respect to the Notes, and pursuant to the Unit,
with respect to the Units and that the Units must be surrendered to the
Trustee as paying agent in order to collect the Mandatory Redemption
Price;
(2) the purchase price (which shall be the Mandatory
Redemption Price) for each Note and the Mandatory Redemption Date;
(3) that, unless the Company shall default in the payment of
the Mandatory Redemption Price, any Unit accepted for payment pursuant
to the Mandatory Redemption shall cease to accrete value (with respect
to the Note portion of the Unit) after the Mandatory Redemption Date;
(4) that Holders will be required to surrender their Units to
the paying agent at the address specified in the notice prior to 5:00
p.m., New York City time, on the Mandatory Redemption Date and must
complete any form letter of transmittal proposed by the Company and
acceptable to the Escrow Agent, Trustee, the Paying Agent and the Unit
Agent;
(5) the instructions that Holders of the Units must follow
in order to surrender their Units.
(c) On or before April 26, 1999 the Trustee and Unit Agent
shall together mail a notice (the "Mandatory Redemption Notice") to the
holders of the Units (with a copy to the Escrow Agent) stating that the Units
shall be mandatorily redeemed or repurchased on or before May 13, 1999, at
the redemption price (the "Mandatory Redemption Price") equal to the Accreted
Value of the Notes on the Mandatory Redemption Date, and shall state the
information provided in Section 4.22(b); it being acknowledged and agreed
that the failure of the Company to deliver the notice pursuant to Section
3(a)(i) of the Escrow Agreement on or prior to April 19, 1999 (the next
succeeding Business Day after the Required Date) shall be a request for the
Trustee and Unit Agent to give the Mandatory Redemption Notice (in compliance
with this Section 4.22 and Section 3(a)(ii) of the Escrow
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Agreement) to the holders of the Units and to consummate the Mandatory
Redemption.
(d) No later than two Business Days prior to the Mandatory
Redemption Date, the Escrow Agent shall disburse all Available Escrow
Proceeds to the Trustee as paying agent in connection with the Mandatory
Redemption of the Units.
(e) No later than two Business Days prior to the Mandatory
Redemption Date, the Company shall deposit with the Trustee as Paying Agent
an amount of funds such that on the Mandatory Redemption Date the Trustee
shall have immediately available funds (including the Available Escrow
Proceeds disbursed pursuant to clause (d) above) to pay the Mandatory
Redemption Price for all outstanding Units.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities
laws or regulations and any applicable requirements of any securities
exchange in which the laws are listed, in connection with the repurchase of
the Units pursuant to the Mandatory Redemption. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this Section 4.22 or Section 3(b) of the Escrow Agreement, the Company
will comply with the applicable securities laws and regulations and
requirements and shall not be deemed to have breached its obligations under
this Section 4.22 or Section 3(b) under the Escrow Agreement by virtue
thereof.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. The Company
shall not (i) consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) or (ii) permit any of the
Restricted Subsidiaries to enter into any such transaction or series of
transactions if it would result in the disposition of all or substantially
all of the properties or assets of the Company and the Restricted
Subsidiaries on a consolidated basis, unless:
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(i) the Company shall be the continuing Person, or the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or that acquired or leased such property
and assets of the Company shall be a corporation organized and validly
existing under the laws of an Approved Jurisdiction and shall expressly
assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of the Company on all of the Notes and
under this Indenture;
(ii) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing;
(iii) the Company delivers to the Trustee an Opinion of
Counsel to the effect that the transaction will not result in the
surviving entity being required to make any deduction or withholding in
amounts greater than that the Company would otherwise be required to
make on account of Netherlands taxes, from any payments in respect of
the Notes or otherwise which would adversely affect Holders of the
Notes from the standpoint of the enforceability of the Notes or this
Indenture or service of process against the Company;
(iv) immediately after giving effect to such transaction on a
pro forma basis, the Company or any Person becoming the successor
obligor of the Notes shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately
prior to such transaction;
(v) immediately after giving effect to such transaction on a
pro forma basis the Company, or any Person becoming the successor
obligor of the Notes, as the case may be, could Incur at least $1.00 of
Indebtedness under the first paragraph of Section 4.03; provided that
this clause (v) shall not apply to a consolidation, combination, merger
or sale of all or substantially all of the assets of the Company if
immediately after giving effect to such transaction on a pro forma
basis, the Company or any Person becoming the successor obligor of the
Notes shall have a Consolidated Leverage Ratio equal to or less than
the Consolidated Leverage Ratio of the Company immediately prior to
such transaction; and
(vi) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iv) and (v) above) and
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Opinion of Counsel, in each case stating that such consolidation,
combination, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent
provided for herein relating to such transaction have been complied
with;
PROVIDED, that clauses (iii), (iv) and (v) above do not apply if, in the good
faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose
of such transaction is to change the jurisdiction of incorporation of the
Company; and provided further that any such transaction shall not have as one
of its purposes the evasion of the foregoing limitations.
SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation
or merger, combination or any transfer of all or substantially all of the
assets of the Company in accordance with Section 5.01 of this Indenture, in
which the Company or the Restricted Subsidiary, as the case may be, is not
the continuing corporation, the successor Person formed by such consolidation
or combination or into which the Company is merged or to which such transfer
is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as
if such successor Person had been named as the Company herein; provided that
solely for computing Cumulative Available Cash Flow and Cumulative
Consolidated Interest Expense for purposes of clause (C)(1) of the first
paragraph of Section 4.04, the Cumulative Available Cash Flow and Cumulative
Consolidated Interest Expense of any Persons other than the Company and the
Restricted Subsidiaries (determined prior to the effective time of such
consolidation, merger or transfer of all or substantially all of the assets
of the Company) shall only be included for periods subsequent to the
effective time of such merger, consolidation, combination or transfer of
assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. The following events are
Events of Default under the Notes and this Indenture:
(a) defaults in the payment of principal of (or premium, if
any, on) any Note when the same becomes due and
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payable at maturity, upon acceleration, upon Mandatory Redemption,
upon an optional redemption or otherwise;
(b) defaults in the payment of interest on any Note when the
same becomes due and payable, and such default continues for a period
of 30 days;
(c) defaults in the performance or breach of the provisions of
this Indenture applicable to mergers, consolidations and transfers of
all or substantially all of the assets of the Company or the failure to
make or consummate an Offer to Purchase in accordance with Section 4.10
or Section 4.12;
(d) defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture or under the
Notes or in the Escrow Agreement (other than a default specified in
clause (a), (b) or (c) above) and such default or breach continues for
a period of 30 consecutive days after written notice by the Trustee or
the Holders of 25% or more in aggregate principal amount at maturity of
the Notes;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Restricted Subsidiary having an
outstanding principal amount of $10 million (or, to the extent non-U.S.
dollar denominated the U.S. Dollar Equivalent thereof) or more in the
aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event of
default that has caused the holder thereof to declare such Indebtedness
to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has
not been rescinded or annulled within 30 days of such acceleration
and/or (II) the failure to make a principal payment at the Stated
Maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10 million (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent thereof) in the
aggregate for all such final judgments or orders against all such
Persons (treating any deductibles, self-insurance or retention as not
so covered) shall be rendered against the Company or any Restricted
Subsidiary and shall not be paid or discharged,
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and there shall be any period of 30 consecutive days following entry
of the final judgment or order that causes the aggregate amount for all
such final judgments or orders outstanding and not paid or discharged
against all such Persons to exceed $10 million (or, to the extent
non-U.S. dollar denominated the U.S. Dollar Equivalent thereof) during
which a stay of enforcement of such final judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any
Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
(B) appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property
and assets of the Company or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Company or any
Significant Subsidiary and, in each case, such decree or order shall
remain unstayed and in effect for a period of 30 consecutive days;
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors;
(i) the Company or the Escrow Guarantor shall assert or
acknowledge in writing that the Escrow Agreement or the Escrow Guaranty
is invalid or unenforceable or the Escrow Agreement (other than upon
satisfaction of the Financing Condition in accordance with its terms)
ceases to give the Trustee the liens, rights, powers, privileges and
security interests purported to be created thereby; or
(j) any License permitting the Company and/or any Significant
Subsidiary to operate in a Target Market shall be revoked (after all
due process expressly provided under
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applicable law with respect to the revocation of any such License) or
shall no longer be in effect or shall not be renewed.
SECTION 6.02. ACCELERATION. If an Event of Default (other
than an Event of Default specified in clause (g) or (h) of Section 6.01 that
occurs with respect to the Company) occurs and is continuing under this
Indenture, the Trustee or the Holders of at least 25% in aggregate principal
amount at maturity of the Notes, then outstanding, by written notice to the
Company (and to the Trustee if such notice is given by the Holders), may, and
the Trustee at the request of such Holders shall, declare the Accreted Value
of, premium, if any, and accrued interest on the Notes to be immediately due
and payable. Upon a declaration of acceleration, such Accreted Value of,
premium, if any, and accrued interest shall be immediately due and payable.
In the event of a declaration of acceleration because an Event of Default set
forth in clause (e) of Section 6.01 has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if
the event of default triggering such Event of Default pursuant to clause (e)
shall be remedied or cured by the Company or the relevant Restricted
Subsidiary or waived by the holders of the relevant Indebtedness within 60
days after the declaration of acceleration with respect thereto. If an Event
of Default specified in clause (g) or (h) of Section 6.01 occurs with respect
to the Company, the Accreted Value of, premium, if any, and accrued interest
on the Notes then outstanding shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee
or any Holder.
At any time after such a declaration of acceleration, but
before a judgment or decree for the payment of the money due has been
obtained by the Trustee, the Holders of at least a majority in principal
amount at maturity of the outstanding Notes by written notice to the Company
and to the Trustee, may waive all past Defaults and rescind and annul such
declaration of acceleration and its consequences if (i) all existing Events
of Default, other than the non-payment of the Accreted Value of, premium, if
any, and accrued interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived and (ii) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs
and is continuing, the Trustee may pursue any
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available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding.
SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Sections
6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount
at maturity of the outstanding Notes, by notice to the Trustee, may waive an
existing Default or Event of Default and its consequences, except a Default
in the payment of principal of, premium, if any, or interest on any Note as
specified in clause (a) or (b) of Section 6.01 or in respect of a covenant or
provision of this Indenture which cannot be modified or amended without the
consent of the holder of each outstanding Note affected. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereto.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of at least
a majority in aggregate principal amount at maturity of the outstanding Notes
may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising an trust or power conferred on
the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that may involve the Trustee in
personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the
giving of such direction and may take any other action it deems proper that
is not inconsistent with any such direction received from Holders of Notes.
SECTION 6.06. LIMITATION ON SUITS. A Holder may not
institute any proceeding, judicial or otherwise, with respect to this
Indenture or the Notes, or for the appointment of a receiver or trustee, or
for any other remedy hereunder unless:
(i) the Holder gives the Trustee written notice of a
continuing Event of Default;
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(ii) the Holders of at least 25% in aggregate principal
amount at maturity of outstanding Notes make a written request to the
Trustee to pursue the remedy;
(iii) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense;
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount at maturity of the outstanding Notes do not
give the Trustee a direction that is inconsistent with the request.
For purposes of Section 6.05 of this Indenture and this
Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any
determination of whether the Holders of the required aggregate principal
amount at maturity of outstanding Notes have concurred in any request or
direction of the Trustee to pursue any remedy available to the Trustee or the
Holders with respect to this Indenture or the Notes or otherwise under the
law.
A Holder may not use this Indenture to prejudice the rights
of another Holder or to obtain a preference or priority over such other
Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of the Accreted Value of, premium, if
any, or interest on, such Note or to bring suit for the enforcement of any
such payment, on or after the due date expressed in the Notes, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of
Default in payment of principal, premium or interest specified in clause (a),
(b) or (c) of Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the
Company or any other obligor of the Notes for the whole amount of principal,
premium, if any, and accrued interest remaining unpaid, together with
interest on overdue principal, premium, if any, and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the
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rate specified in the Notes, and such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee
may file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07) and the Holders allowed in any judicial
proceedings relative to the Company (or any other obligor of the Notes), its
creditors or its property and shall be entitled and empowered to collect and
receive any monies, securities or other property payable or deliverable upon
conversion or exchange of the Notes or upon any such claims and to distribute
the same, and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation expenses, disbursements and advances of the Trustee,
its agent and counsel, and any other amounts due the Trustee under Section
7.07. Nothing herein contained shall be deemed to empower the Trustee to
authorize or consent to, or accept or adopt on behalf of any Holder, any plan
of reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES. If the Trustee collects any money
pursuant to this Article Six, including such amounts held pursuant to the
Escrow Agreement it shall pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for
principal of, premium, if any, and interest on the Notes in respect of which
or for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable
on such Notes for principal, premium, if any, and interest, respectively; and
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Third: to the Escrow Guarantor or any other obligors of
the Notes, as their interests may appear, or as a court of competent
jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may
fix a record date and payment date for any payment to Holders pursuant to
this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as Trustee, a court
may require any party litigant in such suit to file an undertaking to pay the
costs of the suit, and the court may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 of this Indenture, or a
suit by Holders of more than 10% in principal amount at maturity of the
outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then, and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Company, Trustee and the Holders shall
continue as though no such proceeding had been instituted.
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Notes in Section 2.09, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
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SECTION 6.14. DELAY OR OMISSION NOT WAIVER. No delay or
omission of the Trustee or of any Holder to exercise an right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Six or by law to the Trustee or
to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. GENERAL. The duties and responsibilities of
the Trustee shall be as provided by the TIA and as set forth herein.
Notwithstanding the foregoing, no provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Article Seven.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to TIA
Sections 315(a) through (d):
(i) the Trustee may conclusively rely and shall be protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document (whether in its original or facsimile form)
believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter
stated in the document;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and/or an Opinion of Counsel, which
shall conform to Section 10.03 or Section 10.04, as the case may be.
The Trustee shall not be
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liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion;
(iii) the Trustee may act through attorneys and agents of its
selection and the advice of such attorneys and agents 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 reliance
thereon. The Trustee shall not be responsible for the misconduct or
negligence of any agent appointed with due care;
(iv) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(v) the Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or
within its rights or powers or for any action it takes or omits to take
in accordance with the direction of the Holders of a majority in
principal amount at maturity of the outstanding Notes relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; provided that the Trustee's
conduct does not constitute gross negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a making be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, conclusively rely upon an
Officer's Certificate; and
(vii) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation,
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it shall be entitled to examine the books, records and premises of the
Company personally or by agent or attorney at the sole cost of the
Company and shall incur no liability or additional liability of any
kind by reason of such inquiry or investigation.
(viii) the Trustee shall have no duty to inquire as to the
performance of the Company's covenants in Article Four. In addition,
the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to
Sections 6.01 and 4.01 or (ii) any Default or Event of Default of which
the Trustee shall have received written notification, or obtained
actual knowledge.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company or its Affiliates with the same
rights it would have if it were not the Trustee. Any Agent may do the same
with like rights.
However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee (i) makes
no representation as to the validity or adequacy of this Indenture or the
Notes, (ii) shall not be accountable for the Company's use or application of
the proceeds from the Notes and (iii) shall not be responsible for any
statement in the Notes other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT. If any Default or any
Event of Default occurs and is continuing and if such Default or Event of
Default is actually known to a Responsible Officer of the Trustee, the
Trustee shall mail to each Holder in the manner and to the extent provided in
TIA Section 313(c) notice of the Default or Event of Default within 45 days
after it occurs, unless such Default or Event of Default has been cured;
provided, however, that, except in the case of a default in the payment of
the principal of, premium, if any, or interest on any Note, the Trustee shall
be protected in withholding such notice if and so long as the Board of
Directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days
after each May 15, beginning with May 15, 1999, the
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Trustee shall mail to each Holder as provided in TIA Section 313(c) a brief
report dated as of such May 15, if required by TIA Section 313(a).
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall
pay to the Trustee such compensation as shall be agreed upon in writing for
its services. The compensation of the Trustee shall not be limited by any law
on compensation of a trustee of an express trust. The Company shall reimburse
the Trustee upon request for all reasonable out-of-pocket expenses and
advances incurred or made by the Trustee. Such expenses shall include the
reasonable compensation and expenses of the Trustee's agents and counsel.
The Company shall indemnify each of the Trustee and any
predecessor Trustee for, and hold it harmless against, any and all claim,
damage, loss or liability or expense, including taxes (other than taxes based
upon, measured by or determined by the income of the Trustee) incurred by it
without negligence or bad faith on its part in connection with the acceptance
or administration of this Indenture and its duties under this Indenture and
the Notes, including the costs and expenses of defending itself against any
claim or liability and of complying with any process served upon it or any of
its officers in connection with the exercise or performance of any of its
powers or duties under this Indenture and the Notes.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Notes on all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of, premium, if any, and
interest on particular Notes.
If the Trustee incurs expenses or renders services after
the occurrence of an Event of Default specified in clause (g) or (h) of
Section 6.01, the expenses and the compensation for the services will be
intended to constitute expenses of administration under Title 11 of the
United States Bankruptcy Code or any applicable foreign, federal or state law
for the relief of debtors.
The provisions of this Section 7.07 shall survive the
termination of this Indenture.
SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or
removal of the Trustee and appointment of a successor Trus-
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tee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign at any time by so notifying the
Company in writing at least 30 days prior to the date of the proposed
resignation. The Holders of a majority in principal amount at maturity of the
outstanding Notes may remove the Trustee by so notifying the Trustee in
writing and may appoint a successor Trustee with the consent of the Company.
The Company may remove the Trustee if: (i) the Trustee is no longer eligible
under Section 7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent;
(iii) a receiver or other public officer takes charge of the Trustee or its
property; or (iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy
exists in the office of Trustee for any reason, the Company shall promptly
appoint a successor Trustee. Within one year after the successor Trustee
takes office, the Holders of a majority in principal amount at maturity of
the outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Company. If the successor Trustee does not
deliver its written acceptance required by the next succeeding paragraph of
this Section 7.08 within 30 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Company or the Holders of a majority in
principal amount at maturity of the outstanding Notes may, at the expense of
the Company, petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company. Immediately after
the delivery of such written acceptance, subject to the lien provided in
Section 7.07, (i) the retiring Trustee shall transfer all property held by it
as Trustee to the successor Trustee, (ii) the resignation or removal of the
retiring Trustee shall become effective and (iii) the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Holder.
If the Trustee is no longer eligible under Section 7.10,
any Holder who satisfies the requirements of TIA Section 310(b) may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
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The Company shall give notice of any resignation and any
removal of the Trustee and each appointment of a successor Trustee to all
Holders. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligation under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee
corporation or national banking association without any further act shall be
the successor Trustee with the same effect as if the successor Trustee had
been named as the Trustee herein.
SECTION 7.10. ELIGIBILITY. This Indenture shall always have
a Trustee who satisfies the requirements of TIA Section 310(a)(1). The
Trustee shall have a combined capital and surplus of at least $25,000,000 as
set forth in its most recent published annual report of condition.
SECTION 7.11. MONEY HELD IN TRUST. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may
agree with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law and except
for money held in trust under Article Eight of this Indenture.
SECTION 7.12. WITHHOLDING TAXES. The Trustee, as agent for
the Company, shall exclude and withhold from each payment of principal and
interest and other amounts due hereunder or under the Notes any and all
withholding taxes applicable thereto as required by law. The Trustee agrees
to act as such withholding agent and, in connection therewith, whenever any
present or future taxes or similar charges are required to be withheld with
respect to any amounts payable in respect of the Notes, to withhold such
amounts and timely pay the same to the appropriate authority in the name of
and on behalf of the Holders of the Notes, that it will file any necessary
withholding tax returns or statements when due. The Company or the Trustee
shall, as promptly as possible after the payment of the taxes described
above, deliver to each holder of a Note appropriate documentation showing the
payment thereof,
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together with such additional documentary evidence as such holders may
reasonably request from time to time.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS.
Except as otherwise provided in this Section 8.01, the Company may terminate
its obligations under the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes that have been replaced or Notes
that are paid pursuant to Section 4.01 or Notes for whose payment money
or securities have theretofore been held in trust and thereafter repaid
to the Company, as provided in Section 8.05) have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by
it hereunder; or
(ii) (A) the Notes mature within one year or all of them are
to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B)
the Company irrevocably deposits in trust with the Trustee during such
one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely
for the benefit of the Holders for that purpose, money or U.S.
Government Obligations sufficient (in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal, premium, if, any, and interest on the Notes to maturity or
redemption, as the case may be, and to pay all other sums payable by it
hereunder, (C) no Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit, (D)
such deposit will not result in a breach or violation of, or constitute
a default under, this Indenture or any other agreement or instrument to
which the Company is a party or by which it is bound and (E) the
Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satis-
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faction and discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's
obligations under Section 7.07 shall survive. With respect to the foregoing
clause (ii), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06
shall survive until the Notes are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After
any such irrevocable deposit, the Trustee upon request shall acknowledge in
writing the discharge of the Company's obligations under the Notes and this
Indenture except for those surviving obligations specified above.
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE. The
Company will be deemed to have paid and will be discharged from any and all
obligations in respect of the Notes on the 92nd day after the date of the
deposit referred to in clause (A) of this Section 8.02, and the provisions of
this Indenture will no longer be in effect with respect to the Notes, and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same, except as to (i) rights of registration of transfer
and exchange, (ii) substitution of apparently mutilated, defaced, destroyed,
lost or stolen Notes, (iii) rights of Holders to receive payments of
principal thereof and interest thereon, (iv) the Company's obligations under
Section 4.02, (v) the rights, obligations and immunities of the Trustee
hereunder and (vi) the rights of the Holders as beneficiaries of this
Indenture with respect to the property so deposited with the Trustee payable
to all or any of them; provided that the following conditions shall have been
satisfied:
(A) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably
deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10 of this
Indenture) and conveyed all right, title and interest
for the benefit of the Holders, under the terms of an
irrevocable trust agreement in form and substance
satisfactory to the Trustee as trust funds in trust,
specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of,
premium, if any, and interest, if any, on the Notes, and
dedicated solely to the benefit of the Holders, in and to
(1) money in an amount, (2) U.S. Government Obligations
that,
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through the payment of interest, premium, if any, and
principal in respect thereof in accordance with their
terms, will provide, not later than one day before the
due date of any payment referred to in this clause (A),
money in an amount or (3) a combination thereof in an
amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants
expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and
after payment of all foreign, federal, state and local
taxes or other charges and assessments in respect thereof
payable by the Trustee, the principal of, premium, if
any, and accrued interest on the outstanding Notes at the
Stated Maturity of such principal or interest; provided
that the Trustee shall have been irrevocably instructed
to apply such money or the proceeds of such U.S.
Government Obligations to the payment of such principal,
premium, if any, and interest with respect to the Notes;
(B) such deposit will not result in a breach or violation
of, or constitute a Default under, this Indenture or
any other agreement or instrument to which the
Company is a party or by which it is bound;
(C) immediately after giving effect to such deposit on a
pro forma basis, no Default shall have occurred and
be continuing on the date of such deposit or during
the period ending on the 92nd day after such date of
deposit;
(D) the Company shall have delivered to the Trustee (1)
either (x) a ruling directed to the Trustee received
from the Internal Revenue Service to the effect that
the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of the Company's
exercise of its option under this Section 8.02 and will
be subject to U.S. federal income tax on the same amount
and in the same manner and at the same times as would
have been the case if such option had not been exercised
or (y) an Opinion of Counsel to the same effect as the
ruling described in clause (x) above accompanied by a
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ruling to that effect published by the Internal Revenue
Service, unless there has been a change in the applicable
U.S. federal income tax law since the date of this
Indenture such that a ruling from the Internal Revenue
Service is no longer required, (2) an Opinion of Counsel
in the Netherlands and the U.S., as applicable, to the
effect that (x) the creation of the defeasance trust
does not violate the Investment Company Act of 1940,
(y) the deposit of the trust funds will not constitute a
fraudulent conveyance or preferential transfer under
any applicable bankruptcy, insolvency, reorganization
or similar law affecting creditors' rights generally
under any Netherlands or U.S. Federal or state law, and
that the Trustee has a perfected security interest in
such trust fund for the ratable benefit of the Holders of
the Notes and (z) payments from the defeasance trust will
be free and exempt from any and all withholding and
other income taxes of whatever nature imposed or levied
by or on behalf of the Netherlands or any political
subdivision thereof or therein having the power to tax;
and
(E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case
stating that all conditions precedent provided for
herein relating to the defeasance contemplated by
this Section 8.02 have been complied with.
Subsequent to the end of such 92nd day period with respect
to this Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04,
2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06
shall survive until the Notes are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. If and
when a ruling from the Internal Revenue Service or an Opinion of Counsel
referred to in clause (D)(1) of this Section 8.02 is able to be provided
specifically without regard to, and not in reliance upon, the continuance of
the Company's obligations under Section 4.01, then the Company's obligations
under such Section 4.01 shall cease upon delivery to the Trustee of such
ruling or Opinion of Counsel and compliance with the other conditions
precedent provided for herein relating to the defeasance contemplated by this
Section 8.02.
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After any such irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's
obligations under the Notes and this Indenture except for those surviving
obligations in the immediately preceding paragraph.
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS. The
Company may omit to comply with any term, provision or condition set forth in
clause (iv) under Section 5.01 and Sections 4.03 through 4.10, Section 4.12,
and Section 4.20, clause (c) under Section 6.01 with respect to such clause
(iv) under Section 5.01, clause (d) under Section 6.01 and clauses (e) and
(f) under Section 6.01 shall be deemed not to be Events of Default, in each
case with respect to the outstanding Notes if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal or premium, if
any, and interest, if any, on the Notes, and dedicated solely to the
benefit of the Holders, in and to (A) money in an amount, (B) U.S.
Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will
provide, not later than one day before the due date of any payment
referred to in this clause (i), money in an amount or (C) a combination
thereof in an amount sufficient, in the opinion of an internationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest
and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and interest on the outstanding Notes on
the Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Notes;
(ii) such deposit will not result in a breach or violation
of, or constitute a default under, this Indenture
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or any other agreement or instrument to which the Company is a party
or by which it is bound;
(iii) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion of
Counsel, in the Netherlands and the U.S., as applicable, to the effect
that (A) the creation of the defeasance trust does not violate the
Investment Company Act of 1940, (B) the deposit of the trust funds will
not constitute a fraudulent conveyance or preferential transfer under
any applicable bankruptcy, insolvency, reorganization or similar law
affecting creditors' rights generally under any Netherlands or U.S.
Federal or state law or the laws of any other applicable jurisdiction,
and that the Trustee has a perfected security interest in such trust
fund for the ratable benefit of the Holders of the Notes, (C) payments
from the defeasance trust will be free and exempt from any and all
withholding and other income taxes of whatever nature imposed or levied
by or on behalf of the Netherlands or any political subdivision thereof
or therein having the power to tax; (D) the Holders will not recognize
income, gain or loss for U.S. federal income tax purposes as a result
of such deposit and defeasance of certain obligations and will be
subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such deposit and
defeasance had not occurred;
(v) if the Notes are then listed on a national securities
exchange, including the Luxembourg Exchange, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that such
deposit defeasance and discharge will not cause the Notes to be
delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. APPLICATION OF TRUST MONEY. Subject to
Section 8.06, the Trustee or Paying Agent shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to Section 8.01, 8.02 or
8.03, as the case may be, and shall apply the deposited money and the money
from U.S. Government Obligations in accordance with the Notes and this
Inden-
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ture to the payment of principal of, premium, if any, and interest on the
Notes; but such money need not be segregated from other funds except to the
extent required by law.
SECTION 8.05. REPAYMENT TO COMPANY. Subject to Sections
7.07, 8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly
pay to the Company upon request set forth in an Officers' Certificate any
excess money held by them at any time and thereupon shall be relieved from
all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them for the payment
of principal, premium, if any, or interest that remains unclaimed for two
years; provided that the Trustee or such Paying Agent before being required
to make any payment shall cause to be published at the expense of the Company
once in a newspaper of general circulation in the City of New York or mail to
each Holder entitled to such money at such Holder's address (as set forth in
the Security Register) notice that such money remains unclaimed and that
after a date specified therein (which shall be at least 30 days from the date
of such publication or mailing) any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company,
Holders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money
shall cease.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance
with Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
the Company's obligations under this Indenture and the Notes shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.01,
8.02 or 8.03, as the case may be, until such time as the Trustee or Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with Section 8.01, 8.02 or 8.03, as the case may be; provided
that, if the Company has made any payment of principal of, premium, if any,
or interest on any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by
the Trustee or Paying Agent.
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, when
authorized by a resolution of its Board of Directors, and the Trustee may
amend or supplement this Indenture or the Notes without notice to or the
consent of any Holder:
(1) to cure any ambiguity, omission defect or inconsistency in
this Indenture; provided that such amendments or supplements shall not
adversely affect the interests of the Holders in any material respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(5) to provide for the assumption of the Indenture by a
successor corporation as provided in Section 5.01;
(6) to add Guaranties in accordance with Section 4.07;
(7) to make any change that, in the good faith opinion of the
Board of Directors as evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder.
(8) to secure the Notes in accordance with Section 4.09;
(9) to add covenants of the Company for the benefit of the
Holders;
(10) to surrender any right or power conferred upon the
Company;
SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Sections
6.04 and 6.07 and without prior notice to the Holders, the Company, when
authorized by its Board of Directors (as evidenced by a Board Resolution),
and the Trustee may amend this
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Indenture and the Notes with the written consent of the Holders of a majority
in aggregate principal amount at maturity of the Notes then outstanding, and
the Holders of a majority in aggregate principal amount at maturity of the
Notes then outstanding by written notice to the Trustee may waive future
compliance by the Company with any provision of this Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02,
without the consent of each Holder affected, an amendment or waiver,
including a waiver pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or
any installment of interest on, any Note,
(ii) reduce the Accreted Value of, or premium, if any, or
interest on, any Note,
(iii) change the place or currency of payment of principal of,
or premium, if any, or interest on, any Note or adversely affect any
right of repayment at the option of any Holder of any Note,
(iv) impair the right to institute suit for the enforcement
of any payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date) of any Note,
(v) reduce the above-stated percentage of outstanding Notes
the consent of whose Holders is necessary to modify or amend this
Indenture,
(vi) waive a Default in the payment of principal of, premium,
if any, or interest on the Notes,
(vii) modify any of the provisions of this Section 9.02,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Note affected thereby,
(viii) reduce the percentage or aggregate principal amount at
maturity of outstanding Notes which are required to consent to a waiver
of compliance with certain provisions of this Indenture or for waiver
of certain defaults,
(ix) make any change that would result in the Company being
required to make any deduction or withholding from payments in respect
of the Notes,
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(x) release any Subsidiary Guarantor from any of its
obligations under its Subsidiary Guaranty or this Indenture or release
the Escrow Guaranty from any of its obligations under the Escrow
Guaranty or the Indenture, in each case other than in accordance with
the terms of this Indenture and the Escrow Agreement,
(xi) release any Lien Securing the Notes, other than in
accordance with the terms of this Indenture,
(xii) or make any change to this Indenture that would
adversely affect the rights of all Holders to receive Additional
Amounts as described under Section 4.21.
It shall not be necessary for the consent of the Holders
under this Section 9.02 to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected
thereby a notice briefly describing the amendment, supplement or waiver. The
Company will mail supplemental indentures to Holders upon request. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture or waiver.
SECTION 9.03. REVOCATION AND EFFECT OF CONSENT. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the Note of the consenting
Holder, even if notation of the consent is not made on any Note. However, any
such Holder or subsequent Holder may revoke the consent as to its Note or
portion of its Note. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment, supplement
or waiver becomes effective. An amendment, supplement or waiver shall become
effective on receipt by the Trustee of written consents from the Holders of
the requisite percentage in principal amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to consent to
any amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding
paragraph, those persons who were
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Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver
or to revoke any consent previously given, whether or not such persons
continue to be Holders after such record date. No such consent shall be valid
or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective,
it shall bind every Holder unless it is of the type described in any of
clauses (i) through (xii) of Section 9.02. In case of an amendment or waiver
of the type described in clauses (i) through (xii) of Section 9.02, the
amendment or waiver shall bind each Holder who has consented to it and every
subsequent Holder of a Note that evidences the same indebtedness as the Note
of the consenting Holder.
SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES. If an
amendment, supplement or waiver changes the terms of a Note, the Trustee may
require the Holder to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Note about the changed terms and return it to the
Holder and the Trustee may place an appropriate notation on any Note
thereafter authenticated. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new note that reflects the changed terms.
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of any amendment, supplement
or waiver authorized pursuant to this Article Nine is authorized and
permitted by this Indenture. Subject to the preceding sentence, the Trustee
shall sign such amendment, supplement or waiver if the same does not
adversely affect the rights of the Trustee. The Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver that affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT. Every
supplemental indenture executed pursuant to this Article Nine shall conform
to the requirement of the TIA as then in effect.
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ARTICLE TEN
ESCROW GUARANTEE OF SECURITIES
SECTION 10.01. ESCROW GUARANTY. Subject to the provisions
of this Article Ten, the Escrow Guarantor hereby unconditionally and
irrevocably guarantees on a senior basis (such guarantee to be referred to
herein as the "Escrow Guaranty") to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and their successors,
irrespective of the validity and enforceability of this Indenture, the Notes
or the obligations of the Company to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of, premium, if any, and interest on the
Notes (and any Additional Amounts payable thereon) will be duly and
punctually paid in full when due, whether at maturity, by acceleration or
otherwise, and interest on the overdue principal and (to the extent permitted
by law) interest, if any, on the Notes and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder (including
amounts due the Trustee under Section 7.7 hereof) and all other obligations
under this Indenture (the "Indenture Obligations") will be promptly paid in
full or performed, all in accordance with the terms of this Indenture; and
(b) in case of any extension of time of payment or renewal of any Notes or
any of such other Indenture Obligations, the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at the maturity date of the Notes, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed, or failing
performance of any other obligation of the Company to the Holders, for
whatever reason, the Escrow Guarantor will be obligated to pay, or to perform
or cause the performance of, the same immediately. An Event of Default under
this Indenture or the Notes shall constitute an event of default under the
Escrow Guaranty, and shall entitle the Holders of Notes to accelerate the
obligations of the Escrow Guarantor in the same manner and to the same extent
as the obligations of the Company.
The Escrow Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any holder of the Notes with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same, whether or not an Escrow
Guaranty is affixed to any particular Note, or any other circumstance which
might otherwise constitute a legal
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or equitable discharge or defense of the Escrow Guarantor. The Escrow
Guarantor hereby waives the benefit of diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever and covenants that
its Escrow Guaranty will not be discharged except by complete performance of
the obligations contained in the Notes, this Indenture and this Escrow
Guaranty. This Escrow Guaranty is a guarantee of payment and not of
collection. If any Holder or the Trustee is required by any court or
otherwise to return to the Company or any custodian, trustee, liquidator or
other similar official acting in relation to the Company, any amount paid by
the Company to the Trustee or such Holder, this Escrow Guaranty, to the
extent theretofore discharged, shall be reinstated in full force and effect.
The Escrow Guarantor further agrees that, as between it, on the one hand, and
the Holders of Notes and the Trustee, on the other hand, (a) subject to this
Article Ten, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six hereof for the purposes of this Escrow
Guaranty, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (b) in the event of any acceleration of such obligations as provided in
Article Six hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Escrow Guarantor for the purpose of
this Escrow Guaranty.
SECTION 10.02. EXECUTION AND DELIVERY OF THE ESCROW
GUARANTY. To further evidence the Escrow Guaranty set forth in Section 10.01,
the Escrow Guarantor hereby agrees that a notation of such Escrow Guaranty,
substantially in the form included in Exhibit H of this Indenture, shall be
endorsed on each Note authenticated and delivered by the Trustee executed by
manual signature of an officer (or authorized signatory by virtue of a power
of attorney or other similar instrument) of the Escrow Guarantor. The
validity and enforceability of the Escrow Guaranty shall not be affected by
the fact that it is not affixed to any particular Note.
The Escrow Guarantor hereby agrees that its Escrow Guaranty
set forth in Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such Escrow
Guaranty.
If an officer of the Escrow Guarantor whose signature is on
this Indenture or an Escrow Guaranty no longer holds that office at the time
a Trustee authenticates the Note on which
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such Escrow Guaranty is endorsed or at any time thereafter, such Escrow
Guarantor's Subsidiary Guaranty of such Note shall be valid nevertheless.
The delivery of any Note by a Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Escrow
Guaranty set forth in this Indenture on behalf of the Escrow Guarantor.
SECTION 10.03. RELEASE OF THE ESCROW GUARANTOR. (a)
Notwithstanding anything herein to the contrary, on the Release Date, the
Escrow Guarantor will automatically and unconditionally be released and
discharged from all obligations under its Escrow Guaranty; PROVIDED, HOWEVER,
that nothing herein shall modify the provisions of Section 4.07 that may
require, among other things, the Escrow Guarantor to execute a Subsidiary
Guaranty if it is required to do so under such Section 4.07.
(b) The Trustee shall deliver an appropriate instrument
evidencing the release of the Escrow Guarantor upon receipt of a request of
the Company accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 10.03.
The Trustee shall execute any documents reasonably
requested by the Company or the Escrow Guarantor in order to evidence the
release of the Escrow Guarantor from its obligations under its Subsidiary
Guaranty endorsed on the Notes and under this Article Ten.
SECTION 10.04. WAIVER OF SUBROGATION. The Escrow Guarantor
hereby irrevocably waives and agrees not to exercise any claim or other
rights which it may now or hereafter acquire against the Company that arise
from the existence, payment, performance or enforcement of the Company's
obligations under the Notes or this Indenture and the Escrow Guarantor's
obligations under this Subsidiary Guarantee and this Indenture, in any such
instance including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, and any right to
participate in any claim or remedy of the Guaranteed Parties against the
Company, whether or not such claim, remedy or right arises in equity, or
under contract, statute or common law, including, without limitation, the
right to take or receive from the Company, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to the
Escrow Guar-
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antor in violation of the preceding sentence and any amounts owing to the
Trustee or the Holders of Notes under the Notes, this Indenture, or any other
document or instrument delivered under or in connection with such agreements
or instruments, shall not have been paid in full, such amount shall have been
deemed to have been paid to the Escrow Guarantor for the benefit of, and held
in trust for the benefit of, the Guaranteed Parties and shall forthwith be
paid to the Trustee for the benefit of such Holders to be credited and
applied to the obligations in favor of the Guaranteed Parties, whether
matured or unmatured, in accordance with the terms of this Indenture. The
Escrow Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and
that the waiver set forth in this Section 10.04 is knowingly made in
contemplation of such benefits.
SECTION 10.05. IMMEDIATE PAYMENT. The Escrow Guarantor
agrees to make immediate payment to the Trustee on behalf of the Guaranteed
Parties of all Guaranteed Obligations owing or payable to the respective
Guaranteed Parties upon receipt of a demand for payment therefor by the
Trustee to the Escrow Guarantor in writing.
SECTION 10.06. NO SET-OFF. Each payment to be made by the
Escrow Guarantor hereunder in respect of the Guaranteed Obligations shall be
payable in the currency or currencies in which such Guaranteed Obligations
are denominated, and shall be made without set-off, counterclaim, reduction
or diminution of any kind or nature.
SECTION 10.07. OBLIGATIONS ABSOLUTE. The obligations of the
Escrow Guarantor hereunder are and shall be absolute and unconditional and
any monies or amounts expressed to be owing or payable by the Escrow
Guarantor hereunder which may not be recoverable from the Subsidiary
Guarantor on the basis of a guarantee shall be recoverable from the Escrow
Guarantor as a primary obligor and principal debtor in respect thereof.
SECTION 10.08. OBLIGATIONS CONTINUING. Subject to the
provisions of Section 10.03, the obligations of the Escrow Guarantor
hereunder shall be continuing and shall remain in full force and effect until
all the Guaranteed Obligations have been paid and satisfied in full. The
Escrow Guarantor agrees with the Trustee that it will from time to time
deliver to the Trustee suitable acknowledgments of this continued liability
hereunder and under any other instrument or instruments in such form as
counsel to the Trustee may advise and as will prevent any action brought
against it in respect of any default
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hereunder being barred by any statute of limitations now or hereafter in
force in the jurisdiction of incorporation or organization of the Escrow
Guarantor or elsewhere and, in the event of the failure of the Escrow
Guarantor so to do, it hereby irrevocably appoints the Trustee and the
attorneys and agents of the Escrow Guarantor to make, execute and deliver
such written acknowledgment or acknowledgments or other instruments as may
from time to time become necessary or advisable, in the judgment of the
Trustee on the advice of counsel, to fully maintain and keep in force the
liability of the Escrow Guarantor hereunder.
SECTION 10.09. OBLIGATIONS NOT REDUCED. The obligations of
the Escrow Guarantor hereunder shall not be satisfied, reduced or discharged
by any intermediate payment or satisfaction of the whole or any part of the
principal, interest, fees and other monies or amounts which may at any time
be or become owing or payable under or by virtue of or otherwise in
connection with the Notes or this Indenture.
SECTION 10.10. OBLIGATIONS REINSTATED. The obligations of
the Escrow Guarantor hereunder shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment which would
otherwise have reduced the obligations of the Escrow Guarantor hereunder
(whether such payment shall have been made by or on behalf of the Company or
by or on behalf of the Escrow Guarantor) is rescinded or reclaimed from any
of the Guaranteed Parties upon the insolvency, bankruptcy, liquidation or
reorganization of the Company or the Escrow Guarantor or otherwise, all as
though such payment had not been made. If demand for, or acceleration of the
time for, payment by the Company is stayed upon the insolvency, bankruptcy,
liquidation or reorganization of the Company, all such indebtedness otherwise
subject to demand for payment or acceleration shall nonetheless be payable by
the Escrow Guarantor as provided herein.
SECTION 10.11. OBLIGATIONS NOT AFFECTED. The obligations of
the Escrow Guarantor hereunder shall not be affected, impaired or diminished
in any way by any act, omission, matter or thing whatsoever, occurring
before, upon or after any demand for payment hereunder (and whether or not
known or consented to by the Escrow Guarantor or any of the Guaranteed
Parties) which, but for this provision, might constitute a whole or partial
defense to a claim against the Escrow Guarantor hereunder or might operate to
release or otherwise exonerate the Escrow Guarantor from any of its
obligations hereunder or otherwise affect such obligations, whether
occasioned by de-
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fault of any of the Guaranteed Parties or otherwise, including, without
limitation:
(i) any limitation of status or power, disability,
incapacity or other circumstance relating to the Company or any other
person, including any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, winding-up or
other proceeding involving or affecting the Company or any other
person;
(ii) any irregularity, defect, unenforceability or invalidity
in respect of any Indebtedness or other obligation of the Company or
any other person under this Indenture, the Notes or any other document
or instrument;
(iii) any failure of the Company, whether or not without fault
on its part, to perform or comply with any of the provisions of this
Indenture or the Notes, or to give notice thereof to the Escrow
Guarantor;
(iv) the taking or enforcing or exercising or the refusal or
neglect to take or enforce or exercise any right or remedy from or
against the Company or any other Person or their respective assets or
the release or discharge of any such right or remedy;
(v) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other person;
(vi) any change in the time, manner or place of payment of,
or in any other term of, any of the Notes, or any other amendment,
variation, supplement, replacement or waiver of, or any consent to
departure from, any of the Notes or this Indenture, including, without
limitation, any increase or decrease in the principal amount at
maturity of or premium, if any, or interest on any of the Notes;
(vii) any change in the ownership, control, name, objects,
businesses, assets, capital structure or constitution of the Company or
the Escrow Guarantor;
(viii) any merger or amalgamation of the Company or the Escrow
Guarantor with any person or persons;
(ix) the occurrence of any change in the laws, rules,
regulations or ordinances of any jurisdiction by any pres-
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ent or future action of any governmental authority or court amending,
varying, reducing or otherwise affecting, or purporting to amend,
vary, reduce or otherwise affect, any of the Guaranteed Obligations or
the obligations of the Escrow Guarantor under this Escrow Guaranty; and
(x) any other circumstance (other than by complete,
irrevocable payment) that might otherwise constitute a legal or
equitable discharge or defense of the Company under this Indenture or
the Notes or of the Escrow Guarantor in respect of its guarantee
hereunder.
SECTION 10.12. WAIVER. Without in any way limiting the
provisions of Section 7.01 of this Indenture, the Escrow Guarantor hereby
waives notice of acceptance hereof, notice of any liability of the Escrow
Guarantor hereunder, notice or proof of reliance by the Guaranteed Parties
upon the obligations of the Escrow Guarantor hereunder, and diligence,
presentment, demand for payment on the Company, protest, notice of dishonour
or non-payment of any of the Guaranteed Obligations, or other notice or
formalities to the Company or the Escrow Guarantor of any kind whatsoever.
SECTION 10.13. NO OBLIGATION TO TAKE ACTION AGAINST
COMPANY. Neither the Trustee nor any of the other Guaranteed Parties shall
have any obligation to enforce or exhaust any rights or remedies or to take
any other steps under any security for the Guaranteed Obligations or against
the Company or any other person or any property of the Company or any other
person before the Trustee are entitled to demand payment and performance by
the Escrow Guarantor of its liabilities and obligations under this Escrow
Guaranty, and the Escrow Guarantor hereby waives all benefit of discussion.
SECTION 10.14. DEALING WITH THE COMPANY AND OTHERS. The
Guaranteed Parties, without releasing, discharging, limiting or otherwise
affecting in whole or in part the Escrow Guarantor's obligations and
liabilities hereunder and without the consent of or notice to the Escrow
Guarantor, may
(i) grant time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other person;
(ii) take or abstain from taking security or collateral from
the Company or from perfecting security or collateral of the Company;
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(iii) release, discharge, compromise, realize, enforce or
otherwise deal with or do any act or thing in respect of (with or
without consideration) any and all collateral, mortgages or other
security given by the Company or any third party with respect to the
obligations or matters contemplated by this Indenture or the Notes;
(iv) accept compromises or arrangements from the Company;
(v) apply all monies at any time received from the Company
or from any security upon such part of the Guaranteed Obligations as
the Guaranteed Parties may see fit or change any such application in
whole or in part from time to time as the Guaranteed Parties may see
fit; and
(vi) otherwise deal with, or waive or modify their right to
deal with, the Company and all other persons and any security as the
Guaranteed Parties or the Trustee may see fit.
SECTION 10.15. DEFAULT AND ENFORCEMENT. (a) If the
Subsidiary Guarantor fails to pay in accordance with Section 10.05 hereof,
the Trustee may proceed in its name as trustee hereunder in the enforcement
of the Escrow Guaranty and the Guarantor's Obligations thereunder and
hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from the Escrow Guarantor the Guaranteed
Obligations.
(b) No Holder shall have the right to institute any suit,
action or proceeding against the Escrow Guarantor for any default hereunder
except in the manner and subject to the conditions set forth in Article Six
of this Indenture, it being understood and intended that no one or more
Holders shall have any right in any manner whatsoever to enforce any right
hereunder by his or their action except as aforesaid and that all powers and
trusts hereunder shall be exercised and all proceedings at law or in equity
shall be instituted, had and maintained by the Trustee, only as aforesaid and
in any event for the benefit of all Holders as provided in this Indenture.
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ARTICLE ELEVEN
COLLATERAL AND SECURITY
SECTION 11.01. ESCROW AGREEMENT. All of the Escrow
Guarantor's Indenture Obligations shall be secured as provided in the Escrow
Agreement which the Company, the Escrow Guarantor, the Escrow Agent, the
Trustee and the Unit Agent have entered into simultaneously with the
execution of this Indenture. Each Holder, by its acceptance of a Note,
consents and agrees to the terms of the Escrow Agreement (including, without
limitation, the provisions providing for foreclosure and disbursement of
Collateral) as the same may be in effect or may be amended from time to time
in accordance with its terms and authorizes and directs the Escrow Agent and
the Trustee to enter into the Escrow Agreement and to perform its obligations
and exercise its rights thereunder in accordance therewith. The Escrow
Guarantor shall deliver to the Trustee copies of the Escrow Agreement, and
shall do or cause to be done all such acts and things as may be necessary or
proper, or as may be required by the provisions of the Escrow Agreement, to
assure and confirm to the Trustee the security interest in the Collateral
contemplated by the Escrow Agreement, so as to render the same available for
the security and benefit of this Indenture with respect to, and of, the
Notes, according to the intent and purposes expressed in the Escrow
Agreement. The Escrow Guarantor shall take any and all actions required to
cause the Escrow Agreement to create and maintain (to the extent possible
under applicable law), as security for the obligations of the Company
hereunder and its Escrow Guaranty, a valid and enforceable perfected first
priority Lien in and on all the Collateral, in favor of the Trustee for the
benefit of the Trustee, predecessor trustees, and the Holders, superior to
and prior to the rights of all third persons and subject to no other Liens.
The Trustee shall be entitled to take all necessary action to preserve and
protect the security interest in the Collateral and for filing any
instrument, document or notice in any public office at any time or times.
SECTION 11.02. RECORDING AND OPINIONS. (a) At the Trustee's
request, the Escrow Guarantor shall furnish to the Trustee promptly after the
execution and delivery of this Indenture (but in no event later than five
Business Days after the Issue Date) an Opinion of Counsel either (i) stating
that in the opinion of such counsel all action has been taken with respect to
the recording, registering and filing of this Indenture, financing statements
or other instruments necessary to
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make effective the Lien intended to be created by the Escrow Agreement and
reciting with respect to the security interests in the Collateral the details
of such action, or (ii) stating that in the opinion of such counsel no such
action is necessary to make such Lien effective.
(b) The Escrow Guarantor shall furnish to the Escrow Agent
and the Trustee on March 16, 1999, April 16, 1999 and once each month
thereafter until the earlier of the Release Date or the Mandatory Redemption,
an Opinion of Counsel, dated as of such date, either (i) stating that (A) in
the opinion of such counsel, action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and refiling of
all supplemental indentures, financing statements, continuation statements
and other instruments of further assurance as is necessary to maintain the
Lien of the Escrow Agreement and reciting with respect to the security
interests in the Collateral the details of such action or referring to prior
Opinions of Counsel in which such details are given and (B) based on relevant
laws as in effect on the date of such Opinion of Counsel, all financing
statements and continuation statements have been executed and filed that are
necessary as of such date and during the succeeding 12 months fully to
preserve and protect, to the extent such protection and preservation are
possible by filing, the rights of the Holders and the Trustee hereunder and
under the Escrow Agreement with respect to the security interests in the
Collateral or (ii) stating that, in the opinion of such counsel, no such
action is necessary to maintain such Lien and assignment.
SECTION 11.03. RELEASE OF COLLATERAL. (a) Subject to
subsections (b), (c) and (d) of this Section 14.03, Collateral may be
released from the Lien and security interest created by the Escrow Agreement
only in accordance with the provisions of the Escrow Agreement.
(b) No Collateral shall be released from the Lien and
security interest created by the Escrow Agreement pursuant to the provisions
of the Escrow Agreement, other than to the Holders pursuant to the terms
thereof, unless there shall have been delivered to the Trustee the
certificate required by Section 4.22(a).
(c) At any time when a Default shall have occurred and be
continuing and the maturity of the Notes issued on the Issue Date shall have
been accelerated (whether by declaration or otherwise), no Collateral shall
be released pursuant to the provisions of the Escrow Agreement, and no
release of Collat-
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eral in contravention of this Section 11.03(c) shall be effective as against
the Holders, except for the disbursement of all Available Escrow Proceeds to
the Trustee pursuant to Section 3 of the Escrow Agreement.
(d) To the extent applicable, the Escrow Guarantor shall
cause TIA Section 314(d) relating to the release of property or securities
from the Lien and security interest of the Escrow Agreement to be complied
with. Any certificate or opinion required by TIA Section 314(d) may be made
by an officer of the Company except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent person,
which person shall be an independent expert selected or approved by the
Trustee in the exercise of reasonable care.
SECTION 11.04. CERTIFICATES OF THE ESCROW GUARANTOR. The
Escrow Guarantor shall furnish to the Trustee, prior to any proposed release
of Collateral other than pursuant to the express terms of the Escrow
Agreement, (i) all documents required by TIA Section 314(d) and (ii) an
Opinion of Counsel, which may be rendered by internal counsel to the Company,
to the effect that such accompanying documents constitute all documents
required by TIA Section 314(d). The Trustee may, to the extent permitted by
Section 7.02 and Section 7.05, accept as conclusive evidence of compliance
with the foregoing provisions the appropriate statements contained in such
documents and such Opinion of Counsel.
SECTION 11.05. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE
TRUSTEE UNDER THE ESCROW AGREEMENT. Subject to the provisions of Section
6.02, the Trustee may, without the consent of the Holders, on behalf of the
Holders, take all actions it deems necessary or appropriate in order to (a)
enforce any of the terms of the Escrow Agreement and (b) collect and receive
any and all amounts payable in respect of the obligations of the Escrow
Guarantor hereunder. The Trustee shall have power to institute and maintain
such suits and proceedings as it may deem expedient to prevent any impairment
of the Collateral by any acts that may be unlawful or in violation of the
Escrow Agreement or this Indenture, and such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Collateral (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may
be unconstitutional or otherwise invalid if the enforcement of, or compliance
with, such enactment, rule or order would impair the security interest
hereunder or be prejudicial to the interests of the Holders or of the
Trustee).
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SECTION 11.06. AUTHORIZATION OF RECEIPT OF FUNDS BY THE
TRUSTEE UNDER THE ESCROW AGREEMENT. The Trustee is authorized to receive any
funds for the benefit of the Holders disbursed under the Escrow Agreement,
and to make further distributions of such funds to the Holders according to
the provisions of this Indenture.
SECTION 11.07. TERMINATION OF SECURITY INTEREST. Upon
satisfaction of the conditions in the Escrow Agreement relating to the
release of the Collateral, the Trustee shall, at the written request of the
Escrow Guarantor, release the Liens pursuant to this Indenture and the Escrow
Agreement upon the Escrow Guarantor's compliance with the provisions of the
TIA pertaining to release of collateral.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT OF 1939. Prior to the
effectiveness of the Registration Statement, this Indenture shall incorporate
and be governed by the provisions of the TIA that are required to be part of
and to govern indentures qualified under the TIA. After the effectiveness of
the Registration Statement, this Indenture shall be subject to the provisions
of the TIA that are required to be a part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
SECTION 12.02. NOTICES: Any notice or communication shall
be sufficiently given if in writing and delivered in person or mailed by
first class mail addressed as follows:
if to the Company:
CompleTel Europe N.V.
c/o CompleTel LLC
4700 South Syracuse Street
Suite 1050
Denver, Colorado 80237
Attention: Chief Financial Officer
with a copy to:
ING Trust (Netherland) B.V.
P.O. Box 2838
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<PAGE>
1000 CV Amsterdam, The Nederlands
Attention: Paul van Witteveen
if to the Trustee:
U.S. Bank Trust National Association
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be
mailed to him at his address as it appears on the Security Register by first
class mail and shall be sufficiently given to him if so mailed within the
time prescribed. Copies of any such communication or notice to a Holder shall
also be mailed to the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders. Except for a notice to the Trustee, which is deemed given only when
received, and except as otherwise provided in this Indenture, if a notice or
communication is mailed in the manner provided in this Section 10.02, it is
duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give such notice
by mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
SECTION 12.03. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT. Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the
Trustee:
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(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with;
provided, however, that, with respect to matters of fact, an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
SECTION 12.04. STATEMENTS REQUIRED IN CERTIFICATE. Each
certificate with respect to compliance with a condition or covenant provided
for in this Indenture shall include:
(i) a statement that each person signing such certificate
has read such covenant or condition and the definitions herein relating
thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements contained in
such certificate are based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with.
SECTION 12.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 12.06. PAYMENT DATE OTHER THAN A BUSINESS DAY. If
an Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or
date of maturity of any Note shall not be a Business Day, then payment of
principal of, premium, if any, or interest on such Note, as the case may be,
need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest
Payment Date, Payment Date, or Redemption Date, or at
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the Stated Maturity or date of maturity of such Note; provided that no
interest shall accrue for the period from and after such Interest Payment
Date, Payment Date, Redemption Date, Stated Maturity or date of maturity, as
the case may be.
SECTION 12.07. GOVERNING LAW. The laws of the State of New
York shall govern this Indenture and the Notes. The Trustee, the Company and
the Holders agree to submit to the jurisdiction of the courts of the State of
New York in any action or proceeding arising out of or relating to this
Indenture or the Notes.
SECTION 12.08. NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS. This Indenture may not be used to interpret another Indenture,
loan or debt agreement of the Company or any Subsidiary of the Company. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.09. NO RECOURSE AGAINST OTHERS. No recourse for
the payment of the principal of, premium, if any, or interest on any of the
Notes, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company,
Parent or the Escrow Guarantor contained in this Indenture, in any of the
Notes, or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator or against any past, present or future
partner, shareholder, other equityholder, officer, director, employee or
controlling person, as such, of the Company, Parent or the Escrow Guarantor
or of any successor Person, either directly or through the Company or any
successor Person, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Notes.
SECTION 12.10. SUCCESSORS. All agreements of the Company
in this Indenture and the Notes shall bind its successors. All agreements of
the Trustee of this Indenture shall bind its successor.
SECTION 12.11. DUPLICATE ORIGINALS. The parties may sign
any number of copies of this Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement.
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SECTION 12.12. SEPARABILITY. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table
of Contents, Cross-Reference Table and headings of the Articles and Sections
of this Indenture have been inserted for convenience of reference only, are
not to be considered a part hereof and shall in no way modify or restrict any
of the terms and provisions hereof.
SECTION 12.14. AGENT FOR SERVICE; SUBMISSION TO
JURISDICTION; WAIVER OF IMMUNITIES. By the execution and delivery of this
Agreement, the Company (i) acknowledges that it has, by separate written
instrument, designated and appointed CT Corporation System (the "Process
Agent"), 1633 Broadway, New York, New York 10019, United States, as its
authorized agent upon which process may be served in any suit, action or
proceeding arising out of or relating to the Notes or this Indenture that may
be instituted in any Federal or state court in the State of New York, The
City of New York, the Borough of Manhattan, or brought under Federal or state
securities laws or brought by the Trustee (whether in its individual capacity
or in its capacity as Trustee hereunder), and acknowledges that the Process
Agent has accepted such designation, (ii) submits to the jurisdiction of any
such court in any such suit, action or proceeding and (iii) agrees that
service of process upon the Process Agent and written notice of said service
to it at its principal office in accordance with 12.02 hereof), shall be
deemed in every respect effective service of process upon it in any such suit
or proceeding. The Company further agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments as may be necessary to continue such designation and appointment
of the Process Agent in full force and effect so long as the Notes or
Exchange Notes shall be outstanding; provided that the Company may (and
shall, to the extent the Process Agent ceases to be able to be served on the
basis contemplated herein) by written notice to the Trustee, designate such
additional or alternative agents for service of process under this Section
14.14 that (i) maintains an office located in the Borough of Manhattan, The
City of New York in the State of New York, (ii) are either (x) counsel for
the Issuer or (y) a corporate service company which acts as agent for service
of process for other Persons in the ordinary course of its business and (iii)
agrees to act as agent for service of process in accordance with this Section
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10.14. Such notice shall identify the name of such agent for process and the
address of such agent for process in the Borough of Manhattan, The City of
New York, State of New York. Notwithstanding the foregoing, there shall, at
all times, be at least one agent for service of process for the Company
appointed and acting in accordance with this Section 12.14.
To the extent that the Company has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment
in aid of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents, to the extent permitted by
law.
SECTION 12.15. JUDGMENT CURRENCY. The Company hereby
agrees, to indemnify the Trustee and each Holder against any loss incurred by
any of them as a result of any judgment or order being given or made for any
amount due under this Indenture or the Notes and such judgment or order being
expressed and paid in a currency (the "Judgment Currency") other than United
States dollars and as result of any variation as between (i) the rate of
exchange at which the United States dollar amount is converted into the
Judgment Currency for the purpose of such judgment or order and (ii) the spot
rate of exchange in The City of New York at which any such person on the date
of payment of such judgment or order is able to purchase United States
dollars with the amount of the Judgment Currency actually received by such
person. The foregoing indemnity shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot rate
of exchange" shall include any premiums and costs of exchange payable in
connection with the purchase of, or conversion into, United States dollars.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
COMPLETEL EUROPE N.V.
By: /s/ James E. Dovey
------------------------------------
Name: James E. Dovey
Title: Attorney-in-Fact
COMPLETEL ECC B.V.
By: /s/ James E. Dovey
------------------------------------
Name: James E. Dovey
Title: Attorney-in-Fact
U.S. BANK TRUST NATIONAL ASSOCIATION
By: /s/ Judith Zuzek
------------------------------------
Name: Judith Zuzek
Title: Trust Officer
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{FACE OF NOTE}
COMPLETEL EUROPE N.V.
14% Senior Discount Note Due 2009
CUSIP No. $
ISIN No.
No.
This Note is issued with original issue discount for purposes of Section 1271 et
seq. of the Internal Revenue Code. For each $1,000 principal amount at maturity
of this Note, the issue price is $ and the amount of original issue
discount is $ . The issue date of this Note is February 16, 1999 and the
yield to maturity is 14%.
COMPLETEL EUROPE N.V., a Netherlands public company with limited
liability (incorporated with limited liability in The Netherlands and having its
statutory domicile in Amsterdam), (the "Company," which term includes any
successor under the Indenture hereinafter referred to), for value received,
promises to pay to _______________, or its registered assigns, the principal sum
of _______________ ($_______) on February 15, 2009.
Interest Payment Dates: February 15 and August 15, commencing
August 15, 2004.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually by its duly authorized signatories.
COMPLETEL EUROPE N.V.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 14% Senior Discount Notes due 2009 described in
the within-mentioned Indenture.
Date: February 16, 1999 U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee
By:
------------------------------------
Authorized Signatory
<PAGE>
{REVERSE SIDE OF NOTE}
COMPLETEL EUROPE N.V.
14% Senior Discount Note due 2009
1. PRINCIPAL AND INTEREST.
The Company will pay the principal of this Note on February 15,
2009.
The Company promises to pay interest on the principal amount of
this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of record of
the Notes at the close of business on the February 1 or August 1 immediately
preceding the Interest Payment Date (the "Regular Record Date"), on each
Interest Payment Date, commencing August 15, 2004; provided that no interest
shall accrue on the principal amount of this Note prior to February 15, 2004 and
no interest shall be paid on this Note prior to August 15, 2004.
From and after February 15, 2004 interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from February 15, 2004. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium,
if any, and interest on overdue installments of interest, to the extent lawful,
at a rate per annum that is the then applicable interest rate borne by the
Notes.
2. METHOD OF PAYMENT.
The Company will pay interest (except defaulted interest) on the
principal amount of the Notes as provided above on each February 15 and
August 15 to the persons who are Holders (as reflected in the Security Register
at the close of business on the Regular Record Date), in each case, even if the
Note is canceled on registration of transfer or registration of exchange after
such record date; provided that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after February 15, 2009.
The Company will pay principal, premium, Additional Amounts if
any, and as provided above, interest in money of the United States that at the
time of payment is
<PAGE>
legal tender for payment of public and private debts. However, the Company may
pay principal, premium, if any, and interest by its check payable in such money.
It may mail an interest check to a Holder's registered address (as reflected in
the Security Register). If a payment date is a date other than a Business Day
at a place of payment, payment may be made at that place on the next succeeding
day that is a Business Day and no interest shall accrue for the intervening
period.
3. PAYING AGENT AND REGISTRAR.
Initially, the Trustee will act as authenticating agent, Paying
Agent and Registrar in the Borough of Manhattan, The City of New York. The
Company may change any authenticating agent, Paying Agent or Registrar without
notice. The Company, any Subsidiary or any Affiliate of any of them may act as
Paying Agent, Registrar or co-Registrar.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of
February 16, 1999 (the "Indenture"), between the Company, CompleTel ECC B.V., a
Netherlands private limited company (the "Escrow Guarantor") and U.S. Bank Trust
National Association (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control. This is one of the Notes
referred to in the Indenture. The Initial Notes and the Exchange Notes are
unsecured (except to the limited extent provided in the Indenture) and
unsubordinated obligations of the Company limited in aggregate principal amount
at maturity not to exceed $147,500,000.
5. ESCROW GUARANTY.
This Note is entitled to a guaranty, on a senior basis, by the
Escrow Guarantor.
6. ADDITIONAL AMOUNTS.
The Company will pay to the Holders of Notes such Additional
Amounts as may become payable under Section 4.21 of the Indenture.
7. REDEMPTION.
<PAGE>
(a) The Notes will be redeemable, at the Company's option, in
whole or in part, at any time or from time to time, on or after February 15,
2004 and prior to maturity, at the Redemption Prices (expressed in percentages
of principal amount at maturity) set forth below, plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on an Interest Payment Date), if redeemed during
the 12-month period commencing February 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2004 107.000%
2005 104.667%
2006 102.333%
2007 and thereafter 100.000%
</TABLE>
(b) In addition, at any time prior to February 15, 2002 the
Company may redeem up to 33 1/3% of the principal amount at maturity of the
Notes originally issued with the proceeds of one or more Public Equity Offerings
following which there is a Public Market, at the Company's option, at any time
or from time to time in part, at a Redemption Price (expressed as a percentage
of Accreted Value on the Redemption Date) of 114% plus accrued and unpaid
interest, if any, to the Redemption Date; provided that (i) at least $98,334,000
aggregate principal amount at maturity of Notes remains outstanding after each
such redemption and (ii) the Company mails a notice of such redemption within 60
days of receipt of the Public Equity Offering proceeds to be so applied.
Notice of any optional redemption will be mailed at least 30 days
but not more than 60 days before the Redemption Date to each Holder of Notes to
be redeemed at his last address as it appears in the Security Register. On and
after the Redemption Date, interest ceases to accrue and the original issue
discount ceases to accrete on Notes or portions of Notes called for redemption,
unless the Company defaults in the payment of the Redemption Price. The Trustee
may select for redemption portions of the principal amount at maturity of the
Notes that have denominations equal to $1,000 integral multiples thereof, so
long as no Holder holds less than $100,000 principal amount at maturity after
such redemption.
8. MANDATORY REDEMPTION.
The Company shall consummate a Mandatory Redemption on the
Mandatory Redemption Date at the Mandatory Redemption Price in the event the
Financing Commitment Condition is not satisfied.
<PAGE>
9. REDEMPTION FOR CHANGES IN WITHHOLDING TAXES.
The Company may also have the option to redeem the Notes, in
whole, but not in part, in the event of certain changes in the tax laws such
that the Company would be required to pay Additional Amounts, subject to
Section 3.01(c) of the Indenture.
10. REPURCHASE UPON CHANGE IN CONTROL.
Upon the occurrence of an Change of Control, each Holder shall
have the right to require the repurchase of its Notes by the Company in cash
pursuant to the offer described in the Indenture at a purchase price equal to
101% of the Accreted Value thereof plus accrued interest, if any, to the date of
purchase (the "Change of Control Payment").
A notice of such Change of Control will be mailed within 30 days
after any Change of Control occurs to each Holder at his last address as it
appears in the Security Register. On and after the Change of Control Payment
Date, interest ceases to accrue and the original issue discount ceases to
accrete on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the Change of Control Payment.
11. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons in denominations
of $100,000 of principal amount at maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Notes selected for redemption. Also,
it need not register the transfer or exchange of any Notes for a period of 15
days before a selection of Notes to be redeemed is made.
12. PERSONS DEEMED OWNERS.
A Holder shall be treated as the owner of a Note for all purposes.
13. UNCLAIMED MONEY.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all
<PAGE>
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
14. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company will be discharged from this Indenture and the Notes, except in certain
circumstances for certain sections thereof, and (b) to the Stated Maturity, the
Company will be discharged from certain covenants set forth in the Indenture.
15. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Company may be discharged from its obligations under the
Indenture and the Notes except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Notes, in each case upon satisfaction of certain conditions
specified in the Indenture.
16. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount at maturity of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount at maturity of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency and make any change that
does not adversely affect the rights of any Holder in any material respect.
Certain modifications will require the consent of each Holder affected thereby.
17. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 90 days after the end of each fiscal
quarter, the Company must report to the Trustee on compliance with such
limitations.
18. SUCCESSOR PERSONS.
<PAGE>
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
19. DEFAULTS AND REMEDIES.
If an Event of Default (other than an Event of Default specified
in clause (g) or (h) of Section 6.01 of the Indenture that occur with respect to
the Company) occurs and is continuing, the Trustee or the Holders of at least
25% in principal amount at maturity of the Notes may declare all the Notes to be
due and payable. If a bankruptcy or insolvency default with respect to the
Company occurs and is continuing, the Notes automatically become due and
payable. Holders may not enforce this Indenture or the Notes except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it before
it enforces the Indenture or the Notes. Subject to certain limitations, Holders
of at least a majority in principal amount at maturity of the Notes then
outstanding may direct the Trustee in its exercise of any trust or power.
20. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
21. NO RECOURSE AGAINST OTHERS.
No incorporator or any past, present or future partner,
shareholder, other equity holder, officer, director, employee or controlling
person as such, of the Company or of any successor Person shall have any
liability for any obligations of the Company under the Notes or this Indenture
or for any claim based on, in respect of or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
22. AUTHENTICATION.
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this Note.
23. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in
<PAGE>
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian) and
U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to CompleTel
Europe N.V., c/o CompleTel LLC, 4700 South Syracuse Street, Suite 1050, Denver,
Colorado, 80237, Attention: Chief Financial Officer.
24. CHOICE OF LAW.
The laws of the State of New York shall govern the Indenture and
this Note without regard to principles of conflicts of laws.
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Note to
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
_______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:_____________ Signed: ____________________
(Signed exactly as name appears
on the other side of this Note)
Signature Guarantee:___________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.10 or Section 4.12 of this Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.10 or Section 4.12 of the Indenture, state the
amount (in principal amount at maturity): $____________________.
Date: _________________
Your Signature:
_______________________________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:_______________________________
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into by and between
CABLETEL MANAGEMENT, INC., a Colorado corporation with principal offices located
at 4700 S. Syracuse, Suite 1050, Denver, Colorado 80237 (the "Company"), and
JAMES E. DOVEY, a resident of the State of Colorado ("Employee").
A. The Company is a wholly owned subsidiary of CableTel Europe LLC
("CTE"), for which the Company provides management and consulting personnel. CTE
and its affiliates CableTel (Holland) Holding B.V. and D2PC Communications
S.A.R.L., collectively, are referred to herein as "CableTel."
B. The Company wishes to employ Employee and Employee wishes to be
employed by the Company in key management positions with the Company and
CableTel.
C. The Company and Employee, respectively, desire to enter into an
Employment Agreement under the terms and conditions contained herein.
AGREEMENT
In consideration of the rights and obligations created hereunder, the
parties agree as follows:
1. EMPLOYMENT. This Agreement is made between the Company, as employer,
and the Employee and replaces and voids any and all prior employment agreements
made between the Company and Employee. This Agreement shall commence as of the
Effective Date (as set forth in Section 16) for an indefinite period subject to
termination as specified in Section 5.
2. TITLE AND DUTIES. Employee shall be employed by the Company and shall
serve as Chairman and Chief Executive Officer of the Company and of CTE.
Employee shall perform, on a fulltime basis, such duties and bear such
responsibilities, as may be determined from time to time by the Board of
Managers of CTE (the "Board"), commensurate with his position and shall serve
the Company and CTE faithfully and to the best of his ability under the
direction of the Board; provided, that Employee shall be entitled to continue
his involvement in personal business and in the business and operations of
NewTel Holdings, Ltd., Jersey Cable, Ltd. and NewTel, Ltd., each a Channel
Islands company (collectively, the "NewTel Business"), it being understood such
involvement may from time to time require services on his part, but will not in
any event materially interfere with the performance of Employee's duties
hereunder.
3. COMPENSATION.
(a) SALARY. For all services rendered by Employee hereunder, Employee
shall receive a base salary, payable semimonthly in arrears, at the annual rate
of $175,000. The Board shall review Employee's salary annually at the end of
each calendar year and shall provide for such increases to Employee's base
salary as the Board may determine to be appropriate taking into account both
CableTel's and Employee's performance
(b) BENEFITS. In addition to salary payments as provided in
Section 3(a), the Company shall provide Employee with the benefits of such
insurance plans, hospitalization plans, 401(k) and supplemental retirement plans
and other employee fringe benefit plans as are approved by the Board, it being
understood that such benefits shall be comparable to those customarily provided
to executive management personnel of companies in the telecommunications
industry of comparable size and value as
<PAGE>
CableTel. In addition, Employee shall be reimbursed for the reasonable costs of
his advisors with respect to the negotiation of this Agreement. Employee shall
be entitled to sick leave and vacation in accordance with the Company's
established policies applicable to its employees generally, provided that
Employee shall be entitled to a minimum of four weeks vacation each year.
Benefits to be provided by the Company under Sections 5(d), (e) and (f) after
termination of this Agreement for the periods specified therein shall include
health insurance and long term disability insurance providing substantially the
same health insurance and long term disability insurance as was provided to
Employee at the time of the termination of this Agreement.
(c) BONUSES. At the end of each calendar year, Employee shall be
eligible to receive an incentive bonus as authorized by the Board pursuant to
objectives set by the Board, in an amount up to 55% of Employee's base salary
for such year, which amount on the first anniversary of the Effective Date shall
be $95,000, subject to Employee's having met the performance targets established
by the Board.
4. OFFICE SPACE AND EXPENSES; PERSONAL RESIDENCE. The Company shall
provide Employee with appropriate office facilities in the greater Denver,
Colorado metropolitan area, executive secretarial support and other staff
personnel as may reasonably be required, in the reasonable discretion of
Employee, to accomplish the Company's business plan. The Company agrees that
Employee may continue to maintain his principal residence in the greater Denver,
Colorado metropolitan area. If Employee and the Board determine it to be
necessary in order to properly fulfill his responsibilities under this Agreement
to maintain another office in any location in which the Company is then doing
business ("Location"), the Company shall provide adequate housing for Employee
in the form of an apartment or other rental unit in the Location. The Company
shall reimburse Employee for the reasonable amount of hotel, travel,
entertainment and other expenses reasonably incurred by Employee in the
discharge of his duties hereunder, including but not limited to costs incurred
by Employee for living expenses while in, and travel to and from, any Location
on Company business; it being agreed that all international travel shall and all
hotel accommodations and other expenses shall be at levels customary for a chief
executive of a company in the telecommunications industry of comparable size and
value as CableTel.
5. TERMINATION. Employee's employment hereunder shall terminate on the
following terms and conditions:
(a) DEATH. If Employee dies during the term of this Agreement, this
Agreement shall terminate as of the date of Employee's death. The Company shall,
within 180 days after the date of Employee's death, make a cash lump sum payment
(less applicable withholding taxes) to his estate in an amount equal to the
salary (at the level payable in the year of Employee's death) that would have
been payable either for the period of time extending from the date of death to
the date 18 months after the Initial Closing Date (as defined in Section 17), or
for the six months next following the date of death, whichever period of time is
longer.
(b) DISABILITY. If during the term of this Agreement Employee becomes
disabled, the Company may terminate this agreement 30 days after receipt by
Employee or his duly appointed legal representative of Notice of Termination (as
defined below). For purposes of this Section 5(b), Employee shall be "disabled"
if he is unable effectively to perform his duties hereunder by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months. If this Agreement is terminated under this
Section 5(b), Employee shall continue to receive his base salary (at the level
payable in the year of termination) either for the period of time extending from
the date of termination of employment to the date 18 months after the Initial
Closing Date, or for the six months next following the date of termination,
whichever period of time is longer.
-2-
<PAGE>
For purposes of this Agreement, a "Notice of Termination" means a written
notice from the Company which (a) indicates the specific termination provision
in this Agreement relied upon, (b) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so indicated and (c) to
the extent applicable, sets forth the date of termination.
(c) CAUSE. The Company may terminate this Agreement for "cause" upon
receipt by Employee, or on such later date as shall be specified, of Notice of
Termination stating that termination is pursuant to this Section 5(c). For
purposes of this agreement, "cause" shall be defined as any of the following:
(i) any act by Employee, where in respect of such act Employee is ultimately
convicted or enters a plea of guilty or NOLO CONTENDERE to a felony; (ii)
Employee's willful misconduct, gross negligence, perpetration of or
participation in a fraud, in each case where such acts are materially injurious
to the Company or any of its subsidiaries or any affiliate thereof, or (iii)
Employee's material breach of Sections 5 (Confidentiality) or Section 6
(Noncompetition and Nonsolicitation) of the Executive Securities Agreement dated
as of May 18, 1998 by and between CTE and Employee, in each case where
Employee's acts are materially and demonstrably injurious to the Company or an
Affiliate (as defined below). If this Agreement is terminated for cause,
Employee's rights hereunder shall cease immediately on the date of such
termination.
For purposes of this Agreement, the term "Affiliate" means a
person, firm or corporation that directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with, the
Company.
(d) NONPERFORMANCE. The Company may terminate Employee's employment
in the event of Nonperformance. The term "NONPERFORMANCE" shall mean the
occurrence of any of the following:
(i) the repeated failure or refusal in any material respect of
Employee to perform his duties hereunder or to follow, in a manner
reasonably acceptable to the Board, policies or directives established by
the Board;
(ii) the failure of the Company and its subsidiaries to achieve
financial, operating or other performance objectives formally established
by the Board in an approved business plan or operating budget (which may be
embodied in any board resolution or in any document approved by the Board
such as a business plan or budget) together with a determination by the
Board that Employee's performance or failure to perform has been a material
factor in the failure of the Company and its subsidiaries to achieve such
performance objectives; or
(iii) the failure of Employee to achieve specific, formally
adopted performance objectives established by the Board after consultation
with employee and good faith consideration by the Board of Employee's
expressed view of the objectives.
Prior to any termination of Employee's employment for Nonperformance,
the Board shall meet in formal session (but without the attendance of Employee)
upon proper notice to consider the matter of Employee's performance after which
the Board may deliver to Employee written notice (a "NONPERFORMANCE NOTICE")
stating that the Board believes Nonperformance has occurred. Employee shall have
at least 15 calendar days to prepare for a meeting with the Board, at which time
Employee may present any information on market and competitive conditions and
any other factors bearing upon his performance. In assessing Employee's
performance, the Board shall give due consideration to such conditions and such
other factors and shall work with Employee in good faith to establish criteria
which, if satisfied by Employee within 35 days or such longer time as may
reasonably be necessary in view of the criteria (the "CURE PERIOD") after such
meeting, will prevent the Company from terminating Employee for
-3-
<PAGE>
Nonperformance (until such time as another Nonperformance Notice shall be given
and the procedures set forth in this Section 6(d) shall be followed). It is
understood, however, that if Employee and the Board fail to agree on such
criteria, such criteria, and the length of the Cure Period if longer than 35
days, shall be those established in good faith by the Board.
If Employee has failed to resolve the Nonperformance to the
satisfaction of the Board by the end of the Cure Period, Employee's employment
will be subject to termination at anytime thereafter immediately upon adoption
of a resolution to that effect by a majority of the entire Board and upon
delivery by the Company or the Board to Employee of written Notice of
Termination stating that termination is pursuant to this Section 5(d), which
notice shall set forth the date of termination and specifically identify the
basis for the Board's belief that Nonperformance has occurred and not been
cured.
If Employee is discharged pursuant to this Section 5(d), this
Agreement shall immediately terminate at the date set forth in the Notice of
Termination and Employee shall be entitled to receive (i) within thirty days
after the date of termination, a cash lump sum severance payment equal to the
amount of his base salary (at the level payable in the year of termination) that
would have been payable either for the period of time extending from the date of
termination of employment to the date 18 months after the Initial Closing Date,
or for the six months next following the date of termination of employment,
whichever period of time is longer, and (ii) a continuation of his benefits as
specified in Section 3(b) for such period.
(e) WITHOUT CAUSE. The Company may terminate Employee's employment
without cause by delivering to Employee a Notice of Termination stating that
termination is pursuant to this Section 5(e). If Employee is discharged without
cause, this Agreement shall immediately terminate at the date set forth in the
Notice of Termination and Employee shall be entitled to received (i) within
thirty days after the date of termination, a cash lump sum severance payment
equal to the amount of his base salary and bonus (at the level payable in the
year of termination) that would have been payable for the 24 months next
following the date of termination of employment and (ii) a continuation of his
benefits as specified in Section 3(b) for such period.
(f) CHANGE OF CONTROL. If Employee's employment is terminated by the
Company or if Employee resigns after his salary, benefits or any other required
payments (including without limitation any payments pursuant to this Section 5)
are reduced below the minimum levels required by this Agreement or after being
assigned to a position of lesser title, authority or responsibility, or if
Employee is required to move his principal residence from the greater Denver,
Colorado metropolitan area, in any such case within a six-month period after the
occurrence of a Change of Control, this Agreement shall immediately terminate as
of the later of (i) the date next following the date the Change of Control was
effective or (ii) the date Employee resigned or his employment is terminated.
Any such termination shall be treated in the same manner as a termination
without cause pursuant to Section 5(e). Employee agrees that payment of the
amounts due in that event shall constitute liquidated damages or severance pay
or both.
A "Change in Control" will be deemed to have occurred if a person
(as defined in Section 18-101(12) of the Delaware Limited Liability Company
Act), who does not beneficially own (as defined below) any equity interest in
CTE entitled to vote in the election of Representatives to CTE's Board of
Managers ("Membership Interest") as of the Initial Closing Date, becomes the
beneficial owner of a Membership Interest with 51% of the voting power of all
Membership Interests. A "beneficial owner" is any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship, or
otherwise has or shares (i) the power to vote or direct the voting of such
equity interest or (ii) the power to dispose, or direct the disposition of, such
equity interest.
(g) BY EMPLOYEE. Employee may resign from his employment with the
Company at any time. In such event, this Agreement shall terminate immediately.
Such resignation shall have the same
-4-
<PAGE>
effect under this agreement as a termination of this Agreement by the Company
for cause, I.E., Employee's rights hereunder shall cease immediately upon such
termination.
6. FULL SETTLEMENT. In no event shall the Employee be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to Employee under any of the provisions of this Agreement, but such
amounts shall be reduced by the amount Employee obtains from other employment.
The Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which Employee may reasonably incur as a result of any
contest by the Company or Employee of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by Employee about the amount of
any payment pursuant to this Agreement), but only if Employee is successful on
the merits of any such contest plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code").
7. LIMITATION ON PAYMENTS. Notwithstanding anything in this Agreement to
the contrary, if the total payments or distributions by the Company to or for
the benefit of Employee would be subject to the excise tax ("Excise Tax")
imposed by Section 4999 of the Code, then the cash amounts payable to Employee
hereunder shall be reduced, in the manner agreed by the Company and the
Executive, to the extent necessary so that the total of all such payments shall
be $1.00 less than the amount that would trigger the imposition of the Excise
Tax.
8. WAIVER OF BREACH. A waiver by either party of a breach of any
provision of this Agreement by the other party shall not be construed as a
waiver of any breach of another provision or subsequent breach of the same
provision.
9. SEVERABILITY. The invalidity or unenforceability in any application of
any provision in this Agreement will not affect the validity or enforceability
of any other provision or of such provision in any other application.
10. NOTICES. All communications, requests, consents and other notices
provided for in this Agreement shall be in writing and shall be deemed given if
and when delivered personally by hand, sent by telecopy at the appropriate
number indicated below with electronic confirmation of receipt, or mailed by
first class mail, postage prepaid, addressed as follows:
(a) If to the Company:
CableTel Management, Inc.
4700 S. Syracuse, Suite 1050
Denver, CO 80237
Facsimile No.: 303-741-4823
Att.: Chairman of the Board
with a copy to:
Madison Dearborn Partners
Three First National Plaza
Chicago, IL 60602
Facsimile No.: (312) 895-1206
Attn: Paul Finnegan
and to:
-5-
<PAGE>
Lawrence F. DeGeorge
3127 Casseekey Island Road
Jupiter, FL 33477
Facsimile No.: (561) 575-1760
(b) If to Employee:
Mr. James E. Dovey
4700 S. Syracuse, Suite 1050
Denver, CO 80237
Facsimile No.: 303-741-4823
or to such other address or telecopy number as either party may designate by
notice pursuant to this Section 10.
11. JURISDICTION; VENUE; LIMITATION. The District Court of the County of
Arapahoe Colorado, United States of America, shall have exclusive jurisdiction,
including personal jurisdiction, and shall be the exclusive venue for any
controversies or claims arising out of Employee's employment by the Company or
out of this Agreement, except as otherwise agreed by the parties. Any action or
proceeding to enforce the provisions of this Agreement, or to recover damages
from the alleged breach of any provisions of this Agreement shall be commenced
within six months of a party's first notice of a breach by the other party.
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, without reference to the
principles of conflict of laws.
13. ASSIGNMENT. The Company may, with the written consent of Employee,
assign its rights and delegate its obligations under this Agreement to any
Affiliate or, with the express waiver by Employee of the provisions of Section
6(e) to any acquire of substantially all of the business of the Company whether
through merger, purchase of assets or otherwise. Otherwise, neither party may
assign any rights or delegate any duties under this Agreement. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective legal representatives, heirs, and permitted successors and assigns.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding of the parties and supersedes all prior understandings, agreements
or representations by the parties, written or oral, that relate to the subject
matter of this Agreement.
15. AMENDMENTS. No provision of this Agreement may be amended or waived
except by an instrument in writing signed by the Employee and the Company (after
obtaining Board approval).
16. EFFECTIVE DATE. This Agreement shall be effective as of January 1,
1998.
17. INITIAL CLOSING DATE. As used herein, "Initial Closing Date" shall
have the meaning set forth in Section 1C of that certain Equity Purchase
Agreement by and among CTE, Employee and the other Purchasers named therein.
[Remainder of page intentionally left blank]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement the 18th day of May, 1998.
COMPANY:
CABLETEL MANAGEMENT, INC.,
a Colorado corporation
By: /s/ James E. Dovey
-------------------------------------
Title: CEO
----------------------------------
EMPLOYEE:
/s/ JAMES E. DOVEY
-----------------------------------------
James E. Dovey
(Signature page for James E. Dovey Employment Agreement)
-7-
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into by and between
CABLETEL MANAGEMENT, Inc., a Colorado corporation with its principal offices
located at 4700 S. Syracuse, Suite 1050, Denver, Colorado 80237 ("Company"), and
RICHARD N. CLEVENGER, a U.S. citizen and resident of the State of Colorado
("Employee").
RECITALS
A. The Company is a wholly owned subsidiary of CableTel Europe LLC
("CTE"), for which the Company provides management and consulting personnel.
B. CTE has interests in European CLEC telecommunication systems, which
it owns, directly or indirectly, through its affiliates, CableTel (Holland)
Holding B.V. ("CT Holland") and D2PC Communications S.A.R.L. ("D2PC"). CTE, CT
Holland and D2PC, collectively, are referred to herein as "CableTel".
C. The Company wishes to employ Employee and Employee wishes to be
employed by the Company in key management positions of the Company, CTE and its
affiliate D2PC.
D. The Company and Employee, respectively, desire to enter into an
Employment Agreement under the terms and conditions contained herein.
AGREEMENT
In consideration of the rights and obligations created hereunder, the
parties agree as follows:
1. EMPLOYMENT AND ASSIGNMENT. This Agreement is made between the Company,
as employer, and the Employee, a U.S. Citizen and resident, and replaces and
voids any and all prior employment agreements made between the Company and
Employee.
The parties agree that Employee will be seconded to D2PC to work in its
Paris, France offices and acting in collaboration with James E. Dovey, the
Company's chief executive officer ("CEO"). In consideration of his continued
employment by the Company, Employee agrees to discharge faithfully, diligently,
and to the best of his ability, the responsibilities of any position assigned
during his employment. Employee will be supervised, directed and evaluated by
the Company's CEO and the Board of Managers of CTE (the "Board") and the Board
shall be solely responsible for any decisions concerning discipline, termination
and pay increases.
This Agreement shall commence as of the Effective Date (as set forth in
Section 16) for an indefinite period subject to termination as specified in
Section 5. Notwithstanding anything herein to the contrary, Employee's
assignment in France shall not exceed four years.
2. TITLE; SCOPE OF RESPONSIBILITIES. Employee shall serve as Chief
Technology Officer of the Company, CTE and D2PC pursuant to the terms and
conditions of this Agreement.
Except for his involvement in personal investments, provided such
involvement does not require any material services on his part, Employee shall
not engage in any other business activity or activities that
<PAGE>
require material personal services by Employee or that, in the judgment of the
Board, may conflict with the proper performance of his duties hereunder.
3. COMPENSATION; BONUS; BENEFITS.
a. SALARY. For all services rendered by Employee hereunder,
Employee shall receive during the term of this Agreement a base salary, payable
semimonthly in arrears, at the annual rate of $150,000. The base salary shall be
reviewed annually by the Board at the end of each calendar year to determine if
any increase is appropriate.
b. BONUSES. At the end of each calendar year, in respect of all
services provided hereunder, Employee shall be eligible to receive an incentive
bonus as authorized by the Board pursuant to objectives set by the Board, in an
amount up to 55% of Employee's base salary for such year, which amount on the
first anniversary of the Effective Date shall be $82,500, subject to Employee
having met the performance targets established by the Board.
c. FOREIGN ASSIGNMENT INCENTIVE PAYMENT. In consideration of
Employee's agreement to accept a foreign assignment, for such time as Employee
is assigned to work and is residing in France or any other non-U.S. location,
the Company shall pay Employee an incentive payment equal to 15% of the amount
of his base salary paid pursuant to Section 3(a).
d. BASIC BENEFITS. In addition to salary payments as provided in
Section 3(a), the Company shall provide Employee, during the term of this
Agreement, with the benefits of such insurance plans, hospitalization plans,
401(k) and supplemental retirement plans and other employee fringe benefit plans
as are approved by the Board, it being understood that such benefits shall be
comparable to those customarily provided to executive management personnel of
companies in the telecommunications industry of comparable size and value as
CableTel. The Company may provide the benefits described herein directly, by
having Employee participate in the Company's own benefits plan or the Company
may provide any portion of the benefits by reimbursing Employee for premiums he
pays to acquire such benefits under private plans agreed upon between Employee
and the Company.
Employee's immediate family (which for purposes of the Agreement shall
be deemed to consist of his wife and any dependent children) will be covered by
the benefits package described above to the same extent as such immediate family
members are covered for comparable senior executives of the Company in the U.S.
during the term of this Agreement.
In addition, Employee shall be reimbursed by the Company for the
reasonable costs of his advisors with respect to the negotiation of this
Agreement. Employee shall be entitled to sick leave and vacation in accordance
with the Company's established policies applicable to its employees generally,
provided that Employee shall be entitled to a minimum of four weeks vacation
each year. Benefits to be provided by the Company under Sections 5(d), (e) and
(f) after termination of this Agreement for the periods specified therein shall
include health insurance and long term disability insurance providing
substantially the same health insurance and long term disability insurance as
was provided to Employee at the time of the termination of this Agreement.
e. TAX EQUALIZATION.
(i) HYPOTHETICAL TAX DEFINED. The hypothetical tax is the
applicable income and social taxes that Employee would have paid, with
respect to his compensation, bonus and benefits provided by the Company if
living and working in his home country, without any foreign
assignment-related income and deductions. Employee will be responsible for
a hypothetical
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Colorado state income tax equal to what he would have paid had employee
remained in Colorado at the time of assignment. Hypothetical tax
withholding will be applied to base salary, bonus and any other
compensation elements Employee would have received had Employee not been
assigned to a foreign assignment.
(ii) GENERAL PROCEDURE AND COMPUTATION OF HYPOTHETICAL TAX. The
Company will bear the overall worldwide tax burden of Employee to the
extent it exceeds Employee's hypothetical tax liability pursuant to
procedures and guidelines set forth in the Company's Tax Equalization
Policy ("Tax Policy") attached hereto as EXHIBIT A. As a result, the
Company, with the advice of third party tax consultants, reserves the right
to recommend that certain tax filing positions be taken and that various
elections be made on Employee's home and host- country individual income
tax returns in order to reduce Employee's tax burden. If Employee decides
not to accept these tax filing recommendations, Employee will then bear the
additional tax cost related to not taking the tax positions and/or
elections recommended by the Company.
Any home and host-country tax liabilities incurred by Employee,
with respect to his compensation, bonus and benefits provided by the
Company, in excess of the hypothetical tax liability will be paid by the
Company. Conversely, to the extent that any tax benefits (e.g., exclusions,
deductions, exemptions or credits) resulting from the international
assignment reduce the Employee's worldwide tax liabilities below the
hypothetical tax liability, the difference will benefit and be paid to the
Company pursuant to the Tax Policy.
The Company reserves the right, at any time, to change its Tax
Equalization Policy in any way it deems necessary to accomplish tax
equalization in the most efficient manner.
(iii) TAX POSITION CHALLENGES. It is the objective of the Company
that any employee covered by the Company's tax equalization policy pay the
least amount of tax legally possible. It is recognized that the tax laws of
the respective jurisdictions (federal, state, local and foreign) are not
always straightforward. Accordingly, the amount of tax an employee owes to
a jurisdiction may vary based upon how the relevant tax law is interpreted
and applied to the employee's facts and circumstances. In such situations,
it is the policy of the Company to engage professional tax advisors with
the objective of paying the least amount of tax legally possible.
It is recognized that a taxing jurisdiction may challenge tax
positions that achieve the Company's policy of tax minimization. If a tax
position taken with respect to Employee is challenged, the Company will pay
the professional costs involved with the examination and defense of the
position, and any taxes, penalties or interest resulting from the position.
Payment of taxes, penalties and interest is limited to compensation paid
under this Agreement by the Company. Employee is responsible for any taxes
and interest on any item other than the Company compensation.
The tax equalization of any tax deficiencies, penalties and
interest applies if it is attributable to a period of time the Employee was
covered by the Company's Tax Equalization Policy, even if Employee no
longer is employed by the Company when the examination or tax deficiency
arises.
(iv) IRC SECTION 911 - ELECTION TO EXCLUDE CERTAIN COMPENSATION.
Employee's worldwide income tax burden will equal his hypothetical tax. On
a U.S. individual income tax return, an expatriate employee with
host-country-source earned income who meets special detailed requirements
may elect to exclude certain amounts of his host- country earned income
from inclusion in his U.S. return. The election to exclude such income
impacts the ability to minimize
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the overall worldwide tax burden attributable to an expatriate employee.
Since the Company bears the overall worldwide tax burden of Employee to the
extent it is more than Employee's hypothetical tax, the Company reserves
the right to elect the foreign earned income exclusion (Internal Revenue
Code Section 911).
The determination of whether such an election should be made will
be the decision of the Company and the Company's appointed tax consultant,
such that the Company's overall expatriate employment tax cost is minimized
by such election. The benefits of this election appropriately accrue to the
Company, since the expatriate employee will never bear more or less tax
than the hypothetical tax.
This Section 3(e) is intended to survive any termination pursuant to
Sections 5(a), (b), (d), (e), (f) or (g).
f. RELOCATION EXPENSES. The Company will pay the reasonable costs
(which will include the reasonable costs of insurance) of relocating Employee
and his immediate family from their home in the U.S. to France, including
airfare for Employee and his immediate family, the cost of shipping Employee's
household effects to France including insurance coverage, the cost of U.S.
transportation and storage for items that cannot be moved, the cost of air
shipping up to 500 pounds of personal effects needed before other goods arrive
by ship, living expenses for Employee and his family for a period of up to 30
days after their relocation to France or until Employee has located housing in
France, whichever is less; and if Employee begins work in France before his
family moves there, one week of paid leave and round-trip airfare for Employee
to return to the U.S. to assist his family with the move.
For purposes of this Agreement, all airfares paid by the Company for
travel by Employee and his immediate family will be in business class.
g. COST OF LIVING ADJUSTMENTS. The Company will pay Employee a cost
of living adjustment, reflecting the difference in the cost of goods and
services in France as opposed to the U.S. as determined by Runzheimer
International or such other source as the parties shall agree upon, in the
initial amount of ________ per month during each month that Employee resides in
France during the term of this Agreement. The Company will conduct a review of
factors which could have an impact on Employee's cost of living in France at the
end of each six-month period during the term of this Agreement, to determine
what adjustment of the monthly cost of living payment, if any, is necessary or
appropriate to reflect material changes in the cost of living in France. For
purposes of this paragraph, cost of living shall be deemed to refer to factors
affecting the costs of goods and services in France.
h. U.S. VISITS AND EMERGENCY LEAVE. For U.S. visits, the Company
shall pay airfare up to a maximum amount per year equal to the cost of one
business class round trip per year between France and the U.S. for Employee and
his immediate family. In addition, the Company shall provide reasonable paid
emergency leave to Employee in the case of serious injury or death to Employee
or any member of his immediate family or the parents or brothers and sisters of
Employee and his wife and, in connection with any such emergency leave, shall
pay airfare up to a maximum amount per year equal to the cost of one business
class round-trip airfare between France and the U.S. for Employee and his
immediate family.
i. Business Expenses. The Company shall pay or shall reimburse
Employee for reasonable and necessary business expenses incurred by Employee to
carry out Employee's duties under this Agreement which are documented in
accordance with Company policy.
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<PAGE>
4. OTHER PAYMENTS. Additionally, in consideration of Employee's agreement
to accept the foreign assignment, the Company will do the following:
a. TAX RETURN PREPARATION. For such period of time as Employee's tax
return shall be affected by the provisions hereof, the Company will pay the cost
to prepare all U.S. (including any applicable state) and foreign tax returns
which must be filed as a result of Employee's acceptance of the foreign
assignment, by an accounting firm selected by the Company, and provided that
Employee agrees to comply with the Company's Tax Equalization Policy including
requirements that the Employee make certain tax elections designed to minimize
the Company's tax equalization costs. This Section 4(a) is intended to survive
any termination pursuant to Sections 5(a), (b), (d), (e), (f) or (g).
b. HOUSING. The Company will provide suitable housing (including
utilities) in France for Employee and his immediate family, recognizing
Employee's position with the Company and the size of Employee's family. The
Company will provide this benefit in the manner which is most tax- advantageous
to the Company.
c. TRANSPORTATION. The Company will provide suitable transportation
in France for Employee and his immediate family, recognizing Employee's position
with the Company and the size of Employee's family, equivalent to the full-time
use of two automobiles. The Company will provide this benefit in the manner
which is most tax-advantageous to the Company.
d. FOREIGN LANGUAGE TRAINING. The Company will provide training in
foreign languages for Employee and Employee's immediate family at a language
school selected by the Company.
e. PRIVATE SCHOOLING. If Employee determines that the State
education available to his children in France is not comparable to the public
education which they would have received in the United States, the Company will
pay all reasonable tuition fees and related costs (to the extent that such
related costs would not have been incurred in comparable circumstances in the
United States) incurred by Employee in sending his dependent children to an
appropriate private or other fee paying school in France. This benefit will be
available for children in grades kindergarten (the year prior to the first
grade) through grade 12. The Company will provide this benefit in the manner
which is most tax-advantageous to the Company.
f. PLANNING ADVICE. The Company will arrange for provision of legal,
estate planning and financial planning advice for Employee relating to
Employee's relocation and employment abroad, up to an aggregate ceiling (payable
directly by the Company) of U.S. [$______] per year.
g. OTHER RELOCATION EXPENSES. The Company will pay other expenses
reasonably incurred by Employee in relocating to the foreign assignment, up to
an amount equal to one month of Employee's base salary, to the extent such
expenses are not covered by other provisions of this Agreement, documented by
receipts to the extent practical, incurred within 30 days following the date on
which Employee's immediate family relocates and which are non-recurring expenses
necessary for and only incurred because of Employee's relocation (e.g appliance
replacement expense due to voltage differences).
h. TAX GROSS-UP. The Company will pay an incremental amount to
Employee to increase the amount of any incentive bonus received pursuant to
Section 3(b) hereof to the extent required to ensure that the total worldwide
tax paid by Employee on such bonus does not exceed the U.S. federal, FICA and
state tax Employee would have paid on such bonus if the full bonus were subject
only to U.S. tax.
i. U.S. RESIDENCE; AUTOMOBILE. Employee has chosen to retain his
principal residence, and to leave his personal automobiles, in the U.S. and
understands that Employee, and not the
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Company, shall be responsible for all expenses of maintaining such residence and
maintaining and storing such automobiles.
j. REPATRIATION. Upon termination of this Agreement pursuant to
Sections 5(a), (b), (d), (e), (f) or (g), or the earlier termination of
Employee's foreign assignment, the Company shall pay the reasonable costs of
repatriating Employee and his immediate family to their home in the U.S.,
including airfare for Employee and his immediate family, the cost of shipping
Employee's household effects back to the U.S., the cost of air shipping up to
500 pounds of personal effects needed before other goods arrive by ship, the
cost of transport and unpacking of stored property, and such other amounts as
set forth on SCHEDULE A hereto. Notwithstanding the foregoing, in the event
Employee terminates this Agreement pursuant to Section 5(g) for the purposes of
providing services to another employer on an international assignment, the
Company shall have no obligation to provide the repatriation benefits of this
Section 4(j).
5. TERMINATION. Employee's employment hereunder shall terminate on the
following terms and conditions:
a. DEATH. If Employee dies during the term of this Agreement, this
Agreement shall terminate as of the date of Employee's death. The Company shall,
within 180 days after the date of Employee's death, make a cash lump-sum payment
(less applicable withholding taxes) to his estate in an amount equal to the
salary (at the level payable in the year of Employee's death) that would have
been payable either for the period of time extending from the date of death to
the date 18 months after the Initial Closing Date (as defined in Section 17), or
for the nine months next following the date of death, whichever period of time
is longer.
b. DISABILITY. If during the term of this Agreement Employee becomes
disabled, the Company may terminate Employee's assignment in France and return
Employee and his immediate family to the U.S. and the Company may terminate this
agreement 30 days after receipt by Employee or his duly appointed legal
representative of Notice of Termination (as defined below). For purposes of this
Section 5(b), Employee shall be "disabled" if he is unable to effectively
perform his duties hereunder by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
If this Agreement is terminated under this Section 5(b), Employee shall continue
to receive his base salary (at the level payable in the year of termination)
either for the period of time extending from the date of termination of
employment to the date 18 months after the Initial Closing Date, or for the nine
months next following the date of termination, whichever period of time is
longer.
For purposes of this Agreement, a "Notice of Termination" means a written
notice from the Company which (a) indicates the specific termination provision
in this Agreement relied upon, (b) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so indicated and (c) to
the extent applicable, sets forth the date of termination.
c. CAUSE. The Company may terminate this Agreement for "cause" upon
receipt by Employee, or on such later date as shall be specified, of Notice of
Termination stating that termination is pursuant to this Section 5(c). For
purposes of this agreement, "cause" shall be defined as any of the following:
(i) any act by Employee, where in respect of such act Employee is ultimately
convicted or enters a plea of guilty or NOLO CONTENDERE to a felony; (ii)
Employee's willful misconduct, gross negligence, perpetration of or
participation in a fraud, in each case where such acts are materially injurious
to the Company or any of its subsidiaries or any affiliate thereof, or (iii)
Employee's material breach of Sections 5 (Confidentiality) or Section 6
(Noncompetition and Nonsolicitation) of the Executive Securities Agreement dated
as of May 18, 1998 by and between CTE and Employee, in each case where
Employee's acts are
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materially and demonstrably injurious to the Company or an Affiliate (as defined
below). If this Agreement is terminated for cause, Employee's rights hereunder
shall cease immediately on the date of such termination.
For purposes of this Agreement, the term "Affiliate"
means a person, firm or corporation that directly or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with,
the Company.
d. NONPERFORMANCE. The Company may terminate Employee's employment
in the event of Nonperformance. The term "NONPERFORMANCE" shall mean the
occurrence of any of the following:
(i) the repeated failure or refusal in any material respect of
Employee to perform his duties hereunder or to follow, in a manner
reasonably acceptable to the Board, policies or directives established by
the Board;
(ii) the failure of the Company and its subsidiaries to achieve
financial, operating or other performance objectives formally established
by the Board in an approved business plan or operating budget (which may be
embodied in any board resolution or in any document approved by the Board
such as a business plan or budget) together with a determination by the
Board that Employee's performance or failure to perform has been a material
factor in the failure of the Company and its subsidiaries to achieve such
performance objectives; or
(iii) the failure of Employee to achieve specific, formally
adopted performance objectives established by the Board after consultation
with Employee and good faith consideration by the Board of Employee's
expressed views of the objectives;
PROVIDED, that Employee's continued willingness to live and work in France or
any other country shall not be the basis for establishing "Nonperformance"
hereunder unless Employee's failure to live and work in France or another
country in which CableTel operates is, in the good faith determination of the
Board, a material contributing factor to the existence of the circumstances
described in (ii) and/or (iii) above.
Prior to any termination of Employee's employment for Nonperformance,
the Board shall meet in formal session (but without the attendance of Employee)
upon proper notice to consider the matter of Employee's performance after which
the Board may deliver to Employee written notice (a "NONPERFORMANCE NOTICE")
stating that the Board believes Nonperformance has occurred. Employee shall have
at least 15 calendar days to prepare for a meeting with the Board, at which time
Employee may present any information on market and competitive conditions and
any other factors bearing upon his performance. In assessing Employee's
performance, the Board shall give due consideration to such conditions and such
other factors and shall work with Employee in good faith to establish criteria
which, if satisfied by Employee within 35 days or such longer time as may
reasonably be necessary in view of the criteria (the "CURE PERIOD") after such
meeting, will prevent the Company from terminating Employee for Nonperformance
(until such time as another Nonperformance Notice shall be given and the
procedures set forth in this Section 5(d) shall be followed). It is understood,
however, that if Employee and the Board fail to agree on such criteria, such
criteria, and the length of the Cure Period if longer than 35 days, shall be
those established in good faith by the Board.
If Employee has failed to resolve the Nonperformance to the
satisfaction of the Board by the end of the Cure Period, Employee's employment
will be subject to termination at anytime thereafter immediately upon adoption
of a resolution to that effect by a majority of the entire Board and upon
delivery by the Company or the Board to Employee of written Notice of
Termination stating that termination is
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pursuant to this Section 5(d), which notice shall set forth the date of
termination and specifically identify the basis for the Board's belief that
Nonperformance has occurred and not been cured.
If Employee is discharged pursuant to this Section 5(d), this
Agreement shall immediately terminate at the date set forth in the Notice of
Termination and Employee shall be entitled to receive (i) within thirty days
after the date of termination, a cash lump sum severance payment equal to the
amount of his base salary (at the level payable in the year of termination) that
would have been payable either for the period of time extending from the date of
termination of employment to the date 18 months after the Initial Closing Date,
or for the nine months next following the date of termination of employment,
whichever period of time is longer, (ii) a continuation of his benefits as
specified in Section 3(b) for such period, and (iii) the benefits specified in
Sections 3(e), 4(a) and 4(j).
e. WITHOUT CAUSE. The Company may terminate Employee's employment
without cause by delivering to Employee a Notice of Termination stating
that termination is pursuant to this Section 5(e). If Employee is discharged
without cause, this Agreement shall immediately terminate at the date set forth
in the Notice of Termination and Employee shall be entitled to received (i)
within thirty days after the date of termination, a cash lump sum severance
payment equal to the amount of his base salary and bonus (at the level payable
in the year of termination) that would have been payable for the 24 months next
following the date of termination of employment, (ii) a continuation of his
benefits as specified in Section 3(d) for such period, and (iii) the benefits
specified in Sections 3(e), 4(a) and 4(j).
f. CHANGE OF CONTROL. If Employee's employment is terminated by the
Company or if Employee resigns after his salary, benefits or any other required
payments (including without limitation any payments pursuant to this Section 5)
are reduced below the minimum levels required by this Agreement or after being
assigned to a position of lesser title, authority or responsibility, in any such
case within a six-month period after the occurrence of a Change of Control, this
Agreement shall immediately terminate as of later of (i) the date next following
the date the Change of Control was effective or (ii) the date Employee resigned
or his employment is terminated. Any such termination shall be treated in the
same manner as a termination without cause pursuant to Section 5(e). Employee
agrees that payment of the amounts due in that event shall constitute liquidated
damages or severance pay or both.
A "Change in Control" will be deemed to have occurred if a person (as
defined in Section 18-101(12) of the Delaware Limited Liability Company Act),
who does not beneficially own (as defined below) any equity interest in CTE
entitled to vote in the election of Representatives to CTE's Board of Managers
("Membership Interest") on the Initial Closing Date, becomes the beneficial
owner of a Membership Interest with 51% of the voting power of all Membership
Interests. A "beneficial owner" is any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or otherwise has
or shares (i) the power to vote or direct the voting of such equity interest or
(ii) the power to dispose, or direct the disposition of, such equity interest.
g. BY EMPLOYEE. Employee may resign from his employment with the
Company at any time. In such event, this Agreement shall terminate immediately.
If Employee resigns pursuant to this Section 5(g), Employee's rights hereunder
shall cease immediately upon such resignation except as specified in Sections
3(e), 4(a) and 4(j).
6. FULL SETTLEMENT. In no event shall the Employee be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to Employee under any of the provisions of this Agreement, but such
amounts shall be reduced by the amount Employee obtains from other employment.
The Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which Employee may reasonably incur as a result of any
contest by the Company or Employee of
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the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by Employee about the amount of any payment pursuant to this Agreement),
but only if Employee is successful on the merits of any such contest, plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
7. LIMITATION ON PAYMENTS. Notwithstanding anything in this Agreement to
the contrary, if the total payments or distributions by the Company to or for
the benefit of Employee would be subject to the excise tax ("Excise Tax")
imposed by Section 4999 of the Code, then the cash amounts payable to Employee
hereunder shall be reduced, in the manner agreed by the Company and the
Employee, to the extent necessary so that the total of all such payments shall
be $1.00 less than the amount that would trigger the imposition of the Excise
Tax.
8. WAIVER OF BREACH. A waiver by the Company of a breach of any provision
of this Agreement by Employee shall not be construed as a waiver of any breach
of another provision or subsequent breach of the same provision.
9. SEVERABILITY. The invalidity or unenforceability in any application of
any provision in this Agreement will not affect the validity or enforceability
of any other provision or of such provision in any other application.
10. NOTICES. All communications, requests, consents and other notices
provided for in this Agreement shall be in writing and shall be deemed given if
and when delivered personally by hand, sent by telecopy at the appropriate
number indicated below with electronic confirmation of receipt, or mailed by
first class mail, postage prepaid, addressed as follows:
a. If to the Company:
CableTel Management, Inc.
4700 S. Syracuse, Suite 1050
Denver, CO 80237
Facsimile No.: 303-741-4823
Attn: Chief Executive Officer
with a copy to:
Madison Dearborn Partners
Three First National Plaza
Chicago, IL 60602
Facsimile No.: (312) 895-1206
Attn: Paul Finnegan
and to:
Lawrence F. DeGeorge
3127 Casseekey Island Road
Jupiter, FL 33477
Facsimile No.: (561) 575-1760
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b. If to Employee:
Mr. Richard N. Clevenger
38, rue de Bassano
75008 Paris, France
Facsimile No.: 011-33-1-44-31-2079
or to such other address or telecopy number as either party may designate by
notice pursuant to this Section 10.
11. JURISDICTION; VENUE; LIMITATION. The District Court of the County of
Arapahoe Colorado, United States of America, shall have exclusive jurisdiction,
including personal jurisdiction, and shall be the exclusive venue for any
controversies or claims arising out of Employee's employment by the Company or
out of this Agreement, except as otherwise agreed by the parties. Any action or
proceeding to enforce the provisions of this Agreement, or to recover damages
from the alleged breach of any provisions of this Agreement shall be commenced
within six months of a party's first notice of a breach by the other party.
12. GOVERNING LAW. This Agreement and all matters and issues collateral
thereto shall be governed by the laws of the State of Colorado, United States of
America.
13. ASSIGNMENT. The Company may, with the written consent of Employee,
assign its rights and delegate its obligations under this Agreement to any
Affiliate or to any acquirer of substantially all of the business of the Company
whether through merger, purchase of assets, purchase of stock or otherwise.
Otherwise, neither party may assign any rights or delegate any duties under this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, heirs, and permitted
successors and assigns.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding of the parties and supersedes all prior understandings, agreements
or representations by the parties, written or oral, that relate to the subject
matter of this Agreement.
15. AMENDMENTS. No provision of this Agreement may be amended or waived
except by an instrument in writing signed by the Employee and the Company (after
obtaining Board approval).
16. EFFECTIVE DATE. This Agreement shall be effective as of January 1,
1998.
17. INITIAL CLOSING DATE. As used herein, "Initial Closing Date" shall
have the meaning set forth in Section 1C of the Equity Purchase Agreement by and
among CTE, Employee and the other Purchasers named therein.
[The remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement on the 18th day of May, 1998.
COMPANY:
CABLETEL MANAGEMENT, Inc.,
a Colorado corporation
By: /s/ James E. Dovey
-------------------------------------
James E. Dovey
Chief Executive Officer
EMPLOYEE:
/s/ Richard N. Clevenger
-----------------------------------------
Richard N. Clevenger
(Signature page to Richard N. Clevenger Employment Agreement)
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EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into by and between
CABLETEL MANAGEMENT, Inc., a Colorado corporation with its principal offices
located at 4700 S. Syracuse, Suite 1050, Denver, Colorado 80237 ("Company"), and
WILLIAM H. PEARSON, a U.S. citizen and resident of the State of Colorado
("Employee").
RECITALS
A. The Company is a wholly owned subsidiary of CableTel Europe LLC
("CTE"), for which the Company provides management and consulting personnel.
B. CTE has interests in European CLEC telecommunication systems, which it
owns, directly or indirectly, through its affiliates, CableTel (Holland) Holding
B.V. ("CT Holland") and D2PC Communications S.A.R.L ("D2PC"). CTE, CT Holland
and D2PC, collectively, are referred to herein as "CableTel".
C. The Company wishes to employ Employee and Employee wishes to be
employed by the Company in key management and consulting positions of the
Company, CTE and its affiliate D2PC.
D. The Company and Employee, respectively, desire to enter into an
Employment Agreement under the terms and conditions contained herein.
AGREEMENT
In consideration of the rights and obligations created hereunder, the
parties agree as follows:
1. EMPLOYMENT AND ASSIGNMENT. This Agreement is made between the Company,
as employer, and the Employee, a U.S. Citizen and resident, and replaces and
voids any and all prior employment agreements made between the Company and
Employee.
The parties agree that Employee will be seconded to D2PC to work in its
Paris, France offices and acting in collaboration with James E. Dovey, the
Company's chief executive officer ("CEO"). In consideration of his continued
employment by the Company, Employee agrees to discharge faithfully, diligently,
and to the best of his ability, the responsibilities of any position assigned
during his employment. Employee will be supervised, directed and evaluated by
the Company's CEO and the Board of Managers of CTE (the "Board") and the Board
shall be solely responsible for any decisions concerning discipline, termination
and pay increases.
This Agreement shall commence as of the Effective Date (as set forth in
Section 16) for an indefinite period subject to termination as specified in
Section 5. Notwithstanding anything herein to the contrary, Employee's
assignment in France shall not exceed four years.
2. TITLE; SCOPE OF RESPONSIBILITIES. Employee shall serve as President of
the Company, President of CTE and Strategic Consultant to D2PC pursuant to the
terms and conditions of this Agreement.
Except for his involvement in personal investments, provided such
involvement does not require any material services on his part, Employee shall
not engage in any other business activity or activities that
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require material personal services by Employee or that, in the judgment of the
Board, may conflict with the proper performance of his duties hereunder.
3. COMPENSATION; BONUS; BENEFITS.
a. SALARY. For all services rendered by Employee hereunder, Employee
shall receive during the term of this Agreement a base salary, payable
semimonthly in arrears, at the annual rate of $175,000. The base salary shall be
reviewed annually by the Board at the end of each calendar year to determine if
any increase is appropriate.
b. BONUSES. At the end of each calendar year, in respect of all
services provided hereunder, Employee shall be eligible to receive an incentive
bonus as authorized by the Board pursuant to objectives set by the Board in an
amount up to 55% of Employee's base salary for such year, which amount on the
first anniversary of the Effective Date shall be $95,000, subject to Employee
having met the performance targets established by the Board.
c. FOREIGN ASSIGNMENT INCENTIVE PAYMENT. In consideration of
Employee's agreement to accept a foreign assignment, for such time as Employee
is assigned to work and is residing in France or any other non-U.S. location,
the Company shall pay Employee an incentive payment equal to 15% of the amount
of his base salary paid pursuant to Section 3(a).
d. BASIC BENEFITS. In addition to salary payments as provided in
Section 3(a), the Company shall provide Employee, during the term of this
Agreement, with the benefits of such insurance plans, hospitalization plans,
401(k) and supplemental retirement plans and other employee fringe benefit plans
as are approved by the Board, it being understood that such benefits shall be
comparable to those customarily provided to executive management personnel of
companies in the telecommunications industry of comparable size and value as
CableTel. The Company may provide the benefits described herein directly, by
having Employee participate in the Company's own benefits plan or the Company
may provide any portion of the benefits by reimbursing Employee for premiums he
pays to acquire such benefits under private plans agreed upon between Employee
and the Company.
Employee's immediate family (which for purposes of the Agreement shall
be deemed to consist of his wife and any dependent children) will be covered by
the benefits package described above to the same extent as such immediate family
members are covered for comparable senior executives of the Company in the U.S.
during the term of this Agreement.
In addition, Employee shall be reimbursed by the Company for the
reasonable costs of his advisors with respect to the negotiation of this
Agreement. Employee shall be entitled to sick leave and vacation in accordance
with the Company's established policies applicable to its employees generally,
provided that Employee shall be entitled to a minimum of four weeks vacation
each year. Benefits to be provided by the Company under Sections 5(d), (e) and
(f) after termination of this Agreement for the periods specified therein shall
include health insurance and long term disability insurance providing
substantially the same health insurance and long term disability insurance as
was provided to Employee at the time of the termination of this Agreement.
e. TAX EQUALIZATION.
(i) HYPOTHETICAL TAX DEFINED. The hypothetical tax is the
applicable income and social taxes that Employee would have paid with
respect to his compensation, bonus and benefits provided by the Company, if
living and working in his home country, without any foreign
assignment-related income and deductions. Employee will be responsible for
a hypothetical
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Colorado state income tax equal to what he would have paid had employee
remained in Colorado at the time of assignment. Hypothetical tax
withholding will be applied to base salary, bonus and any other
compensation elements Employee would have received had the Employee not
been assigned to a foreign assignment.
(ii) GENERAL PROCEDURE AND COMPUTATION OF HYPOTHETICAL TAX. The
Company will bear the overall worldwide tax burden of Employee to the
extent it exceeds Employee's hypothetical tax liability pursuant to
procedures and guidelines set forth in the Company's Tax Equalization
Policy ("Tax Policy") attached hereto as EXHIBIT A. As a result, the
Company, with the advice of third party tax consultants, reserves the right
to recommend that certain tax filing positions be taken and that various
elections be made on Employee's home and host-country individual income
tax returns in order to reduce Employee's tax burden. If Employee decides
not to accept these tax filing recommendations, Employee will then bear the
additional tax cost related to not taking the tax positions and/or
elections recommended by the Company.
Any home and host-country tax liabilities incurred by Employee,
with respect to his compensation, bonus and benefits provided by the
Company, in excess of the hypothetical tax liability will be paid by the
Company. Conversely, to the extent that any tax benefits (e.g., exclusions,
deductions, exemptions or credits) resulting from the international
assignment reduce the Employee's worldwide tax liabilities below the
hypothetical tax liability, the difference will benefit and be paid to the
Company pursuant to the Tax Policy.
The Company reserves the right, at any time, to change its Tax
Equalization Policy in any way it deems necessary to accomplish tax
equalization in the most efficient manner.
(iii) TAX POSITION CHALLENGES. It is the objective of the Company
that any employee covered by the Company's tax equalization policy pay the
least amount of tax legally possible. It is recognized that the tax laws of
the respective jurisdictions (federal, state, local and foreign) are not
always straightforward. Accordingly, the amount of tax an employee owes to
a jurisdiction may vary based upon how the relevant tax law is interpreted
and applied to the employee's facts and circumstances. In such situations,
it is the policy of the Company to engage professional tax advisors with
the objective of paying the least amount of tax legally possible.
It is recognized that a taxing jurisdiction may challenge tax
positions that achieve the Company's policy of tax minimization. If a tax
position taken with respect to Employee is challenged, the Company will pay
the professional costs involved with the examination and defense of the
position, and any taxes, penalties or interest resulting from the position.
Payment of taxes, penalties and interest is limited to compensation paid
under this Agreement by the Company. Employee is responsible for any taxes
and interest on any item other than the Company compensation.
The tax equalization of any tax deficiencies, penalties and
interest applies if it is attributable to a period of time Employee was
covered by the Company's Tax Equalization Policy, even if Employee no
longer is employed by the Company when the examination or tax deficiency
arises.
(iv) IRC SECTION 911 - ELECTION TO EXCLUDE CERTAIN COMPENSATION.
Employee's worldwide income tax burden will equal his hypothetical tax. On
a U.S. individual income tax return, an expatriate employee with
host-country-source earned income who meets special detailed requirements
may elect to exclude certain amounts of his host- country earned income
from inclusion in his U.S. return. The election to exclude such income
impacts the ability to minimize
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the overall worldwide tax burden attributable to an expatriate employee.
Since the Company bears the overall worldwide tax burden of Employee to the
extent it is more than Employee's hypothetical tax, the Company reserves
the right to elect the foreign earned income exclusion (Internal Revenue
Code Section 911).
The determination of whether such an election should be made will
be the decision of the Company and the Company's appointed tax consultant,
such that the Company's overall expatriate employment tax cost is minimized
by such election. The benefits of this election appropriately accrue to the
Company, since the expatriate employee will never bear more or less tax
than the hypothetical tax.
This Section 3(e) is intended to survive any termination pursuant to
Sections 5(a), (b), (d), (e), (f) or (g).
f. RELOCATION EXPENSES. The Company will pay the reasonable costs
(which will include the reasonable costs of insurance) of relocating Employee
and his immediate family from their home in the U.S. to France, including
airfare for Employee and his immediate family, the cost of shipping Employee's
household effects to France including insurance coverage, the cost of U.S.
transportation and storage for items that cannot be moved, the cost of air
shipping up to 500 pounds of personal effects needed before other goods arrive
by ship, living expenses for Employee and his family for a period of up to 30
days after their relocation to France or until Employee has located housing in
France, whichever is less; and if Employee begins work in France before his
family moves there, one week of paid leave and round-trip airfare for Employee
to return to the U.S. to assist his family with the move.
For purposes of this Agreement, all airfares paid by the Company for
travel by Employee and his immediate family will be in business class.
g. COST OF LIVING ADJUSTMENTS. The Company will pay Employee a cost
of living adjustment, reflecting the difference in the cost of goods and
services in France as opposed to the U.S. as determined by Runzheimer
International or such other source as the parties shall agree upon, in the
initial amount of ________ per month during each month that Employee resides in
France during the term of this Agreement. The Company will conduct a review of
factors which could have an impact on Employee's cost of living in France at the
end of each six-month period during the term of this Agreement, to determine
what adjustment of the monthly cost of living payment, if any, is necessary or
appropriate to reflect material changes in the cost of living in France. For
purposes of this paragraph, cost of living shall be deemed to refer to factors
affecting the costs of goods and services in France.
h. U.S. VISITS AND EMERGENCY LEAVE. For U.S. visits, the Company
shall pay airfare up to a maximum amount per year equal to the cost of one
business class round trip per year between France and the U.S. for Employee and
his immediate family. In addition, the Company shall provide reasonable paid
emergency leave to Employee in the case of serious injury or death to Employee
or any member of his immediate family or the parents or brothers and sisters of
Employee and his wife and, in connection with any such emergency leave, shall
pay airfare up to a maximum amount per year equal to the cost of one business
class round-trip airfare between France and the U.S. for Employee and his
immediate family.
i. Business Expenses. The Company shall pay or shall reimburse
Employee for reasonable and necessary business expenses incurred by Employee to
carry out Employee's duties under this Agreement which are documented in
accordance with Company policy.
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4. OTHER PAYMENTS. Additionally, in consideration of Employee's agreement
to accept the foreign assignment, the Company will do the following:
a. TAX RETURN PREPARATION. For such period of time as Employee's tax
return shall be affected by the provisions hereof, the Company will pay the cost
to prepare all U.S. (including any applicable state) and foreign tax returns
which must be filed as a result of Employee's acceptance of the foreign
assignment, by an accounting firm selected by the Company, and provided that
Employee agrees to comply with the Company's Tax Equalization Policy including
requirements that the Employee make certain tax elections designed to minimize
the Company's tax equalization costs. This Section 4(a) is intended to survive
any termination pursuant to Sections 5(a), (b), (d), (e), (f) or (g).
b. HOUSING. The Company will provide suitable housing (including
utilities) in France for Employee and his immediate family, recognizing
Employee's position with the Company and the size of Employee's family. The
Company will provide this benefit in the manner which is most tax-advantageous
to the Company.
c. TRANSPORTATION. The Company will provide suitable transportation
in France for Employee and his immediate family, recognizing Employee's position
with the Company and the size of Employee's family, equivalent to the full-time
use of two automobiles. The Company will provide this benefit in the manner
which is most tax-advantageous to the Company.
d. FOREIGN LANGUAGE TRAINING. The Company will provide training in
foreign languages for Employee and Employee's immediate family at a language
school selected by the Company.
e. PRIVATE SCHOOLING. If Employee determines that the State
education available to his children in France is not comparable to the public
education which they would have received in the United States, the Company will
pay all reasonable tuition fees and related costs (to the extent that such
related costs would not have been incurred in comparable circumstances in the
United States) incurred by Employee in sending his dependent children to an
appropriate private or other fee paying school in France. This benefit will be
available for children in grades kindergarten (the year prior to the first
grade) through grade 12. The Company will provide this benefit in the manner
which is most tax-advantageous to the Company.
f. PLANNING ADVICE. The Company will arrange for provision of legal,
estate planning and financial planning advice for Employee relating to
Employee's relocation and employment abroad, up to an aggregate ceiling (payable
directly by the Company) of U.S. [$______] per year.
g. OTHER RELOCATION EXPENSES. The Company will pay other expenses
reasonably incurred by Employee in relocating to the foreign assignment, up to
an amount equal to one month of Employee's base salary, to the extent such
expenses are not covered by other provisions of this Agreement, documented by
receipts to the extent practical, incurred within 30 days following the date on
which Employee's immediate family relocates and which are non-recurring expenses
necessary for and only incurred because of Employee's relocation (e.g appliance
replacement expense due to voltage differences).
h. TAX GROSS-UP. The Company will pay an incremental amount to
Employee to increase the amount of any incentive bonus received pursuant to
Section 3(b) hereof to the extent required to ensure that the total worldwide
tax paid by Employee on such bonus does not exceed the U.S. federal, FICA and
state tax Employee would have paid on such bonus if the full bonus were subject
only to U.S. tax.
i. U.S. RESIDENCE; AUTOMOBILE. Employee has chosen to retain his
principal residence, and to leave his personal automobiles, in the U.S. and
understands that Employee, and not the
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Company, shall be responsible for all expenses of maintaining such residence and
maintaining and storing such automobiles.
j. REPATRIATION. Upon termination of this Agreement pursuant to
Sections 5(a), (b), (d), (e), (f) or (g), or the earlier termination of
Employee's foreign assignment, the Company shall pay the reasonable costs of
repatriating Employee and his immediate family to their home in the U.S.,
including airfare for Employee and his immediate family, the cost of shipping
Employee's household effects back to the U.S., the cost of air shipping up to
500 pounds of personal effects needed before other goods arrive by ship, the
cost of transport and unpacking of stored property, and such other amounts as
set forth on SCHEDULE A hereto. Notwithstanding the foregoing, in the event
Employee terminates this Agreement pursuant to Section 5(g) for the purposes of
providing services to another employer on an international assignment, the
Company shall have no obligation to provide the repatriation benefits of this
Section 4(j).
5. TERMINATION. Employee's employment hereunder shall terminate on the
following terms and conditions:
a. DEATH. If Employee dies during the term of this Agreement, this
Agreement shall terminate as of the date of Employee's death. The Company shall,
within 180 days after the date of Employee's death, make a cash lump-sum payment
(less applicable withholding taxes) to his estate in an amount equal to the
salary (at the level payable in the year of Employee's death) that would have
been payable either for the period of time extending from the date of death to
the date 18 months after the Initial Closing Date (as defined in Section 17), or
for the nine months next following the date of death, whichever period of time
is longer.
b. DISABILITY. If during the term of this Agreement Employee becomes
disabled, the Company may terminate Employee's assignment in France and return
Employee and his immediate family to the U.S. and the Company may terminate this
agreement 30 days after receipt by Employee or his duly appointed legal
representative of Notice of Termination (as defined below). For purposes of this
Section 5(b), Employee shall be "disabled" if he is unable to effectively
perform his duties hereunder by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
If this Agreement is terminated under this Section 5(b), Employee shall continue
to receive his base salary (at the level payable in the year of termination)
either for the period of time extending from the date of termination of
employment to the date 18 months after the Initial Closing Date, or for the nine
months next following the date of termination, whichever period of time is
longer.
For purposes of this Agreement, a "Notice of Termination" means a written
notice from the Company which (a) indicates the specific termination provision
in this Agreement relied upon, (b) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so indicated and (c) to
the extent applicable, sets forth the date of termination.
c. CAUSE. The Company may terminate this Agreement for "cause" upon
receipt by Employee, or on such later date as shall be specified, of Notice of
Termination stating that termination is pursuant to this Section 5(c). For
purposes of this agreement, "cause" shall be defined as any of the following:
(i) any act by Employee, where in respect of such act Employee is ultimately
convicted or enters a plea of guilty or NOLO CONTENDERE to a felony; (ii)
Employee's willful misconduct, gross negligence, perpetration of or
participation in a fraud, in each case where such acts are materially injurious
to the Company or any of its subsidiaries or any affiliate thereof, or (iii)
Employee's material breach of Sections 5 (Confidentiality) or Section 6
(Noncompetition and Nonsolicitation) of the Executive Securities Agreement dated
as of May 18, 1998 by and between CTE and Employee, in each case where
Employee's acts are
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materially and demonstrably injurious to the Company or an Affiliate (as defined
below). If this Agreement is terminated for cause, Employee's rights hereunder
shall cease immediately on the date of such termination.
For purposes of this Agreement, the term "Affiliate" means a
person, firm or corporation that directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with, the
Company.
d. NONPERFORMANCE. The Company may terminate Employee's employment
in the event of Nonperformance. The term "NONPERFORMANCE" shall mean the
occurrence of any of the following:
(i) the repeated failure or refusal in any material respect of
Employee to perform his duties hereunder or to follow, in a manner
reasonably acceptable to the Board, policies or directives established by
the Board;
(ii) the failure of the Company and its subsidiaries to achieve
financial, operating or other performance objectives formally established
by the Board in an approved business plan or operating budget (which may be
embodied in any board resolution or in any document approved by the Board
such as a business plan or budget) together with a determination by the
Board that Employee's performance or failure to perform has been a material
factor in the failure of the Company and its subsidiaries to achieve such
performance objectives; or
(iii) the failure of Employee to achieve specific, formally
adopted performance objectives established by the Board after consultation
with Employee and good faith consideration by the Board of Employee's
expressed views of the objectives;
PROVIDED, that Employee's continued willingness to live and work in France or
any other country shall not be the basis for establishing "Nonperformance"
hereunder unless Employee's failure to live and work in France or another
country in which CableTel operates is, in the good faith determination of the
Board, a material contributing factor to the existence of the circumstances
described in (ii) and/or (iii) above.
Prior to any termination of Employee's employment for Nonperformance,
the Board shall meet in formal session (but without the attendance of Employee)
upon proper notice to consider the matter of Employee's performance after which
the Board may deliver to Employee written notice (a "NONPERFORMANCE NOTICE")
stating that the Board believes Nonperformance has occurred. Employee shall have
at least 15 calendar days to prepare for a meeting with the Board, at which time
Employee may present any information on market and competitive conditions and
any other factors bearing upon his performance. In assessing Employee's
performance, the Board shall give due consideration to such conditions and such
other factors and shall work with Employee in good faith to establish criteria
which, if satisfied by Employee within 35 days or such longer time as may
reasonably be necessary in view of the criteria (the "CURE PERIOD") after such
meeting, will prevent the Company from terminating Employee for Nonperformance
(until such time as another Nonperformance Notice shall be given and the
procedures set forth in this Section 5(d) shall be followed). It is understood,
however, that if Employee and the Board fail to agree on such criteria, such
criteria, and the length of the Cure Period if longer than 35 days, shall be
those established in good faith by the Board.
If Employee has failed to resolve the Nonperformance to the
satisfaction of the Board by the end of the Cure Period, Employee's employment
will be subject to termination at anytime thereafter immediately upon adoption
of a resolution to that effect by a majority of the entire Board and upon
delivery by the Company or the Board to Employee of written Notice of
Termination stating that termination is
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pursuant to this Section 5(d), which notice shall set forth the date of
termination and specifically identify the basis for the Board's belief that
Nonperformance has occurred and not been cured.
If Employee is discharged pursuant to this Section 5(d), this
Agreement shall immediately terminate at the date set forth in the Notice of
Termination and Employee shall be entitled to receive (i) within thirty days
after the date of termination, a cash lump sum severance payment equal to the
amount of his base salary (at the level payable in the year of termination) that
would have been payable either for the period of time extending from the date of
termination of employment to the date 18 months after the Initial Closing Date,
or for the nine months next following the date of termination of employment,
whichever period of time is longer, (ii) a continuation of his benefits as
specified in Section 3(b) for such period, and (iii) the benefits specified in
Sections 3(e), 4(a) and 4(j).
e. WITHOUT CAUSE. The Company may terminate Employee's employment
without cause by delivering to Employee a Notice of Termination stating that
termination is pursuant to this Section 5(e). If Employee is discharged without
cause, this Agreement shall immediately terminate at the date set forth in the
Notice of Termination and Employee shall be entitled to received (i) within
thirty days after the date of termination, a cash lump sum severance payment
equal to the amount of his base salary and bonus (at the level payable in the
year of termination) that would have been payable for the 24 months next
following the date of termination of employment, (ii) a continuation of his
benefits as specified in Section 3(d) for such period, and (iii) the benefits
specified in Sections 3(e), 4(a) and 4(j).
f. CHANGE OF CONTROL. If Employee's employment is terminated by the
Company or if Employee resigns after his salary, benefits or any other required
payments (including without limitation any payments pursuant to this Section 5)
are reduced below the minimum levels required by this Agreement or after being
assigned to a position of lesser title, authority or responsibility, in any such
case within a six-month period after the occurrence of a Change of Control, this
Agreement shall immediately terminate as of later of (i) the date next following
the date the Change of Control was effective or (ii) the date Employee resigned
or his employment is terminated. Any such termination shall be treated in the
same manner as a termination without cause pursuant to Section 5(e). Employee
agrees that payment of the amounts due in that event shall constitute liquidated
damages or severance pay or both.
A "Change in Control" will be deemed to have occurred if a person (as
defined in Section 18-101(12) of the Delaware Limited Liability Company Act),
who does not beneficially own (as defined below) any equity interest in CTE
entitled to vote in the election of Representatives to CTE's Board of Managers
("Membership Interest") on the Initial Closing Date, becomes the beneficial
owner of a Membership Interest with 51% of the voting power of all Membership
Interests. A "beneficial owner" is any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or otherwise has
or shares (i) the power to vote or direct the voting of such equity interest or
(ii) the power to dispose, or direct the disposition of, such equity interest.
g. BY EMPLOYEE. Employee may resign from his employment with the
Company at any time. In such event, this Agreement shall terminate immediately.
If Employee resigns pursuant to this Section 5(g), Employee's rights hereunder
shall cease immediately upon such resignation except as specified in Sections
3(e), 4(a) and 4(j).
6. FULL SETTLEMENT. In no event shall the Employee be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to Employee under any of the provisions of this Agreement, but such
amounts shall be reduced by the amount Employee obtains from other employment.
The Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which Employee may reasonably incur as a result of any
contest by the Company or Employee of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
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performance thereof (including as a result of any contest by Employee about the
amount of any payment pursuant to this Agreement), but only if Employee is
successful on the merits of any such contest, plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
7. LIMITATION ON PAYMENTS. Notwithstanding anything in this Agreement to
the contrary, if the total payments or distributions by the Company to or for
the benefit of Employee would be subject to the excise tax ("Excise Tax")
imposed by Section 4999 of the Code, then the cash amounts payable to Employee
hereunder shall be reduced, in the manner agreed by the Company and the
Employee, to the extent necessary so that the total of all such payments shall
be $1.00 less than the amount that would trigger the imposition of the Excise
Tax.
8. WAIVER OF BREACH. A waiver by the Company of a breach of any provision
of this Agreement by Employee shall not be construed as a waiver of any breach
of another provision or subsequent breach of the same provision.
9. SEVERABILITY. The invalidity or unenforceability in any application of
any provision in this Agreement will not affect the validity or enforceability
of any other provision or of such provision in any other application.
10. NOTICES. All communications, requests, consents and other notices
provided for in this Agreement shall be in writing and shall be deemed given if
and when delivered personally by hand, sent by telecopy at the appropriate
number indicated below with electronic confirmation of receipt, or mailed by
first class mail, postage prepaid, addressed as follows:
a. If to the Company:
CableTel Management, Inc.
4700 S. Syracuse, Suite 1050
Denver, CO 80237
Facsimile No.: 303-741-4823
Attn: Chief Executive Officer
with a copy to:
Madison Dearborn Partners
Three First National Plaza
Chicago, IL 60602
Facsimile No.: (312) 895-1206
Attn: Paul Finnegan
and to:
Lawrence F. DeGeorge
3127 Casseekey Island Road
Jupiter, FL 33477
Facsimile No.: (561) 575-1760
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b. If to Employee:
Mr. William H. Pearson
38, rue de Bassano
75008 Paris, France
Facsimile No.: 011-33-1-44-31-2079
or to such other address or telecopy number as either party may designate by
notice pursuant to this Section 10.
11. JURISDICTION; VENUE; LIMITATION. The District Court of the County of
Arapahoe Colorado, United States of America, shall have exclusive jurisdiction,
including personal jurisdiction, and shall be the exclusive venue for any
controversies or claims arising out of Employee's employment by the Company or
out of this Agreement, except as otherwise agreed by the parties. Any action or
proceeding to enforce the provisions of this Agreement, or to recover damages
from the alleged breach of any provisions of this Agreement shall be commenced
within six months of a party's first notice of a breach by the other party.
12. GOVERNING LAW. This Agreement and all matters and issues collateral
thereto shall be governed by the laws of the State of Colorado, United States of
America.
13. ASSIGNMENT. The Company may, with the written consent of Employee,
assign its rights and delegate its obligations under this Agreement to any
Affiliate or to any acquirer of substantially all of the business of the Company
whether through merger, purchase of assets, purchase of stock or otherwise.
Otherwise, neither party may assign any rights or delegate any duties under this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, heirs, and permitted
successors and assigns.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding of the parties and supersedes all prior understandings, agreements
or representations by the parties, written or oral, that relate to the subject
matter of this Agreement.
15. AMENDMENTS. No provision of this Agreement may be amended or waived
except by an instrument in writing signed by the Employee and the Company (after
obtaining Board approval).
16. EFFECTIVE DATE. This Agreement shall be effective as of January 1,
1998.
17. INITIAL CLOSING DATE. As used herein, "Initial Closing Date" shall
have the meaning set forth in Section 1C of the Equity Purchase Agreement by and
among CTE, Employee and the other Purchasers named therein.
[The remainder of this page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement the 18th day of May, 1998.
COMPANY:
CABLETEL MANAGEMENT, Inc.,
a Colorado corporation
By: /s/ James E. Dovey
-------------------------------------
James E. Dovey
Chief Executive Officer
EMPLOYEE:
/s/ William H. Pearson
-----------------------------------------
William H. Pearson
(Signature page to William H. Pearson Employment Agreement)
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<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of December
16, 1998, by and between CABLETEL MANAGEMENT, INC., a Colorado corporation with
principal offices located at 6300 S. Syracuse Way, Suite 355, Englewood,
Colorado 80111 (the "Company"), and DAVID LACEY, a resident of the State of
Colorado ("Employee").
A. The Company is a wholly owned subsidiary of CompleTel LLC ("LLC"), for
which the Company provides management and consulting personnel. LLC and its
subsidiaries and affiliates, collectively, are referred to herein as
"CompleTel."
B. The Company wishes to employ Employee and Employee wishes to be
employed by the Company in key management positions with the Company and
CompleTel.
C. The Company and Employee each desire to enter into an Employment
Agreement under the terms and conditions contained herein.
AGREEMENT
In consideration of the rights and obligations created hereunder, the
parties agree as follows:
1. EMPLOYMENT. The Company agrees to employ Employee and Employee agrees
to be employed by the Company on the terms set forth in this Agreement.
2. TITLE AND DUTIES; SCOPE OF RESPONSIBILITIES.
(a) TITLE AND DUTIES. Employee shall be employed by the Company and
shall serve as Chief Financial Officer of the Company and of LLC or in such
position(s) as the Company's Chief Executive Officer of the Company (the "CEO")
or Board of Directors ("Board") shall in their sole discretion designate from
time to time. Employee shall perform, on a full time basis, such duties and bear
such responsibilities, as may be determined from time to time by the CEO,
commensurate with his position and shall serve the Company and CompleTel
faithfully and to the best of his ability under the direction of the CEO.
(b) SCOPE OF RESPONSIBILITIES. Employee shall devote his entire
working time, attention and energies to the business of the Company and
CompleTel. His actions shall at all times be such that they do not discredit the
Company or CompleTel, their products or services. Except for his involvement in
personal investments, provided such involvement does not require any significant
services on his part, Employee shall not engage in any other business activity
or activities that require significant personal services by Employee or that, in
the judgment of the CEO, may conflict with the proper performance of his duties
hereunder.
<PAGE>
3. COMPENSATION.
(a) SALARY. For all services rendered by Employee hereunder, Employee
shall receive a base salary, payable semimonthly in arrears, at the annual rate
of $170,000. The Board, or any committee thereof that shall have been
established for such purpose (a "Compensation Committee") shall review
Employee's salary annually at the end of each calendar year and may provide for
such increases to Employee's base salary as the Board or Compensation Committee
in its sole discretion may determine.
(b) BONUSES. At the end of each calendar year, in respect of all
services provided hereunder, Employee shall be eligible to receive an incentive
bonus as authorized by the Board (or any Compensation Committee that shall have
been established) pursuant to objectives set by the CEO and the Board, in an
amount up to 50% of Employee's base salary for such year, subject to Employee's
having met the performance targets established by the CEO and the Board;
provided that Employee shall not be eligible for a bonus for the year ended
December 31, 1998.
(c) BENEFITS. In addition to salary payments as provided in Section
3(a), the Company shall provide Employee during the term of this Agreement with
the benefits of such insurance plans, hospitalization plans, 401(k) and
supplemental retirement plans and other employee fringe benefit plans as shall
be generally provided to employees of the Company and for which Employee may be
eligible under the terms of such plans. Employee shall be entitled to sick leave
and vacation in accordance with the Company's established policies applicable to
its employees generally.
4. EXPENSES. Subject to the Company's policies and procedures for the
reimbursement of business expenses incurred by its executive and management
employees, the Company shall reimburse Employee for the reasonable amount of
hotel, travel, entertainment and other expenses reasonably incurred by Employee
in the discharge of his duties hereunder, including but not limited to costs
incurred by Employee for living expenses while in, and travel to and from, any
location in which the Company is then doing business on Company business.
5. EARLY TERMINATION. Employee's employment hereunder shall terminate on
the following terms and conditions:
(a) DEATH. If Employee dies during the term of this Agreement, this
Agreement shall terminate as of the date of Employee's death. The Company shall,
within 180 days after the date of Employee's death, make a cash lump sum payment
(less applicable withholding taxes) to his estate in an amount equal to the
salary (at the level payable in the year of Employee's death) that would have
been payable for the three months next following the date of death.
(b) DISABILITY. If during the term of this Agreement Employee becomes
disabled, this Agreement shall terminate. For purposes of this Section 5(b),
Employee shall be "disabled" if he is unable effectively to perform his duties
hereunder by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which
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<PAGE>
has lasted or can be expected to last for a continuous period of not less than
12 months. If this Agreement is terminated under this Section 5(b), Employee
shall continue to receive his base salary (at the level payable in the year of
termination) for the three months next following the date of termination.
(c) CAUSE. The Company shall have the right to terminate this
agreement effective immediately, without prior notice, procedure or formality of
any kind, with the Company's only obligation being the payment of salary and
accrued, unused vacation compensation earned as of the date of termination and
without liability for severance compensation of any kind, if the Employee:
(i) performs any act where in respect of such act Employee is
ultimately convicted or enters a plea of guilty or NOLO CONTENDERE to a felony
(or crime of similar gravity under the laws of another jurisdiction); engages in
willful misconduct, gross negligence, perpetration of or participation in a
fraud, in each case where such acts are materially injurious to the Company or
any of its Subsidiaries or any affiliate thereof; breaches in any material
respect the terms of this agreement or any policy, procedure or guideline of the
Company or the provisions of Section 5 (Confidentiality), Section 6
(Noncompetition) or Section 7 (Nonsolicitation) of the Executive Securities
Agreement dated as of December 2, 1998 by and between Employee and Parent; or
(d) NONPERFORMANCE. The Company may terminate Employee's employment
in the event of Nonperformance. The term "NONPERFORMANCE" shall mean the
occurrence of any of the following:
(i) the repeated failure or refusal in any material respect of
Employee to perform his duties hereunder or to follow, in a manner reasonably
acceptable to the CEO or the Board, or policies or directives established by the
Board;
(ii) the failure of the Company and its subsidiaries to achieve
financial, operating or other performance objectives formally established by the
Board in an approved business plan or operating budget (which may be embodied in
any board resolution or in any document approved by the Board such as a business
plan or budget) together with a determination by the Board that Employee's
performance or failure to perform has been a material factor in the failure of
the Company and its subsidiaries to achieve such performance objectives; or
(iii) the failure of Employee to achieve specific, formally
adopted performance objectives established by the CEO and the Board after
consultation with employee and good faith consideration by the Board of
Employee's expressed view of the objectives.
Prior to any termination of Employee's employment for Nonperformance,
the Board shall meet in formal session (but without the attendance of Employee)
upon proper notice to consider the matter of Employee's performance after which
the Board may deliver to Employee written notice (a "NONPERFORMANCE NOTICE")
stating that the Board believes Nonperformance has occurred. Employee shall have
at least 15 calendar days to prepare for a
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<PAGE>
meeting with the Board, at which time Employee may present any information on
market and competitive conditions and any other factors bearing upon his
performance. In assessing Employee's performance, the Board shall give due
consideration to such conditions and such other factors and shall work with
Employee in good faith to establish criteria which, if satisfied by Employee
within 35 days or such longer time as may reasonably be necessary in view of the
criteria (the "CURE PERIOD") after such meeting, will prevent the Company from
terminating Employee for Nonperformance (until such time as another
Nonperformance Notice shall be given and the procedures set forth in this
Section 5(d) shall be followed). It is understood, however, that if Employee and
the Board fail to agree on such criteria, such criteria, and the length of the
Cure Period if longer than 35 days, shall be those established in good faith by
the Board.
If Employee has failed to resolve the Nonperformance to the
satisfaction of the Board by the end of the Cure Period, Employee's employment
will be subject to termination at anytime thereafter immediately upon adoption
of a resolution to that effect by a majority of the entire Board and upon
delivery by the Company or the Board to Employee of written Notice of
Termination stating that termination is pursuant to this Section 5(d), which
notice shall set forth the date of termination and specifically identify the
basis for the Board's belief that Nonperformance has occurred and not been
cured.
If Employee is discharged pursuant to this Section 5(d), this
Agreement shall immediately terminate at the date set forth in the Notice of
Termination and Employee shall be entitled to receive (i) within thirty days
after the date of termination, a cash lump sum severance payment equal to the
amount of his base salary (at the level payable in the year of termination) that
would have been payable for the three months next following the date of
termination of employment, whichever period of time is longer, and (ii) a
continuation of his benefits as specified in Section 3(b) for such period.
(e) WITHOUT CAUSE. The Company may terminate this Agreement at any
time without cause.
(f) If Employee is discharged without cause, Employee shall be
entitled to receive (i) within thirty days after the date of termination, a cash
lump sum severance payment equal to the amount of his base salary and bonus (at
the level payable in the year of termination) that would have been payable for
the three months next following the date of termination of employment and (ii) a
continuation of his benefits as specified in Section 3(b) for such period.
(g) BY EMPLOYEE. Employee may terminate this Agreement at any time
upon 30 days notice to the Company, whereupon the Company shall have no further
obligations hereunder.
(h) CHANGE OF CONTROL. If Employee's employment is terminated by the
Company or if Employee resigns after his salary, benefits or any other required
payments (including without limitation any payments pursuant to this Section 5)
are reduced below the minimum levels required by this Agreement or after being
assigned to a position of lesser title, authority or responsibility, or if
Employee is required to move his principal residence from the greater Denver,
Colorado metropolitan area, in any such case within a six-month period after the
occurrence of a Change of Control, this Agreement shall immediately terminate as
of the later of
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<PAGE>
(i) the date next following the date the Change of Control was effective or (ii)
the date Employee resigned or his employment is terminated. Any such termination
shall be treated in the same manner as a termination without cause pursuant to
Section 5(e). Employee agrees that payment of the amounts due in that event
shall constitute liquidated damages or severance pay or both.
A "Change in Control" will be deemed to have occurred if a
person (as defined in Section 18-101(12) of the Delaware Limited Liability
Company Act), who does not beneficially own (as defined below) any equity
interest in CTE entitled to vote in the election of Representatives to CTE's
Board of Managers ("Membership Interest") as of the Initial Closing Date,
becomes the beneficial owner of a Membership Interest with 51% of the voting
power of all Membership Interests. A "beneficial owner" is any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares (i) the power to vote or direct the
voting of such equity interest or (ii) the power to dispose, or direct the
disposition of, such equity interest.
6. FOREIGN CORRUPT PRACTICES ACT. The Employee acknowledges that he has
been provided with and has read the Company's written policy with respect to
compliance with the U.S. Foreign Corrupt Practices Act ("FCPA"). Employee
certifies that he understands the provisions of the FCPA and the Company's
policy, and that he will comply in all respects and will not make, or offer to
make, or direct others to offer or make payments or give anything of value,
directly or indirectly, to an official of a foreign government or political
party for the purpose of influencing a decision to secure or maintain business
for any person. Furthermore, Employee confirms that should he learn of or have
reason to know of any such payment, offer, or agreement to make a payment to a
government official, political party, or political party official or candidate
for the purpose of maintaining or securing business for the Company or any of
its affiliates including LLC and all direct and indirect subsidiaries of LLC, he
will immediately advise the Company of his knowledge or suspicion.
7. WAIVER OF BREACH. A waiver by either party of a breach of any
provision of this Agreement by the other party shall not be construed as a
waiver of any breach of another provision or subsequent breach of the same
provision.
8. SEVERABILITY. The invalidity or unenforceability in any application of
any provision in this Agreement will not affect the validity or enforceability
of any other provision or of such provision in any other application.
9. NOTICES. All communications, requests, consents and other notices
provided for in this Agreement shall be in writing and shall be deemed given if
and when delivered personally by hand, sent by telecopy at the appropriate
number indicated below with electronic confirmation of receipt, or mailed by
first class mail, postage prepaid, addressed as follows:
(a) If to the Company:
CableTel Management, Inc.
6300 S. Syracuse Way, Suite 355
Englewood, CO 80111
Facsimile No.: 303-741-4823
Attn.: Chief Executive Officer
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<PAGE>
(b) If to Employee:
Mr. David Lacey
6300 S. Syracuse Way, Suite 355
Englewood, CO 80111
Facsimile No.: 303-741-4823
or to such other address or telecopy number as either party may designate by
notice pursuant to this Section 10.
10. JURISDICTION; VENUE; LIMITATION. The District Court of the County of
Arapahoe Colorado, United States of America, shall have exclusive jurisdiction,
including personal jurisdiction, and shall be the exclusive venue for any
controversies or claims arising out of Employee's employment by the Company or
out of this Agreement, except as otherwise agreed by the parties. Any action or
proceeding to enforce the provisions of this Agreement, or to recover damages
from the alleged breach of any provisions of this Agreement shall be commenced
within six months of a party's first notice of a breach by the other party.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, without reference to the
principles of conflict of laws.
12. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns, including,
without limitation, any person, partnership, corporation or other entity that
may acquire all or substantially all of the Company's or LLC's assets and
business or into or with which the Company or LLC may be merged or consolidated,
and upon the Executive, his heirs, executors, administrators and legal
representatives. The Executive shall not have any right to commute, anticipate,
encumber, assign or dispose of his right to any payment under this Agreement
prior to receipt thereof and shall not have the right to assign his obligations
under this Agreement.
13. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding of the parties and supersedes all prior understandings, agreements
or representations by the parties, written or oral, that relate to the subject
matter of this Agreement.
14. AMENDMENTS. No provision of this Agreement may be amended or waived
except by an instrument in writing signed by the Employee and the Company.
15. EFFECTIVE DATE. This Agreement shall be effective as of December 16,
1999 when executed by both parties as set forth below.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
COMPANY:
CABLETEL MANAGEMENT, INC.,
a Colorado corporation
By: /s/ James E. Dovey
---------------------------------------
James E. Dovey, Chief Executive Officer
EMPLOYEE:
/s/ David Lacey
-------------------------------------------
David Lacey
(Signature page for David Lacey Employment Agreement)
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<PAGE>
EXHIBIT 10.5
EXECUTIVE SECURITIES AGREEMENT
(DOVEY)
THIS EXECUTIVE SECURITIES AGREEMENT (this "AGREEMENT") is made
as of May 18, 1998, by and between CableTel Europe LLC, a Delaware limited
liability company (the "COMPANY"), and James E. Dovey ("EXECUTIVE"). Capitalized
terms used but not otherwise defined herein have the meanings ascribed to such
terms in Section 7 hereof.
Executive holds beneficially and of record an ownership
interest in the Company (Executive's "EXISTING INTEREST"). This Agreement
contemplates a transaction in which, pursuant to the terms and subject to the
conditions set forth herein, Executive will exchange his Existing Interest in
the Company for newly issued Common Units of the Company. All of such Executive
Securities are subject to time vesting as set forth herein. In addition to time
vesting, a portion of such Executive Securities are also subject to performance
vesting pursuant to the terms of the Performance Vesting Agreement. All of the
Executive Securities held by Executive or his transferees are subject to certain
restrictions on transfer and, upon Executive's ceasing to be employed by the
Company or its Subsidiaries, certain repurchase options, each as set forth
herein.
The execution and delivery of this Agreement by the Company
and Executive are a condition to the purchase of the Company's Preferred Units
by certain Investors and management employees of the Company (including
Executive) pursuant to the terms of the Equity Purchase Agreement. Such
Preferred Units are subject to certain capital contribution obligations,
restrictions on transfer, and other terms as set forth in the Equity Purchase
Agreement. In addition, such Preferred Units, as well as the Executive
Securities, are subject to certain voting agreements and other provisions set
forth herein and in the Securityholders Agreement. In connection with the
execution of this Agreement, the Company's subsidiary, CableTel Management,
Inc., a Colorado corporation, and Executive are entering into an Employment
Agreement dated as of the date hereof (the "EMPLOYMENT AGREEMENT").
NOW, THEREFORE, in consideration of the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. EXCHANGE OF EXECUTIVE'S EXISTING INTEREST FOR EXECUTIVE
SECURITIES.
(a) THE EXCHANGE TRANSACTION. Upon execution of this
Agreement, pursuant to a recapitalization of the Company as set forth in the
amended and restated LLC Agreement, Executive shall exchange all of his Existing
Interest for, and the Company shall issue to Executive, 5,899 Common Units (of
which 3,874 shall not, and 2,025 shall, be subject to performance vesting under
the terms of the Performance Vesting Agreement), each having the rights and
preferences set forth with respect thereto in the LLC Agreement.
(b) SECTION 83(B) ELECTION. Within 30 days after the exchange
transaction described in Section 1(a) above, Executive shall make an effective
election with the Internal
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<PAGE>
Revenue Service under Section 83(b) of the Internal Revenue Code of 1986, as
amended, with respect to the Executive Securities issued hereunder. A form of
such election is attached hereto.
(c) REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. In connection
with the exchange for and issuance of the Executive Securities hereunder,
Executive represents and warrants to the Company that:
(i) As of the date hereof, prior to giving effect
to the transactions contemplated hereby, Executive owns beneficially
and of record all right, title, and interest in and to the Existing
Interest, free and clear of all liens, security interests,
encumbrances, and purchase rights or rights of first refusal.
(ii) The Executive Securities to be acquired by
Executive pursuant to this Agreement shall be acquired for Executive's
own account and not with a view to, or intention of, distribution
thereof in violation of the Securities Act or any applicable state
securities laws, and the Executive Securities shall not be disposed of
in contravention of the Securities Act or any applicable state
securities laws.
(iii) Executive will serve as a management employee
of the Company and its Subsidiaries, is sophisticated in financial
matters and is able to evaluate the risks and benefits of the
investment in the Executive Securities.
(iv) Executive is able to bear the economic risk of
his investment in the Executive Securities for an indefinite period of
time and is aware that transfer of the Executive Securities may not be
possible because (A) such transfer is subject to contractual
restrictions on transfer set forth herein, in the Securityholders
Agreement, and in the Performance Vesting Agreement, and (B) the
Executive Securities have not been registered under the Securities Act
or any applicable state securities laws and, therefore, cannot be sold
unless subsequently registered under the Securities Act and such
applicable state securities laws or an exemption from such registration
is available.
(v) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of
the offering of the Executive Securities issued hereunder and has had
full access to such other information concerning the Company as he has
requested.
(vi) This Agreement, the LLC Agreement, the
Securityholders Agreement, the Performance Vesting Agreement, and the
other agreements contemplated thereby of even date therewith constitute
the legal, valid and binding obligations of Executive, enforceable in
accordance with their terms, and the execution, delivery and
performance of such agreements by Executive and Executive's employment
with the Company and its Subsidiaries do not and shall not conflict
with, violate or cause a breach of any agreement, contract or
instrument to which Executive is a party or by which he is bound or any
judgment, order or decree to which Executive is subject.
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<PAGE>
(d) ACKNOWLEDGMENT BY EXECUTIVE. As an inducement to the
Company to enter into this Agreement, and as a condition thereto, Executive
acknowledges and agrees that none of the execution and delivery of this
Agreement, the issuance of the Executive Securities to Executive, or Executive's
status as a holder of Executive Securities, shall:
(i) entitle Executive to remain in the employment of
the Company and its Subsidiaries or affect the right of the Company or
its Subsidiaries to terminate Executive's employment at any time and
for any reason as permitted by the Employment Agreement; or
(ii) impose upon the Company any duty or obligation
to disclose to Executive, or create in Executive any right to be
advised of, any material information regarding the Company and its
Subsidiaries at any time prior to, upon or in connection with the
repurchase of any Executive Securities upon the termination of
Executive's employment with the Company and its Subsidiaries or as
otherwise provided hereunder.
2. TIME VESTING OF EXECUTIVE SECURITIES.
(a) TIME VESTING SCHEDULE. Except as otherwise provided
herein, an amount of Un-Time-Vested Securities (as defined below) shall time
vest on the date hereof and on each of the first four anniversaries of the date
hereof, such that the Executive Securities shall be time vested on each such
date in accordance with the following schedule:
<TABLE>
<CAPTION>
Cumulative Percentage of
Date Executive Securities
Time Vested on Such Date
<S> <C>
The date hereof 30%
The first anniversary of the date hereof 47.5%
The second anniversary of the date hereof 65%
The third anniversary of the date hereof 82.5%
The fourth anniversary of the date hereof 100%
</TABLE>
Notwithstanding the foregoing sentence, the above time vesting schedule shall
cease and no Un-Time-Vested Securities (as defined below) shall time vest after
the date on which Executive's employment with the Company and its Subsidiaries
terminates for any reason. Executive Securities which have become time vested
pursuant to this Section 2 are referred to herein as "TIME-VESTED SECURITIES,"
and all other Executive Securities are referred to herein as "UN-TIME-VESTED
SECURITIES."
(b) 100% ACCELERATION UPON A QUALIFIED SALE OF THE COMPANY.
All Un-Time-Vested Securities shall become Time-Vested Securities in connection
with the consummation of a Qualified Sale of the Company, so long as Executive
is employed by the Company or any of its Subsidiaries on the date of such sale.
For purposes hereof, a "QUALIFIED SALE OF THE COMPANY" means
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<PAGE>
a Sale of the Company in which the consideration paid in such sale for at least
50% of the Company's outstanding equity securities or of the Company's
consolidated assets consists of cash and/or publicly traded equity securities
(E.G., 66.7% of the consideration for such Sale of the Company would have to
consist of cash and/or publicly traded equity securities if only 75% of the
Company's outstanding equity securities were sold in such transaction).
(c) 100% ACCELERATION UPON A SALE OF THE COMPANY (OTHER THAN A
QUALIFIED SALE OF THE COMPANY) WITH NO CONTINUING COMPARABLE TIME VESTING
ARRANGEMENT. In the event of a Sale of the Company (other than a Qualified Sale
of the Company), the above vesting schedule will not accelerate as a result of
such Sale of the Company; PROVIDED that if the surviving or acquiring Person(s)
in such Sale of the Company fails or declines either to (i) continue after such
Sale of the Company to allow Executive to hold his Un-Time-Vested Securities
subject to the time vesting and repurchase provisions hereof, or (ii) grant to
Executive the number of securities in the surviving or acquiring Person(s) that
Executive would have received in such Sale of the Company in exchange for
Executive's Un-Time-Vested Securities if such securities had instead been
Time-Vested Securities, subject to ongoing time vesting and repurchase
arrangements substantially comparable to those set forth herein (as such
comparability is determined in good faith by the Board), then all Un-Time-Vested
Securities shall become Time-Vested Securities in connection with the
consummation of such Sale of the Company, so long as Executive is employed by
the Company or any of its Subsidiaries on the date of such sale.
(d) ONE-YEAR ACCELERATION UPON A QUALIFIED PUBLIC OFFERING.
Upon the consummation of a Qualified Public Offering, and so long as Executive
is employed by the Company or any of its Subsidiaries on the closing date of
such offering, there will time vest the amount of Un-Time-Vested Securities
which were scheduled to time vest within the 365 days following such closing
date (and the remaining Un-Time-Vested Securities, if any, shall continue to
time vest 17.5% on each anniversary of the date hereof in accordance with clause
(a) above, such that the time vesting schedule set forth in paragraph (a) above
shall have been effectively accelerated by one year).
(e) TIME VESTING AND PERFORMANCE VESTING.
(i) INDEPENDENCE OF TIME AND PERFORMANCE VESTING. The
Company and Executive acknowledge that the Executive Securities
constituting Performance Vesting Securities are subject, in addition to
time vesting under this Section 2, to performance vesting as set forth
in the Performance Vesting Agreement. The time vesting provisions of
this Section 2 operate independently of the performance vesting
provisions under the Performance Vesting Agreement. As such, (A) the
terms "Time-Vested Securities" and "Un-Time-Vested Securities" as used
herein refer only to whether particular Executive Securities have time
vested in accordance with the terms of this Section 2 and do not
indicate whether such Executive Securities that constitute Performance
Vesting Securities have or have not also performance vested under the
Performance Vesting Agreement, and (B) the terms "Performance-Vested
Securities" and "Un-Performance-Vested Securities" (each defined below)
as used herein refer only to whether particular Performance Vesting
Securities have performance vested in accordance with the terms of the
Performance Vesting Agreement and
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<PAGE>
do not indicate whether such Performance Vesting Securities have or
have not also time vested under this Section 2.
(ii) APPLICATION OF TIME VESTING. Whenever
Un-Time-Vested Securities time vest pursuant to the terms of this
Section 2, the Un-Time-Vested Securities that are not Performance
Vesting Securities, on the one hand, and the Un-Time-Vested Securities
that are Performance Vesting Securities, on the other hand, will each
time vest on a pro rata basis based on the number of each such type of
securities then outstanding. Of such Un-Time-Vested Securities
constituting Performance Vesting Securities which are to vest, the
Un-Time-Vested Securities that are Performance-Vested Securities shall
be time vested prior to any Un-Time-Vested Securities that are
Un-Performance-Vested Securities being time vested.
(iii) APPLICATION OF PERFORMANCE VESTING. Whenever
Un-Performance-Vested Securities performance vest pursuant to the terms
of the Performance Vesting Agreement, the Un-Performance-Vested
Securities that are Time-Vested Securities shall be performance vested
prior to any Un-Performance-Vested Securities that are Un-Time-Vested
Securities being performance vested.
(f) 100% ACCELERATION UPON CERTAIN TERMINATION OF EMPLOYMENT.
If Executive's employment with the Company is terminated by the Company without
Cause and not as a result of Nonperformance (as defined in the Employment
Agreement), all Un-Time-Vested Securities shall become Time-Vested Securities in
connection with such termination.
3. REPURCHASE OPTIONS.
(a) REPURCHASE OPTIONS UPON DEATH, DISABILITY, OR TERMINATION
WITHOUT CAUSE. If Executive ceases to be employed by the Company and its
Subsidiaries by reason of Executive's death, Disability, or a termination by the
Company without Cause (such cessation of employment, a "TYPE I REPURCHASE
EVENT"), the Executive Securities then in existence (whether held by Executive
or one or more of Executive's transferees) will be subject to repurchase as set
forth below:
(i) UN-TIME-VESTED SECURITIES. The Company (by action
of the Board) may elect to purchase all or any portion of the Executive
Securities constituting Un-Time-Vested Securities by delivering a
Repurchase Notice to the holder or holders of the Executive Securities
at any time within 30 days after the Type I Repurchase Event.
(ii) TIME-VESTED SECURITIES THAT ARE PERFORMANCE
VESTING SECURITIES. The Company (by action of the Board) may elect to
purchase all or any portion of the Time-Vested Securities that are
Performance Vesting Securities by delivering a Repurchase Notice to the
holder or holders of the Executive Securities at any time within 30
days after the Type I Repurchase Event.
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(iii) TIME-VESTED SECURITIES, OTHER THAN PERFORMANCE
VESTING SECURITIES, WHERE TERMINATION OCCURS DURING START-UP PERIOD. If
a Type I Repurchase Event occurs at any time during the Start-Up
Period, the holders of Start-Up Group Securities shall have the right
to purchase all or any portion (but in any event not more than 75%) of
the Time-Vested Securities that are not Performance Vesting Securities
by delivering a Repurchase Notice to the holder or holders of the
Executive Securities at any time prior to the fourth anniversary of the
date hereof. All repurchases pursuant to the immediately preceding
sentence shall be pro rata among the holders of Start-Up Group
Securities electing such a repurchase based on the number of Start-Up
Group Securities held by each such holder, or on such other basis as
agreed to by the holders of Start-Up Group Securities. If Executive at
any time breaches in any material respect the provisions of Section 5
(Confidentiality) or Section 6 (Noncompetition and Nonsolicitation)
hereof, the Company shall have (A) upon giving written notice to the
holders of Start-Up Group Securities affording them 20 days in which to
exercise any of their remaining repurchase rights pursuant to this
subparagraph (iii), the right to purchase all or any portion of the
Time-Vested Securities (other than Performance Vesting Securities) that
the holders of Start-Up Group Securities have not elected to
repurchase, and (B) the right to purchase all or any portion of the 25%
of such Time-Vested Securities that the holders of Start-Up Group
Securities could not elect to repurchase, in each case by delivering a
Repurchase Notice to the holder or holders of Executive Securities at
any time prior to the six-month anniversary of the date of such breach.
(iv) TIME-VESTED SECURITIES, OTHER THAN PERFORMANCE
VESTING SECURITIES, WHERE TERMINATION OCCURS AFTER START-UP PERIOD. If
a Type I Repurchase Event occurs at any time after the Start-Up Period,
the Company shall have the right to purchase all or any portion of the
Time-Vested Securities that are not Performance Vesting Securities by
delivering a Repurchase Notice to the holder or holders of the
Executive Securities at any time within 30 days after the Type I
Repurchase Event.
(b) REPURCHASE OPTION UPON TERMINATION OTHER THAN BY DEATH,
DISABILITY, OR TERMINATION WITHOUT CAUSE. If Executive ceases to be employed by
the Company and its Subsidiaries for any reason other than Executive's death,
Disability, or a termination by the Company without Cause (such cessation of
employment, a "TYPE II REPURCHASE EVENT"), the Company (by action of the Board)
may elect to purchase all or any portion of the Executive Securities then in
existence (whether held by Executive or one or more of Executive's transferees)
by delivering a Repurchase Notice to the holder or holders of the Executive
Securities at any time within 30 days after the Type II Repurchase Event.
(c) ASSIGNMENT OF REPURCHASE RIGHTS UNDER SECTION 3(A)(III).
(i) Upon any Type I Repurchase Event giving rise to a
right of the holders of Start-Up Group Securities to purchase
Time-Vested Securities (other than Performance Vesting Securities)
under Section 3(a)(iii) hereof, if the Board and the holders of at
least 80% of the Purchaser Securities then outstanding determine within
six months after the occurrence of the Type I Repurchase Event that it
would be in the best interests of the Company for all
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<PAGE>
or any portion of such Time-Vested Securities to be available for
issuance to one or more management or other key employees (each a "KEY
EMPLOYEE") of the Company or any of its Subsidiaries, then the Company
shall have the right to require the holders of Start-Up Group
Securities to assign to the Company their rights to repurchase such
Time-Vested Securities under Section 3(a)(iii) (and by so requiring the
Company shall be deemed to have elected to exercise such assigned
repurchase rights). Any assignment of repurchase rights pursuant to the
immediately preceding sentence shall be made pro rata among all holders
of Start-Up Group Securities based on the number of Start-Up Group
Securities held by each such holder, or on such other basis as agreed
to by the holders of Start-Up Group Securities.
(ii) Each holder of Start-Up Group Securities shall
have the right to assign all or any portion of its repurchase rights
under Section 3(a)(iii) hereof to the Company. Upon the vote of the
holders of a majority of the Start-Up Group Securities then
outstanding, all holders of Start-Up Group Securities will assign their
repurchase rights under Section 3(a)(iii) hereof to the Company.
(iii) If any holder of Start-Up Group Securities
assigns its repurchase rights under Section 3(a)(iii) to the Company,
and the Company fails to exercise such assigned repurchase rights, such
holder shall once again have the right to exercise (or assign) such
rights.
(d) ASSIGNMENT OF COMPANY'S REPURCHASE RIGHTS. Upon any Type I
Repurchase Event or Type II Repurchase Event (a "REPURCHASE EVENT"), the Company
(by action of the Board) shall have the right to assign all or any portion of
its repurchase rights hereunder to any Key Employee of the Company or its
Subsidiaries; PROVIDED that the Company may not assign its rights under Section
3(h) below to pay all or part of the Repurchase Price (as defined below) for
Executive Securities repurchased hereunder by (i) offsetting debts owed by
Executive to the Company or (ii) issuing Class A Senior Units or a promissory
note. If the Company assigns any of its repurchase rights to such a Key
Employee, and such Key Employee fails to exercise such assigned repurchase
rights, the Company shall once again have the right to exercise (or assign) such
rights.
(e) REPURCHASE PRICE. The repurchase price (the "REPURCHASE
PRICE") for any Time-Vested Securities to be repurchased hereunder shall be the
Fair Market Value (as determined below) of such securities on the date of the
Repurchase Event giving rise to such repurchase. The Repurchase Price of any
Un-Time-Vested Securities to be repurchased hereunder shall be the Original Cost
of such securities (with securities having a lower Original Cost being subject
to repurchase prior to securities with a higher Original Cost).
(f) REPURCHASE NOTICE. Each "REPURCHASE NOTICE" delivered
hereunder shall set forth the amount, type, and class of Executive Securities
(including, if applicable, the amount of Un-Time-Vested Securities and/or
Time-Vested Securities) to be acquired from each such holder and the aggregate
consideration to be paid for such Executive Securities. The Executive Securities
to be repurchased pursuant to any Repurchase Notice shall first be satisfied to
the extent possible from the Executive Securities held by Executive at the time
of delivery of such Repurchase Notice. If the
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amount of Executive Securities then held by Executive is less than the total
amount of Executive Securities that have been elected to be purchased pursuant
to such Repurchase Notice, the electing party or parties shall purchase the
remaining securities elected to be purchased from the other holder(s) of
Executive Securities, pro rata according to the amount of Executive Securities
held of record by each such other holder at the time of delivery of such
Repurchase Notice. The amount of Un-Time-Vested Securities and Time-Vested
Securities repurchased hereunder shall be deemed to be allocated among Executive
and the other holders of repurchased Executive Securities (if any) pro rata
according to the amount of Executive Securities to be purchased from such
persons.
(g) FAIR MARKET VALUE OF REPURCHASED EXECUTIVE
SECURITIES.
(i) The "FAIR MARKET VALUE" of Time-Vested Securities
subject to repurchase hereunder (the "VALUED SECURITIES") shall be
determined in accordance with this paragraph (g).
(ii) A majority interest of the Company and/or the
holders of Start-Up Group Securities and/or any assignees of the
Company's repurchase rights ("majority" determined based on the amount
of Valued Securities to be purchased by each), on the one hand, and the
holders of a majority of the Valued Securities to be repurchased, on
the other hand, shall attempt in good faith to agree on the Fair Market
Value of the Valued Securities to be repurchased. Any agreement reached
by such Persons shall be final and binding on all parties hereto.
(iii) If such Persons are unable to reach such
agreement within 20 days after the giving of any Repurchase Notice, the
Fair Market Value of any Valued Securities that are publicly traded
shall be the average, over a period of 21 days consisting of the date
of the Repurchase Event and the 20 consecutive business days prior to
that date, of the average of the closing prices of the sales of such
securities on the primary securities exchange on which such securities
may at that time be listed, or, if there have been no sales on such
exchange on any day, the average of the highest bid and lowest asked
prices on such exchange at the end of such day, or, if on any day such
securities are not so listed, the average of the representative bid and
asked prices quoted in the Nasdaq System as of 4:00 P.M., New York
time, or, if on any day such securities are not quoted in the Nasdaq
System, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar successor organization.
If the Fair Market Value of any Valued Securities on the date that is
180 days after the date of the Repurchase Event (the "SIX-MONTH
ANNIVERSARY DATE") (determined as described in the immediately
preceding sentence with respect to such Six-Month Anniversary Date,
rather than with respect to the date of the Repurchase Event) is
greater than the Fair Market Value of such Valued Securities determined
as described in the immediately preceding sentence with respect to the
date of the Repurchase Event, then the "Fair Market Value" of such
publicly traded Valued Securities shall be the Fair Market Value
determined as of the Six-Month Anniversary Date.
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<PAGE>
(iv) If such Persons are unable to reach agreement
pursuant to subparagraph (ii) within 20 days after the giving of such
Repurchase Notice, and to the extent any Valued Securities are not
publicly traded:
(A) A majority interest of the Company
and/or the holders of Start-Up Group Securities and/or any assignees of
the Company's repurchase rights ("majority" determined based on the
amount of Valued Securities to be purchased by each), on the one hand,
and the holders of a majority of the Valued Securities to be
repurchased, on the other hand, shall each, within 10 days thereafter,
choose one investment banker or other appraiser with experience in
valuing companies such as the Company (and if the Valued Securities
include any Un-Performance-Vested Securities, experienced in valuing
contingent or derivative assets), and the two investment
bankers/appraisers so selected shall together select a third investment
banker/appraiser similarly qualified.
(B) The three investment bankers/appraisers
shall first appraise the fair market value of the Company's equity
(based on the assumption of an orderly, arm's length sale (structured
to produce the highest price to the equityholders of the Company,
whether such structure is a merger, combination, sale of equity
securities, sale of assets, or otherwise) to a willing unaffiliated
buyer (or to a willing affiliated strategic buyer, PROVIDED that the
investment bankers/appraisers shall not consider any premium that such
affiliated strategic buyer would be willing to pay to the extent such
premium is attributable solely to such Person's affiliation with the
Company, unless the Company or its equityholders have received a fully
financed, firm commitment offer (with no material conditions) from such
affiliated strategic buyer to purchase a majority (based on common
equity equivalents) of the Company's outstanding equity at a price that
includes such premium, IT BEING UNDERSTOOD, HOWEVER, that the
investment bankers/appraisers shall consider, without the need for such
a firm commitment offer, the premium, if any, that is attributable to
such Person's future expected synergies to be generated by combining
such Person's operations with those of the Company and its Subsidiaries
if such Person were to acquire the Company). The three investment
bankers/appraisers shall then appraise the fair market value of such
non-publicly-traded Valued Securities as follows:
1) the fair market value of each
Common Unit (or equivalent common equity security) that is not
an Un-Performance-Vested Security shall be equal to the fair
market value of the Company's equity DIVIDED BY the total
number of Common Units (or equivalent common equity
securities) outstanding on the date of the Repurchase Event
(determined on a fully diluted, as-if-converted basis, but
excluding all Un-Performance-Vested Securities);
2) the fair market value of any
Un-Performance-Vested Securities shall reflect (x) the
expected market value of such securities at such future time
as such securities are expected to become performance vested
under the terms of the Performance Vesting Agreement,
appropriately discounted to its present value as of the
relevant valuation date based upon the amount of time from the
relevant
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<PAGE>
valuation date until the date on which such Un-Performance-
Vested Securities are expected to performance vest (if at
all), and (y) the magnitude of the risk that such securities
may never become performance vested under the terms of the
Performance Vesting Agreement; and
3) the fair market value of any other
non-publicly-traded Valued Securities shall be the fair value
of such securities, determined on the basis of an orderly,
arm's length sale (structured to produce the highest for such
securities) to a willing, unaffiliated buyer, taking into
account all relevant factors determinative of value.
The three investment bankers/appraisers shall, within thirty days of
their retention, provide the written results of such appraisals to the
Company and/or the holders of Start-Up Group Securities and/or the
Company's assignees, and to each of the holders of the Valued
Securities to be repurchased.
(C) The "FAIR MARKET VALUE" of the
non-publicly-traded Valued Securities to be repurchased shall be the
average of the two appraisals closest to each other, and such amount
shall be final and binding on all parties hereto; PROVIDED that any
Person electing to purchase Executive Securities hereunder may at any
time within five days after receiving written notice of such
determination rescind its prior exercise of such Person's repurchase
option by giving written notice of such revocation to the holder or
holders of the Executive Securities to be repurchased, and upon such
revocation the revoking party will be treated as if it had never
exercised such repurchase option (it being understood that such
revoking party may not then exercise such repurchase option again with
respect to the same Repurchase Event).
(D) A majority interest of the Company
and/or the holders of Start- Up Group Securities and/or any assignees
of the Company's repurchase rights ("majority" determined based on the
amount of Valued Securities to be purchased by each), on the one hand,
and the holders of a majority of the Valued Securities to be
repurchased, on the other hand, will each pay the costs of their own
chosen appraiser and 50% of the costs of the third appraiser.
(h) CLOSING OF EACH REPURCHASE. Within 10 days after the
Repurchase Price for the Executive Securities to be repurchased at any
repurchase hereunder has been determined, the Company shall send a notice to
each holder of Executive Securities setting forth the consideration to be paid
for such securities and the time and place for the closing of the transaction,
which date shall not be more than 30 days nor less than five days after the
delivery of such notice. At each such closing, the holders of Executive
Securities shall deliver all certificates (if any exist) evidencing the
Executive Securities to be repurchased at such closing to the purchaser or
purchasers thereof, and such purchaser or purchasers shall pay for the Executive
Securities to be purchased at such closing by delivery of a check or wire
transfer of immediately available funds in the aggregate amount of the
Repurchase Price for such Executive Securities; PROVIDED that if the Company is
to purchase any
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<PAGE>
Executive Securities from Executive at such closing, the Company may elect (by
action of the Board) to pay all or any portion of the Repurchase Price for such
Executive Securities by setting off against such Repurchase Price any bona fide
debts owed (regardless of whether then due and payable) by Executive to the
Company or any of its Subsidiaries; AND PROVIDED FURTHER that if the Company is
to purchase any Executive Securities at such closing, the Company may elect (by
action of the Board) to pay all or any portion of the Repurchase Price for such
Executive Securities as follows:
(i) in accordance with the LLC Agreement, by issuing
in exchange for such Executive Securities an equal number of Class A
Senior Units, and each such Class A Senior Unit issued in connection
with such repurchase shall be deemed as of the date of such repurchase
to have capital contributions to the Company made with respect to such
Class A Senior Unit equal to the Repurchase Price for the Executive
Securities in exchange for which such Class A Senior Unit was issued;
or
(ii) if the Company has prior to the date of such
repurchase converted into a corporation or other corporate form, in the
form of a promissory note, which promissory note shall be subordinated
to all of the Company's senior debt obligations either then or
thereafter incurred, shall earn simple annual interest at a rate of 8%
per annum, shall have all principal and accrued interest due and
payable upon maturity, and shall mature upon the earliest to occur of
the Company's initial Public Offering (if such initial Public Offering
has not occurred prior to the issuance of such promissory note), a Sale
of the Company, or the fourth anniversary of the issuance of such
promissory note.
The purchasers of Executive Securities hereunder shall be entitled to receive
customary representations and warranties from the sellers, including
representations and warranties regarding good title to such securities, free and
clear of any liens or encumbrances.
(i) GENERAL LOOK-BACK RIGHTS. If (i) upon any Type I
Repurchase Event, the Company repurchases any Valued Securities pursuant to the
terms of this Section 3, (ii) a Sale of the Company or the Company's initial
Public Offering is consummated within the 1-year period commencing on the date
of such Type I Repurchase Event, and (iii) the value of the Company's equity
implied by the sale price of such Sale of the Company, or the pre-money
valuation of the Company's equity (I.E., the value of the Company's equity prior
to giving effect to such initial Public Offering) implied by such initial Public
Offering, (as applicable, the "IMPLIED VALUATION") is greater than the value of
the Company's equity actually utilized to determine the Fair Market Value of
such repurchased Valued Securities pursuant to Section 3(g), then the Company
shall in connection with such Sale of the Company or initial Public Offering pay
to each Person from whom such Valued Securities were repurchased the difference
of (x) the Fair Market Value of such Valued Securities purchased by the Company
from such Person that would have been calculated pursuant to Section 3(g) had
the Implied Valuation been used as the Company's equity value, MINUS (y) the
Repurchase Price actually paid for such Valued Securities purchased by the
Company from such Person. The Company shall have the right to pay such amounts
in the same manner or form specified in Section 3(h) as the Company may pay the
Repurchase Price for any Executive Securities at the closing of any repurchase
hereunder.
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<PAGE>
(j) SPECIAL LOOK-BACK RIGHTS. If (i) upon any termination of
Executive's employment by the Company on or prior to the first anniversary of
the date hereof, where such termination is not for Cause or as a result of
Nonperformance (as defined in the Employment Agreement), the Company repurchases
any Valued Securities pursuant to the terms of this Section 3, and (ii) the fair
market value of the Company's equity (determined under Section 3(g)(iv)(B)) on
the second anniversary of such termination (the "TWO-YEAR VALUE") is greater
than the value of the Company's equity actually utilized to determine the Fair
Market Value of such repurchased Valued Securities pursuant to Section 3(g),
then the Company shall within 60 days after such second anniversary pay to each
Person from whom such Valued Securities were repurchased as a result of such
termination, the difference of (x) the Fair Market Value of such Valued
Securities purchased by the Company from such Person that would have been
calculated pursuant to Section 3(g) had the Two-Year Value been used as the
Company's equity value, MINUS (y) the Repurchase Price actually paid for such
Valued Securities purchased by the Company from such Person. The Company shall
have the right to pay such amounts in the same manner or form specified in
Section 3(h) as the Company may pay the Repurchase Price for any Executive
Securities at the closing of any repurchase hereunder.
(k) RESTRICTIONS. Notwithstanding anything to the contrary
contained in this Agreement, all repurchases of Executive Securities by the
Company shall be subject to applicable restrictions contained in the Delaware
General Corporation Law, the Delaware Limited Liability Company Act and in the
Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Securities hereunder
which the Company is otherwise entitled to make, the time periods provided in
this paragraph 3 shall be suspended, and the Company may make such repurchases
as soon as it is permitted to do so under such restrictions, unless by such time
such repurchase option has terminated pursuant to paragraph (l) below.
(l) TERMINATION OF REPURCHASE OPTIONS. The repurchase
provisions under this paragraph 3 (and the rights and obligations created
thereby) shall cease to apply to all Time-Vested Securities upon the
consummation of a Qualified Sale of the Company or a Qualified Public Offering
(it being understood that (i) such provisions, rights, and obligations shall
continue to apply to all Un-Time-Vested Securities until such time as they
become Time-Vested Securities in accordance with the terms hereof, and (ii) the
forfeiture provisions of the Performance Vesting Agreement shall continue to
apply to all Un-Performance-Vested Securities until such time as they become
Performance-Vested Securities in accordance with the terms of the Performance
Vesting Agreement).
4. RESTRICTIONS ON TRANSFER.
(a) OPINION OF VALID TRANSFER. In addition to any other
restrictions on transfer imposed by this Agreement, the Securityholders
Agreement, the Performance Vesting Agreement, or the LLC Agreement, no holder of
Executive Securities may sell, transfer or dispose of any Executive Securities
(except pursuant to an effective registration statement under the Securities
Act) without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and
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<PAGE>
substance to the Company) that neither registration nor qualification under the
Securities Act or applicable state securities laws is required in connection
with such transfer.
(b) RESTRICTIVE LEGEND. The certificates representing
Executive Securities shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON MAY 18, 1998, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, VESTING PROVISIONS, AND REPURCHASE
OPTIONS SET FORTH IN AN EXECUTIVE SECURITIES AGREEMENT BETWEEN THE
ISSUER OF SUCH SECURITIES (THE "ISSUER") AND THE INITIAL HOLDER OF SUCH
SECURITIES. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
The legend set forth above shall be removed from the certificates evidencing any
securities which cease to be Executive Securities.
(c) RETENTION OF EXECUTIVE SECURITIES.
(i) Executive shall not sell, transfer, assign,
pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily or by operation of law) any
interest in any Executive Securities (a "TRANSFER"), except (x) with
respect to Un-Performance-Vested Securities, pursuant to the repurchase
provisions of Section 3 hereof or the forfeiture provisions of the
Performance Vesting Agreement (each, an "EXEMPT TRANSFER"), or (y) with
respect to all other Executive Securities, pursuant to (A) the
repurchase provisions of Section 3 hereof, (B) the "Participation
Rights" provisions set forth in the Securityholders Agreement, or (C) a
Sale of the Company (each of (A) through (C), an "EXEMPT TRANSFER").
(ii) The restrictions contained in this paragraph (c)
shall not apply with respect to transfers of Executive Securities
(other than Un-Performance-Vested Securities) (A) pursuant to
applicable laws of descent and distribution or (B) among Executive's
Family Group; PROVIDED that the restrictions contained in this
paragraph shall continue to be applicable to the Executive Securities
after any such Transfer, the transferees of such Executive Securities
shall have agreed in writing to be bound by the provisions of this
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Agreement with respect to the Executive Securities so transferred, and
(prior to the death of Executive) each such transferee of Executive
Securities shall have entered into proxies and other agreements
satisfactory to the holders of a majority of the Purchaser Securities
pursuant to which Executive shall have the sole right to vote such
Executive Securities for all purposes (subject to any applicable voting
agreements set forth herein or in the Securityholders Agreement). For
purposes of this Agreement, "FAMILY GROUP" means Executive's spouse,
siblings and descendants (whether natural or adopted) and any of such
descendants' spouses, any trust which at the time of such Transfer and
at all times thereafter is and remains solely for the benefit of
Executive and/or Executive's spouse, siblings, and/or descendants
and/or such descendants' spouses, and any family partnership the
partners of which consist solely of Executive, such spouse, such
siblings, such descendants, such descendants' spouses, and/or such
trusts.
(iii) The restrictions on the transfer of Executive
Securities set forth in this paragraph (c) shall continue with respect
to each Executive Security following any Transfer thereof (other than
an Exempt Transfer); PROVIDED that upon the consummation of a Qualified
Public Offering, the restrictions set forth in this paragraph (c) shall
thereafter cease to apply to all Fully Vested Securities, it being
understood that such restrictions shall continue to apply to all other
Executive Securities until such time as they become Fully Vested
Securities.
5. CONFIDENTIALITY.
(a) NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION.
Executive shall not disclose or use at any time, either during his employment
with the Company and its Subsidiaries or thereafter, any Confidential
Information (as defined below) of which Executive is or becomes aware, whether
or not such information is developed by him, except to the extent that such
disclosure or use is directly related to and required by Executive's performance
of duties assigned to Executive by the Company and its Subsidiaries, or to the
extent such disclosure is expressly addressed by and is permissible under the
confidentiality provisions set forth in the Equity Purchase Agreement. Executive
shall take all appropriate steps to safeguard Confidential Information and to
protect it against disclosure, misuse, espionage, loss and theft. As used in
this Agreement, the term "CONFIDENTIAL INFORMATION" means information that is
not generally known to the public and that is used, developed or obtained by the
Company or its Subsidiaries in connection with their business, including but not
limited to (i) products or services, (ii) fees, costs and pricing structures,
(iii) designs, (iv) analysis, (v) drawings, photographs and reports, (vi)
computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customer and client information (including customer or
client lists), (xii) copyrightable works, (xiv) all technology and trade
secrets, (xv) business plans and financial models, and (xvi) all similar and
related information in whatever form. Confidential Information shall not include
any information that has been published in a form generally available to the
public prior to the date Executive proposes to disclose or use such information.
Information shall not be deemed to have
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<PAGE>
been published merely because individual portions of the information have been
separately published, but only if all material features constituting such
information have been published in com bination.
(b) THE COMPANY'S OWNERSHIP OF INTELLECTUAL PROPERTY.
(i) ACKNOWLEDGMENT OF COMPANY OWNERSHIP. If Executive
as part of his activities on behalf of the Company and its Subsidiaries
generates, authors or contributes to any invention, design, new
development, device, product, method or process (whether or not
patentable or reduced to practice or constituting Confidential
Information), any copyrightable work (whether or not constituting
Confidential Information) or any other form of Confidential Information
relating directly or indirectly to the Company's and its Subsidiaries'
business as now or hereafter conducted (collectively, "INTELLECTUAL
PROPERTY"), Executive acknowledges that such Intellectual Property is
the exclusive property of the Company and hereby assigns all right,
title and interest in and to such Intellectual Property to the Company.
Any copyrightable work prepared in whole or in part by Executive will
be deemed "a work made for hire" under Section 201(b) of the 1976
Copyright Act, and the Company shall own all of the rights comprised by
the copyright therein. Executive shall promptly and fully disclose all
Intellectual Property to the Company and shall cooperate with the
Company to protect the Company's interests in and rights to such
Intellectual Property (including, without limitation, providing
reasonable assistance in securing patent protection and copyright
registrations and executing all documents as reasonably requested by
the Company, whether such requests occur prior to or after termination
of Executive's employment with the Company).
(ii) EXECUTIVE INVENTION. Executive understands that
paragraph (b)(i) of this Section regarding the Company's ownership of
Intellectual Property does not apply to any invention for which no
equipment, supplies, facilities or trade secret information of the
Company were used and which was developed entirely on Executive's own
time, unless (i) the invention relates to the business of the Company
or any of its Subsidiaries or to their actual or demonstrably
anticipated research or development or (ii) the invention results from
any work performed by Executive for the Company or any of its
Subsidiaries.
(c) DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. As
requested by the Company from time to time and upon the termination of
Executive's employment with the Company and its Subsidiaries for any reason,
Executive shall promptly deliver to the Company all copies and embodiments, in
whatever form, of all Confidential Information and Intellectual Property in
Executive's possession or within his control (including, but not limited to,
written records, notes, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes and all other
materials containing or constituting any Confidential Information or
Intellectual Property) irrespective of the location or form of such material
and, if requested by the Company, shall provide the Company with written
confirmation that all such materials have been delivered to the Company.
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<PAGE>
6. NONCOMPETITION AND NONSOLICITATION.
(a) NONCOMPETITION. Executive acknowledges and agrees with the
Company that in the course of his employment with the Company and its
Subsidiaries he shall become familiar with the Company's trade secrets and with
other Confidential Information concerning the Company and its Subsidiaries, that
Executive's services to the Company and its Subsidiaries are unique in nature
and of an extraordinary value to the Company, and that the Company would be
irreparably damaged if Executive were to provide similar services to any person
or entity competing with the Company or any of its Subsidiaries or engaged in
similar business. In consideration of and as an inducement to the Company's
entering into this Agreement and issuing the Executive Securities hereunder, and
in further consideration of Executive's compensation and severance payments
under Executive's employment arrangement with the Company and its Subsidiaries,
Executive accordingly covenants and agrees with the Company that during the
Noncompete Period (as defined below), Executive shall not, directly or
indirectly, either for himself or for any other individual, corporation,
partnership, joint venture or other entity, participate in any business or
enterprise that engages or proposes to engage in any business conducted by the
Company or any of its Subsidiaries (including, but not limited to, the sale or
provision of local switched dialtone telecommunication services) in any
geographical market in which the Company or any of its Subsidiaries conducts
business (or any geographical market with respect to which the Company proposes
in good faith to conduct business, as evidenced by an Approved Business Plan or
a Board resolution authorizing the Company to use its resources to investigate
or otherwise pursue an opportunity in such market). For purposes of this
Agreement, the term "participate in" shall include, without limitation, having
any direct or indirect interest in any corporation, partnership, joint venture
or other entity, whether as a sole proprietor, owner, stockholder, partner,
joint venturer, creditor or otherwise, or rendering any direct or indirect
service or assistance to any individual, corporation, partnership, joint venture
and other business entity (whether as a director, officer, manager, supervisor,
employee, agent, consultant or otherwise), other than ownership of up to 2% of
the outstanding stock of any class which is publicly traded. Executive agrees
that this covenant is reasonable with respect to its duration, geographical
area, and scope.
(b) NONSOLICITATION. During the Noncompete Period, Executive
shall not (i) induce or attempt to induce any employee of the Company or any of
its Subsidiaries to leave the employ of the Company and its Subsidiaries, or in
any way interfere with the relationship between the Company or any of its
Subsidiaries and any employee thereof, (ii) hire directly or through another
entity any person who was an employee of the Company or any of its Subsidiaries
at any time during the Noncompete Period, or (iii) induce or attempt to induce
any customer, supplier, licensee or other business relation of the Company or
any of its Subsidiaries to cease doing business with the Company and its
Subsidiaries, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company and its
Subsidiaries (including, without limitation, making any negative statements or
communications concerning the Company or any of its Subsidiaries).
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<PAGE>
(c) NONCOMPETE PERIOD. The "NONCOMPETE PERIOD" shall commence
on the date hereof and continue until the second anniversary of the date
Executive ceases to be employed by the Company and its Subsidiaries.
(d) JUDICIAL MODIFICATION. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or geographic area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment or decision may be appealed.
7. DEFINITIONS.
"AGREEMENT" has the meaning set forth with respect thereto in
the preamble.
"BOARD" means the board of managers of the LLC or, if the
Company is hereafter converted into a corporation or other entity form, the
board of directors or comparable governing body of the Company.
"CAUSE" means (A) any act by Executive, where in respect of
such act Executive is ultimately convicted or enters a plea of guilty or NOLO
CONTENDERE to a felony, (B) Executive's willful misconduct, gross negligence,
perpetration of or participation in a fraud, in each case where such acts are
materially injurious to the Company or any of its Subsidiaries or any affiliate
thereof, or (C) Executive's breach in any material respect of the provisions of
Section 5 (Confidentiality) or Section 6 (Noncompetition and Nonsolicitation)
hereof.
"CLASS A SENIOR UNITS" means the Class A Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLASS B SENIOR UNITS" means the Class B Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLASS C SENIOR UNITS" means the Class C Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"COMMON UNITS" means the Common Units of the Company, having
the rights and preferences set forth with respect thereto in the LLC Agreement.
"COMPANY" has the meaning set forth with respect thereto in
the preamble.
"CONFIDENTIAL INFORMATION" has the meaning set forth with
respect thereto in Section
5(a).
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<PAGE>
"DISABILITY" means any illness, accident, injury, physical or
mental incapacity or other disability, where such condition has rendered, or is
expected to render (as determined in the good faith judgment of the Board),
Executive unable or unfit to perform effectively the duties and obligations of
his employment or to participate effectively and actively in the management of
the Company for a period of at least 90 days.
"EQUITY PURCHASE AGREEMENT" means the equity purchase
agreement of even date herewith entered into by and among the Company and
certain investors, as amended from time to time in accordance with the terms
thereof.
"EXECUTIVE" has the meaning set forth with respect thereto in
the preamble.
"EXECUTIVE SECURITIES" means (i) the Common Units issued to
Executive hereunder and (ii) any securities issued directly or indirectly with
respect to any Executive Securities by way of a stock split, stock dividend, or
other division of securities, or in connection with a combination of securities,
recapitalization, merger, consolidation, or other reorganization, or upon
conversion or exercise of any of the foregoing; PROVIDED that Executive
Securities shall not include any Senior Units. As to any particular securities
constituting Executive Securities, such securities shall cease to be Executive
Securities when they have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(b) distributed to the public through a broker, dealer or market maker pursuant
to Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased pursuant to the provisions hereof or forfeited pursuant to the
provisions of the Performance Vesting Agreement. "Executive Securities" refers
only to Executive Securities under this Agreement and does not in any way refer
to any securities referred to as Executive Securities under any other executive
securities agreement between the Company and a Key Employee of the Company or
its Subsidiaries.
"EXEMPT TRANSFER" has the meaning set forth with respect
thereto in Section 4(c)(i).
"EXISTING INTEREST" has the meaning set forth with respect
thereto in the preamble.
"FAIR MARKET VALUE" has the meaning set forth with respect
thereto in Section 3(g).
"FAMILY GROUP" has the meaning set forth with respect thereto
in Section 4(c)(ii).
"FULLY VESTED SECURITIES" means Executive Securities which
both (i) are Time-Vested Securities and (ii) are not Un-Performance-Vested
Securities.
"IMPLIED VALUATION" has the meaning set forth with respect
thereto in Section 3(i).
"INTELLECTUAL PROPERTY" has the meaning set forth with respect
thereto in Section 5(b)(i).
"INVESTOR" has the meaning ascribed to such term in the Equity
Purchase Agreement.
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<PAGE>
"KEY EMPLOYEE" has the meaning set forth with respect thereto
in Section 3(c)(i).
"LLC AGREEMENT" means the limited liability company agreement
governing the affairs of the Company, as amended from time to time in accordance
with its terms.
"MDCP" means Madison Dearborn Capital Partners II, L.P., a
Delaware limited partnership.
"NONCOMPETE PERIOD" has the meaning set forth with respect
thereto in Section 6(c).
"ORIGINAL COST," as to any particular securities, shall mean
the initial price paid to the Company upon issuance of such securities (as such
price is equitably adjusted for any securities splits, securities dividends,
securities combinations, conversions, recapitalizations or reorganizations);
PROVIDED that with respect to any Common Units issued in exchange for Existing
Interests, the Original Cost of such Common Units shall be deemed to be $1.00
per Unit.
"PERFORMANCE-VESTED SECURITIES" means Performance Vesting
Securities that have performance vested pursuant to the terms of the Performance
Vesting Agreement.
"PERFORMANCE VESTING AGREEMENT" means that certain performance
vesting agreement of even date herewith, by and among the Company, certain Key
Employees (including Executive), and the Investors, as amended from time to time
in accordance with its terms.
"PERFORMANCE VESTING SECURITIES" means (i) the Common Units
specified in the Performance Vesting Agreement as subject to performance vesting
thereunder (regardless of whether such Common Units have or have not performance
vested pursuant to the terms thereof), and (ii) any securities issued directly
or indirectly with respect to any Performance Vesting Securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing;
PROVIDED that Performance Vesting Securities shall not include any Senior Units.
As to any particular securities constituting Performance Vesting Securities,
such securities shall cease to be Performance Vesting Securities when they have
been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased
pursuant to the provisions hereof or forfeited pursuant to the provisions of the
Performance Vesting Agreement.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED UNITS" means the Preferred Units of the Company,
having the rights and preferences set forth with respect thereto in the LLC
Agreement.
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<PAGE>
"PUBLIC OFFERING" means any underwritten sale of the company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1 (or
a successor form adopted by the Securities and Exchange Commission); provided
that the following shall not be considered a Public Offering: (i) any issuance
of common stock as consideration for a merger or acquisition, and (ii) any
issuance of common stock or rights to acquire common stock to existing
securityholders or to employees of the Company or its Subsidiaries on Form S-4
or Form S-8 (or a successor form adopted by the Securities and Exchange
Commission) or otherwise.
"PURCHASER SECURITIES" means (i) the Preferred Units issued to
all Purchasers (as defined in the Equity Purchase Agreement) pursuant to the
Equity Purchase Agreement, (ii) any Common Units issued upon conversion of the
Preferred Units referenced in clause (i), and (iii) any securities issued
directly or indirectly with respect to any Purchaser Securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing
securities; PROVIDED that Purchaser Securities shall not include any Senior
Units. As to any particular securities constituting Purchaser Securities, such
securities shall cease to be Purchaser Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased or
otherwise acquired by the Company or forfeited pursuant to the provisions of the
Performance Vesting Agreement. Any reference herein to a "majority of the
Purchaser Securities" or the "number of Purchaser Securities" for purposes of
comparison shall refer, with respect to any particular Investor Securities, to
the number of Common Units (or equivalent common equity securities of the
Company) then represented by such Purchaser Securities (on a fully diluted,
as-if-converted basis).
"QUALIFIED PUBLIC OFFERING" means a Public Offering where BOTH
(i) the proceeds (net of underwriting discounts and
commissions) received by the Company in exchange for its issuance of
shares of common stock in such Public Offering equal or exceed $60
million, AND
(ii) the price per share of common stock paid to the Company
in such Public Offering equals or exceeds the product of (x) 3.0 TIMES
(y) the quotient of (A) the aggregate capital contributions to the
Company under the Equity Purchase Agreement (including the initial
purchase price and all Subsequent Contributions (as defined in the
Equity Purchase Agreement)) made on or prior to the date of such Public
Offering with respect to all Purchaser Securities then outstanding,
DIVIDED BY (B) the number of shares of the Company's common stock
represented by all Purchaser Securities (on a fully diluted,
as-if-converted basis) outstanding immediately prior to the
consummation of such Public Offering.
"QUALIFIED SALE OF THE COMPANY" has the meaning set forth with
respect thereto in Section 2(b).
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<PAGE>
"REPURCHASE EVENT" has the meaning set forth with respect
thereto in Section 3(d).
"REPURCHASE NOTICE" has the meaning set forth with respect
thereto in Section 3(f).
"REPURCHASE PRICE" has the meaning set forth with respect
thereto in Section 3(e).
"SALE OF THE COMPANY" means the arm's length sale of the
Company to a third party or group of third parties acting in concert, pursuant
to which such party or parties acquire (i) equity securities of the Company
possessing the voting power under normal circumstances to control the Company,
or (ii) all or substantially all of the Company's assets determined on a
consolidated basis (in either case, whether by merger, consolidation, sale or
transfer of the Company's equity securities, or sale or transfer of the
Company's consolidated assets).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SECURITYHOLDERS AGREEMENT" means the securityholders
agreement of even date herewith entered into by and among the Company and
certain of its securityholders, as amended from time to time in accordance with
its terms.
"SENIOR UNITS" means the Company's Class A Senior Units,
Class B Senior Units, and Class C Senior Units.
"SIX-MONTH ANNIVERSARY DATE" has the meaning set forth with
respect thereto in Section 3(g)(iii).
"START-UP GROUP SECURITIES" means (i) the Common Units issued
to Lawrence F. DeGeorge pursuant to the Investor Securities Agreement (as
defined in under the Equity Purchase Agreement), (ii) the Common Units issued to
William H. Pearson and Richard N. Clevenger pursuant to their Executive
Securities Agreements (as defined in the Equity Purchase Agreement), and (iii)
any securities issued directly or indirectly with respect to any Start-Up Group
Securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization, or upon conversion or exercise
of any of the foregoing; PROVIDED that Start-Up Group Securities shall not
include any Senior Units. As to any particular securities constituting Start-Up
Group Securities, such securities shall cease to be Start-Up Group Securities
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased pursuant to the provisions of any Executive Securities Agreement
(as defined in the Equity Purchase Agreement) or forfeited pursuant to the
provisions of the Performance Vesting Agreement. Any reference herein to a
"majority of the Start-Up Group Securities" or the "number of Start-Up Group
Securities" for purposes of comparison shall refer, with respect to any
particular Start-Up Group Securities, to the number of Common Units (or
equivalent common equity securities of the Company) then
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<PAGE>
represented by such Start-Up Group Securities (on a fully diluted,
as-if-converted basis, but excluding any Start-Up Group Securities that are
Un-Performance-Vested Securities).
"START-UP PERIOD" means the period of time commencing on the
date hereof and ending on the earliest to occur of (i) the second anniversary of
the date hereof and (ii) the consummation of a Public Offering.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director, manager or general
partner of such limited liability company, partnership, association or other
business entity. For purposes of this Agreement, if the context does not
otherwise indicate in respect of which Person the term "SUBSIDIARY" is used, the
term "SUBSIDIARY" shall refer to any Subsidiary of the Company.
"TIME-VESTED SECURITIES" has the meaning set forth with
respect thereto in Section 2(a).
"TRANSFER" has the meaning set forth with respect thereto in
Section 4(c)(i)
"TYPE I REPURCHASE EVENT" has the meaning set forth with
respect thereto in Section (a).
"TYPE II REPURCHASE EVENT" has the meaning set forth with
respect thereto in Section 3(b).
"UN-PERFORMANCE-VESTED SECURITIES" means Performance Vesting
Securities that have not yet performance vested pursuant to the provisions of
the Performance Vesting Agreement.
"UN-TIME-VESTED SECURITIES" has the meaning set forth with
respect thereto in Section 2(a).
"VALUED SECURITIES" has the meaning set forth with respect
thereto in Section 3(g)(i).
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<PAGE>
8. MISCELLANEOUS PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Securities in violation of any provision of
this Agreement shall be void, and the Company shall not record such purported
Transfer on its books or treat any purported transferee of such Executive
Securities as the owner of such securities for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and related documents among the parties of even
date herewith and therewith embody the complete agreement and understanding
among the parties hereto and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, none of which need contain the signature of more than one party
hereto but each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind the parties hereto and their respective
successors and assigns and shall inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns, whether so
expressed or not.
(f) CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND EXHIBITS HERETO), EVEN
THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(g) REMEDIES. Each of the parties to this Agreement (including
the holders of Start-Up Group Securities, and any Key Employee to which the
Company assigns any of its repurchase rights under Section 3 hereof, as
third-party beneficiaries) shall be entitled to enforce its
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<PAGE>
rights under this Agreement specifically, to recover damages and costs
(including reasonable attorney's fees) caused by any breach of any provision of
this Agreement and to exercise all other rights existing in its favor. The
parties hereto agree and acknowledge that money damages would not be an adequate
remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or deposit) for specific performance
and/or other injunctive relief in order to enforce or prevent any violations of
the provisions of this Agreement.
(h) AMENDMENT, MODIFICATION, OR WAIVER. The provisions of this
Agreement may be amended, modified, or waived only with the prior written
consent of the Company and the Executive.
(i) THIRD-PARTY BENEFICIARIES. The parties hereto acknowledge
and agree that certain provisions of this Agreement are intended for the benefit
of the holders of Start-Up Group Securities and any Key Employee to which the
Company assigns any of its repurchase rights under Section 3 hereof, that such
Persons are third-party beneficiaries of this Agreement, and that the provisions
of this Agreement shall be enforceable by such Persons as provided herein.
(j) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the State of Colorado, the Republic of France, or the jurisdiction of
the Company's principal office, the time period shall be automatically extended
to the business day immediately following such Saturday, Sunday or holiday.
(k) DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT
CONSTRUCTION. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Reference to any agreement, document, or instrument means such agreement,
document, or instrument as amended or otherwise modified from time to time in
accordance with the terms thereof, and if applicable hereof. The use of the
words "include" or "including" in this Agreement shall be by way of example
rather than by limitation. The use of the words "or," "either" or "any" shall
not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
(l) NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when (a) delivered
personally to the recipient, (b) telecopied to the recipient (with hard copy
sent to the recipient by reputable overnight courier service (charges prepaid)
that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a
business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by
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<PAGE>
reputable overnight courier service (charges prepaid). Such notices, demands and
other communications shall be sent to the following Persons at the following
addresses:
TO THE COMPANY:
4700 South Syracuse, Suite 1050
Denver, Colorado 80237
Attention: President
Telephone: (303) 741-4788
Telecopy: (303) 741-4823
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Mark B. Tresnowski, Esq.
Telephone: (312) 861-2385
Telecopy: (312) 861-2200
TO EXECUTIVE: at the address set forth in the Company's
records
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Holme Roberts & Owen LLP
1700 Lincoln Street
Suite 4100
Denver, Colorado 80203
Attention: W. Dean Salter, Esq.
Telephone: (303) 861-7000
Telecopy: (303) 866-0200
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(m) DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or
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<PAGE>
agreement or instrument was transmitted or communicated through the use of a
facsimile machine as a defense to the formation or enforceability of a contract
and each such party forever waives any such defense.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Executive Securities Agreement on the date first written above.
CABLETEL EUROPE LLC
By: /S/ JAMES E. DOVEY
-------------------------------
Its: CEO
-------------------------------
EXECUTIVE
/S/ JAMES E. DOVEY
-------------------------------
Name: James E. Dovey
(Signature page for Executive Securities Agreement)
<PAGE>
EXHIBIT 10.6
FIRST AMENDED AND RESTATED
EXECUTIVE SECURITIES AGREEMENT
(CLEVENGER)
THIS FIRST AMENDED AND RESTATED EXECUTIVE SECURITIES AGREEMENT
(this "AGREEMENT") is made as of January 28, 1999, by and between CompleTel LLC
(formerly known as CableTel Europe LLC), a Delaware limited liability company
(the "COMPANY"), and Richard N. Clevenger ("EXECUTIVE"). Capitalized terms used
but not otherwise defined herein have the meanings ascribed to such terms in
Section 7 hereof.
The Company and Executive are parties to an Executive
Securities Agreement dated as of May 18, 1998 (the "PRIOR AGREEMENT"), pursuant
to which Executive exchanged a then-existing ownership interest in the Company
(the "EXISTING INTEREST") for, and the Company issued to Executive, 3,044 Common
Units (of which 1,999 are not, and 1,045 are, subject to performance vesting
under the terms of the Performance Vesting Agreement). The parties hereto desire
for Executive to make a capital contribution to the Company in the amount of
$2,250 in exchange for the Company's issuance to Executive of an additional
2,250 Common Units (none of which will be subject to performance vesting under
the terms of the Performance Vesting Agreement). In furtherance thereof, the
parties hereto hereby agree to amend and restate the Prior Agreement as set
forth herein.
All of such Executive Securities are subject to time vesting
as set forth herein. In addition to time vesting, the portion of such Executive
Securities indicated above are also subject to performance vesting pursuant to
the terms of the Performance Vesting Agreement. All of the Executive Securities
held by Executive or his transferees are subject to certain restrictions on
transfer and, upon Executive's ceasing to be employed by the Company or its
Subsidiaries, certain repurchase options, each as set forth herein.
All of the Preferred Units issued pursuant to the Equity
Purchase Agreement (including those issued to Executive) are subject to certain
capital contribution obligations, restrictions on transfer, and other terms as
set forth in the Equity Purchase Agreement. In addition, such Preferred Units,
as well as the Executive Securities, are subject to certain voting agreements
and other provisions set forth herein and in the Securityholders Agreement. In
connection with the execution of the Prior Agreement, the Company's subsidiary,
CableTel Management, Inc., a Colorado corporation, and Executive entered into an
Employment Agreement dated as of May 18, 1998 (the "EMPLOYMENT AGREEMENT").
NOW, THEREFORE, in consideration of the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. EXCHANGE OF EXECUTIVE'S EXISTING INTEREST FOR
EXECUTIVE SECURITIES; CAPITAL CONTRIBUTION AND ISSUANCE OF ADDITIONAL EXECUTIVE
SECURITIES.
- 1 -
<PAGE>
(a) THE EXCHANGE TRANSACTION. On May 18, 1998 (the "PRIOR
DATE"), pursuant to the Prior Agreement and pursuant to a recapitalization of
the Company as then set forth in the LLC Agreement, Executive exchanged all of
his Existing Interest for, and the Company issued to Executive, 3,044 Common
Units (of which 1,999 are not, and 1,045 are, subject to performance vesting
under the terms of the Performance Vesting Agreement), each having the rights
and preferences set forth with respect thereto in the LLC Agreement.
(b) CAPITAL CONTRIBUTION AND ISSUANCE OF ADDITIONAL EXECUTIVE
SECURITIES. Upon execution of this Agreement, Executive shall make a capital
contribution to the Company in the amount of $2,250 in exchange for, and the
Company shall issue to Executive, an additional 2,250 Units (none of which will
be subject to performance vesting under the terms of the Performance Vesting
Agreement), each having the rights and preferences set forth with respect
thereto in the LLC Agreement.
(c) SECTION 83(B) ELECTION. Within 30 days after the exchange
transaction described in Section 1(a) above, Executive made an effective
election with the Internal Revenue Service under Section 83(b) of the Internal
Revenue Code of 1986, as amended, with respect to the Executive Securities
issued pursuant thereto. Within 30 days after the issuance of additional
Executive Securities described in Section 1(b) above, Executive shall make an
effective election with the Internal Revenue Service under Section 83(b) of the
Internal Revenue Code of 1986, as amended, with respect to the additional
Executive Securities issued hereunder.
(d) CONSTRUCTION OF OTHER AGREEMENTS. The parties hereto
acknowledge and agree that, pursuant to the express terms of the Equity Purchase
Agreement, the LLC Agreement, the Securityholders Agreement, the Performance
Vesting Agreement, and the Registration Agreement (as defined in the Equity
Purchase Agreement), this Agreement (like the Prior Agreement) is and shall be
considered an "EXECUTIVE SECURITIES AGREEMENT" as such term is used in such
agreements.
(e) REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. In connection
with the exchange for and issuance of the Executive Securities under the Prior
Agreement and the capital contribution for and issuance of the additional
Executive Securities hereunder, Executive represents and warrants to the Company
that:
(i) As of the Prior Date, prior to giving effect to
the transactions contemplated by the Prior Agreement, Executive owned
beneficially and of record all right, title, and interest in and to the
Existing Interest, free and clear of all liens, security interests,
encumbrances, and purchase rights or rights of first refusal.
(ii) The Executive Securities acquired by Executive
under the Prior Agreement and to be acquired by Executive pursuant to
this Agreement shall be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of
the Securities Act or any applicable state securities laws, and the
Executive Securities shall not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
- 2 -
<PAGE>
(iii) Executive will serve as a management employee
of the Company and its Subsidiaries, is sophisticated in financial
matters and is able to evaluate the risks and benefits of the
investment in the Executive Securities.
(iv) Executive is able to bear the economic risk of
his investment in the Executive Securities for an indefinite period of
time and is aware that transfer of the Executive Securities may not be
possible because (A) such transfer is subject to contractual
restrictions on transfer set forth herein, in the Securityholders
Agreement, and in the Performance Vesting Agreement, and (B) the
Executive Securities have not been registered under the Securities Act
or any applicable state securities laws and, therefore, cannot be sold
unless subsequently registered under the Securities Act and such
applicable state securities laws or an exemption from such registration
is available.
(v) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of
the offering of the Executive Securities issued hereunder and has had
full access to such other information concerning the Company as he has
requested.
(vi) This Agreement, the LLC Agreement, the
Securityholders Agreement, the Performance Vesting Agreement, and the
other agreements contemplated thereby of even date therewith constitute
the legal, valid and binding obligations of Executive, enforceable in
accordance with their terms, and the execution, delivery and
performance of such agreements by Executive and Executive's employment
with the Company and its Subsidiaries do not and shall not conflict
with, violate or cause a breach of any agreement, contract or
instrument to which Executive is a party or by which he is bound or any
judgment, order or decree to which Executive is subject.
(f) ACKNOWLEDGMENT BY EXECUTIVE. As an inducement to the
Company to enter into this Agreement, and as a condition thereto, Executive
acknowledges and agrees that none of the execution and delivery of this
Agreement, the issuance of the Executive Securities to Executive, or Executive's
status as a holder of Executive Securities, shall:
(i) entitle Executive to remain in the employment of
the Company and its Subsidiaries or affect the right of the Company or
its Subsidiaries to terminate Executive's employment at any time and
for any reason as permitted by the Employment Agreement; or
(ii) impose upon the Company any duty or obligation
to disclose to Executive, or create in Executive any right to be
advised of, any material information regarding the Company and its
Subsidiaries at any time prior to, upon or in connection with the
repurchase of any Executive Securities upon the termination of
Executive's employment with the Company and its Subsidiaries or as
otherwise provided hereunder.
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<PAGE>
2. TIME VESTING OF EXECUTIVE SECURITIES.
(a) TIME VESTING SCHEDULE. Except as otherwise provided
herein, an amount of Un-Time-Vested Securities (as defined below) shall time
vest on the date hereof and on each of the first four anniversaries of the Prior
Date, such that the Executive Securities shall be time vested on each such date
in accordance with the following schedule:
<TABLE>
<CAPTION>
Cumulative Percentage of
Date Executive Securities
Time Vested on Such Date
<S> <C>
The date hereof 30%
The first anniversary of the Prior Date 47.5%
The second anniversary of the Prior Date 65%
The third anniversary of the Prior Date 82.5%
The fourth anniversary of the Prior Date 100%
</TABLE>
Notwithstanding the foregoing sentence, the above time vesting schedule shall
cease and no Un-Time-Vested Securities (as defined below) shall time vest after
the date on which Executive's employment with the Company and its Subsidiaries
terminates for any reason. Executive Securities which have become time vested
pursuant to this Section 2 are referred to herein as "TIME-VESTED SECURITIES,"
and all other Executive Securities are referred to herein as "UN-TIME-VESTED
SECURITIES."
(b) 100% ACCELERATION UPON A QUALIFIED SALE OF THE COMPANY.
All Un-Time-Vested Securities shall become Time-Vested Securities in connection
with the consummation of a Qualified Sale of the Company, so long as Executive
is employed by the Company or any of its Subsidiaries on the date of such sale.
For purposes hereof, a "QUALIFIED SALE OF THE COMPANY" means a Sale of the
Company in which the consideration paid in such sale for at least 50% of the
Company's outstanding equity securities or of the Company's consolidated assets
consists of cash and/or publicly traded equity securities (E.G., 66.7% of the
consideration for such Sale of the Company would have to consist of cash and/or
publicly traded equity securities if only 75% of the Company's outstanding
equity securities were sold in such transaction).
(c) 100% ACCELERATION UPON A SALE OF THE COMPANY (OTHER THAN A
QUALIFIED SALE OF THE COMPANY) WITH NO CONTINUING COMPARABLE TIME VESTING
ARRANGEMENT. In the event of a Sale of the Company (other than a Qualified Sale
of the Company), the above vesting schedule will not accelerate as a result of
such Sale of the Company; PROVIDED that if the surviving or acquiring Person(s)
in such Sale of the Company fails or declines either to (i) continue after such
Sale of the Company to allow Executive to hold his Un-Time-Vested Securities
subject to the time vesting and repurchase provisions hereof, or (ii) grant to
Executive the number of securities in the surviving or acquiring Person(s) that
Executive would have received in such Sale of the Company in exchange for
Executive's Un-Time-Vested Securities if such securities had instead been
Time-Vested
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<PAGE>
Securities, subject to ongoing time vesting and repurchase arrangements
substantially comparable to those set forth herein (as such comparability is
determined in good faith by the Board), then all Un-Time-Vested Securities shall
become Time-Vested Securities in connection with the consummation of such Sale
of the Company, so long as Executive is employed by the Company or any of its
Subsidiaries on the date of such sale.
(d) ONE-YEAR ACCELERATION UPON A QUALIFIED PUBLIC OFFERING.
Upon the consummation of a Qualified Public Offering, and so long as Executive
is employed by the Company or any of its Subsidiaries on the closing date of
such offering, there will time vest the amount of Un-Time-Vested Securities
which were scheduled to time vest within the 365 days following such closing
date (and the remaining Un-Time-Vested Securities, if any, shall continue to
time vest 17.5% on each anniversary of the Prior Date in accordance with clause
(a) above, such that the time vesting schedule set forth in paragraph (a) above
shall have been effectively accelerated by one year).
(e) TIME VESTING AND PERFORMANCE VESTING.
(i) INDEPENDENCE OF TIME AND PERFORMANCE VESTING. The
Company and Executive acknowledge that the Executive Securities
constituting Performance Vesting Securities are subject, in addition to
time vesting under this Section 2, to performance vesting as set forth
in the Performance Vesting Agreement. The time vesting provisions of
this Section 2 operate independently of the performance vesting
provisions under the Performance Vesting Agreement. As such, (A) the
terms "Time-Vested Securities" and "Un-Time-Vested Securities" as used
herein refer only to whether particular Executive Securities have time
vested in accordance with the terms of this Section 2 and do not
indicate whether such Executive Securities that constitute Performance
Vesting Securities have or have not also performance vested under the
Performance Vesting Agreement, and (B) the terms "Performance-Vested
Securities" and "Un-Performance-Vested Securities" (each defined below)
as used herein refer only to whether particular Performance Vesting
Securities have performance vested in accordance with the terms of the
Performance Vesting Agreement and do not indicate whether such
Performance Vesting Securities have or have not also time vested under
this Section 2.
(ii) APPLICATION OF TIME VESTING. Whenever
Un-Time-Vested Securities time vest pursuant to the terms of this
Section 2, the Un-Time-Vested Securities that are not Performance
Vesting Securities, on the one hand, and the Un-Time-Vested Securities
that are Performance Vesting Securities, on the other hand, will each
time vest on a pro rata basis based on the number of each such type of
securities then outstanding. Of such Un-Time-Vested Securities
constituting Performance Vesting Securities which are to vest, the
Un-Time-Vested Securities that are Performance-Vested Securities shall
be time vested prior to any Un-Time-Vested Securities that are
Un-Performance-Vested Securities being time vested.
(iii) APPLICATION OF PERFORMANCE VESTING. Whenever
Un-Performance-Vested Securities performance vest pursuant to the terms
of the Performance Vesting
- 5 -
<PAGE>
Agreement, the Un-Performance-Vested Securities that are Time-Vested
Securities shall be performance vested prior to any
Un-Performance-Vested Securities that are Un-Time-Vested Securities
being performance vested.
(f) 100% ACCELERATION UPON CERTAIN TERMINATION OF EMPLOYMENT.
If Executive's employment with the Company is terminated by the Company without
Cause and not as a result of Nonperformance (as defined in the Employment
Agreement), all Un-Time-Vested Securities shall become Time-Vested Securities in
connection with such termination.
3. REPURCHASE OPTIONS.
(a) REPURCHASE OPTIONS UPON DEATH, DISABILITY, OR TERMINATION
WITHOUT CAUSE. If Executive ceases to be employed by the Company and its
Subsidiaries by reason of Executive's death, Disability, or a termination by the
Company without Cause (such cessation of employment, a "TYPE I REPURCHASE
EVENT"), the Executive Securities then in existence (whether held by Executive
or one or more of Executive's transferees) will be subject to repurchase as set
forth below:
(i) UN-TIME-VESTED SECURITIES. The Company (by action
of the Board) may elect to purchase all or any portion of the Executive
Securities constituting Un-Time-Vested Securities by delivering a
Repurchase Notice to the holder or holders of the Executive Securities
at any time within 30 days after the Type I Repurchase Event.
(ii) TIME-VESTED SECURITIES THAT ARE PERFORMANCE
VESTING SECURITIES. The Company (by action of the Board) may elect to
purchase all or any portion of the Time-Vested Securities that are
Performance Vesting Securities by delivering a Repurchase Notice to the
holder or holders of the Executive Securities at any time within 30
days after the Type I Repurchase Event.
(iii) TIME-VESTED SECURITIES, OTHER THAN PERFORMANCE
VESTING SECURITIES, WHERE TERMINATION OCCURS DURING START-UP PERIOD. If
a Type I Repurchase Event occurs at any time during the Start-Up
Period, the holders of Start-Up Group Securities shall have the right
to purchase all or any portion (but in any event not more than 75%) of
the Time-Vested Securities that are not Performance Vesting Securities
by delivering a Repurchase Notice to the holder or holders of the
Executive Securities at any time prior to the fourth anniversary of the
Prior Date. All repurchases pursuant to the immediately preceding
sentence shall be pro rata among the holders of Start-Up Group
Securities electing such a repurchase based on the number of Start-Up
Group Securities held by each such holder, or on such other basis as
agreed to by the holders of Start-Up Group Securities. If Executive at
any time breaches in any material respect the provisions of Section 5
(Confidentiality) or Section 6 (Noncompetition and Nonsolicitation)
hereof, the Company shall have (A) upon giving written notice to the
holders of Start-Up Group Securities affording them 20 days in which to
exercise any of their remaining repurchase rights pursuant to this
subparagraph (iii), the right to purchase all or any portion of the
Time-Vested Securities (other than Performance Vesting Securities) that
the holders of Start-Up Group Securities have not elected to
- 6 -
<PAGE>
repurchase, and (B) the right to purchase all or any portion of the 25%
of such Time-Vested Securities that the holders of Start-Up Group
Securities could not elect to repurchase, in each case by delivering a
Repurchase Notice to the holder or holders of Executive Securities at
any time prior to the six-month anniversary of the date of such breach.
(iv) TIME-VESTED SECURITIES, OTHER THAN PERFORMANCE
VESTING SECURITIES, WHERE TERMINATION OCCURS AFTER START-UP PERIOD. If
a Type I Repurchase Event occurs at any time after the Start-Up Period,
the Company shall have the right to purchase all or any portion of the
Time-Vested Securities that are not Performance Vesting Securities by
delivering a Repurchase Notice to the holder or holders of the
Executive Securities at any time within 30 days after the Type I
Repurchase Event.
(b) REPURCHASE OPTION UPON TERMINATION OTHER THAN BY DEATH,
DISABILITY, OR TERMINATION WITHOUT CAUSE. If Executive ceases to be employed by
the Company and its Subsidiaries for any reason other than Executive's death,
Disability, or a termination by the Company without Cause (such cessation of
employment, a "TYPE II REPURCHASE EVENT"), the Company (by action of the Board)
may elect to purchase all or any portion of the Executive Securities then in
existence (whether held by Executive or one or more of Executive's transferees)
by delivering a Repurchase Notice to the holder or holders of the Executive
Securities at any time within 30 days after the Type II Repurchase Event.
(c) ASSIGNMENT OF REPURCHASE RIGHTS UNDER SECTION 3(a)(iii).
(i) Upon any Type I Repurchase Event giving rise to a
right of the holders of Start-Up Group Securities to purchase
Time-Vested Securities (other than Performance Vesting Securities)
under Section 3(a)(iii) hereof, if the Board and the holders of at
least 80% of the Purchaser Securities then outstanding determine within
six months after the occurrence of the Type I Repurchase Event that it
would be in the best interests of the Company for all or any portion of
such Time-Vested Securities to be available for issuance to one or more
management or other key employees (each a "KEY EMPLOYEE") of the
Company or any of its Subsidiaries, then the Company shall have the
right to require the holders of Start-Up Group Securities to assign to
the Company their rights to repurchase such Time-Vested Securities
under Section 3(a)(iii) (and by so requiring the Company shall be
deemed to have elected to exercise such assigned repurchase rights).
Any assignment of repurchase rights pursuant to the immediately
preceding sentence shall be made pro rata among all holders of Start-Up
Group Securities based on the number of Start-Up Group Securities held
by each such holder, or on such other basis as agreed to by the holders
of Start-Up Group Securities.
(ii) Each holder of Start-Up Group Securities shall
have the right to assign all or any portion of its repurchase rights
under Section 3(a)(iii) hereof to the Company. Upon the vote of the
holders of a majority of the Start-Up Group Securities then
outstanding, all holders of Start-Up Group Securities will assign their
repurchase rights under Section 3(a)(iii) hereof to the Company.
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<PAGE>
(iii) If any holder of Start-Up Group Securities
assigns its repurchase rights under Section 3(a)(iii) to the Company,
and the Company fails to exercise such assigned repurchase rights, such
holder shall once again have the right to exercise (or assign) such
rights.
(d) ASSIGNMENT OF COMPANY'S REPURCHASE RIGHTS. Upon any Type I
Repurchase Event or Type II Repurchase Event (a "REPURCHASE EVENT"), the Company
(by action of the Board) shall have the right to assign all or any portion of
its repurchase rights hereunder to any Key Employee of the Company or its
Subsidiaries; PROVIDED that the Company may not assign its rights under Section
3(h) below to pay all or part of the Repurchase Price (as defined below) for
Executive Securities repurchased hereunder by (i) offsetting debts owed by
Executive to the Company or (ii) issuing Class A Senior Units or a promissory
note. If the Company assigns any of its repurchase rights to such a Key
Employee, and such Key Employee fails to exercise such assigned repurchase
rights, the Company shall once again have the right to exercise (or assign) such
rights.
(e) REPURCHASE PRICE. The repurchase price (the "REPURCHASE
PRICE") for any Time-Vested Securities to be repurchased hereunder shall be the
Fair Market Value (as determined below) of such securities on the date of the
Repurchase Event giving rise to such repurchase. The Repurchase Price of any
Un-Time-Vested Securities to be repurchased hereunder shall be the Original Cost
of such securities (with securities having a lower Original Cost being subject
to repurchase prior to securities with a higher Original Cost).
(f) REPURCHASE NOTICE. Each "REPURCHASE NOTICE" delivered
hereunder shall set forth the amount, type, and class of Executive Securities
(including, if applicable, the amount of Un-Time-Vested Securities and/or
Time-Vested Securities) to be acquired from each such holder and the aggregate
consideration to be paid for such Executive Securities. The Executive Securities
to be repurchased pursuant to any Repurchase Notice shall first be satisfied to
the extent possible from the Executive Securities held by Executive at the time
of delivery of such Repurchase Notice. If the amount of Executive Securities
then held by Executive is less than the total amount of Executive Securities
that have been elected to be purchased pursuant to such Repurchase Notice, the
electing party or parties shall purchase the remaining securities elected to be
purchased from the other holder(s) of Executive Securities, pro rata according
to the amount of Executive Securities held of record by each such other holder
at the time of delivery of such Repurchase Notice. The amount of Un-Time-Vested
Securities and Time-Vested Securities repurchased hereunder shall be deemed to
be allocated among Executive and the other holders of repurchased Executive
Securities (if any) pro rata according to the amount of Executive Securities to
be purchased from such persons.
(g) FAIR MARKET VALUE OF REPURCHASED EXECUTIVE SECURITIES.
(i) The "FAIR MARKET VALUE" of Time-Vested Securities
subject to repurchase hereunder (the "VALUED SECURITIES") shall be
determined in accordance with this paragraph (g).
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<PAGE>
(ii) A majority interest of the Company and/or the
holders of Start-Up Group Securities and/or any assignees of the
Company's repurchase rights ("majority" determined based on the amount
of Valued Securities to be purchased by each), on the one hand, and the
holders of a majority of the Valued Securities to be repurchased, on
the other hand, shall attempt in good faith to agree on the Fair Market
Value of the Valued Securities to be repurchased. Any agreement reached
by such Persons shall be final and binding on all parties hereto.
(iii) If such Persons are unable to reach such
agreement within 20 days after the giving of any Repurchase Notice, the
Fair Market Value of any Valued Securities that are publicly traded
shall be the average, over a period of 21 days consisting of the date
of the Repurchase Event and the 20 consecutive business days prior to
that date, of the average of the closing prices of the sales of such
securities on the primary securities exchange on which such securities
may at that time be listed, or, if there have been no sales on such
exchange on any day, the average of the highest bid and lowest asked
prices on such exchange at the end of such day, or, if on any day such
securities are not so listed, the average of the representative bid and
asked prices quoted in the Nasdaq System as of 4:00 P.M., New York
time, or, if on any day such securities are not quoted in the Nasdaq
System, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar successor organization.
If the Fair Market Value of any Valued Securities on the date that is
180 days after the date of the Repurchase Event (the "SIX-MONTH
ANNIVERSARY DATE") (determined as described in the immediately
preceding sentence with respect to such Six-Month Anniversary Date,
rather than with respect to the date of the Repurchase Event) is
greater than the Fair Market Value of such Valued Securities determined
as described in the immediately preceding sentence with respect to the
date of the Repurchase Event, then the "Fair Market Value" of such
publicly traded Valued Securities shall be the Fair Market Value
determined as of the Six-Month Anniversary Date.
(iv) If such Persons are unable to reach agreement
pursuant to subparagraph (ii) within 20 days after the giving of such
Repurchase Notice, and to the extent any Valued Securities are not
publicly traded:
(A) A majority interest of the Company
and/or the holders of Start-Up Group Securities and/or any assignees
of the Company's repurchase rights ("majority" determined based on the
amount of Valued Securities to be purchased by each), on the one hand,
and the holders of a majority of the Valued Securities to be
repurchased, on the other hand, shall each, within 10 days thereafter,
choose one investment banker or other appraiser with experience in
valuing companies such as the Company (and if the Valued Securities
include any Un-Performance-Vested Securities, experienced in valuing
contingent or derivative assets), and the two investment
bankers/appraisers so selected shall together select a third investment
banker/appraiser similarly qualified.
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<PAGE>
(B) The three investment bankers/appraisers
shall first appraise the fair market value of the Company's equity
(based on the assumption of an orderly, arm's length sale (structured
to produce the highest price to the equityholders of the Company,
whether such structure is a merger, combination, sale of equity
securities, sale of assets, or otherwise) to a willing unaffiliated
buyer (or to a willing affiliated strategic buyer, PROVIDED that the
investment bankers/appraisers shall not consider any premium that such
affiliated strategic buyer would be willing to pay to the extent such
premium is attributable solely to such Person's affiliation with the
Company, unless the Company or its equityholders have received a fully
financed, firm commitment offer (with no material conditions) from such
affiliated strategic buyer to purchase a majority (based on common
equity equivalents) of the Company's outstanding equity at a price that
includes such premium, IT BEING UNDERSTOOD, HOWEVER, that the
investment bankers/appraisers shall consider, without the need for such
a firm commitment offer, the premium, if any, that is attributable to
such Person's future expected synergies to be generated by combining
such Person's operations with those of the Company and its Subsidiaries
if such Person were to acquire the Company). The three investment
bankers/appraisers shall then appraise the fair market value of such
non-publicly-traded Valued Securities as follows:
1) the fair market value of each
Common Unit (or equivalent common equity security) that is not
an Un-Performance-Vested Security shall be equal to the fair
market value of the Company's equity DIVIDED BY the total
number of Common Units (or equivalent common equity
securities) outstanding on the date of the Repurchase Event
(determined on a fully diluted, as-if-converted basis, but
excluding all Un-Performance-Vested Securities);
2) the fair market value of any
Un-Performance-Vested Securities shall reflect (x) the
expected market value of such securities at such future time
as such securities are expected to become performance vested
under the terms of the Performance Vesting Agreement,
appropriately discounted to its present value as of the
relevant valuation date based upon the amount of time from the
relevant valuation date until the date on which such
Un-Performance-Vested Securities are expected to performance
vest (if at all), and (y) the magnitude of the risk that such
securities may never become performance vested under the terms
of the Performance Vesting Agreement; and
3) the fair market value of any
other non-publicly-traded Valued Securities shall be the fair
value of such securities, determined on the basis of an
orderly, arm's length sale (structured to produce the highest
for such securities) to a willing, unaffiliated buyer, taking
into account all relevant factors determinative of value.
The three investment bankers/appraisers shall, within thirty days of
their retention, provide the written results of such appraisals to the
Company and/or the holders of Start-Up Group
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<PAGE>
Securities and/or the Company's assignees, and to each of the holders
of the Valued Securities to be repurchased.
(C) The "FAIR MARKET VALUE" of the
non-publicly-traded Valued Securities to be repurchased shall be the
average of the two appraisals closest to each other, and such amount
shall be final and binding on all parties hereto; PROVIDED that any
Person electing to purchase Executive Securities hereunder may at any
time within five days after receiving written notice of such
determination rescind its prior exercise of such Person's repurchase
option by giving written notice of such revocation to the holder or
holders of the Executive Securities to be repurchased, and upon such
revocation the revoking party will be treated as if it had never
exercised such repurchase option (it being understood that such
revoking party may not then exercise such repurchase option again with
respect to the same Repurchase Event).
(D) A majority interest of the Company
and/or the holders of Start- Up Group Securities and/or any assignees
of the Company's repurchase rights ("majority" determined based on the
amount of Valued Securities to be purchased by each), on the one hand,
and the holders of a majority of the Valued Securities to be
repurchased, on the other hand, will each pay the costs of their own
chosen appraiser and 50% of the costs of the third appraiser.
(h) CLOSING OF EACH REPURCHASE. Within 10 days after the
Repurchase Price for the Executive Securities to be repurchased at any
repurchase hereunder has been determined, the Company shall send a notice to
each holder of Executive Securities setting forth the consideration to be paid
for such securities and the time and place for the closing of the transaction,
which date shall not be more than 30 days nor less than five days after the
delivery of such notice. At each such closing, the holders of Executive
Securities shall deliver all certificates (if any exist) evidencing the
Executive Securities to be repurchased at such closing to the purchaser or
purchasers thereof, and such purchaser or purchasers shall pay for the Executive
Securities to be purchased at such closing by delivery of a check or wire
transfer of immediately available funds in the aggregate amount of the
Repurchase Price for such Executive Securities; PROVIDED that if the Company is
to purchase any Executive Securities from Executive at such closing, the Company
may elect (by action of the Board) to pay all or any portion of the Repurchase
Price for such Executive Securities by setting off against such Repurchase Price
any bona fide debts owed (regardless of whether then due and payable) by
Executive to the Company or any of its Subsidiaries; AND PROVIDED FURTHER that
if the Company is to purchase any Executive Securities at such closing, the
Company may elect (by action of the Board) to pay all or any portion of the
Repurchase Price for such Executive Securities as follows:
(i) in accordance with the LLC Agreement, by issuing
in exchange for such Executive Securities an equal number of Class A
Senior Units, and each such Class A Senior Unit issued in connection
with such repurchase shall be deemed as of the date of such repurchase
to have capital contributions to the Company made with respect to such
Class A Senior Unit equal to the Repurchase Price for the Executive
Securities in exchange for which such Class A Senior Unit was issued;
or
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#520873
<PAGE>
(ii) if the Company has prior to the date of such
repurchase converted into a corporation or other corporate form, in the
form of a promissory note, which promissory note shall be subordinated
to all of the Company's senior debt obligations either then or
thereafter incurred, shall earn simple annual interest at a rate of 8%
per annum, shall have all principal and accrued interest due and
payable upon maturity, and shall mature upon the earliest to occur of
the Company's initial Public Offering (if such initial Public Offering
has not occurred prior to the issuance of such promissory note), a Sale
of the Company, or the fourth anniversary of the issuance of such
promissory note.
The purchasers of Executive Securities hereunder shall be entitled to receive
customary representations and warranties from the sellers, including
representations and warranties regarding good title to such securities, free and
clear of any liens or encumbrances.
(i) GENERAL LOOK-BACK RIGHTS. If (i) upon any Type I
Repurchase Event, the Company repurchases any Valued Securities pursuant to the
terms of this Section 3, (ii) a Sale of the Company or the Company's initial
Public Offering is consummated within the 1-year period commencing on the date
of such Type I Repurchase Event, and (iii) the value of the Company's equity
implied by the sale price of such Sale of the Company, or the pre-money
valuation of the Company's equity (I.E., the value of the Company's equity prior
to giving effect to such initial Public Offering) implied by such initial Public
Offering, (as applicable, the "IMPLIED VALUATION") is greater than the value of
the Company's equity actually utilized to determine the Fair Market Value of
such repurchased Valued Securities pursuant to Section 3(g), then the Company
shall in connection with such Sale of the Company or initial Public Offering pay
to each Person from whom such Valued Securities were repurchased the difference
of (x) the Fair Market Value of such Valued Securities purchased by the Company
from such Person that would have been calculated pursuant to Section 3(g) had
the Implied Valuation been used as the Company's equity value, MINUS (y) the
Repurchase Price actually paid for such Valued Securities purchased by the
Company from such Person. The Company shall have the right to pay such amounts
in the same manner or form specified in Section 3(h) as the Company may pay the
Repurchase Price for any Executive Securities at the closing of any repurchase
hereunder.
(j) SPECIAL LOOK-BACK RIGHTS. If (i) upon any termination of
Executive's employment by the Company on or prior to the first anniversary of
the Prior Date, where such termination is not for Cause or as a result of
Nonperformance (as defined in the Employment Agreement), the Company repurchases
any Valued Securities pursuant to the terms of this Section 3, and (ii) the fair
market value of the Company's equity (determined under Section 3(g)(iv)(B)) on
the second anniversary of such termination (the "TWO-YEAR VALUE") is greater
than the value of the Company's equity actually utilized to determine the Fair
Market Value of such repurchased Valued Securities pursuant to Section 3(g),
then the Company shall within 60 days after such second anniversary pay to each
Person from whom such Valued Securities were repurchased as a result of such
termination, the difference of (x) the Fair Market Value of such Valued
Securities purchased by the Company from such Person that would have been
calculated pursuant to Section 3(g) had the Two-Year Value been used as the
Company's equity value, MINUS (y) the Repurchase Price actually paid for such
Valued Securities purchased by the Company from such Person. The Company shall
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have the right to pay such amounts in the same manner or form specified in
Section 3(h) as the Company may pay the Repurchase Price for any Executive
Securities at the closing of any repurchase hereunder.
(k) RESTRICTIONS. Notwithstanding anything to the contrary
contained in this Agreement, all repurchases of Executive Securities by the
Company shall be subject to applicable restrictions contained in the Delaware
General Corporation Law, the Delaware Limited Liability Company Act and in the
Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Securities hereunder
which the Company is otherwise entitled to make, the time periods provided in
this paragraph 3 shall be suspended, and the Company may make such repurchases
as soon as it is permitted to do so under such restrictions, unless by such time
such repurchase option has terminated pursuant to paragraph (l) below.
(l) TERMINATION OF REPURCHASE OPTIONS. The repurchase
provisions under this paragraph 3 (and the rights and obligations created
thereby) shall cease to apply to all Time-Vested Securities upon the
consummation of a Qualified Sale of the Company or a Qualified Public Offering
(it being understood that (i) such provisions, rights, and obligations shall
continue to apply to all Un-Time-Vested Securities until such time as they
become Time-Vested Securities in accordance with the terms hereof, and (ii) the
forfeiture provisions of the Performance Vesting Agreement shall continue to
apply to all Un-Performance-Vested Securities until such time as they become
Performance-Vested Securities in accordance with the terms of the Performance
Vesting Agreement).
4. RESTRICTIONS ON TRANSFER.
(a) OPINION OF VALID TRANSFER. In addition to any other
restrictions on transfer imposed by this Agreement, the Securityholders
Agreement, the Performance Vesting Agreement, or the LLC Agreement, no holder of
Executive Securities may sell, transfer or dispose of any Executive Securities
(except pursuant to an effective registration statement under the Securities
Act) without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Company) that neither registration nor
qualification under the Securities Act or applicable state securities laws is
required in connection with such transfer.
(b) RESTRICTIVE LEGEND. The certificates representing
Executive Securities shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER.
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, VESTING PROVISIONS, AND REPURCHASE
OPTIONS SET FORTH IN AN EXECUTIVE SECURITIES AGREEMENT BETWEEN THE
ISSUER OF SUCH SECURITIES (THE "ISSUER") AND THE INITIAL HOLDER OF SUCH
SECURITIES, AS AMENDED FROM TIME TO TIME. A COPY OF SUCH AGREEMENT MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
The legend set forth above shall be removed from the certificates evidencing any
securities which cease to be Executive Securities.
(c) RETENTION OF EXECUTIVE SECURITIES.
(i) Executive shall not sell, transfer, assign,
pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily or by operation of law) any
interest in any Executive Securities (a "TRANSFER"), except (x) with
respect to Un-Performance-Vested Securities, pursuant to the repurchase
provisions of Section 3 hereof or the forfeiture provisions of the
Performance Vesting Agreement (each, an "EXEMPT TRANSFER"), or (y) with
respect to all other Executive Securities, pursuant to (A) the
repurchase provisions of Section 3 hereof, (B) the "Participation
Rights" provisions set forth in the Securityholders Agreement, or (C) a
Sale of the Company (each of (A) through (C), an "EXEMPT TRANSFER").
(ii) The restrictions contained in this paragraph (c)
shall not apply with respect to transfers of Executive Securities
(other than Un-Performance-Vested Securities) (A) pursuant to
applicable laws of descent and distribution or (B) among Executive's
Family Group; PROVIDED that the restrictions contained in this
paragraph shall continue to be applicable to the Executive Securities
after any such Transfer, the transferees of such Executive Securities
shall have agreed in writing to be bound by the provisions of this
Agreement with respect to the Executive Securities so transferred, and
(prior to the death of Executive) each such transferee of Executive
Securities shall have entered into proxies and other agreements
satisfactory to the holders of a majority of the Purchaser Securities
pursuant to which Executive shall have the sole right to vote such
Executive Securities for all purposes (subject to any applicable voting
agreements set forth herein or in the Securityholders Agreement). For
purposes of this Agreement, "FAMILY GROUP" means Executive's spouse,
siblings and descendants (whether natural or adopted) and any of such
descendants' spouses, any trust which at the time of such Transfer and
at all times thereafter is and remains solely for the benefit of
Executive and/or Executive's spouse, siblings, and/or descendants
and/or such descendants' spouses, and any family partnership the
partners of which consist solely of Executive, such spouse, such
siblings, such descendants, such descendants' spouses, and/or such
trusts.
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<PAGE>
(iii) The restrictions on the transfer of Executive
Securities set forth in this paragraph (c) shall continue with respect
to each Executive Security following any Transfer thereof (other than
an Exempt Transfer); PROVIDED that upon the consummation of a Qualified
Public Offering, the restrictions set forth in this paragraph (c) shall
thereafter cease to apply to all Fully Vested Securities, it being
understood that such restrictions shall continue to apply to all other
Executive Securities until such time as they become Fully Vested
Securities.
5. CONFIDENTIALITY.
(a) NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION.
Executive shall not disclose or use at any time, either during his employment
with the Company and its Subsidiaries or thereafter, any Confidential
Information (as defined below) of which Executive is or becomes aware, whether
or not such information is developed by him, except to the extent that such
disclosure or use is directly related to and required by Executive's performance
of duties assigned to Executive by the Company and its Subsidiaries, or to the
extent such disclosure is expressly addressed by and is permissible under the
confidentiality provisions set forth in the Equity Purchase Agreement. Executive
shall take all appropriate steps to safeguard Confidential Information and to
protect it against disclosure, misuse, espionage, loss and theft. As used in
this Agreement, the term "CONFIDENTIAL INFORMATION" means information that is
not generally known to the public and that is used, developed or obtained by the
Company or its Subsidiaries in connection with their business, including but not
limited to (i) products or services, (ii) fees, costs and pricing structures,
(iii) designs, (iv) analysis, (v) drawings, photographs and reports, (vi)
computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customer and client information (including customer or
client lists), (xii) copyrightable works, (xiv) all technology and trade
secrets, (xv) business plans and financial models, and (xvi) all similar and
related information in whatever form. Confidential Information shall not include
any information that has been published in a form generally available to the
public prior to the date Executive proposes to disclose or use such information.
Information shall not be deemed to have been published merely because individual
portions of the information have been separately published, but only if all
material features constituting such information have been published in com-
bination.
(b) THE COMPANY'S OWNERSHIP OF INTELLECTUAL PROPERTY.
(i) ACKNOWLEDGMENT OF COMPANY OWNERSHIP. If Executive
as part of his activities on behalf of the Company and its Subsidiaries
generates, authors or contributes to any invention, design, new
development, device, product, method or process (whether or not
patentable or reduced to practice or constituting Confidential
Information), any copyrightable work (whether or not constituting
Confidential Information) or any other form of Confidential Information
relating directly or indirectly to the Company's and its Subsidiaries'
business as now or hereafter conducted (collectively, "INTELLECTUAL
PROPERTY"), Executive
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<PAGE>
acknowledges that such Intellectual Property is the exclusive property
of the Company and hereby assigns all right, title and interest in and
to such Intellectual Property to the Company. Any copyrightable work
prepared in whole or in part by Executive will be deemed "a work made
for hire" under Section 201(b) of the 1976 Copyright Act, and the
Company shall own all of the rights comprised by the copyright therein.
Executive shall promptly and fully disclose all Intellectual Property
to the Company and shall cooperate with the Company to protect the
Company's interests in and rights to such Intellectual Property
(including, without limitation, providing reasonable assistance in
securing patent protection and copyright registrations and executing
all documents as reasonably requested by the Company, whether such
requests occur prior to or after termination of Executive's employment
with the Company).
(ii) EXECUTIVE INVENTION. Executive understands that
paragraph (b)(i) of this Section regarding the Company's ownership of
Intellectual Property does not apply to any invention for which no
equipment, supplies, facilities or trade secret information of the
Company were used and which was developed entirely on Executive's own
time, unless (i) the invention relates to the business of the Company
or any of its Subsidiaries or to their actual or demonstrably
anticipated research or development or (ii) the invention results from
any work performed by Executive for the Company or any of its
Subsidiaries.
(c) DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. As
requested by the Company from time to time and upon the termination of
Executive's employment with the Company and its Subsidiaries for any reason,
Executive shall promptly deliver to the Company all copies and embodiments, in
whatever form, of all Confidential Information and Intellectual Property in
Executive's possession or within his control (including, but not limited to,
written records, notes, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes and all other
materials containing or constituting any Confidential Information or
Intellectual Property) irrespective of the location or form of such material
and, if requested by the Company, shall provide the Company with written
confirmation that all such materials have been delivered to the Company.
6. NONCOMPETITION AND NONSOLICITATION.
(a) NONCOMPETITION. Executive acknowledges and agrees with the
Company that in the course of his employment with the Company and its
Subsidiaries he shall become familiar with the Company's trade secrets and with
other Confidential Information concerning the Company and its Subsidiaries, that
Executive's services to the Company and its Subsidiaries are unique in nature
and of an extraordinary value to the Company, and that the Company would be
irreparably damaged if Executive were to provide similar services to any person
or entity competing with the Company or any of its Subsidiaries or engaged in
similar business. In consideration of and as an inducement to the Company's
entering into this Agreement and issuing the Executive Securities hereunder, and
in further consideration of Executive's compensation and severance payments
under Executive's employment arrangement with the Company and its Subsidiaries,
Executive accordingly covenants and agrees with the Company that during the
Noncompete Period (as defined below),
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<PAGE>
Executive shall not, directly or indirectly, either for himself or for any other
individual, corporation, partnership, joint venture or other entity, participate
in any business or enterprise that engages or proposes to engage in any business
conducted by the Company or any of its Subsidiaries (including, but not limited
to, the sale or provision of local switched dialtone telecommunication services)
in any geographical market in which the Company or any of its Subsidiaries
conducts business (or any geographical market with respect to which the Company
proposes in good faith to conduct business, as evidenced by an Approved Business
Plan or a Board resolution authorizing the Company to use its resources to
investigate or otherwise pursue an opportunity in such market). For purposes of
this Agreement, the term "participate in" shall include, without limitation,
having any direct or indirect interest in any corporation, partnership, joint
venture or other entity, whether as a sole proprietor, owner, stockholder,
partner, joint venturer, creditor or otherwise, or rendering any direct or
indirect service or assistance to any individual, corporation, partnership,
joint venture and other business entity (whether as a director, officer,
manager, supervisor, employee, agent, consultant or otherwise), other than
ownership of up to 2% of the outstanding stock of any class which is publicly
traded. Executive agrees that this covenant is reasonable with respect to its
duration, geographical area, and scope.
(b) NONSOLICITATION. During the Noncompete Period, Executive
shall not (i) induce or attempt to induce any employee of the Company or any of
its Subsidiaries to leave the employ of the Company and its Subsidiaries, or in
any way interfere with the relationship between the Company or any of its
Subsidiaries and any employee thereof, (ii) hire directly or through another
entity any person who was an employee of the Company or any of its Subsidiaries
at any time during the Noncompete Period, or (iii) induce or attempt to induce
any customer, supplier, licensee or other business relation of the Company or
any of its Subsidiaries to cease doing business with the Company and its
Subsidiaries, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company and its
Subsidiaries (including, without limitation, making any negative statements or
communications concerning the Company or any of its Subsidiaries).
(c) NONCOMPETE PERIOD. The "NONCOMPETE PERIOD" shall commence
on the date of the Prior Agreement and continue until the second anniversary of
the date Executive ceases to be employed by the Company and its Subsidiaries.
(d) JUDICIAL MODIFICATION. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or geographic area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment or decision may be appealed.
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<PAGE>
7. DEFINITIONS.
"AGREEMENT" has the meaning set forth with respect thereto in
the preamble.
"BOARD" means the board of managers of the LLC or, if the
Company is hereafter converted into a corporation or other entity form, the
board of directors or comparable governing body of the Company.
"CAUSE" means (A) any act by Executive, where in respect of
such act Executive is ultimately convicted or enters a plea of guilty or NOLO
CONTENDERE to a felony, (B) Executive's willful misconduct, gross negligence,
perpetration of or participation in a fraud, in each case where such acts are
materially injurious to the Company or any of its Subsidiaries or any affiliate
thereof, or (C) Executive's breach in any material respect of the provisions of
Section 5 (Confidentiality) or Section 6 (Noncompetition and Nonsolicitation)
hereof.
"CLASS A SENIOR UNITS" means the Class A Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLASS B SENIOR UNITS" means the Class B Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLASS C SENIOR UNITS" means the Class C Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"COMMON UNITS" means the Common Units of the Company, having
the rights and preferences set forth with respect thereto in the LLC Agreement.
"COMPANY" has the meaning set forth with respect thereto in
the preamble.
"CONFIDENTIAL INFORMATION" has the meaning set forth with
respect thereto in Section 5(a).
"DISABILITY" means any illness, accident, injury, physical or
mental incapacity or other disability, where such condition has rendered, or is
expected to render (as determined in the good faith judgment of the Board),
Executive unable or unfit to perform effectively the duties and obligations of
his employment or to participate effectively and actively in the management of
the Company for a period of at least 90 days.
"EQUITY PURCHASE AGREEMENT" means the equity purchase
agreement dated the Prior Date (and amended and restated as of the date hereof)
entered into by and among the Company and certain investors, as amended from
time to time in accordance with the terms thereof.
"EXECUTIVE" has the meaning set forth with respect thereto in
the preamble.
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<PAGE>
"EXECUTIVE SECURITIES" means (i) the Common Units issued to
Executive under the Prior Agreement and hereunder and (ii) any securities issued
directly or indirectly with respect to any Executive Securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing;
PROVIDED that Executive Securities shall not include any Senior Units. As to any
particular securities constituting Executive Securities, such securities shall
cease to be Executive Securities when they have been (a) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them, (b) distributed to the public through a broker, dealer
or market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force) or (c) repurchased pursuant to the provisions hereof or
forfeited pursuant to the provisions of the Performance Vesting Agreement.
"Executive Securities" refers only to Executive Securities under this Agreement
and does not in any way refer to any securities referred to as Executive
Securities under any other executive securities agreement between the Company
and a Key Employee of the Company or its Subsidiaries.
"EXEMPT TRANSFER" has the meaning set forth with respect
thereto in Section 4(c)(i).
"EXISTING INTEREST" has the meaning set forth with respect
thereto in the preamble.
"FAIR MARKET VALUE" has the meaning set forth with respect
thereto in Section 3(g).
"FAMILY GROUP" has the meaning set forth with respect thereto
in Section 4(c)(ii).
"FULLY VESTED SECURITIES" means Executive Securities which
both (i) are Time-Vested Securities and (ii) are not Un-Performance-Vested
Securities.
"IMPLIED VALUATION" has the meaning set forth with respect
thereto in Section 3(i).
"INTELLECTUAL PROPERTY" has the meaning set forth with respect
thereto in Section 5(b)(i).
"INVESTOR" has the meaning ascribed to such term in the Equity
Purchase Agreement.
"KEY EMPLOYEE" has the meaning set forth with respect thereto
in Section 3(c)(i).
"LLC AGREEMENT" means the limited liability company agreement
governing the affairs of the Company, as amended from time to time in accordance
with its terms.
"MDCP" means Madison Dearborn Capital Partners II, L.P., a
Delaware limited partnership.
"NONCOMPETE PERIOD" has the meaning set forth with respect
thereto in Section 6(c).
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<PAGE>
"ORIGINAL COST," as to any particular securities, shall mean
the initial price paid to the Company upon issuance of such securities (as such
price is equitably adjusted for any securities splits, securities dividends,
securities combinations, conversions, recapitalizations or reorganizations);
PROVIDED that with respect to any Common Units issued in exchange for Existing
Interests, the Original Cost of such Common Units shall be deemed to be $1.00
per Unit.
"PERFORMANCE-VESTED SECURITIES" means Performance Vesting
Securities that have performance vested pursuant to the terms of the Performance
Vesting Agreement.
"PERFORMANCE VESTING AGREEMENT" means that certain performance
vesting agreement dated the Prior Date (and amended and restated as of the date
hereof), by and among the Company, certain Key Employees (including Executive),
and the Investors, as amended from time to time in accordance with its terms.
"PERFORMANCE VESTING SECURITIES" means (i) the Common Units
specified in the Performance Vesting Agreement as subject to performance vesting
thereunder (regardless of whether such Common Units have or have not performance
vested pursuant to the terms thereof), and (ii) any securities issued directly
or indirectly with respect to any Performance Vesting Securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing;
PROVIDED that Performance Vesting Securities shall not include any Senior Units.
As to any particular securities constituting Performance Vesting Securities,
such securities shall cease to be Performance Vesting Securities when they have
been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased
pursuant to the provisions hereof or forfeited pursuant to the provisions of the
Performance Vesting Agreement.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED UNITS" means the Preferred Units of the Company,
having the rights and preferences set forth with respect thereto in the LLC
Agreement.
"PRIOR AGREEMENT" has the meaning set forth in the preamble.
"PRIOR DATE" has the meaning set forth in Section 1(a).
"PUBLIC OFFERING" means any underwritten sale of the company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1 (or
a successor form adopted by the Securities and Exchange Commission); provided
that the following shall not be considered a Public Offering: (i) any issuance
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<PAGE>
of common stock as consideration for a merger or acquisition, and (ii) any
issuance of common stock or rights to acquire common stock to existing
securityholders or to employees of the Company or its Subsidiaries on Form S-4
or Form S-8 (or a successor form adopted by the Securities and Exchange
Commission) or otherwise.
"PURCHASER SECURITIES" means (i) the Preferred Units issued to
all Purchasers (as defined in the Equity Purchase Agreement) pursuant to the
Equity Purchase Agreement, (ii) any Common Units issued upon conversion of the
Preferred Units referenced in clause (i), and (iii) any securities issued
directly or indirectly with respect to any Purchaser Securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing
securities; PROVIDED that Purchaser Securities shall not include any Senior
Units. As to any particular securities constituting Purchaser Securities, such
securities shall cease to be Purchaser Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased or
otherwise acquired by the Company or forfeited pursuant to the provisions of the
Performance Vesting Agreement. Any reference herein to a "majority of the
Purchaser Securities" or the "number of Purchaser Securities" for purposes of
comparison shall refer, with respect to any particular Investor Securities, to
the number of Common Units (or equivalent common equity securities of the
Company) then represented by such Purchaser Securities (on a fully diluted,
as-if-converted basis).
"QUALIFIED PUBLIC OFFERING" means a Public Offering where BOTH
(i) the proceeds (net of underwriting discounts and
commissions) received by the Company in exchange for its issuance of
shares of common stock in such Public Offering equal or exceed $60
million, AND
(ii) the price per share of common stock paid to the Company
in such Public Offering equals or exceeds the product of (x) 3.0 TIMES
(y) the quotient of (A) the aggregate capital contributions to the
Company under the Equity Purchase Agreement (including the initial
purchase price and all Subsequent Contributions (as defined in the
Equity Purchase Agreement)) made on or prior to the date of such Public
Offering with respect to all Purchaser Securities then outstanding,
DIVIDED BY (B) the number of shares of the Company's common stock
represented by all Purchaser Securities (on a fully diluted,
as-if-converted basis) outstanding immediately prior to the
consummation of such Public Offering.
"QUALIFIED SALE OF THE COMPANY" has the meaning set forth with
respect thereto in Section 2(b).
"REPURCHASE EVENT" has the meaning set forth with respect
thereto in Section 3(d).
"REPURCHASE NOTICE" has the meaning set forth with respect
thereto in Section 3(f).
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<PAGE>
"REPURCHASE PRICE" has the meaning set forth with respect
thereto in Section 3(e).
"SALE OF THE COMPANY" means the arm's length sale of the
Company to a third party or group of third parties acting in concert, pursuant
to which such party or parties acquire (i) equity securities of the Company
possessing the voting power under normal circumstances to control the Company,
or (ii) all or substantially all of the Company's assets determined on a
consolidated basis (in either case, whether by merger, consolidation, sale or
transfer of the Company's equity securities, or sale or transfer of the
Company's consolidated assets).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SECURITYHOLDERS AGREEMENT" means the securityholders
agreement dated the Prior Date (and amended and restated as of the date hereof)
entered into by and among the Company and certain of its securityholders, as
amended from time to time in accordance with its terms.
"SENIOR UNITS" means the Company's Class A Senior Units,
Class B Senior Units, and Class C Senior Units.
"SIX-MONTH ANNIVERSARY DATE" has the meaning set forth with
respect thereto in Section 3(g)(iii).
"START-UP GROUP SECURITIES" means (i) the Common Units issued
to James E. Dovey and William H. Pearson pursuant to their Executive Securities
Agreements (as defined in the Equity Purchase Agreement), and (ii) any
securities issued directly or indirectly with respect to any Start-Up Group
Securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization, or upon conversion or exercise
of any of the foregoing; PROVIDED that Start-Up Group Securities shall not
include any Senior Units. As to any particular securities constituting Start-Up
Group Securities, such securities shall cease to be Start-Up Group Securities
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased pursuant to the provisions of any Executive Securities Agreement
(as defined in the Equity Purchase Agreement) or forfeited pursuant to the
provisions of the Performance Vesting Agreement. Any reference herein to a
"majority of the Start-Up Group Securities" or the "number of Start-Up Group
Securities" for purposes of comparison shall refer, with respect to any
particular Start-Up Group Securities, to the number of Common Units (or
equivalent common equity securities of the Company) then represented by such
Start-Up Group Securities (on a fully diluted, as-if-converted basis, but
excluding any Start-Up Group Securities that are Un-Performance-Vested
Securities).
- 22 -
<PAGE>
"START-UP PERIOD" means the period of time commencing on the
date of the Prior Agreement and ending on the earliest to occur of (i) the
second anniversary of the date of the Prior Agreement and (ii) the consummation
of a Public Offering.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director, manager or general
partner of such limited liability company, partnership, association or other
business entity. For purposes of this Agreement, if the context does not
otherwise indicate in respect of which Person the term "SUBSIDIARY" is used, the
term "SUBSIDIARY" shall refer to any Subsidiary of the Company.
"TIME-VESTED SECURITIES" has the meaning set forth with
respect thereto in Section 2(a).
"TRANSFER" has the meaning set forth with respect thereto in
Section 4(c)(i)
"TYPE I REPURCHASE EVENT" has the meaning set forth with
respect thereto in Section 3(a).
"TYPE II REPURCHASE EVENT" has the meaning set forth with
respect thereto in Section 3(b).
"UN-PERFORMANCE-VESTED SECURITIES" means Performance Vesting
Securities that have not yet performance vested pursuant to the provisions of
the Performance Vesting Agreement.
"UN-TIME-VESTED SECURITIES" has the meaning set forth with
respect thereto in Section 2(a).
"VALUED SECURITIES" has the meaning set forth with respect
thereto in Section 3(g)(i).
8. MISCELLANEOUS PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer
or attempted Transfer of any Executive Securities in violation of any provision
of this Agreement shall be void, and the
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<PAGE>
Company shall not record such purported Transfer on its books or treat any
purported transferee of such Executive Securities as the owner of such
securities for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and related documents among the parties of even
date herewith and therewith embody the complete agreement and understanding
among the parties hereto and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way (including, without
limitation, the Prior Agreement).
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, none of which need contain the signature of more than one party
hereto but each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind the parties hereto and their respective
successors and assigns and shall inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns, whether so
expressed or not.
(f) CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND EXHIBITS HERETO), EVEN
THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(g) REMEDIES. Each of the parties to this Agreement (including
the holders of Start-Up Group Securities, and any Key Employee to which the
Company assigns any of its repurchase rights under Section 3 hereof, as
third-party beneficiaries) shall be entitled to enforce its rights under this
Agreement specifically, to recover damages and costs (including reasonable
attorney's fees) caused by any breach of any provision of this Agreement and to
exercise all other rights existing in its favor. The parties hereto agree and
acknowledge that money damages would
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<PAGE>
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(h) AMENDMENT, MODIFICATION, OR WAIVER. The provisions of this
Agreement may be amended, modified, or waived only with the prior written
consent of the Company and the Executive.
(i) THIRD-PARTY BENEFICIARIES. The parties hereto acknowledge
and agree that certain provisions of this Agreement are intended for the benefit
of the holders of Start-Up Group Securities and any Key Employee to which the
Company assigns any of its repurchase rights under Section 3 hereof, that such
Persons are third-party beneficiaries of this Agreement, and that the provisions
of this Agreement shall be enforceable by such Persons as provided herein.
(j) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the State of Colorado, the Republic of France, or the jurisdiction of
the Company's principal office, the time period shall be automatically extended
to the business day immediately following such Saturday, Sunday or holiday.
(k) DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT
CONSTRUCTION. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Reference to any agreement, document, or instrument means such agreement,
document, or instrument as amended or otherwise modified from time to time in
accordance with the terms thereof, and if applicable hereof. The use of the
words "include" or "including" in this Agreement shall be by way of example
rather than by limitation. The use of the words "or," "either" or "any" shall
not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
(l) NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when (a) delivered
personally to the recipient, (b) telecopied to the recipient (with hard copy
sent to the recipient by reputable overnight courier service (charges prepaid)
that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a
business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by reputable overnight courier service
(charges prepaid). Such notices, demands and other communications shall be sent
to the following Persons at the following addresses:
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<PAGE>
TO THE COMPANY:
6300 South Syracuse Way, Suite 1050
Englewood, Colorado 80111
Attention: Chief Executive Officer
Telephone: (303) 741-4788
Telecopy: (303) 741-4823
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey W. Richards, Esq.
Telephone: (312) 861-2473
Telecopy: (312) 861-2200
TO EXECUTIVE: at the address set forth in the Company's
records
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Holme Roberts & Owen LLP
1700 Lincoln Street
Suite 4100
Denver, Colorado 80203
Attention: W. Dean Salter, Esq.
Telephone: (303) 861-7000
Telecopy: (303) 866-0200
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(m) DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.
- 26 -
<PAGE>
* * * *
- 27 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
First Amended and Restated Executive Securities Agreement on the date first
written above.
CABLETEL EUROPE LLC
By: /S/ JAMES E. DOVEY
--------------------------------
James E. Dovey, its Chairman and
Chief Executive Officer
EXECUTIVE
/S/ RICHARD N. CLEVENGER
-----------------------------------
Name: Richard N. Clevenger
(Signature page for First Amended and Restated Executive Securities Agreement)
<PAGE>
Exhibit 10.7
EXECUTIVE SECURITIES AGREEMENT
(PEARSON)
THIS EXECUTIVE SECURITIES AGREEMENT (this "AGREEMENT") is made
as of May 18, 1998, by and between CableTel Europe LLC, a Delaware limited
liability company (the "COMPANY"), and William H. Pearson ("EXECUTIVE").
Capitalized terms used but not otherwise defined herein have the meanings
ascribed to such terms in Section 7 hereof.
Executive holds beneficially and of record an ownership
interest in the Company (Executive's "EXISTING INTEREST"). This Agreement
contemplates a transaction in which, pursuant to the terms and subject to the
conditions set forth herein, Executive will exchange his Existing Interest in
the Company for newly issued Common Units of the Company. All of such Executive
Securities are subject to time vesting as set forth herein. In addition to time
vesting, a portion of such Executive Securities are also subject to performance
vesting pursuant to the terms of the Performance Vesting Agreement. All of the
Executive Securities held by Executive or his transferees are subject to certain
restrictions on transfer and, upon Executive's ceasing to be employed by the
Company or its Subsidiaries, certain repurchase options, each as set forth
herein.
The execution and delivery of this Agreement by the Company
and Executive are a condition to the purchase of the Company's Preferred Units
by certain Investors and management employees of the Company (including
Executive) pursuant to the terms of the Equity Purchase Agreement. Such
Preferred Units are subject to certain capital contribution obligations,
restrictions on transfer, and other terms as set forth in the Equity Purchase
Agreement. In addition, such Preferred Units, as well as the Executive
Securities, are subject to certain voting agreements and other provisions set
forth herein and in the Securityholders Agreement. In connection with the
execution of this Agreement, the Company's subsidiary, CableTel Management,
Inc., a Colorado corporation, and Executive are entering into an Employment
Agreement dated as of the date hereof (the "EMPLOYMENT AGREEMENT").
NOW, THEREFORE, in consideration of the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. EXCHANGE OF EXECUTIVE'S EXISTING INTEREST FOR EXECUTIVE
SECURITIES.
(a) THE EXCHANGE TRANSACTION. Upon execution of this
Agreement, pursuant to a recapitalization of the Company as set forth in the
amended and restated LLC Agreement, Executive shall exchange all of his Existing
Interest for, and the Company shall issue to Executive, 6,664 Common Units (of
which 4,377 shall not, and 2,287 shall, be subject to performance vesting under
the terms of the Performance Vesting Agreement), each having the rights and
preferences set forth with respect thereto in the LLC Agreement.
(b) SECTION 83(b) ELECTION. Within 30 days after the exchange
transaction described in Section 1(a) above, Executive shall make an effective
election with the Internal
<PAGE>
Revenue Service under Section 83(b) of the Internal Revenue Code of 1986, as
amended, with respect to the Executive Securities issued hereunder. A form of
such election is attached hereto.
(c) REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. In connection
with the exchange for and issuance of the Executive Securities hereunder,
Executive represents and warrants to the Company that:
(i) As of the date hereof, prior to giving effect
to the transactions contemplated hereby, Executive owns beneficially
and of record all right, title, and interest in and to the Existing
Interest, free and clear of all liens, security interests,
encumbrances, and purchase rights or rights of first refusal.
(ii) The Executive Securities to be acquired by
Executive pursuant to this Agreement shall be acquired for Executive's
own account and not with a view to, or intention of, distribution
thereof in violation of the Securities Act or any applicable state
securities laws, and the Executive Securities shall not be disposed of
in contravention of the Securities Act or any applicable state
securities laws.
(iii) Executive will serve as a management employee
of the Company and its Subsidiaries, is sophisticated in financial
matters and is able to evaluate the risks and benefits of the
investment in the Executive Securities.
(iv) Executive is able to bear the economic risk of
his investment in the Executive Securities for an indefinite period of
time and is aware that transfer of the Executive Securities may not be
possible because (A) such transfer is subject to contractual
restrictions on transfer set forth herein, in the Securityholders
Agreement, and in the Performance Vesting Agreement, and (B) the
Executive Securities have not been registered under the Securities Act
or any applicable state securities laws and, therefore, cannot be sold
unless subsequently registered under the Securities Act and such
applicable state securities laws or an exemption from such registration
is available.
(v) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of
the offering of the Executive Securities issued hereunder and has had
full access to such other information concerning the Company as he has
requested.
(vi) This Agreement, the LLC Agreement, the
Securityholders Agreement, the Performance Vesting Agreement, and the
other agreements contemplated thereby of even date therewith constitute
the legal, valid and binding obligations of Executive, enforceable in
accordance with their terms, and the execution, delivery and
performance of such agreements by Executive and Executive's employment
with the Company and its Subsidiaries do not and shall not conflict
with, violate or cause a breach of any agreement, contract or
instrument to which Executive is a party or by which he is bound or any
judgment, order or decree to which Executive is subject.
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<PAGE>
(d) ACKNOWLEDGMENT BY EXECUTIVE. As an inducement to the
Company to enter into this Agreement, and as a condition thereto, Executive
acknowledges and agrees that none of the execution and delivery of this
Agreement, the issuance of the Executive Securities to Executive, or Executive's
status as a holder of Executive Securities, shall:
(i) entitle Executive to remain in the employment of
the Company and its Subsidiaries or affect the right of the Company or
its Subsidiaries to terminate Executive's employment at any time and
for any reason as permitted by the Employment Agreement; or
(ii) impose upon the Company any duty or obligation
to disclose to Executive, or create in Executive any right to be
advised of, any material information regarding the Company and its
Subsidiaries at any time prior to, upon or in connection with the
repurchase of any Executive Securities upon the termination of
Executive's employment with the Company and its Subsidiaries or as
otherwise provided hereunder.
2. TIME VESTING OF EXECUTIVE SECURITIES.
(a) TIME VESTING SCHEDULE. Except as otherwise provided
herein, an amount of Un-Time-Vested Securities (as defined below) shall time
vest on the date hereof and on each of the first four anniversaries of the date
hereof, such that the Executive Securities shall be time vested on each such
date in accordance with the following schedule:
<TABLE>
<CAPTION>
CUMULATIVE PERCENTAGE OF
DATE EXECUTIVE SECURITIES
TIME VESTED ON SUCH DATE
- -------------------------------------------------------------------------------
<S> <C>
The date hereof 30%
The first anniversary of the date hereof 47.5%
The second anniversary of the date hereof 65%
The third anniversary of the date hereof 82.5%
The fourth anniversary of the date hereof 100%
- -------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing sentence, the above time vesting schedule shall
cease and no Un-Time-Vested Securities (as defined below) shall time vest after
the date on which Executive's employment with the Company and its Subsidiaries
terminates for any reason. Executive Securities which have become time vested
pursuant to this Section 2 are referred to herein as "TIME-VESTED SECURITIES,"
and all other Executive Securities are referred to herein as "UN-TIME-VESTED
SECURITIES."
(b) 100% ACCELERATION UPON A QUALIFIED SALE OF THE COMPANY.
All Un-Time-Vested Securities shall become Time-Vested Securities in connection
with the consummation of a Qualified Sale of the Company, so long as Executive
is employed by the Company or any of its Subsidiaries on the date of such sale.
For purposes hereof, a "QUALIFIED SALE OF THE COMPANY" means
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<PAGE>
a Sale of the Company in which the consideration paid in such sale for at least
50% of the Company's outstanding equity securities or of the Company's
consolidated assets consists of cash and/or publicly traded equity securities
(E.G., 66.7% of the consideration for such Sale of the Company would have to
consist of cash and/or publicly traded equity securities if only 75% of the
Company's outstanding equity securities were sold in such transaction).
(c) 100% ACCELERATION UPON A SALE OF THE COMPANY (OTHER THAN A
QUALIFIED SALE OF THE COMPANY) WITH NO CONTINUING COMPARABLE TIME VESTING
ARRANGEMENT. In the event of a Sale of the Company (other than a Qualified Sale
of the Company), the above vesting schedule will not accelerate as a result of
such Sale of the Company; PROVIDED that if the surviving or acquiring Person(s)
in such Sale of the Company fails or declines either to (i) continue after such
Sale of the Company to allow Executive to hold his Un-Time-Vested Securities
subject to the time vesting and repurchase provisions hereof, or (ii) grant to
Executive the number of securities in the surviving or acquiring Person(s) that
Executive would have received in such Sale of the Company in exchange for
Executive's Un-Time-Vested Securities if such securities had instead been
Time-Vested Securities, subject to ongoing time vesting and repurchase
arrangements substantially comparable to those set forth herein (as such
comparability is determined in good faith by the Board), then all Un-Time-Vested
Securities shall become Time-Vested Securities in connection with the
consummation of such Sale of the Company, so long as Executive is employed by
the Company or any of its Subsidiaries on the date of such sale.
(d) ONE-YEAR ACCELERATION UPON A QUALIFIED PUBLIC OFFERING.
Upon the consummation of a Qualified Public Offering, and so long as Executive
is employed by the Company or any of its Subsidiaries on the closing date of
such offering, there will time vest the amount of Un-Time-Vested Securities
which were scheduled to time vest within the 365 days following such closing
date (and the remaining Un-Time-Vested Securities, if any, shall continue to
time vest 17.5% on each anniversary of the date hereof in accordance with clause
(a) above, such that the time vesting schedule set forth in paragraph (a) above
shall have been effectively accelerated by one year).
(e) TIME VESTING AND PERFORMANCE VESTING.
(i) INDEPENDENCE OF TIME AND PERFORMANCE VESTING. The
Company and Executive acknowledge that the Executive Securities
constituting Performance Vesting Securities are subject, in addition to
time vesting under this Section 2, to performance vesting as set forth
in the Performance Vesting Agreement. The time vesting provisions of
this Section 2 operate independently of the performance vesting
provisions under the Performance Vesting Agreement. As such, (A) the
terms "Time-Vested Securities" and "Un-Time-Vested Securities" as used
herein refer only to whether particular Executive Securities have time
vested in accordance with the terms of this Section 2 and do not
indicate whether such Executive Securities that constitute Performance
Vesting Securities have or have not also performance vested under the
Performance Vesting Agreement, and (B) the terms "Performance-Vested
Securities" and "Un-Performance-Vested Securities" (each defined below)
as used herein refer only to whether particular Performance Vesting
Securities have performance vested in accordance with the terms of the
Performance Vesting Agreement and
- 4 -
<PAGE>
do not indicate whether such Performance Vesting Securities have or
have not also time vested under this Section 2.
(ii) APPLICATION OF TIME VESTING. Whenever
Un-Time-Vested Securities time vest pursuant to the terms of this
Section 2, the Un-Time-Vested Securities that are not Performance
Vesting Securities, on the one hand, and the Un-Time-Vested Securities
that are Performance Vesting Securities, on the other hand, will each
time vest on a pro rata basis based on the number of each such type of
securities then outstanding. Of such Un-Time-Vested Securities
constituting Performance Vesting Securities which are to vest, the
Un-Time-Vested Securities that are Performance-Vested Securities shall
be time vested prior to any Un-Time-Vested Securities that are
Un-Performance-Vested Securities being time vested.
(iii) APPLICATION OF PERFORMANCE VESTING. Whenever
Un-Performance-Vested Securities performance vest pursuant to the terms
of the Performance Vesting Agreement, the Un-Performance-Vested
Securities that are Time-Vested Securities shall be performance vested
prior to any Un-Performance-Vested Securities that are Un-Time-Vested
Securities being performance vested.
(f) 100% ACCELERATION UPON CERTAIN TERMINATION OF EMPLOYMENT.
If Executive's employment with the Company is terminated by the Company without
Cause and not as a result of Nonperformance (as defined in the Employment
Agreement), all Un-Time-Vested Securities shall become Time-Vested Securities in
connection with such termination.
3. REPURCHASE OPTIONS.
(a) REPURCHASE OPTIONS UPON DEATH, DISABILITY, OR TERMINATION
WITHOUT CAUSE. If Executive ceases to be employed by the Company and its
Subsidiaries by reason of Executive's death, Disability, or a termination by the
Company without Cause (such cessation of employment, a "TYPE I REPURCHASE
EVENT"), the Executive Securities then in existence (whether held by Executive
or one or more of Executive's transferees) will be subject to repurchase as set
forth below:
(i) UN-TIME-VESTED SECURITIES. The Company (by action
of the Board) may elect to purchase all or any portion of the Executive
Securities constituting Un-Time-Vested Securities by delivering a
Repurchase Notice to the holder or holders of the Executive Securities
at any time within 30 days after the Type I Repurchase Event.
(ii) TIME-VESTED SECURITIES THAT ARE PERFORMANCE
VESTING SECURITIES. The Company (by action of the Board) may elect to
purchase all or any portion of the Time-Vested Securities that are
Performance Vesting Securities by delivering a Repurchase Notice to the
holder or holders of the Executive Securities at any time within 30
days after the Type I Repurchase Event.
- 5 -
<PAGE>
(iii) TIME-VESTED SECURITIES, OTHER THAN PERFORMANCE
VESTING SECURITIES, WHERE TERMINATION OCCURS DURING START-UP PERIOD. If
a Type I Repurchase Event occurs at any time during the Start-Up
Period, the holders of Start-Up Group Securities shall have the right
to purchase all or any portion (but in any event not more than 75%) of
the Time-Vested Securities that are not Performance Vesting Securities
by delivering a Repurchase Notice to the holder or holders of the
Executive Securities at any time prior to the fourth anniversary of the
date hereof. All repurchases pursuant to the immediately preceding
sentence shall be pro rata among the holders of Start-Up Group
Securities electing such a repurchase based on the number of Start-Up
Group Securities held by each such holder, or on such other basis as
agreed to by the holders of Start-Up Group Securities. If Executive at
any time breaches in any material respect the provisions of Section 5
(Confidentiality) or Section 6 (Noncompetition and Nonsolicitation)
hereof, the Company shall have (A) upon giving written notice to the
holders of Start-Up Group Securities affording them 20 days in which to
exercise any of their remaining repurchase rights pursuant to this
subparagraph (iii), the right to purchase all or any portion of the
Time-Vested Securities (other than Performance Vesting Securities) that
the holders of Start-Up Group Securities have not elected to
repurchase, and (B) the right to purchase all or any portion of the 25%
of such Time-Vested Securities that the holders of Start-Up Group
Securities could not elect to repurchase, in each case by delivering a
Repurchase Notice to the holder or holders of Executive Securities at
any time prior to the six-month anniversary of the date of such breach.
(iv) TIME-VESTED SECURITIES, OTHER THAN PERFORMANCE
VESTING SECURITIES, WHERE TERMINATION OCCURS AFTER START-UP PERIOD. If
a Type I Repurchase Event occurs at any time after the Start-Up Period,
the Company shall have the right to purchase all or any portion of the
Time-Vested Securities that are not Performance Vesting Securities by
delivering a Repurchase Notice to the holder or holders of the
Executive Securities at any time within 30 days after the Type I
Repurchase Event.
(b) REPURCHASE OPTION UPON TERMINATION OTHER THAN BY DEATH,
DISABILITY, OR TERMINATION WITHOUT CAUSE. If Executive ceases to be employed by
the Company and its Subsidiaries for any reason other than Executive's death,
Disability, or a termination by the Company without Cause (such cessation of
employment, a "TYPE II REPURCHASE EVENT"), the Company (by action of the Board)
may elect to purchase all or any portion of the Executive Securities then in
existence (whether held by Executive or one or more of Executive's transferees)
by delivering a Repurchase Notice to the holder or holders of the Executive
Securities at any time within 30 days after the Type II Repurchase Event.
(c) ASSIGNMENT OF REPURCHASE RIGHTS UNDER SECTION 3(a)(iii).
(i) Upon any Type I Repurchase Event giving rise to a
right of the holders of Start-Up Group Securities to purchase
Time-Vested Securities (other than Performance Vesting Securities)
under Section 3(a)(iii) hereof, if the Board and the holders of at
least 80% of the Purchaser Securities then outstanding determine within
six months after the occurrence of the Type I Repurchase Event that it
would be in the best interests of the Company for all
- 6 -
<PAGE>
or any portion of such Time-Vested Securities to be available for
issuance to one or more management or other key employees (each a "KEY
EMPLOYEE") of the Company or any of its Subsidiaries, then the Company
shall have the right to require the holders of Start-Up Group
Securities to assign to the Company their rights to repurchase such
Time-Vested Securities under Section 3(a)(iii) (and by so requiring the
Company shall be deemed to have elected to exercise such assigned
repurchase rights). Any assignment of repurchase rights pursuant to the
immediately preceding sentence shall be made pro rata among all holders
of Start-Up Group Securities based on the number of Start-Up Group
Securities held by each such holder, or on such other basis as agreed
to by the holders of Start-Up Group Securities.
(ii) Each holder of Start-Up Group Securities shall
have the right to assign all or any portion of its repurchase rights
under Section 3(a)(iii) hereof to the Company. Upon the vote of the
holders of a majority of the Start-Up Group Securities then
outstanding, all holders of Start-Up Group Securities will assign their
repurchase rights under Section 3(a)(iii) hereof to the Company.
(iii) If any holder of Start-Up Group Securities
assigns its repurchase rights under Section 3(a)(iii) to the Company,
and the Company fails to exercise such assigned repurchase rights, such
holder shall once again have the right to exercise (or assign) such
rights.
(d) ASSIGNMENT OF COMPANY'S REPURCHASE RIGHTS. Upon any Type I
Repurchase Event or Type II Repurchase Event (a "REPURCHASE EVENT"), the Company
(by action of the Board) shall have the right to assign all or any portion of
its repurchase rights hereunder to any Key Employee of the Company or its
Subsidiaries; PROVIDED that the Company may not assign its rights under Section
3(h) below to pay all or part of the Repurchase Price (as defined below) for
Executive Securities repurchased hereunder by (i) offsetting debts owed by
Executive to the Company or (ii) issuing Class A Senior Units or a promissory
note. If the Company assigns any of its repurchase rights to such a Key
Employee, and such Key Employee fails to exercise such assigned repurchase
rights, the Company shall once again have the right to exercise (or assign) such
rights.
(e) REPURCHASE PRICE. The repurchase price (the "REPURCHASE
PRICE") for any Time-Vested Securities to be repurchased hereunder shall be the
Fair Market Value (as determined below) of such securities on the date of the
Repurchase Event giving rise to such repurchase. The Repurchase Price of any
Un-Time-Vested Securities to be repurchased hereunder shall be the Original Cost
of such securities (with securities having a lower Original Cost being subject
to repurchase prior to securities with a higher Original Cost).
(f) REPURCHASE NOTICE. Each "REPURCHASE NOTICE" delivered
hereunder shall set forth the amount, type, and class of Executive Securities
(including, if applicable, the amount of Un-Time-Vested Securities and/or
Time-Vested Securities) to be acquired from each such holder and the aggregate
consideration to be paid for such Executive Securities. The Executive Securities
to be repurchased pursuant to any Repurchase Notice shall first be satisfied to
the extent possible from the Executive Securities held by Executive at the time
of delivery of such Repurchase Notice. If the
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amount of Executive Securities then held by Executive is less than the total
amount of Executive Securities that have been elected to be purchased pursuant
to such Repurchase Notice, the electing party or parties shall purchase the
remaining securities elected to be purchased from the other holder(s) of
Executive Securities, pro rata according to the amount of Executive Securities
held of record by each such other holder at the time of delivery of such
Repurchase Notice. The amount of Un-Time-Vested Securities and Time-Vested
Securities repurchased hereunder shall be deemed to be allocated among Executive
and the other holders of repurchased Executive Securities (if any) pro rata
according to the amount of Executive Securities to be purchased from such
persons.
(g) FAIR MARKET VALUE OF REPURCHASED EXECUTIVE SECURITIES.
(i) The "FAIR MARKET VALUE" of Time-Vested Securities
subject to repurchase hereunder (the "VALUED SECURITIES") shall be
determined in accordance with this paragraph (g).
(ii) A majority interest of the Company and/or the
holders of Start-Up Group Securities and/or any assignees of the
Company's repurchase rights ("majority" determined based on the amount
of Valued Securities to be purchased by each), on the one hand, and the
holders of a majority of the Valued Securities to be repurchased, on
the other hand, shall attempt in good faith to agree on the Fair Market
Value of the Valued Securities to be repurchased. Any agreement reached
by such Persons shall be final and binding on all parties hereto.
(iii) If such Persons are unable to reach such
agreement within 20 days after the giving of any Repurchase Notice, the
Fair Market Value of any Valued Securities that are publicly traded
shall be the average, over a period of 21 days consisting of the date
of the Repurchase Event and the 20 consecutive business days prior to
that date, of the average of the closing prices of the sales of such
securities on the primary securities exchange on which such securities
may at that time be listed, or, if there have been no sales on such
exchange on any day, the average of the highest bid and lowest asked
prices on such exchange at the end of such day, or, if on any day such
securities are not so listed, the average of the representative bid and
asked prices quoted in the Nasdaq System as of 4:00 P.M., New York
time, or, if on any day such securities are not quoted in the Nasdaq
System, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar successor organization.
If the Fair Market Value of any Valued Securities on the date that is
180 days after the date of the Repurchase Event (the "SIX-MONTH
ANNIVERSARY DATE") (determined as described in the immediately
preceding sentence with respect to such Six-Month Anniversary Date,
rather than with respect to the date of the Repurchase Event) is
greater than the Fair Market Value of such Valued Securities determined
as described in the immediately preceding sentence with respect to the
date of the Repurchase Event, then the "Fair Market Value" of such
publicly traded Valued Securities shall be the Fair Market Value
determined as of the Six-Month Anniversary Date.
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<PAGE>
(iv) If such Persons are unable to reach agreement
pursuant to subparagraph (ii) within 20 days after the giving of such
Repurchase Notice, and to the extent any Valued Securities are not
publicly traded:
(A) A majority interest of the Company
and/or the holders of Start-Up Group Securities and/or any assignees
of the Company's repurchase rights ("majority" determined based on the
amount of Valued Securities to be purchased by each), on the one hand,
and the holders of a majority of the Valued Securities to be
repurchased, on the other hand, shall each, within 10 days thereafter,
choose one investment banker or other appraiser with experience in
valuing companies such as the Company (and if the Valued Securities
include any Un-Performance-Vested Securities, experienced in valuing
contingent or derivative assets), and the two investment
bankers/appraisers so selected shall together select a third investment
banker/appraiser similarly qualified.
(B) The three investment bankers/appraisers
shall first appraise the fair market value of the Company's equity
(based on the assumption of an orderly, arm's length sale (structured
to produce the highest price to the equityholders of the Company,
whether such structure is a merger, combination, sale of equity
securities, sale of assets, or otherwise) to a willing unaffiliated
buyer (or to a willing affiliated strategic buyer, PROVIDED that the
investment bankers/appraisers shall not consider any premium that such
affiliated strategic buyer would be willing to pay to the extent such
premium is attributable solely to such Person's affiliation with the
Company, unless the Company or its equityholders have received a fully
financed, firm commitment offer (with no material conditions) from such
affiliated strategic buyer to purchase a majority (based on common
equity equivalents) of the Company's outstanding equity at a price that
includes such premium, IT BEING UNDERSTOOD, HOWEVER, that the
investment bankers/appraisers shall consider, without the need for such
a firm commitment offer, the premium, if any, that is attributable to
such Person's future expected synergies to be generated by combining
such Person's operations with those of the Company and its Subsidiaries
if such Person were to acquire the Company). The three investment
bankers/appraisers shall then appraise the fair market value of such
non-publicly-traded Valued Securities as follows:
1) the fair market value of each
Common Unit (or equivalent common equity security) that is not
an Un-Performance-Vested Security shall be equal to the fair
market value of the Company's equity DIVIDED BY the total
number of Common Units (or equivalent common equity
securities) outstanding on the date of the Repurchase Event
(determined on a fully diluted, as-if-converted basis, but
excluding all Un-Performance-Vested Securities);
2) the fair market value of any
Un-Performance-Vested Securities shall reflect (x) the
expected market value of such securities at such future time
as such securities are expected to become performance vested
under the terms of the Performance Vesting Agreement,
appropriately discounted to its present value as of the
relevant valuation date based upon the amount of time from the
relevant
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valuation date until the date on which such Un-Performance-
Vested Securities are expected to performance vest (if at
all), and (y) the magnitude of the risk that such securities
may never become performance vested under the terms of the
Performance Vesting Agreement; and
3) the fair market value of any
other non-publicly-traded Valued Securities shall be the fair
value of such securities, determined on the basis of an
orderly, arm's length sale (structured to produce the highest
for such securities) to a willing, unaffiliated buyer, taking
into account all relevant factors determinative of value.
The three investment bankers/appraisers shall, within thirty days of
their retention, provide the written results of such appraisals to the
Company and/or the holders of Start-Up Group Securities and/or the
Company's assignees, and to each of the holders of the Valued
Securities to be repurchased.
(C) The "FAIR MARKET VALUE" of the
non-publicly-traded Valued Securities to be repurchased shall be the
average of the two appraisals closest to each other, and such amount
shall be final and binding on all parties hereto; PROVIDED that any
Person electing to purchase Executive Securities hereunder may at any
time within five days after receiving written notice of such
determination rescind its prior exercise of such Person's repurchase
option by giving written notice of such revocation to the holder or
holders of the Executive Securities to be repurchased, and upon such
revocation the revoking party will be treated as if it had never
exercised such repurchase option (it being understood that such
revoking party may not then exercise such repurchase option again with
respect to the same Repurchase Event).
(D) A majority interest of the Company
and/or the holders of Start-Up Group Securities and/or any assignees
of the Company's repurchase rights ("majority" determined based on the
amount of Valued Securities to be purchased by each), on the one hand,
and the holders of a majority of the Valued Securities to be
repurchased, on the other hand, will each pay the costs of their own
chosen appraiser and 50% of the costs of the third appraiser.
(h) CLOSING OF EACH REPURCHASE. Within 10 days after the
Repurchase Price for the Executive Securities to be repurchased at any
repurchase hereunder has been determined, the Company shall send a notice to
each holder of Executive Securities setting forth the consideration to be paid
for such securities and the time and place for the closing of the transaction,
which date shall not be more than 30 days nor less than five days after the
delivery of such notice. At each such closing, the holders of Executive
Securities shall deliver all certificates (if any exist) evidencing the
Executive Securities to be repurchased at such closing to the purchaser or
purchasers thereof, and such purchaser or purchasers shall pay for the Executive
Securities to be purchased at such closing by delivery of a check or wire
transfer of immediately available funds in the aggregate amount of the
Repurchase Price for such Executive Securities; PROVIDED that if the Company is
to purchase any
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<PAGE>
Executive Securities from Executive at such closing, the Company may elect (by
action of the Board) to pay all or any portion of the Repurchase Price for such
Executive Securities by setting off against such Repurchase Price any bona fide
debts owed (regardless of whether then due and payable) by Executive to the
Company or any of its Subsidiaries; AND PROVIDED FURTHER that if the Company is
to purchase any Executive Securities at such closing, the Company may elect (by
action of the Board) to pay all or any portion of the Repurchase Price for such
Executive Securities as follows:
(i) in accordance with the LLC Agreement, by issuing
in exchange for such Executive Securities an equal number of Class A
Senior Units, and each such Class A Senior Unit issued in connection
with such repurchase shall be deemed as of the date of such repurchase
to have capital contributions to the Company made with respect to such
Class A Senior Unit equal to the Repurchase Price for the Executive
Securities in exchange for which such Class A Senior Unit was issued;
or
(ii) if the Company has prior to the date of such
repurchase converted into a corporation or other corporate form, in the
form of a promissory note, which promissory note shall be subordinated
to all of the Company's senior debt obligations either then or
thereafter incurred, shall earn simple annual interest at a rate of 8%
per annum, shall have all principal and accrued interest due and
payable upon maturity, and shall mature upon the earliest to occur of
the Company's initial Public Offering (if such initial Public Offering
has not occurred prior to the issuance of such promissory note), a Sale
of the Company, or the fourth anniversary of the issuance of such
promissory note.
The purchasers of Executive Securities hereunder shall be entitled to receive
customary representations and warranties from the sellers, including
representations and warranties regarding good title to such securities, free and
clear of any liens or encumbrances.
(i) GENERAL LOOK-BACK RIGHTS. If (i) upon any Type I
Repurchase Event, the Company repurchases any Valued Securities pursuant to the
terms of this Section 3, (ii) a Sale of the Company or the Company's initial
Public Offering is consummated within the 1-year period commencing on the date
of such Type I Repurchase Event, and (iii) the value of the Company's equity
implied by the sale price of such Sale of the Company, or the pre-money
valuation of the Company's equity (I.E., the value of the Company's equity prior
to giving effect to such initial Public Offering) implied by such initial Public
Offering, (as applicable, the "IMPLIED VALUATION") is greater than the value of
the Company's equity actually utilized to determine the Fair Market Value of
such repurchased Valued Securities pursuant to Section 3(g), then the Company
shall in connection with such Sale of the Company or initial Public Offering pay
to each Person from whom such Valued Securities were repurchased the difference
of (x) the Fair Market Value of such Valued Securities purchased by the Company
from such Person that would have been calculated pursuant to Section 3(g) had
the Implied Valuation been used as the Company's equity value, MINUS (y) the
Repurchase Price actually paid for such Valued Securities purchased by the
Company from such Person. The Company shall have the right to pay such amounts
in the same manner or form specified in Section 3(h) as the Company may pay the
Repurchase Price for any Executive Securities at the closing of any repurchase
hereunder.
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<PAGE>
(j) SPECIAL LOOK-BACK RIGHTS. If (i) upon any termination of
Executive's employment by the Company on or prior to the first anniversary of
the date hereof, where such termination is not for Cause or as a result of
Nonperformance (as defined in the Employment Agreement), the Company repurchases
any Valued Securities pursuant to the terms of this Section 3, and (ii) the fair
market value of the Company's equity (determined under Section 3(g)(iv)(B)) on
the second anniversary of such termination (the "TWO-YEAR VALUE") is greater
than the value of the Company's equity actually utilized to determine the Fair
Market Value of such repurchased Valued Securities pursuant to Section 3(g),
then the Company shall within 60 days after such second anniversary pay to each
Person from whom such Valued Securities were repurchased as a result of such
termination, the difference of (x) the Fair Market Value of such Valued
Securities purchased by the Company from such Person that would have been
calculated pursuant to Section 3(g) had the Two-Year Value been used as the
Company's equity value, MINUS (y) the Repurchase Price actually paid for such
Valued Securities purchased by the Company from such Person. The Company shall
have the right to pay such amounts in the same manner or form specified in
Section 3(h) as the Company may pay the Repurchase Price for any Executive
Securities at the closing of any repurchase hereunder.
(k) RESTRICTIONS. Notwithstanding anything to the contrary
contained in this Agreement, all repurchases of Executive Securities by the
Company shall be subject to applicable restrictions contained in the Delaware
General Corporation Law, the Delaware Limited Liability Company Act and in the
Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Securities hereunder
which the Company is otherwise entitled to make, the time periods provided in
this paragraph 3 shall be suspended, and the Company may make such repurchases
as soon as it is permitted to do so under such restrictions, unless by such time
such repurchase option has terminated pursuant to paragraph (l) below.
(l) TERMINATION OF REPURCHASE OPTIONS. The repurchase
provisions under this paragraph 3 (and the rights and obligations created
thereby) shall cease to apply to all Time-Vested Securities upon the
consummation of a Qualified Sale of the Company or a Qualified Public Offering
(it being understood that (i) such provisions, rights, and obligations shall
continue to apply to all Un-Time-Vested Securities until such time as they
become Time-Vested Securities in accordance with the terms hereof, and (ii) the
forfeiture provisions of the Performance Vesting Agreement shall continue to
apply to all Un-Performance-Vested Securities until such time as they become
Performance-Vested Securities in accordance with the terms of the Performance
Vesting Agreement).
4. RESTRICTIONS ON TRANSFER.
(a) OPINION OF VALID TRANSFER. In addition to any other
restrictions on transfer imposed by this Agreement, the Securityholders
Agreement, the Performance Vesting Agreement, or the LLC Agreement, no holder of
Executive Securities may sell, transfer or dispose of any Executive Securities
(except pursuant to an effective registration statement under the Securities
Act) without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and
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<PAGE>
substance to the Company) that neither registration nor qualification under the
Securities Act or applicable state securities laws is required in connection
with such transfer.
(b) RESTRICTIVE LEGEND. The certificates representing
Executive Securities shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON MAY 18, 1998, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, VESTING PROVISIONS, AND REPURCHASE
OPTIONS SET FORTH IN AN EXECUTIVE SECURITIES AGREEMENT BETWEEN THE
ISSUER OF SUCH SECURITIES (THE "ISSUER") AND THE INITIAL HOLDER OF SUCH
SECURITIES. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
The legend set forth above shall be removed from the certificates evidencing any
securities which cease to be Executive Securities.
(c) RETENTION OF EXECUTIVE SECURITIES.
(i) Executive shall not sell, transfer, assign,
pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily or by operation of law) any
interest in any Executive Securities (a "TRANSFER"), except (x) with
respect to Un-Performance-Vested Securities, pursuant to the repurchase
provisions of Section 3 hereof or the forfeiture provisions of the
Performance Vesting Agreement (each, an "EXEMPT TRANSFER"), or (y) with
respect to all other Executive Securities, pursuant to (A) the
repurchase provisions of Section 3 hereof, (B) the "Participation
Rights" provisions set forth in the Securityholders Agreement, or (C) a
Sale of the Company (each of (A) through (C), an "EXEMPT TRANSFER").
(ii) The restrictions contained in this paragraph (c)
shall not apply with respect to transfers of Executive Securities
(other than Un-Performance-Vested Securities) (A) pursuant to
applicable laws of descent and distribution or (B) among Executive's
Family Group; PROVIDED that the restrictions contained in this
paragraph shall continue to be applicable to the Executive Securities
after any such Transfer, the transferees of such Executive Securities
shall have agreed in writing to be bound by the provisions of this
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<PAGE>
Agreement with respect to the Executive Securities so transferred, and
(prior to the death of Executive) each such transferee of Executive
Securities shall have entered into proxies and other agreements
satisfactory to the holders of a majority of the Purchaser Securities
pursuant to which Executive shall have the sole right to vote such
Executive Securities for all purposes (subject to any applicable voting
agreements set forth herein or in the Securityholders Agreement). For
purposes of this Agreement, "FAMILY GROUP" means Executive's spouse,
siblings and descendants (whether natural or adopted) and any of such
descendants' spouses, any trust which at the time of such Transfer and
at all times thereafter is and remains solely for the benefit of
Executive and/or Executive's spouse, siblings, and/or descendants
and/or such descendants' spouses, and any family partnership the
partners of which consist solely of Executive, such spouse, such
siblings, such descendants, such descendants' spouses, and/or such
trusts.
(iii) The restrictions on the transfer of Executive
Securities set forth in this paragraph (c) shall continue with respect
to each Executive Security following any Transfer thereof (other than
an Exempt Transfer); PROVIDED that upon the consummation of a Qualified
Public Offering, the restrictions set forth in this paragraph (c) shall
thereafter cease to apply to all Fully Vested Securities, it being
understood that such restrictions shall continue to apply to all other
Executive Securities until such time as they become Fully Vested
Securities.
5. CONFIDENTIALITY.
(a) NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION.
Executive shall not disclose or use at any time, either during his employment
with the Company and its Subsidiaries or thereafter, any Confidential
Information (as defined below) of which Executive is or becomes aware, whether
or not such information is developed by him, except to the extent that such
disclosure or use is directly related to and required by Executive's performance
of duties assigned to Executive by the Company and its Subsidiaries, or to the
extent such disclosure is expressly addressed by and is permissible under the
confidentiality provisions set forth in the Equity Purchase Agreement. Executive
shall take all appropriate steps to safeguard Confidential Information and to
protect it against disclosure, misuse, espionage, loss and theft. As used in
this Agreement, the term "CONFIDENTIAL INFORMATION" means information that is
not generally known to the public and that is used, developed or obtained by the
Company or its Subsidiaries in connection with their business, including but not
limited to (i) products or services, (ii) fees, costs and pricing structures,
(iii) designs, (iv) analysis, (v) drawings, photographs and reports, (vi)
computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customer and client information (including customer or
client lists), (xii) copyrightable works, (xiv) all technology and trade
secrets, (xv) business plans and financial models, and (xvi) all similar and
related information in whatever form. Confidential Information shall not include
any information that has been published in a form generally available to the
public prior to the date Executive proposes to disclose or use such information.
Information shall not be deemed to have
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<PAGE>
been published merely because individual portions of the information have been
separately published, but only if all material features constituting such
information have been published in combination.
(b) THE COMPANY'S OWNERSHIP OF INTELLECTUAL PROPERTY.
(i) ACKNOWLEDGMENT OF COMPANY OWNERSHIP. If Executive
as part of his activities on behalf of the Company and its Subsidiaries
generates, authors or contributes to any invention, design, new
development, device, product, method or process (whether or not
patentable or reduced to practice or constituting Confidential
Information), any copyrightable work (whether or not constituting
Confidential Information) or any other form of Confidential Information
relating directly or indirectly to the Company's and its Subsidiaries'
business as now or hereafter conducted (collectively, "INTELLECTUAL
PROPERTY"), Executive acknowledges that such Intellectual Property is
the exclusive property of the Company and hereby assigns all right,
title and interest in and to such Intellectual Property to the Company.
Any copyrightable work prepared in whole or in part by Executive will
be deemed "a work made for hire" under Section 201(b) of the 1976
Copyright Act, and the Company shall own all of the rights comprised by
the copyright therein. Executive shall promptly and fully disclose all
Intellectual Property to the Company and shall cooperate with the
Company to protect the Company's interests in and rights to such
Intellectual Property (including, without limitation, providing
reasonable assistance in securing patent protection and copyright
registrations and executing all documents as reasonably requested by
the Company, whether such requests occur prior to or after termination
of Executive's employment with the Company).
(ii) EXECUTIVE INVENTION. Executive understands that
paragraph (b)(i) of this Section regarding the Company's ownership of
Intellectual Property does not apply to any invention for which no
equipment, supplies, facilities or trade secret information of the
Company were used and which was developed entirely on Executive's own
time, unless (i) the invention relates to the business of the Company
or any of its Subsidiaries or to their actual or demonstrably
anticipated research or development or (ii) the invention results from
any work performed by Executive for the Company or any of its
Subsidiaries.
(c) DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. As
requested by the Company from time to time and upon the termination of
Executive's employment with the Company and its Subsidiaries for any reason,
Executive shall promptly deliver to the Company all copies and embodiments, in
whatever form, of all Confidential Information and Intellectual Property in
Executive's possession or within his control (including, but not limited to,
written records, notes, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes and all other
materials containing or constituting any Confidential Information or
Intellectual Property) irrespective of the location or form of such material
and, if requested by the Company, shall provide the Company with written
confirmation that all such materials have been delivered to the Company.
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<PAGE>
6. NONCOMPETITION AND NONSOLICITATION.
(a) NONCOMPETITION. Executive acknowledges and agrees with the
Company that in the course of his employment with the Company and its
Subsidiaries he shall become familiar with the Company's trade secrets and with
other Confidential Information concerning the Company and its Subsidiaries, that
Executive's services to the Company and its Subsidiaries are unique in nature
and of an extraordinary value to the Company, and that the Company would be
irreparably damaged if Executive were to provide similar services to any person
or entity competing with the Company or any of its Subsidiaries or engaged in
similar business. In consideration of and as an inducement to the Company's
entering into this Agreement and issuing the Executive Securities hereunder, and
in further consideration of Executive's compensation and severance payments
under Executive's employment arrangement with the Company and its Subsidiaries,
Executive accordingly covenants and agrees with the Company that during the
Noncompete Period (as defined below), Executive shall not, directly or
indirectly, either for himself or for any other individual, corporation,
partnership, joint venture or other entity, participate in any business or
enterprise that engages or proposes to engage in any business conducted by the
Company or any of its Subsidiaries (including, but not limited to, the sale or
provision of local switched dialtone telecommunication services) in any
geographical market in which the Company or any of its Subsidiaries conducts
business (or any geographical market with respect to which the Company proposes
in good faith to conduct business, as evidenced by an Approved Business Plan or
a Board resolution authorizing the Company to use its resources to investigate
or otherwise pursue an opportunity in such market). For purposes of this
Agreement, the term "participate in" shall include, without limitation, having
any direct or indirect interest in any corporation, partnership, joint venture
or other entity, whether as a sole proprietor, owner, stockholder, partner,
joint venturer, creditor or otherwise, or rendering any direct or indirect
service or assistance to any individual, corporation, partnership, joint venture
and other business entity (whether as a director, officer, manager, supervisor,
employee, agent, consultant or otherwise), other than ownership of up to 2% of
the outstanding stock of any class which is publicly traded. Executive agrees
that this covenant is reasonable with respect to its duration, geographical
area, and scope.
(b) NONSOLICITATION. During the Noncompete Period, Executive
shall not (i) induce or attempt to induce any employee of the Company or any of
its Subsidiaries to leave the employ of the Company and its Subsidiaries, or in
any way interfere with the relationship between the Company or any of its
Subsidiaries and any employee thereof, (ii) hire directly or through another
entity any person who was an employee of the Company or any of its Subsidiaries
at any time during the Noncompete Period, or (iii) induce or attempt to induce
any customer, supplier, licensee or other business relation of the Company or
any of its Subsidiaries to cease doing business with the Company and its
Subsidiaries, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company and its
Subsidiaries (including, without limitation, making any negative statements or
communications concerning the Company or any of its Subsidiaries).
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<PAGE>
(c) NONCOMPETE PERIOD. The "NONCOMPETE PERIOD" shall commence
on the date hereof and continue until the second anniversary of the date
Executive ceases to be employed by the Company and its Subsidiaries.
(d) JUDICIAL MODIFICATION. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or geographic area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment or decision may be appealed.
7. DEFINITIONS.
"AGREEMENT" has the meaning set forth with respect thereto in
the preamble.
"BOARD" means the board of managers of the LLC or, if the
Company is hereafter converted into a corporation or other entity form, the
board of directors or comparable governing body of the Company.
"CAUSE" means (A) any act by Executive, where in respect of
such act Executive is ultimately convicted or enters a plea of guilty or NOLO
CONTENDERE to a felony, (B) Executive's willful misconduct, gross negligence,
perpetration of or participation in a fraud, in each case where such acts are
materially injurious to the Company or any of its Subsidiaries or any affiliate
thereof, or (C) Executive's breach in any material respect of the provisions of
Section 5 (Confidentiality) or Section 6 (Noncompetition and Nonsolicitation)
hereof.
"CLASS A SENIOR UNITS" means the Class A Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLASS B SENIOR UNITS" means the Class B Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLASS C SENIOR UNITS" means the Class C Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"COMMON UNITS" means the Common Units of the Company, having
the rights and preferences set forth with respect thereto in the LLC Agreement.
"COMPANY" has the meaning set forth with respect thereto in
the preamble.
"CONFIDENTIAL INFORMATION" has the meaning set forth with
respect thereto in Section 5(a).
- 17 -
<PAGE>
"DISABILITY" means any illness, accident, injury, physical or
mental incapacity or other disability, where such condition has rendered, or is
expected to render (as determined in the good faith judgment of the Board),
Executive unable or unfit to perform effectively the duties and obligations of
his employment or to participate effectively and actively in the management of
the Company for a period of at least 90 days.
"EQUITY PURCHASE AGREEMENT" means the equity purchase
agreement of even date herewith entered into by and among the Company and
certain investors, as amended from time to time in accordance with the terms
thereof.
"EXECUTIVE" has the meaning set forth with respect thereto in
the preamble.
"EXECUTIVE SECURITIES" means (i) the Common Units issued to
Executive hereunder and (ii) any securities issued directly or indirectly with
respect to any Executive Securities by way of a stock split, stock dividend, or
other division of securities, or in connection with a combination of securities,
recapitalization, merger, consolidation, or other reorganization, or upon
conversion or exercise of any of the foregoing; PROVIDED that Executive
Securities shall not include any Senior Units. As to any particular securities
constituting Executive Securities, such securities shall cease to be Executive
Securities when they have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(b) distributed to the public through a broker, dealer or market maker pursuant
to Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased pursuant to the provisions hereof or forfeited pursuant to the
provisions of the Performance Vesting Agreement. "Executive Securities" refers
only to Executive Securities under this Agreement and does not in any way refer
to any securities referred to as Executive Securities under any other executive
securities agreement between the Company and a Key Employee of the Company or
its Subsidiaries.
"EXEMPT TRANSFER" has the meaning set forth with respect
thereto in Section 4(c)(i).
"EXISTING INTEREST" has the meaning set forth with respect
thereto in the preamble.
"FAIR MARKET VALUE" has the meaning set forth with respect
thereto in Section 3(g).
"FAMILY GROUP" has the meaning set forth with respect thereto
in Section 4(c)(ii).
"FULLY VESTED SECURITIES" means Executive Securities which
both (i) are Time-Vested Securities and (ii) are not Un-Performance-Vested
Securities.
"IMPLIED VALUATION" has the meaning set forth with respect
thereto in Section 3(i).
"INTELLECTUAL PROPERTY" has the meaning set forth with respect
thereto in Section 5(b)(i).
"INVESTOR" has the meaning ascribed to such term in the Equity
Purchase Agreement.
- 18 -
<PAGE>
"KEY EMPLOYEE" has the meaning set forth with respect thereto
in Section 3(c)(i).
"LLC AGREEMENT" means the limited liability company agreement
governing the affairs of the Company, as amended from time to time in accordance
with its terms.
"MDCP" means Madison Dearborn Capital Partners II, L.P., a
Delaware limited partnership.
"NONCOMPETE PERIOD" has the meaning set forth with respect
thereto in Section 6(c).
"ORIGINAL COST," as to any particular securities, shall mean
the initial price paid to the Company upon issuance of such securities (as such
price is equitably adjusted for any securities splits, securities dividends,
securities combinations, conversions, recapitalizations or reorganizations);
PROVIDED that with respect to any Common Units issued in exchange for Existing
Interests, the Original Cost of such Common Units shall be deemed to be $1.00
per Unit.
"PERFORMANCE-VESTED SECURITIES" means Performance Vesting
Securities that have performance vested pursuant to the terms of the Performance
Vesting Agreement.
"PERFORMANCE VESTING AGREEMENT" means that certain performance
vesting agreement of even date herewith, by and among the Company, certain Key
Employees (including Executive), and the Investors, as amended from time to time
in accordance with its terms.
"PERFORMANCE VESTING SECURITIES" means (i) the Common Units
specified in the Performance Vesting Agreement as subject to performance vesting
thereunder (regardless of whether such Common Units have or have not performance
vested pursuant to the terms thereof), and (ii) any securities issued directly
or indirectly with respect to any Performance Vesting Securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing;
PROVIDED that Performance Vesting Securities shall not include any Senior Units.
As to any particular securities constituting Performance Vesting Securities,
such securities shall cease to be Performance Vesting Securities when they have
been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased
pursuant to the provisions hereof or forfeited pursuant to the provisions of the
Performance Vesting Agreement.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED UNITS" means the Preferred Units of the Company,
having the rights and preferences set forth with respect thereto in the LLC
Agreement.
- 19 -
<PAGE>
"PUBLIC OFFERING" means any underwritten sale of the company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1 (or
a successor form adopted by the Securities and Exchange Commission); provided
that the following shall not be considered a Public Offering: (i) any issuance
of common stock as consideration for a merger or acquisition, and (ii) any
issuance of common stock or rights to acquire common stock to existing
securityholders or to employees of the Company or its Subsidiaries on Form S-4
or Form S-8 (or a successor form adopted by the Securities and Exchange
Commission) or otherwise.
"PURCHASER SECURITIES" means (i) the Preferred Units issued to
all Purchasers (as defined in the Equity Purchase Agreement) pursuant to the
Equity Purchase Agreement, (ii) any Common Units issued upon conversion of the
Preferred Units referenced in clause (i), and (iii) any securities issued
directly or indirectly with respect to any Purchaser Securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing
securities; PROVIDED that Purchaser Securities shall not include any Senior
Units. As to any particular securities constituting Purchaser Securities, such
securities shall cease to be Purchaser Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased or
otherwise acquired by the Company or forfeited pursuant to the provisions of the
Performance Vesting Agreement. Any reference herein to a "majority of the
Purchaser Securities" or the "number of Purchaser Securities" for purposes of
comparison shall refer, with respect to any particular Investor Securities, to
the number of Common Units (or equivalent common equity securities of the
Company) then represented by such Purchaser Securities (on a fully diluted,
as-if-converted basis).
"QUALIFIED PUBLIC OFFERING" means a Public Offering where BOTH
(i) the proceeds (net of underwriting discounts and
commissions) received by the Company in exchange for its issuance of
shares of common stock in such Public Offering equal or exceed $60
million, AND
(ii) the price per share of common stock paid to the Company
in such Public Offering equals or exceeds the product of (x) 3.0 TIMES
(y) the quotient of (A) the aggregate capital contributions to the
Company under the Equity Purchase Agreement (including the initial
purchase price and all Subsequent Contributions (as defined in the
Equity Purchase Agreement)) made on or prior to the date of such Public
Offering with respect to all Purchaser Securities then outstanding,
DIVIDED BY (B) the number of shares of the Company's common stock
represented by all Purchaser Securities (on a fully diluted,
as-if-converted basis) outstanding immediately prior to the
consummation of such Public Offering.
"QUALIFIED SALE OF THE COMPANY" has the meaning set forth with
respect thereto in Section 2(b).
- 20 -
<PAGE>
"REPURCHASE EVENT" has the meaning set forth with respect
thereto in Section 3(d).
"REPURCHASE NOTICE" has the meaning set forth with respect
thereto in Section 3(f).
"REPURCHASE PRICE" has the meaning set forth with respect
thereto in Section 3(e).
"SALE OF THE COMPANY" means the arm's length sale of the
Company to a third party or group of third parties acting in concert, pursuant
to which such party or parties acquire (i) equity securities of the Company
possessing the voting power under normal circumstances to control the Company,
or (ii) all or substantially all of the Company's assets determined on a
consolidated basis (in either case, whether by merger, consolidation, sale or
transfer of the Company's equity securities, or sale or transfer of the
Company's consolidated assets).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SECURITYHOLDERS AGREEMENT" means the securityholders
agreement of even date herewith entered into by and among the Company and
certain of its securityholders, as amended from time to time in accordance with
its terms.
"SENIOR UNITS" means the Company's Class A Senior Units, Class
B Senior Units, and Class C Senior Units.
"SIX-MONTH ANNIVERSARY DATE" has the meaning set forth with
respect thereto in Section 3(g)(iii).
"START-UP GROUP SECURITIES" means (i) the Common Units issued
to Lawrence F. DeGeorge pursuant to the Investor Securities Agreement (as
defined in under the Equity Purchase Agreement), (ii) the Common Units issued to
William H. Pearson and Richard N. Clevenger pursuant to their Executive
Securities Agreements (as defined in the Equity Purchase Agreement), and (iii)
any securities issued directly or indirectly with respect to any Start-Up Group
Securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization, or upon conversion or exercise
of any of the foregoing; PROVIDED that Start-Up Group Securities shall not
include any Senior Units. As to any particular securities constituting Start-Up
Group Securities, such securities shall cease to be Start-Up Group Securities
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased pursuant to the provisions of any Executive Securities Agreement
(as defined in the Equity Purchase Agreement) or forfeited pursuant to the
provisions of the Performance Vesting Agreement. Any reference herein to a
"majority of the Start-Up Group Securities" or the "number of Start-Up Group
Securities" for purposes of comparison shall refer, with respect to any
particular Start-Up Group Securities, to the number of Common Units (or
equivalent common equity securities of the Company) then
- 21 -
<PAGE>
represented by such Start-Up Group Securities (on a fully diluted,
as-if-converted basis, but excluding any Start-Up Group Securities that are
Un-Performance-Vested Securities).
"START-UP PERIOD" means the period of time commencing on the
date hereof and ending on the earliest to occur of (i) the second anniversary of
the date hereof and (ii) the consummation of a Public Offering.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director, manager or general
partner of such limited liability company, partnership, association or other
business entity. For purposes of this Agreement, if the context does not
otherwise indicate in respect of which Person the term "SUBSIDIARY" is used, the
term "SUBSIDIARY" shall refer to any Subsidiary of the Company.
"TIME-VESTED SECURITIES" has the meaning set forth with
respect thereto in Section 2(a).
"TRANSFER" has the meaning set forth with respect thereto in
Section 4(c)(i)
"TYPE I REPURCHASE EVENT" has the meaning set forth with
respect thereto in Section 3(a).
"TYPE II REPURCHASE EVENT" has the meaning set forth with
respect thereto in Section 3(b).
"UN-PERFORMANCE-VESTED SECURITIES" means Performance Vesting
Securities that have not yet performance vested pursuant to the provisions of
the Performance Vesting Agreement.
"UN-TIME-VESTED SECURITIES" has the meaning set forth with
respect thereto in Section 2(a).
"VALUED SECURITIES" has the meaning set forth with respect
thereto in Section 3(g)(i).
- 22 -
<PAGE>
8. MISCELLANEOUS PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Securities in violation of any provision of
this Agreement shall be void, and the Company shall not record such purported
Transfer on its books or treat any purported transferee of such Executive
Securities as the owner of such securities for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and related documents among the parties of even
date herewith and therewith embody the complete agreement and understanding
among the parties hereto and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, none of which need contain the signature of more than one party
hereto but each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind the parties hereto and their respective
successors and assigns and shall inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns, whether so
expressed or not.
(f) CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND EXHIBITS HERETO), EVEN
THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(g) REMEDIES. Each of the parties to this Agreement (including
the holders of Start-Up Group Securities, and any Key Employee to which the
Company assigns any of its repurchase rights under Section 3 hereof, as
third-party beneficiaries) shall be entitled to enforce its
- 23 -
<PAGE>
rights under this Agreement specifically, to recover damages and costs
(including reasonable attorney's fees) caused by any breach of any provision of
this Agreement and to exercise all other rights existing in its favor. The
parties hereto agree and acknowledge that money damages would not be an adequate
remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or deposit) for specific performance
and/or other injunctive relief in order to enforce or prevent any violations of
the provisions of this Agreement.
(h) AMENDMENT, MODIFICATION, OR WAIVER. The provisions of this
Agreement may be amended, modified, or waived only with the prior written
consent of the Company and the Executive.
(i) THIRD-PARTY BENEFICIARIES. The parties hereto acknowledge
and agree that certain provisions of this Agreement are intended for the benefit
of the holders of Start-Up Group Securities and any Key Employee to which the
Company assigns any of its repurchase rights under Section 3 hereof, that such
Persons are third-party beneficiaries of this Agreement, and that the provisions
of this Agreement shall be enforceable by such Persons as provided herein.
(j) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the State of Colorado, the Republic of France, or the jurisdiction of
the Company's principal office, the time period shall be automatically extended
to the business day immediately following such Saturday, Sunday or holiday.
(k) DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT
CONSTRUCTION. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Reference to any agreement, document, or instrument means such agreement,
document, or instrument as amended or otherwise modified from time to time in
accordance with the terms thereof, and if applicable hereof. The use of the
words "include" or "including" in this Agreement shall be by way of example
rather than by limitation. The use of the words "or," "either" or "any" shall
not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
(l) NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when (a) delivered
personally to the recipient, (b) telecopied to the recipient (with hard copy
sent to the recipient by reputable overnight courier service (charges prepaid)
that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a
business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by
- 24 -
<PAGE>
reputable overnight courier service (charges prepaid). Such notices, demands and
other communications shall be sent to the following Persons at the following
addresses:
TO THE COMPANY:
4700 South Syracuse, Suite 1050
Denver, Colorado 80237
Attention: President
Telephone: (303) 741-4788
Telecopy: (303) 741-4823
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Mark B. Tresnowski, Esq.
Telephone: (312) 861-2385
Telecopy: (312) 861-2200
TO EXECUTIVE: at the address set forth in the Company's records
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Holme Roberts & Owen LLP
1700 Lincoln Street
Suite 4100
Denver, Colorado 80203
Attention: W. Dean Salter, Esq.
Telephone: (303) 861-7000
Telecopy: (303) 866-0200
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(m) DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or
- 25 -
<PAGE>
agreement or instrument was transmitted or communicated through the use of a
facsimile machine as a defense to the formation or enforceability of a contract
and each such party forever waives any such defense.
* * * *
- 26 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Executive Securities Agreement on the date first written above.
CABLETEL EUROPE LLC
By: /s/ James E. Dovey
-----------------------------------
Its: CEO
----------------------------------
EXECUTIVE
/s/ William H. Pearson
---------------------------------------
Name: William H. Pearson
(Signature page for Executive Securities Agreement)
<PAGE>
EXECUTIVE SECURITIES AGREEMENT
(LACEY)
THIS EXECUTIVE SECURITIES AGREEMENT (this "AGREEMENT") is made as of
December 2, 1998, by and between CompleTel LLC, a Delaware limited liability
company (the "COMPANY"), and David Lacey ("EXECUTIVE"). Capitalized terms used
but not otherwise defined herein have the meanings ascribed to such terms in
Section 8 hereof.
This Agreement contemplates a transaction in which, pursuant to the
terms and subject to the conditions set forth herein, Executive will purchase
Common Units of the Company. All of such Executive Securities are subject to
time vesting as set forth herein. In addition to time vesting, a portion of
such Executive Securities are also subject to performance vesting pursuant to
the terms of the Performance Vesting Agreement. All of the Executive Securities
held by Executive or his transferees are subject to certain restrictions on
transfer and, upon Executive's ceasing to be employed by the Company or its
Subsidiaries, certain repurchase options, each as set forth herein. In
addition, the Executive Securities are subject to certain voting agreements and
other provisions set forth herein and in the Securityholders Agreement. The
Company's subsidiary CableTel Management, Inc. ("CTM") intends as soon as
reasonably possible to enter into an Employment Agreement with Executive as its
Chief Financial Officer (the "EMPLOYMENT AGREEMENT").
NOW, THEREFORE, in consideration of the mutual promises made herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE OF EXECUTIVE SECURITIES.
(a) PURCHASE. The Company agrees to issue and sell to Executive and
Executive agrees to purchase from the Company, upon execution of this Agreement
and payment of the purchase price, 1000 Common Units (of which 700 shall not,
and 300 shall, be subject to performance vesting under the terms of the
Performance Vesting Agreement), each having the rights and preferences set forth
with respect thereto in the LLC Agreement. The aggregate purchase price for the
Executive Securities is $1,000, which amount shall be paid to the Company, in
U.S. Dollars, by cashier's or certified check, or by wire transfer.
(b) REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. In connection with
the purchase and issuance of the Executive Securities hereunder, Executive
represents and warrants to the Company that:
(i) The Executive Securities to be acquired by Executive
pursuant to this Agreement shall be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act or any applicable state securities laws, and the Executive
Securities shall not be disposed of in contravention of the Securities Act or
any applicable state securities laws.
<PAGE>
(ii) Executive is sophisticated in financial matters and is
able to evaluate the risks and benefits of the investment in the Executive
Securities.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Securities for an indefinite period of time and is
aware that transfer of the Executive Securities may not be possible because (A)
such transfer is subject to contractual restrictions on transfer set forth
herein, in the Securityholders Agreement, and in the Performance Vesting
Agreement, and (B) the Executive Securities have not been registered under the
Securities Act or any applicable state securities laws and, therefore, cannot be
sold unless subsequently registered under the Securities Act and such applicable
state securities laws or an exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of the
Executive Securities issued hereunder and has had full access to such other
information concerning the Company as he has requested.
(v) This Agreement, the LLC Agreement, the Securityholders
Agreement, the Registration Agreement, the Performance Vesting Agreement, the
Joinder Agreement, and the other agreements contemplated thereby of even date
therewith constitute the legal, valid and binding obligations of Executive,
enforceable in accordance with their terms, and the execution, delivery and
performance of such agreements by Executive and Executive's employment by the
Company and its Subsidiaries do not and shall not conflict with, violate or
cause a breach of any agreement, contract or instrument to which Executive is a
party or by which he is bound or any judgment, order or decree to which
Executive is subject.
(c) ACKNOWLEDGMENT BY EXECUTIVE. As an inducement to the Company to
enter into this Agreement, and as a condition thereto, Executive acknowledges
and agrees that this Agreement and the purchase of the Executive Securities
hereunder are not a condition to his employment by the Company or any Subsidiary
and that none of the execution and delivery of this Agreement, the issuance of
the Executive Securities to Executive, or Executive's status as a holder of
Executive Securities, shall:
(i) entitle Executive to remain employed by the Company or
its Subsidiaries or affect the right of the Company or its Subsidiaries to
terminate Executive's employment at any time and for any reason as permitted by
the Employment Agreement; or
(ii) impose upon the Company any duty or obligation to
disclose to Executive, or create in Executive any right to be advised of, any
material information regarding the Company and its Subsidiaries at any time
prior to, upon or in connection with the repurchase of any Executive Securities
upon the termination of Executive's employment by the Company or its
Subsidiaries or as otherwise provided hereunder.
-2-
<PAGE>
2. TIME VESTING OF EXECUTIVE SECURITIES.
(a) TIME VESTING SCHEDULE. Except as otherwise provided herein, an
amount of Un-Time-Vested Securities (as defined below) shall time vest on
December 31, 1998, on each of the first three anniversaries of such date, and on
the fourth anniversary of the date hereof, such that the Executive Securities
shall be time vested on each such date in accordance with the following
schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Cumulative Percentage of
Date Executive Securities
------ Time Vested on Such Date
----------------------------
- --------------------------------------------------------------------------------
<S> <C>
December 31, 1998 4.17%
- --------------------------------------------------------------------------------
December 31, 1999 29.17%
- --------------------------------------------------------------------------------
December 31, 2000 54.17%
- --------------------------------------------------------------------------------
December 31, 2001 79.17%
- --------------------------------------------------------------------------------
Fourth anniversary of the date hereof 100%
- --------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing sentence, the above time vesting schedule shall
cease and no Un-Time-Vested Securities (as defined below) shall time vest after
the date on which Executive's employment with the Company or its Subsidiaries
terminates voluntarily, involuntarily, with or without cause, for any reason or
for no reason. Executive Securities which have become time vested pursuant to
this Section 2 are referred to herein as "TIME-VESTED SECURITIES," and all other
Executive Securities are referred to herein as "UN-TIME-VESTED SECURITIES."
(b) 100% ACCELERATION UPON A QUALIFIED SALE OF THE COMPANY. All
Un-Time-Vested Securities shall become Time-Vested Securities in connection with
the consummation of a Qualified Sale of the Company, so long as Executive is
employed by the Company or any of its Subsidiaries on the date of such sale.
For purposes hereof, a "QUALIFIED SALE OF THE COMPANY" means a Sale of the
Company in which the consideration paid in such sale for at least 50% of the
Company's outstanding equity securities or of the Company's consolidated assets
consists of cash and/or publicly traded equity securities (E.G., 66.7% of the
consideration for such Sale of the Company would have to consist of cash and/or
publicly traded equity securities if only 75% of the Company's outstanding
equity securities were sold in such transaction).
(c) 100% ACCELERATION UPON A SALE OF THE COMPANY (OTHER THAN A
QUALIFIED SALE OF THE COMPANY) WITH NO CONTINUING COMPARABLE TIME VESTING
ARRANGEMENT. In the event of a Sale of the Company (other than a Qualified Sale
of the Company), the above vesting schedule will not accelerate as a result of
such Sale of the Company; PROVIDED that if the surviving or acquiring Person(s)
in such Sale of the Company fails or declines either to (i) continue after such
Sale of the Company to allow Executive to hold his Un-Time-Vested Securities
subject to the time vesting and repurchase provisions hereof, or (ii) grant to
Executive the number of securities in the surviving or acquiring Person(s) that
Executive would have received in such Sale of the Company in exchange
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for Executive's Un-Time-Vested Securities if such securities had instead been
Time-Vested Securities, subject to ongoing time vesting and repurchase
arrangements substantially comparable to those set forth herein (as such
comparability is determined in good faith by the Board), then all Un-Time-Vested
Securities shall become Time-Vested Securities in connection with the
consummation of such Sale of the Company, so long as Executive is employed by
the Company or any of its Subsidiaries on the date of such sale.
(d) ONE-YEAR ACCELERATION UPON A QUALIFIED PUBLIC OFFERING. Upon the
consummation of a Qualified Public Offering, and so long as Executive is
employed by the Company or any of its Subsidiaries on the closing date of such
offering, there will time vest the amount of Un-Time-Vested Securities which
were scheduled to time vest within the 365 days following such closing date (and
the remaining Un-Time-Vested Securities, if any, shall continue to time vest in
accordance with paragraph (a) above, such that the time vesting schedule set
forth in paragraph (a) above shall have been effectively accelerated by one
year).
(e) TIME VESTING AND PERFORMANCE VESTING.
(i) INDEPENDENCE OF TIME AND PERFORMANCE VESTING. The
Company and Executive acknowledge that the Executive Securities constituting
Performance Vesting Securities are subject, in addition to time vesting under
this Section 2, to performance vesting as set forth in the Performance Vesting
Agreement. The time vesting provisions of this Section 2 operate independently
of the performance vesting provisions under the Performance Vesting Agreement.
As such, (A) the terms "Time-Vested Securities" and "Un-Time-Vested Securities"
as used herein refer only to whether particular Executive Securities have time
vested in accordance with the terms of this Section 2 and do not indicate
whether such Executive Securities that constitute Performance Vesting Securities
have or have not also performance vested under the Performance Vesting
Agreement, and (B) the terms "Performance-Vested Securities" and
"Un-Performance-Vested Securities" (each defined below) as used herein refer
only to whether particular Performance Vesting Securities have performance
vested in accordance with the terms of the Performance Vesting Agreement and do
not indicate whether such Performance Vesting Securities have or have not also
time vested under this Section 2.
(ii) APPLICATION OF TIME VESTING. Whenever Un-Time-Vested
Securities time vest pursuant to the terms of this Section 2, the Un-Time-Vested
Securities that are not Performance Vesting Securities, on the one hand, and the
Un-Time-Vested Securities that are Performance Vesting Securities, on the other
hand, will each time vest on a pro rata basis based on the number of each such
type of securities then outstanding. Of such Un-Time-Vested Securities
constituting Performance Vesting Securities which are to vest, the
Un-Time-Vested Securities that are Performance-Vested Securities shall be time
vested prior to any Un-Time-Vested Securities that are Un-Performance-Vested
Securities being time vested.
(iii) APPLICATION OF PERFORMANCE VESTING. Whenever
Un-Performance-Vested Securities performance vest pursuant to the terms of the
Performance Vesting Agreement, the Un-Performance-Vested Securities that are
Time-Vested Securities shall be performance vested
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prior to any Un-Performance-Vested Securities that are Un-Time-Vested Securities
being performance vested.
3. REPURCHASE OPTIONS
(a) REPURCHASE OPTION UPON CESSATION OF EMPLOYMENT. If Executive
ceases voluntarily or involuntarily, with or without cause, to be employed by
the Company or its Subsidiaries for any reason or for no reason (such cessation
of employment, a "REPURCHASE EVENT"), the Company (by action of the Board) may
elect to purchase all or any portion of the Executive Securities then in
existence (whether held by Executive or one or more of Executive's transferees)
by delivering a Repurchase Notice to the holder or holders of the Executive
Securities at any time within 30 days after the Repurchase Event.
(b) ASSIGNMENT OF COMPANY'S REPURCHASE RIGHTS. Upon any Repurchase
Event, the Company (by action of the Board) shall have the right to assign all
or any portion of its repurchase rights hereunder to one or more management or
other key employees (each a "KEY EMPLOYEE") of the Company or any of its
Subsidiaries; PROVIDED that the Company may not assign its rights under Section
3(f) below to pay all or part of the Repurchase Price (as defined below) for
Executive Securities repurchased hereunder by (i) offsetting debts owed by
Executive to the Company or (ii) issuing Class A Senior Units or a promissory
note. If the Company assigns any of its repurchase rights to such a Key
Employee, and such Key Employee fails to exercise such assigned repurchase
rights, the Company shall once again have the right to exercise (or assign) such
rights.
(c) REPURCHASE PRICE. The repurchase price (the "REPURCHASE PRICE")
for any Time-Vested Securities to be repurchased hereunder shall be the Fair
Market Value (as determined below) of such securities on the date of the
Repurchase Event giving rise to such repurchase. The Repurchase Price of any
Un-Time-Vested Securities to be repurchased hereunder shall be the Original Cost
of such securities (with securities having a lower Original Cost being subject
to repurchase prior to securities with a higher Original Cost).
(d) REPURCHASE NOTICE. Each "REPURCHASE NOTICE" delivered hereunder
shall set forth the amount, type, and class of Executive Securities (including,
if applicable, the amount of Un-Time-Vested Securities and/or Time-Vested
Securities) to be acquired from each such holder and the aggregate consideration
to be paid for such Executive Securities. The Executive Securities to be
repurchased pursuant to any Repurchase Notice shall first be satisfied to the
extent possible from the Executive Securities held by Executive at the time of
delivery of such Repurchase Notice. If the amount of Executive Securities then
held by Executive is less than the total amount of Executive Securities that
have been elected to be purchased pursuant to such Repurchase Notice, the
electing party or parties shall purchase the remaining securities elected to be
purchased from the other holder(s) of Executive Securities, pro rata according
to the amount of Executive Securities held of record by each such other holder
at the time of delivery of such Repurchase Notice. The amount of Un-Time-Vested
Securities and Time-Vested Securities repurchased hereunder shall be deemed to
be allocated among Executive and the other holders of repurchased Executive
Securities (if any) pro rata according to the amount of Executive Securities to
be purchased from such persons.
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(e) FAIR MARKET VALUE OF REPURCHASED EXECUTIVE SECURITIES.
(i) The "FAIR MARKET VALUE" of Time-Vested Securities subject
to repurchase hereunder (the "VALUED SECURITIES") shall be determined in
accordance with this paragraph (e).
(ii) A majority interest of the Company and/or any assignees
of the Company's repurchase rights ("majority" determined based on the amount of
Valued Securities to be purchased by each), on the one hand, and the holders of
a majority of the Valued Securities to be repurchased, on the other hand, shall
attempt in good faith to agree on the Fair Market Value of the Valued Securities
to be repurchased. Any agreement reached by such Persons shall be final and
binding on all parties hereto.
(iii) If such Persons are unable to reach such agreement within
20 days after the giving of any Repurchase Notice, the Fair Market Value of any
Valued Securities that are publicly traded shall be the average, over a period
of 21 days consisting of the date of the Repurchase Event and the 20 consecutive
business days prior to that date, of the average of the closing prices of the
sales of such securities on the primary securities exchange on which such
securities may at that time be listed, or, if there have been no sales on such
exchange on any day, the average of the highest bid and lowest asked prices on
such exchange at the end of such day, or, if on any day such securities are not
so listed, the average of the representative bid and asked prices quoted in the
Nasdaq System as of 4:00 P.M., New York time, or, if on any day such securities
are not quoted in the Nasdaq System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau Incorporated, or any similar successor
organization. If the Fair Market Value of any Valued Securities on the date
that is 180 days after the date of the Repurchase Event (the "SIX-MONTH
ANNIVERSARY DATE") (determined as described in the immediately preceding
sentence with respect to such Six-Month Anniversary Date, rather than with
respect to the date of the Repurchase Event) is greater than the Fair Market
Value of such Valued Securities determined as described in the immediately
preceding sentence with respect to the date of the Repurchase Event, then the
"Fair Market Value" of such publicly traded Valued Securities shall be the Fair
Market Value determined as of the Six-Month Anniversary Date.
(iv) If such Persons are unable to reach agreement pursuant to
subparagraph (ii) within 20 days after the giving of such Repurchase Notice, and
to the extent any Valued Securities are not publicly traded:
(A) A majority interest of the Company and/or any
assignees of the Company's repurchase rights ("majority" determined based on the
amount of Valued Securities to be purchased by each), on the one hand, and the
holders of a majority of the Valued Securities to be repurchased, on the other
hand, shall each, within 10 days thereafter, choose one investment banker or
other appraiser with experience in valuing companies such as the Company (and if
the Valued Securities include any Un-Performance-Vested Securities, experienced
in valuing contingent or derivative assets), and the two investment
bankers/appraisers so selected shall together select a third investment
banker/appraiser similarly qualified.
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(B) The three investment bankers/appraisers shall first
appraise the fair market value of the Company's equity (based on the assumption
of an orderly, arm's length sale (structured to produce the highest price to the
equity holders of the Company, whether such structure is a merger, combination,
sale of equity securities, sale of assets, or otherwise) to a willing
unaffiliated buyer (or to a willing affiliated strategic buyer, PROVIDED that
the investment bankers/appraisers shall not consider any premium that such
affiliated strategic buyer would be willing to pay to the extent such premium is
attributable solely to such Person's affiliation with the Company, unless the
Company or its equityholders have received a fully financed, firm commitment
offer (with no material conditions) from such affiliated strategic buyer to
purchase a majority (based on common equity equivalents) of the Company's
outstanding equity at a price that includes such premium, IT BEING UNDERSTOOD,
HOWEVER, that the investment bankers/appraisers shall consider, without the need
for such a firm commitment offer, the premium, if any, that is attributable to
such Person's future expected synergies to be generated by combining such
Person's operations with those of the Company and its Subsidiaries if such
Person were to acquire the Company). The three investment bankers/appraisers
shall then appraise the fair market value of such non-publicly-traded Valued
Securities as follows:
1) the fair market value of each Common Unit (or
equivalent common equity security) that is not an Un-Performance-Vested Security
shall be equal to the fair market value of the Company's equity DIVIDED BY the
total number of Common Units (or equivalent common equity securities)
outstanding on the date of the Repurchase Event (determined on a fully diluted,
as-if-converted basis, but excluding all Un-Performance-Vested Securities);
2) the fair market value of any
Un-Performance-Vested Securities shall reflect (x) the expected market value of
such securities at such future time as such securities are expected to become
performance vested under the terms of the Performance Vesting Agreement,
appropriately discounted to its present value as of the relevant valuation date
based upon the amount of time from the relevant valuation date until the date on
which such Un-Performance-Vested Securities are expected to performance vest (if
at all), and (y) the magnitude of the risk that such securities may never become
performance vested under the terms of the Performance Vesting Agreement; and
3) the fair market value of any other
non-publicly-traded Valued Securities shall be the fair value of such
securities, determined on the basis of an orderly, arm's length sale (structured
to produce the highest for such securities) to a willing, unaffiliated buyer,
taking into account all relevant factors determinative of value.
The three investment bankers/appraisers shall, within thirty days of their
retention, provide the written results of such appraisals to the Company
and/or the Company's assignees, and to each of the holders of the Valued
Securities to be repurchased.
(C) The "FAIR MARKET VALUE" of the non-publicly-traded
Valued Securities to be repurchased shall be the average of the two appraisals
closest to each other, and such amount shall be final and binding on all parties
hereto; PROVIDED that any Person electing to purchase
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Executive Securities hereunder may at any time within five days after receiving
written notice of such determination rescind its prior exercise of such Person's
repurchase option by giving written notice of such revocation to the holder or
holders of the Executive Securities to be repurchased, and upon such revocation
the revoking party will be treated as if it had never exercised such repurchase
option (it being understood that such revoking party may not then exercise such
repurchase option again with respect to the same Repurchase Event).
(D) A majority interest of the Company and/or any
assignees of the Company's repurchase rights ("majority" determined based on the
amount of Valued Securities to be purchased by each), on the one hand, and the
holders of a majority of the Valued Securities to be repurchased, on the other
hand, will each pay the costs of their own chosen appraiser and 50% of the costs
of the third appraiser.
(f) CLOSING OF EACH REPURCHASE. Within 10 days after the Repurchase
Price for the Executive Securities to be repurchased at any repurchase hereunder
has been determined, the Company shall send a notice to each holder of Executive
Securities setting forth the consideration to be paid for such securities and
the time and place for the closing of the transaction, which date shall not be
more than 30 days nor less than five days after the delivery of such notice. At
each such closing, the holders of Executive Securities shall deliver all
certificates (if any exist) evidencing the Executive Securities to be
repurchased at such closing to the purchaser or purchasers thereof, and such
purchaser or purchasers shall pay for the Executive Securities to be purchased
at such closing by delivery of a check or wire transfer of immediately available
funds in the aggregate amount of the Repurchase Price for such Executive
Securities; PROVIDED that if the Company is to purchase any Executive Securities
from Executive at such closing, the Company may elect (by action of the Board)
to pay all or any portion of the Repurchase Price for such Executive Securities
by setting off against such Repurchase Price any bona fide debts owed
(regardless of whether then due and payable) by Executive to the Company or any
of its Subsidiaries; AND PROVIDED FURTHER that if the Company is to purchase any
Executive Securities at such closing, the Company may elect (by action of the
Board) to pay all or any portion of the Repurchase Price for such Executive
Securities as follows:
(i) in accordance with the LLC Agreement, by issuing in
exchange for such Executive Securities an equal number of Class A Senior Units,
and each such Class A Senior Unit issued in connection with such repurchase
shall be deemed as of the date of such repurchase to have capital contributions
to the Company made with respect to such Class A Senior Unit equal to the
Repurchase Price for the Executive Securities in exchange for which such Class A
Senior Unit was issued; or
(ii) if the Company has prior to the date of such repurchase
converted into a corporation or other corporate form, in the form of a
promissory note, which promissory note shall be subordinated to all of the
Company's senior debt obligations either then or thereafter incurred, shall earn
simple annual interest at a rate of 8% per annum, shall have all principal and
accrued interest due and payable upon maturity, and shall mature upon the
earliest to occur of the Company's initial Public Offering (if such initial
Public Offering has not occurred prior to the issuance of such promissory note),
a Sale of the Company, or the fourth anniversary of the issuance of such
promissory note.
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The purchasers of Executive Securities hereunder shall be entitled to
receive customary representations and warranties from the sellers, including
representations and warranties regarding good title to such securities, free and
clear of any liens or encumbrances.
(g) GENERAL LOOK-BACK RIGHTS. If (i) upon any Repurchase Event by
reason of Executive's death, Disability, or a termination by the Company without
Cause (such a Repurchase Event, a "Type I Repurchase Event"), the Company
repurchases any Valued Securities pursuant to the terms of this Section 3, (ii)
a Sale of the Company or the Company's initial Public Offering is consummated
within the 1-year period commencing on the date of such Type I Repurchase Event,
and (iii) the value of the Company's equity implied by the sale price of such
Sale of the Company, or the pre-money valuation of the Company's equity (I.E.,
the value of the Company's equity prior to giving effect to such initial Public
Offering) implied by such initial Public Offering, (as applicable, the "IMPLIED
VALUATION") is greater than the value of the Company's equity actually utilized
to determine the Fair Market Value of such repurchased Valued Securities
pursuant to Section 3(e), then the Company shall in connection with such Sale of
the Company or initial Public Offering pay to each Person from whom such Valued
Securities were repurchased the difference of (x) the Fair Market Value of such
Valued Securities purchased by the Company from such Person that would have been
calculated pursuant to Section 3(e) had the Implied Valuation been used as the
Company's equity value, MINUS (y) the Repurchase Price actually paid for such
Valued Securities purchased by the Company from such Person. The Company shall
have the right to pay such amounts in the same manner or form specified in
Section 3(f) as the Company may pay the Repurchase Price for any Executive
Securities at the closing of any repurchase hereunder.
(h) RESTRICTIONS. Notwithstanding anything to the contrary contained
in this Agreement, all repurchases of Executive Securities by the Company shall
be subject to applicable restrictions contained in the Delaware General
Corporation Law, the Delaware Limited Liability Company Act and in the Company's
and its Subsidiaries' debt and equity financing agreements. If any such
restrictions prohibit the repurchase of Executive Securities hereunder which the
Company is otherwise entitled to make, the time periods provided in this
paragraph 3 shall be suspended, and the Company may make such repurchases as
soon as it is permitted to do so under such restrictions, unless by such time
such repurchase option has terminated pursuant to paragraph (i) below.
(i) TERMINATION OF REPURCHASE OPTIONS. The repurchase provisions
under this paragraph 3 (and the rights and obligations created thereby) shall
cease to apply to all Time-Vested Securities upon the consummation of a
Qualified Sale of the Company or a Qualified Public Offering (it being
understood that (i) such provisions, rights, and obligations shall continue to
apply to all Un-Time-Vested Securities until such time as they become
Time-Vested Securities in accordance with the terms hereof, and (ii) the
forfeiture provisions of the Performance Vesting Agreement shall continue to
apply to all Un-Performance-Vested Securities until such time as they become
Performance-Vested Securities in accordance with the terms of the Performance
Vesting Agreement).
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4. RESTRICTIONS ON TRANSFER.
(a) OPINION OF VALID TRANSFER. In addition to any other restrictions
on transfer imposed by this Agreement, the Securityholders Agreement, the
Performance Vesting Agreement, or the LLC Agreement, no holder of Executive
Securities may sell, transfer or dispose of any Executive Securities (except
pursuant to an effective registration statement under the Securities Act)
without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Company) that neither registration nor
qualification under the Securities Act or applicable state securities laws is
required in connection with such transfer.
(b) RESTRICTIVE LEGEND. The certificates representing Executive
Securities shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON DECEMBER 2, 1998, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE,
AND SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, VESTING PROVISIONS, AND
REPURCHASE OPTIONS SET FORTH IN AN EXECUTIVE SECURITIES AGREEMENT
BETWEEN THE ISSUER OF SUCH SECURITIES (THE "ISSUER") AND THE INITIAL
HOLDER OF SUCH SECURITIES. A COPY OF SUCH AGREEMENT MAY BE OBTAINED
BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE."
The legend set forth above shall be removed from the certificates evidencing any
securities which cease to be Executive Securities.
(c) RETENTION OF EXECUTIVE SECURITIES.
(i) Executive shall not sell, transfer, assign, pledge or
otherwise dispose of (whether with or without consideration and whether
voluntarily or involuntarily or by operation of law) any interest in any
Executive Securities (a "TRANSFER"), except (x) with respect to
Un-Performance-Vested Securities, pursuant to the repurchase provisions of
Section 3 hereof or the forfeiture provisions of the Performance Vesting
Agreement (each, an "EXEMPT TRANSFER"), or (y) with respect to all other
Executive Securities, pursuant to (A) the repurchase provisions of Section 3
hereof, (B) the "Participation Rights" provisions set forth in the
Securityholders Agreement, or (C) a Sale of the Company (each of (A) through
(C), an "EXEMPT TRANSFER").
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(ii) The restrictions contained in this paragraph (c) shall
not apply with respect to transfers of Executive Securities (other than
Un-Performance-Vested Securities) (A) pursuant to applicable laws of descent and
distribution or (B) among Executive's Family Group; PROVIDED that the
restrictions contained in this paragraph shall continue to be applicable to the
Executive Securities after any such Transfer, the transferees of such Executive
Securities shall have agreed in writing to be bound by the provisions of this
Agreement with respect to the Executive Securities so transferred, and (prior to
the death of Executive) each such transferee of Executive Securities shall have
entered into proxies and other agreements satisfactory to the holders of a
majority of the Purchaser Securities pursuant to which Executive shall have the
sole right to vote such Executive Securities for all purposes (subject to any
applicable voting agreements set forth herein or in the Securityholders
Agreement). For purposes of this Agreement, "FAMILY GROUP" means Executive's
spouse, siblings and descendants (whether natural or adopted) and any of such
descendants' spouses, any trust which at the time of such Transfer and at all
times thereafter is and remains solely for the benefit of Executive and/or
Executive's spouse, siblings, and/or descendants and/or such descendants'
spouses, and any family partnership the partners of which consist solely of
Executive, such spouse, such siblings, such descendants, such descendants'
spouses, and/or such trusts.
(iii) The restrictions on the transfer of Executive Securities
set forth in this paragraph (c) shall continue with respect to each Executive
Security following any Transfer thereof (other than an Exempt Transfer);
PROVIDED that upon the consummation of a Qualified Public Offering, the
restrictions set forth in this paragraph (c) shall thereafter cease to apply to
all Fully Vested Securities, it being understood that such restrictions shall
continue to apply to all other Executive Securities until such time as they
become Fully Vested Securities.
5. CONFIDENTIALITY.
(a) NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Executive
shall not disclose or use at any time, either during his employment with the
Company or its Subsidiaries or thereafter, any Confidential Information (as
defined below) of which Executive is or becomes aware, whether or not such
information is developed by him, except to the extent that such disclosure or
use is directly related to and required by Executive's performance of duties
assigned to Executive by the Company or its Subsidiaries. Executive shall take
all appropriate steps to safeguard Confidential Information and to protect it
against disclosure, misuse, espionage, loss and theft. As used in this
Agreement, the term "CONFIDENTIAL INFORMATION" means information that is not
generally known to the public and that is used, developed or obtained by the
Company or its Subsidiaries in connection with their business, including but not
limited to (i) products or services, (ii) fees, costs and pricing structures,
(iii) designs, (iv) analysis, (v) drawings, photographs and reports,
(vi) computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases,
(ix) accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customer and client information (including customer or
client lists), (xii) copyrightable works, (xiv) all technology and trade
secrets, (xv) business plans and financial models, and (xvi) all similar and
related information in whatever form. Confidential Information shall not
include any information that has been published in a form generally available to
the public
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prior to the date Executive proposes to disclose or use such information.
Information shall not be deemed to have been published merely because individual
portions of the information have been separately published, but only if all
material features constituting such information have been published in
combination.
(b) THE COMPANY'S OWNERSHIP OF INTELLECTUAL PROPERTY.
(i) ACKNOWLEDGMENT OF COMPANY OWNERSHIP. If Executive
as part of his activities on behalf of the Company or its Subsidiaries
generates, authors or contributes to any invention, design, new development,
device, product, method or process (whether or not patentable or reduced to
practice or constituting Confidential Information), any copyrightable work
(whether or not constituting Confidential Information) or any other form of
Confidential Information relating directly or indirectly to the Company's and
its Subsidiaries' business as now or hereafter conducted (collectively,
"INTELLECTUAL PROPERTY"), Executive acknowledges that such Intellectual Property
is the exclusive property of the Company and hereby assigns all right, title and
interest in and to such Intellectual Property to the Company. Any copyrightable
work prepared in whole or in part by Executive will be deemed "a work made for
hire" under Section 201(b) of the 1976 Copyright Act, and the Company shall own
all of the rights comprised by the copyright therein. Executive shall promptly
and fully disclose all Intellectual Property to the Company and shall cooperate
with the Company to protect the Company's interests in and rights to such
Intellectual Property (including, without limitation, providing reasonable
assistance in securing patent protection and copyright registrations and
executing all documents as reasonably requested by the Company, whether such
requests occur prior to or after termination of Executive's employment by the
Company).
(ii) EXECUTIVE INVENTION. Executive understands that
paragraph (b)(i) of this Section regarding the Company's ownership of
Intellectual Property does not apply to any invention for which no equipment,
supplies, facilities or trade secret information of the Company were used and
which was developed entirely on Executive's own time, unless (i) the invention
relates to the business of the Company or any of its Subsidiaries or to their
actual or demonstrably anticipated research or development or (ii) the invention
results from any work performed by Executive for the Company or any of its
Subsidiaries.
(c) DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. As
requested by the Company from time to time and upon the termination of
Executive's employment with the Company and its Subsidiaries for any reason,
Executive shall promptly deliver to the Company all copies and embodiments, in
whatever form, of all Confidential Information and Intellectual Property in
Executive's possession or within his control (including, but not limited to,
written records, notes, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes and all other
materials containing or constituting any Confidential Information or
Intellectual Property) irrespective of the location or form of such material
and, if requested by the Company, shall provide the Company with written
confirmation that all such materials have been delivered to the Company.
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6. NONCOMPETITION.
(a) COVENANTS. During the term of this Agreement and for a period of
twenty-four (24) months after termination of this Agreement (the "Noncompetition
Period"), Executive shall not, directly or indirectly, as an officer, director,
employee, consultant, owner, shareholder, adviser, joint venturer, or otherwise,
compete with the Company or any Subsidiary in any geographical market in which
the Company or any Subsidiary conducts business (or any geographical market with
respect to which the Company proposes in good faith to conduct business, as
evidenced by an approved business plan or a Board resolution authorizing the
Company to use its resources to investigate or otherwise pursue an opportunity
in such market) (the "Protected Region"): (i) in construction and operation of
competitive local exchange telecommunications systems; or (ii) in any other line
of business in which the Company was engaged at any time during the term of this
Agreement; or (iii) in any other line of business into which the Company during
the term of Executive's employment, formed an intention to enter during the term
of Executive's obligation not to compete, and which the Company's Board has
disclosed to Executive in writing within ten (10) days following the termination
of this Agreement. This covenant shall not preclude Executive from owning less
than two percent (2%) of the securities of any competitor of the Company if such
securities are publicly traded on a nationally recognized stock exchange or
over-the-counter market.
(b) ACKNOWLEDGMENTS. Executive acknowledges that the foregoing
geographic restriction on competition is fair and reasonable in its duration,
geographical area and scope, given the geographic scope of the Company's
business operations and the nature of Executive's position with the Company.
Executive also acknowledges that while employed by the Company Executive will
have access to information that would be valuable or useful to the Company's
competitors, and therefore acknowledges that the foregoing restrictions on
Executive's future employment and business activities are fair and reasonable.
Executive acknowledges and is prepared for the possibility that Executive's
standard of living may be reduced during the Noncompetition Period, and assumes
and accepts any risk associated with that possibility.
(c) JUDICIAL MODIFICATION. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or geographic area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment or decision may be appealed.
7. NONSOLICITATION. During the term of this Agreement and for a
period of twenty four (24) months after termination of this Agreement, Executive
shall not without the Company's prior written consent, directly or indirectly:
(a) cause or attempt to cause any employee, agent or contractor of
the Company or any Company affiliate, to terminate his or her employment, agency
or contractor relationship with Company or any Company affiliate; interfere or
attempt to interfere with the relationship between
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the Company and any employee, contractor or agent of the Company; hire or
attempt to hire any employee, agent or contractor of the Company or any Company
affiliate; or conduct business of any kind with any Company contractor.
(b) solicit business from or conduct business with any customer or
client served by the Company; or interfere or attempt to interfere with any
transaction, agreement or business relationship in which the Company or any
affiliate was involved.
8. DEFINITIONS.
"AGREEMENT" has the meaning set forth in the preamble.
"BOARD" means the board of managers of the Company or, if the Company
is hereafter converted into a corporation or other entity form, the board of
directors or comparable governing body of the Company.
"CAUSE" means (A) any act by Executive, where in respect of such act
Executive is ultimately convicted or enters a plea of guilty or NOLO CONTENDERE
to a felony (or crime of similar gravity under the laws of another
jurisdiction), (B) Executive's willful misconduct, gross negligence,
perpetration of or participation in a fraud, in each case where such acts are
materially injurious to the Company or any of its Subsidiaries or any affiliate
thereof, (C) Executive's breach in any material respect of the provisions of
Section 5 (Confidentiality), Section 6 (Noncompetition) or Section 7
(Nonsolicitation) or (D) Executive's nonperformance including without
limitation, failure to perform his duties as directed by the Company or failure
to achieve specific performance objectives established by the Company.
"CLASS A SENIOR UNITS" means the Class A Senior Units of the Company,
having the rights and preferences set forth in the LLC Agreement.
"CLASS B SENIOR UNITS" means the Class B Senior Units of the Company,
having the rights and preferences set forth in the LLC Agreement.
"CLASS C SENIOR UNITS" means the Class C Senior Units of the Company,
having the rights and preferences set forth in the LLC Agreement.
"COMMON UNITS" means the Common Units of the Company, having the
rights and preferences set forth in the LLC Agreement.
"COMPANY" has the meaning set forth in the preamble.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 5(a).
"DISABILITY" means any illness, accident, injury, physical or mental
incapacity or other disability, where such condition has rendered, or is
expected to render (as determined in the good faith judgment of the Board),
Executive unable or unfit to perform effectively the duties and
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obligations of his employment or to participate effectively and actively in the
management of the Company for a period of at least 90 days.
"EQUITY PURCHASE AGREEMENT" means the equity purchase agreement dated
May 18, 1998, by and among the Company and certain investors, as amended from
time to time in accordance with the terms thereof.
"EXECUTIVE" has the meaning set forth in the preamble.
"EXECUTIVE SECURITIES" means (i) the Common Units issued to Executive
hereunder and (ii) any securities issued directly or indirectly with respect to
any Executive Securities by way of a stock split, stock dividend, or other
division of securities, or in connection with a combination of securities,
recapitalization, merger, consolidation, or other reorganization, or upon
conversion or exercise of any of the foregoing; PROVIDED that Executive
Securities shall not include any Senior Units. As to any particular securities
constituting Executive Securities, such securities shall cease to be Executive
Securities when they have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(b) distributed to the public through a broker, dealer or market maker pursuant
to Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased pursuant to the provisions hereof or forfeited pursuant to the
provisions of the Performance Vesting Agreement. "Executive Securities" refers
only to Executive Securities under this Agreement and does not in any way refer
to any securities referred to as Executive Securities under any other executive
securities agreement between the Company and a Key Employee of the Company or
its Subsidiaries.
"EXEMPT TRANSFER" has the meaning set forth in Section 4(c)(i).
"FAIR MARKET VALUE" has the meaning set forth in Section 3(e).
"FAMILY GROUP" has the meaning set forth in Section 4(c)(ii).
"FULLY VESTED SECURITIES" means Executive Securities which both (i)
are Time-Vested Securities and (ii) are not Un-Performance-Vested Securities.
"IMPLIED VALUATION" has the meaning set forth in Section 3(g).
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 5(b)(i).
"JOINDER AGREEMENT" means the joinder and rights agreement of even
date herewith entered into by and between the Company and the Executive,
pursuant to which Executive shall become a party to the LLC Agreement, the
Securityholders Agreement, the Registration Agreement and the Performance
Vesting Agreement as if he were an original signatory to each such agreement.
"KEY EMPLOYEE" has the meaning set forth in Section 3(b).
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"LLC AGREEMENT" means the limited liability company agreement
governing the affairs of the Company, as amended from time to time in accordance
with its terms.
"NONCOMPETITION PERIOD" has the meaning set forth in Section 6(a).
"NONSOLICITATION PERIOD" has the meaning set forth in Section 7.
"ORIGINAL COST," as to any particular securities, shall mean the
initial price paid to the Company upon issuance of such securities (as such
price is equitably adjusted for any securities splits, securities dividends,
securities combinations, conversions, recapitalizations or reorganizations).
"PERFORMANCE-VESTED SECURITIES" means Performance Vesting Securities
that have performance vested pursuant to the terms of the Performance Vesting
Agreement.
"PERFORMANCE VESTING AGREEMENT" means that certain performance vesting
agreement dated May 18, 1998, by and among the Company, certain Key Employees
(including Executive), and the Investors party thereto, as amended from time to
time in accordance with its terms.
"PERFORMANCE VESTING SECURITIES" means (i) the Common Units specified
in the Performance Vesting Agreement as subject to performance vesting
thereunder (regardless of whether such Common Units have or have not performance
vested pursuant to the terms thereof), and (ii) any securities issued directly
or indirectly with respect to any Performance Vesting Securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing;
PROVIDED that Performance Vesting Securities shall not include any Senior Units.
As to any particular securities constituting Performance Vesting Securities,
such securities shall cease to be Performance Vesting Securities when they have
been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased
pursuant to the provisions hereof or forfeited pursuant to the provisions of the
Performance Vesting Agreement.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED UNITS" means the Preferred Units of the Company, having the
rights and preferences set forth in the LLC Agreement.
"PUBLIC OFFERING" means any underwritten sale of the company's common
stock pursuant to an effective registration statement under the Securities Act
filed with the Securities and Exchange Commission on Form S-1 (or a successor
form adopted by the Securities and Exchange
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Commission); provided that the following shall not be considered a Public
Offering: (i) any issuance of common stock as consideration for a merger or
acquisition, and (ii) any issuance of common stock or rights to acquire common
stock to existing securityholders or to employees of the Company or its
Subsidiaries on Form S-4 or Form S-8 (or a successor form adopted by the
Securities and Exchange Commission) or otherwise.
"PURCHASER SECURITIES" means (i) the Preferred Units issued pursuant
to the Equity Purchase Agreement, (ii) any Common Units issued upon conversion
of the Preferred Units referenced in clause (i), and (iii) any securities issued
directly or indirectly with respect to any Purchaser Securities by way of a
stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing
securities; PROVIDED that Purchaser Securities shall not include any Senior
Units. As to any particular securities constituting Purchaser Securities, such
securities shall cease to be Purchaser Securities when they have been
(a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased or
otherwise acquired by the Company or forfeited pursuant to the provisions of the
Performance Vesting Agreement. Any reference herein to a "majority of the
Purchaser Securities" or the "number of Purchaser Securities" for purposes of
comparison shall refer, with respect to any particular Purchaser Securities, to
the number of Common Units (or equivalent common equity securities of the
Company) then represented by such Purchaser Securities (on a fully diluted,
as-if-converted basis).
"QUALIFIED PUBLIC OFFERING" means a Public Offering where BOTH
(i) the proceeds (net of underwriting discounts and commissions)
received by the Company in exchange for its issuance of shares of common
stock in such Public Offering equal or exceed $60 million, AND
(ii) the price per share of common stock paid to the Company in
such Public Offering equals or exceeds the product of (x) 3.0 TIMES (y) the
quotient of (A) the aggregate capital contributions to the Company under
the Equity Purchase Agreement (including the initial purchase price and all
subsequent contributions made in respect of the Preferred Units under the
terms of the Equity Purchase Agreement) made on or prior to the date of
such Public Offering with respect to all Purchaser Securities then
outstanding, DIVIDED BY (B) the number of shares of the Company's common
stock represented by all Purchaser Securities (on a fully diluted,
as-if-converted basis) outstanding immediately prior to the consummation of
such Public Offering.
"QUALIFIED SALE OF THE COMPANY" has the meaning set forth in Section
2(b).
"REPURCHASE EVENT" has the meaning set forth in Section 3(a).
"REPURCHASE NOTICE" has the meaning set forth in Section 3(d).
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"REPURCHASE PRICE" has the meaning set forth in Section 3(c).
"SALE OF THE COMPANY" means the arm's length sale of the Company to a
third party or group of third parties acting in concert, pursuant to which such
party or parties acquire (i) equity securities of the Company possessing the
voting power under normal circumstances to control the Company, or (ii) all or
substantially all of the Company's assets determined on a consolidated basis (in
either case, whether by merger, consolidation, sale or transfer of the Company's
equity securities, or sale or transfer of the Company's consolidated assets).
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITYHOLDERS AGREEMENT" means the securityholders agreement dated
May 18, 1998 entered into by and among the Company and certain of its
securityholders, as amended from time to time in accordance with its terms.
"SENIOR UNITS" means the Company's Class A Senior Units, Class B
Senior Units, and Class C Senior Units.
"SIX-MONTH ANNIVERSARY DATE" has the meaning set forth in Section
3(e)(iii).
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director, manager or general partner of such
limited liability company, partnership, association or other business entity.
For purposes of this Agreement, if the context does not otherwise indicate in
respect of which Person the term "SUBSIDIARY" is used, the term "SUBSIDIARY"
shall refer to any Subsidiary of the Company.
"TIME-VESTED SECURITIES" has the meaning set forth in Section 2(a).
"TRANSFER" has the meaning set forth in Section 4(c)(i).
"TYPE I REPURCHASE EVENT" has the meaning set forth in Section 3(g).
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"UN-PERFORMANCE-VESTED SECURITIES" means Performance Vesting
Securities that have not yet performance vested pursuant to the provisions of
the Performance Vesting Agreement.
"UN-TIME-VESTED SECURITIES" has the meaning set forth in Section 2(a).
"VALUED SECURITIES" has the meaning set forth in Section 3(e)(i).
9. MISCELLANEOUS PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Executive Securities in violation of any provision of this
Agreement shall be void, and the Company shall not record such purported
Transfer on its books or treat any purported transferee of such Executive
Securities as the owner of such securities for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and related documents among the parties of even date herewith
and therewith embody the complete agreement and understanding among the parties
hereto and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, none of which need contain the signature of more than one party
hereto but each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind the parties hereto and their respective successors and
assigns and shall inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns, whether so expressed or not.
(f) CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW STATUTES,
RULES, PROVISIONS, OR DECISIONAL LAW (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW STATUTES,
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RULES, PROVISIONS, OR DECISIONAL LAW (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION), SHALL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF
LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
AND OTHERWISE APPLY.
(g) JURISDICTION; SERVICE OF PROCESS. ANY ACTIONS OR PROCEEDINGS,
WHETHER AT LAW OR IN EQUITY, SEEKING TO ENFORCE OR TO ENJOIN THE ENFORCEMENT OF
ANY PROVISION OF THIS AGREEMENT, OR BASED ON ANY RIGHT ARISING OUT OF THIS
AGREEMENT SHALL BE BROUGHT, TRIED AND LITIGATED AGAINST ANY OF THE PARTIES IN
THE COURTS OF THE STATE OF COLORADO, OR, IF IT HAS OR CAN ACQUIRE JURISDICTION,
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO, AND EACH OF
THE PARTIES HEREBY CONSENTS TO THE JURISDICTION OF SUCH COURTS (AND OF THE
APPROPRIATE APPELLATE COURTS) IN ANY SUCH ACTION OR PROCEEDING AND WAIVES ANY
AND ALL POSSIBLE OBJECTIONS TO VENUE LAID THEREIN, INCLUDING WITHOUT LIMITATION
FORUM NON CONVENIENS. PROCESS IN ANY ACTION OR PROCEEDING REFERRED TO IN THE
PRECEDING SENTENCE MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD BY PREPAID
FEDERAL EXPRESS, DHL OR OTHER INTERNATIONAL AIR COURIER TO THE EXECUTIVE AT THE
LAST KNOWN ADDRESS PROVIDED TO THE COMPANY IN WRITING, TO THE COMPANY AT THE
ADDRESS SET FORTH IN SECTION 9(m) HEREIN OR SUCH OTHER ADDRESS PROVIDED TO
EXECUTIVE IN WRITING, AND TO THE LAST KNOWN ADDRESS OF ALL OTHER ADDRESSEES.
(h) REMEDIES. Each of the parties to this Agreement (including any
Key Employee to which the Company assigns any of its repurchase rights under
Section 3 hereof, as third-party beneficiaries) shall be entitled to enforce its
rights under this Agreement specifically, to recover damages and costs
(including reasonable attorney's fees) caused by any breach of any provision of
this Agreement and to exercise all other rights existing in its favor. The
parties hereto agree and acknowledge that money damages would not be an adequate
remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion, subject to the limitations set forth in Section 9(g)
hereof, apply to any court of law or equity of competent jurisdiction (without
posting any bond or deposit) for specific performance and/or other injunctive
relief in order to enforce or prevent any violations of the provisions of this
Agreement.
(i) AMENDMENT, MODIFICATION, OR WAIVER. The provisions of this
Agreement may be amended, modified, or waived only with the prior written
consent of the Company and the Executive.
(j) THIRD-PARTY BENEFICIARIES. The parties hereto acknowledge and
agree that certain provisions of this Agreement are intended for the benefit of
any Key Employee to which the Company assigns any of its repurchase rights under
Section 3 hereof, that such Persons are third-party beneficiaries of this
Agreement, and that the provisions of this Agreement shall be enforceable by
such Persons as provided herein.
(k) BUSINESS DAYS. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the State of Colorado or the jurisdiction of the Company's principal office,
the time period shall be extended automatically to the business day immediately
following such Saturday, Sunday or holiday.
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(l) DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT CONSTRUCTION.
The descriptive headings of this Agreement are inserted for convenience only and
do not constitute a substantive part of this Agreement. Whenever required by
the context, any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular forms of nouns, pronouns,
and verbs shall include the plural and vice versa. Reference to any agreement,
document, or instrument means such agreement, document, or instrument as amended
or otherwise modified from time to time in accordance with the terms thereof,
and if applicable hereof. The use of the words "include" or "including" in this
Agreement shall be by way of example rather than by limitation. The use of the
words "or," "either" or "any" shall not be exclusive. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. If an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
(m) NOTICES. Subject to the requirements regarding service of
process set forth in Section 9(g) above, all notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
(a) delivered personally to the recipient, (b) telecopied to the recipient (with
hard copy sent to the recipient by reputable overnight courier service (charges
prepaid) that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on
a business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by reputable overnight courier service
(charges prepaid). Such notices, demands and other communications shall be sent
to the following Persons at the following addresses:
TO THE COMPANY:
6300 South Syracuse Way, Suite 355
Englewood, CO 80111
Attention: Chief Executive Officer
Telephone: (303) 741-4788
Telecopy: (303) 741-4823
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Mark B. Tresnowski, Esq.
Telephone: (312) 861-2385
Telecopy: (312) 861-2200
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AND WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Holme Roberts & Owen LLP
1700 Lincoln Street
Suite 4100
Denver, Colorado 80203
Attention: W. Dean Salter, Esq.
Telephone: (303) 861-7000
Telecopy: (303) 866-0200
To Executive: at the address set forth in the Company's records
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(n) DELIVERY BY FACSIMILE. This Agreement, the agreements referred
to herein, and each other agreement or instrument entered into in connection
herewith or therewith or contemplated hereby or thereby, and any amendments
hereto or thereto, to the extent signed and delivered by means of a facsimile
machine, shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement or instrument, each other party
hereto or thereto shall reexecute original forms thereof and deliver them to all
other parties. No party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or communicated through the
use of a facsimile machine as a defense to the formation or enforceability of a
contract and each such party forever waives any such defense.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Executive
Securities Agreement on the date first written above.
COMPLETEL LLC
By: /s/ James E. Dovey
----------------------------------------
James E. Dovey, Chief Executive Officer
EXECUTIVE
/s/ David Lacey
---------------------------------------------
David Lacey
(Signature Page for Executive Securities Agreement)
<PAGE>
JOINDER AND RIGHTS AGREEMENT
(LACEY)
THIS JOINDER AND RIGHTS AGREEMENT (this "AGREEMENT") is made as of
December 2, 1998, by and between CompleTel LLC, a Delaware limited liability
company (the "COMPANY"), and David Lacey ("EXECUTIVE"). Capitalized terms used
but not otherwise defined herein have the meanings ascribed to such terms in the
LLC Agreement (as defined below).
The holders of interests in the profits, losses, and distributions of
the Company (the "MEMBERS") are parties to a limited liability company
agreement, dated as of May 18, 1998, governing the affairs of the Company (as
amended from time to time in accordance with its terms, the "LLC AGREEMENT"). In
connection with the execution of the LLC Agreement, the Company and the Members
entered into a securityholders agreement dated as of May 18, 1998 (as amended
from time to time in accordance with its terms, the "SECURITYHOLDERS
AGREEMENT"), a registration rights agreement dated as of May 18, 1998 (as
amended from time to time in accordance with its terms, the "REGISTRATION
AGREEMENT"), and a performance vesting agreement dated as of May 18, 1998 (as
amended from time to time in accordance with its terms, the "PERFORMANCE VESTING
AGREEMENT") (the LLC Agreement, the Securityholders Agreement, the Registration
Agreement and the Performance Vesting Agreement, collectively the "Equity
Agreements").
The terms of the LLC Agreement contemplate that the Board of Managers
of the Company may approve the issuance of the Company's Common Units to
management and other key employees of the Company and its Subsidiaries ("Key
Employees"), and that in connection with and as a condition to any such issuance
the Key Employee issued such Common Units shall make a specified contribution to
the capital of the Company, shall enter into an Executive Securities Agreement
and become a party to the LLC Agreement, the Securityholders Agreement, the
Registration Agreement, and the Performance Vesting Agreement, and shall take
such other actions as shall be required by the Board of Managers.
Pursuant thereto, Executive and the Company have entered into an
Executive Securities Agreement of even date herewith (as amended from time to
time according to its terms, the "EXECUTIVE AGREEMENT"), pursuant to which the
Company issued to Executive 1000 Common Units having the rights, obligations,
and preferences set forth with respect thereto in the LLC Agreement (the
"PURCHASED UNITS") in exchange for Executive making an initial capital
contribution to the Company in cash in the amount of $1,000.00. As required by
the LLC Agreement, and in further consideration of and as a condition to the
Company's agreement to enter into the Executive Agreement and issue the
Purchased Units to Executive, the parties hereto desire that Executive become a
party to the LLC Agreement, the Securityholders Agreement, the Registration
Agreement, and the Performance Vesting Agreement as set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. ADDITION OF EXECUTIVE TO THE LLC AGREEMENT. The parties hereto
agree that, by and upon execution of this Agreement, Executive shall as of the
date hereof be a party to the LLC Agreement and shall for all purposes be
considered a "MEMBER" and a holder of "COMMON UNITS" thereunder and shall be
entitled to all the rights and benefits and subject to all the duties and
<PAGE>
obligations of a Member and a holder of Common Units thereunder, as fully as if
Executive were an original signatory thereto in such capacities.
2. ADDITION OF EXECUTIVE TO THE SECURITYHOLDERS AGREEMENT. The
parties hereto agree that, by and upon execution of this Agreement, Executive
shall as of the date hereof be a party to the Securityholders Agreement and
shall for all purposes be considered a "SECURITYHOLDER," a holder of
"SECURITYHOLDER SECURITIES," a holder of "EXECUTIVE SECURITIES," and a holder of
"MANAGEMENT EQUITY" thereunder, and shall be entitled to all the rights and
benefits and subject to all the duties and obligations of a Securityholder and a
holder of Securityholder Securities, Executive Securities, and Management Equity
thereunder, as fully as if Executive were an original signatory thereto in such
capacities.
3. ADDITION OF EXECUTIVE TO THE REGISTRATION AGREEMENT. The parties
hereto agree that, by and upon execution of this Agreement, Executive shall as
of the date hereof be a party to the Registration Agreement and shall for all
purposes be considered a holder of "REGISTRABLE SECURITIES" and a holder of
"MANAGEMENT REGISTRABLE SECURITIES" thereunder and shall be entitled to all the
rights and benefits and subject to all the duties and obligations of a holder of
Registrable Securities and Management Registrable Securities thereunder, as
fully as if Executive were an original signatory thereto in such capacities.
4. ADDITION OF EXECUTIVE TO THE PERFORMANCE VESTING AGREEMENT. The
parties hereto agree that, by and upon execution of this Agreement, Executive
shall as of the date hereof be a party to the Performance Vesting Agreement and
shall for all purposes be considered an Executive thereunder, and that for all
purposes 300 of the Common Units purchased by Executive under the Executive
Agreement shall be considered "MANAGEMENT SECURITIES" and "PLEDGED SECURITIES"
(of which 100 shall be considered "CLIFF MANAGEMENT SECURITIES" and 200 shall be
considered "SLOPE MANAGEMENT SECURITIES") thereunder (all as defined in the
Performance Vesting Agreement), and Executive shall be entitled to all the
rights and benefits and subject to all the duties and obligations of an
Executive and a holder of Management Securities and Pledged Securities
thereunder, as fully as if Executive were an original signatory thereto in such
capacities.
5. RESTRICTIVE LEGENDS. In addition to the legends required by
Section 6 of the Securityholders Agreement and Section 8(b) of the Performance
Vesting Agreement, each certificate or instrument (if any) evidencing the
Purchased Units (or any Company securities issued in exchange for or otherwise
in respect of such Purchased Units) shall, until such time as such securities
are no longer subject to the provisions of the Securityholders Agreement or the
Performance Vesting Agreement in accordance with the provisions thereof, be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE BECAME SUBJECT TO
THE AFOREMENTIONED SECURITYHOLDERS AGREEMENT AND PERFORMANCE
VESTING AGREEMENT PURSUANT TO A JOINDER AND RIGHTS AGREEMENT
DATED AS OF DECEMBER 2, 1998, BY AND BETWEEN THE ISSUER AND THE
INITIAL HOLDER OF SUCH SECURITIES. A COPY OF SUCH AGREEMENT SHALL
BE FURNISHED WITHOUT
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<PAGE>
CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
6. CONTINUING EFFECT. Pursuant to the express terms of the LLC
Agreement, Securityholders Agreement, Registration Agreement, and Performance
Vesting Agreement, this Agreement shall not constitute an amendment or waiver of
any provision of the LLC Agreement, of any provision of the Securityholders
Agreement, of any provision of the Registration Agreement, or of any provision
of the Performance Vesting Agreement, all of which shall continue and remain in
full force and effect in accordance with their terms.
7. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
8. CONSENT TO AMENDMENTS. The provisions of this Agreement may be
amended, modified, or waived only with the prior written consent of the Company
and Executive; PROVIDED that no such amendment, modification, waiver shall in
any way be construed to constitute an amendment, modification, or waiver of the
LLC Agreement, the Securityholders Agreement, the Registration Agreement, the
Performance Vesting Agreement, or any other agreement (in each case, including
without limitation with respect to Executive's being a party to such agreements
and the rights and obligations of Executive as a party to such agreements),
which agreements may only be amended, modified, or waived in accordance with the
provisions thereof.
9. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
10. CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW STATUTES,
RULES, PROVISIONS, OR DECISIONAL LAW (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW STATUTES, RULES, PROVISIONS, OR DECISIONAL LAW
(WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURIS DICTION), SHALL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN THOUGH UNDER THAT
JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF
SOME OTHER JURISDICTION WOULD ORDINARILY AND OTHERWISE APPLY.
11. JURISDICTION; SERVICE OF PROCESS. THE PARTIES ACKNOWLEDGE AND
AGREE THAT ANY ACTIONS OR PROCEEDINGS, WHETHER AT LAW OR IN EQUITY, SEEKING TO
ENFORCE OR TO ENJOIN THE
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<PAGE>
ENFORCEMENT OF ANY PROVISION OF THIS AGREEMENT OR THE LLC AGREEMENT, THE
SECURITYHOLDERS AGREEMENT, THE REGISTRATION AGREEMENT, OR THE PERFORMANCE
VESTING AGREEMENT, OR BASED ON ANY RIGHT ARISING OUT OF THIS AGREEMENT OR THE
LLC AGREEMENT, THE SECURITYHOLDERS AGREEMENT, THE REGISTRATION AGREEMENT, OR THE
PERFORMANCE VESTING AGREEMENT SHALL BE BROUGHT, TRIED AND LITIGATED AGAINST ANY
OF THE PARTIES IN THE COURTS OF THE STATE OF COLORADO, OR, IF IT HAS OR CAN
ACQUIRE JURISDICTION, IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
COLORADO, AND EACH OF THE PARTIES HEREBY CONSENTS TO THE JURISDICTION OF SUCH
COURTS (AND OF THE APPROPRIATE APPELLATE COURTS) IN ANY SUCH ACTION OR
PROCEEDING AND WAIVES ANY AND ALL POSSIBLE OBJECTIONS TO VENUE LAID THEREIN,
INCLUDING WITHOUT LIMITATION FORUM NON CONVENIENS. PROCESS IN ANY ACTION OR
PROCEEDING REFERRED TO IN THE PRECEDING SENTENCE MAY BE SERVED ON ANY PARTY
ANYWHERE IN THE WORLD BY PREPAID FEDERAL EXPRESS, DHL OR OTHER INTERNATIONAL AIR
COURIER TO THE EXECUTIVE AT THE LAST KNOWN ADDRESS PROVIDED TO THE COMPANY IN
WRITING, TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION 9(m) OF THE
EXECUTIVE AGREEMENT OR SUCH OTHER ADDRESS PROVIDED TO EXECUTIVE IN WRITING, AND
TO THE LAST KNOWN ADDRESS OF ALL OTHER ADDRESSEES.
12. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and the Executive and their respective successors and assigns, whether
so expressed or not.
13. DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT CONSTRUCTION. The
descriptive headings of this Agreement are inserted for convenience only and do
not constitute a substantive part of this Agreement. Whenever required by the
context, any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular forms of nouns, pronouns,
and verbs shall include the plural and vice versa. Except as otherwise expressly
provided herein, reference to any agreement, document, or instrument means such
agreement, document, or instrument as amended or otherwise modified from time to
time in accordance with the terms thereof, and if applicable hereof. The use of
the words "include" or "including" in this Agreement shall be by way of example
rather than by limitation. The use of the words "or," "either" or "any" shall
not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
14. DELIVERY BY FACSIMILE. This Agreement, the agreements referred to
herein, and each other agreement or instrument entered into in connection
herewith or therewith or contemplated hereby or thereby, and any amendments
hereto or thereto, to the extent signed and delivered by means of a facsimile
machine, shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement or instrument, each other party
hereto or thereto shall reexecute original forms thereof and deliver them to all
other parties. No party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or
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<PAGE>
agreement or instrument was transmitted or communicated through the use of a
facsimile machine as a defense to the formation or enforceability of a contract
and each such party forever waives any such defense.
* * * * *
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
COMPLETEL LLC
/s/ James E. Dovey
----------------------------------------
James E. Dovey, Chief Executive Officer
EXECUTIVE
/s/ David Lacey
----------------------------------------
David Lacey
(Signature Page to Joinder and Rights Agreement)
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<PAGE>
- --------------------------------------------------------------------------------
EQUITY REGISTRATION RIGHTS AGREEMENT
Dated as of February 16, 1999
among
COMPLETEL LLC,
COMPLETEL HOLDINGS LLC,
COMPLETEL (N.A.) N.V.
and
COMPLETEL EUROPE N.V.
as Issuers
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
and
DEGEORGE HOLDINGS LIMITED PARTNERSHIP
as Shareholders to the limited extent set forth herein
SALOMON SMITH BARNEY INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
MORGAN STANLEY & CO. INCORPORATED,
TD SECURITIES (USA) INC.
and
PARIBAS CORPORATION
as Initial Purchasers,
AND
U.S. BANK TRUST NATIONAL ASSOCIATION
as Transfer Agent to the limited extent
set forth herein
- --------------------------------------------------------------------------------
<PAGE>
THIS EQUITY REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is
made and entered into as of February 16, 1999, among CompleTel LLC, a Delaware
limited liability company ("PARENT"), CompleTel Holdings LLC, a Delaware limited
liability company (the "LLC"), CompleTel (N.A.) N.V., a Netherlands Antilles
limited liability company ("CNANV"), CompleTel Europe N.V., a Netherlands
private company with limited liability (the "COMPANY," and together with Parent,
LLC and CNANV, the "ISSUERS"), Madison Dearborn Capital Partners II, L.P.
("MDP"), DeGeorge Holdings Limited Partnership ("LPL," and together with MDP,
the "SHAREHOLDERS"), and Salomon Smith Barney Inc. ("SALOMON"), Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, TD
Securities (USA) Inc. And Paribas Corporation (collectively, the "INITIAL
PURCHASERS") and, as to Sections 3.2, 3.5, 3.6 and 8(d) only, U.S. Bank Trust
National Association (the "TRANSFER AGENT"). The Shareholders shall be deemed
not to be a party to Sections 2.1, 2.2, 3.5, 3.6, 3.7, 4, 5 and 6 hereof.
This Agreement is made pursuant to the Purchase Agreement, dated
as of February 16, 1999, among the Company, the LLC and the Initial Purchasers
(the "PURCHASE AGREEMENT"), relating to the sale by the Company and the LLC to
the Initial Purchasers of an aggregate of 147,500 Units (the "UNITS"), each Unit
consisting of US$1,000 principal amount at maturity of 14% Senior Discount Notes
due 2009 (the "NOTES") of the Company and 1,475,000 Non-Voting Class B
Membership Interests (each an "LLC SHARE") of the LLC. Pursuant to an agreement
among the Company, CNANV and the LLC dated February 16, 1999 (the "SUBSCRIPTION
AGREEMENT"), 31 capital shares of Netherlands Guilders ("NLG") 1,000 each of the
Company will be issued and delivered by the Company to CNANV for the benefit of
the LLC and 753 capital shares of US$1.00 each of CNANV will be issued and
delivered by CNANV to the LLC for the capital accounts of the holders of LLC
Shares issued as a part of the Units. In order to induce the Initial Purchasers
to enter into the Purchase Agreement, the Issuers have agreed to provide to the
Holders (as defined herein) the registration rights for the Registrable
Securities (as defined herein) set forth in this Agreement and the Shareholders,
for themselves and their Affiliates, and have agreed to provide the Holders,
among other things, the tag-along rights for the Shares (as defined herein) and
Registrable Securities set forth herein. The execution and delivery of this
Agreement by each of the parties hereto is a condition to the obligations of the
Initial Purchasers to purchase the Units under the Purchase Agreement.
<PAGE>
-2-
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"ADVICE" shall have the meaning ascribed to that term in the last
paragraph of Section 4.
"AFFILIATE" means, when used with reference to any Person, any
other Person directly or indirectly controlling, controlled by, or under direct
or indirect common control with, the referent Person or such other Person, as
the case may be. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling," "controlled by," and "under
common control with"), when used with respect to any specified Person, means the
power to direct or cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise as such term is understood in the context of the Exchange
Act. For purposes of this definition of Affiliate, (i) the family group of
Lawrence F. DeGeorge comprised of his spouse, siblings and descendants (whether
natural or adopted) and any of such descendants' spouses, any trust which at all
times is and remains solely for the benefit of Lawrence F. DeGeorge and/or his
spouse, siblings, and/or descendants and/or such descendants' spouses, and any
family partnership the partners of which consists solely of Lawrence F.
DeGeorge, such spouse, such siblings, such descendants, such descendants'
spouses, and/or such trusts shall be deemed to be Affiliates of DeGeorge
Holdings Limited Partnership and (ii) any partner of Madison Dearborn Capital
Partners II, L.P. on the date of this Agreement shall be deemed to be an
Affiliate of Madison Dearborn Capital Partners II, L.P.
"BLACK OUT PERIOD" shall have the meaning ascribed to that term in
Section 2.1(a).
"BUSINESS DAY" shall mean a day that is not a Legal Holiday.
"CAPITAL STOCK" shall mean, with respect to any Person, any and
all shares or other equivalents (however designated) of capital stock, capital
shares, partnership interests, member interests or any other participation,
right or other interest in the nature of an equity interest in such Person or
<PAGE>
-3-
any option, warrant or other security convertible into or exercisable or
exchangeable for any of the foregoing.
"CHANGE OF CONTROL" shall have the meaning ascribed to that term
in the Indenture governing the Notes, as in effect on the date hereof.
"COMMON STOCK" shall mean the capital shares of NLG 1,000 each of
the Company, and any capital share equivalents, participations or interests
comparable to any of the foregoing and any options, warrants, subscription bonds
or security convertible into or exercisable or exchangeable for any of the
foregoing.
"COMPANY REGISTRABLE SECURITIES" means Registrable Securities
issued by the Company or any of its successors, or the LLC or any of its
successors, as the case may be.
"CURRENT-MARKET VALUE" per share of Common Stock of the Company 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 or (ii)(a) if the
security is registered under the Exchange Act, the average of the daily market
prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the securities have been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average of the closing sales prices for all of the trading days before such
date for which closing sales prices are available, in the case of each of
(ii)(a) and (ii)(b), as certified to the Holders by the President, any Vice
President or the Chief Financial Officer of the Company. The market price for
each such trading day shall be: (A) in the case of a security listed or
admitted to trading on any United States national securities exchange or
quotation system, the closing sales price, regular way on such day, or if no
sale takes place on such day, the average of the closing bid and asked prices on
such day, (B) in the case of a security not then listed or admitted to trading
on any United States national securities exchange or quotation system, the last
reported sale price on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reputable quotation source designated by the Company, (C) in the case of a
security not then listed or admitted to trading on any national securities
exchange or quotation system and as to which no such reported sale price or bid
and asked prices are available, the average of the reported high bid and low
asked prices on such day, as reported by a reputable quotation service, or a
newspaper of
<PAGE>
-4-
general circulation in the Borough of Manhattan, City and State of New York,
customarily published on each Business Day, designated by the Company, or, if
there shall be no bid and asked prices on such day, the average ofthe high bid
and low asked prices, as so reported, on the most recent day (not more than 30
days prior to the date in question) for which prices have been so reported and
(D) if there are no bid and asked prices reported during the 30 days prior to
the date in question, the Current Market Value shall be determined as if the
securities were not registered under the Exchange Act.
"DEFINITIVE CERTIFICATE" refers to Shares that are not represented
by the Global Certificate and, instead, are issued in definitive registered
form.
"DEMAND REGISTRATION" shall have the meaning ascribed to that term
in Section 2.1(a).
"DEPOSITARY" means The Depository Trust Company, its nominees and
successors.
"EFFECTIVENESS PERIOD" shall have the meaning ascribed to that
term in Section 2.1(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCLUDED TRANSFER" shall mean (i) a Transfer by a Shareholder or
any of its Affiliates to a Shareholder or an Affiliate of a Shareholder, so long
as such transferee agrees to be bound by the transferor's obligations under this
Agreement to the same extent as the transferor, (ii) a Transfer pursuant to a
registered public offering, in which holders of Registrable Securities have
available to them (without cut-back) the rights provided under Section 2.2,
(iii) Transfers in the aggregate resulting in gross proceeds of $5,000,000 or
less to the Shareholders (which will be allocated pro rata among the
Shareholders based on their holdings of Parent Capital Stock on the date hereof,
unless otherwise agreed by the Shareholders) or (iv) Transfers to directors,
officers or other employees of Parent or CENV having a fair market value
(determined in each such case at the time of any such Transfer) not to exceed
$5,000,000 in aggregate amount.
"FAIR MARKET VALUE" shall mean the value of any securities as
determined (without any discount for lack of liquidity, the amount of such
securities proposed to be sold or the fact that such securities held by any
Holder of such security
<PAGE>
-5-
may represent a minority interest in a private company) by an Independent
Financial Expert selected by the Company for the determination of such value.
"FULLY DILUTED SHARES" shall mean the outstanding shares of Common
Stock of the Company, after giving effect to the exercise of all outstanding
options, subscription bonds, warrants or other rights or securities to acquire
Common Stock.
"GLOBAL CERTIFICATE" refers to the initial form of Share
certificates which, unless otherwise instructed, will be issued in global form
and held by the Depositary.
"HOLDER" shall mean the Initial Purchasers, for so long as the
Initial Purchasers own any Registrable Securities, and their successors, assigns
and direct and indirect transferees who become registered owners of Registrable
Securities.
"INCLUDED SECURITIES" shall have the meaning ascribed to that term
in the Section 3.3.
"INDEPENDENT FINANCIAL EXPERT" means a United States investment
banking firm of international standing in the United States and the European
Community (i) which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect material financial interest for its
proprietary account in the Company or any of its Affiliates and (ii) which, in
the judgment of the Board of Directors of Parent, is otherwise independent with
respect to the Company and its Affiliates and qualified to perform the task for
which it is to be engaged.
"INITIAL PUBLIC EQUITY OFFERING" means a primary public offering
(whether or not underwritten, but excluding any offering pursuant to Form S-8
under the Securities Act or any other publicly registered offering pursuant to
the Securities Act pertaining to an issuance of shares of Common Stock or
Membership Interests or securities exercisable therefor under any benefit plan,
employee compensation plan, or employee or director stock purchase plan) of
Common Stock or Membership Interests pursuant to an effective registration
statement under the Securities Act.
"INITIAL PURCHASERS" shall have the meaning ascribed to that term
in the preamble hereto.
"ISSUERS" shall have the meaning ascribed to that term in the
preamble hereto.
<PAGE>
-6-
"LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on which
banking institutions in New York, New York or Amsterdam, the Netherlands are
required by law, regulation or executive order to remain closed.
"LIQUIDATION EVENT" shall have the meaning set forth in the LLC
Agreement.
"LLC AGREEMENT" shall mean the Limited Liability Company Agreement
of the LLC.
"LLC SHARES" shall have the meaning ascribed to that term in the
preamble hereto.
"LOCK UP PERIOD" shall have the meaning ascribed to that term in
Section 2.1(a).
"MEMBERSHIP INTERESTS" means any Capital Stock of the LLC, however
designated, and any other securities issued or issuable to or in exchange for
Membership Interests in connection with a recapitalizations merger,
consolidation or other reorganization or otherwise of the LLC.
"PARTICIPATING HOLDER" shall have the meaning ascribed to that
term in Section 3.3(a).
"PERSON" shall mean an individual, partnership, corporation,
limited liability company, trust or unincorporated organization, or a government
or agency or political subdivision thereof.
"PIGGY-BACK REGISTRATION" shall have the meaning ascribed to that
term in Section 2.2.
"PROPOSED PURCHASER" shall have the meaning ascribed to that term
in Section 3.3(a).
"PROPOSED TRANSFER DATE" shall have the meaning ascribed to that
term in Section 3.3(a).
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated pursuant to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration
<PAGE>
-7-
Statement, and all other amendments and supplements to any such prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference, if any, in such prospectus.
"PUBLIC OFFERING" means an offering (whether or not underwritten,
but excluding any offering pursuant to Form S-8 under the Securities Act or any
other publicly registered offering (regardless of the jurisdiction of any such
registration) pertaining to the issuance of shares of Common Stock or Membership
Interests or securities exercisable therefor under any employee or director
stock purchase plan) of Capital Stock of any Person which is eligible for sale
to the general public in the United States of America or in any jurisdiction
within the European Community.
"PURCHASE AGREEMENT" shall have the meaning ascribed to that term
in the preamble hereto.
"REGISTRABLE SECURITIES" shall mean any of (a) the Shares and (b)
any other securities issued or issuable with respect to or in exchange for the
Shares by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (a) a Registration
Statement with respect to the offering of such securities by the Holder thereof
shall have been declared effective under the Securities Act and such securities
shall have been disposed of by such Holder pursuant to such Registration
Statement, (b) such securities have been sold to the public pursuant to Rule 144
(or any similar provision then in force, but not Rule 144A) promulgated under
the Securities Act or are eligible for sale in all respects to the public
without volume or manner of sale restrictions under Rule 144(k) (or any similar
provision then in force, but not Rule 144A) promulgated under the Securities
Act, (c) such securities shall have been otherwise transferred and new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company or the LLC, as the case may
be, or its transfer agent and subsequent disposition of such securities shall
not require registration or qualification under the Securities Act or any
similar state law then in force or (d) such securities shall have ceased to be
outstanding.
"REGISTRATION EXPENSES" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all SEC and stock ex-
<PAGE>
-8-
change or National Association of Securities Dealers, Inc. registration and
filing fees and expenses, fees and expenses of compliance with securities or
blue sky laws (including, without limitation, in the event of an underwritten
offering, reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities), rating
agency fees, printing expenses, messenger, telephone and delivery expenses, fees
and disbursements of counsel for the Company and all independent certified
public accountants, and, in the event of an underwritten offering, the fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of Registrable Securities by
Holders of such Registrable Securities).
"REGISTRATION STATEMENT" shall mean any registration statement of
the Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"REQUISITE SHARES" shall mean a number of Registrable Securities
equivalent to not less than 35% of the Registrable Securities.
"RULE 144" shall mean Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"RULE 144A" shall mean Rule 144A under the Securities Act, as such
Rule may be amended from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"SHARES" shall mean (a) the LLC Shares sold to the Initial
Purchasers as part of the Units pursuant to the Pur-
<PAGE>
-9-
chase Agreement, whether held by any Initial Purchaser or any subsequent
assignee or transferee, (b) the Common Stock issued to CNANV for the benefit of
the LLC in connection with the transactions contemplated by the Purchase
Agreement, whether held by CNANV, the LLC or any subsequent assignee or
transferee and (c) any other securities issued or issuable with respect to or in
exchange for the foregoing by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise.
"TAG-ALONG NOTICE" shall have the meaning ascribed to that term in
Section 3.3(a).
"TAG-ALONG RIGHT" shall have the meaning ascribed to that term in
Section 3.3(a).
"TRANSFER" shall mean, with respect to Common Stock or LLC Shares,
any sale, assignment, gift, transfer, exchange, pledge or other disposition of
beneficial ownership of such securities.
"TRANSFER AGENT" shall have the meaning ascribed to that term in
the preamble hereto and shall include any other transfer agent or registrar for
any of the Shares. The Issuers will be required to cause each such transfer
agent to become a party hereto for purposes of Sections 3.5 to 3.7.
"TRANSFER NOTICE" shall have the meaning ascribed to that term in
Section 3.3 (a) .
"TRIGGERING DATE" shall mean the day on which a bona fide
underwritten public offering of Common Stock is consummated, as a result of
which at least 20% of the outstanding shares of Common Stock of the Company are
listed on a national securities exchange or the Nasdaq National Market System.
"TRIGGERING EVENT" shall mean the occurrence of any of the
following: (a) an Initial Public Equity Offering, (b) a Change of Control or (c)
the later to occur of (1) a Liquidation Event or (2) the fifth anniversary of
the date hereof.
"WITHDRAWAL ELECTION" shall have the meaning ascribed to that term
in Section 2.3(c).
<PAGE>
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2. REGISTRATION RIGHTS.
2.1. DEMAND REGISTRATION. (a) REQUEST FOR REGISTRATION. At any
time on or after a Triggering Event, Holders owning, individually or in the
aggregate, at least the Requisite Shares may make two written requests for
registration (each a "DEMAND REGISTRATION") under the Securities Act of their
Company Registrable Securities. Any such request will specify the number of
Company Registrable Securities proposed to be sold and will also specify the
intended method of disposition thereof. Subject to the other provisions of this
Section 2.1, the Company or the LLC, as the case may be, shall give written
notice of such registration request within 10 days after the receipt thereof to
all other Holders. Within 30 days after receipt of such notice by any Holder,
such Holder may request in writing that its Company Registrable Securities be
included in such registration and the Company or the LLC, as the case may be,
shall include in the Demand Registration the Company Registrable Securities of
any such selling Holder requested to be so included. Each such request by such
other selling Holders shall specify the number of Company Registrable Securities
proposed to be sold and the intended method of disposition thereof. Upon a
demand, the Company or the LLC, as the case may be, will (i) prepare, file with
the SEC and use its reasonable best efforts to cause to become effective within
120 days of such demand a Registration Statement in respect-of all the Company
Registrable Securities which Holders request for inclusion therein; PROVIDED
that if such demand occurs during a Black Out Period or a period (not to exceed
180 days) during which the Company, or the LLC, as the case may be, is
prohibited or restricted from issuing or selling Common Stock or Membership
Interests generally pursuant to any underwriting or purchase agreement relating
to an offering of any such securities or securities convertible into or
exchangeable for any such securities in an offering under Rule 144A or an
underwritten public offering under the Securities Act (a "LOCK UP PERIOD"), the
Company or the LLC, as the case may be, shall not be required to notify the
Holders of such demand or file such Registration Statement prior to the end of
the Black out Period or Lock Up Period, as the case may be, in which event, the
Company or the LLC, as the case may be, will use its best efforts to cause such
Registration Statement to become effective no later than 30 days after the end
of the Black Out Period or Lock Up Period, as the case may be, and (ii) keep
such Registration Statement continuously effective for the shorter of (a) 180
days (the "EFFECTIVENESS PERIOD") and (b) such period of time as all of the
Company Registrable Securities included in such Registration Statement have been
sold thereunder; PROVIDED
<PAGE>
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that the Company or the LLC, as the case may be, may postpone the filing period,
suspend the effectiveness of any registration, suspend the use of any Prospectus
and shall not be required to amend or supplement the Registration Statement, any
related Prospectus or any document incorporated therein by reference (other than
an effective registration statement being used for an underwritten offering) in
the event that, and for a period, in the case of any particular Demand
Registration, not to exceed an aggregate of 30 days ("BLACK OUT PERIOD") if (i)
an event or circumstance occurs and is continuing as a result of which the
Registration Statement, any related Prospectus or any document incorporated
therein by reference as then amended or supplemented would, in the Company's or
the LLC's, as the case may be, good faith judgment, contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein (in the case of any Prospectus, in the light of the
circumstances under which they were made), not misleading, and (ii) the
disclosure otherwise relates to a material business transaction which has not
yet been publicly disclosed; PROVIDED, FURTHER, that the Effectiveness Period
shall be extended by the number of days in any Black Out Period.
In the event of the occurrence of any Black Out Period during an
Effectiveness Period or Lock Up Period, the Company or if the LLC has
consummated a Public Offering, the LLC will promptly notify the Holders of
Company Registrable Securities thereof in writing.
(b) EFFECTIVE REGISTRATION. A registration will not be deemed to
have been effected as a Demand Registration, and thereby satisfy the obligation
hereunder, unless it has been declared effective by the SEC and the Company or
the LLC, as the case may be, has complied in all material respects with its
obligations under this Agreement with respect thereto; PROVIDED that if, after
it has become effective, the offering of Company Registrable Securities pursuant
to such registration is or becomes the subject of any stop order, injunction or
other order or requirement of the SEC or any other governmental or
administrative agency, or if any court prevents or otherwise limits the sale of
Company Registrable Securities pursuant to the registration (for any reason
other than the act or omissions of the Holders) for the period of time
contemplated hereby, such registration will be deemed not to have been effected.
If (i) a registration requested pursuant to this Section 2.1 is deemed not to
have been effected or (ii) the registration requested pursuant to this Section
2.1 does not remain effective for the Effectiveness Period, then the Company or
the LLC, as the case
<PAGE>
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may be, shall continue to be obligated to effect an additional registration
pursuant to this Section 2.1. The Holders of Company Registrable Securities
shall be permitted to withdraw all or any part of the Company Registrable
Securities from a Demand Registration at any time prior to the effective date of
such Demand Registration. If at any time a Registration Statement is filed with
the SEC pursuant to a Demand Registration, and subsequently a sufficient number
of the Company Registrable Securities are withdrawn from the Demand Registration
so that such Registration Statement does not cover that number of Company
Registrable Securities at least equal to 25% of the Registrable Securities, the
Holders who have not withdrawn their Company Registrable Securities shall have
the opportunity to include an additional number of Company Registrable
Securities in the Demand Registration so that such Registration Statement covers
that number of Company Registrable Securities at least equal to 25% of the
Registrable Securities. If an additional number of Company Registrable
Securities is not so included, the Company or the LLC, as the case may be, may
withdraw the Registration Statement. Such withdrawn Registration Statement ill
not count as a Demand Registration and the Company or the LLC, as the case may
be, shall continue to be obligated to effect a registration pursuant to this
Section 2.1; PROVIDED the Holders that requested withdrawal shall be obligated
to reimburse the Company or the LLC, as the case may be, for all customary and
reasonable out-of-pocket expenses incurred by it in performing its obligations
hereunder with respect to such withdrawn Registration Statement.
(c) PRIORITY IN DEMAND REGISTRATIONS PURSUANT TO SECTION 2.1. If
a Demand Registration pursuant to this Section 2.1 involves an underwritten
offering and the lead managing underwriter advises the Company or the LLC, as
the case may be, in writing that, in its view, the number of Company Registrable
Securities requested by the Holders to be included in such registration,
together with any other securities to be included in such registration exceeds
the number which, can be sold without adversely affecting the offering: FIRST,
the securities other than the Company Registrable Securities of the Holders
included in such registration shall be reduced in their entirety before any
reduction of Company Registrable Securities; and SECOND, to the extent the
reduction set forth in the immediately preceding clause is insufficient to
reduce the number of securities requested for inclusion in such registration to
a number, which, in the view of such lead managing underwriter, can be sold
without adversely affecting the offering, the number of such Company Registrable
Securities to be included in such registration shall be allocated PRO RATA among
all requesting Holders
<PAGE>
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on the basis of the relative number of Company Registrable Securities then held
by each such Holder (provided that any Company Registrable Securities thereby
allocated to any such Holder that exceed such Holder's request shall be
reallocated among the remaining requesting Holders in like manner). In the
event that the number of Company Registrable Securities requested to be included
in such registration is less than the number which, in the view of the lead
managing underwriter, can be sold without adversely affecting the offering, the
Company or the LLC, as the case may be, may include in such registration the
securities of the Company or the LLC, as the case may be, or any other Person up
to the number of securities that, in the view of the lead managing underwriter,
can be sold without adversely affecting the offering.
(d) SELECTION OF UNDERWRITER. If the Holders so elect, the
offering of such Company Registrable Securities pursuant to a Demand
Registration shall be in the form of an underwritten offering. The Company or
the LLC, as the case may be, shall select one or more nationally (in the United
States) recognized firms of investment bankers (to whom a majority of Holders
making such Demand Registration shall not have reasonably objected) to act as
the managing underwriter or underwriters (and if more than one Managing
Underwriter is selected, the Company or the LLC, as the case may be, shall also
name the lead managing underwriter) in connection with such offering and shall
select any additional investment bankers and managers to be used in connection
with the offering.
(e) EXPENSES. The Company or the LLC, as the case may be, will
pay all Registration Expenses in connection with the registration requested
pursuant to Section 2.1(a). Each Holder shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of such Holder's Company Registrable Securities pursuant to a registration
statement requested pursuant to this Section 2.1.
(f) ABILITY OF HOLDERS OF LLC SHARES TO EFFECT RIGHTS. In the
event that the Initial Public Equity Offering occurs but a Liquidation Event has
not occurred, Holders of Registrable Securities of the LLC will be entitled to
the rights and privileges pertaining to Company Registrable Securities in
accordance with each such Holder's Percentage Interest (as defined in the
limited liability company agreement of the LLC) with respect to the Company
Registrable Securities held by the LLC notwithstanding that a Liquidation Event
has not occurred and Holders may cause the LLC to deliver Company Regis-
<PAGE>
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trable Securities for inclusion in a Demand Registration pursuant to this
Section 2.1.
2.2. PIGGY-BACK REGISTRATION. If at any time any of the Issuers
proposes to file a Registration Statement under the Securities Act with respect
to an offering by such Issuer for its own account or for the account of any of
its respective securityholders of any class of Common Stock or of securities
representing beneficial ownership of Common Stock (other than (i) a registration
statement on Form S-8, S-4 or F-4 (or any substitute form that may be adopted by
the SEC), (ii) a registration statement filed in connection with an offer or
offering of securities solely to such Issuer's existing securityholders or (iii)
a Demand Registration), then such Issuer shall give written notice of such
proposed filing to the Holders of Registrable Securities as soon as practicable
(but in no event less than 20 Business Days before the anticipated filing date),
and such notice shall offer such Holders the opportunity to register such number
of Registrable Securities as each such Holder may request (which request shall
specify the Registrable Securities intended to be disposed of by such Holder (a
"PIGGY-BACK REGISTRATION"). Such Issuer shall use its reasonable best efforts
to cause the managing underwriter or underwriters of such proposed underwritten
offering to permit the Registrable Securities requested to be included in a
Piggy-Back Registration and to permit the sale or other disposition of such
Registrable Securities in accordance with the intended method of distribution
thereof; PROVIDED, HOWEVER, in no event shall such Issuer be required to reduce
the number of securities proposed to be sold by such Issuer or alter the terms
of the securities proposed to be sold by such issuer in order to induce the
managing underwriter or underwriters to permit Registrable Securities to be
included. The Registrable Securities shall be included on the same terms and
conditions as any similar securities of such Issuer or any other securityholder
included therein. Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any Registration Statement pursuant
to this Section 2.2 by giving written notice to such Issuer of its request to
withdraw prior to the effectiveness of the Registration Statement. An Issuer
may withdraw a Piggy-Back Registration at any time prior to the time it becomes
effective; PROVIDED that such Issuer shall give prompt notice thereof to
participating Holders. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 2.2, and each Holder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or
<PAGE>
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disposition of such Holder's Registrable Securities pursuant to a registration
statement effected pursuant to this Section 2.2.
No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve an Issuer of its
obligation to effect a registration upon the request of Holders pursuant to
Section 2.1, and no failure to effect a registration under this Section 2.2 and
to complete the sale of Registrable Securities in connection therewith shall
relieve an Issuer of any other obligation under this Agreement.
Notwithstanding anything in this Agreement to the contrary,
Holders of Registrable Securities will not have Piggyback Registration rights in
respect of an Initial Public Equity Offering in which no shareholder or member,
as the case may be, of any of the Issuers is a participant.
2.3. REDUCTION OF OFFERING. (a) If the lead managing
underwriter of any underwritten offering described in Section 2.2 has informed,
in writing, the Holders of the Registrable Securities requesting inclusion in
such offering that it is its view that the total number of securities which an
Issuer, the Holders and any other Persons desiring to participate in such
registration intend to include in such offering is such as to materially and
adversely affect the success of such offering, including the price at which such
securities can be sold, then the number of Registrable Securities to be offered
for the account of such Holders and the number of such securities to be offered
for the account of all such other Persons (other than the Company) participating
in such registration shall be reduced or limited PRO RATA in proportion to the
respective number of securities requested to be registered to the extent
necessary to reduce the total number of securities requested to be included in
such offering to the number of securities, if any, recommended by such lead
managing underwriter; PROVIDED that if such offering is effected for the account
of any securityholder of the Company other than the Holders or the Shareholders
(either directly or through any of the Issuers), pursuant to the demand
registration rights of any such securityholder, then the number of securities to
be offered for the account of the Company (if any) and the Holders (but not such
securityholders who have exercised their demand registration rights) shall be
reduced or limited PRO RATA in proportion to the respective number of securities
requested to be registered to the extent necessary to reduce the total number of
securities requested to be included in such offering to the number of
securities, if any, recommended by such lead managing underwriter.
<PAGE>
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(b) If the lead managing underwriter of any underwritten offering
described in Section 2.2 notifies the Holders requesting inclusion of
Registrable Securities in such offering, that the kind of securities that such
Holders, the Company and any other Persons desiring to participate in such
registration intend to include in such offering is such as to materially and
adversely affect the success of such offering, (x) the Registrable Securities to
be included in such offering shall be reduced as described in clause (i) above
or (y) if a reduction in the Registrable Securities pursuant to clause (i) above
would, in the judgment of the lead managing underwriter, be insufficient to
substantially eliminate the adverse effect that inclusion of the Registrable
Securities requested to be included would have on such offering, such
Registrable Securities will be excluded from such offering.
(c) If, as a result of the proration provisions of this Section
2.3, any Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Holder has requested to be included, such
Holder may elect to withdraw his request to include Registrable Securities in
such registration (a "WITHDRAWAL ELECTION"); PROVIDED that a Withdrawal Election
shall be made prior to the effectiveness of the Registration Statement and shall
be irrevocable and, after making a Withdrawal Election, a Holder shall no longer
have any right to include Registrable Securities in the registration as to which
such Withdrawal Election was made.
(d) Holders of Registrable Securities of the LLC will be entitled
to the rights and privileges pertaining to Company Registrable Securities in
accordance with each such Holder's Percentage Interest with respect to the
Company Registrable Securities held by the LLC notwithstanding that a
Liquidation Event has not occurred and Holders may cause the LLC to deliver
Company Registrable Securities for inclusion in a Piggy-Back Registration
pursuant to this Section 2.3.
3. TRANSFERS.
3.1. GENERALLY. All Shares and Registrable Securities at any
time and from time to time outstanding shall be held subject to the conditions
and restrictions set forth in this Section 3. All shares of Capital Stock of
the Issuers now or hereafter beneficially owned by the Shareholders and each of
their Affiliates shall be held subject to the conditions and restrictions set
forth in Section 3.2 and 3.3 and certain other restrictions on transfers under
the Securities Act. Each Holder of Shares and Registrable Securities and each
of the
<PAGE>
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Shareholders by executing this Agreement or by accepting a certificate
representing Capital Stock or other indicia of ownership therefor from an Issuer
agree with each Issuer to such conditions and restrictions.
3.2. RESTRICTIONS ON TRANSFER. (a) The LLC shall keep, at the
office or agency maintained by the LLC for such purpose in the City of New York,
Borough of Manhattan, a register or registers in which, subject to such
reasonable regulations as it may prescribe, the LLC shall provide for the
registration of, and registration of transfer of, Shares of the LLC as provided
in this Article. The Company shall at all times maintain appropriate and
customary arrangements providing for the registration of, and registration of
transfer of, Shares as provided in this Article. Each person designated by an
Issuer from time to time as a person authorized to register the transfer and
exchange of the Shares of such Issuer is hereinafter called, individually and
collectively, the "TRANSFER AGENT" and shall be required to agree to Sections
3.2 through 3.5 hereof. The LLC has initially appointed U.S. Bank Trust
National Association as Transfer Agent with respect to Shares of the LLC. The
Company has initially appointed U.S. Bank Trust National Association as Transfer
Agent with respect to Shares of the Company. Upon written notice by any Issuer
to any acting Transfer Agent, such Issuer may appoint a successor Transfer Agent
for such purposes.
(b) Any Transfer made in violation of this Agreement by a
Shareholder or any of its Affiliates shall be deemed null and void and shall not
be recorded as a transfer upon the transfer books of the applicable Issuer.
Each certificate representing beneficial ownership of shares of Common Stock
held by a Shareholder and each of its Affiliates shall contain conspicuous
notation on such certificate indicating that the transfer of such shares is
subject to the terms and restrictions of this Agreement, and each of the
Shareholders hereby consents to the placement of such legend on the certificate
or certificates representing the beneficial ownership of shares of Common Stock
owned by such party.
3.3. TAG-ALONG RIGHTS. (a) In the event of any proposed direct
or indirect Transfer of beneficial ownership of Common Stock (whether now or
hereafter issued) by Parent (in the case of the LLC), the LLC (in the case of
CNANV), CNANV (in the case of the Company) or a Shareholder or any of its
Affiliates (in the case of Parent) (the "PROPOSED SELLER") in any transaction or
series of related transactions (including any proposed direct or indirect
transfer of Common Stock by the LLC
<PAGE>
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for the capital account of any Shareholder or any Affiliate having an interest
in the LLC) to any Person (other than an Excluded Transfer or a Transfer of
beneficial ownership of Common Stock by the LLC to the Member of the LLC whose
capital account is at such time credited with such Common Stock upon the
occurrence of a Liquidation Event) (such other Person being hereinafter referred
to as the "PROPOSED PURCHASER") at any time prior to the Triggering Date, the
holders of Shares and Registrable Securities shall have the irrevocable and
exclusive right, but not the obligation (the "TAG-ALONG RIGHT"), to require the
Proposed Purchaser to purchase from each of them up to such number of Shares and
Registrable Securities (the "INCLUDED SECURITIES") determined in accordance with
Section 3.3(c). The Proposed Seller shall give written notice (a "TRANSFER
NOTICE") at least 30 days prior to the date of the proposed Transfer (the
"PROPOSED TRANSFER DATE") to the holders of Shares and Registrable Securities
stating (i) the name and address of the Proposed Purchaser, (ii) the proposed
amount of consideration, terms and conditions of payment offered by such
Proposed Purchaser (if the proposed consideration is not cash, the Transfer
Notice shall describe the terms of the proposed consideration) and the time and
place of the closing for the proposed Transfer, (iii) the number of shares of
Common Stock and other securities proposed to be directly or indirectly
Transferred by the Proposed Seller and/or its Affiliates and (iv) either that
the Proposed Purchaser has been informed of the Tag-Along Right and has agreed
to purchase Shares and Registrable Securities in accordance with the terms
hereof or that the Proposed Seller or any of its Affiliates will make such
purchase. The Tag-Along Right shall be exercised by any or all of the holders
of Shares and Registrable Securities by giving written notice to the Issuers of
the Shares or Registrable Securities proposed to be sold ("TAG-ALONG NOTICE"),
within 20 days of receipt of the Transfer Notice, indicating its election to
exercise the Tag-Along Right (the "PARTICIPATING HOLDERS"). The Tag-Along
Notice shall state the amount of Shares and Registrable Securities that such
holder proposes to include in such Transfer to the Proposed Purchaser. Failure
by any holder to give such notice within the 20-day period shall be deemed an
election by such holder not to sell its Shares and Registrable Securities
pursuant to that Transfer. The closing with respect to any sale to a Proposed
Purchaser pursuant to this Section shall be held at the time and place specified
in the Transfer Notice but in any event within 60 days of the Proposed Transfer
Date; PROVIDED that if through the exercise of reasonable efforts the Proposed
Seller or any of its Affiliates is unable to cause such transaction to close
within 60 days, such period may be extended for such reasonable period of time
as may be neces-
<PAGE>
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sary to close such transaction. Consummation of the sale of Common Stock or
other securities by the Proposed Seller and/or its Affiliates to a Proposed
Purchaser shall be conditioned upon consummation of the sale by each
Participating Holder to such Proposed Purchaser (or the Proposed Seller) of the
Included Securities, if any.
(b) In the event that the Proposed Purchaser does not purchase
Included Securities from the holders on the same terms and conditions as
purchased from the Proposed Seller and its Affiliates, then the Proposed Seller
or such Affiliate shall purchase, or cause another Person to purchase, such
Included Securities if the Transfer occurs.
(c) Each holder of Shares and Registrable Securities shall have
the right to require the Proposed Purchaser to purchase from such holder up to a
percentage of the number of Shares and Registrable Securities owned by such
holder equaling the percentage derived by dividing the total number of shares of
Common Stock that the Proposed Seller and its Affiliates propose to directly or
indirectly Transfer by the total number of shares of Common Stock at the time
beneficially owned by the Proposed Seller and its Affiliates; PROVIDED that in
the event of any proposed Transfer, either at the time or as a result of which
there would result a Change of Control, each holder of Shares and Registrable
Securities shall have the right to require the Proposed Purchaser to purchase
all of the Shares and Registrable Securities owned by such holder.
(d) Any Shares and/or Registrable Securities purchased from the
Participating Holders pursuant to this Section 3.3 shall be paid for in the same
type of consideration and at the same price per share of Common Stock and upon
the same terms and conditions of such proposed Transfer of Common Stock by the
Proposed Seller and/or any of its Affiliates. If the proposed Transfer involves
the transfer of equity interests other than Common Stock, the price to be paid
for any Shares and/or Registrable securities purchased from the Participating
Holders pursuant to this Section 3.3 shall be the same price per share of Common
Stock implied by the number of shares of beneficially owned Common Stock
directly or indirectly represented by the equity interests which are proposed
for Transfer. The Proposed Seller shall arrange for payment directly by the
Proposed Purchaser to each Participating Holder, upon delivery of the
certificate or certificates representing the Shares and/or Registrable
Securities duly endorsed for transfer, together with such other documents as the
Proposed Purchaser may reasonably request.
<PAGE>
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(e) If at the end of 60 days following the Proposed Transfer
Date, or as otherwise extended pursuant to the provisions of Section 3.3(a), the
sale of Common Stock by the Proposed Seller and/or its Affiliates and the sale
of the Included Securities have not been completed in accordance with the terms
of the Proposed Purchaser's offer, all certificates representing the Included
Securities shall be returned to the Participating Holders, and all the
restrictions on Transfer contained in this Agreement with respect to Common
Stock beneficially owned by the Proposed Seller and its Affiliates shall remain
in effect.
3.4. OBLIGATION TO SELL. If at any time prior to the Triggering
Date Parent and/or any of its Affiliates determine to sell all of the Capital
Stock of the Company (other than Capital Stock of the Company owned by
individuals who are directors and officers of Parent and who in the aggregate
own less than 25% of the Capital Stock of the Company) then beneficially owned
by Parent to a Person other than an Affiliate of Parent or Shareholder, Parent
shall have the right to require the Holders of Registrable Securities to sell
such Registrable Securities to such transferee; PROVIDED that (a) the
consideration to be received by the Shareholders of Registrable Securities shall
be the same type of consideration received by Parent 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 National
Market System, (b) after giving effect to such transaction, Parent, its
Affiliates and the Shareholders and their Affiliates shall not beneficially own,
directly or indirectly, any Capital Stock or rights to purchase Capital Stock of
the Company and (c) the foregoing provisions shall not apply to sales of Common
Stock by the Company in a registered public offering under the Securities Act or
an offering pursuant to Rule 144A. Any Registrable Securities purchased from
the Holders pursuant to this Section 3.4 shall be paid for at the same price per
share of Common Stock and upon the same terms and conditions of such proposed
transfer of Common Stock by Parent. If the Registrable Securities to be
purchased include securities other than Common Stock, the price to be paid for
such securities shall be the same price per share or other denomination paid by
the Proposed Purchaser for like securities purchased from Parent, or, if like
securities are not purchased from the Shareholders and their Affiliates, the
Fair Market Value of such securities.
<PAGE>
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3.5. REGISTRATION OF TRANSFERS OR EXCHANGES.
(a) TRANSFER OR EXCHANGE OF DEFINITIVE CERTIFICATES. When
Definitive Certificates are presented to the Transfer Agent with a request from
the holder:
(i) to register the transfer of the Definitive Certificates; or
(ii) to exchange such Definitive Certificates for an equal
number of Definitive Certificates of other authorized denominations,
the Transfer Agent shall register the transfer or make the exchange as requested
if the requirements under this Agreement as set forth in this Section 3.5 for
such transactions are met; PROVIDED, HOWEVER, that the Definitive Certificates
presented or surrendered by a holder for registration of transfer or ex- change:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer or exchange in form satisfactory to the Company or the
LLC, as applicable, and the Transfer Agent, duly executed by such
holder or by his attorney, duly authorized in writing; and
(y) in the case of Registrable Securities which are presented for
transfer or exchange prior to (X) the date which is two years (or
such shorter period as may be prescribed by Rule 144(k) (or any
successor provision thereto)) after the later of the date of
original issuance of the Shares and the last date on which the
Company or the LLC or any or their affiliates was the owner of
such Shares, or any predecessor thereto, and (Y) such later date,
if any, as may be required by any subsequent change in applicable
law (the "RESALE RESTRICTION TERMINATION DATE"), such Shares shall
be accompanied by the following additional information and
documents, as applicable:
(A) if such Shares are being delivered to the Transfer Agent by
a holder for registration in the name of such holder,
without transfer, a certification from such holder to that
effect (in substantially the form of EXHIBIT C hereto); or
(B) if such Shares are being transferred to a qualified
institutional buyer (as defined in Rule
<PAGE>
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144A under the Securities Act) (a "QIB") in accordance with
Rule 144A under the Securities Act, a certification from
the transferor to that effect (in substantially the form of
EXHIBIT C hereto); or
(C) if such Shares are being transferred to an institutional
"accredited investor" within the meaning of subparagraphs
(a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under the
Securities Act (an "INSTITUTIONAL ACCREDITED INVESTOR"),
delivery by the transferor of a certification to that
effect (in substantially the form of EXHIBIT C hereto), and
delivery by the proposed transferee of a Transferee
Certificate for Institutional Accredited Investors (in
substantially the form of EXHIBIT D hereto); or
(D) if such Shares are being transferred in reliance on
Regulation S under the Securities Act, delivery by the
transferor of a certification to that effect (in
substantially the form of EXHIBIT C hereto), and a
Certificate for Regulation S Transfers in the form of
EXHIBIT E hereto; or
(E) if such Shares are being transferred in reliance on Rule
144 under the Securities Act, delivery by the transferor of
(i) a certification from the transferor to that effect (in
substantially the form of EXHIBIT C hereto), and (ii) an
opinion of counsel reasonably satisfactory to the Company
or the LLC, as the case may be, to the effect that such
transfer is in compliance with the Securities Act; or
(F) if such Shares are being transferred in reliance on another
exemption from the registration requirements of the
Securities Act, a certification from the transferor to that
effect (in substantially the form of EXHIBIT C hereto) and
an opinion of counsel reasonably satisfactory to the
Company or the LLC, as the case may be, to the effect that
such transfer is in compliance with the Securities Act;
PROVIDED that the Company or the LLC, as the case may be,
may, based upon the views of its own counsel, instruct the
Transfer Agent not to register such transfer in any case
where the proposed transferee is not a
<PAGE>
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QIB, non-U.S. Person (as defined in Regulation S) or
Institutional Accredited Investor.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE CERTIFICATE FOR A
BENEFICIAL INTEREST IN A GLOBAL CERTIFICATE. A Definitive Certificate may not
be transferred by a holder for a beneficial interest in a Global Certificate
except upon satisfaction of the requirements set forth below. Upon receipt by
the Transfer Agent of a Definitive Certificate, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Transfer Agent,
together with:
(A)(i) certification from such holder (in substantially the form
of EXHIBIT C hereto) that such Definitive Certificate is
being transferred to a QIB in accordance with Rule 144A
under the Securities Act; or
(ii) certification from such holder (in substantially the form
of EXHIBIT C hereto) that such Definitive Certificate is
being transferred to an Institutional Accredited Investor
and delivery by the proposed transferee of a Transferee
Certificate for Institutional Accredited Investors (in
substantially the form of EXHIBIT D hereto); or
(iii) certification form such holder (in substantially the form
of EXHIBIT C hereto) that such Definitive Certificate is
being transferred in reliance on Regulation S under the
Securities Act and delivery of a Certificate for Regulation
S Transfers in the form of EXHIBIT E hereto; or
(iv) certification form such holder (in substantially the form
of EXHIBIT C) that such Definitive Certificate is being
transferred in reliance on Rule 144 under the Securities
Act and delivery of an opinion of counsel reasonably
satisfactory to the Company or the LLC, as the case may be,
to the effect that such transfer is in compliance with the
Securities Act; or
(v) certification from such holder (in substantially in the
form of EXHIBIT C hereto)
<PAGE>
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that such Definitive Certificate is being transferred
pursuant to another exemption from registration
requirements of the Securities Act and delivery of an
opinion of counsel reasonably satisfactory to the Company
or the LLC, as the case may be, to the effect that such
transfer is in compliance with the Securities Act; PROVIDED
that the Company or the LLC, as the case may be, may, based
upon the views of its own counsel, instruct the Transfer
Agent not to register such transfer in any case where the
proposed transferee is not a QIB, non-U.S. Person (as
defined in Regulation S) or Institutional Accredited
Investor; and
(B) written instructions directing the Transfer Agent to make,
or to direct the Depositary to make, an endorsement on the
Global Certificate to reflect an increase in the aggregate
amount of the Shares represented by the Global Certificate,
then the Transfer Agent shall cancel such Definitive Certificate and cause, or
direct the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Transfer Agent, the number of
Shares represented by the Global Certificate to be increased accordingly. If no
Global Certificate is then outstanding, the Company shall issue and the Transfer
Agent shall upon written instructions from the Company authenticate a new Global
Certificate in the appropriate amount.
(c) TRANSFER OR EXCHANGE OF GLOBAL CERTIFICATE. The transfer or
exchange of Global Certificates or beneficial interests therein shall be
effected through the Depositary, in accordance with this Section 3.5, the
Private Placement Legend, this Agreement (including the restrictions on transfer
set forth herein) and the procedures of the Depositary therefor.
(d) TRANSFER OR EXCHANGE OF A BENEFICIAL INTEREST IN A GLOBAL
CERTIFICATE FOR A DEFINITIVE CERTIFICATE.
(i) Any person having a beneficial interest in a Global
Certificate may transfer or exchange such beneficial interest for a
Definitive Certificate upon receipt by the Transfer Agent of written
instructions or such other form of instructions as is customary for the
Depositary
<PAGE>
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from the Depositary or its nominee on behalf of any person having a
beneficial interest in a Global Certificate, including a written order
containing registration instructions and, in the case of any such
transfer or exchange prior to the Resale Restriction Termination Date,
the following additional information and documents:
(A) if such beneficial interest is being transferred to the
person designated by the Depositary as being the beneficial
owner, a certification from such person to that effect (in
substantially the form of EXHIBIT C hereto); or
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a
certification from the transferor to that effect (in
substantially the form of EXHIBIT C hereto); or
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery by the
transferor of a certification to that effect (in
substantially the form of EXHIBIT C hereto), and delivery
by the proposed transferee of a Transferee Certificate for
Institutional Accredited Investors (in substantially the
form of EXHIBIT D hereto); or
(D) if such beneficial interest is being transferred in
reliance on Regulation S under the Securities Act, delivery
by the transferor of (i) a certification to that effect (in
substantially in the form of EXHIBIT C a hereto), and (ii)
a Certificate for Regulation S Transfers in the form of
EXHIBIT E hereto; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery by
the transferor of (i) a certification to that effect (in
substantially the form of EXHIBIT C hereto) and (ii) an
opinion of counsel reasonably satisfactory to the Company
or the LLC, as the case may be, to the effect that such
transfer is in compliance with the Securities Act; or
(F) if such beneficial interest is being transferred in
reliance on another exemption from the regis-
<PAGE>
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tration requirements of the Securities Act, a certification
from the transferor to that effect (in substantially the
form of EXHIBIT C hereto) and an opinion of counsel
reasonably satisfactory to the Company or the LLC, as the
case may be, to the effect that such transfer is in
compliance with the Securities Act; PROVIDED that the
Company or the LLC, as the case may be, may instruct the
Transfer Agent not to register such transfer in any case
where the proposed transferee is not a QIB, non-U.S. Person
or Institutional Accredited Investor;
then the Transfer Agent will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Transfer Agent, the aggregate amount of the Global Certificate to be
reduced and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an officers'
certificate (a certificate signed by two officers of such company, one of
whom must be the principal executive officer, principal financial officer
or principal accounting officer) (an "OFFICERS' CERTIFICATE"), the
Transfer Agent will authenticate and deliver to the transferee a
Definitive Certificate.
(ii) Definitive Certificates issued in exchange for a beneficial
interest in a Global Certificate pursuant to this Section 3.5(d) shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Transfer Agent in writing.
The Transfer Agent shall deliver such Definitive Certificates to the
persons in whose names such Shares are so registered and adjust the
Global Certificate pursuant to paragraph (h) of this Section 3.5.
(e) RESTRICTIONS ON TRANSFER OR EXCHANGE OF GLOBAL CERTIFICATES.
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 3.5), a Global
Certificate may not be transferred or exchanged as a whole except by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
<PAGE>
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(f) AUTHENTICATION OF DEFINITIVE CERTIFICATES IN ABSENCE OF
DEPOSITARY. If at any time:
(i) the Depositary for the Global Certificates notifies the
Company that the Depositary is unwilling or unable to continue as
Depositary for the Global Certificate and a successor Depositary for the
Global Certificate is not appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company and, if prior to the occurrence of a
Liquidation Event, the LLC, notify the Transfer Agent in writing that it
elects to cause the issuance of Definitive Certificates for all Global
Certificates under this Agreement,
then the Company and, if applicable, the LLC, will execute, and the Transfer
Agent will, upon receipt of an Officers' Certificate requesting the
authentication and delivery of Definitive Certificates, authenticate and deliver
Definitive Certificates, in an aggregate number equal to the aggregate number of
Shares represented by the Global Certificate, in exchange for such Global
Certificate.
(g) PRIVATE PLACEMENT LEGEND. Upon the registration of transfer,
exchange or replacement of Share certificates not bearing the legend set forth
in the first paragraph of EXHIBIT A attached hereto (the "PRIVATE PLACEMENT
LEGEND"), the Transfer Agent shall deliver Share certificates that do not bear
the Private Placement Legend. Upon the registration of transfer, exchange or
replacement of Share certificates bearing the Private Placement Legend, the
Transfer Agent shall deliver Share certificates that bear the Private Placement
Legend unless, and the Transfer Agent is hereby authorized to deliver Share
certificates without the Private Placement Legend if, (i) the requested transfer
is not prior to the date which is two years (or such shorter period as may be
prescribed by Rule 144(k) (or any successor provision thereto) under the
Securities Act or any successor provision thereunder) after the later of the
original Issue Date of the Shares or the last day on which the Company or the
LLC, as the case may be, or any of its Affiliates was the owner of the Shares or
any predecessor security, (ii) there is delivered to the Transfer Agent an
opinion of counsel reasonably satisfactory to the Company and the Transfer 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 or (iii) the Shares to be transferred or exchanged represented
<PAGE>
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by such Share Certificates are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act.
(h) CANCELLATION OR ADJUSTMENT OF A GLOBAL CERTIFICATE. At such
time as all beneficial interests in a Global Certificate have either been
exchanged for Definitive Certificates, redeemed, repurchased or canceled, such
Global Certificate shall be returned to the Company or the LLC, as the case may
be, or, upon written order to the Transfer Agent in the form of an Officers'
Certificate from the Company or the LLC, as the case may be, retained and
canceled by the Transfer Agent. At any time prior to such cancellation, if any
beneficial interest in a Global Certificate is exchanged for Definitive
Certificates, redeemed, repurchased or canceled, the number of Shares
represented by such Global Certificate shall be reduced and an endorsement shall
be made on such Global Certificate by the Transfer Agent to reflect such
reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS OR EXCHANGES OF
DEFINITIVE CERTIFICATES.
(i) To permit registrations of transfers or exchanges, the
Company or the LLC, as the case may be, shall execute, at the Transfer
Agent's request, and the Transfer Agent shall authenticate Definitive
Certificates and Global Certificates.
(ii) All Definitive Certificates and Global Certificates issued
upon any registration, transfer or exchange of Definitive Certificates or
Global Certificates shall be the valid obligations of the Company or the
LLC, as the case may be, entitled to the same benefits under this
Agreement as the Definitive Certificates or Global Certificates
surrendered upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of
any Shares, the Transfer Agent and the Company or the LLC, as the case
may be, may deem and treat the person in whose name any Shares are
registered as the absolute owner of such Shares, and neither the Transfer
Agent nor the Company or the LLC, as the case may be, shall be affected
by notice to the contrary.
(j) COMPLIANCE. Other than following the applicable terms and
requirements of this Agreement, the Transfer Agent
<PAGE>
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shall have no additional duty to monitor compliance with federal, state or other
securities laws.
3.6. LOST, STOLEN, DESTROYED, DEFACED OR MUTILATED SHARE
CERTIFICATES. Upon receipt by the Company and the Transfer Agent (or any agent
of the Company or the Transfer Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Share certificate and of an indemnity bond satisfactory to them and, in
the case of mutilation or defacement, upon surrender thereof to the Transfer
Agent for cancellation, then, in the absence of notice to the Company or the
Transfer Agent that such Share certificate has been acquired by a BONA FIDE
purchaser or holder in due course, the Company shall execute, and an authorized
signatory of the Transfer Agent shall manually authenticate and deliver, in
exchange for or in lieu of the lost, stolen, destroyed, defaced or mutilated
Share certificate, a new Share certificate representing a like number of Shares,
bearing a number or other distinguishing symbol not contemporaneously
outstanding. Upon the issuance of any new Share certificate under this Section
in a name other than the prior registered holder of the lost, stolen, destroyed,
defaced or mutilated Share certificate, the Company or the LLC, as the case may
be, may require the payment from the holder of such Share 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 expenses
of the Transfer Agent) in connection therewith. Every substitute Share
certificate executed and delivered pursuant to this Section in lieu of any lost,
stolen or destroyed Share certificate shall constitute an additional contractual
obligation of the Company or the LLC, as the case may be, whether or not the
lost, stolen or destroyed Share 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 Share certificates duly executed and
delivered hereunder. The provisions of this Section 3.6 are exclusive with
respect to the replacement of lost, stolen, destroyed, defaced or mutilated
Share 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 Share certificates.
3.7. SEPARATION OF SHARES AND NOTES. The Notes and the LLC
Shares will not be separately transferable until the
<PAGE>
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Separability Date. "SEPARABILITY DATE" shall mean the earliest to occur of:
(i) six months after the date hereof, (ii) the date on which a registration
statement under the Securities Act, with respect to a registered exchange offer
for the Notes or covering the sale by holders of the Notes is declared effective
under the Securities Act, (iii) the occurrence of an Event of Default (as
defined in the Indenture), (iv) immediately prior to the occurrence of a Change
of Control (as defined in the Indenture) or (v) such earlier date as may be
determined by Salomon in its sole discretion and specified to the Company, the
LLC, each Trustee (as defined in the Indenture) and the Transfer Agent in
writing. Notwithstanding the foregoing, in the event a Change of Control (as
defined in the Indenture) is proposed and the Company commences a Change of
Control Offer (as defined in the Indenture) prior to the Separability Date, as
determined by the preceding sentence, the Separability Date shall be such
earlier date of commencement. The separation of the Shares and the Notes is
herein referred to as a "SEPARATION."
4. REGISTRATION PROCEDURES.
In connection with the obligations of the Company or the LLC, as
the case may be, with respect to any Registration Statement pursuant to Sections
2.1 and 2.2 hereof, the Company or the LLC, as the case may be, shall:
(a) A reasonable period of time prior to the initial filing of a
Registration Statement or Prospectus and a reasonable period of time
prior to the filing of any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein
by reference), furnish to the Holders of the Registrable Securities
included in such Registration Statement, and the managing underwriters,
if any, copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders, and such
underwriters, if any, and use reasonable commercial efforts to cause the
officers and directors of the Company or the LLC, as the case may be,
counsel to the Company or the LLC, as the case may be, and independent
certified public accountants to the Company or the LLC, as the case may
be, to respond to such reasonable inquiries as shall be necessary, in the
opinion of respective counsel to such Holders and such underwriters, to
conduct a reasonable investigation within the meaning of the Securities
Act. The Company or the LLC, as the case may be,
<PAGE>
-31-
shall not file any such Registration Statement in respect of a Demand
Registration or related Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable Securities
included in such Registration Statement shall reasonably object on a
timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration statement as may be
necessary to keep such Registration Statement continuously effective for
the applicable time period required hereunder (except for Black Out
Periods); cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of
all securities covered by such Registration Statement during such period
in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or in such
Prospectus as so supplemented;
(c) Notify the holders of Registrable Securities to be sold and
the managing underwriters, if any, promptly, and (if requested by any
such person), confirm such notice in writing, (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment is proposed to be
filed, and (B) with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the SEC or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the
SEC, any state securities commission, any other governmental agency or
any court or any stop order, order or injunction suspending or enjoining
the use of a Prospectus or the effectiveness of a Registration Statement
or the initiation of any proceedings for that purpose, (iv) of the
receipt by the Company or the LLC, as the case may be, of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (v) of the happening of any event or
information becoming known that makes any statement made in a
Registration Statement or related Prospectus untrue in any material
respect or that requires
<PAGE>
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the making of any changes in such Registration Statement or Prospectus so
that, in the case of a Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of a Prospectus, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(d) Use its reasonable best efforts to avoid the issuance of or,
if issued, obtain the withdrawal of any order enjoining or suspending the
use of a Prospectus or the effectiveness of a Registration Statement or
the lifting of any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction described in Section 4(h), at the earliest practicable
moment;
(e) If requested by the managing underwriters, if any, (i)
promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters, if any,
reasonably believe should be included therein, and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment
under the Securities Act as soon as practicable after the Company has
received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; PROVIDED, that the
Company or the LLC, as the case may be, shall not be required to take any
action pursuant to this Section 4(e) that would, in the opinion of
counsel for the Company or the LLC, as the case may be, violate
applicable law;
(f) Upon written request to the Company or the LLC, as the case
may be, furnish to each Holder of Registrable Securities to be sold
pursuant to a Registration Statement and each managing underwriter, if
any, without charge, at least one conformed copy of such Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated
therein by reference, and all exhibits to the extent requested (including
those previously furnished or incorporated by reference) as soon as
practicable after the filing of such documents with the SEC;
<PAGE>
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(g) Deliver to each Holder of Registrable Securities to be sold
pursuant to a Registration Statement, and the underwriters, if any,
without charge, as many copies of the Prospectus (including each form of
prospectus) and each amendment or supplement thereto as such persons
reasonably request; and the Company or the LLC, as the case may be,
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling holders of Registrable
Securities and the underwriters, if any, in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto;
(h) Prior to any public offering of Registrable Securities, use
its reasonable best efforts to register or qualify or cooperate with the
Holders of Registrable Securities to be sold, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions as any such Holder or underwriter
reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective hereunder and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered
by the applicable Registration Statement; PROVIDED that the Company or
the LLC, as the case may be, shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so
qualified or (ii) take any action which would subject it to general
service of process or to taxation in any jurisdiction where they are not
so subject;
(i) In connection with any sale or transfer of Registrable
Securities that will result in such securities no longer being
Registrable Securities, cooperate with the Holders thereof and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company and to
enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or such
<PAGE>
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Holders may request at least two Business Days prior to any sale of
Registrable Securities;
(j) Upon the occurrence of any event contemplated by Section
4(c)(v), except during Black Out Periods as promptly as practicable,
prepare a supplement or amendment, including, if appropriate, a
post-effective amendment, to each Registration Statement or a supplement
to the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file any other required document
so that, as thereafter delivered, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(k) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by the managing
underwriters, if any) in order to expedite or facilitate the disposition
of such Registrable Securities, and, whether or not an underwriting
agreement is entered into and whether or not the registration is an
underwritten registration, (i) make such representations and warranties
to the underwriters and selling Holders, if any, with respect to the
business of the Company and its subsidiaries (including with respect to
businesses or assets acquired or to be acquired by any of them), and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when requested; (ii)
in the case of an underwritten offering, obtain opinions of counsel and
updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters,
addressed to each of the underwriters, and selling Holders), covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters or selling Holders; (iii) use their reasonable best efforts
to obtain customary "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company or the LLC, as
the case may be (and, if necessary, any other independent certified
<PAGE>
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public accountants of any subsidiary of the Company or the LLC, as the
case may be, or of any acquired business for which financial statements
and financial data is, or is required to be, included in the Registration
Statement), addressed (where reasonably possible) to each of the
underwriters nd selling Holders, if any, such letters to be in customary
form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings; (iv) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the
underwriters, if any, than those set forth in Section 5 hereof (or such
other provisions and procedures acceptable to the managing underwriters,
if any); and (v) deliver such documents and certificates as may be
reasonably requested by the managing underwriters, if any, to evidence
the continued validity of the representations and warranties made
pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company or the LLC, as the case may be;
(l) Make available for inspection by a representative of any
underwriter participating in any such disposition of Registrable
Securities, and any attorney, consultant or accountant retained by such
selling Holders or underwriter, at the offices where normally kept,
during reasonable business hours, all pertinent financial and other
records, corporate documents and properties of the Company or the LLC, as
the case may be, and its subsidiaries (including with respect to
businesses and assets acquired or to be acquired to the extent that such
information is available), and cause its and its subsidiaries' officers,
directors, agents and employees (including with respect to businesses and
assets acquired or to be acquired to the extent that such information is
available) to supply all information in each case reasonably requested by
any such representative, underwriter, attorney, consultant or accountant
in connection with such Registration Statement; PROVIDED, that such
persons shall first agree in writing with the Company or the LLC, as the
case may be, that any information that is reasonably and in good faith
designated by the Company or the LLC, as the case may be, in writing as
confidential at the time of delivery of such information shall be kept
confidential by such Persons, unless (i) disclosure of such information
is required by court or administrative order or is necessary to respond
to inquiries of regulatory authorities, (ii) disclosure of
<PAGE>
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such information is required by law (including any disclosure
requirements pursuant to Federal securities laws in connection with the
filing of the Registration Statement or the use of any Prospectus), (iii)
such information becomes generally available to the public other than as
a result of a disclosure or failure to safeguard such information by such
Person or their Affiliates or agents or (iv) such information becomes
available to such Person from a source other than the Company or the LLC,
as the case may be, and their respective subsidiaries and such source is
not bound by a confidentiality obligations;
(m) Comply with all applicable rules and regulations of the SEC
and make generally available to their securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 under the Securities Act, no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal quarter
in which Registrable Securities are sold to underwriters in a firm
commitment or reasonable efforts underwritten offering and (ii) if not
sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter after the effective date of a Registration
Statement, which statement shall cover said period, consistent with the
requirements of Rule 158 under the Securities Act; and
(n) Cooperate with each seller of Registrable Securities covered
by any Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Securities and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc.
The Company or the LLC, as the case may be, may require a Holder
of Registrable Securities to be included in a Registration Statement to furnish
to the Company or the LLC, as the case may be, such information regarding (i)
the intended method of distribution of such Registrable Securities, (ii) such
Holder and (iii) the Registrable Securities held by such Holder as is required
by law to be disclosed in such Registration Statement and the Company or the
LLC, as the case may be, may exclude from such Registration Statement the
Registrable Securities of any Holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request. The Company
or the LLC, as the case may be, shall not be required to provide indemnification
to any Underwriter or
<PAGE>
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any other person relating to information referred to in clauses (i) and (ii)
provided to the Company or the LLC, as the case may be, in writing specifically
for inclusion in such Registration Statement.
If any such Registration Statement refers to any Holder by name or
otherwise as the Holder of any securities of the Company or the LLC, as the case
may be, then such Holder shall have the right to require (i) the insertion
therein of language, in form and substance reasonably satisfactory to such
Holder, to the effect that the holding by such Holder of such securities is not
to be construed as a recommendation by such Holder of the investment quality of
the securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the Company
or the LLC, as the case may be, or (ii) in the event that such reference to such
Holder by name or otherwise is not required by the Securities Act, the deletion
of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company or
the LLC, as the case may be, of the happening of any event of the kind described
in Section 4(c)(ii), 4(c)(iii), 4(c)(iv) or 4(c)(v) hereof, such Holder will
forthwith discontinue disposition of such Registrable Securities covered by such
Registration Statement or Prospectus until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 4(j) hereof,
or until it is advised in writing (the "ADVICE") by the Company or the LLC, as
the case may be, that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus. If the Company or the LLC, as the case may be, shall give any such
notice, the Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each Holder of Registrable Securities covered by such
Registration Statement shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof or (y) the Advice, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus.
<PAGE>
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5. INDEMNIFICATION AND CONTRIBUTION.
(a) Each Issuer agrees, jointly and severally, to indemnify and
hold harmless each initial Purchaser, each Holder, each underwriter who
participates in an offering of Registrable Securities, their respective
Affiliates, each Person, if any, who controls any of such parties within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
and each of their respective directors, officers, employees and agents, as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto), covering
Registrable Securities, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made not
misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any court or governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission; PROVIDED that (subject to Section 5(d) below) any such
settlement is effected with the written consent of the Issuers; and
(iii) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of one counsel chosen by
Salomon), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any court
or governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omis-
<PAGE>
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sion, to the extent that any such expense is not paid under subparagraph
(i) or (ii) of this Section 5(a);
PROVIDED that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission (i) made in reliance upon and in
conformity with written information furnished to any Issuer by an Initial
Purchaser, such Holder or any underwriter in writing expressly for use in the
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) or (ii) contained in any preliminary prospectus
if such Initial Purchaser, such Holder or such underwriter failed to send or
deliver a copy of the Prospectus (in the form it was first provided to such
parties for confirmation of sales) to the Person asserting such losses, claims,
damages or liabilities on or prior to the delivery of written confirmation of
any sale of securities covered thereby to such Person in any case where such
delivery is required by the Securities Act and such Prospectus would have
corrected such untrue statement or omission. Any amounts advanced by any Issuer
to an indemnified party pursuant to this Section 5 as a result of such losses
shall be returned to such Issuer if it shall be finally determined by such a
court in a judgment not subject to appeal or final review that such indemnified
party was not entitled to indemnification by any Issuer.
(b) By accepting the benefits of this Agreement, each Holder
agrees, severally and not jointly, to indemnify and hold harmless the Issuers,
each Initial Purchaser, each underwriter who participates in an offering of
Registrable Securities and the other selling Holders and each of their
respective directors, officers (including each officer of the Issuers who signed
the Registration Statement), employees and agents and each Person, if any, who
controls the Issuers, within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all loss, liability,
claim, damage and expense whatsoever described in the indemnity contained in
Section 5(a) hereof, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Issuers by such selling Holder expressly for use in the
Registration Statement (or any amendment thereto), or any such Prospectus (or
any amendment or supplement thereto).
<PAGE>
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(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 5(a) above, counsel to the indemnified parties shall be
selected by Salomon and, in the case of parties indemnified pursuant to Section
5(b) above, counsel to the indemnified parties shall be selected by the Issuers.
Notwithstanding the foregoing sentence, in case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent it may wish, jointly with any other indemnifying
party similarly notified, unless such indemnified party shall have one or more
legal defenses available to it which are not available to the indemnifying
party, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party. After notice from the indemnifying party to such
indemnified party of its election as aforesaid to assume the defense thereof and
approval by such indemnified party of counsel appointed to defend such action,
the indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. An indemnifying party may participate at its own
expense in the defense of any such action; PROVIDED, HOWEVER, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 5 (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional
<PAGE>
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release of each indemnified party from all liability arising out of such
litigation, investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel to which they are entitled pursuant to the provisions of this Agreement,
such indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 5(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 5 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Issuers, each Initial
Purchaser and the Holders shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement incurred by the Issuers, the Initial Purchasers and the Holders, as
incurred; PROVIDED that no Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person that was not guilty of such fraudulent
misrepresentation. As between the Issuers, the Initial Purchasers and the
Holders, such parties shall contribute to such aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement in such proportion as shall be appropriate to reflect the relative
fault of either of the Issuers, on the one hand, and the Initial Purchasers and
the Holders, on the other hand, with respect to the statements or omissions
which resulted in such loss, liability, claim, damage or expense, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault of either of the Issuers, on the one hand, and of the Initial
Purchasers and the Holders, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omis-
<PAGE>
-42-
sion to state a material fact relates to information supplied by either of the
Issuers, on the one hand, or by or on behalf of an Initial Purchaser or the
Holders, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Issuers, the Initial Purchasers and the Holders of the Registrable
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 5 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the relevant
equitable considerations. For purposes of this Section 5, each Affiliate of
each Initial Purchaser or a Holder, and each director, officer, employee, agent
and Person, if any, who controls an Initial Purchaser or Holder or such
Affiliate within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act shall have he same rights to contribution as such Initial
Purchaser or Holder, and each director of the any Issuer, each officer of any
Issuer who signed the Registration Statement, and each Person, if any, who
controls either Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Issuers.
6. RULE 144A AND FUTURE IPOS.
(a) The Company and the LLC shall use their respective best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time it is not required
to file such reports, it will, upon the request of any holder or beneficial
owner of Registrable Securities, make available other information as required
by, and so long as necessary to permit, sales of Registrable Securities pursuant
to Rule 144A. Notwithstanding the foregoing, nothing in this Section 6 shall be
deemed to require the Company or the LLC to register any of its securities
pursuant to the Exchange Act.
(b) Parent and the Shareholders each agree not to allow the LLC
or the Company to make a Public Offering of any class of Capital Stock or other
equity interests unless, prior to commencing such Public Offering, any necessary
changes are made to provide that the Shares are convertible into such class of
Capital Stock or other equity interests of the LLC or the Company, as
applicable, on a share-for-share basis and that rights, conditions and
privileges attaching to such class of Capital Stock or other equity interests
are not adverse to holders of Shares as compared with the terms of Class A
Interests (as defined in the LLC Agreement) (except with respect to
<PAGE>
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voting rights). Parent also agrees, for so long as any Registrable Securities
are outstanding, (i) not to make, and not to allow any of its direct or indirect
subsidiaries other than the Company or the LLC to make, a Public Offering of any
class of Capital Stock and (ii) not to engage in any business other than
beneficially owning Capital Stock of the Company and CableTel Management Inc.
and administrative and managerial activities reasonably related thereto.
7. UNDERWRITTEN REGISTRATIONS.
No Person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such Registrable Securities on
the basis reasonably provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
8. MISCELLANEOUS. (a) REMEDIES. In the event of a breach by
Parent, the LLC, CNANV, the Company, or any Shareholder or by a holder of Shares
of any of its obligations under this Agreement, each holder of Shares and any
Shareholder, Parent, the LLC, CNANV, and the Company, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
Parent, the LLC, CNANV, the Company and each Shareholder and each holder of
Shares agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach of any of the provisions of this Agreement
and each hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Parent, the LLC, CNANV, the
Company and the Shareholders have not entered into any agreement that is
inconsistent with the rights granted to the holders of Shares and indemnified
persons in this Agreement or otherwise conflicts with the provisions hereof.
Without the written consent of the holders of a majority of the outstanding
Shares, Parent, the LLC, CNANV, the Company and the Shareholders shall not grant
to any Person any rights which conflict with or are inconsistent with the
provisions of this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not
<PAGE>
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be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the holders of not less than a majority of the then outstanding
Shares and/or Registrable Securities, as applicable. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders whose securities
are being sold pursuant to a Registration Statement and that does not directly
or indirectly affect the rights of other Holders may be given by Holders of a
majority of the Registrable Securities being sold by such Holders pursuant to
such Registration Statement; PROVIDED, that the provisions of this sentence may
not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence. Notwithstanding the
foregoing, no amendment, modification, supplement, waiver or consent with
respect to Section 5 shall be made or given otherwise than with the prior
written consent of each Holder or former Holder affected thereby.
(d) NOTICES. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier:
(i) if to Parent, the LLC, CNANV or the Company:
c/o CompleTel LLC
6300 South Syracuse Way, Suite 355
Englewood, Colorado 80111
fax: (303) 741-4823
Attention: James E. Dovey
(ii) if to the Shareholders:
Madison Dearborn Capital Partners II, L.P.
c/o Madison Dearborn Partners, Inc.
Three First National Plaza, Suite 3800
Chicago, Illinois 60202
fax: (312) 895-1256
Attention: Paul J. Finnegon
DeGeorge Holdings Limited Partnership
c/o LPL Investment Group, Inc.
140 Intercoastal Point Drive
Jupiter, Florida 33447
fax: (561) 745-2299
Attention: Lawrence G. DeGeorge
<PAGE>
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(iii) if to the Transfer Agent:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
fax: (651) 244-0711
Attention: Corporate Trust Administration
(iv) if to the Initial Purchasers, as provided in the Purchase
Agreement.
(v) if to any other Person who is then the registered holder of
Shares or Registrable Securities, to the address of such holder as it
appears in the register therefor of the Company or the LLC, as the case
may be.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when received if delivered by a next-day air courier;
ten Business Days after being deposited in the mail, postage prepaid, if mailed;
and when receipt is acknowledged by the recipient's telecopier machine, if
telecopied.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties hereto and shall inure to the benefit of each holder of Shares and
Registrable Securities. None of Parent, the LLC, CNANV, the Company or any
Shareholder may assign any of its rights hereunder without the prior written
consent of each holder of Shares and Registrable Securities other than in
connection with an Excluded Transfer of the type described in clause (i) or the
definition thereof. If any transferee of any holder shall acquire Shares or
Registrable Securities, in any manner, whether by operation of law or otherwise,
such Shares or Registrable Securities shall be held subject to all of the terms
of this Agreement, and by taking and holding such Shares or Registrable
Securities such person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement and such
person shall be entitled to receive the benefits hereof.
(f) COUNTERPARTS. This Agreement may be executed by manual or
facsimile signature in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and, all of
<PAGE>
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which taken together shall constitute one and the same Agreement.
(g) GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THIS THE LAWS OF THE STATE
OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW
YORK. PARENT, THE LLC, CNANV, THE COMPANY, THE SHAREHOLDERS AND THE INITIAL
PURCHASERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
(h) SEVERABILITY. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(i) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
All references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(j) AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF
IMMUNITIES. By the execution and delivery of this Agreement, each of CNANV and
the Company (i) hereby designates and appoints CT Corporation System, 1633
Broadway, New York, NY 10019 ("CT CORPORATION SYSTEM") (and any successor
entity), as its authorized agent upon which process may be served in any suit or
proceeding arising out of or relating to this Agreement that may be instituted
in any federal or state court in The
<PAGE>
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City of New York, Borough of Manhattan, State of New York or brought under
federal or state securities laws, and agrees to furnish to each other party
hereto, promptly following the execution hereof, satisfactory evidence that CT
Corporation system has accepted such designation, (ii) submits to the
jurisdiction of any such court in any such suit or proceeding and (iii) agrees
that service of process upon CT Corporation System and written notice of said
service to the Company in accordance with Section 8(d) shall be deemed in every
respect effective service of process upon each of such Persons, in any such suit
or proceeding. Each of the CNANV and the Company further agrees to take any and
all action, including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
CT Corporation System in full force and effect so long as any of the Units,
Notes or Registrable Securities shall be outstanding; PROVIDED that each of
CNANV and the Company may and to the extent CT Corporation System ceases to be
able to be served on the basis contemplated herein shall, by written notice to
the holders of Registrable Securities, designate such additional or alternative
agent for service of process under this Section 8(j) that (i) maintains an
office located in the Borough of Manhattan, City of New York, State of New York
and (ii) is either (x) counsel for such person or (y) a corporate service
company which acts as agent for service of process for other persons in the
ordinary course of its business. Such written notice shall identify the name of
such agent for service of process and the address of the office of such agent
for service of process in the Borough of Manhattan, City of New York, State of
New York.
To the extent that any of the CNANV or the Company has or
hereafter may acquire any immunity from jurisdiction of any court of (i) any
jurisdiction in which they own or lease property or assets, (ii) the United
States or the State of New York, (iii) the Netherlands or any political
subdivision thereof or (iv) the Netherlands Antilles or any political
subdivision thereof or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property and assets or this
Agreement or any of the Units, the Notes or the Registrable Securities or
actions to enforce judgments in respect of any thereof, each of the CNANV and
the Company hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents, to the extent permitted by
law.
<PAGE>
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IN WITNESS WHEREOF, the parties have caused this Equity
Registration Rights Agreement to be duly executed as of the date first written
above.
COMPLETEL LLC
By: /s/ James E. Dovey
--------------------------------------
Name: James E. Dovey
Title: Chief Executive Officer
COMPLETEL HOLDINGS LLC
By: /s/ James E. Dovey
--------------------------------------
Name: James E. Dovey
Title: Chief Executive Officer
COMPLETEL (N.A.) N.V.
By: /s/ James E. Dovey
--------------------------------------
Name: James E. Dovey
Title: Attorney-in-fact
COMPLETEL EUROPE N.V.
By: /s/ James E. Dovey
--------------------------------------
Name: James E. Dovey
Title: Attorney-in-fact
<PAGE>
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MADISION DEARBORN CAPITAL
PARTNERS II, L.P.
By: Madison Dearborn Partners II, L.P., its
general partner
By: Madison Dearborn Partners, Inc., its
general partner
By: /s/ Paul J. Finnegan
--------------------------------------
Name: Paul J. Fnnegan
Title: Managing Director
DEGEORGE HOLDINGS LIMITED
PARTNERSHIP
By:
By: /s/ Lawrence F. DeGeorge
--------------------------------------
Name: Lawrence F. DeGeorge
Title: Chairman
U.S. BANK TRUST NATIONAL
ASSOCIATION
as Transfer Agent with respect to Sections
3.2, 3.5 and 8(d) hereof only
By: /s/ Judith M. Zuzek
--------------------------------------
Name: Judith M. Zuzek
Title: Turst Officer
<PAGE>
-50-
SALOMON SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
TD SECURITIES (USA) INC.
PARIBAS CORPORATION
By: Salomon Smith Barney Inc.
By: /s/ Christopher Clipper
----------------------------------------
Name: Christopher Clipper
Title: Vice President
<PAGE>
COMPLETEL LLC GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "GUARANTY") is made and entered into this
16th of February, 1999 by CompleTel LLC, a Delaware limited liability company
(the "GUARANTOR"), in favor of each holder from time to time (the "NOTEHOLDERS")
of the aggregate principal amount at maturity of the 14% Senior Discount Notes
due 2009 (the "NOTES") issued by CompleTel Europe N.V., a public company with
limited liability (naamloze vennootschap) incorporated under the laws of The
Netherlands and having its corporate domicile in Amsterdam (the "ISSUER"),
pursuant to an indenture dated as of the date hereof (the "INDENTURE") by and
between the Issuer, CompleTel ECC B.V., a private company with limited liability
(besloten vennootschap) incorporated under the laws of The Netherlands and
having its corporate domicile in Amsterdam, and U.S. Bank Trust National
Association, a National banking corporation. Capitalized terms used herein and
not otherwise defined herein shall have the meaning ascribed to them in the
Indenture.
RECITALS
A. The Guarantor is the ultimate parent of the Issuer.
B. The Issuer will issue and sell the Notes pursuant to an exemption from
the U.S. Securities Act of 1933, as amended, and will issue and sell the Notes
to the Noteholders pursuant to certain exceptions from finance company laws of
The Netherlands that require, among other things, that the Notes be guaranteed
by the ultimate parent of the Issuer.
C. The execution and delivery of this Guaranty by the Guarantor are
conditions precedent to the Noteholders' purchase of the Notes. The Guarantor,
as the ultimate parent of the Issuer, hereby acknowledges it will benefit from
the Issuer's sale of the Notes to the Noteholders and its guaranty thereof.
AGREEMENT
NOW THEREFORE, in compliance with applicable banking laws and U.S.
securities laws and in consideration of, the Noteholders' purchase of the Notes,
the Guarantor hereby covenants and agrees with, and represents and warrants to
the Noteholders as follows:
1. GUARANTY. The Guarantor hereby irrevocably and unconditionally
guarantees to each holder from time to time of any of the Notes, the due and
punctual payment in full of (a) the principal of, premium, if any, and interest
on, and any Additional Amounts due under, and any other amounts due under, the
Notes when and as the same shall become due and payable (whether at stated
maturity or by required or optional prepayment, mandatory redemption, or by
acceleration or otherwise) and (b) any other sums that may become due under, or
in connection with, the terms and provisions of the Notes (all such obligations
described in clauses (a) and (b) above are herein called the "GUARANTEED
OBLIGATIONS"). The guaranty in the preceding sentence is an absolute, and
unconditional
PARENT GUARANTY
<PAGE>
present and continuing guaranty of payment and not of collectibility and is in
no way conditional or contingent upon any attempt to collect from the Issuer or
other guarantor of the Guaranteed Obligations, if any, or upon any other action,
occurrence or circumstance whatsoever. If the Issuer fails to pay any of such
Guaranteed Obligations, the Guarantor agrees to pay the same when due to the
holders of the Notes entitled thereto, without demand, presentment, protest or
notice of any kind, in lawful money of the United States of America, at the
place for payment specified in the Notes and the Indenture.
2. WAIVERS. The Guarantor hereby waives: (a) notice of acceptance of this
Guaranty and of the creation and existence of the Notes; (b) presentment, demand
for payment, notice of dishonor, notice of nonpayment, and protest of any
instrument evidencing the Notes; (c) all other demands and notices to the
Guarantor or any other person and all other actions to establish the liability
of the Guarantor hereunder; and (d) the right to trial by jury in any action in
connection with this Guaranty. No delay or failure by the Noteholders in the
exercise of any right or remedy shall constitute a waiver thereof, and no single
or partial exercise by the Noteholders of any right or remedy shall preclude
other or further exercise of any other right or remedy.
3. SEVERABILITY. Any invalidity or unenforceability of any provision or
application of this Guaranty, or any portion hereof, shall not affect other
lawful provisions and applications hereof, and to this end the provisions of
this Guaranty are declared to be severable. This Guaranty is binding on the
Guarantor and on the successors and assigns of the Guarantor, and of each of
them respectively, and shall inure to the benefit of the Noteholders, their
successors and assigns.
4. GOVERNING LAW. This Guaranty is governed by and must be construed in
accordance with the laws of the State of New York, U.S.A.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
PARENT GUARANTY
2
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement to be
executed and delivered as of the dated and year first above written.
COMPLETEL LLC,
a Delaware limited liability company
By: /s/ James E. Dovey
-----------------------------------
Its: CEO
---------------------------------
PARENT GUARANTY
<PAGE>
EXHIBIT 10.12
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FIRST AMENDED AND RESTATED
EQUITY PURCHASE AGREEMENT
BY AND AMONG
COMPLETEL LLC
AND
THE PURCHASERS LISTED ON
THE SIGNATURE PAGES ATTACHED HERETO
JANUARY 28, 1999
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TABLE OF CONTENTS
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Section 1. Authorization and Closings......................................................................2
1A. Authorization of the Preferred Units............................................................2
1B. Purchase and Sale of Preferred Units under the Prior Purchase Agreements........................3
1C. Additional Capital Contributions with Respect to Prior Preferred Units; Purchase and
Sale of Incremental Preferred Units.............................................................3
1D. The Closing.....................................................................................3
Section 2. Conditions to the Closing.......................................................................4
2A. Representations and Warranties; Covenants.......................................................4
2B. Amendment and Restatement of LLC Agreement......................................................4
2C. Securityholders Agreement.......................................................................4
2D. Registration Agreement..........................................................................4
2E. Performance Vesting Agreement...................................................................5
2F. Sale of Incremental Preferred Units to Each Participating Purchaser; Receipt of
Additional Contributions........................................................................5
2G. Securities Law Compliance.......................................................................5
2H. Compliance with Applicable Laws.................................................................5
2I. Expenses........................................................................................5
2J. Closing Documents...............................................................................5
2K. Proceedings.....................................................................................6
2L. Waiver..........................................................................................6
Section 3. [INTENTIONALLY OMITTED].........................................................................6
Section 4. Representations and Warranties of the Company...................................................6
4A. Organization, Corporate Power and Licenses......................................................6
4B. Capitalization and Related Matters..............................................................6
4C. Authorization; No Breach........................................................................7
4D. Conduct of Business; Absence of Liabilities.....................................................8
4E. Assets..........................................................................................8
4F. Subsidiaries....................................................................................8
4G. Contracts and Commitments.......................................................................8
4H. Intellectual Property Rights....................................................................9
4I. Litigation, etc.................................................................................9
4J. Brokerage......................................................................................10
4K. Governmental Consent, etc......................................................................10
4L. Compliance with Laws...........................................................................10
4M. Affiliated Transactions........................................................................10
4N. Disclosure.....................................................................................10
Section 5. Representations and Warranties of the Purchasers...............................................10
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5A. Organization; Authorization....................................................................11
5B. Brokerage......................................................................................11
5C. Purchasers' Investment Representations.........................................................11
Section 6. Covenants......................................................................................12
6A. Financial Statements and Other Information.....................................................12
6B. Inspection of Property.........................................................................15
6C. Restrictions...................................................................................15
6D. Affirmative Covenants..........................................................................19
6E. Compliance with Agreements.....................................................................20
6F. Current Public Information.....................................................................20
6G. Intellectual Property Rights...................................................................21
6H. Public Disclosures.............................................................................21
6I. [Intentionally Omitted]........................................................................21
6J. Preemptive Rights..............................................................................21
Section 7. Purchasers' Put Rights.........................................................................23
7A. Put Right......................................................................................23
7B. Duties of the Company..........................................................................23
7C. Repurchase Price...............................................................................24
7D. Fair Market Value of Securities................................................................24
Section 8. Transfer of Restricted Securities..............................................................26
8A. General Provisions.............................................................................26
8B. Opinion Delivery...............................................................................26
8C. Rule 144A......................................................................................27
8D. Legend Removal.................................................................................27
Section 9. Definitions....................................................................................27
9A. Definitions....................................................................................27
9B. Knowledge......................................................................................37
Section 10. Miscellaneous Provisions.......................................................................37
10A. Expenses.......................................................................................37
10B. Remedies.......................................................................................37
10C. Consent to Amendments..........................................................................38
10D. Survival of Representations and Warranties.....................................................39
10E. Successors and Assign..........................................................................39
10F. Severability...................................................................................39
10G. Counterparts...................................................................................39
10H. Descriptive Headings; Interpretation; No Strict Construction...................................39
10I. Governing Law..................................................................................40
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10J. Notices........................................................................................40
10K. Business Days..................................................................................41
10L. Delivery by Facsimile..........................................................................42
10M. Effectiveness of Agreement.....................................................................42
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LIST OF EXHIBITS
Exhibit 1 - Second Amended and Restated LLC Agreement
Exhibit 2 - First Amended and Restated Securityholders Agreement
Exhibit 3 - First Amended and Restated Registration Agreement
Exhibit 4 - First Amended and Restated Performance Vesting Agreement
LIST OF SCHEDULES
Schedule of Original Purchasers
Schedule of Prior Purchasers
Schedule of Purchasers
Licenses Schedule
Capitalization Schedule
Activities and Liabilities Schedule
Assets Schedule
Subsidiaries Schedule
Contracts Schedule
Intellectual Property Schedule
Litigation Schedule
Company Brokerage Schedule
Consents Schedule
Affiliated Transactions Schedule
Purchasers Brokerage Schedule
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FIRST AMENDED AND RESTATED
EQUITY PURCHASE AGREEMENT
THIS FIRST AMENDED AND RESTATED EQUITY PURCHASE AGREEMENT
(this "AGREEMENT") is made as of January 28, 1999, by and among CompleTel LLC
(formerly known as CableTel Europe LLC), a Delaware limited liability company
(the "COMPANY"), Madison Dearborn Capital Partners II, L.P. ("MDCP"), DeGeorge
Holdings Limited Partnership ("DEGEORGE HOLDINGS"), James C. Allen ("ALLEN"),
Royce J. Holland ("HOLLAND"), George T. Laub ("LAUB"), Reed E. Hundt ("HUNDT"),
Dovey Company LLC ("DOVEY LLC"), William H. Pearson ("PEARSON"), Richard N.
Clevenger ("CLEVENGER"), and David E. Lacey ("LACEY"). MDCP, DeGeorge Holdings,
Allen, Holland, Laub, and Hundt are referred to herein collectively as the
"INVESTORS" and individually as an "INVESTOR." Dovey LLC, Pearson, Clevenger,
and Lacey are referred to herein collectively as the "EXECUTIVES" and
individually as an "EXECUTIVE." The Investors and the Executives are referred to
herein collectively as the "PURCHASERS," and each Investor and Executive is
referred to herein individually as a "PURCHASER." Capitalized terms used but not
otherwise defined herein have the meanings ascribed to such terms in Section 9.
As of May 18, 1998, the Company and MDCP, Lawrence F. DeGeorge
("DEGEORGE"), James E. Dovey ("DOVEY"), Pearson, and Clevenger (collectively,
the "ORIGINAL PURCHASERS") entered into an Equity Purchase Agreement (the "PRIOR
AGREEMENT"), pursuant to which each of the Original Purchasers made capital
contributions (and committed to make subsequent capital contributions subject to
the terms and conditions set forth in the Prior Agreement) to the Company in the
amount set forth opposite such Original Purchaser's name on the SCHEDULE OF
ORIGINAL PURCHASERS attached hereto in exchange for, and the Company issued to
each such Original Purchaser, the number of Preferred Units set forth opposite
such Original Purchaser's name on the attached SCHEDULE OF ORIGINAL PURCHASERS.
Pursuant to an Assignment and Substitution dated June 3, 1998
(the "DEGEORGE ASSIGNMENT"), DeGeorge transferred all of his Preferred Units in
the Company to DeGeorge Holdings as of the date of the DeGeorge Assignment, and
in connection therewith DeGeorge Holdings became bound by the terms and
conditions of the Prior Agreement.
As of July 15, 1998, the Company and Allen entered into an
Additional Investor Equity Purchase and Joinder and Rights Agreement (the "ALLEN
PURCHASE AGREEMENT"), pursuant to which Allen made capital contributions to the
Company in exchange for, and the Company issued to Allen, the number of
Preferred Units set forth opposite Allen's name on the attached SCHEDULE OF
PRIOR PURCHASERS, and in connection therewith Allen became a party to the Prior
Agreement. As of July 15, 1998, the Company and Holland entered into an
Additional Investor Equity Purchase and Joinder and Rights Agreement (the
"HOLLAND PURCHASE AGREEMENT"), pursuant to which Holland made capital
contributions to the Company in exchange for, and the Company issued to Holland,
the number of Preferred Units set forth opposite Holland's name on the attached
SCHEDULE OF PRIOR PURCHASERS, and in connection therewith Holland became a party
to the Prior Agreement.
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Pursuant to the Assignment and Purchase Agreement dated as of
November 11, 1998 (the "DOVEY ASSIGNMENT"), Dovey transferred all of his
Preferred Units in the Company to Dovey LLC as of the date of the Dovey
Assignment. In addition, as of November 11, 1998, the Company and Dovey LLC
entered into an Additional Preferred Units Purchase Agreement (the "DOVEY LLC
PURCHASE AGREEMENT"), pursuant to which Dovey LLC made capital contributions to
the Company in exchange for, and the Company issued to Dovey LLC, an additional
150 Preferred Units (such that, after giving effect to the Dovey Assignment and
the Dovey LLC Purchase Agreement, Dovey LLC held the number of Preferred Units
set forth opposite Dovey LLC's name on the attached SCHEDULE OF PRIOR
PURCHASERS). In connection therewith, Dovey LLC became a party to the Prior
Agreement.
As of December 2, 1998, the Company and Lacey entered into an
Additional Investor Equity Purchase and Joinder and Rights Agreement (the "LACEY
PURCHASE AGREEMENT"), pursuant to which Lacey made capital contributions to the
Company in exchange for, and the Company issued to Lacey, the number of
Preferred Units set forth opposite Lacey's name on the attached SCHEDULE OF
PRIOR PURCHASERS, and in connection therewith Lacey became a party to the Prior
Agreement.
The parties hereto desire that, effective as of the date
hereof:
(i) each of MDCP, DeGeorge Holdings, Allen, Holland, Dovey
LLC, Pearson, Clevenger, and Lacey (collectively, the "PRIOR PURCHASERS") shall
(subject to the terms and conditions set forth herein) make additional capital
contributions to the Company with respect to their Preferred Units pursuant to
the Prior Purchase Agreements (as defined below);
(ii) each of MDCP, DeGeorge Holdings, Laub, Hundt, Dovey LLC,
Pearson, Clevenger, and Lacey (collectively, the "PARTICIPATING PURCHASERS")
shall (subject to the terms and conditions set forth herein) purchase Preferred
Units from the Company;
(iii) the Prior Agreement shall be amended and restated in its
entirety as set forth herein; and
(iv) each of the Prior Agreement, the Allen Purchase
Agreement, the Holland Purchase Agreement, the Dovey LLC Purchase Agreement, and
the Lacey Purchase Agreement (collectively, the "PRIOR PURCHASE AGREEMENTS")
shall be superseded in its entirety by this Agreement and the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
SECTION 1. AUTHORIZATION AND CLOSINGS.
a. AUTHORIZATION OF THE PREFERRED UNITS. The Company shall
authorize the issuance and sale to the Participating Purchasers of an aggregate
of 5,000 Preferred Units (the "INCREMENTAL PREFERRED UNITS"), each having the
rights and preferences set forth with respect thereto
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in the LLC Agreement, such that the total number of authorized Preferred Units
(which consist of the Preferred Units issued pursuant to the Prior Purchase
Agreements (the "PRIOR PREFERRED UNITS") and the Incremental Preferred Units to
be issued to the Participating Purchasers pursuant to this Agreement) shall be
65,750. The Preferred Units are convertible into the Company's Common Units, in
the manner and on the terms set forth in the LLC Agreement.
b. PURCHASE AND SALE OF PREFERRED UNITS UNDER THE PRIOR
PURCHASE AGREEMENTS. Pursuant to the Prior Purchase Agreements, each of the
Prior Purchasers has prior to the date hereof purchased from the Company, and
the Company has issued to each such Prior Purchaser, the number of Preferred
Units listed opposite such Prior Purchaser's name on the attached SCHEDULE OF
PRIOR PURCHASERS. Prior to or contemporaneously with the execution of this
Agreement, each of the Prior Purchasers has made capital contributions to the
Company with respect to the Prior Preferred Units (either as "Initial
Contributions" or as "Subsequent Contributions" pursuant to the terms of the
Prior Purchase Agreements) in the aggregate equal to the amount set forth
opposite such Prior Purchaser's name on the attached SCHEDULE OF PRIOR
PURCHASERS.
c. ADDITIONAL CAPITAL CONTRIBUTIONS WITH RESPECT TO PRIOR
PREFERRED UNITS; PURCHASE AND SALE OF INCREMENTAL PREFERRED UNITS. At the
Closing (as defined below), subject to the terms and conditions set forth
herein:
i. each of the Prior Purchasers shall make capital
contributions to the Company in respect of such Prior Purchaser's Prior
Preferred Units in the aggregate amount (such Prior Purchaser's "ADDITIONAL
CONTRIBUTION AMOUNT") set forth opposite such Prior Purchaser's name on the
SCHEDULE OF PURCHASERS attached hereto (and such Additional Contribution Amount
shall be deemed to be a "Subsequent Contribution" hereunder by such Prior
Purchaser with respect to such Prior Preferred Units); and
ii. the Company shall sell to each Participating Purchaser,
and each Participating Purchaser shall purchase from the Company, the number of
Incremental Preferred Units set forth opposite such Participating Purchaser's
name on the SCHEDULE OF PURCHASERS. The aggregate purchase price to be paid at
the Closing by each such Participating Purchaser (such Participating Purchaser's
"INCREMENTAL PURCHASE PRICE") is set forth opposite such Participating
Purchaser's name on the attached SCHEDULE OF PURCHASERS and is deemed herein to
be such Participating Purchaser's "Initial Contribution" with respect to such
Incremental Preferred Units. The sale of Incremental Preferred Units to each
Participating Purchaser at the Closing shall constitute a separate sale
hereunder.
d. THE CLOSING. The closing of the separate purchases and
sales of the Incremental Preferred Units and the making of the Additional
Contribution Amounts (the "CLOSING") shall take place at the offices of Kirkland
& Ellis in Chicago, Illinois, on January 28, 1999, or at such other place or on
such other date as may be mutually agreeable to the Company and the Purchasers
(the date of the Closing, the "CLOSING DATE"). At the Closing:
(i) the Company shall deliver to each Participating Purchaser
certificates evidencing the Incremental Preferred Units to be purchased by such
Participating Purchaser, registered in such Participating Purchaser's name (or
if such Incremental Preferred Units are
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uncertificated, shall enter such Participating Purchaser's name in the Company's
books and records as the record holder of such Incremental Preferred Units),
upon such Participating Purchaser's payment of the purchase price therefor by
delivery to the Company of a cashier's or certified check, or wire transfer of
immediately available funds to an account designated by the Company, in an
aggregate amount equal to such Participating Purchaser's Incremental Purchase
Price; and
(ii) each Prior Purchaser shall deliver to the Company a
cashier's or certified check, or wire transfer of immediately available funds to
an account designated by the Company, in the aggregate amount equal to such
Prior Purchaser's Additional Contribution Amount.
SECTION 2. CONDITIONS TO THE CLOSING. The obligation of each
Prior Purchaser to make its Additional Contribution Amount and of each
Participating Purchaser to purchase and pay for the Incremental Preferred Units
at the Closing is subject to the satisfaction as of the Closing of the following
conditions:
a. REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties contained in Sections 4 and 5 hereof shall be
true and correct in all material respects at and as of the date of the Prior
Agreement (except to the extent of changes caused by the transactions expressly
contemplated herein and therein), the representations and warranties contained
in Sections 4A (Organization), 4B (Capitalization), 4C (Authorization), 4J
(Brokerage), 4K (Governmental Consent), 4L (Compliance with Laws), and 4N
(Disclosure) shall be true and correct in all material respects at and as of the
Closing as though then made, and the Company shall have performed in all
material respects all of the covenants required to be performed by it hereunder
prior to the Closing.
b. AMENDMENT AND RESTATEMENT OF LLC AGREEMENT. The limited
liability company agreement governing the affairs of the Company shall have been
amended and restated in form and substance as set forth in EXHIBIT 1 hereto (as
so amended and restated, the "LLC AGREEMENT"), shall be in full force and effect
under the laws of Delaware as of the Closing, and shall not have been further
amended or modified.
c. SECURITYHOLDERS AGREEMENT. The Securityholders Agreement
originally dated as of May 18, 1998, by and among the Company and certain of its
Securityholders (as amended from time to time in accordance with its terms, the
"SECURITYHOLDERS AGREEMENT"), shall have been amended and restated in form and
substance as set forth in EXHIBIT 2 attached hereto, shall be in full force and
effect as of the Closing, and shall not have been further amended or modified.
d. REGISTRATION AGREEMENT. The Registration Agreement
originally dated as of May 18, 1998, by and among the Company and certain of its
securityholders (as amended from time to time in accordance with its terms, the
"REGISTRATION AGREEMENT"), shall have been amended and restated in form and
substance as set forth in EXHIBIT 3 attached hereto, shall be in full force and
effect as of the Closing, and shall not have been further amended or modified.
e. PERFORMANCE VESTING AGREEMENT. The Performance Vesting
Agreement originally dated as of May 18, 1998, by and among the Company, the
Investors, and certain holders of Executive Securities (as amended from time to
time in accordance with its terms, the
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"PERFORMANCE VESTING AGREEMENT"), shall have been amended and restated in form
and substance as set forth in EXHIBIT 4 attached hereto, shall be in full force
and effect as of the Closing, and shall not have been further amended or
modified.
f. SALE OF INCREMENTAL PREFERRED UNITS TO EACH PARTICIPATING
PURCHASER; RECEIPT OF ADDITIONAL CONTRIBUTIONS. The Company shall have
simultaneously sold to each Participating Purchaser the Incremental Preferred
Units to be purchased by such Participating Purchaser hereunder at the Closing
and shall have received payment therefor in full as specified in Section 1D
hereof; and the Company shall have received from each of the Prior Purchasers
payment in full of such Prior Purchaser's Additional Contribution Amount as
specified in Section 1D.
g. SECURITIES LAW COMPLIANCE. The Company shall have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance, in compliance with such laws, of the Incremental
Preferred Units to be issued at the Closing pursuant to this Agreement.
h. COMPLIANCE WITH APPLICABLE LAWS. The payment of the
Additional Contribution Amount by each Prior Purchaser and the purchase of
Incremental Preferred Units by each Participating Purchaser hereunder at the
Closing shall not be prohibited by any applicable law or governmental rule or
regulation and shall not subject such Purchaser to any penalty, liability or, in
such Purchaser's reasonable judgment, other onerous condition under or pursuant
to any applicable law or governmental rule or regulation, and the payment of the
Additional Contribution Amount by each Prior Purchaser and the purchase of the
Incremental Preferred Units by each Participating Purchaser hereunder shall be
permitted by the laws, rules and regulations of the jurisdictions and
governmental authorities and agencies to which such Purchaser is subject.
i. EXPENSES. At the Closing, the Company shall have reimbursed
MDCP and DeGeorge Holdings for their reasonable out-of-pocket expenses as
provided in paragraph 10A hereof, to the extent then known.
j. CLOSING DOCUMENTS. The Company shall have delivered to each
Purchaser all of the following documents:
i. an Officer's Certificate, dated the Closing Date,
stating that the conditions specified in paragraphs 1A-1D and 2A-2H,
inclusive, have been fully satisfied; and
ii. such other documents relating to the transactions
contemplated by this Agreement as any Purchaser or its special counsel
may reasonably request.
k. PROCEEDINGS. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions to occur
at the Closing shall be consummated at or prior to the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Purchasers and their respective special counsel.
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l. WAIVER. Any condition specified in this Section 2 may be
waived if such waiver is consented to by each Purchaser; PROVIDED that no such
waiver shall be effective against any Purchaser unless it is set forth in a
writing executed by such Purchaser.
SECTION 3. [INTENTIONALLY OMITTED].
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a
material inducement to the Prior Purchasers to enter into this Agreement,
purchase the Preferred Units under the Prior Purchase Agreements, and pay the
Additional Contribution Amounts hereunder, the Company hereby represents and
warrants to such Prior Purchasers that Sections 4A through 4N, inclusive, were
true and correct at and as of the date of the Prior Agreement (except, with
respect to Section 4B, to the extent of changes caused by the transactions
expressly contemplated therein and herein). In addition, as a material
inducement to the Purchasers to enter into this Agreement, purchase the
Incremental Preferred Units hereunder, and pay the Additional Contribution
Amounts hereunder, the Company hereby represents and warrants that Sections 4A
(Organization), 4B (Capitalization), 4C (Authorization), 4J (Brokerage), 4K
(Governmental Consent), 4L (Compliance with Laws), and 4N (Disclosure) below are
true and correct at and as of the date of the Closing:
a. ORGANIZATION, CORPORATE POWER AND LICENSES. The Company is
a limited liability company duly organized, validly existing and in good
standing under the laws of Delaware and is qualified to do business in every
jurisdiction in which its ownership of property or conduct of business requires
it to qualify. The Company possesses all requisite power and authority and,
except as set forth in the "LICENSES SCHEDULE" attached hereto or the Offering
Memorandum, all material licenses, permits and authorizations necessary to own
and operate its properties, to carry on its businesses as presently proposed to
be conducted and to carry out the transactions contemplated by this Agreement.
The copies of the Company's LLC Agreement which have been furnished to the
Investors' respective special counsel reflect all amendments made thereto at any
time prior to the date of this Agreement and are correct and complete.
b. CAPITALIZATION AND RELATED MATTERS.
i. As of the Closing and immediately thereafter, the
authorized equity capital of the Company shall consist of. (a) 65,750 Preferred
Units, all of which shall be issued and outstanding; (b) 107,500 Common Units,
16,496 of which shall be issued and outstanding, 7,029 of which shall be issued
and outstanding and shall be subject to performance vesting under the
Performance Vesting Agreement, 1,004 of which shall be reserved for issuance to
management and other key employees ("KEY EMPLOYEES") of the Company and its
Subsidiaries in accordance with terms of the LLC Agreement, 471 of which shall
be reserved for issuance to Key Employees of the Company and its Subsidiaries in
accordance with the terms of the LLC Agreement and shall when issued be subject
to performance vesting under the Performance Vesting Agreement, and 82,500 of
which shall be reserved for issuance upon conversion of the outstanding
Preferred Units; (c) an unlimited number of Class A Senior Units, all of which
shall in accordance with the LLC Agreement be reserved for issuance upon a
repurchase of Common Units from the Executives or other Key Employees of the
Company and its Subsidiaries pursuant to the provisions of the Executive
Securities Agreements; (d) an unlimited number of Class B Senior Units, all of
which shall in
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accordance with the LLC Agreement be reserved for issuance upon the forfeiture
of Preferred Units pursuant to the provisions of the Performance Vesting
Agreement; and (e) an unlimited number of Class C Senior Units, all of which
shall in accordance with the LLC Agreement be reserved for issuance to
defaulting holders of Purchaser Securities under Section 10B(ii) hereof. Except
as set forth on the attached "CAPITALIZATION SCHEDULE" or in the first sentence
of this Section 4B(i), as of the Closing, the Company shall not have outstanding
any equity securities (including any options, warrants or other rights to
acquire equity securities of the Company).
ii. There are no statutory or, to the best of the Company's
knowledge, contractual securityholders' preemptive rights or rights of first
refusal with respect to the issuance of the Preferred Units hereunder or the
issuance of the Common Units upon conversion of any of the Preferred Units. The
Company has not violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its equity securities, and
the offer, sale and issuance of the Preferred Units hereunder do not require
registration under the Securities Act or any applicable state securities laws.
To the best of the Company's knowledge, there are no agreements between the
Company's securityholders with respect to the voting or transfer of the
Company's equity securities or with respect to any other aspect of the Company's
affairs, except for this Agreement, the LLC Agreement, the Executive Securities
Agreements, the Performance Vesting Agreement, the Registration Agreement, and
the Securityholders Agreement.
c. AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement, the Registration Agreement, the Securityholders
Agreement, the Executive Securities Agreements, the Performance Vesting
Agreement, and all other agreements contemplated hereby to which the Company is
a party, and the amendment and restatement of the LLC Agreement, have been duly
authorized by the Company. This Agreement, the Registration Agreement, the
Securityholders Agreement, the Executive Securities Agreements, the Performance
Vesting Agreement, and all other agreements contemplated hereby to which the
Company is a party each constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and limitations on the availability of
equitable remedies. The execution and delivery by the Company of this Agreement,
the Registration Agreement, the Securityholders Agreement, the Executive
Securities Agreements, the Performance Vesting Agreement, and all other
agreements contemplated hereby to which the Company is a party and the
consummation of the transactions contemplated hereby and thereby, the offering,
sale and issuance of the Preferred Units hereunder and the Common Units under
the Executive Securities Agreements, the issuance of the Company's equity
securities under the Permitted Securities Plan (as defined below), the issuance
of the Common Units upon conversion of the Preferred Units, the amendment and
restatement of the LLC Agreement, and the fulfillment of and compliance with the
respective terms hereof and thereof by the Company, do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's or any Subsidiary's
equity securities or assets pursuant to, (iv) give any third party the right to
modify, terminate or accelerate any obligation under, (v) result in a violation
of, or (vi) require any authorization, consent, approval, exemption or other
action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency, pursuant to, the LLC Agreement of
the Company,
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or any law, statute, rule or regulation to which the Company or any Subsidiary
is subject, or any agreement, instrument, order, judgment or decree to which the
Company or any Subsidiary is subject.
d. CONDUCT OF BUSINESS; ABSENCE OF LIABILITIES. Prior to the
date of the Prior Agreement, except as set forth on the attached "ACTIVITIES AND
LIABILITIES SCHEDULE" the Company has not conducted any business, activities or
operations nor incurred any expenses, obligations or liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known
to the Company and whether due or to become due and regardless of when
asserted).
e. ASSETS. Except as set forth on the attached "ASSETS
SCHEDULE," none of the Company or its Subsidiaries owns or leases any assets of
any kind, whether tangible or intangible (excluding Intellectual Property
Rights). The Company has good and marketable title to, or a valid leasehold
interest in, all assets listed on the Assets Schedule, free and clear of all
Liens.
f. SUBSIDIARIES. Except as set forth on the attached
"SUBSIDIARIES SCHEDULE," the Company does not own or hold, and has never owned
or held, any shares of stock or any other securities or interests in or any
rights to acquire any shares of stock or any other security or interest in any
other Person.
g. CONTRACTS AND COMMITMENTS.
i. Except as expressly contemplated by this Agreement or as
set forth on the attached "CONTRACTS SCHEDULE," neither the Company nor any
Subsidiary is a party to or bound by any written or oral contract of any kind,
including but not limited to any agreement, employee benefit plan, employment
contract, insurance contract, loan agreement, guarantee, lease, license,
warranty, or affirmative or restrictive covenant.
ii. All of the contracts, agreements and instruments set forth
on the Contracts Schedule are valid, binding and enforceable in accordance with
their respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, in oratorium., or other laws affecting creditors'
rights generally and limitations on the availability of equitable remedies.
iii. The Investors and their respective special counsel have
been supplied with a true and correct copy of each of the written instruments,
plans, contracts and agreements and an accurate written description of each of
the oral arrangements, contracts and agreements which are referred to on the
Contracts Schedule, together with all amendments, waivers or other changes
thereto.
h. INTELLECTUAL PROPERTY RIGHTS. The attached "INTELLECTUAL
PROPERTY SCHEDULE" contains a complete and accurate list of all (i) patented or
registered Intellectual Property Rights owned or used by the Company or any
Subsidiary, (ii) pending patent applications and applications for registrations
of other Intellectual Property Rights filed by the Company or any Subsidiary,
(iii) unregistered trade names and corporate names owned or used by the Company
or any Subsidiary, and (iv) unregistered trademarks and service marks owned or
used by the Company or any Subsidiary. The Intellectual Property Schedule also
contains a complete and accurate list of all
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licenses and other rights granted by the Company or any Subsidiary to any third
party with respect to any Intellectual Property Rights and all licenses and
other rights granted by any third party to the Company or any Subsidiary with
respect to any Intellectual Property Rights, in each case identifying the
subject Intellectual Property Rights. Notwithstanding the foregoing, the
Intellectual Property Schedule need not list or describe any "off-the-shelf"
products (including computer software applications) generally available to the
public that are used by the Company and its Subsidiaries. Except as set forth on
the Intellectual Property Schedule: (a) the Company or one of its Subsidiaries
owns all right, title and interest to, or has the right to use pursuant to a
valid license, all Intellectual Property Rights necessary for the operation of
the businesses of the Company and its Subsidiaries as presently proposed to be
conducted, free and clear of all Liens, (b) the Company and its Subsidiaries own
all right, title and interest in and to all of the Intellectual Property Rights
listed on such schedule, free and clear of all Liens, (c) there have been no
claims made against the Company or any Subsidiary asserting the invalidity,
misuse, or unenforceability of any of such Intellectual Property Rights, and
there are no valid grounds for the same, and (d) neither the Company nor any
Subsidiary has received any notices of, and is not aware of any facts which
indicate the likelihood of, any infringement or misappropriation by, or conflict
with, any third party with respect to such Intellectual Property Rights
(including, without limitation, any demand or request that the Company or any
Subsidiary license any rights from a third party).
i. LITIGATION, ETC. Except as set forth on the attached
"LITIGATION SCHEDULE," there are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Company's actual
knowledge, threatened against or affecting the Company or any Subsidiary (or to
the best of the Company's actual knowledge, pending or threatened against or
affecting any of the officers, directors or employees of the Company and its
Subsidiaries with respect to their businesses or proposed business activities),
or pending or threatened by the Company or any Subsidiary against any third
party, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality (including, without
limitation, any actions, suits, proceedings or investigations with respect to
the transactions contemplated by this Agreement); neither the Company nor any
Subsidiary is subject to, to the best of the Company's actual knowledge, any
governmental investigations or inquiries (including, without limitation,
inquiries as to the qualification to hold or receive any license or permit);
and, to the best of the Company's knowledge, there is no basis for any of the
foregoing. Neither the Company nor any Subsidiary is subject to any judgment,
order or decree of any court or other governmental agency.
j. BROKERAGE. Other than as specifically described on the
attached "COMPANY BROKERAGE SCHEDULE," there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Company. The Company shall pay, and hold each
Purchaser harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim (including, without limitation, the claims
described on the Company Brokerage Schedule); PROVIDED that with respect to any
claim not described on the Company Brokerage Schedule, the Company need not
indemnify pursuant to this Section 4J any Purchaser that had actual knowledge of
such arrangement or agreement prior to the Closing Date.
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k. GOVERNMENTAL CONSENT, ETC. Except as set forth on the
attached "CONSENTS SCHEDULE," no permit, consent, approval or authorization of,
or declaration to or filing with, any governmental authority is required in
connection with the execution, delivery and performance by the Company of this
Agreement or the other agreements contemplated hereby, or the consummation by
the Company of any other transactions contemplated hereby or thereby.
l. COMPLIANCE WITH LAWS. Neither the Company nor any
Subsidiary has violated any law or any governmental regulation or requirement in
any material respect.
m. AFFILIATED TRANSACTIONS. Except for this Agreement and the
other agreements expressly contemplated hereby, and except as set forth on the
attached "AFFILIATED TRANSACTIONS SCHEDULE," no officer, director, employee or
Affiliate of the Company or any Subsidiary or any individual related by blood,
marriage or adoption to any such individual or any entity in which any such
Person or individual owns at least a 2% beneficial interest, is a party to any
agreement, contract, commitment or transaction with the Company or any
Subsidiary or has any material interest in any material property owned or used
by the Company or any of its Subsidiaries.
n. DISCLOSURE. Neither this Agreement nor any of the exhibits,
schedules, attachments, written statements, documents, certificates or other
written items supplied to any Purchaser or any other holder of Purchaser
Securities by or on behalf of the Company with respect to the transactions
contemplated hereby (including, without limitation, the Offering Memorandum)
contain any untrue statement of a material fact or omit a material fact
necessary to make each statement contained herein or therein not misleading.
There is no fact which the Company has not disclosed to the Purchasers and the
holders of Purchaser Securities in writing and of which any of its officers,
directors or executive employees is aware and which would reasonably be expected
to have a material adverse effect upon the expected business, financial
condition, operations, assets, or business prospects of the Company and its
Subsidiaries taken as a whole.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
As a material inducement to the Company to enter into this Agreement and to
engage in the transactions and enter into the agreements contemplated hereby
(including, without limitation, issuing the Preferred Units hereunder and under
the Prior Purchase Agreements), each of the Purchasers hereby represents and
warrants for itself, severally and not jointly, that:
a. ORGANIZATION; AUTHORIZATION. Such Purchaser (if an entity)
is duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization. If such Purchaser is an entity, the execution,
delivery, and performance of this Agreement, the LLC Agreement, the Registration
Agreement, the Securityholders Agreement, the Performance Vesting Agreement, and
the other agreements contemplated hereby to which such Purchaser is a party by
such Purchaser and the consurnmation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all requisite action on the
part of such Purchaser and the partners, stockholders, members, or other owners
thereof, and no other proceedings on its or their part (other than giving notice
of drawdowns on fund capital commitments) is necessary to authorize the
execution, delivery or performance of this Agreement or such other agreements.
If such Purchaser is an individual, such Purchaser has all requisite capacity
and authority to execute and
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deliver this Agreement, the Registration Agreement, the Securityholders
Agreement, the Performance Vesting Agreement, and the other agreements
contemplated hereby to which such Purchaser is a party, and to perform and
consummate the transactions contemplated hereby and thereby. This Agreement
constitutes, and each of the other agreements contemplated hereby to which such
Purchaser is a party will when executed constitute, a valid and binding
obligation of such Purchaser, enforceable in accordance with their terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and limitations
on the availability of equitable remedies. If such Purchaser is an entity, the
execution, delivery, and performance by such Purchaser of this Agreement, the
Registration Agreement, the Securityholders Agreement, the Performance Vesting
Agreement, and the other agreements contemplated hereby to which such Purchaser
is a party do not and shall not conflict with or constitute a default, breach,
or violation of the terms, conditions, or provisions of such Purchaser's
partnership agreement, certificate of incorporation, or similar organizational
document.
b. BROKERAGE. Other than as specifically described on the
attached "PURCHASERS BROKERAGE SCHEDULE," there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon any Purchaser. Each Purchaser shall pay, and hold the
Company and each other Purchaser harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys' fees and
out-of-pocket expenses) arising in connection with any such arrangement or
agreement binding upon such Purchaser (including, without limitation, the claims
described on the Purchasers Brokerage Schedule); PROVIDED that with respect to
any claim not described on the Purchasers Brokerage Schedule, such an
indemnifying Purchaser need not indemnify pursuant to this Section 5B any
Purchaser that had actual knowledge of such arrangement or agreement prior to
the Closing Date.
c. PURCHASERS' INVESTMENT REPRESENTATIONS. Each Purchaser
hereby represents that (i) it is an "accredited investor" as defined in Rule 501
of Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act, (ii) it is sophisticated in financial matters and is able to
evaluate the risks and benefits of the investment in the Preferred Units, (iii)
it has had an opportunity to ask questions and receive answers concerning the
terms and conditions of its purchase of the Preferred Units issued hereunder and
has had full access to such other information concerning the Company (including,
without limitation, the Offering Memorandum and copies of the agreements
referred to herein) as it has requested, (iv) it is acquiring the Restricted
Securities purchased hereunder or acquired pursuant hereto for its own account
with the present intention of holding such securities for purposes of
investment, and (v) it has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws; PROVIDED that nothing contained herein shall prevent any
Purchaser or any subsequent holders of Restricted Securities from transferring
such securities in compliance with the provisions of Section 8 hereof. Each
certificate or instrument representing Restricted Securities shall be imprinted
with a legend in substantially the following form:
"The securities represented by this certificate were originally issued
on __________________, and have not been registered under the
Securities Act of 1933, as amended. The transfer of the securities
represented by this certificate is
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subject to the conditions specified in the Equity Purchase Agreement
dated as of May 18, 1998 (and as amended and restated as of January 28,
1999), as amended and modified from time to time, between the issuer
(the "Company") and the initial holder of these securities. The Company
reserves the right to refuse the transfer of such securities until such
conditions have been fulfilled with respect to such transfer.
A copy of such conditions shall be famished by the Company to the
holder hereof upon written request and without charge."
SECTION 6. COVENANTS.
a. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company
shall deliver to each of MDCP and DeGeorge Holdings (so long as such Person
holds any Purchaser Securities) and to any subsequent holder of at least 20% of
the Purchaser Securities then outstanding (each of MDCP and DeGeorge and each
such subsequent 20% holder, a "QUALIFIED HOLDER") all the information described
in this paragraph 6A:
i. as soon as available but in any event within 30
days after the end of each monthly accounting period in each fiscal
year: (a) unaudited consolidating (unless the Company has only one
operating Subsidiary) and consolidated statements of income and cash
flows of the Company and its Subsidiaries for such monthly period and
for the period from the beginning of the fiscal year to the end of such
month, and unaudited consolidating (unless the Company has only one
operating Subsidiary) and consolidated balance sheets of the Company
and its Subsidiaries as of the end of such monthly period, setting
forth in each case comparisons to the Company's annual budget and to
the corresponding period in the preceding fiscal year, and all such
statements shall be prepared in accordance with GAAP (subject to the
absence of footnote disclosures and to changes resulting from normal
year-end adjustments for recurring accruals), and shall be certified by
the Company's chief financial officer, and (b) a status report prepared
by the Company's chief financial officer, indicating whether the
Company has met its budgeted financial goals (including, without
limitation, those specified in any Approved Business Plan and those
delivered pursuant to subparagraph (v) below), discussing the reasons
for any variation from such goals, and describing what actions the
Company and its Subsidiaries have taken and propose to take in order to
meet budgeted financial targets in the future;
ii. within 45 days after the end of each quarterly
accounting period in each fiscal year, an Officer's Certificate stating
that the Company is not in default under this Agreement or the
Registration Agreement, and that neither the Company nor any of its
Subsidiaries is in default under any of its other material agreements
or, if any such default exists, specifying the nature and period of
existence thereof and what actions the Company and its Subsidiaries
have taken and propose to take with respect thereto;
iii. within 90 days after the end of each fiscal
year, consolidating (unless the Company has only one operating
Subsidiary) and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating
(unless the Company has only one operating Subsidiary) and consolidated
balance sheets of
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the Company and its Subsidiaries as of the end of such fiscal year,
setting forth in each case comparisons to the Company's annual budget
and to the preceding fiscal year, all prepared in accordance with GAAP,
and accompanied by (a) with respect to the consolidated portions of
such statements, an opinion containing no exceptions or qualifications
(except for qualifications regarding specified contingent liabilities)
of an independent accounting firm of recognized national standing
acceptable to the holders of a majority of the Purchaser Securities,
(b) a certificate from such accounting firm, addressed to the Board,
stating that in the course of its examination nothing came to its
attention that caused it to believe that there was any default
specified in paragraph 6A(ii) in existence or that there was any other
default by the Company or any Subsidiary in the fulfillment of or
compliance with any of the terms, covenants, provisions or conditions
of any material agreement to which the Company or any Subsidiary is a
party or, if such accountants have reason to believe any such default
by the Company or any Subsidiary exists, a certificate specifying the
nature and period of existence thereof, and (c) a copy of such firm's
annual management letter to the Board;
iv. promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning
significant aspects of the Company's operations or financial affairs
given to the Company by its independent accountants (and not otherwise
contained in other materials provided hereunder);
v. at least 30 days but not more than 90 days prior
to the beginning of each fiscal year, an annual budget prepared on a
monthly basis for the Company and its Subsidiaries for such fiscal year
(displaying anticipated statements of income and cash flows and balance
sheets and budgeted capital expenditures), which annual budget shall
have been approved by the holders of a majority of the Purchaser
Securities then outstanding (as approved, an "APPROVED BUDGET"), and
promptly upon preparation thereof any other significant budgets
prepared by the Company and any revisions of such annual or other bud
gets (it being understood that any revisions of any Approved Budget
must be approved by the holders of a majority of the Purchaser
Securities then outstanding);
vi. promptly (but in any event within five business
days) after the discovery or receipt of notice of any default under any
material agreement to which the Company or any of its Subsidiaries is a
party, any condition or event which is reasonably likely to result in
any material liability under any federal, state, local or foreign
statute or regulation relating to public health and safety, worker
health and safety or pollution or protection of the environment or any
other material adverse change, event or circumstance affecting the
Company or any Subsidiary (including, without limitation, the filing of
any material litigation against the Company or any Subsidiary or the
existence of any dispute with any Person which involves a reasonable
likelihood of such litigation being commenced), an Officer's
Certificate specifying the nature and period of existence thereof and
what actions the Company and its Subsidiaries have taken and propose to
take with respect thereto;
vii. within ten days after transmission thereof,
copies of all financial statements, proxy statements, reports and any
other general written communications which the Company sends to its
stockholders and copies of all registration statements and all
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<PAGE>
regular, special or periodic reports which it files, or (to its
knowledge) any of its officers or directors files with respect to the
Company, with the Securities and Exchange Commission or with any
securities exchange on which any of its securities are then listed, and
copies of all press releases and other statements made available
generally by the Company to the public concerning material developments
in the Company's and its Subsidiaries' businesses; and
viii. with reasonable promptness, such other
information and financial data concerning the Company and its
Subsidiaries as any Qualified Holder may reasonably request.
Each of the financial statements referred to in subparagraphs 6A(i) and (iii)
shall be true and correct in all material respects as of the dates and for the
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end adjustments for recurring
accruals (none of which would, alone or in the aggregate, be materially adverse
to the financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole).
Notwithstanding the foregoing, the provisions of this paragraph 6A shall cease
to be effective so long as the Company (a) is subject to the periodic reporting
requirements of the Securities Exchange Act and continues to comply with such
requirements and (b) promptly provides to each Qualified Holder all reports and
other materials filed by the Company with the Securities and Exchange Commission
pursuant to the periodic reporting requirements of the Securities Exchange Act;
provided that so long as any Preferred Units remain outstanding, the Company
shall continue to deliver to each Qualified Holder the information specified in
subparagraphs 6A(ii), 6A(iii)(b), 6A(v), 6A(vi), and 6A(viii).
Except as otherwise required by law or judicial order or decree or requested by
any governmental agency or authority, or as specified in the immediately
following proviso, each Person entitled to receive information regarding the
Company and its Subsidiaries under paragraph 6A or 6B shall not disclose any
such information to any third party (other than such Person's advisors or
representatives); PROVIDED that such a Person may disclose such information (i)
in connection with the sale or transfer of any Purchaser Securities if such
Person's prospective transferee agrees in writing to be bound by the provisions
of this paragraph, (ii) if such Person is a partnership, limited liability
company or corporation, to such Person's partners, members and shareholders, as
the case may be, in the ordinary course of its business, or (iii) if such
information is available to the public other than by reason of any breach of
this provision.
For purposes of this Agreement, all holdings of Preferred Units or other
Purchaser Securities by Persons who are Affiliates shall be aggregated for
purposes of meeting any threshold tests under this Agreement.
b. INSPECTION OF PROPERTY. To the extent not otherwise
prohibited by law or regulation, the Company shall permit any representatives
designated by any Qualified Holder, upon reasonable notice and during normal
business hours and at such other times as any such Qualified Holder may
reasonably request to (i) visit and inspect any of the properties of the Company
and its Subsidiaries, (ii) examine the corporate and financial records of the
Company and its Subsidiaries
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<PAGE>
and make copies thereof or extracts therefrom and (iii) discuss the affairs,
finances and accounts of any such corporations with the directors, officers, key
employees and independent accountants of the Company and its Subsidiaries. The
presentation of an executed copy of this Agreement (or photocopy thereof) by any
Qualified Holder or representative thereof to the Company's independent
accountants shall constitute the Company's permission to its independent
accountants to participate in discussions with such Persons.
c. RESTRICTIONS. Prior to the consummation of a Public
Offering, the Company shall not, without the prior written consent of the
holders of a majority of the Purchaser Securities then outstanding (or, in the
case of clauses (i), (ii), (vii), and (ix), without the prior written consent of
the holders of at least 80% of the Purchaser Securities then outstanding):
i. directly or indirectly declare or pay any
dividends or make any distributions upon any of its equity securities
other than the Preferred Units pursuant to the terms of the LLC
Agreement;
ii. directly or indirectly redeem, purchase or
otherwise acquire, or permit any Subsidiary to redeem, purchase or
otherwise acquire, any of the Company's or any Subsidiary's capital
stock or other equity securities (including, without limitation, any
warrants, options and other rights to acquire such capital stock or
other equity securities), except for (A) cancellations of the Company's
equity securities pursuant to the Performance Vesting Agreement; (B)
repurchases of equity securities (including, without limitation, any
warrants, options and other rights to acquire capital stock or other
equity securities) pursuant to the terms of any Permitted Securities
Plan (as defined below), (C) repurchases of the Company's securities
pursuant to the terms of the Executive Securities Agreements, or (D)
repurchases of the Company's securities pursuant to the terms of
Section 7 (Purchasers' Put Rights) or Section 10B(ii) (Remedies for
Defaulting Purchaser) hereof,
iii. except for (w) issuances of Preferred Units at
the Closing as contemplated under this Agreement or of Common Units
upon conversion of such Preferred Units, (x) issuances of Common Units
as contemplated under the Executive Securities Agreements or to Key
Employees as contemplated under the LLC Agreement, (y) issuances of
Senior Units in accordance with the LLC Agreement pursuant to the
repurchase provisions set forth in the Executive Securities Agreements
or in Section 10B(ii) hereof or pursuant to the forfeiture provisions
set forth in the Performance Vesting Agreement, or (z) issuances of
securities pursuant to the terms of a Permitted Securities Plan (as
defined below), authorize, issue or enter into any agreement providing
for the issuance (contingent or otherwise) of (a) any notes or debt
securities containing equity features (including, without limitation,
any notes or debt securities convertible into or exercisable or
exchangeable for capital stock or other equity securities, issued in
connection with the issuance of capital stock or other equity
securities or containing profit participation features), other than as
may be expressly specified in any Approved Business Plan or Approved
Budget, or (b) any capital stock or other equity securities (or any
securities convertible into or exercisable or exchangeable for any
capital stock or other equity securities);
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<PAGE>
iv. make, or permit any Subsidiary to make, any loans
or advances to, guarantees for the benefit of, or Investments in, any
Person (other than a Wholly Owned Subsidiary established under the laws
of a jurisdiction of the United States or any of its territorial
possessions or under the laws of any country that is a member of the
European Union), except for (a) reasonable advances to employees or
customers in the ordinary course of business, (b) acquisitions
permitted under subparagraph (viii) below, and (c) Investments having a
stated maturity no greater than one year from the date the Company
makes such Investment in (1) obligations of the United States
government or any agency thereof or obligations guaranteed by the
United States government, (2) certificates of deposit of commercial
banks having combined capital and surplus of at least $500 million or
(3) commercial paper with a rating of at least "PRIME-1 " by Moody's
Investors Service, Inc. (or the equivalent rating from another,
comparably reputable rating agency);
v. merge or consolidate with any Person or, except as
permitted under subparagraph (viii) below, permit any Subsidiary to
merge or consolidate with any Person (other than a merger between
Wholly Owned Subsidiaries);
vi. sell, lease or otherwise dispose of, or permit
any Subsidiary to sell, lease or otherwise dispose of, any assets,
where such assets (together with all other assets disposed of by the
Company and its Subsidiaries in such transaction or a series of related
transactions) represent more than 10% of the consolidated assets of the
Company and its Subsidiaries (computed on the basis of book value,
determined in accordance with GAAP, or fair market value, determined by
the Board in its reasonable good faith judgment), or sell or
permanently dispose of any of its or any Subsidiary's material
Intellectual Property Rights;
vii. liquidate, dissolve or effect a recapitalization
or reorganization, or permit any Subsidiary to liquidate, dissolve or
effect a recapitalization or reorganization, in any form of transaction
(including, without limitation, any reorganization of a corporation
into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal
income tax purposes, or vice versa), except as expressly provided in
the LLC Agreement or Securityholders Agreement;
viii. acquire, or permit any Subsidiary to acquire,
any interest in any company or business (whether by a purchase of
assets, purchase of stock, merger or otherwise), or enter into any
joint venture (in each case, other than as may be expressly specified
in any Approved Business Plan or Approved Budget);
ix. enter into, or permit any Subsidiary to enter
into, the ownership, active management or operation of any business
other than the provision of wireline telecommunications services in
markets in Europe;
x. become subject to, or permit any of its
Subsidiaries to become subject to (including, without limitation, by
way of amendment to or modification of) any agreement or instrument
which by its terms would (under any circumstances) restrict (a) the
right of any Subsidiary to make loans or advances or pay dividends to,
transfer property to, or repay any
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Indebtedness owed to, the Company or another Subsidiary or (b) the
Company's performance of its obligations under the provisions of this
Agreement (including, without limitation, the provisions of Section 7
(Put Rights) hereof), the Securityholders Agreement, the Registration
Agreement, or the LLC Agreement (including, without limitation,
provisions relating to the making of distributions with respect to the
Preferred Yield on, and the conversion of, any Preferred Units);
xi. except as expressly contemplated by this
Agreement, make any amendment to the LLC Agreement;
xii. enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, benefit plan, commitment or arrangement with
any of its or any Subsidiary's executive officers, directors or
Affiliates or with any individual related by blood, marriage or
adoption to any such indi vidual or with any entity in which any such
Person or individual owns at least a 2% beneficial interest, except for
customary and reasonable employment arrangements and except as
otherwise expressly contemplated by this Agreement;
xiii. establish or acquire any Subsidiaries other
than Wholly Owned Subsidiaries organized under the laws of a
jurisdiction of the United States or any of its territorial possessions
or under the laws of any country that is a member of the European
Union;
xiv. create, incur, assume or suffer to exist, or
permit any Subsidiary to create, incur, assume or suffer to exist,
Indebtedness on a consolidated basis in an aggregate outstanding
principal amount in excess of $100,000 at any time (other than
Indebtedness expressly specified in any Approved Business Plan or
Approved Budget);
xv. create, incur, assume or suffer to exist, or
permit any Subsidiary to create, incur, assume or suffer to exist, any
Liens other than Permitted Liens;
xvi. make any capital expenditures or permit any
Subsidiary to make any capital expenditures (including, without
limitation, payments with respect to capitalized leases, as determined
in accordance with GAAP) exceeding $100,000 in the aggregate on a
consolidated basis during any 12-month period (other than capital
expenditures expressly specified in any Approved Business Plan or
Approved Budget);
xvii. enter into, or permit any Subsidiary to enter
into, any leases or other rental agreements (excluding capitalized
leases, as determined in accordance with GAAP) under which the amount
of the aggregate lease payments for all such agreements exceeds
$100,000 on a consolidated basis for any 12-month period, PROVIDED that
the Company and its Subsidiaries shall be allowed to enter into any
leasing arrangements (including, but not limited to, leasing
telecommunications networks) that are expressly specified in any
Approved Business Plan or Approved Budget;
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xviii. change its fiscal year or permit any
Subsidiary to change its fiscal year;
xix. adopt any option plan or employee securities
ownership plan or issue any equity securities (including any options,
warrants, or other rights to acquire equity securities) to any Key
Employee other than (a) in accordance with the LLC Agreement, (b) in
accordance with the repurchase provisions set forth in the Executive
Securities Agreements or in Section 10B(ii) hereof, or in accordance
with the forfeiture provisions set forth in the Performance Vesting
Agreement, or (c) pursuant to a securities plan, the terms of which
shall be approved by the holders of a majority of the Purchaser
Securities then outstanding, under which Key Employees may, after the
third anniversary of the date of the Prior Agreement, be granted equity
securities (including options, warrants, or other rights to acquire
equity securities) representing up to 5% of the Company's Common Units,
determined immediately after giving-effect to the transactions
contemplated hereby on a fully diluted and as-if-converted basis (a
"PERMITTED SECURITIES PLAN");
xx. issue or sell any shares of the capital stock or
other equity securities (including, without limitation, any warrants,
options, and other rights to acquire such capital stock or other equity
securities) of any Subsidiary to any Person other than the Company or a
Wholly Owned Subsidiary;
xxi. terminate the employment of, hire, or enter
into, amend or modify any employment agreement or arrangement with the
Company's chief executive officer;
xxii. grant, or permit any of its Subsidiaries to
grant, any registration rights (including, without limitation, any
demand or piggyback registration rights) with respect to any of its
capital stock or other equity securities, other than pursuant to the
Registration Agreement as in effect on the Closing Date;
xxiii. amend, waive, or otherwise modify any Approved
Business Plan;
xxiv. use the proceeds from the sale of the Preferred
Units hereunder or from any Subsequent Closings other than for working
capital and budgeted general corporate purposes reflected in any
Approved Business Plan or Approved Budget, or for such other purposes
as are contemplated by any Approved Business Plan or Approved Budget;
xxv. select, retain, or enter into, amend, terminate,
or modify any retention arrangement with, any underwriter, manager, or
financial advisor to advise the Company and its Subsidiaries with
respect to any proposed Sale of the Company or to underwrite, or advise
the Company with respect to, a Public Offering or any acquisitions or
financing transactions;
xxvi. change any of the accounting principles or
practices utilized by the Company or its Subsidiaries, or select,
retain, or amend, terminate, or modify any retention arrangement with
any accounting firm engaged to audit the Company's or its Subsidiaries'
financial statements; or
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xxvii. agree or commit to any of the foregoing.
d. AFFIRMATIVE COVENANTS. So long as any Purchaser Securities
remain outstanding, the Company shall, and shall cause each Subsidiary (if any)
to, unless it has received the prior written consent of the holders of a
majority of the Purchaser Securities then outstanding:
i. at all times cause to be done all things necessary
to maintain, preserve and renew its corporate or other entity
existence;
ii. at all times take all actions and cause to be
done all things necessary to obtain, maintain, preserve, and renew all
material licenses, authorizations, orders, permits, and other
governmental approvals necessary to the conduct of its businesses as
presently proposed to be conducted and as hereafter conducted;
iii. maintain and keep its material properties in
good repair, working order and condition, and from time to time make
all necessary or desirable repairs, renewals and replacements, so that
its businesses may be properly and advantageously conducted in all
material respects at all times;
iv. pay and discharge when payable all taxes,
assessments and governmental charges imposed upon its properties or
upon the income or profits therefrom (in each case before the same
becomes delinquent and before penalties accrue thereon) and all
material claims for labor, materials or supplies which if unpaid would
by law become a Lien upon any of its property unless and to the extent
that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
GAAP) have been established on its books with respect thereto;
v. comply with all other material obligations which
it incurs pursuant to any contract or agreement, whether oral or
written, express or implied, as such obligations become due, unless and
to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in
accordance with GAAP) have been established on its books with respect
thereto;
vi. comply in all material respects with all
applicable laws, rules and regulations of the Securities and Exchange
Commission, the ART (and other comparable governmental bodies) and all
other governmental authorities to which any of the Company or its
Subsidiaries are subject;
vii. apply for and continue in force with good and
responsible insurance companies adequate insurance covering risks of
such types and in such amounts as are customary for corporations of
similar size engaged in similar lines of business; and
viii. maintain proper books of record and account
which present fairly in all material respects its financial condition
and results of operations and make provisions on
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its financial statements for all such proper reserves as in each case
are required in accordance with GAAP.
e. COMPLIANCE WITH AGREEMENTS. The Company shall perform and
observe all of its obligations to each holder of Preferred Units or other
Purchaser Securities as set forth in the LLC Agreement and the Registration
Agreement.
f. CURRENT PUBLIC INFORMATION. At all times after the Company
has filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of, or otherwise becomes subject to the periodic
reporting requirements of, either the Securities Act or the Securities Exchange
Act, the Company shall file all reports required to be filed by it under the
Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder and shall take such
further action as any holder or holders of Restricted Securities may reasonably
request, all to the extent required to enable such holders to sell Restricted
Securities pursuant to (i) Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission or (ii) a registration statement on Form S-2 or S-3 or any
similar registration form hereafter adopted by the Securities and Exchange
Commission. Upon request, the Company shall deliver to any holder of Restricted
Securities a written statement as to whether it has complied with such
requirements.
g. INTELLECTUAL PROPERTY RIGHTS. The Company shall, and shall
cause each Subsidiary to, possess and maintain all material Intellectual
Property Rights necessary to the conduct of their respective businesses and own
all right, title and interest in and to, or have a valid license for, all such
Intellectual Property Rights. Neither the Company nor any Subsidiary shall take
any action, or fail to take any action, which would result in the invalidity,
abandonment, misuse or unenforceability of such Intellectual Property Rights or
which would infringe upon or misappropriate any rights of other Persons.
h. PUBLIC DISCLOSURES. The Company shall not, nor shall it
permit any Subsidiary to, disclose any Investor's or any holder of Investor
Securities' name or identity as an investor in the Company in any press release
or other public announcement or in any document or material filed with any
governmental entity, without the prior written consent of such Person, unless
such disclosure is required by applicable law or governmental regulations or by
order of a court of competent jurisdiction, in which case prior to making such
disclosure the Company shall give written notice to such Person describing in
reasonable detail the proposed content of such disclosure and shall permit such
Person to review and comment upon the form and substance of such disclosure.
i. [INTENTIONALLY OMITTED].
j. PREEMPTIVE RIGHTS.
i. If the Company authorizes the issuance or sale of any
Common Units (or any securities containing options or rights to acquire any
Common Units), other than an Exempt Issuance (as defined below), the Company
shall first offer to sell to each holder of Purchaser Securities or
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Fully Vested Securities a portion of the securities to be issued equal to the
number of securities to be issued MULTIPLIED BY the quotient obtained by
dividing (1) the number of Purchaser Securities and Fully Vested Securities held
by such holder, by (2) the total number of Purchaser Securities and Fully Vested
Securities then outstanding. Each such holder shall be entitled to purchase such
securities at the most favorable price and on the most favorable terms as such
securities are to be offered to any other Persons; PROVIDED that if all Persons
entitled to purchase or receive such securities are required to also purchase
other securities of the Company, the holders exercising their rights pursuant to
this paragraph shall also be required to purchase the same strip of securities
(on the same terms and conditions) that such other Persons are required to
purchase. The purchase price for all securities offered to such holders
hereunder shall be payable in cash.
ii. In order to exercise its purchase rights hereunder, a
holder of Purchaser Securities or Fully Vested Securities must within 30 days
after receipt of written notice from the Company describing in reasonable detail
the securities being offered, the purchase price thereof, the payment terms and
such holder's percentage allotment, deliver a written notice to the Company
describing such holder's election hereunder. If all of the securities offered to
the holders of Purchaser Securities and Fully Vested Securities are not fully
subscribed, the remaining stock and securities shall be reoffered by the Company
to the holders purchasing their full allotment upon the terms set forth in this
paragraph, except that such holders must exercise their rights within 5 business
days after receipt of such reoffer.
iii. Upon the expiration of the offering periods described
above, the Company shall be entitled to sell such securities which the holders
of Purchaser Securities and Fully Vested Securities have not elected to purchase
during the 180 days following such expiration at a price not less and on other
terms and conditions no more favorable to the purchasers thereof than that
offered to such holders. Any securities offered or sold by the Company after
such 180-day period must be reoffered to the holders of Purchaser Securities and
Fully Vested Securities pursuant to the terms of this paragraph.
iv. The rights of the holders of Purchaser Securities and
Fully Vested Securities under this paragraph 6J shall terminate upon the
consummation of the first to occur of (x) a Qualified Public Offering and (y) a
Sale of the Company.
v. For purposes of this Agreement, "EXEMPT ISSUANCE" shall
mean any issuance (a) of Preferred Units at the Closing as contemplated under
this Agreement, (b) of Common Units as contemplated under the Executive
Securities Agreements or to Key Employees as contemplated under the LLC
Agreement, (c) of securities upon conversion or exercise of, or in exchange for,
any securities of the Company or any options or other rights to acquire
securities of the Company, (d) to Key Employees of the Company and its
Subsidiaries pursuant to the terms of a Permitted Securities Plan (as defined
above) or otherwise, (d) of the Company's securities in connection with the
acquisition of another company or business, (e) as a pro rata distribution with
respect to the Company's Common Units, (f) pursuant to any securities split,
securities dividend, recapitalization or reorganization that does not dilute the
economic interest of any holder of Common Units, (g) of warrants or equity
securities issued to a lender in connection with its loan to the Company or any
of its Subsidiaries, (h) of Senior Units in accordance with the LLC Agreement
pursuant to the
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repurchase provisions set forth in the Executive Securities Agreements or
Section 10B(ii) hereof or pursuant to the forfeiture provisions set forth in the
Performance Vesting Agreement, or (i) pursuant to a Public Offering.
vi. Each of the parties to this Agreement accepts,
acknowledges, and agrees that the provisions of this Section 6 are entered into
for the benefit of the holders of Fully Vested Securities as third-party
beneficiaries, and that such provisions shall be enforceable by the holders of
Fully Vested Securities as provided herein.
SECTION 7. PURCHASERS' PUT RIGHTS.
a. PUT RIGHT.
i. At any time and from time to time on or after the seventh
anniversary of the date of the Prior Agreement, but not after the consummation
of a Qualified Public Offering or a Sale of the Company, each holder of
Purchaser Securities and Class B Senior Units shall have the right to require
the Company to repurchase all, but not less than all, of the outstanding
Purchaser Securities and Class B Senior Units held by such holder at the
Repurchase Price (as defined below) by giving written notice to the Company of
such holder's exercise of this right (the "EXERCISE NOTICE").
ii. Within 10 days after receipt of an Exercise Notice, the
Company shall give written notice (the "REPURCHASE NOTICE") to each other holder
of Purchaser Securities and Class B Senior Units, setting forth the identity of
the holder tendering such Exercise Notice, the number of Purchaser Securities
and Class B Senior Units to be repurchased from such holder, and a reasonable
approximation of the fair market value of the Company's assets (net of any
liabilities) and of each Purchaser Security and Class B Senior Unit at the time
of such Repurchase Notice. Each other holder of Purchaser Securities or Class B
Senior Units shall be entitled to join in such repurchase and require the
Company to purchase all, but not less than all, of the Purchaser Securities and
Class B Senior Units held by such holder at the same closing, at the same price,
and on the same terms as the holder tendering the Exercise Notice by giving
Exercise Notice within 20 days after the date of the Repurchase Notice.
iii. Promptly (but in any event within five days after the end
of this 20-day period), the Company shall send each holder of Purchaser
Securities and Class B Senior Units written notice updating the information
contained in the Repurchase Notice (the "REVISED REPURCHASE NOTICE").
iv. Within 10 days after the Repurchase Price (as defined
below) for the Purchaser Securities and Class B Senior Units to be repurchased
at any repurchase hereunder has been determined as set forth below, the Company
shall send a notice to each holder of Purchaser Securities and Class B Senior
Units setting forth the consideration to be paid for the Purchaser Securities
and Class B Senior Units to be repurchased, as well as a time and place,
mutually agreeable to the Company and the holders of a majority of the total
number of Purchaser Securities and Class B Senior Units to be repurchased
(treating the Purchaser Securities and the Class B Senior
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Units as a single class for purposes of such consent), for the closing of the
repurchase transaction. At the closing of the repurchase transaction, the
electing holders shall sell to the Company and the Company shall purchase from
such holders the Purchaser Securities and Class B Senior Units specified in the
Revised Repurchase Notice at the Repurchase Price (as defined below).
b. DUTIES OF THE COMPANY. The Company shall do everything
within its power under the law and the LLC Agreement, including but not limited
to assuming or refinancing debt, obtaining consents or waivers from its or its
Subsidiaries' lenders, recapitalizing the Company, consummating a Public
Offering, or selling the Company or one or more of its Subsidiaries, to enable
the Company to satisfy its repurchase obligations under this Section 7 (and each
holder of Purchaser Securities shall vote all Company securities over which it
has voting control, and shall take all such further actions, as may be necessary
or desirable to effectuate the foregoing).
c. REPURCHASE PRICE. The repurchase price for each Purchaser
Security or Class B Senior Unit repurchased by the Company under this Section 7
(the "REPURCHASE PRICE") shall be equal to (i) in the case of any Preferred
Unit, the greater of (A) the "Liquidation Value" of such Preferred Unit
(together with all accrued but unpaid "Preferred Yield" thereon) as of the date
of valuation as calculated under the LLC Agreement and (B) the Fair Market Value
for such Preferred Unit, and (ii) in the case of any other Purchaser Security or
any Class B Senior Unit, the Fair Market Value for such security.
d. FAIR MARKET VALUE OF SECURITIES.
i. The "FAIR MARKET VALUE" of any Purchaser Securities and
Class B Senior Units to be repurchased hereunder (the "VALUED SECURITIES") shall
be determined in accordance with this paragraph 7D.
ii. The holders of the Valued Securities to be repurchased and
the holders of the Company's Common Units (other than Valued Securities)
(determined on a fully diluted, as-if-converted basis, but excluding all
Un-Performance-Vested Securities) shall attempt in good faith to agree on the
Fair Market Value of the Valued Securities to be repurchased. Any agreement
reached by the holders of a majority of the Valued Securities, on the one hand,
and the holders of a majority of the Company's Common Units (other than Valued
Securities) (determined on a fully diluted, as-if-converted basis, but excluding
all Un-Performance-Vested Securities), on the other hand, shall be final and
binding on all parties hereto.
iii. If such Persons are unable to reach such agreement within
20 days after the giving of any Repurchase Notice, the Fair Market Value of any
Valued Securities that are publicly traded shall be the average, over a period
of 21 days consisting of the date of the Exercise Notice and the 20 consecutive
business days prior to that date, of the average of the closing prices of the
sales of such securities on the principal securities exchange on which such
securities may at that time be listed, or, if there have been no sales on such
exchange on any day, the average of the highest bid and lowest asked prices on
such exchange at the end of such day, or, if on any day such securities are not
so listed, the average of the representative bid and asked prices quoted in the
Nasdaq System as of 4:00 P.M., New York time, or, if on any day such securities
are not quoted in the Nasdaq System,
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the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization.
iv. If such Persons are unable to reach agreement pursuant to
subparagraph (ii) within 20 days after the giving of such Repurchase Notice, and
to the extent any Valued Securities are not publicly traded:
(1) The holders of a majority of the Valued
Securities to be repurchased, on the one hand, and the holders of a
majority of the Company's Common Units (other than Valued Securities)
(determined on a fully diluted, as-if-converted basis, but excluding
all Un-Performance-Vested Securities), on the other hand, shall each,
within 10 days thereafter, choose one investment banker or other
appraiser with experience in valuing companies such as the Company, and
the two investment bankers/appraisers so selected shall together select
a third investment banker/appraiser similarly qualified.
(2) The three investment bankers/appraisers shall
first appraise the fair market value of the Company's equity (based on
the assumption of an orderly, arm's length sale (structured to produce
the highest price to the equity holders of the Company, whether such
structure is a merger, combination, sale of equity securities, sale of
assets, or otherwise) to a willing unaffiliated buyer (or to a willing
affiliated strategic buyer, PROVIDED that the investment
bankers/appraisers shall not consider any premium that such affiliated
strategic buyer would be willing to pay to the extent such premium is
attributable solely to such Person's then current affiliation with the
Company, unless the Company or its equityholders have received a fully
financed, firm Commitment offer (with no material conditions) from such
affiliated strategic buyer to purchase a majority (based on common
equity equivalents) of the Company's outstanding equity at a price that
includes such premium, IT BEING UNDERSTOOD, HOWEVER, that the
investment bankers/appraisers shall consider, without the need for such
a firm commitment offer, the premium, if any, that is attributable to
such Person's future expected synergies to be generated by combining
such Person's operations with those of the Company and its Subsidiaries
if such Person were to acquire the Company). The three investment
bankers/appraisers shall then appraise the fair market value of such
non-publicly-traded Valued Securities as follows:
(i) the fair market value of each Common
Unit (or equivalent common equity security) shall be equal to
the fair market value of the Company's equity DIVIDED BY the
total number of Common Units (or equivalent common equity
securities) outstanding on the date of the giving of the
Exercise Notice (determined on a fully diluted,
as-if-converted basis, but excluding all Un-Performance-Vested
Securities);
(ii) the fair market value of each Preferred
Unit shall be equal to the greater of (x) the Liquidation
Value (as defined in the LLC Agreement) of such Preferred
Unit, together with all accrued but unpaid Preferred Yield (as
defined in the LLC Agreement) thereon, and (y) the fair market
value (determined in accordance
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with subparagraph (1) above) of the Common Units (including
fractional units) into which such Preferred Unit is
convertible on the date of the giving of the Exercise Notice;
(iii) the fair market value of each Class B
Senior Unit shall be equal to the Class B Senior Value (as
defined in the LLC Agreement) of such Class B Senior Unit,
together with all accrued but unpaid Class B Senior Yield (as
defined in the LLC Agreement) thereon, on the date of the
giving of the Exercise Notice; and
(iv) the fair market value of any other
non-publicly-traded Valued Securities shall be the fair value
of such securities, determined on the basis of an orderly,
arm's length sale to a willing, unaffiliated buyer, taking
into account all relevant factors determinative of value.
The three investment bankers/appraisers shall, within thirty days of
their retention, provide the written results of such appraisals to the
holders of a majority of the Valued Securities to be repurchased, on
the one hand, and the holders of a majority of the Company's Common
Units (other than Valued Securities) (determined on a fully diluted,
as-if-converted basis, but excluding all Un-Performance-Vested
Securities), on the other hand.
(3) The "FAIR MARKET VALUE" of the
non-publicly-traded Valued Securities to be repurchased shall be the
average of the two appraisals closest to each other, and such amount
shall be final and binding on all parties hereto; PROVIDED that any
Person electing to have Purchaser Securities repurchased hereunder may
at any time within five days after receiving written notice of such
determination rescind its prior exercise of such Person's put rights by
giving written notice of such revocation to the Company, and upon such
revocation the revoking party will be treated as if it had never
exercised such put right hereunder.
(4) The costs of such appraisal shall be borne by the
Company.
SECTION 8. TRANSFER OF RESTRICTED SECURITIES.
a. GENERAL PROVISIONS. Restricted Securities are transferable
only pursuant to (i) public offerings registered under the Securities Act, (ii)
Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar
rule or rules then in force) if such rule is available, and (iii) subject to the
various conditions and prohibitions set forth in this Agreement (including,
without limitation, paragraph 8B below) and in the other agreements contemplated
hereby (including, without limitation, the Securityholders Agreement, the
Executive Securities Agreements, and the Performance Vesting Agreement), any
other legally available means of transfer.
b. OPINION DELIVERY. In connection with the transfer of any
Restricted Securities (other than a transfer described in paragraph 8A(i) or
(ii) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of Kirkland & Ellis or other counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such transfer of
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Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company an opinion of Kirkland & Ellis or
such other counsel that no subsequent transfer of such Restricted Securities
shall require registration under the Securities Act, the Company shall promptly
upon such contemplated transfer deliver new certificates for such Restricted
Securities which do not bear the Securities Act legend set forth in paragraph 5C
above. If the Company is not required to deliver new certificates for such
Restricted Securities not bearing such legend, the holder thereof shall not
transfer the same until the prospective transferee has confirmed to the Company
in writing its agreement to be bound by the conditions contained in this Section
8 and paragraph 5C.
c. RULE 144A. Upon the request of any holder of Purchaser
Securities, the Company shall promptly supply to such Person or its prospective
transferees all information regarding the Company required to be delivered in
connection with a transfer pursuant to Rule 144A of the Securities and Exchange
Commission.
d. LEGEND REMOVAL. If any Restricted Securities become
eligible for sale pursuant to Rule 144(k), the Company shall, upon the request
of the holder of such Restricted Securities, remove the legend set forth in
paragraph 5C from the certificates for such Restricted Securities.
SECTION 9. DEFINITIONS.
a. DEFINITIONS. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"ADDITIONAL CONTRIBUTION AMOUNT" has the meaning set forth
with respect thereto in Section 1C.
"AFFILIATE" of any particular Person means (i) any other
Person controlling, controlled by or under common control with such particular
Person, where "control" means the possession, directly or indirectly, of the
power to direct the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise, and (ii) if such
Person (other than the Company) is a partnership, any partner thereof.
"ALLEN" has the meaning set forth with respect thereto in the
preamble.
"ALLEN PURCHASE AGREEMENT" has the meaning set forth with
respect thereto in the preamble.
"APPROVED BUDGET" has the meaning set forth with respect
thereto in Section 6A(v).
"APPROVED BUSINESS PLAN" means a business proposal submitted
by the chief executive officer of the Company to the Board and to the Investors,
setting forth: (i) the proposed business activities of the Company in a
specified geographical area during a specified period of time; (ii) projections
of revenues, expenses, and income from such business activities during such
period;
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(iii) projections of the amounts, timing, and proposed terms for vendor
financing and other financing to be obtained by the Company to support such
business activities during such period; (iv) the expected amounts and
anticipated timing of periodic capital drawdowns that the Company's management
deems necessary to support such business activities during such period; and (v)
a budget of proposed expenditures of such capital; PROVIDED, however, that no
such business proposal shall constitute an Approved Business Plan unless and
until it has been approved by the Board and the holders of a majority of the
Purchaser Securities then outstanding.
"ART" means the French Autorite de Regulation des
Telecommunications and includes and governmental body or agency succeeding to
the functions thereof.
"BOARD" means the board of managers of the Company or, if the
Company is hereafter converted into a corporation or other entity form, the
board of directors or comparable governing body of the Company.
"CLASS A SENIOR UNITS" means the Class A Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLASS B SENIOR UNITS" means the Class B Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLASS B SENIOR VALUE" has the meaning ascribed to such term
in the LLC Agreement.
"CLASS B SENIOR YIELD" has the meaning ascribed to such term
in the LLC Agreement.
"CLASS C SENIOR UNITS" means the Class C Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLEVENGER " has the meaning set forth with respect thereto in
the preamble.
"CLOSING" has the meaning set forth with respect thereto in
Section 1D.
"CLOSING DATE" has the meaning set forth with respect thereto
in Section 1D.
"COMMON UNITS" means the Common Units of the Company, having
the rights and preferences set forth with respect thereto in the LLC Agreement.
"COMPANY" has the meaning set forth with respect thereto in
the preamble (including any successor described in Section 10.1 of the LLC
Agreement).
"DEGEORGE" has the meaning set forth with respect thereto in
the preamble.
"DEGEORGE ASSIGNMENT" has the meaning set forth with respect
thereto in the preamble.
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"DEGEORGE HOLDINGS" has the meaning set forth with respect
thereto in the preamble.
"DOVEY " has the meaning set forth with respect thereto in the
preamble.
"DOVEY ASSIGNMENT" has the meaning set forth with respect
thereto in the preamble.
"DOVEY LLC" has the meaning set forth with respect thereto in
the preamble.
"DOVEY LLC PURCHASE AGREEMENT" has the meaning set forth with
respect thereto in the preamble.
"EXECUTIVE" and "EXECUTIVES" have the meanings set forth with
respect thereto in the preamble.
"EXECUTIVE SECURITIES" means (i) the Common Units issued under
the Executive Securities Agreements (including to Key Employees in accordance
with the LLC Agreement), and (ii) any securities issued directly or indirectly
with respect to any Executive Securities by way of a stock split, stock
dividend, or other division of securities, or in connection with a combination
of securities, recapitalization, merger, consolidation, or other reorganization;
PROVIDED that Executive Securities shall not include any Senior Units. As to any
particular securities constituting Executive Securities, such securities shall
cease to be Executive Securities when they have been (a) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them, (b) distributed to the public through a broker, dealer
or market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force), or (c) repurchased or otherwise acquired by the
Company (or its assignees). Any reference herein to a "majority of the Executive
Securities" or the "number of Executive Securities" for purposes of comparison
shall refer, with respect to any particular Executive Securities, to the number
of Common Units (or equivalent common equity securities of the Company) then
represented by such Executive Securities (on a fully diluted, as-if-converted
basis, but excluding any Un-Performance-Vested Securities).
"EXECUTIVE SECURITIES AGREEMENT" shall mean any of the
executive securities agreements heretofore entered into between the Company and
an Executive or another employee of the Company or its Subsidiaries, pursuant to
which such employee has purchased Common Units of the Company, as well as any
executive securities agreement substantially similar thereto, entered into by
and between the Company and any Key Employee of the Company and its
Subsidiaries, pursuant to which such Key Employee purchases securities of the
Company in accordance with the LLC Agreement.
"EXEMPT ISSUANCE" has the meaning set forth with respect
thereto in Section 6J.
"EXERCISE NOTICE" has the meaning set forth with respect
thereto in Section 7A(i).
"FAIR MARKET VALUE" has the meaning and shall be determined in
the manner set forth with respect thereto in Section 7D.
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"FULLY VESTED SECURITIES" means Executive Securities as of the
date of any determination to be made hereunder (and after giving effect to any
vesting which would occur under the Performance Vesting Agreement with respect
to any sale of securities on such date) which both (A) have time vested pursuant
to the provisions of the Executive Securities Agreements and (B) are not
Un-Performance-Vested Securities.
"GAAP" means United States generally accepted accounting
principles consistently applied.
"HOLLAND" has the meaning set forth with respect thereto in
the preamble.
"HOLLAND PURCHASE AGREEMENT" has the meaning set forth with
respect thereto in the preamble.
"HUNDT" has the meaning set forth with respect thereto in the
preamble.
"INCREMENTAL PREFERRED UNITS" has the meaning set forth with
respect thereto in Section 1A.
"INCREMENTAL PURCHASE PRICE" has the meaning set forth with
respect thereto in Section 1C.
"INDEBTEDNESS" means at a particular time, without
duplication, (i) any indebtedness for borrowed money or indebtedness issued in
substitution for or exchange of indebtedness for borrowed money, (ii) any
indebtedness evidenced by any note, bond, debenture or other debt security,
(iii) any indebtedness for the deferred purchase price of property or services
with respect to which a Person is liable, contingently or otherwise, as obligor
or otherwise (other than trade payables and other current liabilities incurred
in the ordinary course of business which are not more than six months past due),
(iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness guaranteed in any manner by
a Person (including, without limitation, guarantees in the form of an agreement
to repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets and (viii) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
"INITIAL CONTRIBUTION" has the meaning set forth with respect
thereto in Sections 1B and 1C and under the Prior Purchase Agreements.
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works
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and registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software,
data, data bases and documentation thereof, (vi) trade secrets and other
confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (vii) other
intellectual property rights and (viii) copies and tangible embodiments thereof
(in whatever form or medium).
"INVESTMENT" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"INVESTOR" and "INVESTORS" have the meanings set forth with
respect thereto in the preamble.
"INVESTOR SECURITIES" means (i) the Preferred Units issued to
the Investors hereunder (including under the Prior Purchase Agreements), (ii)
any Common Units issued or issuable upon conversion of the Preferred Units
referred to in paragraph (i), and (iii) any securities issued directly or
indirectly with respect to any of the foregoing securities by way of a stock
split, stock dividend, or other division of securities, or in connection with a
combination of securities, recapitalization, merger, consolidation, or other
reorganization; PROVIDED that Investor Securities shall not include any Senior
Units. As to any particular securities constituting Investor Securities, such
securities shall cease to be Investor Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force), or (c) repurchased or
otherwise acquired by the Company or forfeited pursuant to the terms of the
Performance Vesting Agreement. Any reference herein to a "majority of the
Investor Securities" or the "number of Investor Securities" for purposes of
comparison shall refer, with respect to any particular Investor Securities, to
the number of Common Units (or equivalent common equity securities of the
Company) then represented by such Investor Securities (on a fully diluted,
as-if-converted basis).
"KEY EMPLOYEES" has the meaning set forthwith respect thereto
in Section 4B(i).
"LACEY" has the meaning set forth with respect thereto in the
preamble.
"LACEY PURCHASE AGREEMENT" has the meaning set forth with
respect thereto in the preamble.
"LAUB" has the meaning set forth with respect thereto in the
preamble.
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<PAGE>
"LIEN" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against the Company, any of its
Subsidiaries or any Affiliate, any filing or agreement to file a financing
statement as debtor under the Uniform Commercial Code or any similar statute
other than to reflect ownership by a third party of property leased to the
Company or any of its Subsidiaries under a lease which is not in the nature of a
conditional sale or title retention agreement, or any subordination arrangement
in favor of another Person (other than any subordination arising in the ordinary
course of business).
"LIQUIDATION VALUE" has the meaning ascribed to such term in
the LLC Agreement.
"LLC AGREEMENT" has the meaning set forth with respect thereto
in Section 2B.
"MAXIMUM COMMITMENT" means, (i) with respect to a Purchaser's
Prior Preferred Units, the maximum commitment amount relating to such Prior
Preferred Units set forth opposite such Purchaser's name on the SCHEDULE OF
PRIOR PURCHASERS, and (ii) with respect to a Purchaser's Incremental Preferred
Units, the maximum commitment amount relating to such Incremental Preferred
Units set forth opposite such Purchaser's name on the SCHEDULE OF PURCHASERS.
"MDCP" has the meaning set forth with respect thereto in the
preamble.
"OFFERING MEMORANDUM" means the Preliminary Offering
Memorandum dated as of December 29, 1998, concerning the proposed private
placement of certain unit securities consisting of notes and equity interests of
certain of the Company's Subsidiaries.
"OFFICER'S CERTIFICATE" means a certificate signed by the
Company's president or its chief financial officer, stating that (i) the officer
signing such certificate has made or has caused to be made such investigations
as are reasonably necessary in order to permit him to verify the accuracy of the
information set forth in such certificate and (ii) such certificate does not
misstate any material fact and does not omit to state any fact necessary to make
the certificate not misleading.
"ORIGINAL PURCHASERS" has the meaning set forth with respect
thereto in the preamble.
"PARTICIPATING PURCHASERS" has the meaning set forth with
respect thereto in the preamble.
"PEARSON" has the meaning set forth with respect thereto in
the preamble.
"PERFORMANCE VESTING AGREEMENT" has the meaning set forth with
respect thereto in Section 2E.
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<PAGE>
"PERMITTED LIEN" means:
(i) tax liens with respect to taxes not yet due and
payable or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established in
accordance with GAAP;
(ii) deposits or pledges made in connection with, or
to secure payment of, utilities or similar services, workers'
compensation, unemployment insurance, old age pensions or other social
security obligations;
(iii) purchase money security interests in any
property acquired by the Company or any Subsidiary to the extent
permitted by this Agreement;
(iv) interests or title of a lessor under any lease
permitted by this Agreement;
(v) mechanics', materialmen's or contractors' liens
or encumbrances or any similar lien or restriction for amounts not yet
due and payable;
(vi) easements, rights-of-way, restrictions and other
similar charges and encumbrances not interfering with the ordinary
conduct of the business of the Company and its Subsidiaries or
detracting from the value of the assets of the Company and its
Subsidiaries; and
(vii) security interests in the assets of the Company
and its Subsidiaries granted to the Company's and its Subsidiaries'
lenders to secure Indebtedness permitted under Section 6C above.
"PERMITTED SECURITIES PLAN" has the meaning set forth with
respect thereto in Section 6C(xix).
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED UNITS" means the Preferred Units of the Company,
having the rights and preferences set forth with respect thereto in the LLC
Agreement.
"PREFERRED YIELD" has the meaning ascribed to such term in the
LLC Agreement.
"PRIOR AGREEMENT" has the meaning set forth with respect
thereto in the preamble.
"PRIOR PREFERRED UNITS" has the meaning set forth with respect
thereto in Section 1A.
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<PAGE>
"PRIOR PURCHASE AGREEMENTS" has the meaning set forth with
respect thereto in the preamble.
"PRIOR PURCHASERS" has the meaning set forth with respect
thereto in the preamble.
"PUBLIC OFFERING" means any underwritten sale of the Company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1 (or
a successor form adopted by the Securities and Exchange Commission); provided
that the following shall not be considered a Public Offering: (i) any issuance
of common stock as consideration for a merger or acquisition, and (ii) any
issuance of common stock or rights to acquire common stock to existing
securityholders or to employees of the Company or its Subsidiaries on Form S-4
or Form S-8 (or any successor forms adopted by the Securities and Exchange
Commission) or otherwise.
"PURCHASER" and "PURCHASERS" have the meanings set forth with
respect thereto in the preamble.
"PURCHASER SECURITIES" means (i) the Preferred Units issued to
the Purchasers hereunder (including under the Prior Purchase Agreements), (ii)
any Common Units issued or issuable upon conversion of the Preferred Units
referred to in paragraph (i), and (iii) any securities issued directly or
indirectly with respect to any of the foregoing securities by way of a stock
split, stock dividend, or other division of securities, or in connection with a
combination of securities, recapitalization, merger, consolidation, or other
reorganization; PROVIDED that Purchaser Securities shall not include any Senior
Units. As to any particular securities constituting Purchaser Securities, such
securities shall cease to be Purchaser Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force), or (c) repurchased or
otherwise acquired by the Company (or its assignee) or forfeited pursuant to the
terms of the Performance Vesting Agreement. Any reference herein to a "majority
of the Purchaser Securities" or the "number of Purchaser Securities" for
purposes of comparison shall refer, with respect to any particular Purchaser
Securities, to the number of Common Units (or equivalent common equity
securities of the Company) then represented by such Purchaser Securities (on a
fully diluted, as-if-converted basis).
"QUALIFIED HOLDER" has the meaning set forth with respect
thereto in Section 6A.
"QUALIFIED PUBLIC OFFERING" means a Public Offering where BOTH
(i) the proceeds (net of underwriting discounts and
commissions) received by the Company in exchange for its issuance of
shares of common stock in such Public Offering equal or exceed $60
million, AND
(ii) the price per share of common stock paid to the Company
in such Public Offering equals or exceeds the product of (x) 3.0 TIMES
(y) the quotient of (A) the aggregate Initial Contributions and
Subsequent Contributions made on or prior to the date of such
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<PAGE>
Public Offering with respect to all Purchaser Securities then
outstanding, divided by (B) the number of shares of the Company's
common stock represented by all Purchaser Securities (on a fully
diluted, as-if-converted basis) outstanding immediately prior to the
consummation of such Public Offering.
"REGISTRATION AGREEMENT" has the meaning set forth with
respect thereto in Section 2D.
"REPURCHASE NOTICE" has the meaning set forth with respect
thereto in Section 7A(ii).
"REPURCHASE PRICE" has the meaning set forth with respect
thereto in Section 7C.
"RESTRICTED SECURITIES" means (i) the Preferred Units issued
hereunder (including under the Prior Purchase Agreements), (ii) the Common Units
issued upon conversion of the Preferred Units, and (iii) any securities issued
with respect to the securities referred to in clauses (i) or (ii) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Restricted Securities, such securities shall cease to be
Restricted Securities when they have (a) been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) become eligible for sale pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act or (c) been otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in paragraph 5C have been delivered by the Company in accordance with
paragraph 8B. Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in paragraph 5C.
"SALE OF THE COMPANY" means the arm's length sale of the
Company to a third party or group of third parties acting in concert, pursuant
to which such party or parties acquire (i) equity securities of the Company
possessing the voting power under normal circumstances to control the Company,
or (ii) all or substantially all of the Company's assets determined on a
consolidated basis (in either case, whether by merger, consolidation, sale or
transfer of the Company's equity securities, or sale or transfer of the
Company's consolidated assets).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" means the United States
Securities and Exchange Commission and includes any governmental body or agency
succeeding to the functions thereof.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"SECURITYHOLDERS AGREEMENT" has the meaning set forth with
respect thereto in Section 2C.
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<PAGE>
"SENIOR UNITS" means the Company's Class A Senior Units, Class
B Senior Units, and Class C Senior Units.
"SUBSEQUENT CLOSING" means each of the subsequent closings
under the Prior Agreement (including, with respect to the Additional
Contribution Amounts, the Closing) at which the Purchasers made or make
"Subsequent Contributions" within the meaning of the Prior Agreement.
"SUBSEQUENT CONTRIBUTION" has the meaning set forth with
respect thereto in Sections 1B and 1C and under the Prior Purchase Agreements.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director, manager or general
partner of such limited liability company, partnership, association or other
business entity. For purposes of this Agreement, if the context does not
otherwise indicate in respect of which Person the term "SUBSIDIARY" is used, the
term "SUBSIDIARY" shall refer to any Subsidiary of the Company.
"UN-PERFORMANCE-VESTED SECURITIES" means any Executive
Securities which are subject to performance vesting, but have not yet
performance vested, pursuant to the provisions of the Performance Vesting
Agreement.
"WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, a
Subsidiary of which all of the outstanding capital stock or other ownership
interests (other than director shares) are owned by such Person or another
Wholly Owned Subsidiary of such Person. For purposes of this Agreement, if the
context does not otherwise indicate in respect of which Person the term "WHOLLY
OWNED SUBSIDIARY" is used, the term "WHOLLY OWNED SUBSIDIARY" shall refer to any
Wholly Owned Subsidiary of the Company.
b. KNOWLEDGE. As used in Section 4, the terms "knowledge" or
"aware" in respect of the Company shall mean and include (i) the actual
knowledge or awareness of the Executives (including Dovey), and (ii) with
respect to each of the Persons identified in clause (i) above, the knowledge or
awareness which a prudent business person would have obtained in the conduct of
his business after making reasonable inquiry and reasonable diligence with
respect to the particular matter in question.
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<PAGE>
SECTION 10. MISCELLANEOUS PROVISIONS.
a. EXPENSES. The Company shall pay, and hold each of MDCP and
DeGeorge Holdings harmless against liability for the payment of, the reasonable
out-of-pocket expenses of MDCP and DeGeorge Holdings, including the reasonable
fees and expenses of MDCP's special counsel, Kirkland & Ellis, and MDCP's
special French counsel, Serra Michaud, arising in connection with (i) the
performance of due diligence investigations concerning the Company and its
operations and management, the negotiation and execution of this Agreement, the
LLC Agreement, and the other agreements contemplated hereby, and the
consummation of the transactions to occur at the Closing or any Subsequent
Closing as contemplated hereby, (ii) any amendments or waivers (whether or not
the same become effective) under or in respect of this Agreement, the LLC
Agreement, or any of the other agreements contemplated hereby, (iii) the
enforcement of the rights granted under this Agreement, the LLC Agreement, or
any of the other agreements contemplated hereby, (iv) any filing with any
governmental agency with respect to such Investor's investment in the Company or
any other filing with any governmental agency with respect to the Company or any
of its Subsidiaries which mentions such Investor, and (v) stamp and other taxes
which may be payable in respect of the execution and delivery of this Agreement
or the issuance, delivery or acquisition of any Preferred Units or any Common
Units issuable upon conversion of any Preferred Units.
b. REMEDIES.
i. Each holder of Purchaser Securities shall have all rights
and remedies set forth in this Agreement and the LLC Agreement and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law or at equity. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce (upon demonstration of irreparable harm)
such rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement, and to
exercise all other rights granted by law.
ii. If at the Closing, after all conditions to the Closing set
forth in Section 2 hereof have been either satisfied or waived in accordance
with the terms hereof, any Prior Purchaser refuses to tender such Purchaser's
required Additional Contribution Amount for such Closing, the Company shall have
the right, in addition to the remedies available under Section 10B(i) above, to
repurchase all Purchaser Securities held by such refusing Purchaser for an
aggregate price equal to the lesser of (x) the Fair Market Value of such
securities and (y) the sum of the Initial Contribution made with respect to such
Purchaser Securities and all Subsequent Contributions made with respect to such
Purchaser Securities at all prior Subsequent Closings. The Company shall have
the option, in accordance with the LLC Agreement, to pay such repurchase price
by issuing to such holder in exchange for such Purchaser Securities an equal
number of Class C Senior Units, and each such Class C Senior Unit issued in
connection with such repurchase shall be deemed as of the date of such
repurchase to have capital contributions to the Company made with respect to
such Class C Senior Unit equal to the lesser of (A) the Fair Market Value of the
repurchased Unit in exchange for which such Class C Senior Unit was issued and
(B) the aggregate capital contributions (including Initial Contributions and
Subsequent Contributions) made on or prior to the date of such repurchase with
respect to the repurchased Unit in exchange for which such Class C Senior Unit
was issued (PROVIDED
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<PAGE>
that if the Company has prior to the date of such repurchase converted into a
corporation or other corporate form, the Company shall have the option to pay
such repurchase price in the form of a promissory note with the following terms:
(a) principal equal to the repurchase price for such Purchaser Securities; (b)
liquidation preference junior to (I) all senior debt obligations of the Company
then or thereafter incurred, (II) the "Liquidation Value" of the Preferred Units
(together with all accrued but unpaid "Preferred Yield" thereon) and (III) the
"Class B Senior Value" of the Class B Senior Units (together with all accrued
but unpaid "Class B Senior Yield" thereon) as determined under the LLC
Agreement; (c) simple interest at a rate of 8% per annum; and (d) all principal
and accrued interest due and payable on the first to occur of (1) the closing of
a Qualified Public Offering, (2) a Sale of the Company, and (3) the fifth
anniversary of the issuance of such note). If a Purchaser's holdings of
Purchaser Securities are repurchased pursuant to this paragraph, such Purchaser
shall with respect to the repurchased Purchaser Securities thereafter retain no
further (I) right to enforce or benefit from the provisions of this Agreement or
any other agreement contemplated hereby to which such Purchaser is a party,
other than the promissory note described in the immediately preceding sentence,
or (II) obligation under this Agreement to make Subsequent Contributions at any
Subsequent Closing.
c. CONSENT TO AMENDMENTS. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended, modified, or
waived, and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the prior written consent of the holders of a majority of the Purchaser
Securities outstanding at the time such amendment or waiver becomes effective;
PROVIDED that if any such amendment, modification or waiver would adversely
affect any holder of Purchaser Securities relative to the holders of Purchaser
Securities voting in favor of such amendment, modification, or waiver, such
amendment, modification or waiver shall also require the written consent of the
holders of a majority of the Purchaser Securities held by all holders so
adversely affected; AND PROVIDED FURTHER that if any such amendment,
modification or waiver would adversely affect the holders of Executive
Securities relative to the holders of Purchaser Securities voting in favor of
such amendment, modification, or waiver, such amendment, modification or waiver
shall also require the written consent of the holders of a majority of the
Executive Securities held by all holders so adversely affected; AND PROVIDED
FURTHER that if any such amendment, modification or waiver is to a provision in
this Agreement that requires a specific vote to take an action thereunder or to
take an action with respect to the matters described therein, such amendment,
modification or waiver shall not be effective unless such vote is obtained with
respect to such amendment, modification or waiver. No course of dealing between
the Company and any holder of Purchaser Securities or any delay by such holder
in exercising any rights hereunder or under the LLC Agreement shall operate as a
waiver of any rights of such holder.
d. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
regardless of any investigation made by any Purchaser or on its behalf.
e. SUCCESSORS AND ASSIGN. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto
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<PAGE>
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto whether so expressed or not. In addition, and whether or not
any express assignment has been made, (i) the provisions of this Agreement which
are for any Purchaser's benefit as a Purchaser or holder of Purchaser Securities
are also for the benefit of, and enforceable by, any subsequent holder of such
Purchaser Securities, and (ii) the provisions of this Agreement relating to each
Purchaser's obligation to make Subsequent Contributions at Subsequent Closings
with respect to such Purchaser's Purchaser Securities (including, without
limitation, such obligation, the preconditions to such obligation, and the
Maximum Commitment applicable to such Purchaser Securities) shall bind and inure
to the benefit of any subsequent holder of such Purchaser Securities in
proportion to the number of such Purchaser Securities acquired by such
subsequent holder.
f. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
g. COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all which counterparts taken together shall constitute
one and the same Agreement.
h. DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT
CONSTRUCTION. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Reference to any agreement, document, or instrument means such agreement,
document, or instrument as amended or otherwise modified from time to time in
accordance with the terms thereof, and if applicable hereof. The use of the
words "include" or "including" in this Agreement shall be by way of example
rather than by limitation. The use of the words "or," "either" or "any" shall
not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. The parties agree that prior drafts of this
Agreement shall be deemed not to provide any evidence as to the meaning of any
provision hereof or the intent of the parties hereto with respect hereto.
i. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND EXHIBITS HERETO), EVEN
THOUGH UNDER THAT JURISDICTION'S
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<PAGE>
CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER
JURISDICTION WOULD ORDINARILY APPLY.
j. NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when (a) delivered
personally to the recipient, (b) telecopied to the recipient (with hard copy
sent to the recipient by reputable overnight courier service (charges prepaid)
that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a
business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by reputable overnight courier service
(charges prepaid). Such notices, demands and other communications shall be sent
to the following Persons at the following addresses:
TO MDCP:
Three First National Plaza, Suite 3800
Chicago, Illinois 60670
Attention: Paul J. Finnegan
James N. Perry, Jr.
James H. Kirby
Telephone: (312) 895-1000
Telecopy: (312) 895-1001
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey W. Richards, Esq.
Telephone: (312) 861-2473
Telecopy: (312) 861-2200
TO DEGEORGE:
3127 Casseekey Island Road
Jupiter, Florida 33477
Telephone: (561) 747-8277
Telecopy: (561) 575-1760
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WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Jonathan Dodge, Esq.
Vice President, Secretary, and General Counsel
DeGeorge Financial Corporation
591 Park Avenue
New York, New York 10021-7361
Telephone: (212) 371-9777
Telecopy: (212) 688-5233
TO ANY EXECUTIVE: at the Company's address, to the attention
of such Executive
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Holme Roberts & Owen LLP
1700 Lincoln Street, Suite 4100
Denver, Colorado 80203
Attention: W. Dean Salter, Esq.
Telephone: (303) 866-0245
Telecopy: (303) 866-0200
TO THE COMPANY:
6300 Syracuse Way, Suite 355
Englewood, Colorado 80111
Attention: Chief Executive Officer
Telephone: (303) 741-4788
Telecopy: (303) 741-4823
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
k. BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday, or legal
holiday in the State of Colorado, the Republic of France or the jurisdiction in
which the Company's principal office is located, the time period shall
automatically be extended to the business day immediately following such
Saturday, Sunday, or legal holiday.
l. DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and
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<PAGE>
deliver them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.
m. EFFECTIVENESS OF AGREEMENT. This Agreement shall be valid,
binding, and effective against each Purchaser when it has been signed by such
Purchaser. Pursuant to Section 10C of the Prior Agreement, this Agreement
amending and restating the Prior Agreement (and superseding the Prior Purchase
Agreements) shall be valid, binding, and effective against all Purchasers when
it has been signed by the holders of a majority of the Purchaser Securities.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
First Amended and Restated Equity Purchase Agreement as of the date first above
written.
COMPANY:
COMPLETEL LLC
By /s/ James E. Dovey
--------------------------------
James E. Dovey, its Chairman and CEO
INVESTORS:
DEGEORGE HOLDINGS LIMITED PARTNERSHIP
By LPL Investment Group, Inc., its
general partner
By /s/ Lawrence F. DeGeorge
--------------------------------
Lawrence F. DeGeorge, its Chairman
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P., its
general partner
By Madison Dearborn Partners, Inc., its
general partner
By /s/ Paul J. Finnegan
--------------------------------
Its Managing Director
--------------------------------
/s/ James C. Allen
-----------------------------------
James C. Allen
/s/ Royce J. Holland
-----------------------------------
Royce J. Holland
/s/ George T. Laub
-----------------------------------
George T. Laub
(Signature Page for First Amended and Restated Equity Purchase Agreement)
<PAGE>
_/s/ Reed E. Hundt_______________________________________
Reed E. Hundt
EXECUTIVES:
DOVEY FAMILY PARTNERS LLLP
By _/s/ James E. Dovey___________________________________
James E. Dovey, its general partner
DOVEY COMPANY LLC
By _/s/ James E. Dovey___________________________________
James E. Dovey, its manager
_/s/ James E. Dovey______________________________________
James E. Dovey
_/s/ William H. Pearson__________________________________
William H. Pearson
_/s/ Richard N. Clevenger_________________________________
Richard N. Clevenger
_/s/ David E. Lacey_______________________________________
David E. Lacey
(Signature Page for First Amended and Restated Equity Purchase Agreement)
<PAGE>
Exhibit 10.13
FIRST AMENDED AND RESTATED
SECURITYHOLDERS AGREEMENT
THIS FIRST AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT
(this "AGREEMENT") is made as of January 28, 1999, by and among CompleTel LLC
(formerly known as CableTel Europe LLC), a Delaware limited liability company
(the "COMPANY"), and Madison Dearborn Capital Partners II, L.P., ("MDCP"),
DeGeorge Holdings Limited Partnership ("DEGEORGE HOLDINGS"), James C. Allen
("ALLEN"), Royce J. Holland ("HOLLAND"), George T. Laub ("LAUB"), Reed E. Hundt
("HUNDT"), Dovey Company LLC ("DOVEY LLC"), William H. Pearson ("PEARSON"),
Richard N. Clevenger ("CLEVENGER"), David E. Lacey ("LACEY"), and the other
Persons listed as Securityholders on the signature pages hereto (collectively,
the "SECURITYHOLDERS"). MDCP, DeGeorge Holdings, Allen, Holland, Laub, and Hundt
are referred to herein collectively as the "INVESTORS" and individually as an
"INVESTOR." Capitalized terms used but not otherwise defined herein are defined
in Section 8 hereof.
As of May 18, 1998, the Company and MDCP, Lawrence F. DeGeorge
("DEGEORGE"), James E. Dovey ("DOVEY"), Pearson, and Clevenger entered into a
securityholders agreement (the "PRIOR AGREEMENT"). The parties hereto desire
that, effective as of the date hereof, the Prior Agreement shall be amended and
revised in its entirety as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. REPRESENTATIONS AND WARRANTIES. Each Securityholder
represents and warrants that (i) such Securityholder has full power and
authority to execute, deliver and perform its obligations under this Agreement,
(ii) this Agreement has been duly authorized, executed and delivered by such
Securityholder and constitutes the valid and binding obligation of such
Securityholder, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and limitations
on the availability of equitable remedies, and (iii) such Securityholder has not
granted a proxy and is not party to any voting trust or other agreement with
respect to any Securityholder Securities, other than this Agreement, the Equity
Purchase Agreement, and the other agreements contemplated by the exhibits
thereto. No holder of Securityholder Securities will grant any proxy or become
party to any voting trust or other agreement which is inconsistent with,
conflicts with, or violates any provision of this Agreement.
2. THE BOARD.
(a) BOARD COMPOSITION AND VACANCIES. From and after the date
of this Agreement and until the provisions of this Section 2 cease to be
effective, each holder of Securityholder Securities shall vote all such holder's
Securityholder Securities and any other voting securities of the Company over
which such holder has voting control and shall take all other necessary or
desirable actions within such holder's control (whether in such holder's
capacity as a securityholder, director,
<PAGE>
representative, member of a board committee, officer of the Company or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all necessary or desirable
actions within its control (including, without limitation, calling special Board
and securityholder meetings), so that:
(i) The authorized number of representatives on the
Board shall be established and remain at eight representatives;
PROVIDED that at such time as MDCP ceases to be entitled (pursuant to
Section 2(a)(ii)(A)) to designate four representatives to the Board,
the authorized number of representatives on the Board shall be reduced
to and thereafter remain at seven representatives.
(ii) The following individuals shall be elected to
the Board:
(A) four representatives designated by the
holders of a majority of the MDCP Equity held by MDCP and its
Affiliates so long as MDCP and its Affiliates continue to hold
a majority of the outstanding Purchaser Securities;
thereafter, three representatives designated by the holders of
a majority of the MDCP Equity held by MDCP and its Affiliates
so long as MDCP and its Affiliates continue to hold at least
70% of the MDCP Equity; thereafter, two representatives
designated by the holders of a majority of the MDCP Equity
held by MDCP and its Affiliates so long as MDCP and its
Affiliates continue to hold at least 55% of the MDCP Equity;
and thereafter, one representative designated by the holders
of a majority of the MDCP Equity held by MDCP and its
Affiliates so long as MDCP and its Affiliates continue to hold
at least 40% of the MDCP Equity (such representatives, the
"MDCP REPRESENTATIVES");
(B) two representatives designated by the
holders of a majority of the DeGeorge Equity held by DeGeorge,
his Family Group, and his Affiliates so long as DeGeorge, his
Family Group, and his Affiliates continue to hold at least 70%
of the DeGeorge Equity; and thereafter, one representative
designated by the holders of a majority of the DeGeorge Equity
held by DeGeorge, his Family Group, and his Affiliates so long
as DeGeorge, his Family Group, and his Affiliates continue to
hold at least 40% of the DeGeorge Equity (such
representatives, the "DEGEORGE REPRESENTATIVES");
(C) one member of the Company's management
designated by the holders of a majority of the Management
Equity (the "MANAGEMENT REPRESENTATIVE"); and
(D) one representative (the "OUTSIDE
REPRESENTATIVE") designated by the holders of a majority of
the Purchaser Securities then outstanding and approved by the
holders of a majority of the Management Equity, which approval
will not be unreasonably withheld.
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<PAGE>
(iii) Except as otherwise determined by the Board,
the composition of the board of directors (or comparable governing
body) of each of the Company's Subsidiaries (a "SUB BOARD") shall be
the same as that of the Board; PROVIDED that, except as otherwise
determined by the Board, if the laws of the jurisdiction in which a
Company Subsidiary is organized prohibit its Sub Board from having the
same board composition as prescribed for the Board, or if such Sub
Board having such board composition would result in an adverse tax
consequence to any representative serving thereon or to the Company or
any of its Subsidiaries or members, (A) the authorized number of
representatives for such Sub Board shall be the same as that of the
Board, (B) the representative positions for such Sub Board shall be
filled with representatives who satisfy such laws or avoid such adverse
tax consequence, as appropriate, and who are designated by the holders
entitled to designate the representatives serving on the Board in the
same proportion as such representatives, to the extent practicable, and
(C) if permitted by the laws of the jurisdiction in which such
Subsidiary is organized and if such would not result in an adverse tax
consequence to any representative serving on such Sub Board or to the
Company or any of its Subsidiaries or members, the parent entity of
such Subsidiary shall execute and maintain a "unanimous declaration of
shareholders" vesting the sole power and authority to direct the
affairs of such Subsidiary in its shareholders.
(iv) Committees of the Board or a Sub Board shall be
created only upon the approval of a majority of the members of the
Board or the applicable Sub Board, and the composition of each such
committee shall be determined by the Board or the applicable Sub Board.
(v) Any representative will be removed from the Board
or a Sub Board, with or without cause, at the written request of the
holder or holders entitled to designate such representative to serve on
such Board or Sub Board, but only upon such written notice and under no
other circumstances; PROVIDED that if any Management Representative
ceases to be an employee of the Company or any of its Subsidiaries,
such representative shall be removed as a member of the Board and each
Sub Board promptly after his or her employment ceases.
(vi) If any representative ceases to serve as a
member of the Board or any Sub Board during his or her term of office,
the resulting vacancy on the Board or Sub Board shall be filled by a
representative (or in the case of a vacant Management Representative
position, a member of the Company's management) designated by the
holder or holders entitled to designate the departing representative.
(vii) If any party eligible to designate a
representative under this Section 2 fails to so designate, the
individual previously holding such representative position shall be
elected to such position, unless such individual has been removed as a
representative or fails or declines to serve, in which case such
vacancy shall remain until filled with a representative designated by
the holder or holders which failed to designate an individual to fill
such representative position.
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<PAGE>
(viii) If any party becomes ineligible, by virtue of
the terms of subparagraph 2(a)(ii), to designate a representative to
fill a representative position pursuant to such subparagraph, all
rights and entitlements hereunder to designate (and the concomitant
rights to remove, replace, etc.) persons to fill such position (unless
such position ceases to exist by operation of the proviso in Section
2(a)(i)) shall thereafter be exercised by the holders of a majority of
the Purchaser Securities then outstanding.
(ix) Each representative shall be entitled to one
vote on all matters submitted to a vote of the Board; PROVIDED that so
long as MDCP is entitled (pursuant to Section 2(a)(ii)(A)) to designate
four representatives to the Board, one of the MDCP Representatives
(which MDCP Representative shall be selected from among the MDCP
Representatives present in person or by proxy for a Board vote by the
MDCP Representatives present in person (or, if none, by proxy) for such
vote) shall be entitled to two votes (and, during such time as an MDCP
Representative is entitled to two votes, a "majority" of the
representatives on the Board shall for all purposes (including
determinations of the existence of a quorum or of a majority vote
required for action by the Board) mean representatives entitled to cast
a majority of the total votes that may be cast by all representatives);
AND PROVIDED FURTHER that at such time as MDCP ceases to be entitled
(pursuant to Section 2(a)(ii)(A)) to designate four representatives to
the Board, each representative shall thereafter be entitled to only one
vote on all matters submitted to a vote by the Board.
(b) DIRECTOR EXPENSES; INDEMNITY INSURANCE; EXCULPATION. The
Company shall pay the reasonable out-of-pocket expenses incurred by each
representative in connection with attending the meetings of the Board, any Sub
Board and/or any committee thereof. So long as any representative designated
under this Agreement serves on the Board and for five years thereafter, the
Company shall maintain directors and officers indemnity insurance coverage
satisfactory to the Board at the time such insurance is first obtained and not
thereafter reduced in amount or coverage, and the LLC Agreement (or the
Company's other organizational documents, as appropriate) shall provide for
indemnification and exculpation of representatives to the fullest extent
permitted under applicable law.
(c) ATTENDANCE RIGHT. If at any time MDCP or DeGeorge fails
for any reason, or becomes ineligible, to designate any representatives pursuant
to this Section 2, then so long as such Investor together with its Affiliates
(and in the case of DeGeorge, Family Group) continues to hold at least 10% of
the MDCP Equity or DeGeorge Equity, as appropriate, the Company shall (i) permit
an individual selected by such Investor to attend as a non-voting observer (or,
in the case of a telephonic conference, listener) all meetings of the Board, any
Sub Board, or any committees thereof, (ii) provide such individual with all
written materials and other information (including, without limitation, copies
of meeting minutes and notices of future meetings) given to representatives in
connection with such meetings at the same time such materials and information
are given to the representatives, and (iii) pay the reasonable out-of-pocket
expenses incurred by such individual in connection with attending such meetings.
(d) TERMINATION. The provisions of this Section 2 shall
terminate automatically and be of no further force and effect upon the
consummation of a Sale of the Company; PROVIDED that
- 4 -
<PAGE>
the requirements of the second sentence of Section 2(b) shall continue in full
force for the time periods referenced therein.
3. RESTRICTIONS ON TRANSFER OF EXECUTIVE SECURITIES. Each
holder of Executive Securities accepts, acknowledges, and agrees that the
Executive Securities held by such Person and its transferees are subject to
significant restrictions on transfer, repurchase options, and certain other
agreements set forth in the Executive Securities Agreement to which such Person
is a party.
4. RESTRICTIONS ON TRANSFER OF PURCHASER SECURITIES.
(a) RETENTION OF PURCHASER SECURITIES.
(i) No holder of Investor Securities shall sell,
transfer, assign, pledge, or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by
operation of law) any interest in any Purchaser Securities (a
"TRANSFER") at any time prior to the first anniversary of the date of
the Prior Agreement, except pursuant to (A) a Sale of the Company, (B)
a Permitted Transfer (as defined below), (C) the repurchase provisions
set forth in the Equity Purchase Agreement, or (D) the forfeiture
provisions set forth in the Performance Vesting Agreement.
(ii) No holder of Purchaser Securities (other than
Investor Securities) shall Transfer any such Purchaser Securities at
any time prior to the second anniversary of the date of the Prior
Agreement, except pursuant to (A) a Sale of the Company, (B) a
Permitted Transfer (as defined below), (C) the repurchase provisions
set forth in the Equity Purchase Agreement, or (D) the forfeiture
provisions set forth in the Performance Vesting Agreement.
(iii) No holder of Purchaser Securities shall
Transfer any Purchaser Securities at any time after the expiration of
the applicable time period set forth in subparagraph 4(a)(i) or (ii)
above, except pursuant to (A) a Sale of the Company, (B) a Public Sale,
(C) a Permitted Transfer (as defined below), (D) the repurchase
provisions or the put rights provisions set forth in the Equity
Purchase Agreement, (E) the forfeiture provisions set forth in the
Performance Vesting Agreement, or (F) the provisions of paragraphs 4(b)
and 4(c) hereof.
(b) FIRST REFUSAL RIGHTS.
(i) At least 30 days prior to any Transfer of
Purchaser Securities (except pursuant to (A) a Sale of the Company, (B)
a Public Sale, (C) a Permitted Transfer (as defined below), (D) the
repurchase provisions or the put rights provisions set forth in the
Equity Purchase Agreement, or (E) the forfeiture provisions set forth
in the Performance Vesting Agreement), the Securityholder desiring to
make such Transfer (the "TRANSFERRING SECURITYHOLDER") shall deliver a
written notice (the "OFFER NOTICE") to each other Securityholder,
specifying in reasonable detail the identity of the prospective
transferee(s), the number and type of Purchaser Securities to be
transferred (the "OFFERED SECURITIES") and the price and other terms
and conditions of the proposed Transfer. The Transferring
- 5 -
<PAGE>
Securityholder shall not consummate such proposed Transfer until at
least 30 days after the delivery of the Offer Notice, unless the
parties to the Transfer have been finally determined pursuant to this
Section 4 prior to the expiration of such 30-day period (the date of
the first to occur of such final determination or such expiration is
referred to herein as the "AUTHORIZATION DATE").
(ii) Each holder of Purchaser Securities may elect to
purchase all (but not less than all) of such holder's Pro Rata Share
(as defined below) of the Offered Securities at the price and on the
other terms set forth in the Offer Notice, by delivering written notice
of such election to the Transferring Securityholder within 20 days
after delivery of the Offer Notice. Any Offered Securities not elected
to be purchased by the end of such 20-day period shall during the
immediately following 10-day period be reoffered by the Transferring
Securityholder on a pro rata basis to the holders of Purchaser
Securities who have elected to purchase their Pro Rata Share, and so on
until the holders of Purchaser Securities have elected to purchase all
of the Offered Securities or no holders of Purchaser Securities desire
to elect to purchase any remaining reoffered Offered Securities. For
purposes of this paragraph, the "PRO RATA SHARE" of each holder of
Purchaser Securities shall be equal to the quotient of (x) the number
of Purchaser Securities then held by such holder, DIVIDED BY (y) the
aggregate number of Purchaser Securities then held by all holders of
Purchaser Securities (other than the Transferring Securityholder).
(iii) If the holders of Purchaser Securities have
elected to purchase all of the Offered Shares from the Transferring
Securityholder, such purchase shall be consummated as soon as
practicable after the delivery of the election notice(s) to the
Transferring Securityholder, but in any event within 30 days after the
Authorization Date. Notwithstanding any other provision hereof, if the
sale price, or any portion thereof, for the Offered Securities is not
payable in the form of cash at closing or cash payable on a defined
basis (such as pursuant to simple promissory notes issued by the
prospective purchaser described in the Offer Notice), each holder of
Investor Securities electing to purchase Offered Securities pursuant to
this paragraph shall be required to pay only such portion, if any, of
the sale price described in the Offer Notice as consists of such cash
or cash-payable consideration, and delivery of such consideration to
the Transferring Securityholder shall be payment in full for such
Offered Securities.
(iv) If the holders of Purchaser Securities do not
elect, in the aggregate, to purchase all of the Offered Securities from
the Transferring Securityholder, all elections to purchase such Offered
Securities shall be null and void, and the Transferring Securityholder
shall have the right, within the 90 days following the Authorization
Date and subject to the provisions of subparagraph 4(c) below, to
transfer such Offered Securities to the transferee(s) specified in the
Offer Notice in the amounts specified in the Offer Notice at a price
not less than the price per security specified in the Offer Notice and
on other terms no more favorable to the transferee(s) thereof than
specified in the Offer Notice. Any Purchaser Securities not so
transferred within such 90-day period shall be reoffered to the holders
of Purchaser Securities pursuant to this paragraph 4(b) prior to any
subsequent Transfer.
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<PAGE>
(c) PARTICIPATION RIGHTS.
(i) Any holder of Purchaser Securities or Fully
Vested Securities who is not purchasing any Offered Securities pursuant
to paragraph 4(b) above may elect to participate (as set forth herein)
in any sale of Offered Securities pursuant to subparagraph 4(b)(iv)
above (and only in sales pursuant to such subparagraph) at the
Equivalent Price (as defined below) and on substantially the same terms
applicable to the Transferring Securityholder by giving written notice
of such election to the Transferring Securityholder within 30 days
after delivery of the Offer Notice.
(ii) Each holder of Fully Vested Securities electing
to participate in such Transfer shall be entitled to sell in the
contemplated Transfer a number of Fully Vested Securities equal to the
product of (A) the number of Fully Vested Securities held by such
holder, TIMES (B) a fraction, the numerator of which is the number of
Offered Securities proposed to be sold in such contemplated Transfer,
and the denominator of which is the aggregate number of Purchaser
Securities and Executive Securities (other than Un-Performance-Vested
Securities) then outstanding. Each holder of Purchaser Securities
electing to participate in such Transfer shall be entitled to sell in
the contemplated Transfer a number of Purchaser Securities equal to the
product of (x) the difference of the number of Offered Securities
proposed to be sold in the contemplated Transfer MINUS the number of
Fully Vested Securities to be included in such Transfer by all holders
of Fully Vested Securities electing to participate in such Transfer
(calculated pursuant to the immediately preceding sentence), TIMES (y)
a fraction, the numerator of which is the number of Purchaser
Securities held by such holder, and the denominator of which is the
aggregate number of Purchaser Securities held by the Transferring
Securityholder and all other Securityholders electing to participate in
such Transfer.
(iii) Each Transferring Securityholder shall use best
efforts to obtain the agreement of the prospective transferee(s) to the
participation of each electing Securityholder and to the inclusion of
the Purchaser Securities and/or Fully Vested Securities which each such
Securityholder has the right to, and has elected to, include in the
contemplated Transfer. No Transferring Securityholder shall transfer
any of its Purchaser Securities to any prospective transferee(s) unless
(A) such prospective transferee(s) agree to allow the participation of
all electing Securityholders and to the inclusion in such Transfer of
the Purchaser Securities and/or Fully Vested Securities which such
holders have the right to, and have elected to, include, or (B) the
Transferring Securityholder purchases from each electing Securityholder
the same number of securities (at the same price and on the same terms)
that such participating Securityholder would have been entitled to sell
had the prospective transferee(s) so agreed.
(iv) Each Securityholder transferring securities
pursuant to this paragraph 4(c) shall pay its pro rata share (based on
the number of Securityholder Securities to be transferred by such
Securityholder) of the expenses incurred by the Securityholders in
connection with such transfer and shall be obligated to participate
severally on a pro rata basis (based on the number of Securityholder
Securities to be sold) in any indemnification
- 7 -
<PAGE>
or other obligations that the Transferring Securityholder agrees to
provide in connection with such transfer (other than any such
obligations that relate solely to a particular Securityholder, such as
indemnification with respect to representations and warranties given by
a Securityholder regarding such Securityholder's title to and ownership
of Securityholder Securities, in respect of which only such
Securityholder shall be liable); PROVIDED that no holder shall be
obligated in connection with such indemnification or other obligations
with respect to an amount in excess of the net cash proceeds paid to
such holder in connection with such Transfer.
(d) DEFINITIONS. For purposes of this Section 4, the following
terms shall have the meanings set forth below:
"EQUIVALENT PRICE," as to any particular security shall mean
(i) with respect to any security of the same class of securities as any Offered
Securities being transferred by the Transferring Securityholder, the price
specified in the Offer Notice to be paid to the Transferring Securityholder for
each security of such class, (ii) with respect to any other security, the fair
value of such security (as based upon, or implied by, the price specified in the
Offer Notice to be paid to the Transferring Securityholder(s) for the type and
class of Offered Securities to be transferred in the contemplated Transfer) as
agreed upon by the Transferring Securityholder and the holders of a majority of
the Securityholder Securities electing to be included in such Transfer (or if
such Persons cannot reach agreement, as determined by an appraiser or investment
banker mutually agreeable to such Persons).
"PERMITTED TRANSFER" shall mean any transfer of Purchaser
Securities (i) in the case of any Securityholder that is an Investor, (A) to an
Affiliate of the transferor or (B) to any Person acquiring all or substantially
all of the transferor's portfolio investments, and (ii) in the case of an
Executive, pursuant to applicable laws of descent and distribution or among such
Person's Family Group (as defined in the Executive Securities Agreements);
PROVIDED that in each case the restrictions contained herein shall continue to
be applicable to such Purchaser Securities after any such Permitted Transfer,
and the transferee(s) of such Purchaser Securities shall have agreed in writing
to be bound by the provisions of this Agreement and the related agreements
contemplated hereby with respect to the Purchaser Securities so transferred.
(e) TERMINATION OF RESTRICTIONS. The provisions of this
Section 4 shall continue to apply to each Purchaser Security (and shall survive
any transfer thereof) until the earliest to occur of (A) the date on which such
Purchaser Security has been transferred in a Public Sale, pursuant to the
repurchase provisions or the put rights provisions of the Equity Purchase
Agreement, or pursuant to the forfeiture provisions of the Performance Vesting
Agreement, (B) a Sale of the Company, or (C) the consummation of a Public
Offering.
5. SALE OF THE COMPANY; INITIAL PUBLIC OFFERING.
(a) SECURITYHOLDERS' SALE OF THE COMPANY OBLIGATION. If at any
time the holders of a majority of the Purchaser Securities then outstanding,
approve a Sale of the Company (an "APPROVED SALE"), each holder of
Securityholder Securities shall vote for, consent to and raise no objections
against such Approved Sale. If the Approved Sale is structured as a sale of
equity, each
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<PAGE>
such holder of Securityholder Securities shall agree to sell all of such
holder's Securityholder Securities on the terms and conditions approved by the
holders of a majority of the Purchaser Securities then outstanding. Each holder
of Securityholder Securities shall be obligated to join on a pro rata basis
(based on the number of Securityholder Securities to be sold) in any
indemnification or other obligations that the sellers of Securityholder
Securities are required to provide in connection with the Approved Sale (other
than any such obligations that relate solely to a particular Securityholder,
such as indemnification with respect to representations and warranties given by
a Securityholder regarding such Securityholder's title to and ownership of
Securityholder Securities, in respect of which only such Securityholder shall be
liable); PROVIDED that no holder shall be obligated in connection with such
indemnification or other obligations with respect to an amount in excess of the
consideration received by such holder in connection with such transfer. Each
holder of Securityholder Securities shall take all other necessary or desirable
actions in connection with the consummation of the Approved Sale as requested by
the Company.
(b) CONDITIONS TO SALE OF THE COMPANY OBLIGATION. The
obligations of each holder of Securityholder Securities to approve or
participate in any Approved Sale are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, each
holder of a class of the Company's capital stock shall receive the same form of
consideration and the same amount of consideration for each share of such class
of capital stock to be sold in such Approved Sale, and (ii) if any holders of a
class of the Company's capital stock are given an option as to the form and
amount of consideration to be received, each holder of such class of capital
stock shall be given the same option.
(c) INITIAL PUBLIC OFFERING. In the event that the holders of
a majority of the Purchaser Securities then outstanding approve an initial
Public Offering, each holder of Securityholder Securities shall vote for,
consent to and raise no objections against such proposed Public Offering, and
shall take all such other necessary or desirable actions in connection with the
consummation of the Public Offering as reasonably requested by the Company.
(d) TERMINATION. The provisions of this paragraph 5 shall
terminate upon the completion of a Sale of the Company.
(e) DISSENTERS RIGHTS. Notwithstanding anything in this
paragraph 5 to the contrary, each holder of Securityholder Securities shall have
the right to exercise such holder's rights under Section 18-210 of the Act
(entitled "Contractual Appraisal Rights") with respect to a Sale of the Company.
6. RESTRICTIVE LEGEND. Each certificate evidencing
Securityholder Securities and each certificate issued in exchange for or upon
the transfer of any Securityholder Securities (if such securities remain
Securityholder Securities after such transfer) shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The securities represented by this certificate are subject to
a voting agreement, restrictions on transfer, and certain
other agreements set forth in a First Amended and Restated
Securityholders Agreement
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<PAGE>
dated as of January 28, 1999, among the issuer of such
securities (the "Issuer") and certain of the Issuer's
securityholders, as amended and modified from time to time. A
copy of such Securityholders Agreement shall be furnished
without charge by the Issuer to the holder hereof upon written
request."
The Company shall imprint such legend on certificates evidencing Securityholder
Securities outstanding as of the date hereof. The legend set forth above shall
be removed from the certificates evidencing any securities which cease to be
Securityholder Securities in accordance with the definition of such term herein.
7. EXECUTION OF THIS AGREEMENT BY TRANSFEREES. Prior to
transferring any Securityholder Securities to any Person (other than pursuant to
a Public Sale, a Sale of the Company, the put rights provisions of the Equity
Purchase Agreement, the repurchase provisions set forth in the Equity Purchase
Agreement or any Executive Securities Agreement, or the forfeiture provisions of
the Performance Vesting Agreement), the transferring Securityholder(s) shall
cause the prospective transferee(s) to be bound by this Agreement and to execute
and deliver to the Company and the other Securityholders a counterpart of this
Agreement.
8. DEFINITIONS.
"ACT" means the Delaware Limited Liability Company Act, 6
Del.L. Section 18-101, ET SEQ., as it may be amended from time to time, and any
successor thereto.
"ALLEN" has the meaning set forth with respect thereto in the
preamble.
"AFFILIATE" of any particular Person means (i) any other
Person controlling, controlled by or under common control with such particular
Person, where "control" means the possession, directly or indirectly, of the
power to direct the management and policies of a Person whether through the
ownership of voting securities, contract or otherwise, and (ii) if such Person
(other than the Company) is a partnership, the partners thereof.
"AUTHORIZATION DATE" has the meaning set forth with respect
thereto in Section 4(b)(i).
"AGREEMENT" has the meaning set forth with respect thereto in
the preamble.
"BOARD" means the board of managers of the Company or, if the
Company is hereafter converted into a corporation or other entity form, the
board of directors or comparable governing body of the Company.
"CLASS A SENIOR UNITS" means the Class A Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLASS B SENIOR UNITS" means the Class B Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
- 10 -
<PAGE>
"CLASS C SENIOR UNITS" means the Class C Senior Units of the
Company, having the rights and preferences set forth with respect thereto in the
LLC Agreement.
"CLEVENGER" has the meaning set forth with respect thereto in
the preamble.
"COMMON UNITS" means the Common Units of the Company, having
the rights and preferences set forth with respect thereto in the LLC Agreement.
"COMPANY" has the meaning set forth with respect thereto in
the preamble.
"DEGEORGE" has the meaning set forth with respect thereto in
the preamble.
"DEGEORGE HOLDINGS" has the meaning set forth with respect
thereto in the preamble.
"DEGEORGE EQUITY" means (i) the Preferred Units issued to
DeGeorge pursuant to the Equity Purchase Agreement, (ii) any Common Units issued
upon conversion of the Preferred Units referred to in clause (i), and (iii) any
securities issued directly or indirectly with respect to any of the foregoing
securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization, or upon conversion or exercise
of any of the foregoing securities; PROVIDED that DeGeorge Equity shall in no
event include any Senior Units. As to any particular securities constituting
DeGeorge Equity, such securities shall cease to be DeGeorge Equity when they
have been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force), or (c) repurchased or
otherwise acquired by the Company (or its assignees) or forfeited pursuant to
the terms of the Performance Vesting Agreement. Any reference herein to a
"majority of the DeGeorge Equity" or the "number of securities constituting
DeGeorge Equity" for purposes of comparison shall refer, with respect to any
particular securities constituting DeGeorge Equity, to the number of Common
Units (or equivalent common equity securities of the Company) then represented
by such DeGeorge Equity (on a fully diluted, as-if-converted basis).
"DEGEORGE REPRESENTATIVE" has the meaning set forth with
respect thereto in Section 2(a).
"DOVEY" has the meaning set forth with respect thereto in the
preamble.
"DOVEY LLC" has the meaning set forth with respect thereto in
the preamble.
"EQUITY PURCHASE AGREEMENT" means the equity purchase
agreement dated the date of the Prior Agreement (and amended and restated as of
the date hereof), by and among the Company, the Investors and the other Persons
listed on the signature pages thereto, as amended from time to time in
accordance with its terms.
"EQUIVALENT PRICE" has the meaning set forth with respect
thereto in Section 4(d).
- 11 -
<PAGE>
"EXECUTIVE" means each employee of the Company and its
Subsidiaries issued Common Units of the Company pursuant to an Executive
Securities Agreement.
"EXECUTIVE SECURITIES" has the meaning set forth with respect
thereto in the Equity Purchase Agreement.
"EXECUTIVE SECURITIES AGREEMENTS" has the meaning set forth
with respect thereto in the Equity Purchase Agreement.
"FAMILY GROUP" (i) as to DeGeorge, means DeGeorge's spouse,
siblings and descendants (whether natural or adopted) and any of such
descendants' spouses, any trust which is and remains solely for the benefit of
DeGeorge and/or DeGeorge's spouse, siblings, and/or descendants and/or such
descendants' spouses, and any family partnership the partners of which consist
solely of DeGeorge, such spouse, such siblings, such descendants, such
descendants' spouses, and/or such trusts; and (ii) as to any Executive, has the
meaning set forth in such Executive's Executive Securities Agreement.
"FULLY VESTED SECURITIES" means Executive Securities as of the
date of any determination to be made hereunder (and after giving effect to any
vesting which would occur under the Performance Vesting Agreement with respect
to any sale of securities on such date) which both (A) have time vested pursuant
to the provisions of the Executive Securities Agreements AND (B) are not
Un-Performance-Vested Securities.
"HOLLAND" has the meaning set forth with respect thereto in
the preamble.
"HUNDT" has the meaning set forth with respect thereto in the
preamble.
"INVESTOR" and "INVESTORS" have the meanings set forth with
respect thereto in the preamble.
"INVESTOR SECURITIES" means (i) the Preferred Units issued to
the Investors under the Equity Purchase Agreement, (ii) any Common Units issued
upon conversion of the Preferred Units referred to in clause (i), and (iii) any
securities issued directly or indirectly with respect to any of the foregoing
securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization, or upon conversion or exercise
of any of the foregoing securities; PROVIDED that Investor Securities shall in
no event include any Senior Units. As to any particular securities constituting
Investor Securities, such securities shall cease to be Investor Securities when
they have been (a) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, (b) distributed
to the public through a broker, dealer or market maker pursuant to Rule 144
under the Securities Act (or any similar provision then in force) or (c)
repurchased or otherwise acquired by the Company (or its assignees) or forfeited
pursuant to the terms of the Performance Vesting Agreement. Any reference herein
to a "majority of the Investor Securities" or the "number of Investor
Securities" for purposes of comparison shall refer, with respect to any
particular Investor Securities, to the number of Common Units (or equivalent
common
- 12 -
<PAGE>
equity securities of the Company) then represented by such Investor Securities
(on a fully diluted, as-if-converted basis).
"KEY EMPLOYEE" means any management or other key employee of
the Company or any of its Subsidiaries.
"LACEY" has the meaning set forth with respect thereto in the
preamble.
"LAUB" has the meaning set forth with respect thereto in the
preamble.
"LLC AGREEMENT" means that certain limited liability company
agreement governing the affairs of the Company, entered into by and among the
Investors, the Executives, and the other holders of unit membership interests in
the Company.
"MANAGEMENT EQUITY" means (i) the Common Units issued to the
Executives and to other Key Employees of the Company under the Executive
Securities Agreements (but not including any Un-Performance-Vested Securities),
and (ii) any securities issued directly or indirectly with respect to any of the
foregoing securities by way of a stock split, stock dividend, or other division
of securities, or in connection with a combination of securities,
recapitalization, merger, consolidation, or other reorganization, or upon
conversion or exercise of any of the foregoing securities; PROVIDED that
Management Equity shall in no event include any Senior Units; AND PROVIDED
FURTHER that Management Equity shall in no event include any securities held by
any Person other than a Key Employee of the Company and its Subsidiaries or any
transferee of a Key Employee in a transfer (A) pursuant to applicable laws of
descent and distribution or (B) among such Key Employee's Family Group (as
defined in the Executive Securities Agreements). As to any particular securities
constituting Management Equity, such securities shall cease to be Management
Equity when they have been (a) effectively registered under the Securities Act
and disposed of in accordance with the registration statement covering them, (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force), (c)
transferred to any Person other than (1) a Key Employee of the Company and its
Subsidiaries or (2) by a Key Employee in a transfer (x) pursuant to applicable
laws of descent and distribution or (y) among such Key Employee's Family Group
(as defined in the Executive Securities Agreements), or (d) repurchased or
otherwise acquired by the Company (or its assignees) or forfeited pursuant to
the terms of the Performance Vesting Agreement. Any reference herein to a
"majority of the Management Equity" or the "number of securities constituting
Management Equity" for purposes of comparison shall refer, with respect to any
particular securities constituting Management Equity, to the number of Common
Units (or equivalent common equity securities of the Company) then represented
by such Management Equity (on a fully diluted, as-if-converted basis, but (as
stated above) excluding any Un-Performance-Vested Securities).
"MANAGEMENT REPRESENTATIVE" has the meaning set forth with
respect thereto in Section 2(a).
"MDCP" has the meaning set forth with respect thereto in the
preamble.
- 13 -
<PAGE>
"MDCP EQUITY" means (i) the Preferred Units issued to MDCP
pursuant to the Equity Purchase Agreement, and (ii) any securities issued
directly or indirectly with respect to any of the foregoing securities by way of
a stock split, stock dividend, or other division of securities, or in connection
with a combination of securities, recapitalization, merger, consolidation, or
other reorganization, or upon conversion or exercise of any of the foregoing
securities; PROVIDED that MDCP Equity shall in no event include any Senior
Units. As to any particular securities constituting MDCP Equity, such securities
shall cease to be MDCP Equity when they have been (a) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them, (b) distributed to the public through a broker, dealer
or market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force), or (c) repurchased or otherwise acquired by the
Company (or its assignees) or forfeited pursuant to the terms of the Performance
Vesting Agreement. Any reference herein to a "majority of the MDCP Equity" or
the "number of securities constituting MDCP Equity" for purposes of comparison
shall refer, with respect to any particular securities constituting MDCP Equity,
to the number of Common Units (or equivalent common equity securities of the
Company) then represented by such MDCP Equity (on a fully diluted,
as-if-converted basis).
"MDCP REPRESENTATIVE" has the meaning set forth with respect
thereto in Section 2(a).
"OFFER NOTICE" has the meaning set forth with respect thereto
in Section 4(b)(i).
"OFFERED SECURITIES" has the meaning set forth with respect
thereto in Section 4(b)(i).
"OUTSIDE REPRESENTATIVE" has the meaning set forth with
respect thereto in Section 2(a).
"PERFORMANCE VESTING AGREEMENT" has the meaning set forth with
respect thereto in the Equity Purchase Agreement.
"PERMITTED TRANSFER," unless otherwise expressly stated, has
the meaning set forth with respect thereto in Section 4(d).
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED UNITS" means the Preferred Units of the Company,
having the rights and preferences set forth with respect thereto in the LLC
Agreement.
"PRIOR AGREEMENT" has the meaning set forth with respect
thereto in the preamble.
"PRO RATA SHARE" has the meaning set forth with respect
thereto in Section 4(b)(ii).
- 14 -
<PAGE>
"PUBLIC OFFERING" means any underwritten sale of the Company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1 (or
a successor form adopted by the Securities and Exchange Commission); PROVIDED
that the following shall not be considered a Public Offering: (i) any issuance
of common stock as consideration for a merger or acquisition, and (ii) any
issuance of common stock or rights to acquire common stock to existing
securityholders or to employees of the Company or its Subsidiaries on Form S-4
or S-8 (or a successor form adopted by the Securities and Exchange Commission)
or otherwise.
"PUBLIC SALE" means any sale of securities to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act (or any similar provision then in force).
"PURCHASER SECURITIES" means (i) the Preferred Units issued
pursuant to the Equity Purchase Agreement, (ii) any Common Units issued or
issuable upon conversion of the Preferred Units referred to in paragraph (i),
and (iii) any securities issued directly or indirectly with respect to any of
the foregoing securities by way of a stock split, stock dividend, or other
division of securities, or in connection with a combination of securities,
recapitalization, merger, consolidation, or other reorganization; PROVIDED that
Purchaser Securities shall not include any Senior Units. As to any particular
securities constituting Purchaser Securities, such securities shall cease to be
Purchaser Securities when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any similar provision
then in force), or (c) repurchased or otherwise acquired by the Company (or its
assignee) or forfeited pursuant to the terms of the Performance Vesting
Agreement. Any reference herein to a "majority of the Purchaser Securities" or
the "number of Purchaser Securities" for purposes of comparison shall refer,
with respect to any particular Purchaser Securities, to the number of Common
Units (or equivalent common equity securities of the Company) then represented
by such Purchaser Securities (on a fully diluted, as-if-converted basis).
"SALE OF THE COMPANY" means the arm's length sale of the
Company to a third party or group of third parties acting in concert, pursuant
to which such party or parties acquire (i) equity securities of the Company
possessing the voting power under normal circumstances to control the Company,
or (ii) all or substantially all of the Company's assets determined on a
consolidated basis (in either case, whether by merger, consolidation, sale or
transfer of the Company's equity securities, or sale or transfer of the
Company's consolidated assets).
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"SECURITYHOLDER" and "SECURITYHOLDERS" have the meanings set
forth with respect thereto in the preamble, and such terms include any Person
becoming a party hereto after the date hereof in accordance with the terms
hereof.
- 15 -
<PAGE>
"SECURITYHOLDER SECURITIES" means (i) any Preferred Units or
Common Units issued to or otherwise acquired by a Securityholder, and (ii) any
securities issued directly or indirectly with respect to any of the foregoing
securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization, or upon conversion or exercise
of any of the foregoing securities; PROVIDED that Securityholder Securities
shall in no event include any Senior Units. As to any particular securities
constituting Securityholder Securities, such securities shall cease to be
Securityholder Securities when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the registration statement
covering them, (b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any similar provision
then in force) or (c) repurchased or otherwise acquired by the Company (or its
assignees) or forfeited pursuant to the terms of the Performance Vesting
Agreement. Any reference herein to a "majority of the Securityholder Securities"
or the "number of Securityholder Securities" for purposes of comparison shall
refer, with respect to any particular Securityholder Securities, to the number
of Common Units (or equivalent common equity securities of the Company) then
represented by such Securityholder Securities (on a fully diluted,
as-if-converted basis, but excluding any Un-Performance-Vested Securities).
"SENIOR UNITS" means, collectively, the Class A Senior Units,
the Class B Senior Units, and the Class C Senior Units.
"SUB BOARD" has the meaning set forth with respect thereto in
Section 2(a).
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the limited liability company, partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that Person
or a combination thereof. For purposes hereof, a Person or Persons shall be
deemed to have a majority ownership interest in a limited liability company,
partnership, association or other business entity if such Person or Persons
shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control the
managing director or general partner of such limited liability company,
partnership, association or other business entity. For purposes of this
Agreement, if the context does not otherwise indicate in respect of which Person
the term "SUBSIDIARY" is used, the term "SUBSIDIARY" shall refer to any
Subsidiary of the Company.
"TRANSFERRING SECURITYHOLDER" has the meaning set forth with
respect thereto in Section 4(b)(i).
- 16 -
<PAGE>
"UN-PERFORMANCE-VESTED SECURITIES" means any Executive
Securities which are subject to performance vesting, but have not yet
performance vested, pursuant to the provisions of the Performance Vesting
Agreement.
9. TRANSFERS IN VIOLATION OF AGREEMENT. Any transfer or
attempted transfer of any Securityholder Securities in violation of any
provision of this Agreement shall be void, and none of the Company or any
Subsidiary shall record such purported transfer on its books or treat any
purported transferee of such Securityholder Securities as the owner of such
securities for any purpose.
10. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
11. COMPLETE AGREEMENT. Except as otherwise expressly set
forth herein, this Agreement, those documents expressly referred to herein and
related documents of even date herewith among the parties embody the complete
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way (including, without limitation, the
Prior Agreement).
12. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, none of which need contain the signature of more than one party
hereto but each of which shall be deemed an original and all of which taken
together shall constitute one and the same agreement. Any Key Employee of the
Company or its Subsidiaries who purchases securities pursuant to an Executive
Securities Agreement may at any time after the date hereof, with the written
approval of the Company, become a party to this Agreement by executing a
counterpart to this Agreement agreeing to be bound by the provisions hereof as
if such Person were an original signatory hereto (which joinder shall not
constitute an amendment, modification, or waiver hereof).
13. SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Company and its successors and assigns and the Securityholders and any
subsequent holders of Securityholder Securities and the respective successors
and assigns of each of them, so long as they hold Securityholder Securities,
whether so expressed or not.
14. REMEDIES. Each of the parties to this Agreement shall be
entitled to enforce their rights under this Agreement specifically, to recover
damages and costs (including reasonable attorney's fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages would
- 17 -
<PAGE>
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief
(without posting a bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
15. AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended, modified, or waived only with the prior written consent of the
holders of a majority of the Purchaser Securities outstanding at the time such
amendment or waiver becomes effective; PROVIDED that if any such modification,
amendment or waiver would adversely affect any Securityholder or Securityholders
relative to the Securityholders voting in favor thereof, such modification,
amendment or waiver shall also require the prior written approval of the holders
of a majority of the Securityholder Securities held by the Securityholder(s) so
adversely affected; AND PROVIDED FURTHER that if any such amendment,
modification or waiver is to a provision in this Agreement that requires a
specific vote to take an action thereunder or to take an action with respect to
the matters described therein, such amendment, modification or waiver shall not
be effective unless such vote is obtained with respect to such amendment,
modification or waiver. No course of dealing or the failure of any party to
enforce any of the provisions of this Agreement shall in any way operate as a
waiver of such provisions and shall not affect the right of such party
thereafter to enforce each and every provision of this Agreement in accordance
with its terms.
16. NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when (a) delivered
personally to the recipient, (b) telecopied to the recipient (with hard copy
sent to the recipient by reputable overnight courier service (charges prepaid)
that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a
business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by reputable overnight courier service
(charges prepaid). Such notices, demands and other communications shall be sent
to the Company at the address set forth below and to any Securityholder or other
holder of Securityholder Securities subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party.
TO THE COMPANY:
6300 Syracuse Way, Suite 355
Denver, Colorado 80111
Attention: Chief Executive Officer
Telephone: (303) 741-4788
Telecopy: (303) 741-4823
17. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AGREEMENT AND
THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION
- 18 -
<PAGE>
OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE
OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND
EXHIBITS HERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR
CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD
ORDINARILY APPLY.
18. BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the State of Colorado, the Republic of France, or the jurisdiction
where the Company's principal office is located, the time period shall
automatically be extended to the business day immediately following such
Saturday, Sunday or legal holiday.
19. DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT
CONSTRUCTION. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Except as otherwise expressly provided herein, reference to any agreement,
document, or instrument means such agreement, document, or instrument as amended
or otherwise modified from time to time in accordance with the terms thereof,
and if applicable hereof. The use of the words "include" or "including" in this
Agreement shall be by way of example rather than by limitation. The use of the
words "or," "either" or "any" shall not be exclusive. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. If an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
20. DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.
21. EFFECTIVENESS OF AGREEMENT. This Agreement shall be valid,
binding, and effective against each holder of Securityholder Securities when it
has been signed by such holder. Pursuant to Section 15 of the Prior Agreement,
this Agreement amending and restating the Prior Agreement shall be valid,
binding, and effective against all Securityholders when it has been signed by
the holders of a majority of the Purchaser Securities.
- 19 -
<PAGE>
* * * *
- 20 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
First Amended and Restated Securityholders Agreement on the day and year first
above written.
COMPANY:
COMPLETEL, LLC
By /s/ James E. Dovey
---------------------------------------
James E. Dovey, its Chairman and CEO
SECURITYHOLDERS:
DEGEORGE HOLDINGS LIMITED PARTNERSHIP
BY LPL INVESTMENT GROUP, INC., ITS GENERAL PARTNER
By /s/ Lawrence F. DeGeorge
---------------------------------------
Lawrence F. DeGeorge, its Chairman
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P., its general partner
By Madison Dearborn Partners, Inc., its general partner
By /s/ Paul J. Finnegan
---------------------------------------
Its Managing Director
---------------------------------------
/s/ James C. Allen
-------------------------------------------
James C. Allen
/s/ Royce J. Holland
-------------------------------------------
Royce J. Holland
/s/ George T. Laub
-------------------------------------------
George T. Laub
(Signature page for First Amended and Restated Securityholders Agreement)
<PAGE>
/s/ Reed E. Hundt
-------------------------------------------
Reed E. Hundt
DOVEY FAMILY PARTNERS LLLP
By /s/ James E. Dovey
----------------------------------------
James E. Dovey, its general partner
DOVEY COMPANY LLC
By /s/ James E. Dovey
----------------------------------------
James E. Dovey, its manager
/s/ James E. Dovey
-------------------------------------------
James E. Dovey
/s/ William H. Pearson
-------------------------------------------
William H. Pearson
/s/ Richard N. Clevenger
-------------------------------------------
Richard N. Clevenger
/s/ David E. Lacey
-------------------------------------------
David E. Lacey
(Signature page for First Amended and Restated Securityholders Agreement)
<PAGE>
OTHER PERSONS (SIGNATURES OF WHOM ARE
NOT INCLUDED) WHO ARE PARTY TO THIS
AGREEMENT PURSUANT TO THEIR EXECUTIVE
SECURITIES AGREEMENTS (AND/OR JOINDER
AGREEMENTS ENTERED INTO IN CONNECTION
THEREWITH):
----------------------------------------
RICHARD FOLLIOT
ANNA LASCAR
JEAN-MARIE LE MONZE
CHARLES MENATTI
JOHN SEDER
ALEXANDRE WESTPHALEN
NICOLAS PITANCE
CLAUDE LEMAIRE
MICHEL PICARIELLO
FRANK LAUTERSLAGER
JOHN PUHL
HAROLD F. CAREY, JR.
GUY GENSOLLEN
PIERRE WATTELIER
HANSJORG RIEDER
IAN SEXTON
JEAN-FRANCOIS GOLHEN
JEROME DE VITRY
MARTINE CLARKSON
CHANTAL LEBON
MARIE LECOCQ
ANNE-CATHERINE NICOSIA
VALERIE HOTTE
MARIE-CHRISTINE BOUDIN
VAN-LINH SIHARATH
ISABELLE DUBIEN
NADEGE GRIFFIT
GREGORY BURLINCHON
CECILE AFFRET
JEAN RODRIGUEZ
CATHERINE GROSJEAN
CHRISTY CANTERBURY
KATHLEEN HANLON
(Signature page for First Amended and Restated Securityholders Agreement)
<PAGE>
Exhibit 10.14
FIRST AMENDED AND RESTATED
PERFORMANCE VESTING AGREEMENT
THIS FIRST AMENDED AND RESTATED PERFORMANCE VESTING AGREEMENT
(this "AGREEMENT") is made as of January 28, 1999, by and between CompleTel LLC
(formerly known as CableTel Europe LLC), a Delaware limited liability company
(the "COMPANY"), Madison Dearborn Capital Partners II, L.P. ("MDCP"), DeGeorge
Holdings Limited Partnership ("DEGEORGE HOLDINGS"), James C. Allen ("ALLEN"),
Royce J. Holland ("HOLLAND"), George T. Laub ("LAUB"), Reed E. Hundt ("HUNDT"),
Dovey Company LLC ("DOVEY LLC"), William H. Pearson ("PEARSON"), Richard N.
Clevenger ("CLEVENGER"), David E. Lacey ("LACEY"), and the other Persons listed
on the signature pages hereto. MDCP, DeGeorge Holdings, Allen, Holland, Laub,
and Hundt are referred to herein collectively as the "INVESTORS" and
individually as an "INVESTOR." Each of the Investors, Dovey LLC, Pearson,
Clevenger, and Lacey are referred to herein collectively as the "PURCHASERS" and
individually as a "PURCHASER." Pearson, Clevenger, Lacey, and each of the other
Persons listed on the attached SCHEDULE OF PERFORMANCE VESTING UNITS are
referred to herein collectively as the "EXECUTIVES" and individually as an
"EXECUTIVE." Capitalized terms used but not otherwise defined herein have the
meanings ascribed to such terms in Section 1 hereof.
As of May 18, 1998, the Company and MDCP, Lawrence F. DeGeorge
("DEGEORGE"), James E. Dovey ("DOVEY"), Pearson, and Clevenger entered into a
performance vesting agreement (the "PRIOR AGREEMENT"). The parties hereto desire
that, effective as of the date hereof, the Prior Agreement shall be amended and
restated in its entirety as set forth below.
Certain of the securities owned by the Executives on the date
hereof are subject only to time vesting and others are subject to both time
vesting and performance vesting. Section 2 of the Executive Securities
Agreements each entered into between the Company and one of the Executives (the
"EXECUTIVE SECURITIES AGREEMENTS") contains the provisions governing the time
vesting of both groups of securities. This Performance Vesting Agreement
contains the provisions governing the performance vesting of the second group of
securities.
For purposes of this Agreement, the term "MANAGEMENT
SECURITIES" refers to the securities which are subject to performance vesting
under this Agreement, as set forth on the SCHEDULE OF PERFORMANCE VESTING
SECURITIES attached hereto, whether or not they have performance vested. Those
Management Securities which have performance vested pursuant to this Agreement
are referred to herein as "VESTED MANAGEMENT SECURITIES," whether or not they
have time vested under the Executive Securities Agreements. Those outstanding
Management Securities which have not yet performance vested pursuant to this
Agreement are referred to herein as "UNVESTED MANAGEMENT SECURITIES," whether or
not they have time vested under the Executive Securities Agreements.
Of the currently outstanding Management Securities,
approximately 66.67% are subject to the performance vesting provisions set forth
in Section 3 below (the "SLOPE MANAGEMENT SECURITIES"), and approximately 33.33%
are subject to the performance vesting provisions set forth
<PAGE>
in Section 4 below (the "CLIFF MANAGEMENT SECURITIES"). Each time MDCP sells or
transfers all or a portion of its equity in the Company (with certain exceptions
and qualifications set forth in Section 3(b) below), a portion of the Slope
Management Securities will performance vest and/or be forfeited, depending on
the price received or deemed received by MDCP in the transaction. The Cliff
Management Securities, on the other hand, will vest as a block (a) upon any such
sale or transfer of MDCP's equity if the price received or deemed received by
MDCP equals or exceeds certain amounts specified in Section 4 below, and (b)
upon the closing of a Qualified Public Offering.
Each time Management Securities vest, the same number of
Common Units owned or deemed owned by the Purchasers will be forfeited (pro rata
among the holders thereof), and each time Management Securities are forfeited,
the same number of Common Units owned or deemed owned by the Purchasers will no
longer be deemed forfeitable (pro rata among the holders thereof).
With respect to the relationship between time vesting and
performance vesting of Executive Securities, Section 2(e)(ii) of the Executive
Securities Agreements provides that of the securities subject to both
performance vesting and time vesting (i.e., the Management Securities), those
which have performance vested pursuant to this Agreement will time vest before
those which have not yet performance vested pursuant to this Agreement. This
Agreement (as well as Section 2(e)(iii) of the Executive Securities Agreements)
provides for the analogous case: Management Securities subject to this Agreement
which have time vested pursuant to the Executive Securities Agreements will
performance vest before any such Management Securities which have not yet time
vested.
NOW, THEREFORE, in consideration of the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement shall
have the respective meanings for purposes of this Agreement set forth below. All
references which are not otherwise identified to the preamble or sections refer
to the preamble or such sections of this Agreement.
"AGREEMENT" is defined in the preamble.
"ALLEN" has the meaning set forth with respect thereto in the
preamble.
"APPLICABLE VESTING PERCENTAGE" is defined in Section 3(d).
"CLASS A SENIOR UNITS" means the Class A Senior Units of the
Company, having the rights and preferences set forth in the LLC Agreement.
"CLASS B SENIOR UNITS" means the Class B Senior Units of the
Company, having the rights and preferences set forth in the LLC Agreement.
"CLASS B SENIOR VALUE" has the meaning ascribed to such term
in the LLC Agreement.
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"CLASS B SENIOR YIELD" has the meaning ascribed to such term
in the LLC Agreement.
"CLASS C SENIOR UNITS" means the Class C Senior Units of the
Company, having the rights and preferences set forth in the LLC Agreement.
"CLEVENGER" is defined in the preamble.
"CLIFF MANAGEMENT SECURITIES" is defined in the preamble.
"COMMON UNITS" means the Common Units of the Company, having
the rights and preferences set forth in the LLC Agreement.
"DEGEORGE" is defined in the preamble.
"DEGEORGE HOLDINGS" is defined in the preamble.
"DOVEY" is defined in the preamble.
"DOVEY LLC" is defined in the preamble.
"EQUITY PURCHASE AGREEMENT" means the equity purchase
agreement dated the date of the Prior Agreement (and amended and restated as of
the date hereof), by and among the Company and the Purchasers, as amended from
time to time in accordance with its terms.
"EXECUTIVE" and "EXECUTIVES" are defined in the preamble.
"EXECUTIVE SECURITIES" means the Executive Securities as
defined under the Executive Securities Agreements.
"EXECUTIVE SECURITIES AGREEMENTS" has the meaning set forth in
the preamble and includes any Executive Securities Agreements entered into by
the Company with its Key Employees after the date hereof.
"EXPIRATION DATE" is defined in Section 5.
"FAIR MARKET VALUE" is defined in Section 8(a).
"FORFEITABLE PURCHASER SECURITIES" means 7,500/82,500 (I.E.,
1/11th) of the Purchaser Securities which are derived from the Preferred Units
held by each Purchaser on the date of this amendment and restatement (which
Preferred Units and their holders are set forth on the "Schedule of Purchasers"
attached to the Equity Purchase Agreement as in effect on the date of this
amendment and restatement), subject to the following qualifications:
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(i) If any Forfeitable Purchaser Securities are actually
forfeited pursuant to the provisions hereof, such forfeited Forfeitable
Purchaser Securities shall by such forfeiture cease to be Forfeitable
Purchaser Securities.
(ii) Contemporaneously with any MDCP Sale, the number of
Forfeitable Purchaser Securities held by each holder thereof that would
be forfeited pursuant to Section 3 in connection with such MDCP Sale if
the Return Multiple for such MDCP Sale were 10 shall (to the extent not
actually forfeited in connection with such MDCP Sale pursuant to the
provisions hereof) no longer be subject to forfeiture hereunder and
shall forever cease to be Forfeitable Purchaser Securities.
(iii) Upon the Expiration Date, all Forfeitable Purchaser
Securities shall (to the extent not actually forfeited in connection
with a deemed MDCP Sale on the Expiration Date pursuant to the
provisions hereof) no longer be subject to forfeiture hereunder and
shall forever cease to be Forfeitable Purchaser Securities.
(iv) A pro-rata portion of each holder's Forfeitable Purchaser
Securities shall forever cease to be Forfeitable Purchaser Securities
if (A) any Unvested Management Securities are repurchased pursuant to
the provisions of an Executive Securities Agreement or (B) any
authorized but unissued Unvested Management Securities are canceled
pursuant to Section 2.2(c)(iii)(II) of the LLC Agreement. The number of
each holder's Forfeitable Purchaser Securities which shall cease to be
Forfeitable Purchaser Securities pursuant to this subparagraph (iv)
shall be determined by multiplying
(x) the number of Unvested Management Securities so
repurchased or canceled,
TIMES
(y) a fraction, the numerator of which is the number of
Forfeitable Purchaser Securities held by such holder, and the
denominator of which is the aggregate number of Forfeitable
Purchaser Securities held by all holders.
Any reference herein to a "majority of the Forfeitable Purchaser
Securities" or the "number of Forfeitable Purchaser Securities" for
purposes of comparison shall refer, with respect to any particular
Forfeitable Purchaser Securities, to the number of Common Units (or
equivalent common equity securities of the Company) then represented by
such Forfeitable Purchaser Securities (on a fully diluted,
as-if-converted basis).
"HOLLAND" has the meaning set forth with respect thereto in
the preamble.
"HUNDT" has the meaning set forth with respect thereto in the
preamble.
"INVESTOR" and "INVESTORS" are defined in the preamble.
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<PAGE>
"INVESTOR SECURITIES" has the meaning set forth in the Equity
Purchase Agreement. Any reference herein to a "majority of the Investor
Securities" or the "number of Investor Securities" for purposes of comparison
shall refer, with respect to any particular Investor Securities, to the number
of Common Units (or equivalent common equity securities of the Company) then
represented by such Investor Securities (on a fully diluted, as-if-converted
basis).
"KEY EMPLOYEE" means any management or other key employee of
the Company or any of its Subsidiaries.
"LACEY" has the meaning set forth with respect thereto in the
preamble.
"LAUB" has the meaning set forth with respect thereto in the
preamble.
"LIQUIDATION VALUE" has the meaning ascribed thereto in the
LLC Agreement.
"LLC AGREEMENT" means the limited liability company agreement
governing the affairs of the Company, as amended from time to time in accordance
with its terms.
"MANAGEMENT SECURITIES" is defined in the preamble.
"MDCP" is defined in the preamble.
"MDCP FORFEITABLE SECURITIES" means the Forfeitable Purchaser
Securities originally held by MDCP (and such MDCP Forfeitable Securities shall
cease to be MDCP Forfeitable Securities when they have ceased to be Forfeitable
Purchaser Securities in accordance with the terms of this Agreement).
"MDCP SALE" is defined in Section 3(b).
"PEARSON" is defined in the preamble.
"PERCENTAGE OF MDCP SECURITIES SOLD" is defined in
Section 3(c).
"PERFORMANCE VESTING PERIOD" is defined in Section 3(a).
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PLEDGED SECURITIES" has the meaning set forth with respect
thereto in Section 7(a).
"PREFERRED UNITS" means the Preferred Units of the Company,
having the rights and preferences set forth with respect thereto in the LLC
Agreement.
"PREFERRED YIELD" has the meaning ascribed to such term in the
LLC Agreement.
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<PAGE>
"PUBLIC OFFERING" means any underwritten sale of the Company's
common stock pursuant to an effective registration statement under the
Securities Act filed with the Securities and Exchange Commission on Form S-1 (or
a successor form adopted by the Securities and Exchange Commission); provided
that the following shall not be considered a Public Offering: (i) any issuance
of common stock as consideration for a merger or acquisition, and (ii) any
issuance of common stock or rights to acquire common stock to existing
securityholders or to employees of the Company or its Subsidiaries on Form S-4
or Form S-8 (or a successor form adopted by the Securities and Exchange
Commission) or otherwise.
"PURCHASER" and "PURCHASERS" are defined in the preamble.
"PURCHASER SECURITIES" has the meaning set forth in the Equity
Purchase Agreement. Any reference herein to a "majority of the Purchaser
Securities" or the "number of Purchaser Securities" for purposes of comparison
shall refer, with respect to any particular Purchaser Securities, to the number
of Common Units (or equivalent common equity securities of the Company) then
represented by such Purchaser Securities (on a fully diluted, as-if-converted
basis).
"QUALIFIED PUBLIC OFFERING" means a Public Offering where BOTH
(i) the proceeds (net of underwriting discounts and
commissions) received by the Company in exchange for its issuance of
shares of common stock in such Public Offering equal or exceed $60
million, AND
(ii) the price per share of common stock paid to the Company
in such Public Offering equals or exceeds the product of (x) 3.0 TIMES
(y) the quotient of (A) the aggregate capital contributions to the
Company under the Equity Purchase Agreement (including the initial
purchase price and all Subsequent Contributions (as defined in the
Equity Purchase Agreement)) made on or prior to the date of such Public
Offering with respect to all Purchaser Securities then outstanding,
DIVIDED BY (B) the number of shares of the Company's common stock
represented by all Purchaser Securities (on a fully diluted,
as-if-converted basis) outstanding immediately prior to the
consummation of such Public Offering.
"RETURN MULTIPLE" is defined in Section 3(e).
"SALE OF THE COMPANY" means the arm's length sale of the
Company to a third party or group of third parties acting in concert, in
connection with which such party or parties acquire (i) equity securities of the
Company possessing the voting power under normal circumstances to control the
Company, or (ii) all or substantially all of the Company's assets determined on
a consolidated basis (in either case, whether such sale takes the form of a
merger, consolidation, sale or transfer of the Company's equity securities, or
sale or transfer of the Company's consolidated assets).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
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<PAGE>
"SECURITYHOLDERS AGREEMENT" means the securityholders
agreement dated the date of the Prior Agreement (and amended and restated as of
the date hereof), by and among the Company and certain of its securityholders,
as amended from time to time in accordance with its terms.
"SENIOR UNITS" means the Company's Class A Senior Units, Class
B Senior Units, and Class C Senior Units.
"SLOPE MANAGEMENT SECURITIES" is defined in the preamble.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director, manager or general
partner of such limited liability company, partnership, association or other
business entity. For purposes of this Agreement, if the context does not
otherwise indicate in respect of which Person the term "SUBSIDIARY" is used, the
term "SUBSIDIARY" shall refer to any Subsidiary of the Company.
"UNVESTED MANAGEMENT SECURITIES" is defined in the preamble.
"UNVESTED CLIFF MANAGEMENT SECURITIES" means Unvested Management Securities
which are Cliff Management Securities. "UNVESTED SLOPE MANAGEMENT SECURITIES"
means Unvested Management Securities which are Slope Management Securities.
"VALUED ASSETS" is defined in Section 8(a)(i).
"VESTED MANAGEMENT SECURITIES" is defined in the preamble.
"VESTED CLIFF MANAGEMENT SECURITIES" means Vested Management Securities which
are Cliff Management Securities. "VESTED SLOPE MANAGEMENT SECURITIES" means
Vested Management Securities which are Slope Management Securities.
"VESTING EVENT" is defined in Section 8(a).
2. SECURITIES SUBJECT TO PERFORMANCE VESTING. As to each
Executive, the number of such Executive's Executive Securities as are designated
Management Securities opposite such Executive's name on the attached SCHEDULE OF
PERFORMANCE VESTING SECURITIES shall be subject to performance vesting pursuant
to the terms and conditions set forth in this Agreement. If any Key Employee of
the Company and its Subsidiaries is issued any Common Units pursuant to Section
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2.1(c) of the LLC Agreement, such Key Employee shall be required to enter into
an Executive Securities Agreement in a form approved by the Company and the
number of such Common Units as are specified in such Executive Securities
Agreement as constituting "Performance-Vesting Securities" shall be deemed
Management Securities subject to performance vesting pursuant to the terms and
conditions set forth in this Agreement, and the Company shall revise and update
the attached SCHEDULE OF PERFORMANCE VESTING SECURITIES in order to reflect such
additional Management Securities.
3. PERFORMANCE VESTING OF SLOPE MANAGEMENT SECURITIES.
(a) Contemporaneously with any MDCP Sale occurring during the
seven-year period commencing on the date of the Prior Agreement (the
"PERFORMANCE VESTING PERIOD"):
(i) There shall performance vest a number (if any) of the Unvested
Slope Management Securities held by each holder thereof equal to the
product of
(x) the number of Unvested Slope Management Securities held by
such holder immediately prior to such MDCP Sale,
MULTIPLIED BY
(y) the Percentage of MDCP Securities Sold in such MDCP Sale,
MULTIPLIED AGAIN by
(z) the Applicable Vesting Percentage for such MDCP Sale.
(ii) There shall be forfeited a number of Unvested Slope Management
Securities held by each holder thereof equal to the difference (if any)
between
(x) the maximum number of such holder's Unvested Slope
Management Securities that could performance vest under
Section 3(a)(i) in connection with such MDCP Sale (i.e., the
number that would performance vest if the Return Multiple for
such MDCP Sale were 10),
MINUS
(y) the number of such holder's Unvested Slope Management
Securities that will actually performance vest under Section
3(a)(i) in connection with such MDCP Sale,
and such forfeiture will be automatic, effective without further action
by the Company or the holder of such Unvested Slope Management
Securities, and such holder shall thereafter no longer exercise nor
have the right to exercise any of its rights with respect to such
forfeited securities.
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(iii) There shall also be forfeited a number of Forfeitable Purchaser
Securities held by each holder thereof equal to the product of
(x) the aggregate number of Unvested Slope Management
Securities held by all holders thereof that will performance
vest in connection with such MDCP Sale
MULTIPLIED BY
(y) a fraction, the numerator of which is the number of
Forfeitable Purchaser Securities held by such holder
immediately prior to such MDCP Sale, and the denominator of
which is the aggregate number of Forfeitable Purchaser
Securities outstanding immediately prior to such MDCP Sale,
and such forfeiture will also be automatic, effective without further
action by the Company or the holder of such Forfeitable Purchaser
Securities, and such holder shall thereafter no longer exercise nor
have the right to exercise any of its rights with respect to such
forfeited securities.
(iv) A number of Forfeitable Purchaser Securities held by each holder
shall not be forfeited and shall no longer be deemed Forfeitable
Purchaser Securities subject to forfeiture after such MDCP Sale, equal
to the product of:
(x) the aggregate number of Unvested Slope Management
Securities (if any) held by all holders thereof that will be
forfeited in connection with such MDCP Sale
MULTIPLIED BY
(y) a fraction, the numerator of which is the number of
Forfeitable Purchaser Securities held by such holder
immediately prior to such MDCP Sale, and the denominator of
which is the aggregate number of Forfeitable Purchaser
Securities outstanding immediately prior to such MDCP Sale.
(b) As used herein, "MDCP SALE" means any sale or transfer of
Purchaser Securities by MDCP to any Person (including a transfer by way of
merger or consolidation, a transfer to the Company in connection with any
redemption or liquidation of such securities, or a distribution-in-kind of such
securities to MDCP's partners), OTHER THAN:
(i) any conversion of Preferred Units, or
(ii) any recapitalization or other reorganization (including, without
limitation, in connection with any conversion of the Company into a
corporation or other entity form) in which MDCP's ownership of the
Company's equity securities immediately after such transaction is
substantially identical to MDCP's ownership of the Company's equity
securities immediately prior to such transaction);
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Notwithstanding the foregoing, any holder of Unvested Management Securities may
elect in a writing delivered within 7 days after the MDCP Sale to the holder or
holders of a majority of the Purchaser Securities then outstanding to ignore any
MDCP Sale in which all or substantially all of the consideration for the
Purchaser Securities transferred by MDCP constitutes publicly or privately
traded securities (other than a Sale of the Company, a liquidation or redemption
of Purchaser Securities by the Company, or a distribution-in-kind of Purchaser
Securities to MDCP's partners), and solely as to each such electing holder such
ignored MDCP Sale shall for purposes hereof (and all calculations hereunder) be
treated as not having been an MDCP Sale.
(c) As used herein, the "PERCENTAGE OF MDCP SECURITIES SOLD"
in any MDCP Sale shall be equal to the quotient of
(x) the number of Purchaser Securities transferred by MDCP in
such MDCP Sale
DIVIDED BY
(y) the number of Purchaser Securities (excluding all
Forfeitable Purchaser Securities other than Forfeitable
Purchaser Securities which were transferred by MDCP in such
MDCP Sale) held by MDCP immediately prior to such MDCP Sale.
(d) For purposes hereof, the "APPLICABLE VESTING PERCENTAGE"
for any MDCP Sale shall be equal to the quotient of (x) the Return Multiple for
such MDCP Sale MINUS 3 (PROVIDED that such difference shall not be less than
zero nor greater than 7), DIVIDED BY (y) 7.
(e) For purposes hereof, the "RETURN MULTIPLE" for any MDCP
Sale shall be equal to the quotient of (x) the sum (without duplication) of (i)
the Fair Market Value of all consideration (including assumed indebtedness)
received by MDCP in such MDCP Sale in exchange for the Purchaser Securities
transferred by MDCP in such MDCP Sale (or, with respect to any MDCP Sale that is
a distribution to MDCP's partners, the Fair Market Value of the Purchaser
Securities so distributed) PLUS (ii) the aggregate dividends or other
distributions made by the Company to MDCP on or prior to the date of such MDCP
Sale in respect of the Purchaser Securities transferred by MDCP in such MDCP
Sale, DIVIDED BY (y) the aggregate capital contributions to the Company pursuant
to the Equity Purchase Agreement (including the initial purchase price and all
Subsequent Contributions (as defined in the Equity Purchase Agreement)) made on
or prior to the date of such MDCP Sale in respect of the Purchaser Securities
transferred by MDCP in such MDCP Sale (as well as in respect of all MDCP
Forfeitable Securities that will be forfeited pursuant to this Agreement in
connection with such MDCP Sale).
4. PERFORMANCE VESTING OF CLIFF MANAGEMENT SECURITIES. All
Cliff Management Securities shall performance vest contemporaneously with the
first to occur of (i) any MDCP Sale occurring during the Performance Vesting
Period where the Return Multiple for such MDCP Sale equals or exceeds 3 or (ii)
any Qualified Public Offering occurring during the Performance Vesting Period.
Contemporaneously with such vesting, there shall be forfeited a number of
Forfeitable Purchaser Securities held by each holder thereof equal to the
product of
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(x) the aggregate number of Unvested Cliff Management Securities held
by all holders thereof that will performance vest under this Section 4
in connection with such MDCP Sale or Qualified Public Offering (as the
case may be)
MULTIPLIED BY
(y) a fraction, the numerator of which is the number of Forfeitable
Purchaser Securities held by such holder immediately prior to such MDCP
Sale or Qualified Public Offering (as the case may be), and the
denominator of which is the aggregate number of Forfeitable Purchaser
Securities outstanding immediately prior to such MDCP Sale or Qualified
Public Offering (as the case may be),
and such forfeiture will be automatic, effective without further action by the
Company or the holder of such Forfeitable Purchaser Securities, and such holder
shall thereafter no longer exercise nor have the right to exercise any of its
rights with respect to such forfeited securities.
5. EXPIRATION OF PERFORMANCE VESTING PERIOD. If any Unvested
Management Securities remain outstanding upon the expiration of the Performance
Vesting Period (the "EXPIRATION DATE"), there shall immediately prior to such
expiration be deemed to have occurred an MDCP Sale in which MDCP sold all
Purchaser Securities held by MDCP on such Expiration Date for a purchase price
equal to the Fair Market Value of such Purchaser Securities. Upon such
Expiration Date, any Unvested Management Securities that do not performance vest
pursuant to Sections 3 or 4 in connection with such hypothetical MDCP Sale shall
without further action by the Company or the holder of such Unvested Management
Securities automatically be deemed forfeited, and such holder shall thereafter
no longer exercise nor have the right to exercise any of its rights with respect
to such forfeited securities.
6. FORFEITURE PROCEDURE.
(a) Upon any forfeiture of any Unvested Management Securities
pursuant to this Agreement, the holder of such forfeited securities shall
promptly submit the certificate or certificates (if any) representing such
forfeited securities to the Company for cancellation. Upon such submission, the
Company shall take all actions necessary to retire such forfeited securities and
to cause such securities to resume the status of authorized and unissued Common
Units (or other equivalent common equity securities of the Company). If the
Management Securities are certificated, the Company shall promptly cancel the
submitted certificate(s) and issue to the holder thereof a certificate
representing the number of securities (if any) which were evidenced by the
submitted certificate(s) but which were not forfeited.
(b) Upon any forfeiture of any Forfeitable Purchaser
Securities pursuant to this Agreement, the holder of such forfeited securities
shall promptly submit the certificate or certificates (if any) representing the
number of such forfeited Forfeitable Purchaser Securities to the Company for
cancellation. Each holder of Forfeitable Purchaser Securities may satisfy its
obligation pursuant to the immediately preceding sentence by tendering
Forfeitable Purchaser Securities constituting Common Units and/or Forfeitable
Purchaser Securities constituting Preferred Units, together
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aggregating the number of such holder's Forfeitable Purchaser Securities that
are forfeited. Upon any such submission, the Company shall take all actions
necessary to retire such forfeited securities and to cause such securities to
resume the status of authorized and unissued Common Units (or other equivalent
common equity securities of the Company) or Preferred Units, as the case may be.
If the Purchaser Securities are certificated, the Company shall promptly cancel
the submitted certificate(s) and issue to the holder thereof a certificate
representing the number of securities (if any) which were evidenced by the
submitted certificate(s) but which were not forfeited. If any holder's
Forfeitable Purchaser Securities constituting Preferred Units are forfeited, the
Company shall in connection with such forfeiture issue to such holder an equal
number of Class B Senior Units (or equivalent non-convertible preferred
securities), and each such Class B Senior Unit issued in connection with such
forfeiture shall be deemed as of the date of such forfeiture to have a Class B
Senior Value and accrued, paid, unpaid, and accumulated Class B Senior Yield
thereon equal to the Liquidation Value and the accrued, paid, unpaid, and
accumulated Preferred Yield thereon, respectively, of the Preferred Units in
exchange for which such Class B Senior Unit was issued.
7. PLEDGE OF UNVESTED MANAGEMENT SECURITIES.
(a) PLEDGE. Each Executive hereby initially pledges to the
Company, and grants to the Company a security interest in, such Executive's
Unvested Management Securities (such Executive's "PLEDGED SECURITIES") as
security for the performance of such Executive's duties and obligations pursuant
to this Agreement.
(b) DELIVERY OF PLEDGED SECURITIES. Upon the execution of this
Agreement, each Executive shall deliver to the Company the certificate(s) (if
any) representing such Executive's Pledged Securities, together with duly
executed forms of assignment in blank sufficient to transfer title thereto to
the Company.
(c) STATUS AS HOLDER. For purposes of determinations and
calculations under this Agreement, each Executive shall be deemed to be the
holder of such Executive's Pledged Securities.
(d) DISTRIBUTIONS, OTHER CERTIFICATES, ETC. If any Executive
becomes entitled to receive or receives any securities or other property with
respect to, in substitution of, or in exchange for any of such Executive's
Pledged Securities (whether as a distribution in connection with any
recapitalization, reorganization or reclassification, a dividend or otherwise)
other than a distribution under Section 3.1(b) of the LLC Agreement with respect
to taxes, or any certificate(s) representing any of such Executive's Pledged
Securities, such Executive shall accept such securities, property, or
certificate(s) on behalf of and for the benefit of the Company as additional
security for such Executive's obligations hereunder and shall promptly deliver
such additional security to the Company together with duly executed forms of
assignment in blank, and such additional security shall be deemed to be part of
such Executive's Pledged Securities.
(e) RELEASE OF PLEDGED SECURITIES UPON PERFORMANCE VESTING.
Upon any of any Executive's Pledged Securities becoming Vested Management
Securities pursuant to this Agreement which are also time vested under Section 2
of such Executive's Executive Securities Agreement, the Company shall deliver to
such Executive the certificate or certificates (if any) representing such
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<PAGE>
Vested Management Securities (or, if necessary, the Company shall cancel the
certificate or certificates representing such Vested Management Securities,
issue to such Executive a certificate representing the number of Vested
Management Securities represented by such submitted certificate(s), and shall
issue and retain a certificate (issued in such Executive's name) representing
the number of Management Securities which were represented by such submitted
certificate(s) but which were not performance vested and not forfeited), and
such Vested Management Securities shall no longer constitute part of such
Executive's Pledged Securities.
(f) VOTING AGREEMENT AND PROXY. Each holder of Unvested
Management Securities hereby agrees that upon any vote of the Company's voting
securities, such holder will vote all such Unvested Management Securities in the
same proportion as all other voting securities of the Company are voted by the
holders thereof. To insure performance of this voting agreement, each Executive
hereby appoints each member of the Company's Board of Managers who is not also
employed by the Company or any of its direct or indirect Subsidiaries as his
true and lawful proxy and attorney-in fact, with full power of substitution, to
vote all of such Executive's Pledged Securities on all matters to be voted on by
the Company's securityholders in the manner described in the immediately
preceding sentence. These proxies and powers granted by each Executive pursuant
to this Section 7(f) are coupled with an interest, and are given to secure such
Executive's performance of his duties and obligations under this Agreement. Such
proxies and powers shall be irrevocable with respect to each such Pledged
Security (and shall survive the death, disability, incompetency, or bankruptcy
of such Executive) until such time as such Pledged Security becomes a Vested
Performance Security pursuant to the provisions of this Agreement which is also
time vested under Section 2 of such Executive's Executive Securities Agreement
and thereby ceases to be a Pledged Security, at which time such proxy shall be
deemed revoked with respect to such security (but not with respect to any
securities that remain Pledged Securities).
(g) FURTHER ASSURANCES. Each Executive agrees that at any time
and from time to time upon the request of the Company, such Executive shall
execute and deliver such further documents and take such further actions as the
Company may reasonably request in order to effect the purpose and intent of this
Agreement.
8. MISCELLANEOUS PROVISIONS.
(a) DETERMINATIONS OF FAIR MARKET VALUE.
(i) The "FAIR MARKET VALUE" of Purchaser Securities
pursuant to Section 5 above or of the consideration received in
exchange for Purchaser Securities in an MDCP Sale (either, the "VALUED
ASSETS") shall be determined in accordance with this paragraph (a).
(ii) The holders of the Forfeitable Purchaser
Securities then outstanding, on the one hand, and the holders of the
Unvested Management Securities then outstanding, on the other hand,
shall attempt in good faith to agree on the Fair Market Value of the
Valued Assets. Any agreement reached by the holders of a majority of
the Forfeitable Purchaser Securities and the holders of a majority of
the Unvested Management Securities shall be final and binding on all
parties hereto.
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<PAGE>
(iii) If such Persons are unable to reach such
agreement within a reasonable period of time (but in any event within
60 days), the Fair Market Value of any Valued Assets that are publicly
traded securities shall be the average, over a period of 21 days
consisting of the date of the event which gives rise to the need to
determine Fair Market Value for purposes of this Agreement (a "VESTING
EVENT") and the 20 consecutive business days prior to that date, of the
average of the closing prices of the sales of such securities on the
primary securities exchange on which such securities may at that time
be listed, or, if there have been no sales on such exchange on any day,
the average of the highest bid and lowest asked prices on such exchange
at the end of such day, or, if on any day such securities are not so
listed, the average of the representative bid and asked prices quoted
in the Nasdaq System as of 4:00 P.M., New York time, or, if on any day
such securities are not quoted in the Nasdaq System, the average of the
highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization.
(iv) If such Persons are unable to reach agreement
pursuant to subparagraph (ii) within a reasonable time, and to the
extent any Valued Assets are not publicly traded securities:
(A) The holders of a majority of the
Forfeitable Purchaser Securities then outstanding, on the one hand, and
the holders of a majority of the Unvested Management Securities then
outstanding, on the other hand, shall each, within 10 days thereafter,
choose one investment banker or other appraiser with experience in
valuing assets such as the Valued Assets, and the two investment
bankers/appraisers so selected shall together select a third investment
banker/appraiser similarly qualified.
(B) To the extent the Valued Assets
represent Purchaser Securities, the three investment bankers/appraisers
shall first appraise the fair market value of the Company's equity
(based on the assumption of an orderly, arm's length sale (structured
to produce the highest price to the equity holders of the Company,
whether such structure is a merger, combination, sale of equity
securities, sale of assets, or otherwise) to a willing unaffiliated
buyer (or to a willing affiliated strategic buyer, PROVIDED that the
investment bankers/appraisers shall not consider any premium that such
affiliated strategic buyer would be willing to pay to the extent such
premium is attributable solely to such Person's then current
affiliation with the Company, unless the Company or its equityholders
have received a fully financed, firm commitment offer (with no material
conditions) from such affiliated strategic buyer to purchase a majority
(based on common equity equivalents) of the Company's outstanding
equity at a price that includes such premium, IT BEING UNDERSTOOD,
HOWEVER, that the investment bankers/appraisers shall consider, without
the need for such a firm commitment offer, the premium, if any, that is
attributable to such Person's future expected synergies to be generated
by combining such Person's operations with those of the Company and its
Subsidiaries if such Person were to acquire the Company). The three
investment bankers/appraisers shall then appraise the fair market value
of such non-publicly-traded Purchaser Securities as follows:
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<PAGE>
1) the fair market value of each
Common Unit (or equivalent common equity security) shall be
equal to the fair market value of the Company's equity DIVIDED
BY the total number of Common Units (or equivalent common
equity securities) outstanding on the date of the Vesting
Event (determined on a fully diluted, as-if-converted basis,
but excluding all Unvested Management Securities);
2) the fair market value of each
Preferred Unit shall be equal to the greater of (x) the
Liquidation Value (as defined in the LLC Agreement) of such
Preferred Unit, together with all accrued but unpaid Preferred
Yield (as defined in the LLC Agreement) thereon, and (y) the
fair market value (determined in accordance with subparagraph
(1) above) of the Common Units (including fractional units)
into which such Preferred Unit is convertible on the date of
the Vesting Event;
3) the fair market value of any
other non-publicly-traded Purchaser Securities shall be the
fair value of such securities, determined on the basis of an
orderly, arm's length sale (structured to produce the highest
price for such securities) to a willing, unaffiliated buyer,
taking into account all relevant factors determinative of
value.
To the extent the Valued Assets represent assets other than
non-publicly-traded securities of the Company, the three investment
bankers/appraisers shall appraise the fair market value of such Valued
Assets (based on the assumption of an orderly, arm's length sale
(structured to produce the highest price for such assets) to a willing
unaffiliated buyer (or to a willing affiliated strategic buyer,
PROVIDED that the investment bankers/appraisers shall not consider any
premium that such affiliated strategic buyer would be willing to pay to
the extent such premium is attributable solely to such Person's
affiliation with the Company, unless the Company or its equityholders
have received a fully financed, firm commitment offer (with no material
conditions other than those which are highly likely to be satisfied)
from such affiliated strategic buyer to purchase such Valued Assets at
a price that includes such premium).
The three investment bankers/appraisers shall, within thirty days of
their retention, provide the written results of such appraisals to the
holders of a majority of the Forfeitable Purchaser Securities then
outstanding and the holders of a majority of the Unvested Management
Securities then outstanding.
(C) The "FAIR MARKET VALUE" of the Valued
Assets other than publicly traded securities shall be the average of
the two appraisals thereof closest to each other, and such amount shall
be final and binding on all parties hereto.
(D) The holders of a majority of the
Forfeitable Purchaser Securities then outstanding, on the one hand, and
the holders of a majority of the Unvested
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<PAGE>
Management Securities then outstanding, on the other hand, shall each
pay the costs of their own chosen appraiser and 50% of the costs of the
third appraiser.
(b) RESTRICTIVE LEGEND. Each certificate representing Unvested
Management Securities or Forfeitable Purchaser Securities shall bear a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
FORFEITURE PROVISIONS SET FORTH IN A FIRST AMENDED AND RESTATED
PERFORMANCE VESTING AGREEMENT DATED AS OF JANUARY 28, 1999, BY AND
AMONG THE ISSUER OF SUCH SECURITIES (THE "ISSUER"), THE INITIAL HOLDER
OF THESE SECURITIES, AND CERTAIN OTHER PERSONS LISTED ON THE SIGNATURE
PAGES ATTACHED THERETO, AS AMENDED FROM TIME TO TIME IN ACCORDANCE WITH
ITS TERMS. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
The legend set forth above shall be removed from the certificates evidencing
Unvested Management Securities or Forfeitable Purchaser Securities when such
securities cease to be Unvested Management Securities or Forfeitable Purchaser
Securities, as applicable, pursuant to the terms hereof.
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other related documents among the parties
hereto of even date herewith and therewith embody the complete agreement and
understanding among the parties hereto and supersede and preempt any prior
understandings, agreements or representations by or among the parties hereto,
written or oral, which may have related to the subject matter hereof in any way
(including, without limitation, the Prior Agreement).
(e) COUNTERPARTS. This Agreement may be executed in separate
counterparts, none of which need contain the signature of more than one party
hereto but each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Any Key Employee of
the Company or its Subsidiaries who is issued Management Securities pursuant to
an Executive Securities Agreement may at any time after the date hereof, with
the written approval of the Company, become a party to this Agreement by
executing a counterpart to this Agreement agreeing to be bound by the provisions
hereof as if such Person were an original signatory hereto (which joinder shall
not constitute an amendment, modification, or waiver hereof).
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<PAGE>
(f) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind the parties hereto and their respective
successors and assigns and shall inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns, whether so
expressed or not. Notwithstanding the foregoing, no holder of Unvested
Management Securities shall transfer any of such Unvested Management Securities
to any Person, except (i) pursuant to the pledge or forfeiture provisions of
this Agreement, or the repurchase provisions of the Executive Securities
Agreements, or (ii) to the executor of such holder's estate, at which time such
executor shall sign a counterpart to this Agreement agreeing to stand in the
place of such holder and be bound by the provisions hereof with respect to such
Unvested Management Securities.
(g) CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND EXHIBITS HERETO), EVEN
THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(h) REMEDIES. Each of the parties to this Agreement shall be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorney's fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(i) AMENDMENT, MODIFICATION, OR WAIVER. The provisions of this
Agreement may be amended, modified, or waived only with the prior written
consent of the Company, the holders of a majority of the Forfeitable Purchaser
Securities, and the holders of a majority of the Unvested Management Securities.
(j) DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT
CONSTRUCTION. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Reference to any agreement, document, or instrument means such agreement,
document, or instrument as amended or otherwise modified from time to time in
accordance with the terms thereof, and if applicable hereof. The use of the
words "include" or "including" in this Agreement shall be by way of example
rather than limitation. The use of the words "or," "either" or "any" shall not
be exclusive. The parties hereto have participated jointly in the negotiation
and drafting of this Agreement. If an ambiguity or question
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<PAGE>
of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.
(k) DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.
(l) EFFECTIVENESS OF AGREEMENT. This Agreement shall be valid,
binding, and effective against each holder of Management Securities or
Forfeitable Purchaser Securities when it has been signed by such holder.
Pursuant to Section 8(i) of the Prior Agreement, this Agreement amending and
restating the Prior Agreement shall be valid, binding, and effective against all
holders of Management Securities and Forfeitable Purchaser Securities when it
has been signed by the holders of a majority of the Forfeitable Purchaser
Securities and the holders of a majority of the Unvested Management Securities.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
First Amended and Restated Performance Vesting Agreement on the date first
written above.
COMPANY
COMPLETEL, LLC
By /s/ James E. Dovey
------------------------------------------
James E. Dovey, its Chairman and CEO
PURCHASERS
DEGEORGE HOLDINGS LIMITED PARTNERSHIP
BY LPL INVESTMENT GROUP, INC., ITS GENERAL PARTNER
By /s/ Lawrence F. DeGeorge
------------------------------------------
Lawrence F. DeGeorge, its Chairman
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P., its general partner
By Madison Dearborn Partners, Inc., its general partner
By /s/ Paul J. Finnegan
------------------------------------------
Its Managing Director
------------------------------------------
/s/ James C. Allen
----------------------------------------------
James C. Allen
/s/ Royce J. Holland
----------------------------------------------
Royce J. Holland
/s/ George T. Laub
----------------------------------------------
George T. Laub
(Signature page for First Amended and Restated Performance Vesting Agreement)
<PAGE>
/s/ Reed E. Hundt
----------------------------------------------
Reed E. Hundt
DOVEY COMPANY LLC
By /s/ James E. Dovey
------------------------------------------
James E. Dovey, its manager
EXECUTIVES:
/s/ James E. Dovey
----------------------------------------------
James E. Dovey
/s/ William H. Pearson
----------------------------------------------
William H. Pearson
/s/ Richard N. Clevenger
----------------------------------------------
Richard N. Clevenger
/s/ David E. Lacey
----------------------------------------------
David E. Lacey
(Signature page for First Amended and Restated Performance Vesting Agreement)
<PAGE>
OTHER PERSONS (SIGNATURES OF WHOM ARE
NOT INCLUDED) WHO ARE PARTY TO THIS
AGREEMENT PURSUANT TO THEIR EXECUTIVE
SECURITIES AGREEMENTS (AND/OR JOINDER
AGREEMENTS ENTERED INTO IN CONNECTION
THEREWITH):
----------------------------------------
RICHARD FOLLIOT
ANNA LASCAR
JEAN-MARIE LE MONZE
CHARLES MENATTI
JOHN SEDER
ALEXANDRE WESTPHALEN
NICOLAS PITANCE
CLAUDE LEMAIRE
MICHEL PICARIELLO
FRANK LAUTERSLAGER
JOHN PUHL
HAROLD F. CAREY, JR.
GUY GENSOLLEN
PIERRE WATTELIER
HANSJORG RIEDER
IAN SEXTON
JEAN-FRANCOIS GOLHEN
JEROME DE VITRY
(Signature page for First Amended and Restated Performance Vesting Agreement)
<PAGE>
EXHIBIT 10.15
FIRST AMENDED AND RESTATED REGISTRATION AGREEMENT
THIS FIRST AMENDED AND RESTATED REGISTRATION AGREEMENT (this
"AGREEMENT") is made as of January 28, 1999, by and among CompleTel LLC
(formerly known as CableTel Europe LLC), a Delaware limited liability company
(the "COMPANY"), Madison Dearborn Capital Partners II, L.P. ("MDCP"), DeGeorge
Holdings Limited Partnership ("DEGEORGE HOLDINGS"), James C. Allen ("ALLEN"),
Royce J. Holland ("HOLLAND"), George T. Laub ("LAUB"), Reed E. Hundt ("HUNDT"),
Dovey Company LLC ("DOVEY LLC"), William H. Pearson ("PEARSON"), Richard N.
Clevenger ("CLEVENGER"), David E. Lacey ("LACEY"), and the other holders of
Registrable Securities listed on the signature pages attached hereto. MDCP,
DeGeorge Holdings, Allen, Holland, Laub, and Hundt are referred to herein
collectively as the "INVESTORS" and individually as an "INVESTOR." Capitalized
terms used but not otherwise defined herein have the meanings set forth in
paragraph 8 hereof.
As of May 18, 1998, the Company and MDCP, Lawrence F. DeGeorge
("DEGEORGE"), James E. Dovey ("DOVEY"), Pearson, and Clevenger entered into a
Registration Agreement (the "PRIOR AGREEMENT"). The parties hereto desire that,
effective as of the date hereof, the Prior Agreement shall be amended and
restated in its entirety as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time after the date
hereof and prior to the Company's Initial Public Offering, the holders of a
majority of the Purchaser Registrable Securities then outstanding may request
registration under the Securities Act of all or any portion of their Registrable
Securities on Form S-1 or any similar long-form registration (a "LONG-FORM
REGISTRATION"). After the Company's Initial Public Offering, (i) the holders of
a majority of the MDCP Registrable Securities then outstanding may request up to
two Long-Form Registrations, (ii) the holders of a majority of the DeGeorge
Registrable Securities then outstanding may request one Long-Form Registration,
and (iii) the holders of at least 10% of the Purchaser Registrable Securities
then outstanding may request registration under the Securities Act of all or any
portion of their Registrable Securities on Form S-3 or any similar short-form
registration ("SHORT-FORM REGISTRATIONS") if available; PROVIDED that the
aggregate offering value of the Registrable Securities requested to be
registered in any registration under this paragraph 1(a) (any "DEMAND
REGISTRATION") must equal at least $30 million if the registration is the
Company's Initial Public Offering, at least $15 million in any other Long-Form
Registration, and at least $5 million in any Short-Form Registration.
All requests for Demand Registrations shall be made by giving
written notice to the Company (the "DEMAND NOTICE"). Each Demand Notice shall
specify the approximate number of
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<PAGE>
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within ten days after receipt of any Demand
Notice, the Company shall give written notice of such requested registration to
all other holders of Registrable Securities and, subject to the provisions of
paragraph 1(d) below, shall include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice.
(b) EXPENSES; WITHDRAWAL. The Company shall pay all
Registration Expenses of all holders of Registrable Securities in all Demand
Registrations. A registration shall not count as one of the permitted Long-Form
Registrations until both (i) it has become effective and (ii) the holders of
Registrable Securities initially requesting such registration are able to
register and sell at least 90% of the Registrable Securities requested to be
included in such registration; PROVIDED that the Company shall in any event pay
all Registration Expenses in connection with any registration initiated as a
Demand Registration whether or not it has become effective and whether or not
such registration has counted as one of the permitted Long-Form Registrations.
All Long-Form Registrations shall be underwritten registrations unless otherwise
requested by the holders of a majority of the Registrable Securities included in
the applicable Long-Form Registration.
(c) SHORT-FORM REGISTRATIONS. Demand Registrations shall be
Short-Form Registrations whenever the Company is permitted to use any applicable
short form. After the Company has become subject to the reporting requirements
of the Securities Exchange Act, the Company shall use its best efforts to make
Short-Form Registrations on Form S-3 (or any successor form) available for the
sale of Registrable Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not
include in any Demand Registration any securities which are not Registrable
Securities without the prior written consent of the holders of a majority of the
Registrable Securities included in such registration. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities initially
requesting registration, the Company shall include in such registration the
number which can be so sold in the following order of priorities: (i) first, the
Purchaser Registrable Securities requested to be included in such registration,
pro rata among the holders of such Purchaser Registrable Securities on the basis
of the number of shares owned by each such holder, (ii) second, the other
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
shares owned by each such holder, and (ii) third, other securities requested to
be included in such registration.
(e) RESTRICTIONS ON LONG-FORM REGISTRATIONS. The Company shall
not be obligated to effect any Demand Registration which is a Long-Form
Registration within 180 days after the effective date of a previous Demand
Registration which was a Long-Form Registration or a previous registration in
which the holders of Registrable Securities were given piggyback rights pursuant
to paragraph 2 and in which such holders were able to register and sell at least
90% of the
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<PAGE>
number of Registrable Securities requested to be included therein. The Company
may preempt any request for a Demand Registration in order to effect an
underwritten primary registration on behalf of the Company, PROVIDED that (i)
such preempting underwritten primary registration must become effective within
90 days after the date such preempted Demand Registration is requested, (ii) the
holders of Registrable Securities initially requesting the preempted Demand
Registration must have piggyback rights pursuant to paragraph 2 with respect to
the preempting primary registration and must be able to register and sell
pursuant to such piggyback rights in such primary registration at least 90% of
the Registrable Securities initially requested to be included in the preempted
Demand Registration, (iii) the Company shall pay all Registration Expenses in
connection with any such preempting primary registration, and (iv) the preempted
Demand Registration shall not count as one of the permitted Demand Registrations
hereunder. The Company may preempt a Demand Registration hereunder only once in
any 12-month period. The Company may postpone for up to 180 days the filing or
the effectiveness of a registration statement for a Demand Registration if the
Company's board of directors determines in its reasonable good faith judgment
that such Demand Registration would reasonably be expected to have a material
adverse effect on any proposal or plan by the Company or any of its direct or
indirect subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer,
reorganiza tion or similar transaction; PROVIDED that in such event, the holders
of Registrable Securities initially requesting such Demand Registration shall be
entitled to withdraw such request and, if such request is withdrawn, such Demand
Registration shall not count as one of the permitted Demand Registrations
hereunder and the Company shall pay all Registration Expenses in connection with
such withdrawn registration. The Company may delay a Demand Registration
hereunder only once in any twelve-month period.
(f) SELECTION OF UNDERWRITERS. Subject to the approval rights
granted to the holders of Purchaser Registrable Securities under the Equity
Purchase Agreement, the Board shall select the investment banker(s) and
manager(s) to administer the offering.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
prior written consent of the holders of a majority of the Purchaser Registrable
Securities (or, if none, the Registrable Securities) then outstanding; PROVIDED
that the Company may grant rights to other Persons to participate in Piggyback
Registrations so long as such rights are subordinate to the rights of the
holders of Registrable Securities with respect to such Piggyback Registrations;
AND PROVIDED FURTHER that the Company may grant rights to other Persons to
request registrations so long as the holders of Registrable Securities are
entitled to participate in any such registrations with such Persons pro rata on
the basis of the number of shares owned by each such holder.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "PIGGYBACK
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REGISTRATION"), the Company shall give prompt written notice (in any event
within three business days after its receipt of notice of any exercise of demand
registration rights other than under this Agreement) to all holders of
Registrable Securities of its intention to effect such a registration and shall,
subject to the provisions of paragraph 2(c) below, include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 20 days after the receipt of the
Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, the Company shall include in
such registration (i) first, the securities the Company proposes to sell, (ii)
second, the Purchaser Registrable Securities requested to be included in such
registration, pro rata among the holders of such Purchaser Registrable
Securities on the basis of the number of shares owned by each such holder, (iii)
third, the other Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, and (iv) fourth, other
securities requested to be included in such registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the holders initially
requesting such registration, the Company shall include in such registration (i)
first, the securities requested to be included therein by the holders requesting
such registration and the Registrable Securities requested to be included in
such registration, pro rata among the holders of any such securities on the
basis of the number of securities so requested to be included therein owned by
each such holder, and (ii) second, other securities requested to be included in
such registration.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration
is an underwritten offering, subject to the approval rights granted to the
holders of Purchaser Registrable Securities under the Equity Purchase Agreement,
the Board shall select the investment banker(s) and man ager(s) to administer
the offering.
(f) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convert ible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders
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of such securities, until a period of at least 180 days has elapsed from the
effective date of such previous registration.
3. HOLDBACK AGREEMENTS.
(a) HOLDERS OF REGISTRABLE SECURITIES. Each holder of
Registrable Securities shall not effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of the Company, or
any securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and the 180-day period beginning on
the effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration in which Registrable Securities are included (in each
case, except as part of such underwritten registration), unless in each case the
underwriters managing the registered public offering otherwise agree.
(b) THE COMPANY. The Company (i) shall not effect any public
sale or distribution of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, during the seven days
prior to and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) shall cause each holder of
its Common Stock, or any securities convertible into or exchange able or
exercisable for Common Stock, purchased from the Company at any time after the
date of this Agreement (other than in a registered public offering or pursuant
to Rule 144) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use its best efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and pursuant thereto
the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents shall be subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than 180 days and comply with the provisions of the Securities Act
with respect
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to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the Nasdaq and, if listed on the
Nasdaq, use its best efforts to secure designation of all such Registrable
Securities covered by such registration statement as a Nasdaq "national market
system security" within the meaning of Rule 11Aa2-1 of the Securities and
Exchange Commission or, failing that, to secure Nasdaq authorization for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register as such with respect to such
Registrable Securities with the National Association of Securities Dealers (the
"NASD");
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including effecting a stock split, a
combination of shares, or other recapitalization);
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<PAGE>
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder,
in its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(m) obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering the matters
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request; and
(n) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of the Registrable Securities.
5. REGISTRATION EXPENSES.
(a) EXPENSES. All expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
fees and disbursements of custodians, and fees and disbursements of counsel for
the Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "REGISTRATION EXPENSES"), shall be borne
as provided in this Agreement, except that the Company
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shall, in any event, pay its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed or on the Nasdaq.
(b) REIMBURSEMENT OF COUNSEL. In connection with each Demand
Registration and each Piggyback Registration, the Company shall reimburse the
holders of Registrable Securities included in such registration (i) for the
reasonable fees and disbursements (not to exceed $20,000 for any one
registration) of one counsel chosen by the holders of a majority of the
Purchaser Registrable Securities (or, if none, Registrable Securities) included
in such registration and (ii) for the reasonable fees and disbursements (not to
exceed $5,000 per additional counsel for any one registration) of each
additional counsel retained by any holder of Registrable Securities solely for
the purpose of rendering a legal opinion to underwriters on behalf of such
holder in connection with any underwritten Demand Registration or Piggyback
Registration.
(c) PAYMENT OF CERTAIN EXPENSES BY HOLDERS OF REGISTRABLE
SECURITIES. Underwriting discounts and commissions and transfer taxes relating
to the Registrable Securities included in any registration hereunder, and all
fees and expenses of counsel for any holder of Registrable Securities (other
than fees and expenses to be reimbursed by the Company as set forth in paragraph
(b) above) shall be borne and paid by the holders of such Registrable
Securities.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, each holder of Registrable Securities, its officers and directors and
each Person that controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, shall indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any
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<PAGE>
untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided that the obligation to indemnify shall be individual, not joint
and several, for each holder and shall be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.
The Company also agrees to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason such that such provisions provide
the same obligations and benefits to the indemnified party as those which would
have been applicable had the indemnification provisions in paragraphs 6(a) and
(b) been available taking into account all of the limitations set forth in
paragraphs 6(a) and (b).
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; PROVIDED that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to the Company with respect thereto, except as
otherwise provided in paragraph 6(b) hereof, or to the
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underwriters with respect thereto, except to the extent of the indemnification
being given to the Company and its controlling persons in paragraph 6(a) hereof.
8. DEFINITIONS.
"AGREEMENT" has the meaning set forth with respect thereto in
the preamble.
"ALLEN" has the meaning set forth with respect thereto in the
preamble.
"BOARD" means the board of managers of the Company or, if the
Company is hereafter converted into a corporation or other entity form, the
board of directors or comparable governing body of the Company.
"CLEVENGER" has the meaning set forth with respect thereto in
the preamble.
"COMMON STOCK" means the Common Units and, in the event the
Company has hereafter converted into a corporation or other entity form, the
common stock or other comparable common equity securities of the Company.
"COMMON UNITS" means the Common Units of the Company, having
the rights and preferences set forth with respect thereto in the LLC Agreement.
"COMPANY" has the meaning set forth with respect thereto in
the preamble.
"DEGEORGE" has the meaning set forth with respect thereto in
the preamble.
"DEGEORGE HOLDINGS" has the meaning set forth with respect
thereto in the preamble.
"DEGEORGE REGISTRABLE SECURITIES" means Registrable Securities
derived from or relating to the Preferred Units issued to DeGeorge under the
Equity Purchase Agreement.
"DEMAND NOTICE" has the meaning set forth with respect thereto
in Section 1(a).
"DEMAND REGISTRATION" has the meaning set forth with respect
thereto in Section 1(a).
"DOVEY" has the meaning set forth with respect thereto in the
preamble.
"DOVEY LLC" has the meaning set forth with respect thereto in
the preamble.
"EQUITY PURCHASE AGREEMENT" means that certain equity purchase
agreement dated the date of the Prior Agreement (and amended and restated as of
the date hereof), by and between the Company, the Investors, and the other
Persons listed on the signature pages thereto, as amended from time to time in
accordance with its terms.
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"EXECUTIVE SECURITIES AGREEMENTS" has the meaning set forth
with respect thereto in the Equity Purchase Agreement.
"HOLLAND" has the meaning set forth with respect thereto in
the preamble.
"HUNDT" has the meaning set forth with respect thereto in the
preamble.
"INVESTOR" and "INVESTORS" have the meaning set forth with
respect thereto in the preamble.
"INITIAL PUBLIC OFFERING" means a sale of Common Stock to the
public registered under the Securities Act on Form S-1 or any similar form.
"LACEY" has the meaning set forth with respect thereto in the
preamble.
"LAUB" has the meaning set forth with respect thereto in the
preamble.
"LLC AGREEMENT" means that certain limited liability company
agreement governing the affairs of the Company, by and among the Investors and
the other holders of unit membership interests in the Company, as amended from
time to time in accordance with its terms.
"LONG-FORM REGISTRATION" has the meaning set forth with
respect thereto in Section 1(a).
"MDCP" has the meaning set forth with respect thereto in the
preamble.
"MDCP REGISTRABLE SECURITIES" means Registrable Securities
derived from or relating to the Preferred Units issued to MDCP under the Equity
Purchase Agreement.
"NASD" has the meaning set forth with respect thereto in
Section 4(f).
"PERFORMANCE VESTING AGREEMENT" means that certain performance
vesting agreement dated the date of the Prior Agreement (and amended and
restated as of the date hereof), by and between the Company, the Investors, and
the other Persons listed on the signature pages thereto, as amended from time to
time in accordance with its terms.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PIGGYBACK REGISTRATION" has the meaning set forth with
respect thereto in Section 2(a).
"PREFERRED UNITS" means the Preferred Units of the Company,
having the rights and preferences set forth with respect thereto in the LLC
Agreement.
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"PRIOR AGREEMENT" has the meaning set forth with respect
thereto in the preamble.
"PURCHASER REGISTRABLE SECURITIES" means Registrable
Securities derived from or relating to the Preferred Units issued to the
Investors and the other purchasers under the Equity Purchase Agreement.
"REGISTRABLE SECURITIES" means (i) any Common Stock issued
upon conversion of any Preferred Units issued under the Equity Purchase
Agreement, (ii) any Common Stock issued under the Executive Securities
Agreements (other than any Un-Performance-Vested Securities), (iii) any Common
Stock issued or issuable with respect to the securities referred to in clauses
(i) and (ii) by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, or upon conversion or exercise of any such securities, and (iv)
any other Common Stock of the Company (other than any Un-Performance-Vested
Securities) held by any holder of Registrable Securities; PROVIDED that with
respect to any Registrable Securities, such securities shall cease to be
Registrable Securities when they have been (A) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (B) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any similar rule
promulgated by the Securities and Exchange Commission then in force), or (C)
repurchased or otherwise acquired by the Company (or its assignees) or forfeited
pursuant to the terms of the Performance Vesting Agreement. For purposes of this
Agreement, a Person shall be deemed to be the holder of Registrable Securities,
and the Registrable Securities shall be deemed to be outstanding and in
existence, whenever such Person has the right to acquire such Registrable
Securities upon conversion of preferred stock, Preferred Units, or similar
securities held by such Person, whether or not such acquisition has actually
been effected, and such Person shall be entitled to exercise the rights of a
holder of such Registrable Securities hereunder.
"REGISTRATION EXPENSES" has the meaning set forth with respect
thereto in Section 5(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"SECURITYHOLDERS AGREEMENT" means that certain securityholders
agreement dated the date of the Prior Agreement (and amended and restated as of
the date hereof) by and between the Company and certain of its securityholders,
as amended from time to time in accordance with its terms.
"SHORT-FORM REGISTRATIONS" has the meaning set forth with
respect thereto in Section 1(a).
"SUBSIDIARY INITIAL PUBLIC OFFERING" has the meaning set forth
with respect thereto in Section 9(b)(ii).
"UN-PERFORMANCE-VESTED SECURITIES" means any Company
securities which are subject to performance vesting, but have not yet
performance vested, pursuant to the provisions of the Performance Vesting
Agreement.
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9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES;
APPLICABILITY OF RIGHTS TO SUBSIDIARIES OF THE COMPANY.
(i) The Company shall not take any action, or permit
any change to occur, with respect to its securities which would
materially and adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would
materially and adversely affect the marketability of such Registrable
Securities in any such registration (including, without limitation,
effecting a stock split or a combination of shares).
(ii) In the event that (A) any direct or indirect
subsidiary of the Company proposes to sell any of its common equity
securities to the public in a registered offering on Form S-1 under the
Securities Act (or any similar form) (a "SUBSIDIARY INITIAL PUBLIC
OFFERING"), or (B) the holders of a majority of the Purchaser
Registrable Securities then outstanding request a Subsidiary Initial
Public Offering, then each holder of Registrable Securities shall vote
all such holder's Registrable Securities and any other voting
securities of the Company or its subsidiaries over which such holder
has voting control and shall take all other necessary or desirable
actions within such holder's control (whether in such holder's capacity
as a securityholder, director, representative, member of a board
committee, officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes
of obtaining a quorum and execution of written consents in lieu of
meetings), and the Company shall take all necessary or desirable
actions within its control (including, without limitation, calling
special board and securityholder meetings and voting the securities of
its direct and indirect subsidiaries), in each case in the manner
determined by the holders of a majority of the Purchaser Registrable
Securities, so that each of the holders of Registrable Securities shall
be able to exercise and obtain the benefit of its rights hereunder
(including Demand Registration and Piggyback Registration rights) with
respect to such subsidiary (including with respect to such Subsidiary
Initial Public Offering and other registered public offerings of such
subsidiary's common equity securities) as if such subsidiary were the
Company.
(c) REMEDIES. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
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(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company and the holders of a majority of the
Purchaser Registrable Securities then outstanding; PROVIDED that if any such
amendment or waiver would adversely affect any holder of Registrable Securities
relative to the holders of Registrable Securities voting in favor of such
amendment or waiver, such amendment or waiver shall also require the approval of
the holders of a majority of the Registrable Securities held by all holders so
adversely affected; AND PROVIDED FURTHER that if any such amendment or waiver is
to a provision in this Agreement that requires a specific vote to take an action
thereunder or to take an action with respect to the matters described therein,
such amendment or waiver shall not be effective unless such vote is obtained
with respect to such amendment or waiver.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement. Any management or other key
employee of the Company or its subsidiaries who purchases securities pursuant to
an Executive Securities Agreement may at any time after the date hereof, with
the written approval of the Company, become a party to this Agreement by
executing a counterpart to this Agreement agreeing to be bound by the provisions
hereof as if such Person were an original signatory hereto (which joinder shall
not constitute an amendment, modification, or waiver hereof).
(h) DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT
CONSTRUCTION. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Reference to any agreement, document, or instrument means such agreement,
document, or instrument as amended or otherwise modified from time to time in
accordance with the terms thereof, and if applicable hereof. The use of the
words "include" or "including" in this Agreement shall be by way of example
rather than by limitation. The use of the words "or," "either" or "any" shall
not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by
- 14 -
<PAGE>
the parties hereto, and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
(i) GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(j) NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when (a) delivered
personally to the recipient, (b) telecopied to the recipient (with hard copy
sent to the recipient by reputable overnight courier service (charges prepaid)
that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a
business day, and otherwise on the next business day, or (c) one business day
after being sent to the recipient by reputable overnight courier service
(charges prepaid). Such notices, demands and other communications shall be sent
to the Company at the address set forth below and to any holder of Registrable
Securities at such address as indicated by the Company's records, or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party. The Company's address
is:
6300 Syracuse Way, Suite 355
Englewood, Colorado 80111
Attention: Chief Executive Officer
Telephone: (303) 741-4788
Telecopy: (303) 741-4823
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the State of Colorado, the Republic of France, or the jurisdiction in
which the Company's principal office is located, the time period shall
automatically be extended to the business day immediately following such
Saturday, Sunday or legal holiday.
(l) DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument
- 15 -
<PAGE>
shall raise the use of a facsimile machine to deliver a signature or the fact
that any signature or agreement or instrument was transmitted or communicated
through the use of a facsimile machine as a defense to the formation or
enforceability of a contract and each such party forever waives any such
defense.
(m) EFFECTIVENESS OF AGREEMENT. This Agreement shall be valid,
binding, and effective against each holder of Registrable Securities when it has
been signed by such holder. Pursuant to Section 9(d) of the Prior Agreement,
this Agreement amending and restating the Prior Agreement shall be valid,
binding, and effective against all holders of Registrable Securities when it has
been signed by the holders of a majority of the Purchaser Registrable
Securities.
* * * * *
- 16 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
First Amended and Restated Registration Agreement as of the date first written
above.
COMPLETEL, LLC
By /s/ James E. Dovey
-----------------------------------------------------
James E. Dovey, its Chairman and CEO
DEGEORGE HOLDINGS LIMITED PARTNERSHIP
BY LPL INVESTMENT GROUP, INC., ITS GENERAL PARTNER
By /s/ Lawrence F. DeGeorge
-----------------------------------------------------
Lawrence F. DeGeorge, its Chairman
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P., its general partner
By Madison Dearborn Partners, Inc., its general partner
By /s/ Paul J. Finnegan
-----------------------------------------------------
Its Managing Director
---------------------------------------------------
/s/ James C. Allen
--------------------------------------------------------
James C. Allen
/s/ Royce J. Holland
--------------------------------------------------------
Royce J. Holland
/s/ George T. Laub
--------------------------------------------------------
George T. Laub
(Signature page for First Amended and Restated Registration Agreement)
<PAGE>
/s/ Reed E. Hundt
--------------------------------------------------------
Reed E. Hundt
DOVEY FAMILY PARTNERS LLLP
By /s/ James E. Dovey
----------------------------------------------------
James E. Dovey, its general partner
DOVEY COMPANY LLC
By /s/ James E. Dovey
----------------------------------------------------
James E. Dovey, its manager
/s/ James E. Dovey
--------------------------------------------------------
James E. Dovey
/s/ William H. Pearson
--------------------------------------------------------
William H. Pearson
/s/ Richard N. Clevenger
--------------------------------------------------------
Richard N. Clevenger
/s/ David E. Lacey
--------------------------------------------------------
David E. Lacey
(Signature page for First Amended and Restated Registration Agreement)
<PAGE>
OTHER PERSONS (SIGNATURES OF WHOM ARE
NOT INCLUDED) WHO ARE PARTY TO THIS
AGREEMENT PURSUANT TO THEIR EXECUTIVE
SECURITIES AGREEMENTS (AND/OR JOINDER
AGREEMENTS ENTERED INTO IN CONNECTION
THEREWITH):
---------------------------------------------
RICHARD FOLLIOT
ANNA LASCAR
JEAN-MARIE LE MONZE
CHARLES MENATTI
JOHN SEDER
ALEXANDRE WESTPHALEN
NICOLAS PITANCE
CLAUDE LEMAIRE
MICHEL PICARIELLO
FRANK LAUTERSLAGER
JOHN PUHL
HAROLD F. CAREY, JR.
GUY GENSOLLEN
PIERRE WATTELIER
HANSJORG RIEDER
IAN SEXTON
JEAN-FRANCOIS GOLHEN
JEROME DE VITRY
MARTINE CLARKSON
CHANTAL LEBON
MARIE LECOCQ
ANNE-CATHERINE NICOSIA
VALERIE HOTTE
MARIE-CHRISTINE BOUDIN
VAN-LINH SIHARATH
ISABELLE DUBIEN
NADEGE GRIFFIT
GREGORY BURLINCHON
CECILE AFFRET
JEAN RODRIGUEZ
CATHERINE GROSJEAN
CHRISTY CANTERBURY
KATHLEEN HANLON
(Signature page for First Amended and Restated Registration Agreement)
<PAGE>
EXECUTIVE SECURITIES AGREEMENT
(___________)
THIS EXECUTIVE SECURITIES AGREEMENT (this "AGREEMENT") is made as
of ___________, by and between CompleTel LLC, a Delaware limited liability
company (the "COMPANY"), and ___________ ("EXECUTIVE"). Capitalized terms
used but not otherwise defined herein have the meanings ascribed to such
terms in Section 8 hereof.
This Agreement contemplates a transaction in which, pursuant to the
terms and subject to the conditions set forth herein, Executive will purchase
Common Units of the Company. All of such Executive Securities are subject to
time vesting as set forth herein. In addition to time vesting, a portion of
such Executive Securities are also subject to performance vesting pursuant to
the terms of the Performance Vesting Agreement. All of the Executive
Securities held by Executive or his transferees are subject to certain
restrictions on transfer and, upon Executive's ceasing to be employed by the
Company or its Subsidiaries, certain repurchase options, each as set forth
herein. In addition, the Executive Securities are subject to certain voting
agreements and other provisions set forth herein and in the Securityholders
Agreement. The Company's Subsidiary _____________ ("COMPLETEL")
[has entered/intends] as soon as reasonably possible to enter into an
Employment Agreement with Executive as its ________________ (the "EMPLOYMENT
AGREEMENT").
NOW, THEREFORE, in consideration of the mutual promises made herein
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. PURCHASE OF EXECUTIVE SECURITIES.
(a) PURCHASE. The Company agrees to issue and sell to Executive
and Executive agrees to purchase from the Company, upon execution of this
Agreement and payment of the purchase price, ______ Common Units (of which
_____ shall not, and ____ shall, be subject to performance vesting under the
terms of the Performance Vesting Agreement), each having the rights and
preferences set forth with respect thereto in the LLC Agreement. The
aggregate purchase price for the Executive Securities is $_____, which amount
shall be paid to the Company, in U.S. Dollars, by cashier's or certified
check, or by wire transfer.
(b) REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. In connection
with the purchase and issuance of the Executive Securities hereunder,
Executive represents and warrants to the Company that:
(i) The Executive Securities to be acquired by Executive
pursuant to this Agreement shall be acquired for Executive's own account and
not with a view to, or intention of, distribution thereof in violation of the
Securities Act or any applicable state securities laws, and the Executive
Securities shall not be disposed of in contravention of the Securities Act or
any applicable state securities laws.
<PAGE>
(ii) Executive is sophisticated in financial matters and is
able to evaluate the risks and benefits of the investment in the Executive
Securities.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Securities for an indefinite period of time and
is aware that transfer of the Executive Securities may not be possible
because (A) such transfer is subject to contractual restrictions on transfer
set forth herein, in the Securityholders Agreement, and in the Performance
Vesting Agreement, and (B) the Executive Securities have not been registered
under the Securities Act or any applicable state securities laws and,
therefore, cannot be sold unless subsequently registered under the Securities
Act and such applicable state securities laws or an exemption from such
registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of the
Executive Securities issued hereunder and has had full access to such other
information concerning the Company as he has requested.
(v) This Agreement, the LLC Agreement, the Securityholders
Agreement, the Registration Agreement, the Performance Vesting Agreement, the
Joinder Agreement, and the other agreements contemplated thereby of even date
therewith constitute the legal, valid and binding obligations of Executive,
enforceable in accordance with their terms, and the execution, delivery and
performance of such agreements by Executive and Executive's employment by the
Company and its Subsidiaries do not and shall not conflict with, violate or
cause a breach of any agreement, contract or instrument to which Executive is
a party or by which he is bound or any judgment, order or decree to which
Executive is subject.
(c) ACKNOWLEDGMENT BY EXECUTIVE. As an inducement to the Company
to enter into this Agreement, and as a condition thereto, Executive
acknowledges and agrees that this Agreement and the purchase of the Executive
Securities hereunder are not a condition to his employment by the Company or
any Subsidiary and that none of the execution and delivery of this Agreement,
the issuance of the Executive Securities to Executive, or Executive's status
as a holder of Executive Securities, shall:
(i) entitle Executive to remain employed by the Company or
its Subsidiaries or affect the right of the Company or its Subsidiaries to
terminate Executive's employment at any time and for any reason as permitted
by the Employment Agreement; or
(ii) impose upon the Company any duty or obligation to
disclose to Executive, or create in Executive any right to be advised of, any
material information regarding the Company and its Subsidiaries at any time
prior to, upon or in connection with the repurchase of any Executive
Securities upon the termination of Executive's employment by the Company or
its Subsidiaries or as otherwise provided hereunder.
-2-
<PAGE>
2. TIME VESTING OF EXECUTIVE SECURITIES.
(a) TIME VESTING SCHEDULE. Except as otherwise provided herein,
an amount of Un-Time-Vested Securities (as defined below) shall time vest on
December 31, ____, on each of the first three anniversaries of such date, and
on the fourth anniversary of the date hereof, such that the Executive
Securities shall be time vested on each such date in accordance with the
following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Cumulative Percentage of
Date Executive Securities
Time Vested on Such Date
- --------------------------------------------------------------------------------
<S> <C>
December 31, ____
- --------------------------------------------------------------------------------
December 31, ____
- --------------------------------------------------------------------------------
December 31, ____
- --------------------------------------------------------------------------------
December 31, ____
- --------------------------------------------------------------------------------
Fourth anniversary of the date hereof 100%
- --------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing sentence, the above time vesting schedule shall
cease and no Un-Time-Vested Securities (as defined below) shall time vest
after the date on which Executive's employment with the Company or its
Subsidiaries terminates voluntarily, involuntarily, with or without cause,
for any reason or for no reason. Executive Securities which have become time
vested pursuant to this Section 2 are referred to herein as "TIME-VESTED
SECURITIES," and all other Executive Securities are referred to herein as
"UN-TIME-VESTED SECURITIES."
(b) 100% ACCELERATION UPON A QUALIFIED SALE OF THE COMPANY.
All Un-Time-Vested Securities shall become Time-Vested Securities in
connection with the consummation of a Qualified Sale of the Company, so long
as Executive is employed by the Company or any of its Subsidiaries on the
date of such sale. For purposes hereof, a "QUALIFIED SALE OF THE COMPANY"
means a Sale of the Company in which the consideration paid in such sale for
at least 50% of the Company's outstanding equity securities or of the
Company's consolidated assets consists of cash and/or publicly traded equity
securities (E.G., 66.7% of the consideration for such Sale of the Company
would have to consist of cash and/or publicly traded equity securities if
only 75% of the Company's outstanding equity securities were sold in such
transaction).
(c) 100% ACCELERATION UPON A SALE OF THE COMPANY (OTHER THAN
A QUALIFIED SALE OF THE COMPANY) WITH NO CONTINUING COMPARABLE TIME VESTING
ARRANGEMENT. In the event of a Sale of the Company (other than a Qualified
Sale of the Company), the above vesting schedule will not accelerate as a
result of such Sale of the Company; PROVIDED that if the surviving or
acquiring Person(s) in such Sale of the Company fails or declines either to
(i) continue after such Sale of the Company to allow Executive to hold his
Un-Time-Vested Securities subject to the time vesting and repurchase
provisions hereof, or (ii) grant to Executive the number of securities in the
surviving or acquiring Person(s) that Executive would have received in such
Sale of the Company in exchange
-3-
<PAGE>
for Executive's Un-Time-Vested Securities if such securities had instead been
Time-Vested Securities, subject to ongoing time vesting and repurchase
arrangements substantially comparable to those set forth herein (as such
comparability is determined in good faith by the Board), then all
Un-Time-Vested Securities shall become Time-Vested Securities in connection
with the consummation of such Sale of the Company, so long as Executive is
employed by the Company or any of its Subsidiaries on the date of such sale.
(d) ONE-YEAR ACCELERATION UPON A QUALIFIED PUBLIC OFFERING.
Upon the consummation of a Qualified Public Offering, and so long as
Executive is employed by the Company or any of its Subsidiaries on the
closing date of such offering, there will time vest the amount of
Un-Time-Vested Securities which were scheduled to time vest within the 365
days following such closing date (and the remaining Un-Time-Vested
Securities, if any, shall continue to time vest in accordance with paragraph
(a) above, such that the time vesting schedule set forth in paragraph (a)
above shall have been effectively accelerated by one year).
(e) TIME VESTING AND PERFORMANCE VESTING.
(i) INDEPENDENCE OF TIME AND PERFORMANCE VESTING. The
Company and Executive acknowledge that the Executive Securities constituting
Performance Vesting Securities are subject, in addition to time vesting under
this Section 2, to performance vesting as set forth in the Performance
Vesting Agreement. The time vesting provisions of this Section 2 operate
independently of the performance vesting provisions under the Performance
Vesting Agreement. As such, (A) the terms "Time-Vested Securities" and
"Un-Time-Vested Securities" as used herein refer only to whether particular
Executive Securities have time vested in accordance with the terms of this
Section 2 and do not indicate whether such Executive Securities that
constitute Performance Vesting Securities have or have not also performance
vested under the Performance Vesting Agreement, and (B) the terms
"Performance-Vested Securities" and "Un-Performance-Vested Securities" (each
defined below) as used herein refer only to whether particular Performance
Vesting Securities have performance vested in accordance with the terms of
the Performance Vesting Agreement and do not indicate whether such
Performance Vesting Securities have or have not also time vested under this
Section 2.
(ii) APPLICATION OF TIME VESTING. Whenever
Un-Time-Vested Securities time vest pursuant to the terms of this Section 2,
the Un-Time-Vested Securities that are not Performance Vesting Securities, on
the one hand, and the Un-Time-Vested Securities that are Performance Vesting
Securities, on the other hand, will each time vest on a pro rata basis based
on the number of each such type of securities then outstanding. Of such
Un-Time-Vested Securities constituting Performance Vesting Securities which
are to vest, the Un-Time-Vested Securities that are Performance-Vested
Securities shall be time vested prior to any Un-Time-Vested Securities that
are Un-Performance-Vested Securities being time vested.
(iii) APPLICATION OF PERFORMANCE VESTING. Whenever
Un-Performance-Vested Securities performance vest pursuant to the terms of
the Performance Vesting Agreement, the Un-Performance-Vested Securities that
are Time-Vested Securities shall be performance vested
-4-
<PAGE>
prior to any Un-Performance-Vested Securities that are Un-Time-Vested
Securities being performance vested.
3. REPURCHASE OPTIONS
(a) REPURCHASE OPTION UPON CESSATION OF EMPLOYMENT. If
Executive ceases voluntarily or involuntarily, with or without cause, to be
employed by the Company or its Subsidiaries for any reason or for no reason
(such cessation of employment, a "REPURCHASE EVENT"), the Company (by action
of the Board) may elect to purchase all or any portion of the Executive
Securities then in existence (whether held by Executive or one or more of
Executive's transferees) by delivering a Repurchase Notice to the holder or
holders of the Executive Securities at any time within 30 days after the
Repurchase Event.
(b) ASSIGNMENT OF COMPANY'S REPURCHASE RIGHTS. Upon any
Repurchase Event, the Company (by action of the Board) shall have the right
to assign all or any portion of its repurchase rights hereunder to one or
more management or other key employees (each a "KEY EMPLOYEE") of the Company
or any of its Subsidiaries; PROVIDED that the Company may not assign its
rights under Section 3(e) below to pay all or part of the Repurchase Price
(as defined below) for Executive Securities repurchased hereunder by (i)
offsetting debts owed by Executive to the Company or (ii) issuing Class A
Senior Units or a promissory note. If the Company assigns any of its
repurchase rights to such a Key Employee, and such Key Employee fails to
exercise such assigned repurchase rights, the Company shall once again have
the right to exercise (or assign) such rights.
(c) REPURCHASE PRICE. The repurchase price (the "REPURCHASE
PRICE") for any Time-Vested Securities to be repurchased hereunder shall be
the Fair Market Value of such securities on the date of the Repurchase Event
giving rise to such repurchase. The Repurchase Price of any Un-Time-Vested
Securities to be repurchased hereunder shall be the Original Cost of such
securities (with securities having a lower Original Cost being subject to
repurchase prior to securities with a higher Original Cost).
(d) REPURCHASE NOTICE. Each "REPURCHASE NOTICE" delivered
hereunder shall set forth the amount, type, and class of Executive Securities
(including, if applicable, the amount of Un-Time-Vested Securities and/or
Time-Vested Securities) to be acquired from each such holder and the
aggregate consideration to be paid for such Executive Securities, and the
time and place for closing of the repurchase (which date shall not be more
than 60 days nor less than 10 days after the delivery of such Repurchase
Notice). The Executive Securities to be repurchased pursuant to any
Repurchase Notice shall first be satisfied to the extent possible from the
Executive Securities held by Executive at the time of delivery of such
Repurchase Notice. If the amount of Executive Securities then held by
Executive is less than the total amount of Executive Securities that have
been elected to be purchased pursuant to such Repurchase Notice, the electing
party or parties shall purchase the remaining securities elected to be
purchased from the other holder(s) of Executive Securities, pro rata
according to the amount of Executive Securities held of record by each such
other holder at the time of delivery of such Repurchase Notice. The amount
of Un-Time-Vested Securities and Time-Vested Securities repurchased hereunder
shall be deemed to be allocated among Executive
-5-
<PAGE>
and the other holders of repurchased Executive Securities (if any) pro rata
according to the amount of Executive Securities to be purchased from such
persons.
(e) CLOSING OF EACH REPURCHASE. The closing of any
repurchase of Executive Securities hereunder shall occur at the date and time
specified in the applicable Repurchase Notice with respect to such
repurchase. At each such closing, the holders of Executive Securities shall
deliver all certificates (if any exist) evidencing the Executive Securities
to be repurchased at such closing to the purchaser or purchasers thereof, and
such purchaser or purchasers shall pay for the Executive Securities to be
purchased at such closing by delivery of a check or wire transfer of
immediately available funds in the aggregate amount of the Repurchase Price
for such Executive Securities; PROVIDED that if the Company is to purchase
any Executive Securities from Executive at such closing, the Company may
elect (by action of the Board) to pay all or any portion of the Repurchase
Price for such Executive Securities by setting off against such Repurchase
Price any bona fide debts owed (regardless of whether then due and payable)
by Executive to the Company or any of its Subsidiaries; AND PROVIDED FURTHER
that if the Company is to purchase any Executive Securities at such closing,
the Company may elect (by action of the Board) to pay all or any portion of
the Repurchase Price for such Executive Securities as follows:
(i) in accordance with the LLC Agreement, by issuing in
exchange for such Executive Securities an equal number of Class A Senior
Units, and each such Class A Senior Unit issued in connection with such
repurchase shall be deemed as of the date of such repurchase to have capital
contributions to the Company made with respect to such Class A Senior Unit
equal to the Repurchase Price for the Executive Securities in exchange for
which such Class A Senior Unit was issued; or
(ii) if the Company has prior to the date of such
repurchase converted into a corporation or other corporate form, in the form
of a promissory note, which promissory note shall be subordinated to all of
the Company's senior debt obligations either then or thereafter incurred,
shall earn simple annual interest at a rate of 8% per annum, shall have all
principal and accrued interest due and payable upon maturity, and shall
mature upon the earliest to occur of the Company's initial Public Offering
(if such initial Public Offering has not occurred prior to the issuance of
such promissory note), a Sale of the Company, or the fourth anniversary of
the issuance of such promissory note.
The purchasers of Executive Securities hereunder shall be entitled
to receive customary representations and warranties from the sellers,
including representations and warranties regarding good title to such
securities, free and clear of any liens or encumbrances.
(f) RESTRICTIONS. Notwithstanding anything to the contrary
contained in this Agreement, all repurchases of Executive Securities by the
Company shall be subject to applicable restrictions contained in the Delaware
General Corporation Law, the Delaware Limited Liability Company Act and in
the Company's and its Subsidiaries' debt and equity financing agreements. If
any such restrictions prohibit the repurchase of Executive Securities
hereunder which the Company is otherwise entitled to make, the time periods
provided in this paragraph 3 shall be suspended, and
-6-
<PAGE>
the Company may make such repurchases as soon as it is permitted to do so
under such restrictions, unless by such time such repurchase option has
terminated pursuant to paragraph (g) below.
(g) TERMINATION OF REPURCHASE OPTIONS. The repurchase
provisions under this paragraph 3 (and the rights and obligations created
thereby) shall cease to apply to all Time-Vested Securities upon the
consummation of a Qualified Sale of the Company or a Qualified Public
Offering (it being understood that (i) such provisions, rights, and
obligations shall continue to apply to all Un-Time-Vested Securities until
such time as they become Time-Vested Securities in accordance with the terms
hereof, and (ii) the forfeiture provisions of the Performance Vesting
Agreement shall continue to apply to all Un-Performance-Vested Securities
until such time as they become Performance-Vested Securities in accordance
with the terms of the Performance Vesting Agreement).
4. RESTRICTIONS ON TRANSFER.
(a) OPINION OF VALID TRANSFER. In addition to any other
restrictions on transfer imposed by this Agreement, the Securityholders
Agreement, the Performance Vesting Agreement, or the LLC Agreement, no holder
of Executive Securities may sell, transfer or dispose of any Executive
Securities (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act or applicable state
securities laws is required in connection with such transfer.
(b) RESTRICTIVE LEGEND. The certificates representing
Executive Securities shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON ________________, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, VESTING
PROVISIONS, AND REPURCHASE OPTIONS SET FORTH IN AN
EXECUTIVE SECURITIES AGREEMENT BETWEEN THE ISSUER OF SUCH
SECURITIES (THE "ISSUER") AND THE INITIAL HOLDER OF SUCH
SECURITIES. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
The legend set forth above shall be removed from the certificates evidencing any
securities which cease to be Executive Securities.
-7-
<PAGE>
(c) RETENTION OF EXECUTIVE SECURITIES.
(i) Executive shall not sell, transfer, assign, pledge or
otherwise dispose of (whether with or without consideration and whether
voluntarily or involuntarily or by operation of law) any interest in any
Executive Securities (a "TRANSFER"), except (x) with respect to
Un-Performance-Vested Securities, pursuant to the repurchase provisions of
Section 3 hereof or the forfeiture provisions of the Performance Vesting
Agreement (each, an "EXEMPT TRANSFER"), or (y) with respect to all other
Executive Securities, pursuant to (A) the repurchase provisions of Section 3
hereof, (B) the "Participation Rights" provisions set forth in the
Securityholders Agreement, or (C) a Sale of the Company (each of (A) through
(C), an "EXEMPT TRANSFER").
(ii) The restrictions contained in this paragraph (c)
shall not apply with respect to transfers of Executive Securities (other than
Un-Performance-Vested Securities) (A) pursuant to applicable laws of descent
and distribution or (B) among Executive's Family Group; PROVIDED that the
restrictions contained in this paragraph shall continue to be applicable to
the Executive Securities after any such Transfer, the transferees of such
Executive Securities shall have agreed in writing to be bound by the
provisions of this Agreement with respect to the Executive Securities so
transferred, and (prior to the death of Executive) each such transferee of
Executive Securities shall have entered into proxies and other agreements
satisfactory to the holders of a majority of the Purchaser Securities
pursuant to which Executive shall have the sole right to vote such Executive
Securities for all purposes (subject to any applicable voting agreements set
forth herein or in the Securityholders Agreement). For purposes of this
Agreement, "FAMILY GROUP" means Executive's spouse, siblings and descendants
(whether natural or adopted) and any of such descendants' spouses, any trust
which at the time of such Transfer and at all times thereafter is and remains
solely for the benefit of Executive and/or Executive's spouse, siblings,
and/or descendants and/or such descendants' spouses, and any family
partnership the partners of which consist solely of Executive, such spouse,
such siblings, such descendants, such descendants' spouses, and/or such
trusts.
(iii) The restrictions on the transfer of Executive
Securities set forth in this paragraph (c) shall continue with respect to
each Executive Security following any Transfer thereof (other than an Exempt
Transfer); PROVIDED that upon the consummation of a Qualified Public
Offering, the restrictions set forth in this paragraph (c) shall thereafter
cease to apply to all Fully Vested Securities, it being understood that such
restrictions shall continue to apply to all other Executive Securities until
such time as they become Fully Vested Securities.
5. CONFIDENTIALITY.
(a) NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION.
Executive shall not disclose or use at any time, either during his employment
with the Company or its Subsidiaries or thereafter, any Confidential
Information (as defined below) of which Executive is or becomes aware,
whether or not such information is developed by him, except to the extent
that such disclosure or use is directly related to and required by
Executive's performance of duties assigned to Executive by the Company or its
Subsidiaries. Executive shall take all appropriate steps to safeguard
Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft. As used in this
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Agreement, the term "CONFIDENTIAL INFORMATION" means information that is not
generally known to the public and that is used, developed or obtained by the
Company or its Subsidiaries in connection with their business, including but
not limited to (i) products or services, (ii) fees, costs and pricing
structures, (iii) designs, (iv) analysis, (v) drawings, photographs and
reports, (vi) computer software, including operating systems, applications
and program listings, (vii) flow charts, manuals and documentation, (viii)
data bases, (ix) accounting and business methods, (x) inventions, devices,
new developments, methods and processes, whether patentable or unpatentable
and whether or not reduced to practice, (xi) customer and client information
(including customer or client lists), (xii) copyrightable works, (xiv) all
technology and trade secrets, (xv) business plans and financial models, and
(xvi) all similar and related information in whatever form. Confidential
Information shall not include any information that has been published in a
form generally available to the public prior to the date Executive proposes
to disclose or use such information. Information shall not be deemed to have
been published merely because individual portions of the information have
been separately published, but only if all material features constituting
such information have been published in combination.
(b) THE COMPANY'S OWNERSHIP OF INTELLECTUAL PROPERTY.
(i) ACKNOWLEDGMENT OF COMPANY OWNERSHIP. If
Executive as part of his activities on behalf of the Company or its
Subsidiaries generates, authors or contributes to any invention, design, new
development, device, product, method or process (whether or not patentable or
reduced to practice or constituting Confidential Information), any
copyrightable work (whether or not constituting Confidential Information) or
any other form of Confidential Information relating directly or indirectly to
the Company's and its Subsidiaries' business as now or hereafter conducted
(collectively, "INTELLECTUAL PROPERTY"), Executive acknowledges that such
Intellectual Property is the exclusive property of the Company and hereby
assigns all right, title and interest in and to such Intellectual Property to
the Company. Any copyrightable work prepared in whole or in part by
Executive will be deemed "a work made for hire" under Section 201(b) of the
1976 Copyright Act, and the Company shall own all of the rights comprised by
the copyright therein. Executive shall promptly and fully disclose all
Intellectual Property to the Company and shall cooperate with the Company to
protect the Company's interests in and rights to such Intellectual Property
(including, without limitation, providing reasonable assistance in securing
patent protection and copyright registrations and executing all documents as
reasonably requested by the Company, whether such requests occur prior to or
after termination of Executive's employment by the Company).
(ii) EXECUTIVE INVENTION. Executive understands that
paragraph (b)(i) of this Section regarding the Company's ownership of
Intellectual Property does not apply to any invention for which no equipment,
supplies, facilities or trade secret information of the Company were used and
which was developed entirely on Executive's own time, unless (i) the
invention relates to the business of the Company or any of its Subsidiaries
or to their actual or demonstrably anticipated research or development or
(ii) the invention results from any work performed by Executive for the
Company or any of its Subsidiaries.
(c) DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT.
As requested by the Company from time to time and upon the termination of
Executive's employment with the Company
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and its Subsidiaries for any reason, Executive shall promptly deliver to the
Company all copies and embodiments, in whatever form, of all Confidential
Information and Intellectual Property in Executive's possession or within his
control (including, but not limited to, written records, notes, photographs,
manuals, notebooks, documentation, program listings, flow charts, magnetic
media, disks, diskettes, tapes and all other materials containing or
constituting any Confidential Information or Intellectual Property)
irrespective of the location or form of such material and, if requested by
the Company, shall provide the Company with written confirmation that all
such materials have been delivered to the Company.
6. NONCOMPETITION.
(a) COVENANTS. During the term of this Agreement and for a
period of ________ after termination of this Agreement (the "Noncompetition
Period"), Executive shall not, directly or indirectly, as an officer,
director, employee, consultant, owner, shareholder, adviser, joint venturer,
or otherwise, compete with the Company within the United Kingdom (the
"Protected Region"): (i) in construction and operation of competitive local
exchange telecommunications systems; or (ii) in any other line of business in
which the Company was engaged at any time during the term of this Agreement;
or (iii) in any other line of business into which the Company during the term
of Executive's employment, formed an intention to enter during the term of
Executive's obligation not to compete, and which the Company's Board has
disclosed to Executive in writing within ten (10) days following the
termination of this Agreement. This covenant shall not preclude Executive
from owning less than two percent (2%) of the securities of any competitor of
the Company if such securities are publicly traded on a nationally recognized
stock exchange or over-the-counter market.
(b) ACKNOWLEDGMENTS. Executive acknowledges that the
foregoing geographic restriction on competition is fair and reasonable, given
the geographic scope of the Company's business operations and the nature of
Executive's position with the Company. Executive also acknowledges that
while employed by the Company Executive will have access to information that
would be valuable or useful to the Company's competitors, and therefore
acknowledges that the foregoing restrictions on Executive's future employment
and business activities are fair and reasonable. Executive acknowledges and
is prepared for the possibility that Executive's standard of living may be
reduced during the Noncompetition Period, and assumes and accepts any risk
associated with that possibility.
(c) JUDICIAL MODIFICATION. If the final judgment of a court
of competent jurisdiction declares that any term or provision of this Section
is invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or geographic area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment or
decision may be appealed.
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7. NONSOLICITATION. During the term of this Agreement and
for a period of _______ months after termination of this Agreement, Executive
shall not without the Company's prior written consent, directly or
indirectly:
(a) cause or attempt to cause any employee, agent or
contractor of the Company or any Company affiliate, to terminate his or her
employment, agency or contractor relationship with Company or any Company
affiliate; interfere or attempt to interfere with the relationship between
the Company and any employee, contractor or agent of the Company; hire or
attempt to hire any employee, agent or contractor of the Company or any
Company affiliate; or conduct business of any kind with any Company
contractor.
(b) solicit business from or conduct business with any
customer or client served by the Company; or interfere or attempt to
interfere with any transaction, agreement or business relationship in which
the Company or any affiliate was involved.
8. DEFINITIONS.
"AGREEMENT" has the meaning set forth in the preamble.
"BOARD" means the board of managers of the Company or, if the
Company is hereafter converted into a corporation or other entity form, the
board of directors or comparable governing body of the Company.
"CAUSE" means (A) any act by Executive, where in respect of
such act Executive is ultimately convicted or enters a plea of guilty or NOLO
CONTENDERE to a felony (or crime of similar gravity under the laws of another
jurisdiction), (B) Executive's willful misconduct, gross negligence,
perpetration of or participation in a fraud, in each case where such acts are
materially injurious to the Company or any of its Subsidiaries or any
affiliate thereof, (C) Executive's breach in any material respect of the
provisions of Section 5 (Confidentiality), Section 6 (Noncompetition) or
Section 7 (Nonsolicitation) or (D) Executive's nonperformance including
without limitation, failure to perform his duties as directed by the Company
or failure to achieve specific performance objectives established by the
Company.
"CLASS A SENIOR UNITS" means the Class A Senior Units of the
Company, having the rights and preferences set forth in the LLC Agreement.
"CLASS B SENIOR UNITS" means the Class B Senior Units of the
Company, having the rights and preferences set forth in the LLC Agreement.
"CLASS C SENIOR UNITS" means the Class C Senior Units of the
Company, having the rights and preferences set forth in the LLC Agreement.
"COMMON UNITS" means the Common Units of the Company, having
the rights and preferences set forth in the LLC Agreement.
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"COMPANY" has the meaning set forth in the preamble.
"CONFIDENTIAL INFORMATION" has the meaning set forth in
Section 5(a).
"DISABILITY" means any illness, accident, injury, physical or
mental incapacity or other disability, where such condition has rendered, or
is expected to render (as determined in the good faith judgment of the
Board), Executive unable or unfit to perform effectively the duties and
obligations of his employment or to participate effectively and actively in
the management of the Company for a period of at least 90 days.
"EQUITY PURCHASE AGREEMENT" means the equity purchase
agreement dated May 18, 1998, by and among the Company and certain investors,
as amended from time to time in accordance with the terms thereof.
"EXECUTIVE" has the meaning set forth in the preamble.
"EXECUTIVE SECURITIES" means (i) the Common Units issued to
Executive hereunder and (ii) any securities issued directly or indirectly
with respect to any Executive Securities by way of a stock split, stock
dividend, or other division of securities, or in connection with a
combination of securities, recapitalization, merger, consolidation, or other
reorganization, or upon conversion or exercise of any of the foregoing;
PROVIDED that Executive Securities shall not include any Senior Units. As to
any particular securities constituting Executive Securities, such securities
shall cease to be Executive Securities when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act
(or any similar provision then in force) or (c) repurchased pursuant to the
provisions hereof or forfeited pursuant to the provisions of the Performance
Vesting Agreement. "Executive Securities" refers only to Executive
Securities under this Agreement and does not in any way refer to any
securities referred to as Executive Securities under any other executive
securities agreement between the Company and a Key Employee of the Company or
its Subsidiaries.
"EXEMPT TRANSFER" has the meaning set forth in Section
4(c)(i).
"FAIR MARKET VALUE" as to any Executive Securities on any
particular date, shall mean the fair market value of such securities as of
such date, as determined in good faith by the Board. With respect to any
Executive Securities that are Un-Performance-Vested Securities, the Board
shall in determining the Fair Market Value of such securities reflect (x) the
expected market value of such securities at such future time as such
securities are expected to become performance vested under the terms of the
Performance Vesting Agreement, appropriately discounted to its present value
as of the relevant valuation date based upon the amount of time from the
relevant valuation date until the date on which such Un-Performance-Vested
Securities are expected to performance vest (if at all), and (y) the
magnitude of the risk that such securities may never become performance
vested under the terms of the Performance Vesting Agreement.
"FAMILY GROUP" has the meaning set forth in Section 4(c)(ii).
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"FULLY VESTED SECURITIES" means Executive Securities which
both (i) are Time-Vested Securities and (ii) are not Un-Performance-Vested
Securities.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section
5(b)(i).
"JOINDER AGREEMENT" means the joinder and rights agreement of
even date herewith entered into by and between the Company and the Executive,
pursuant to which Executive shall become a party to the LLC Agreement, the
Securityholders Agreement, the Registration Agreement and the Performance
Vesting Agreement as if he were an original signatory to each such agreement.
"KEY EMPLOYEE" has the meaning set forth in Section 3(b).
"LLC AGREEMENT" means the limited liability company agreement
governing the affairs of the Company, as amended from time to time in
accordance with its terms.
"NONCOMPETITION PERIOD" has the meaning set forth in Section
6(a).
"NONSOLICITATION PERIOD" has the meaning set forth in
Section 7.
"ORIGINAL COST," as to any particular securities, shall mean
the initial price paid to the Company upon issuance of such securities (as
such price is equitably adjusted for any securities splits, securities
dividends, securities combinations, conversions, recapitalizations or
reorganizations).
"PERFORMANCE-VESTED SECURITIES" means Performance Vesting
Securities that have performance vested pursuant to the terms of the
Performance Vesting Agreement.
"PERFORMANCE VESTING AGREEMENT" means that certain
performance vesting agreement dated May 18, 1998, by and among the Company,
certain Key Employees (including Executive), and the Investors party thereto,
as amended from time to time in accordance with its terms.
"PERFORMANCE VESTING SECURITIES" means (i) the Common Units
specified in the Performance Vesting Agreement as subject to performance
vesting thereunder (regardless of whether such Common Units have or have not
performance vested pursuant to the terms thereof), and (ii) any securities
issued directly or indirectly with respect to any Performance Vesting
Securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities,
recapitalization, merger, consolidation, or other reorganization, or upon
conversion or exercise of any of the foregoing; PROVIDED that Performance
Vesting Securities shall not include any Senior Units. As to any particular
securities constituting Performance Vesting Securities, such securities shall
cease to be Performance Vesting Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased
pursuant to the provisions hereof or forfeited pursuant to the provisions of
the Performance Vesting Agreement.
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"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"PREFERRED UNITS" means the Preferred Units of the Company,
having the rights and preferences set forth in the LLC Agreement.
"PUBLIC OFFERING" means any underwritten sale of the
company's common stock pursuant to an effective registration statement under
the Securities Act filed with the Securities and Exchange Commission on Form
S-1 (or a successor form adopted by the Securities and Exchange Commission);
provided that the following shall not be considered a Public Offering: (i)
any issuance of common stock as consideration for a merger or acquisition,
and (ii) any issuance of common stock or rights to acquire common stock to
existing securityholders or to employees of the Company or its Subsidiaries
on Form S-4 or Form S-8 (or a successor form adopted by the Securities and
Exchange Commission) or otherwise.
"PURCHASER SECURITIES" means (i) the Preferred Units issued
pursuant to the Equity Purchase Agreement, (ii) any Common Units issued upon
conversion of the Preferred Units referenced in clause (i), and (iii) any
securities issued directly or indirectly with respect to any Purchaser
Securities by way of a stock split, stock dividend, or other division of
securities, or in connection with a combination of securities,
recapitalization, merger, consolidation, or other reorganization, or upon
conversion or exercise of any of the foregoing securities; PROVIDED that
Purchaser Securities shall not include any Senior Units. As to any
particular securities constituting Purchaser Securities, such securities
shall cease to be Purchaser Securities when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act
(or any similar provision then in force) or (c) repurchased or otherwise
acquired by the Company or forfeited pursuant to the provisions of the
Performance Vesting Agreement. Any reference herein to a "majority of the
Purchaser Securities" or the "number of Purchaser Securities" for purposes of
comparison shall refer, with respect to any particular Purchaser Securities,
to the number of Common Units (or equivalent common equity securities of the
Company) then represented by such Purchaser Securities (on a fully diluted,
as-if-converted basis).
"QUALIFIED PUBLIC OFFERING" means a Public Offering where BOTH
(i) the proceeds (net of underwriting discounts and
commissions) received by the Company in exchange for its issuance of
shares of common stock in such Public Offering equal or exceed $60
million, AND
(ii) the price per share of common stock paid to the Company
in such Public Offering equals or exceeds the product of (x) 3.0
TIMES (y) the quotient of (A) the aggregate capital contributions to
the Company under the Equity Purchase Agreement (including the
initial purchase price and all subsequent contributions made in
respect of the Preferred Units under the terms of the Equity
Purchase Agreement) made on or prior to the date of such
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Public Offering with respect to all Purchaser Securities then
outstanding, DIVIDED BY (B) the number of shares of the Company's
common stock represented by all Purchaser Securities (on a fully
diluted, as-if-converted basis) outstanding immediately prior to the
consummation of such Public Offering.
"QUALIFIED SALE OF THE COMPANY" has the meaning set forth in
Section 2(b).
"REPURCHASE EVENT" has the meaning set forth in Section 3(a).
"REPURCHASE NOTICE" has the meaning set forth in Section 3(d).
"REPURCHASE PRICE" has the meaning set forth in Section 3(c).
"SALE OF THE COMPANY" means the arm's length sale of the
Company to a third party or group of third parties acting in concert, pursuant
to which such party or parties acquire (i) equity securities of the Company
possessing the voting power under normal circumstances to control the Company,
or (ii) all or substantially all of the Company's assets determined on a
consolidated basis (in either case, whether by merger, consolidation, sale or
transfer of the Company's equity securities, or sale or transfer of the
Company's consolidated assets).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SECURITYHOLDERS AGREEMENT" means the securityholders agreement
dated May 18, 1998 entered into by and among the Company and certain of its
securityholders, as amended from time to time in accordance with its terms.
"SENIOR UNITS" means the Company's Class A Senior Units, Class
B Senior Units, and Class C Senior Units.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director, manager or general
partner of such limited liability company, partnership, association or other
business entity. For purposes of this Agreement, if the context does not
otherwise indicate in
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respect of which Person the term "SUBSIDIARY" is used, the term "SUBSIDIARY"
shall refer to any Subsidiary of the Company.
"TIME-VESTED SECURITIES" has the meaning set forth in Section
2(a).
"TRANSFER" has the meaning set forth in Section 4(c)(i).
"UN-PERFORMANCE-VESTED SECURITIES" means Performance Vesting
Securities that have not yet performance vested pursuant to the provisions of
the Performance Vesting Agreement.
"UN-TIME-VESTED SECURITIES" has the meaning set forth in
Section 2(a).
9. MISCELLANEOUS PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Securities in violation of any provision
of this Agreement shall be void, and the Company shall not record such
purported Transfer on its books or treat any purported transferee of such
Executive Securities as the owner of such securities for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or any other jurisdiction, but this
Agreement shall be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision had never been contained
herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and related documents among the parties of even
date herewith and therewith embody the complete agreement and understanding
among the parties hereto and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in
separate counterparts, none of which need contain the signature of more than
one party hereto but each of which shall be deemed to be an original and all
of which taken together shall constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind the parties hereto and their respective
successors and assigns and shall inure to the benefit of and be enforceable
by the parties hereto and their respective successors and assigns, whether so
expressed or not.
(f) CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF DELAWARE WITHOUT GIVING EFFECT TO ANY
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CHOICE OF LAW OR CONFLICT OF LAW STATUTES, RULES, PROVISIONS, OR DECISIONAL
LAW (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
DELAWARE. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
STATUTES, RULES, PROVISIONS, OR DECISIONAL LAW (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION), SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT, EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE
OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER
JURISDICTION WOULD ORDINARILY AND OTHERWISE APPLY.
(g) JURISDICTION; SERVICE OF PROCESS. ANY ACTIONS OR
PROCEEDINGS, WHETHER AT LAW OR IN EQUITY, SEEKING TO ENFORCE OR TO ENJOIN
THE ENFORCEMENT OF ANY PROVISION OF THIS AGREEMENT, OR BASED ON ANY RIGHT
ARISING OUT OF THIS AGREEMENT SHALL BE BROUGHT, TRIED AND LITIGATED AGAINST
ANY OF THE PARTIES IN THE COURTS OF THE STATE OF COLORADO, OR, IF IT HAS OR
CAN ACQUIRE JURISDICTION, IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF COLORADO, AND EACH OF THE PARTIES HEREBY CONSENTS TO THE
JURISDICTION OF SUCH COURTS (AND OF THE APPROPRIATE APPELLATE COURTS) IN ANY
SUCH ACTION OR PROCEEDING AND WAIVES ANY AND ALL POSSIBLE OBJECTIONS TO VENUE
LAID THEREIN, INCLUDING WITHOUT LIMITATION FORUM NON CONVENIENS. PROCESS IN
ANY ACTION OR PROCEEDING REFERRED TO IN THE PRECEDING SENTENCE MAY BE SERVED
ON ANY PARTY ANYWHERE IN THE WORLD BY PREPAID FEDERAL EXPRESS, DHL OR OTHER
INTERNATIONAL AIR COURIER TO THE EXECUTIVE AT THE LAST KNOWN ADDRESS PROVIDED
TO THE COMPANY IN WRITING, TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION
9(m) HEREIN OR SUCH OTHER ADDRESS PROVIDED TO EXECUTIVE IN WRITING, AND TO
THE LAST KNOWN ADDRESS OF ALL OTHER ADDRESSEES.
(h) REMEDIES. Each of the parties to this Agreement
(including any Key Employee to which the Company assigns any of its
repurchase rights under Section 3 hereof, as third-party beneficiaries) shall
be entitled to enforce its rights under this Agreement specifically, to
recover damages and costs (including reasonable attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge that
money damages would not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion,
subject to the limitations set forth in Section 9(g) hereof, apply to any
court of law or equity of competent jurisdiction (without posting any bond or
deposit) for specific performance and/or other injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement.
(i) AMENDMENT, MODIFICATION, OR WAIVER. The provisions of
this Agreement may be amended, modified, or waived only with the prior
written consent of the Company and the Executive.
(j) THIRD-PARTY BENEFICIARIES. The parties hereto
acknowledge and agree that certain provisions of this Agreement are intended
for the benefit of any Key Employee to which the Company assigns any of its
repurchase rights under Section 3 hereof, that such Persons are third-party
beneficiaries of this Agreement, and that the provisions of this Agreement
shall be enforceable by such Persons as provided herein.
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(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the State of Colorado, the United Kingdom, or the jurisdiction of
the Company's principal office, the time period shall be extended
automatically to the business day immediately following such Saturday, Sunday
or holiday.
(l) DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT
CONSTRUCTION. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the
singular forms of nouns, pronouns, and verbs shall include the plural and
vice versa. Reference to any agreement, document, or instrument means such
agreement, document, or instrument as amended or otherwise modified from time
to time in accordance with the terms thereof, and if applicable hereof. The
use of the words "include" or "including" in this Agreement shall be by way
of example rather than by limitation. The use of the words "or," "either" or
"any" shall not be exclusive. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. If an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any of the provisions of this Agreement.
(m) NOTICES. Subject to the requirements regarding service
of process set forth in Section 9(g) above, all notices, demands or other
communications to be given or delivered under or by reason of the provisions
of this Agreement shall be in writing and shall be deemed to have been given
when (a) delivered personally to the recipient, (b) telecopied to the
recipient (with hard copy sent to the recipient by reputable overnight
courier service (charges prepaid) that same day) if telecopied before 5:00
p.m. Chicago, Illinois time on a business day, and otherwise on the next
business day, or (c) one business day after being sent to the recipient by
reputable overnight courier service (charges prepaid). Such notices, demands
and other communications shall be sent to the following Persons at the
following addresses:
TO THE COMPANY:
6300 South Syracuse Way, Suite 355
Englewood, CO 80111
Attention: Chief Executive Officer
Telephone: (303) 741-4788
Telecopy: (303) 741-4823
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<PAGE>
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey Richards, Esq.
Telephone: (312) 861-2385
Telecopy: (312) 861-2200
AND WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Holme Roberts & Owen LLP
1700 Lincoln Street
Suite 4100
Denver, Colorado 80203
Attention: W. Dean Salter, Esq.
Telephone: (303) 861-7000
Telecopy: (303) 866-0200
To Executive: at the address set forth in the Company's
records or to such other address or to the attention of such other person as
the recipient party has specified by prior written notice to the sending
party.
(n) DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person.
At the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Executive Securities Agreement on the date first written above.
COMPLETEL LLC
By:
-----------------------------------
EXECUTIVE
---------------------------------------
(Signature Page for Executive Securities Agreement)
<PAGE>
JOINDER AND RIGHTS AGREEMENT
(_______)
THIS JOINDER AND RIGHTS AGREEMENT (this "AGREEMENT") is made as of
_________, by and between CompleTel LLC, a Delaware limited liability company
(the "COMPANY"), and _________ ("EXECUTIVE"). Capitalized terms used but not
otherwise defined herein have the meanings ascribed to such terms in the LLC
Agreement (as defined below).
The holders of interests in the profits, losses, and distributions
of the Company (the "MEMBERS") are parties to a limited liability company
agreement, dated as of May 18, 1998, governing the affairs of the Company (as
amended from time to time in accordance with its terms, the "LLC AGREEMENT").
In connection with the execution of the LLC Agreement, the Company and the
Members entered into a securityholders agreement dated as of May 18, 1998 (as
amended from time to time in accordance with its terms, the "SECURITYHOLDERS
AGREEMENT"), a registration rights agreement dated as of May 18, 1998 (as
amended from time to time in accordance with its terms, the "REGISTRATION
AGREEMENT"), and a performance vesting agreement dated as of May 18, 1998 (as
amended from time to time in accordance with its terms, the "PERFORMANCE
VESTING AGREEMENT") (the LLC Agreement, the Securityholders Agreement, the
Registration Agreement and the Performance Vesting Agreement, collectively
the "Equity Agreements").
The terms of the LLC Agreement contemplate that the Board of
Managers of the Company may approve the issuance of the Company's Common
Units to management and other key employees of the Company and its
Subsidiaries ("Key Employees"), and that in connection with and as a
condition to any such issuance the Key Employee issued such Common Units
shall make a specified contribution to the capital of the Company, shall
enter into an Executive Securities Agreement and become a party to the LLC
Agreement, the Securityholders Agreement, the Registration Agreement, and the
Performance Vesting Agreement, and shall take such other actions as shall be
required by the Board of Managers.
Pursuant thereto, Executive and the Company have entered into an
Executive Securities Agreement of even date herewith (as amended from time to
time according to its terms, the "EXECUTIVE AGREEMENT"), pursuant to which
the Company issued to Executive ______ Common Units having the rights,
obligations, and preferences set forth with respect thereto in the LLC
Agreement (the "PURCHASED UNITS") in exchange for Executive making an initial
capital contribution to the Company in cash in the amount of $____. As
required by the LLC Agreement, and in further consideration of and as a
condition to the Company's agreement to enter into the Executive Agreement
and issue the Purchased Units to Executive, the parties hereto desire that
Executive become a party to the LLC Agreement, the Securityholders Agreement,
the Registration Agreement, and the Performance Vesting Agreement as set
forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. ADDITION OF EXECUTIVE TO THE LLC AGREEMENT. The parties
hereto agree that, by and upon execution of this Agreement, Executive shall
as of the date hereof be a party to the LLC Agreement and shall for all
purposes be considered a "MEMBER" and a holder of "COMMON UNITS" thereunder
and shall be entitled to all the rights and benefits and subject to all the
duties and
<PAGE>
obligations of a Member and a holder of Common Units thereunder, as fully as
if Executive were an original signatory thereto in such capacities.
2. ADDITION OF EXECUTIVE TO THE SECURITYHOLDERS AGREEMENT. The
parties hereto agree that, by and upon execution of this Agreement, Executive
shall as of the date hereof be a party to the Securityholders Agreement and
shall for all purposes be considered a "SECURITYHOLDER," a holder of
"SECURITYHOLDER SECURITIES," a holder of "EXECUTIVE SECURITIES," and a holder
of "MANAGEMENT EQUITY" thereunder, and shall be entitled to all the rights
and benefits and subject to all the duties and obligations of a
Securityholder and a holder of Securityholder Securities, Executive
Securities, and Management Equity thereunder, as fully as if Executive were
an original signatory thereto in such capacities.
3. ADDITION OF EXECUTIVE TO THE REGISTRATION AGREEMENT. The
parties hereto agree that, by and upon execution of this Agreement, Executive
shall as of the date hereof be a party to the Registration Agreement and
shall for all purposes be considered a holder of "REGISTRABLE SECURITIES" and
a holder of "MANAGEMENT REGISTRABLE SECURITIES" thereunder and shall be
entitled to all the rights and benefits and subject to all the duties and
obligations of a holder of Registrable Securities and Management Registrable
Securities thereunder, as fully as if Executive were an original signatory
thereto in such capacities.
4. ADDITION OF EXECUTIVE TO THE PERFORMANCE VESTING AGREEMENT.
The parties hereto agree that, by and upon execution of this Agreement,
Executive shall as of the date hereof be a party to the Performance Vesting
Agreement and shall for all purposes be considered an Executive thereunder,
and that for all purposes ______ of the Common Units purchased by Executive
under the Executive Agreement shall be considered "MANAGEMENT SECURITIES" and
"PLEDGED SECURITIES" (of which _____ shall be considered "CLIFF MANAGEMENT
SECURITIES" and _____ shall be considered "SLOPE MANAGEMENT SECURITIES")
thereunder (all as defined in the Performance Vesting Agreement), and
Executive shall be entitled to all the rights and benefits and subject to all
the duties and obligations of an Executive and a holder of Management
Securities and Pledged Securities thereunder, as fully as if Executive were
an original signatory thereto in such capacities.
5. RESTRICTIVE LEGENDS. In addition to the legends required by
Section 6 of the Securityholders Agreement and Section 8(b) of the
Performance Vesting Agreement, each certificate or instrument (if any)
evidencing the Purchased Units (or any Company securities issued in exchange
for or otherwise in respect of such Purchased Units) shall, until such time
as such securities are no longer subject to the provisions of the
Securityholders Agreement or the Performance Vesting Agreement in accordance
with the provisions thereof, be stamped or otherwise imprinted with a legend
in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE BECAME SUBJECT TO THE
AFOREMENTIONED SECURITYHOLDERS AGREEMENT AND PERFORMANCE VESTING
AGREEMENT PURSUANT TO A JOINDER AND RIGHTS AGREEMENT DATED AS OF
_____________, BY AND BETWEEN THE ISSUER AND THE INITIAL HOLDER OF
SUCH SECURITIES. A COPY OF SUCH AGREEMENT SHALL BE FURNISHED WITHOUT
-2-
<PAGE>
CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
6. CONTINUING EFFECT. Pursuant to the express terms of the LLC
Agreement, Securityholders Agreement, Registration Agreement, and Performance
Vesting Agreement, this Agreement shall not constitute an amendment or waiver
of any provision of the LLC Agreement, of any provision of the
Securityholders Agreement, of any provision of the Registration Agreement, or
of any provision of the Performance Vesting Agreement, all of which shall
continue and remain in full force and effect in accordance with their terms.
7. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of any other
provision of this Agreement in such jurisdiction or affect the validity,
legality or enforceability of any provision in any other jurisdiction, but
this Agreement shall be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been
contained herein.
8. CONSENT TO AMENDMENTS. The provisions of this Agreement may
be amended, modified, or waived only with the prior written consent of the
Company and Executive; PROVIDED that no such amendment, modification, waiver
shall in any way be construed to constitute an amendment, modification, or
waiver of the LLC Agreement, the Securityholders Agreement, the Registration
Agreement, the Performance Vesting Agreement, or any other agreement (in each
case, including without limitation with respect to Executive's being a party
to such agreements and the rights and obligations of Executive as a party to
such agreements), which agreements may only be amended, modified, or waived
in accordance with the provisions thereof.
9. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
10. CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
STATUTES, RULES, PROVISIONS, OR DECISIONAL LAW (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE. IN FURTHERANCE OF
THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW STATUTES, RULES, PROVISIONS,
OR DECISIONAL LAW (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER
JURISDICTION), SHALL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF
LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
AND OTHERWISE APPLY.
11. JURISDICTION; SERVICE OF PROCESS. THE PARTIES ACKNOWLEDGE
AND AGREE THAT ANY ACTIONS OR PROCEEDINGS, WHETHER AT LAW OR IN EQUITY,
SEEKING TO ENFORCE OR TO ENJOIN THE
-3-
<PAGE>
ENFORCEMENT OF ANY PROVISION OF THIS AGREEMENT OR THE LLC AGREEMENT, THE
SECURITYHOLDERS AGREEMENT, THE REGISTRATION AGREEMENT, OR THE PERFORMANCE
VESTING AGREEMENT, OR BASED ON ANY RIGHT ARISING OUT OF THIS AGREEMENT OR THE
LLC AGREEMENT, THE SECURITYHOLDERS AGREEMENT, THE REGISTRATION AGREEMENT, OR
THE PERFORMANCE VESTING AGREEMENT SHALL BE BROUGHT, TRIED AND LITIGATED
AGAINST ANY OF THE PARTIES IN THE COURTS OF THE STATE OF COLORADO, OR, IF IT
HAS OR CAN ACQUIRE JURISDICTION, IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF COLORADO, AND EACH OF THE PARTIES HEREBY CONSENTS TO THE
JURISDICTION OF SUCH COURTS (AND OF THE APPROPRIATE APPELLATE COURTS) IN ANY
SUCH ACTION OR PROCEEDING AND WAIVES ANY AND ALL POSSIBLE OBJECTIONS TO VENUE
LAID THEREIN, INCLUDING WITHOUT LIMITATION FORUM NON CONVENIENS. PROCESS IN
ANY ACTION OR PROCEEDING REFERRED TO IN THE PRECEDING SENTENCE MAY BE SERVED
ON ANY PARTY ANYWHERE IN THE WORLD BY PREPAID FEDERAL EXPRESS, DHL OR OTHER
INTERNATIONAL AIR COURIER TO THE EXECUTIVE AT THE LAST KNOWN ADDRESS PROVIDED
TO THE COMPANY IN WRITING, TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION
9(m) OF THE EXECUTIVE AGREEMENT OR SUCH OTHER ADDRESS PROVIDED TO EXECUTIVE
IN WRITING, AND TO THE LAST KNOWN ADDRESS OF ALL OTHER ADDRESSEES.
12. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
the Company and the Executive and their respective successors and assigns,
whether so expressed or not.
13. DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT CONSTRUCTION.
The descriptive headings of this Agreement are inserted for convenience only
and do not constitute a substantive part of this Agreement. Whenever
required by the context, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular forms of
nouns, pronouns, and verbs shall include the plural and vice versa. Except
as otherwise expressly provided herein, reference to any agreement, document,
or instrument means such agreement, document, or instrument as amended or
otherwise modified from time to time in accordance with the terms thereof,
and if applicable hereof. The use of the words "include" or "including" in
this Agreement shall be by way of example rather than by limitation. The use
of the words "or," "either" or "any" shall not be exclusive. The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the
parties hereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
14. DELIVERY BY FACSIMILE. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of
a facsimile machine, shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof
delivered in person. At the request of any party hereto or to any such
agreement or instrument, each other party hereto or thereto shall reexecute
original forms thereof and deliver them to all other parties. No party
hereto or to any such agreement or instrument shall raise the use of a
facsimile machine to deliver a signature or the fact that any signature or
-4-
<PAGE>
agreement or instrument was transmitted or communicated through the use of a
facsimile machine as a defense to the formation or enforceability of a
contract and each such party forever waives any such defense.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
COMPLETEL LLC
---------------------------------------
EXECUTIVE
---------------------------------------
(Signature Page to Joinder and Rights Agreement)
<PAGE>
ARRETE DATED 17 NOVEMBER 1998 AUTHORISING COMPLETEL SARL TO SET UP AND
OPERATE A TELECOMMUNICATION NETWORK OPEN TO THE PUBLIC AND TO SUPPLY THE
PUBLIC WITH THE TELEPHONE SERVICE.
The Secretary of state of industry,
Considering the International Telecommunications Union Convention, the
International Telecommunications Regulation and the Radiocommunication
Regulation;
Considering the Posts and Telecommunications Code, and especially articles
L.33-1 and L.34-1;
Considering the Consumer Code;
Considering the law nDEG. 78-23 dated 10 January 1978 (as amended) relating
to the protection and information of the consumers of products and services;
Considering the financial law (as amended) for 1987 (nDEG. 86-1317 dated 30
December 1986);
Considering the law nDEG. 90-1170 dated 29 December 1990 (as amended) relating
to Telecommunications Regulation, and especially its article 28;
Considering the law nDEG. 91-646 dated 10 July 1991 relating to the secrecy of
correspondence sent out by Telecommunications means;
Considering the Decree nDEG. 59-147 dated 7 January 1959 relating to the
general defence organisation and its enforcement texts;
Considering the Decree nDEG. 86-1243 dated 1 December 1986 (as amended) relating
to the freedom of prices and of competition;
Considering the Decree dated 3 February 1993 (as amended) relating to radio
electric frequency allocation fees and relating to management fees due by the
holders of authorisations delivered in application of articles L.33-1 and
L.33-2 of the Posts and Telecommunications Code;
Considering the Decree nDEG. 96-1175 dated 27 December 1996 relating to
standard clauses of specifications associated with the authorisations
allocated in application of articles 33-1 and L.34-1;
Considering the Decree nDEG. 96-1224 dated 27 December 1996 relating to the
fees due for the management expenses of the numbering national plan and its
utilisation control;
Considering the Decree nDEG. 97-188 dated 3 March 1997 relating to the
interconnection stated by article L.34-8 of the Posts and telecommunications
Code;
<PAGE>
Considering the Decree nDEG. 97-475 dated 13 May 1997 relating to the
financing of the universal service in application of article 35-3 of the
Posts and Telecommunications Code;
Considering CompleTel SARL's request dated 24 April 1998, located 44, rue
Washington, Washington Plaza, 75408 Paris Cedex 08, and completed by its
letters dated 2,9,12,23 and 24 June, 10 and 20 July, 24 and 31 August 1998;
Considering Completel SARL's letter dated 16 July 1998 responding to the
Telecommunications Regulatory Authority's letter dated 9 July 1998;
Considering the decision nDEG. 98-659 of the Telecommunications Regulatory
Authority dated 2 September 1998 relating to the instruction of the request
for authorisation introduced by Completel SARL,
Decides
Article 1: CompleTel SARL is authorised to set up and operate a
telecommunication network open to the public in the Ile-de-France, Rhone
Alpes, Provence-Alpes-Cote d'Azur and Nord-Pas-de-Calais regions, as well as
in the towns of Rouen, Bordeaux, Toulouse, Nantes, Strasbourg and Nancy,
according to the terms stated in the specifications appended to the present
order.
Article 2: CompleTel SARL is authorised to supply the public with the
telephone service in the Ile-de-France, Rhone Alpes, Provence-Alpes-Cote
d'Azur and Nord-Pas-de-Calais regions, as well as in the Meurthe-et-Moselle,
Seine-Maritime, Bas-Rhin, Loire Atlantique, Gironde and Haute-Garonne
departments, according to the terms stated in the specifications appended to
the present order.
Article 3: The present authorisation is delivered for 15 years as from the
date of publication of the present order. The terms of its renewal are
defined in article L.33-1 of the Posts and Telecommunications Code.
Article 4: The present authorisation is linked to its holder and can't be
transferred to a third party.
Article 5: The modifications of the share capital of the holder of the
authorisation are to be communicated to the Telecommunications Regulatory
Authority in order to check that such modifications are compatible with the
terms of the authorisation.
Article 6: The present order and its appendix will be published in the French
Official Journal.
Paris, 17 November 1998.
/s/ Christian Pierret
Christian Pierret
<PAGE>
LICENCE GRANTED BY
THE SECRETARY OF STATE FOR TRADE AND INDUSTRY TO
COMPLETEL UK LIMITED
UNDER SECTION 7 OF THE TELECOMMUNICATIONS ACT 1984
THE LICENCE
1. The Secretary of State, in exercise of the powers conferred on him by
section 7 of the Telecommunications Act 1984 (hereinafter referred to as "the
Act") and after consulting the Director hereby grants to CompleTel UK Limited
(hereinafter referred to as "the Licensee") a licence, for the period
specified in paragraph 3, subject to the Conditions set out in Schedule 1 and
to revocation as provided for in paragraph 3 and in Schedule 2, to run
telecommunication systems of every description within the United Kingdom
("the Applicable Systems") and authorises the Licensee to do all or any of
the acts specified in Schedule 3.
2. The Telecommunications Code contained in Schedule 2 to the Act shall
apply to the Licensee for all purposes except those not relating to the
Applicable Systems and subject to the other exceptions and conditions set out
in Schedule 4 for so long as this Licence is one to which section 8 of the
Act applies.
DURATION
3. This Licence shall enter into force on the date of signature and shall be
of 25 years' duration in the first instance but, without prejudice to
Schedule 2 to this Licence, shall be subject to revocation thereafter on ten
years' notice in writing of such revocation and such notice shall accordingly
not be given before the end of the fifteenth year after the granting of this
Licence.
INTERPRETAION
4. The Interpretation Act 1978 shall apply for the purpose of interpreting
this Licence as if it were an Act of Parliament. In this Licence, except as
hereinafter provided or unless the context otherwise requires, words or
expressions shall have the meaning assigned to them and otherwise any word or
expression shall have the same meaning as it has in the Act. For the purposes
of interpreting this Licence, headings and titles shall be disregarded.
5. In this Licence, "Licence" means a licence granted or having effect as if
granted under section 7 of the Act.
6. For the purposes of this Licence the "Applicable Systems" means any or
all of the telecommunication systems run by the Licensee under this Licence
unless the context otherwise requires.
7. Where this Licence provides for any power of the Secretary of State or
the Director to give any direction, notice or consent or make any
specification, designation or determination, it implies, unless the contrary
intention appears, a power, exercisable in the same manner and subject to the
same conditions or limitations, to revoke, amend or give or make again any
such
<PAGE>
direction, notice, consent, specification, designation or determination; and
any reference however expressed to the Director making any determination
about any matter shall be construed as making such determination after
consultation with the Licensee and where appropriate with any other person
who may have a relevant interest in the matter to which the determination
relates.
8. Any notification which is required to be given under this Licence by the
Secretary of State or the Director shall be satisfied by serving the document
by post on the Licensee at the Licensee's registered office.
/s/ Philippa Lloyd
Philippa Lloyd
11 January 1999
For and on behalf of the Secretary of
State for Trade and Industry
<PAGE>
MANAGEMENT AGREEMENT
between
CompleTel Europe N.V.,
CompleTel LLC
and
ING Trust (Nederland) B.V.
<PAGE>
1
MANAGEMENT AGREEMENT
This Agreement (hereinafter referred to as the "Agreement") made between and
entered into by:
1. ING TRUST (NEDERLAND) B.V., a private company with limited liability,
duly organized and existing under the laws of the Netherlands with
registered office at Prinses Irenestraat 61, 1077 WV Amsterdam, the
Netherlands (hereinafter referred to as "the Manager")
and
2. COMPLETEL EUROPE N.V. a public company, incorporated under the laws of
the Netherlands with registered office at Prinses Irenestraat 61, 1077
WV Amsterdam, the Netherlands (hereinafter referred to as "the
Corporation"),
and
3. COMPLETEL LLC, a limited liability company duly organized and existing
under the laws of Delaware, with registered office at 430 South Syracuse
Street, Suite 355, Denver, Colorado 80111 (hereinafter referred to as
"the Shareholder"),
WITNESSETH:
WHEREAS the Corporation has requested the Manager to provide services to the
Corporation which may include the formation of the Corporation and to act as
managing director of the Corporation in order to manage and control its conduct
of business and to provide such facilities to the Corporation as may be
appropriate or deemed useful for the principal operating and general business of
the Corporation in the Netherlands;
WHEREAS the Manager is willing to act as managing director of the Corporation,
and to provide such facilities to the Corporation as may be appropriate or
deemed useful for the principal operating and general business of the
Corporation in the Netherlands, subject to and in accordance with the terms and
provisions set forth hereinafter.
Now, THEREFORE, in consideration of the premises and the mutual covenants
contained herein it is agreed by and between the parties hereto as follows:
ARTICLE I APPOINTMENT
The Manager will act as managing director of the Corporation as of date or date
of incorporation and will manage the business of the Corporation on the terms
and conditions set forth in the Agreement for an unlimited period.
<PAGE>
2
ARTICLE II DUTIES
1. The Manager will render domicile and manage and control the conduct of
the business of the Corporation in accordance with the laws of the
Netherlands, its articles of association, the resolutions of its
shareholders' and executive board, provided that, in doing so, the
Manager is not forced to act in an illegal manner or contrary to the
spirit of law and jurisprudence, and as usual in the types of business
in which the Manager and the Corporation are engaged respectively.
2. The Manager will take all steps necessary to incorporate the Corporation
for the Shareholder and to maintain the due existence and good standing
of the Corporation under the laws of the Netherlands and the articles of
association.
3. The Manager will provide such facilities to the Corporation as may be
appropriate or deemed useful.
4. In the execution of its duties the Manager shall take due care of the
interests of the Corporation to the best of its ability.
5. The Manager may subcontract one or more of its duties to third parties,
for which the Manager will remain responsible.
ARTICLE III LIABILITY
The Manager shall not be liable towards the Corporation and/or the Shareholder
for any action duly or lawfully taken or omitted to be taken by it hereunder or
in connection herewith, except for gross negligence or wilful misconduct of the
Manager or his employees.
ARTICLE IV INDEMNITY
The Corporation and/or the Shareholder shall safeguard the Manager and/or his
employees and hold free and harmless against any claim, which may be made upon
the Manager, arising from or connected with the Manager's performance under the
Agreement, unless in the event of gross negligence or wilful misconduct of the
Manager or his employees. The Corporation and/or the Shareholder will reimburse
the Manager for any costs and expenses, including lawyer's fees in connection
with such a claim.
<PAGE>
3
ARTICLE V TERMINATION
1. Either the Manager or the Corporation or the Shareholder may terminate
the Agreement, without any obligation to state any reason therefor, on
three months' prior notice by way of telefax or registered letter to the
mailing address of the other party, as referred to in Article IX of the
Agreement (hereinafter referred to as the "Mailing Address").
2. In the event of gross negligence or wilful misconduct of the Manager or
his employees the Corporation and/or the Shareholder is/are entitled to
terminate the Agreement forthwith by giving notice by way of telefax or
registered letter to the Mailing Address of the Manager.
3. By giving notice by telefax or registered letter to the Mailing Address
of the Corporation and the Shareholder, the Manager is entitled to
terminate the Agreement forthwith upon the occurrence of any of the
following events:
a. failure by the Corporation and/or the Shareholder to perform or
to comply with any term or covenant contained in the Agreement;
b. any act or omission of the Corporation and/or its Shareholder or
beneficial owner(s) in respect of the Corporation, that at the
sole discretion of the Manager makes it unacceptable to him
continuing to manage the Corporation;
c. transfer of any share by any Shareholder without prior approval
of the transferee by the Manager, which approval shall not
unreasonably be withheld;
d. insolvency or bankruptcy of any Shareholder or beneficial owner;
e. appointment by the Corporation of an employee or another managing
director or officer of the Corporation, who is or has become
unacceptable as such to the Manager.
4. In the event of termination of the Agreement, the Corporation and/or the
Shareholder shall instruct the Manager to whom the management of the
Corporation will be transferred. In absence of such instructions the
Manager shall inform third parties he deems useful, including but not
limited to the local authorities in the Netherlands, about the
termination of the Agreement and file a Mailing Address, other than
Prinses Irenestraat 61, 1077 WV Amsterdam, the Netherlands for all
purposes.
The Corporation, the Shareholder and the Manager agree that upon
termination of the Agreement the files of the Corporation will be
transferred to the new managing director when all amounts due by the
Corporation or the Shareholder to the Manager have been paid.
5. In the event that the Corporation is in liquidation and the Manager has
been appointed as an agent in the Netherlands for the Liquidator, the
conditions of the Agreement will remain in force.
<PAGE>
4
ARTICLE VI FEES AND EXPENSES
1. In consideration of the services to be rendered the Corporation will pay
to the Manager:
a. a management fee including domiciliation of NLG 5,000 + VAT per
calendar year and
b. a fee varying from NLG 75 to NLG 250 + VAT per man hour for
management services and for the hours spent during the
<PAGE>
5
incorporation of the Corporation at the request of the Shareholder.
2. In consideration of the administration and bookkeeping services the
Corporation will pay the Manager a fee varying from NLG 75 to NLG 250 +
VAT per hour or part thereof.
3. Furthermore the Manager shall charge the Corporation for out-of-pocket
expenses, including but not limited to costs of telefax, telephone and
postage.
4. a. The management fee including domiciliation due to the Manager
per calendar year (Article VI-1a) will be charged to the
Corporation in advance. When the Manager has only been in office
for a part of a year, the fee is only due over that part of the
year whereas any part of a month shall be computed as a whole
month.
b. The fee for management services (Article VI-1b) is charged for
on a retainer basis for NLG 750 + VAT in advance per calendar
year, which amount will be settled against hours spent to the
Corporation.
5. Without prejudice to Article VI-4b, all amounts due to the Manager under
this article will be paid without set off or counterclaim and free and
clear of, and without deduction or withholding for or on account of, any
taxes, levies, impots, duties, fees assessments or other charges of
whatever nature.
6. The Manager is entitled to increase the fees at the beginning of a
calendar year based upon an increase of operating expenses. The Manager
will inform the Corporation by letter to the Mailing Address at least
four months in advance.
7. The Corporation authorizes the Manager to debit the bank accounts of the
Corporation for any and all amounts due by the Corporation to the
Manager under this article. If debiting the accounts will result in a
debit balance on the bank accounts of the Corporation the Manager will
inform the Shareholder of the Corporation accordingly. The Shareholder
herewith agrees and guarantees to supply the funds necessary to
re-establish a credit balance on the Corporation's bank accounts
immediately if so requested by the Manager and/or the bank.
ARTICLE VII MISCELLANEOUS
1. If and when an external audit of the reports of the Corporation is
required, such request must be directed in writing to the Manager,
specifying the name and address of the audit firm to be approached by
the Manager. Auditing costs are charged directly to the Corporation.
2. As soon as the annual report has been made, the Manager is authorized to
reserve the corporate income tax, due by the Corporation, on a separate
account in Netherlands' currency.
3. The Corporation herewith authorizes the Manager to debit the bank
accounts of the Corporation in order to settle payment of tax
assessments at the time such taxes are due. If debiting the accounts
will result in a debit balance on the bank accounts of the Corporation
the Manager will inform the Shareholder accordingly. The Shareholder
herewith agrees and guarantees to supply the funds necessary to
re-establish a credit balance on the Corporation's bank accounts
immediately if so requested by the Manager and/or the bank.
<PAGE>
6
ARTICLE VIII NON-EXCLUSIVENESS
The Agreement will not preclude the Manager from acting as a managing director
of other corporations.
ARTICLE IX MAILING ADDRESS
Until prior written notice of any change thereof the Mailing Addresses are as
follows:
for the Manager :
ING Trust (Nederland) B.V.
Prinses Irenestraat 61, 1077 WV Amsterdam
P.O. Box 2838, 1000 CV AMSTERDAM
the Netherlands
telephone: +31 20 5405800
telefax: +31 20 6447011
for the Corporation :
CompleTel Europe N.V.
Prinses Irenestraat 61, 1077 WV Amsterdam
P.O. Box 2838, 1000 CV AMSTERDAM
the Netherlands
telephone: +31 20 5405800
telefax: +31 20 6447011
<PAGE>
7
for the Shareholder:
CompleTel LLC
Attn. Mr James Dovey
430 South Syracuse Way, Suite 355
Englewood, Colorado 80111
USA
telephone: 00 1 303 7414788
telefax: 00 1 303 7414823
<PAGE>
8
ARTICLE X GOVERNING LAW
The Agreement is subject to the laws of the Netherlands. Any disputes arising
hereunder shall be brought before the competent court in Amsterdam.
The Agreement has been executed and signed in triplicate on the places and dates
stated below.
The Manager : ING Trust (Nederland) B.V.
/s/ Paul C.E. van Witteveen
----------------------------------
Authorized signatures
By:
Title:
Place:Amsterdam
Date: 1999
The Corporation : CompleTel Europe N.V.
/s/ Paul C.E. van Witteveen
----------------------------------
Authorized signature(s)
By:Managing Director
ING Trust (Nederland) B.V.
Title:
Place:Amsterdam
Date: 1999
The Shareholder : CompleTel LLC
/s/ James E. Dovey
----------------------------------
Authorized signature(s)
By:
Title:
Place:
Date: 1998
<PAGE>
1
LETTER OF UNDERTAKING
The undersigned, COMPLETEL LLC, with office address at 6300 South Syracuse Way,
Suite 355, Colorado 80111 USA, hereinafter referred to as "the Guarantor",
WHEREAS the Guarantor is familiar with the terms and conditions, conceived in
the Management Agreement (hereinafter referred to as "the Agreement"), pursuant
to which ING TRUST (NEDERLAND) B.V. is prepared to act as managing director
(hereinafter referred to as "the Manager") of COMPLETEL EUROPE N.V. as of date
of appointment as mentioned in Article I of the Agreement (hereinafter referred
to as "the Corporation"), a Corporation which will be organized and will be duly
in existence under the laws of the Netherlands,
DOES HEREWITH UNDERTAKE
1. To pay the Manager a fee for its hours spent in connection with the
formation of the Corporation and its appointment as Manager in conformity
with the man-hour fee, stated in Article VI sub 1 and sub 2 of the
Agreement;
2. To cover any financial obligation incurred by the Manager in connection
with the conduct of business of the Corporation or for which the Manager
could be held liable and does herewith declare himself (themselves
severally and jointly) fully liable towards the Manager for all the
Corporation owes or will owe the Manager on account of the Agreement and
undertake therefore to pay immediately upon having been given notice by the
Manager to the effect that the Corporation has failed to fulfil its
obligations under the Agreement the amounts to be stated, and does
furthermore undertake:
(a) To hold the Manager free and harmless against any claim which may be
made upon the Manager arising from or connected with the Manager's
performance under the Agreement or arising from or connected with
the act of any other Manager of the Corporation; furthermore the
Guarantor will reimburse the Manager for any costs and expenses
including lawyer's fees incurred by the Manager in connection with
such claim, unless in the event of wilful misconduct or gross
negligence committed by the Manager,
(b) To refrain of making any claim upon the Manager arising from or
connected with the Manager's performance under the Agreement or
arising from or connected with acts of any other Manager of the
Corporation, unless in the event of wilful misconduct or gross
negligence committed by the Manager.
The above undertaking will remain valid in the event the shareholder of the
Corporation should sell, pledge or otherwise transfer all or part of his
interest in one or more of the shares in the Corporation until the Manager will
have received a similar undertaking from the transferee, in a form and wording
acceptable to the Manager.
<PAGE>
2
For the purpose of this Undertaking the Manager includes any individual employee
of the Manager put at the disposal of the Corporation. This undertaking is also
active in case the Manager acts as agent of the Liquidator of the Corporation.
This Undertaking also indemnifies ING Bank N.V. and/or its subsidiaries,
providing Management services for the Corporation.
This Undertaking is subject to the laws of the Netherlands.
Executed at Denver, Colorado this 17th day of June 1999.
------------------
/s/ James E. Dovey
THE GUARANTOR
<PAGE>
SUPPLY AGREEMENT
BETWEEN
COMPLETEL SAS
AND
MATRA NORTEL COMMUNICATIONS
THIS SUPPLY AGREEMENT (this "AGREEMENT") dated 8 January, 1999 is by and
between CompleTel, a Societe par Actions Simplifiee with an address of 44,
rue Washington, 75408 Paris Cedex 08 (the "CUSTOMER"), and Matra Nortel
Communications, a Societe par Actions Simplifiee with its registered office
at 50, rue du President Sadate, 29562 Quimper Cedex 9, France (the
"SUPPLIER").
WITNESSETH that in consideration of the mutual promises and covenants
hereinafter set forth and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. SCOPE
1.1 DEFINITIONS. Capitalized terms used but not defined in this Agreement
shall have the meanings ascribed thereto in EXHIBIT A attached hereto.
1.2 SYSTEMS. The parties hereto agree and acknowledge that it is the
intention of the Customer to integrate Equipment and Software, by
utilizing the Supplier's Services, into one or more Systems, as provided
herein.
1.3 PURCHASES AND SALES. The Customer shall have the right to purchase, and
the Supplier shall be obligated to sell the Equipment, Documentation and
Software described in EXHIBIT B and extensions to the product lines
described therein to the extent and as provided in this Agreement. All
Equipment purchased by the Customer hereunder shall be New Equipment.
All such Equipment, Documentation and Services may be purchased, in whole
or in part, on a Turnkey Installation basis. The Supplier shall make
available to the Customer for purchase under this Agreement all
Equipment, Documentation and Services Supplier generally makes available
to Supplier's Customers at the time of an Order or within 6 months
thereafter.
1.4 LICENSES. The Customer shall have the right to acquire a license to, and
the Supplier shall be obligated to license to the Customer, the Software
to the extent and as provided in this Agreement. The Supplier shall make
available to the Customer for license under this Agreement all Software
Supplier generally makes available to Supplier's Customers at the time of
an Order or within 6 months thereafter.
<PAGE>
2. TERM
This Agreement shall be effective as of the date first set forth above
and shall remain in effect for five years from such date ("TERM"). The
Parties may extend the Term or any subsequent term by executing a
separate written amendment of extension prior to the expiration of the
Term.
3. FORECASTS
3.1 DELIVERY OF SIX MONTH ROLLING FORECASTS. As soon as practicable
after the date hereof, and thereafter not less than 45
(forty-five) calendar days before the end of each calendar
quarter, the Customer shall deliver to the Supplier a non-binding
forecast of good faith estimated Orders expected to be submitted
by the Customer within the next two calendar quarters, broken down
by quarter (the "FORECAST"), such Forecasts to include
descriptions and quantities of all Equipment, Software and
Services estimated to be ordered within the next two calendar
quarters (specified by quarter). In addition, the forecast shall
specify the anticipated Systems and Subsystems included with such
Equipment, Software and Services.
3.2 REVIEW OF FORECAST. As soon as practicable after the Supplier's
receipt of the Forecast, the Supplier and the Customer shall
review the Forecast to the extent reasonably requested by the
Supplier. The Supplier shall notify the Customer not later than
10 (ten) calendar days after its receipt of the Forecast whether
it is acceptable to it, or if not, what changes would be necessary
to make it acceptable; PROVIDED, HOWEVER, that if the Forecast for
the first quarter covered thereby does not specify a greater
quantity of an item of Equipment or Software or a shorter delivery
time than the prior Forecast covering such quarter, it shall
automatically be deemed accepted by the Supplier as to such items
for the first quarter covered by such Forecast. To the extent of
any other changes to the Forecast for the first quarter and the
Forecast for the second quarter covered thereby, the parties shall
endeavour in good faith to agree upon those portions of the
Forecast as soon as practicable. If the Supplier has not notified
the Customer within 15 (fifteen) calendar days after its receipt
of the Forecast of its non-acceptance thereof, it shall be deemed
accepted.
4. ORDERING
4.1 ORDERS. All purchases of Equipment, Documentation and Services,
and licensing of Software, by the Customer pursuant to this
Agreement shall be made by means of one or more purchase orders
(each an "ORDER" or collectively "ORDERS" as the context may
require) issued from time to time by the Customer in writing.
Each Order shall set forth in reasonable detail:
(a) The Order number and date of issuance;
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<PAGE>
(b) The Equipment, Software and Services ordered, including the
applicable price therefor (either by reference to the price
list attached as EXHIBIT D or otherwise) and any applicable
discounts (the "PRICE");
(c) Requested place of delivery (the "DESTINATION") and, if
different than the Destination, the Site for Installation;
(d) Each Subsystem, System and Group of Assets, if different,
included in such Order and the interconnections required;
(e) The Project Schedule, which shall specify the requested
delivery date, the scheduled Site Readiness Date and the
Target Acceptance Date for each Subsystem, System and Group
of Assets covered by such Order; PROVIDED THAT, the
delivery date shall not be less than 45 (forty-five)
calendar days after the date of such Order issuance;
(f) If Equipment is being ordered, whether the Supplier is to
(i) furnish the Equipment without engineering or
Installation Services ("FO ORDERS"), (ii) furnish the
Equipment with engineering Services only ("E&F ORDERS"),
(iii) furnish the Equipment with Installation Services only
("F&I ORDERS") or (iv) furnish the Equipment with
engineering and Installation services ("EF&I ORDERS");
(g) With respect to each E&F Order, F&I Order and EF&I Order,
the specific engineering and Installation Services to be
performed by the Supplier;
(h) All applicable requirements regarding Commissioning testing
and procedures, including, if applicable, any changes or
additions to the tests and procedures set forth in
EXHIBIT E; and
(i) Other appropriate information as may be mutually agreed by
the parties.
4.2 TIMING OF ORDERS. Except as may be agreed to by the Supplier, any
Order must be placed with the Supplier by giving written notice of
such Order (the "Order Notice") at least 45 (forty-five) calendar
days before the quarter in which the ordered Equipment, Software
and Services are to be delivered, at the following address:
Matra Nortel Communications
33, quai Paul Doumer
Paris La Defense
92415 Courbevoie Cedex - France
To the Attention of: CompleTel Account Manager
Any notice of communication sent under this Agreement shall be
deemed given upon receipt.
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<PAGE>
4.3 ACCEPTANCE OF ORDERS BY THE SUPPLIER.
4.3.1 Each written Order placed by the Customer in compliance
with the provisions of this Agreement (including, without
limitation, the Order Notice provisions of SECTION 4.2)
that is within (i) the Customer's most current Forecast (as
accepted by the Supplier in accordance with SECTIONS 3.2
AND 3.3) shall be deemed an Accepted Order, and shall bind
the Supplier to honour all dates, amounts and other
requirements set forth in the Order upon receipt by the
Supplier unless, subject to SECTION 4.4.2, the Supplier
notifies the Customer of errors or inconsistencies in such
Order within 10 (ten) Working Days of the Supplier's
receipt of such Order and states in such Order Notice that
it has not accepted such Order, in which case the terms of
SECTION 4.3.3 shall apply.
4.3.2 Any Equipment or Software ordered which is in excess of 10%
more than the amount set forth for such item in the most
recent Forecast that has been accepted by the Supplier
under SECTION 3.2, shall be subject to the Supplier's
ability to deliver.
4.3.3 If the Customer submits an Order with lead times that are
shorter than the lead times set forth on the Forecast for
the relevant period, provided that such order is otherwise
accepted pursuant to SECTION 4.3.1, the Supplier shall use
commercially reasonable efforts to accommodate the lead
times set forth in such Order, and shall, within 10 (ten)
Working Days, indicate in writing to the Customer whether
such shortened lead times are acceptable. If such
shortened lead times are unacceptable, the Customer and the
Supplier shall endeavour to agree upon mutually acceptable
lead times.
4.3.4 Other than as provided in SECTION 4.3.2 and subject to
SECTION 4.4.2, if the Customer submits an Order for
Equipment, Software or Services that is not in compliance
with the provisions of this Agreement, then the Customer
and the Supplier shall endeavour in good faith to agree
upon mutually acceptable terms for such Order, and such
Order, if accepted by the Supplier by an Order Notice to
the Customer shall be an Accepted Order, which shall bind
the Supplier to honour all dates, amounts and other
requirements set forth in the Order.
4.4 FORM OF ORDERS.
4.4.1 Notwithstanding that an Order may not refer to this
Agreement, any Order issued by the Customer during the Term
shall be deemed to have been issued pursuant to this
Agreement and shall be governed by the terms and conditions
of this Agreement, unless the parties expressly agree to
the contrary in writing.
4
<PAGE>
4.4.2 Preprinted terms or conditions on the applicable order
shall be deemed deleted and of no force or effect and shall
not provide the basis for non-acceptance by the Supplier of
any Order.
4.5 CHANGE ORDERS.
4.5.1 Except as set forth below, any change to an Accepted Order,
shall be negotiated by the parties in good faith and shall
be mutually agreed upon and subsequently detailed in a
written change to the Order ("CHANGE ORDER"), referencing
the original Order and signed by authorized representatives
of the Customer and the Supplier. Changes to the
Destination or Installation within France within the same
metropolitan area as the original Destination Site shall
not require an agreement (and shall not result in any
adjustment to price or delivery date).
4.5.2 The Customer may change the Destination or Site by Order
Notice to the Supplier at least 5 Working Days prior to the
scheduled delivery or Installation date, as the case may
be, for Equipment (other than Switching Equipment).
4.5.3 Any resulting adjustment to the Order prices for Equipment
to be delivered outside of France shall be based on prices
set forth in EXHIBIT D. Charges for any Services
associated with a Change Order shall be as mutually agreed
to by the Customer and the Supplier prior to execution of
the Change Order. In the event that the Change Order
affects work already performed, the adjustment of the Order
price shall include reasonable charges incurred by the
Supplier related to such work.
5. PRICES
5.1 GENERAL.
5.1.1 The prices, fees and discount schedules for Equipment,
Software, Documentation and Services are set forth on
EXHIBIT D, PROVIDED THAT, if the price determined pursuant
to SECTION 5.1.3 (as if the Equipment , Software or
Services were not set forth on EXHIBIT D) or SECTION 5.6
would be lower, than that price shall apply. For the
avoidance of doubt, prices for all Installation Services
related to Transmission Equipment are included in the price
of such Transmission Equipment.
5.1.2 All such prices referred to in SECTION 5.1.1 in U.S.
Dollars shall be fixed and guaranteed for the Term of this
Agreement, subject to the provisions of SECTION 5.6.
5.1.3 Prices for Equipment, Software, Documentation and Services
not set forth in EXHIBIT D, if not otherwise set forth in
this Agreement, shall be no greater than the lesser of (a)
the Supplier's list prices in effect on the date
5
<PAGE>
of ordering by the Customer, subject to any applicable
discounts made available to the Customer with respect to
items within the same category under this Agreement, or (b)
prices generally made available to Supplier's Customers at
the time of ordering by the Customer.
5.2 PRICES INCLUSIVE. The unit prices of Equipment include use of the
applicable Software and one complete set of all manuals and
Documentation required by the Customer for such Equipment and
Software (except as otherwise provided herein, in an Exhibit
hereto or in any Accepted Order). Prices for any additional sets
of Documentation (or portions thereof) shall be those set forth in
EXHIBIT D. The Supplier represents that the Documentation, in
conjunction with appropriate training, is all that is reasonably
necessary to use, maintain and operate the Equipment, Software and
Systems sold or licensed to the Customer pursuant to this
Agreement.
5.3 FREIGHT. All prices for Equipment and Software set forth in
EXHIBIT D are, and all prices for Equipment or Software to be
charged in the future shall be Delivered Duty Paid, VAT unpaid [at
named place of Destination] ("DDP (Destination)").
5.4 INSURANCE. The Supplier will pay for all insurance costs
associated with shipment of the Equipment and Software to the
Destination specified in the applicable Order or a Change Order
made in accordance with SECTION 4.5.
5.5 TAXES. Equipment prices and charges for any Services set forth in
EXHIBIT D do not include Value Added Tax or sales tax, which if
applicable will be identified separately on the invoice and
payable by the Customer as an addition to the Price.
5.6 MOST FAVOURED CUSTOMER PRICING.
5.6.1 The Supplier warrants that the prices set forth in Section
5 and/or in Exhibit D to this Agreement are substantially
as favourable as prices offered or charged by the Supplier
to other customers, for any comparable system providing
similar functionality after adjusting such other customers
prices for sales volume, financing, payment terms, unusual
warranties, technology related differences and any other
commercial terms.
5.6.2 Each calendar year, and no later than thirty (30) days
after the anniversary date of this Agreement, the parties
shall meet to review and negotiate in good faith prices to
be charged by the Supplier for any Order for Equipment,
Documentation, Services and Software, to be placed by the
Customer during the next twelve (12) months from such
anniversary date of this Agreement to assure that the
prices set forth in Section 5 and/or in Exhibit D to this
Agreement continue to be consistent with the above
provision; PROVIDED, HOWEVER, that unless and until the
parties agree on revised prices, the prices that were in
effect immediately prior to any such negotiations shall
continue in effect.
6
<PAGE>
5.7 VOLUME DISCOUNT. The purchase price for all Equipment,
Documentation and Services purchased or to be purchased and
Software licensed or to be licensed by the Customer or any
Affiliate Customer hereunder or under any Additional Agreement
from and after the effective date of this Agreement shall include
the applicable Sales Volume Discount. "SALES VOLUME DISCOUNT"
shall mean 2% of the price stated in EXHIBIT D or otherwise agreed
to in a Purchase Order for all purchases from the Supplier under
this Agreement. The Sales Volume Discount shall be deducted from
amounts otherwise payable pursuant to EXHIBIT D or otherwise
agreed to in a Purchase Order. In the event that the purchases
by the Customer and its Affiliates from the Supplier and the
Affiliate Suppliers does not equal or exceed US $35 million in any
calendar year, the Sales Volume Discount for that year shall be
reduced to 1% of such price for all purchases ordered and paid for
during that calendar year, and the Customer shall pay to the
Supplier within 60 days after the end of the calendar year an
amount equal to the difference between (i) the purchase or license
price that would have been payable for all Equipment, Software,
Documentation and Services purchased or licensed during the
relevant calendar year if the Sales Volume Discount had been 1%,
and (ii) the actual purchase or license price paid for all such
Equipment, Software, Documentation and Services during such
calendar year.
6. TAXES [Intentionally Omitted for this Agreement]
7. DELIVERY; RISK OF LOSS; TITLE
7.1 DELIVERY SCHEDULE. Delivery of Equipment, Software, Documentation
and Services shall be made to the Site and in accordance with the
schedule provided in an Accepted Order; subject to any Change
Order made in accordance with SECTION 4.5.
7.2 TITLE. Title to each item of Equipment furnished by the Supplier
to the Customer in accordance with this Agreement shall pass to
the Customer on the date of Acceptance of the Subsystem relating
to such Equipment. The Supplier warrants to the Customer that
such title shall be good and defensible, free and clear of all
liens and encumbrances as of the date title passes. Title to
Software shall not pass to the Customer at any time. The Supplier
warrants that it has the right to grant to the Customer the
licenses granted hereunder.
7.3 RISK OF LOSS. Risk of loss with respect to each item of Equipment
or Software shall pass to the Customer upon delivery of such item
to the Customer at the Customer's Destination; PROVIDED, THAT
nothing contained in this SECTION 7.3 shall relieve the supplier
of liability under SECTION 17.
7.4 SPARES. The Supplier shall maintain in its warehouse, at no
charge to the Customer a one-month's supply of the greater of
(a) the Supplier's recommended level of spares for the Equipment
and the component parts thereof previously ordered by the
Customer, and (b) the one-month average of the quantity of
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<PAGE>
Equipment and the component parts thereof ordered by the Customer
in the immediately preceding four months.
7.5 PRIORITY SHIPPING. In the event of a delay in the performance of
the Supplier's obligations hereunder (other than as a result of a
Change Order causing such delay), the Supplier shall use all
reasonable endeavours (including without limitation assigning
additional personnel and reallocating resources) to minimize or
cure the delays at the Supplier's cost. In the event of a delay
in the delivery of Equipment or Software which is the subject of
an Accepted Order beyond the delivery date specified in such Order
therefor, and such delay is not excused under the provisions of
SECTION 14, upon the Customer's request shipment of the delayed
Equipment or Software when ready to ship shall be made specifying
priority transportation at the Supplier's sole cost.
8. PAYMENT
8.1 CURRENCY. All prices and fees shall be stated, all invoices shall
be issued, and all payments shall be made, in US Dollars unless
payment in EURO is required by law (as expressed in a legal
opinion satisfactory to the Customer), in which case payments
shall be in an amount of EURO determined by the US Dollar/EURO
exchange rate in effect at the date the payment is to be made
(such exchange rate to be the published exchange rate of the
European Central Bank). The Customer shall also have the right to
elect at the time of the Order, that the prices and fees shall be
stated, all invoices shall be issued, and all payments shall be
made, in EURO based upon an exchange rate between the US Dollar
and the EURO determined at the time the Order is placed (such rate
to be the published rate of the European Central Bank).
8.2 INVOICES. The Supplier shall invoice the Customer for Equipment,
Software and Documentation for the appropriate amounts and at the
appropriate times in accordance with SECTION 8.3, 8.4 OR 8.5. The
Supplier shall invoice the Customer for Services as set forth in
SECTION 8.6 OR 8.7, as applicable. Each invoice shall specify
whether it is partial or final. No preprinted term or condition
of any invoice shall be binding upon the Customer. Payments shall
be due 30 days from receipt of invoice (assuming invoices were
given in accordance with the applicable provisions of this SECTION
8).
8.3 SWITCHING EQUIPMENT. With respect to the Switching Equipment, the
Supplier shall invoice to the Customer the aggregate price
therefor in accordance with SECTION 8.2, based on the following
schedule:
(i) 10% of the aggregate purchase price of such Switching
Equipment when the Order is accepted or otherwise
acknowledged as provided in SECTION 4.3 ;
(ii) 50% of the aggregate purchase price, upon the delivery of
such Switching Equipment at Destination as provided in
SECTION 7.1;
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<PAGE>
(iii) 25% of the aggregate purchase price, on Acceptance by the
Customer of the Subsystem to which such Switching Equipment
relates;
(iv) 10% of the aggregate purchase price, on Acceptance by the
Customer of the System to which such Switching Equipment
relates;
(v) the remaining 5% on the earlier of (A) Final Acceptance of
the Group of Assets to which such Switching Equipment
relates; and (B) 90 (ninety) calendar days after the last
Target Acceptance Date included in the applicable Order for
all Subsystems, Equipment and Services covered thereby;
PROVIDED, HOWEVER, that the final payment shall only be due
with respect to Equipment that has been Accepted and for
which Acceptance has occurred to any Subsystem and System
to which such Switching Equipment relates.
8.4 TRANSMISSION EQUIPMENT AND NETWORK MANAGEMENT SYSTEM. With
respect to Transmission Equipment, Network Management System
Equipment and Software and other Equipment (excluding Switching
Equipment) and Software ("OTHER PRODUCTS"), the Supplier shall
invoice to the Customer the aggregate price therefor in accordance
with SECTION 8.2, based on the following schedule:
(i) 60% of the aggregate purchase price of such Other Products
after delivery to the Customer of such Other Products to
the Customer to the Destination specified in the applicable
Order or a Change Order made in accordance with SECTION
4.5;
(ii) 25% of the aggregate purchase price, on Acceptance by the
Customer of the Subsystem to which such Other Products
relates;
(iii) 10% of the aggregate purchase price, on Acceptance by the
Customer of the System to which such Other Products
relates;
(iv) the remaining 5% on the earlier of (A) Final Acceptance of
the Group of Assets to which such Other Products relates;
and (B) 90 (ninety) calendar days after the last Target
Acceptance Date included in the applicable Order for all
Other Products and Services covered thereby; PROVIDED,
HOWEVER, that the final payment shall only be due with
respect to Other Products that have been Accepted and for
which Acceptance has occurred to any Subsystem and System
to which such Other Products or Services relates.
8.5 SPARES AND DOCUMENTATION. The Supplier shall invoice the Customer
for the full purchase price of all Spares in accordance with the
procedures set forth in EXHIBIT D.
8.6 FIRST LINE MAINTENANCE SERVICES. The Supplier shall invoice the
Customer for First Line Maintenance Services in accordance with
the procedures set forth in EXHIBIT D.
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8.7 TECHNICAL SUPPORT SERVICES AND NETWORK OPERATIONS CENTER SERVICES.
The Supplier shall invoice the Customer for Technical Support
Services and Network Operations Center Services in accordance with
the procedures set forth in EXHIBIT D.
8.8 PAYMENT NOT ACCEPTANCE. Any payments by the Customer in
accordance with this Agreement shall not constitute Acceptance.
8.9 DISPUTES AS TO INVOICES. The Customer is not required to pay
invoiced amounts that the Customer disputes until such dispute is
resolved, PROVIDED the Customer notifies the Supplier in writing
of such dispute prior to 15 (fifteen) Working Days after receiving
such invoice. Once such dispute is resolved, the Customer shall
pay such invoice within 30 (thirty) calendar days following the
resolution of such dispute. The Supplier shall continue to
provide Equipment, Documentation, Software and Services without
interruption in the event of disputes concerning payment or other
provisions of this Agreement. If the dispute has not been
resolved within one hundred calendar days from the Customer's
Notice to the Supplier of such dispute, the Supplier reserves the
right to put the work directly related to such dispute on hold
pending resolution of such dispute.
9. TECHNICAL SPECIFICATIONS
9.1 SPECIFICATIONS. The Supplier's Specifications, including drawings
relating to Equipment and Software ordered, and including the
Specifications in EXHIBIT B, entitled "Product Descriptions" are
hereby made a part of this Agreement for the purposes of each
Order.
9.2 DRAWINGS. The Supplier shall provide, as requested by the
Customer and at no charge, any applicable drawings and updates
thereof. The Supplier shall also provide, at no charge, and on an
ongoing basis, a current index of all drawings, showing latest
issue number, as well as complete descriptive information. If the
Customer requires an additional copy of the Supplier's drawings
and index, such drawings and index shall be made available to the
Customer at no charge. The Supplier shall provide with each
Order, current applicable drawings in the type of media as
specified by the Customer. Such drawings shall be delivered to
the Destination specified in the applicable Order.
9.3 SITE PREPARATION SPECIFICATIONS. The Supplier shall promptly
furnish for each Order, standard site preparation Specifications,
if applicable, in such detail to ensure that Equipment can be
properly installed. The Customer shall prepare the Site at its
own expense. If any alterations or modifications are required in
site preparation which are attributable to either parties
incomplete or erroneous Specifications, such alterations or
modifications shall be made at the cost of the party causing such
alterations or modifications.
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9.4 REPRODUCTION. The Customer shall have the right to reproduce
Specifications, including drawings and updates thereof, for use by
the Customer for engineering, installing, maintaining, repairing
and operating Equipment and Software.
10. SOFTWARE LICENSE
10.1 LICENSE. Software provided under this Agreement is either
licensed or sublicensed by the Supplier to the Customer. The
Customer is hereby granted a perpetual non-exclusive, license to
use the Software and, to the extent necessary to support and
maintain the Software, to de-bug, enhance and otherwise modify the
Software (the "SOFTWARE RIGHT TO USE"). For the period of the
longer of (a) until the end of the Term and (b) one year, the
Supplier shall provide to the Customer all updates (including,
without limitation, fault correcting updates), revisions and new
versions of the Software licenced or sublicensed by the Customer
under this Agreement to the extent, but only to the extent, they
do not add additional functionality for which Supplier generally
charges its other customers; PROVIDED that in determining what
software Customer is entitled to receive without charge, if it is
possible to lock off features that provide additional
functionality without destroying the integrity or functionality of
the Software, then Customer shall be entitled to the upgrades to
the features and functionality it originally paid for without
additional charge.
10.2 SUPPLIER'S/SUPPLIER'S LICENSOR'S EXCLUSIVE PROPERTY. The Customer
agrees that the Software shall, as between the parties hereto and
subject to the license granted hereunder, be treated as the
exclusive property of the Supplier or the Supplier's licensors, as
appropriate, and the Customer shall:
(a) hold the Software (including any methods or concepts
utilized therein) in confidence for the benefit of the
Supplier or the Supplier's licensors as appropriate in
accordance with SECTION 16 unless such Software or the
methods or concepts utilized therein are already in the
public domain (other than through Customer's breach of this
Agreement);
(b) not duplicate, copy, or modify the Software in whole or in
part except solely for backup or archival purposes, or to
the extent provided in the Nortel Letter Agreement, to
maintain and support the Software;
(c) not decompile or attempt to reverse engineer the Software;
(d) destroy or forthwith return to the Supplier any Software
component or Documentation that has been replaced,
modified, or updated.
10.3 ASSIGNMENTS AND SUBLICENSES.
10.3.1 The Customer may transfer or assign any license granted by
the Supplier hereunder to any parent, subsidiary of parent,
subsidiary, Affiliate, owner,
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part owner, successor or related company of the Customer
upon prior Notice to the Supplier.
10.3.2 The Customer and any successor to the Customer's title in
the Equipment shall have the right without prior written
consent of the Supplier (a) to assign any license of the
Software to a third party in addition to those set forth in
SECTION 10.3.1 who acquires legal title to the Equipment,
or (b) to sublicense the rights herein granted to any such
third party who subsequently acquires the right to use the
Equipment, PROVIDED THAT any such third party (either
assignee or sublicensee) agrees to abide by the terms and
conditions of this license, in which case the Customer
shall be relieved of any obligations hereunder with respect
to the Software the license of which is so assigned or
sublicensed; PROVIDED, FURTHER, if the Software and related
Equipment are removed from France and such assignment or
sublicense was made without Supplier's prior written
consent, then Supplier's obligations under SECTION 15
(Infringement) shall not extend to such Software.
10.4 SURVIVAL. The license contained herein and the obligations of the
Customer hereunder shall survive the termination of this
Agreement, regardless of the cause of termination.
11. CUSTOMER'S AND SUPPLIER'S OBLIGATIONS
11.1 CUSTOMER'S OBLIGATIONS. In order to enable the Supplier to
perform the Supplier's obligations pursuant to E&F Orders, F&I
Orders and EF&I Orders, the Customer agrees to fulfill any of its
obligations specified in EXHIBIT F and any others that may be
mutually agreed between the Customer and Supplier in relation to a
specific Order.
11.1.1 The Customer shall provide the Supplier with a Site which
is Site Ready for Installation on or before the date
specified in the Project Schedule included in the
applicable Order; PROVIDED, HOWEVER, if the Site is not
Site Ready on the Scheduled Site Readiness Date then the
Supplier shall have the right to request an extension of
the related Target Acceptance Date on a day-for-day basis
that the Site Readiness Date is delayed beyond its
Scheduled Site Readiness Date. Failure of the Customer to
meet the Site Readiness Date shall result in the rights
described in this SECTION 11.1.1, but shall not constitute
a breach of this Agreement by the Customer or give rise to
any other rights or claims by the Supplier.
11.2 SUPPLIER'S OBLIGATIONS.
11.2.1 The Supplier shall, at no additional charge, package
Equipment and Software in a suitable manner in accordance
with all applicable laws and regulations and provide
protection against damage during shipment
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and handling. All Equipment and Software shall be shipped
DDP (Destination).
11.2.2 To the extent that it does not conflict with any non
disclosure or confidentiality agreements previously entered
into with any third parties, the Supplier agrees, at no
charge to the Customer, (i) to provide the Customer with
reasonably available market data for business case
modelling for each territory in which any Systems are to be
implemented, and (ii) to assist the Customer in acquiring
in each such territory interconnect access with any local
telecommunications providers with which the Supplier has a
relationship and to use commercially reasonably efforts to
cause any of its Affiliates to do the same.
11.2.3 Provided that Sites are ready for Installation and
Commissioning of Equipment, the Supplier shall furnish at
its own cost and expense all labour, supervision,
machinery, tools, equipment, fuel, power, materials,
expendable supplies, transportation, licenses, permits,
bonds, and all other items that may be required or
appropriate in the procurement of Systems, Equipment or
Software, except the Customer's operating licenses and
other items that the Customer specifically agrees to
furnish.
11.2.4 The Supplier will upon the reasonable request of the
Customer provide the Customer with reports containing
information requested by the Customer, which may include
but are not limited to: (i) a list and description of all
Equipment, Software, Documentation and Services Ordered by
the Customer during a particular period; (ii) the prices
therefor and (iii) a statement as to which such Orders have
been performed and which are pending; and a statement as to
the status of all pending Orders.
11.2.5 The Supplier shall supply all future updates, revisions and
corrections of Documentation necessary for the Customer's
use of all Systems, Equipment and Software. The Customer
shall have the right to reproduce and translate the
Documentation for the purpose of engineering, maintaining,
repairing and operating all Systems, Equipment and
Software. Reproductions and translations of Documentation
shall include copyright or similar proprietary notices.
The Customer may request, from time to time, that
Documentation be provided in hard copy, by CDRom or other
reasonably available technology.
12. ACCEPTANCE
12.1 DEFINITION OF ACCEPTANCE. "ACCEPTANCE" shall mean, with respect
to a System, Subsystem, Group of Assets or any item of Equipment
or Software, that such System, Subsystem, Group of Assets or item
of Equipment or Software, as the case may be, (i) meets each of
the Specifications, (ii) has successfully completed Commissioning
in accordance with EXHIBIT E (as it may be modified pursuant to
SECTION 12.2), if the Supplier performs Installation Services,
(iii) meets all
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requirements of this Agreement and any Accepted Order, and (iv)
has been put In-Service, in each case in accordance with this
SECTION 12, and the parties have signed an Acceptance Certificate
in accordance with SECTION 12.3.
12.2 TESTS AND PROCEDURES. EXHIBIT E is a detailed description of the
tests and procedures to be performed to ensure that all applicable
Equipment, Software, Systems and Subsystems meet each of the
Specifications. The Customer and the Supplier recognize that such
tests and procedures (i) may be modified or supplemented, if
applicable, by the reasonable request of the Customer in the
Project Schedule included in an Order, or otherwise by mutual
agreement of the parties hereto, and (ii) may require updating
from time to time but requests for such updating shall not be made
later than 10 (ten) Working Days before Commissioning tests are
scheduled to commence; and the parties hereto agree to work in
good faith to agree upon any update or modification prior to the
commencement of Commissioning tests after a reasonable request for
an update or modification is made by either party.
12.3 CERTIFICATE OF TEST RESULTS; NON-ACCEPTANCE. The Supplier shall
notify the Customer as soon as it knows, but at least 5 (five)
Working Days before the date on which Commissioning (as agreed
pursuant to SECTION 12.2) will be conducted with respect to any
System, Subsystem, Group of Assets or item of Equipment or
Software. The Supplier and the Customer (or the Customer's
nominee) shall jointly conduct the Commissioning tests. If
neither the Customer nor its nominee attends the Commissioning
tests, the Supplier shall proceed with the tests and immediately
forward the test results (including actual test sequences,
deviations and retests necessary to obtain successful conclusion)
to the Customer.
12.3.1 If any System, Subsystem, Group of Assets or item of
Equipment or Software does not meet each of the applicable
Specifications, fails to pass all Commissioning tests or
otherwise does not fulfill the applicable criteria set
forth in EXHIBIT E (as it may be modified pursuant to
SECTION 12.2), the Supplier shall, at its expense, correct
the defects as soon as practicable. Commissioning and
other testing (or so much of it as necessary) shall be
recommenced immediately after such correction in accordance
with this SECTION 12.
12.3.2 Upon the successful completion of the Commissioning tests
to the Supplier's satisfaction, the Supplier shall submit
to the Customer a certificate certifying the test results
(the "CERTIFICATE OF TEST RESULTS") and stating that the
System, Subsystem, Group of Assets or applicable Equipment
and Software has been Installed in accordance with the
requirements of this Agreement (if the Supplier was to
Install such System or Equipment and Software) and that the
applicable System, Subsystem, Group of Assets, Equipment
and Software has passed all Commissioning tests and
performs in accordance with the requirements of this
Agreement.
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12.3.3 Upon receipt of the Certificate of Test Results, the
Customer (or its designee) may, at its own expense, retest
the applicable System, Subsystem, Group of Assets,
Equipment or Software for conformity with the
Specifications, satisfaction of the Commissioning tests and
the other requirements set forth in EXHIBIT E (as it may be
modified pursuant to SECTION 12.2). If such tests, retests
or inspections conducted by the Customer (or its designee)
indicate that the System, Subsystem, Group of Assets,
Equipment or Software does not comply with the
Specifications, does not satisfy the Commissioning tests or
otherwise does not fulfill all of the requirements set
forth in EXHIBIT E, (as it may be modified pursuant to
SECTION 12.2), the Customer shall deliver written notice of
such noncompliance to the "CompleTel Project Manager" at
Supplier's offices at the address specified in SECTION 4.2
for Order Notices specifying in detail the tests, retests
or inspections performed and the results obtained, and
Acceptance thereof shall not occur. The Supplier shall at
its own expense, promptly take whatever action is necessary
to correct such deficiencies, including if necessary
replacement of rejected purchases, and shall provide the
Customer's CTO with written notice of correction, which
shall be deemed to be a delivery by the Supplier of a new
Certificate of Test Results for purposes of SECTION 12.3.2;
and the terms of SECTION 12.3.3 AND 12.3.4 shall apply to
such new Certificate.
12.3.4 If the Customer either (i) has not provided written notice
pursuant to SECTION 12.3.3 that it intends to test, retest
or inspect the applicable System, Subsystem, Group of
Assets, Equipment or Software with respect to a Certificate
of Test Results or has not otherwise provided written
notice to the "CompleTel Project Manager" at Supplier's
offices at the address specified in SECTION 4.2 for Order
Notices that any such System, Subsystem, Group of Assets,
Equipment or Software is not acceptable or (ii) has
determined that the Systems, Subsystems, Group of Assets,
Equipment and Software, as applicable, are acceptable, then
the Customer shall promptly sign the applicable Acceptance
Certificate and deliver it to the Supplier evidencing that
Acceptance has occurred with respect to all Systems,
Subsystems, Groups of Assets Equipment and Software that
are the subject of such Acceptance Certificate. At such
time, any items identified as remaining outstanding and
which Customer did not consider at that time as material
enough to prevent Acceptance from occurring with respect to
the applicable System, Subsystem, Equipment or Software
shall be identified ("DEFICIENCY LIST ITEMS") and the list
attached to the applicable Acceptance Certificate. The
Supplier shall, within 5 Working Days after its receipt of
an executed Acceptance Certificate, complete and correct
all deficiency list items at the Supplier's expense. Upon
resolution of deficiency list items by the Supplier, the
Supplier shall submit to the Customer a certificate
verifying that no further deficiency list items remain
unresolved, and the Customer shall execute such certificate
and return it to the Supplier within 5 Working Days if it
concurs. "Final Acceptance" of a Group of Assets shall not
be considered to have occurred until all Systems,
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Subsystems, Equipment and Software included in the
applicable Order have been Accepted and all deficiency list
items for all items included in such Group of Assets have
been corrected except for pre-agreed minor and/or
non-service affecting deficiencies.
12.4 SPECIFICATIONS. The Supplier acknowledges that the Customer, in
entering into this Agreement, is relying on the Supplier's
assurances that any System ordered by the Customer will perform in
accordance with the Specifications.
12.5 LIQUIDATED DAMAGES. If the Supplier, other than for reasons of
Force Majeure or as a consequence of acts or omissions of the
Customer or third parties' under Customer's control, fails to
achieve Acceptance by the Target Acceptance Date specified in the
applicable Order with respect to any System, then the Supplier
shall pay to the Customer by way of liquidated damages the amount
of liquidated damages calculated as set forth below, being a
genuine pre-estimate of the likely damages that the Customer will
suffer resulting from delay in the period from the Target
Acceptance Date of such System, until actual date of Acceptance
thereof.
12.5.1 If the System in delay is included in the Initial Purchase
Order attached hereto as EXHIBIT I, then the liquidated
damages payable with respect to such System shall be an
amount equal to the percentage set out below of the price
of the System in delay:
0.4286% thereof per day for the first 7 calendar days of
delay;
0.1426% thereof per day for the next 7 calendar days of
delay;
0.1426% thereof per day for the next 7 calendar days of
delay;
0.2857% thereof per day for the next 7 calendar days of
delay;
0.4286% thereof per day for the next 7 calendar days of
delay,
0.1426% thereof per day for the next 35 calendar days of
delay,
up to a maximum of 15% (fifteen per cent) of the price of the
System in delay as set out on the applicable Order, but in no
event shall the liquidated damages payable for all Systems
included in the Initial Purchase Order exceed 10% of the Order
Price of the Group of Assets subject to such Order.
12.5.2 If the System in delay is not included in the Initial
Purchase Order attached hereto as EXHIBIT I, then the
liquidated damages payable with respect to such System
shall be an amount equal to the percentage set out below of
the price of the System in delay:
0.4286% thereof per day for the first 7 calendar days of
delay;
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0.1426% thereof per day for the next 7 calendar days of
delay;
0.1426% thereof per day for the next 7 calendar days of
delay;
0.2857% thereof per day for the next 7 calendar days of
delay;
0.4286% thereof per day for the next 7 calendar days of
delay,
0.1426% thereof per day for the next 14 calendar days of
delay,
up to a maximum of 12% (twelve per cent) of the price of the
System in delay as set out on the applicable Order, but in no
event shall the liquidated damages payable for all Systems
included in any one Order exceed 10% of the Order Price of the
Group of Assets subject to such Order.
12.5.3 The sum determined as set out in SECTION 12.5.1 OR 12.5.2,
as applicable, shall be in full and final satisfaction of
the Supplier's liability for delay for such period. Once
the liquidated damages under this SECTION 12.5 reach the
maximum amount specified above with respect to any System
in delay, the Customer shall have only the additional
rights and remedies set forth in SECTIONS 12.6, 13, 17 AND
19 with respect to such System.
12.6 REMEDIES FOR NONACCEPTANCE OR DELAY.
12.6.1 NON-ACCEPTANCE. If the Supplier has not provided the
Customer a Certificate of Test results showing successful
completion of the Commissioning tests by the applicable
Target Acceptance Date, or if the Customer has otherwise
notified the Supplier that any System or any item of
Equipment or Software is not acceptable and the Supplier
has failed to make all such necessary corrections or
replacements to the Customer's satisfaction, then at the
Customer's request, (i) the Customer shall have no
obligation to pay for such rejected items, and (ii) the
Supplier shall refund to the Customer all amounts
previously paid by the Customer for such rejected Systems,
Equipment or Software (including without limitation all
amounts paid pursuant to SECTION 8) and will be liable for
any additional costs, expenses or damages resulting
therefrom in accordance with SECTIONS 13 AND 19, as
applicable. The Supplier shall remove the non-accepted
purchases and reimburse the Customer for all costs of
removing and returning such purchases to the Supplier.
12.6.2 DELAY. Should any dispute or matter of difference arise
between the Supplier and the Customer as to the existence
of any delay in the performance by the Supplier of its
obligations under the Agreement, the length of the delay,
the reasons for such delay, any excuse for delay or the
interpretation or enforcement of this SECTION 12, such
dispute or matter of difference shall be resolved by
dispute resolution in accordance with SECTION 20.
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13. WARRANTIES
13.1 EQUIPMENT WARRANTY. The Supplier warrants that Equipment supplied
hereunder, excluding Software, will be free from defective
material and faulty workmanship, will be free from defects in
design (except any portion of such Equipment manufactured or
developed in accordance with a detailed design furnished by the
Customer and for which the Supplier has notified the Customer in
writing in advance that the Supplier is not warranting the design)
and will conform to the applicable Specifications, Documentation,
statements of work and other requirements set forth in this
Agreement, including any applicable Orders, for a period of 24
months from the last day of the calendar quarter in which
Acceptance as set forth in SECTION 12 occurs with respect to the
Subsystem in which such Equipment is included (the "EQUIPMENT
WARRANTY PERIOD"). Any repair or replacement of defective
Equipment shall be warranted for a period equal to 12 months from
the date of such repair or replacement.
13.2 SERVICES WARRANTY. The Supplier shall perform Services with
promptness and diligence which Services shall be performed in
accordance with the highest standards in the industry, to the
reasonable satisfaction of the Customer. In addition, the
Supplier warrants that any Services performed by the Supplier will
be free from defects in workmanship and will conform to all
statements of work and other requirements set forth in this
Agreement, including any applicable Orders, for the duration of
the Equipment Warranty Period with respect to the Equipment
related to such Services.
13.3 SOFTWARE WARRANTY. With respect to all Software embedded or
otherwise included in, or licensed for use with, Equipment
purchased under this Agreement, the Supplier warrants to the
Customer that any such Software shall function during the
Equipment Warranty Period of such Equipment without material
service-affecting deficiencies which result from a defect in the
Software and shall perform in accordance with all Specifications,
Documentation, statements of work and all other requirements set
forth in this Agreement, including any applicable Orders. With
respect to all other Software licensed under this Agreement, the
Supplier warrants to the Customer that any such Software shall
function without material service-affecting deficiencies which
result from a defect in the Software and shall perform in
accordance with all Specifications, Documentation, statements of
work and all other requirements set forth in this Agreement,
including any applicable Orders.
13.4 REMEDIES FOR BREACH OF WARRANTY.
13.4.1 In addition to any other obligations the Supplier may have
under EXHIBIT C to respond to a fault, and not as a
limitation on such obligations, the Supplier agrees to
commence work on all Equipment, Software or Installation
defects not materially affecting System performance,
service to subscribers, data collection as it relates to
billing, networking,
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administration or maintenance within two Working Days of
notification thereof and will cure the same as promptly
as practicable.
13.4.2 In addition to any other obligations the Supplier may have
under EXHIBIT C to respond to a fault, and not as a
limitation on such obligations, if as a result of any
invocation of the System Warranty or any warranty related
to Equipment, Software or Installation, System performance,
service to subscribers, data collection as it relates to
billing, networking, administration or maintenance are
materially and adversely affected, the Supplier shall, at
its sole cost and expense, commence work to correct such
defect or replace such defective Equipment or Software as
soon as practicable, but in no event later than four hours
after the Customer's notification of the Supplier of such
defect, and shall ship any required replacement Equipment
(or components thereof) or replacement Software (it being
understood and agreed that if Software modifications are
required, the Supplier shall, as promptly as practicable,
make such modifications) to the Customer as soon thereafter
as practicable but in no event later than 24 hours after
Notice of such defect. Where the services of the
Supplier's service personnel at the Customer's Sites are
required hereunder, then the Supplier shall, at its sole
cost and expense, dispatch such service personnel as are
required to correct such defects as soon after receipt of
Notice as practicable but in no event later than 24 hours
after Notice of such defect.
13.5 EXCESSIVE FAILURE.
13.5.1 In the event that, during the Equipment Warranty Period,
the Customer experiences failure of electronic circuit
board components, subassemblies or other Equipment that can
be installed and reinstalled by the Customer in the
ordinary course of business, and in the reasonable judgment
of the chief technical officer of the Customer ("tHE
CUSTOMER CTO") such failures are excessive (which in any
event would include a failure rate which exceeds on an
annualized basis one and one-half per cent (1-1/2%)), the
Customer shall give the Supplier Notice of such excessive
failures and (i) the Supplier shall give highest priority
to the remedy of the cause of such failures, and (ii) the
Supplier shall, without charge to the Customer, supply to
the Customer additional spare boards, subassemblies or such
other Equipment of each type so depleted, as necessary to
maintain an adequate emergency replacement stock, until
implementation of a permanent remedy. Upon implementation
of a permanent remedy, (1) all excess boards, subassemblies
or other Equipment supplied under this SECTION 13.5.1 shall
be returned to the Supplier at the Supplier's cost, and (2)
all in-service and spare stock boards, subassemblies and
other equipment that are the subject of the corrections
contemplated by this SECTION 13.5.1 shall be updated, at no
charge to the Customer, to the revision level incorporating
the permanent remedy. The Supplier shall
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provide the Customer with a proposed plan to remedy such
failure in accordance with SECTION 13.5.3.
13.5.2 In the event that, during the Equipment Warranty Period,
the Customer experiences failure of Equipment (other than
electronic circuit board components, subassemblies or other
Equipment that can be installed and reinstalled by the
Customer in the ordinary course of business), and in the
reasonable judgment of the Customer CTO such failures are
excessive (which in any event would include a failure rate
which exceeds on an annualized basis one and one-half per
cent (1-1/2%)) the Customer shall give the Supplier Notice
of such excessive failures and, (i) the Supplier shall give
highest priority to the remedy of the cause of such
failures, and (2) the Supplier shall, without charge to the
Customer, maintain an adequate emergency replacement stock
of such Equipment so as to be able to respond as if it were
a Category 1 Fault under EXHIBIT C, whether or not it would
otherwise qualify as a Category 1 Fault. The Supplier
shall provide the Customer with a proposed plan to remedy
such failure in accordance with SECTION 13.5.3.
13.5.3 The Supplier shall provide the Customer with a proposed
plan to remedy the cause of such failure as soon as
practicable, but in no event later than twenty (20) Working
Days after receiving Notice from the Customer of excessive
failures under SECTIONS 13.5.1 AND 13.5.2. After review
by, and discussions with, the Customer of such proposed
plan, the Supplier shall provide the Customer with a final
plan to remedy the cause of such failure within thirty (30)
Working Days after receiving such Notice from the Customer.
If the Customer does not believe such plan is adequate, the
parties shall, in good faith, attempt to agree on a
prescribed plan of action to determine the cause of such
failures and to implement a permanent remedy therefor. If
the parties cannot agree on a prescribed plan of action,
either party may implement the dispute resolution process
contained in SECTION 20 with respect to such disagreement.
13.6 SYSTEM WARRANTY. In order to maintain total System performance
and quality of service, the Supplier warrants that a System, when
operated as a complete System, shall, for a period of 24 months
from Acceptance thereof (which shall be the last date of
Acceptance of all Subsystems included within such System), conform
in all respects to the requirements of, and perform the functions
set forth in, this Agreement, any Accepted Order and all
Specifications and shall be free from defects materially and
adversely affecting System performance, service to subscribers,
data collection as it relates to billing, networking,
administration or maintenance as set forth in this Agreement, any
Accepted Order and all Specifications (the "SYSTEM WARRANTY").
The Supplier's obligations under this SECTION 13.5 are limited to
correction of any such defect or the cause of any such failure to
perform. The System Warranty shall not be construed so as to
extend the Equipment Warranty Period or Warranty on any Software.
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13.7 FAILURE DESPITE MEETING SPECIFICATIONS. If, in the Customer's
reasonable judgment, any System, fails to adequately address the
Customer's "real world" operational needs despite meeting all
applicable Specifications and other warranties under this
Agreement, and the source of such failure was an omission from the
Specifications then the Supplier shall use reasonable efforts, as
promptly as practicable, to correct such failure, and (i) if such
failure can be corrected by a modification to the Equipment or
Software, the Customer and the Supplier shall share equally in the
costs of such modification or (ii) if such failure can only be
corrected by replacement of the Equipment or Software, the
Customer shall be entitled to a credit of fifty percent of the
cost of the replaced Equipment or Software against the purchase
price of the replacement Equipment or Software.
13.8 POST WARRANTY PERIOD REPAIRS. Upon expiration of the applicable
warranty period for Equipment or Software furnished hereunder,
repair and replacement service for such Equipment or Software
shall be available to the Customer from the Supplier in accordance
with the Supplier's procedures and charges then in effect;
PROVIDED, that any such charges shall be no less favourable than
the rates charged to any of the Supplier's Customers. New
Equipment or parts or Equipment or parts of equivalent age,
quality (prior to the failure thereof) and functionality must be
used in effecting all repairs or replacements. Parts that have
been removed from Equipment shall become the Supplier's property
and parts that are installed in Equipment shall become the
Customer's property. Such repair and replacement service shall be
available for a minimum period of ten years from the date of
Acceptance of such Equipment, subject to the condition that should
the Supplier discontinue manufacture or repair of the Equipment,
Software or portions thereof prior to the expiration of such ten
year period (such right of discontinuance being expressly reserved
by the Supplier), the Supplier will give the Customer a twelve
(12) month prior Notice of any discontinuance so as to enable the
Customer to place an order for its requirements or to enter into
any other mutually satisfactory agreement with the Supplier prior
to such discontinuance. This provision shall survive the
expiration of this Agreement.
13.9 WARRANTY OF POST WARRANTY PERIOD REPAIRS. Repairs or replacements
made after expiration of the Equipment Warranty Period are
warranted by the Supplier, as provided in SECTIONS 13.1, 13.2 OR
13.3 hereof, for a period of one (1) year from the date of
shipment of such repair or replacement.
13.10 SHIPPING; RISK OF LOSS. All Equipment or Software to be repaired
or replaced both within and out of warranty shall be packed by the
Customer in accordance with the Supplier's instructions and
(except for out of warranty repairs or replacements) shall be
shipped at the Supplier's expense and risk of loss or damage to a
location designated by the Supplier prior to such shipment.
Repaired or replaced Equipment or Software shall be returned to
the Customer at the Supplier's expense and risk of loss. All
customs duties, levies, taxes and other costs relating to the
export or import of any defective, replaced or repaired Equipment
of Software covered by any warranty shall be the sole
responsibility of the Supplier.
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13.11 YEAR 2000 WARRANTIES. Supplier represents and warrants that any
hardware, software (including, without limitation, third party
software and embedded software) and systems provided under this
Agreement are and will continue to be year 2000 compliant; that
is, that neither the performance nor the functionality of such
hardware, software and systems is or will be effected by dates
prior to, during and after the year 2000, including, without
limitation, (i) no value for a date will cause any interruption in
operation, (ii) date-based functionality will behave consistently
for dates prior to, during and after the year 2000, (iii) in all
interfaces and data storage, the century in any date will be
specified either explicitly or by unambiguous algorithms or
inferencing rules, PROVIDED HOWEVER, that the century in any date
need not be specified so long as those functions will continue to
operate consistently, predictability and accurately, without
interruption or manual intervention as a result of such date data
or the lack thereof, and (iv) all leap years will be recognized as
leap years, including, without limitation, the year 2000. The
representation and warranty contained in this Section shall
survive the termination of this Agreement.
13.12 ABUSED, MISUSED EQUIPMENT AND/OR SOFTWARE. The Supplier shall
have no obligation to repair or replace Equipment and/or Software
which has been abused, used in unauthorised applications,
improperly stored or improperly installed by the Customer,
altered, or used in conjunction with third party material which is
defective or of poor quality, or which has been operated and
maintained by the Customer with a material lack of compliance with
the Supplier's operating and maintenance instructions. The
Supplier shall be entitled to charge the Customer for any work
performed in investigating and/or rectifying problems covered by
the provisions of this SECTION 13.12.
13.13 SURVIVAL OF WARRANTIES. All warranties provided by the Supplier
shall survive the inspection, Acceptance and payment, and
termination of this Agreement and shall be for the benefit of the
Customer and its successors in interest and permitted assigns.
13.14 EXPRESS WARRANTIES ONLY. THE WARRANTIES AND REMEDIES SET FORTH IN
THIS AGREEMENT CONSTITUTE THE ONLY WARRANTIES WITH RESPECT TO
EQUIPMENT AND INSTALLATION THEREOF AND SOFTWARE AND THE CUSTOMER'S
EXCLUSIVE REMEDIES IN THE EVENT SUCH WARRANTIES ARE BREACHED.
SUCH WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES.
14. FORCE MAJEURE
14.1 GENERAL. If the performance of any duty or obligation under this
Agreement or an Order, other than the obligations to indemnify or
the obligations under a warranty, is interfered with by reason of
an event of force majeure (as hereinafter defined), the party that
is unable to perform as a result of such event shall give prompt
Notice of such event with reasonably full particulars concerning
such event. Thereupon, the obligations of the party that is
unable to perform, so far as they are
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affected by such event, shall be suspended during, but no longer
than, the continuance of such event, provided such party uses its
reasonable efforts to remove the force majeure event as quickly
as practicable (and the other party shall likewise be excused from
the performance of its obligations to the extent such party's
obligations relate to the performance so interfered with). Both
parties shall proceed to perform their respective obligations with
dispatch whenever such causes are removed or cease to exist. The
term "force majeure" shall mean an act of God, act of the public
enemy, war, blockade, public riot, explosion, lightening, fire,
storm, flood or other act of nature. Neither financial difficulty
nor the failure of hardware, software and systems to be year 2000
compliant, shall be considered an event of force majeure.
14.2 ACCEPTED SYSTEMS. Systems that have been Accepted in accordance
with this Agreement shall not be subject to the provisions of this
SECTION 14.
14.3 TERMINATION. In the event either party shall be prevented by
force majeure from material performance of its obligations
hereunder for a continuous period of more than 60 days the other
party shall have the right to terminate this Agreement or any
Order by Notice whereupon the provisions set forth below shall
apply.
14.3.1 Fifty percent of the costs incurred by Supplier for
preparatory Site work performed prior to the occurrence of
the event of force majeure which is rendered useless or of
limited value to the Customer, as determined in good faith
by the parties hereto, shall be paid by the Customer to the
Supplier.
14.3.2 For Equipment in the process of being manufactured, fifty
percent of the amount necessary to reimburse Supplier for
the reasonable, direct costs (as reflected on a schedule to
be provided by Supplier and agreed to by the Customer
specifying in reasonable detail the changes and the costs
associated therewith) to remove and adjust Customer
specific configurations integrated into any such components
into a standard configuration for the potential sale of
such components (or integration into standard configuration
Equipment) to another customer.
14.3.3 With respect to any Subsystem (whether or not the Subsystem
has been Accepted) that is part of a System that has not
been Accepted, (A) the Equipment and Software components
that are useable in the reasonable opinion of the Customer
following the Termination shall be retained by the Customer
and the Customer shall pay for them at the Order Price
therefor; and (B) the Equipment and Software components of
such Subsystem that are not useable in the reasonable
opinion of the Customer following the Termination shall be
decommissioned, de-installed and/or extracted, as the case
may be. The parties hereto shall divide the costs so
incurred to decommission, de-install and/or extract equally
between the parties.
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14.3.4 In the event the parties are not able to come to an
agreement regarding the amount described in SECTION 14.3,
then either party may invoke the dispute resolution
procedures of SECTION 20.
14.4 INSURANCE. If either party to this Agreement makes any payment
pursuant to SECTION 14.3, ("the Payment") and the other party
receives any benefit from any policy of insurance which would not
have been received but for the circumstances giving rise to the
Payment, the insurance proceeds will first be applied to the costs
and expenses described in SECTION 14.3 and the parties hereto
shall share any remaining costs and expenses in accordance with
SECTION 14.3.
15. INFRINGEMENT
15.1 INDEMNIFICATION. The Supplier shall defend, indemnify and hold
harmless the Customer against all actions, suits, proceedings or
claims for infringement or violation of any patent, trademark,
copyright, registered design, or other intellectual or industrial
property rights of any kind or nature whatsoever, arising by
reason of the Customer's purchase, possession or use of the
System, the Software, or the Equipment within the country in which
the System, the Software or the Equipment was delivered to or
installed in by the Supplier. Supplier agrees to defend, at
Supplier's expense, the Customer against any such claims and to
pay all litigation costs, reasonable attorneys' fees, settlement
payments and any damages awarded in such suit, claim or
proceeding, provided that the Customer follows the procedures set
forth in SECTION 17.3.
15.2 SUPPLIER'S OPTIONS. If the Supplier gives the Customer Notice of
an actual or potential infringement claim (or in the case of an
injunction being granted against the Customer's continued use of
the System) the Supplier shall at its sole option either:
(i) modify the System or part thereof so that it does not
infringe; or
(ii) replace the System or part thereof with non-infringing
products; or
(iii) procure for the Customer the right for the Customer to
continue its use of the System;
PROVIDED THAT the such replacement or modification shall not
adversely impair the System from performing in accordance with the
Specifications. If the Supplier is unable to procure any of the
above, the Supplier shall have the right to require the return of
the infringing Equipment and/or Software to the Supplier and the
Supplier shall refund to the Customer the value of non-infringing
Equipment of comparable specifications and functionality and
associated Software licence charges less any outstanding monies
due to the Supplier under the Contract. Satisfaction of the
provisions of this SECTION 15.2 shall not relieve Supplier of its
obligations to indemnify, defend and hold the Customer harmless
under SECTION 15.1.
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15.3 LIMITATIONS. The indemnity given in SECTION 15.1 shall not extend
to infringement resulting from:
(a) the use or adoption by the Supplier of the Customer's
parts, designs or changes to the Specifications, where the
infringement arises from such use or adoption, or
(b) the use of the System, the Equipment or the Software in a
manner or for a purpose not stated in the Specifications or
otherwise in contradiction of the intended use of such
Equipment or Software, where the infringement arises from
such use, or
(c) modification of the System, the Equipment and/or the
Software by the Customer where such modification is not
authorised by the Supplier, where the infringement arises
from such modification, or
(d) the use or location of the System, the Equipment and/or the
Software in a country other than the country in which and
for which it was supplied by the Supplier, where such
infringement arises from such use or location, or
(e) the use of the System, the Equipment and/or the Software in
combination with other products not provided by the
Supplier, where the infringement is a direct result of such
combination, or
(f) an admission by the Customer contrary to the provisions of
SECTION 17.3 (d) which is or may be prejudicial to the
Supplier's case.
In the excepted cases stated above, the Customer shall indemnify
the Supplier against any claim of patent infringement arising from
the Customer's purchase; possession or use of the System. The
Customer shall pay all litigation costs, reasonable attorneys'
fees, settlement payments and any damages awarded in any such
infringement claim.
15.4 REMEDIES. The remedies set forth in this Agreement establish the
entire obligation of the parties in regard to claims relating to
intellectual property rights including claims directed to the
infringement of patents, trademark, copyright, registered design
or other intellectual or industrial property rights.
16. CONFIDENTIAL INFORMATION
All technical information, specifications, drawings, documentation and
"know-how" of every kind and description whatsoever disclosed by either
party (the "disclosing party") to the other under this Agreement
("INFORMATION"), is the exclusive property of the disclosing party, and
the other party (the "recipient"), except as specifically authorized in
writing by the disclosing party or as permitted hereunder, shall treat
and protect such Information as confidential, shall not reproduce the
Information except to the extent reasonably required for the performance
of this Agreement, shall not divulge such Information in whole or in part
to
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any third party, and shall use such Information only for purposes
necessary for the performance of this Agreement or as may be required for
the use of Equipment, Software or Systems. Each party shall disclose the
Information only to those of its employees and agents who shall have a
"need-to-know" the Information for the purposes described herein after
first making such employees or agents aware of the confidentiality
obligations set forth above. Notwithstanding any other provisions of
this SECTION 16, Information may be disclosed as may be required by law,
regulation or court or agency order or demand, after prompt prior
notification to the disclosing party of such required disclosure. Such
obligations of confidentiality shall not apply to Information that (i) is
in the recipient's possession prior to disclosure to the recipient,
(ii) is in the public domain prior to disclosure to recipient,
(iii) comes into the recipient's possession from a source other than the
disclosing party with no obligation to maintain the confidentiality
thereof, or (iv) enters the public domain through no violation of the
obligations to maintain the confidentiality thereof contained herein.
The terms of this SECTION 16 shall survive the termination of this
Agreement.
17. INDEMNITY
17.1 GENERAL. Each party hereto (the "INDEMNITOR") hereby covenants
and agrees to indemnify, defend and hold harmless, the other party
and, its former, current and future officers, directors, employees
and agents, servants, shareholders, subsidiaries, successors and
assigns (herein the "INDEMNIFIED PARTIES") from and against any
liability of the Indemnified Parties for any injury to persons
(including death) or loss or damage, to tangible property or,
other than any incidental or consequential loss or damage, other
losses, fees, penalties, damages, costs, proceedings, actions,
expenses, liabilities, claims, judgments, orders, awards or
demands (and all expenses directly associated therewith, asserted
against, suffered or incurred by the Indemnified Parties,
including costs, expenses, reasonable attorneys' fees, court
costs, legal expenses and consultants' and experts' fees and
expenses directly related thereto) resulting from the negligent,
wilful or intentional acts or omissions of the Indemnitor, its
subcontractors and its or their officers, directors, employees or
agents in the performance, of or in connection with, its
obligations under this Agreement.
17.2 PROCEDURAL MATTERS. In the event of a claim being made by a third
party against an Indemnified Party with respect to which the
Indemnitor has covenanted to indemnify the Indemnified Party (the
"INDEMNITY CLAIM"), the following provisions will apply:
(a) The Indemnified Party shall promptly give Notice to the Indemnitor
of such Indemnity Claim upon becoming aware of the same;
PROVIDED, that the failure of any Indemnified Party to give such
Notice shall not relieve the Indemnitor of any liability under
this Agreement unless and to the extent the Indemnitor was
materially adversely prejudiced by such failure to give prompt
Notice.
(b) The Indemnified Party shall have a right to participate in the
negotiation, settlement and defence of such Indemnity Claim and
shall have the right to disagree on reasonable grounds with the
selection and retention of counsel, in which case counsel
reasonably satisfactory to the Indemnified Party shall be retained
by the
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Indemnitor. If, in the reasonable judgment of the Indemnified
Party's counsel, there is the reasonable likelihood of a conflict
of interest such that representation of the Indemnitor and the
Indemnified Party by the same counsel would violate the
applicable Rules of Professional Conduct or like governing rules,
then in such event the reasonable fees and expenses of appropriate
separate counsel for an Indemnified Party shall be borne by the
Indemnitor. Such separate counsel shall be selected by the
Indemnified Party and reasonably approved by the Indemnitor. In
no event shall the Indemnitor be liable for the fees and expenses
of more than one law firm for an Indemnified Party.
(c) If the Indemnitor fails to defend or settle any Indemnity Claim
within a reasonable time, the Indemnified Party shall be entitled
to assume control of the Indemnity Claim at the expense of the
Indemnitor, and the Indemnitor shall be bound by the results
obtained by the Indemnified Party with respect to any such
Indemnity Claim including any settlement thereof.
(d) Unless the Indemnitor fails to assume control of the negotiation,
settlement and defence of any Indemnity Claim, the Indemnified
Party shall not admit liability or otherwise negotiate, settle,
compromise or pay any Indemnity Claim except with the prior
written consent of the Indemnitor, which shall not be unreasonably
withheld.
(e) Notwithstanding anything else in this SECTION 17, the Indemnitor
shall not settle any Indemnity Claim without the prior written
approval of the Indemnified Party, which shall not be unreasonably
withheld. In addition, the Indemnitor shall not conduct any
related legal or administrative proceeding in a manner which
would, in the opinion of the Indemnified Party, acting reasonably,
have a material adverse impact on the business, operations,
assets, condition (financial or otherwise) or prospects of the
Indemnified Party.
(f) The Indemnified Party and the Indemnitor shall cooperate in good
faith in connection with defending or settling any such Indemnity
Claim, and each party shall have reasonable access to the books,
records and personnel in the possession or control of the other
party which are pertinent to the defence.
(g) The Indemnified Party and the Indemnitor agree that the
Indemnified Party may join the Indemnitor in any action, claim or
proceeding brought by a third party, as to which any right of
indemnity created by this Agreement would or might apply, for the
purpose of enforcing any right of the indemnity granted to such
Indemnified Party pursuant to this Agreement.
18. TECHNICAL SUPPORT
18.1 TECHNICAL SUPPORT. The Supplier shall, for a period of (10) ten
years after the date hereof, make available at the Customer's
request on-site technical support to assist the Customer in the
engineering, installation, operation and maintenance of Equipment,
Software and Systems. Technical Support which can be offered with
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this Agreement is set forth in EXHIBIT C, entitled "Technical
Support" attached hereto and incorporated herein by this
reference.
18.2 RATES. Such technical support shall be available at the rates set
forth in EXHIBIT C.
19. DEFAULT
19.1 TERMINATION OF THIS AGREEMENT OR AN ORDER BY THE CUSTOMER.
19.1.1 If during the course of this Agreement the Supplier shall
be in material breach of this Agreement in whole or in
part, including any Order, the Customer shall so inform the
Supplier by Notice and should the breach continue for more
than 30 (thirty) calendar days after such Notice, then,
without prejudice to any of the Customer's rights accrued
prior to the date of termination, the Customer may
terminate this Agreement or any Order or part thereof for
which the corresponding Group of Assets have not been
finally Accepted, by Notice to the Supplier.
19.2 TERMINATION OF THIS AGREEMENT OR AN ORDER BY THE SUPPLIER.
19.2.1 If during the course of this Agreement the Customer shall
be in material breach of this Agreement or an Order, the
Supplier shall so inform the Customer by Notice and should
the breach continue for more than 30 (thirty) calendar days
after such Notice, then the Supplier may terminate this
Agreement or any Order or part thereof for which the
corresponding Group of Assets have not been finally
Accepted by Notice to the Customer.
19.2.2 In the event the Supplier terminates this Agreement or one
or more Orders in accordance with SECTION 19.2.1 due to the
Customer's failure to pay amounts when due under this
Agreement, the Supplier shall be entitled to amounts owing
to it under this Agreement plus reasonable costs and
expenses (including reasonable attorneys' fees) incurred in
connection with collecting amounts owing by the Customer.
19.2.3 In the event the Supplier terminates the Agreement or one
or more Orders in accordance with SECTION 19.2.1 due to a
material breach by the Customer (other than the Customer's
failure to pay amounts when due hereunder), the Supplier
shall be (x) excused from its obligation to deliver any
Equipment not yet delivered by it to Customer under any
terminated Orders and (y) entitled to (i) be reimbursed for
the value of work performed on Site for the benefit of the
Customer, (ii) be paid the Order Price for any Equipment
and Software delivered to and Accepted by the Customer and
(iii) with respect to Equipment or Software in the process
of being manufactured or otherwise not yet delivered and
Accepted by Customer, the reasonable, direct costs (as
reflected on a schedule to be provided by the Supplier
specifying in reasonable detail the charges and costs
associated therewith) to remove and adjust the Customer's
specific configurations integrated into the Equipment
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or Software required to bring it into a standard
configuration for the potential sale of such Equipment or
Software to another customer.
19.2.4 The Supplier shall take all reasonable actions to mitigate
its damages in the event of a material breach of the
Agreement or an Order by the Customer.
19.3 TERMINATION BASED ON INSOLVENCY OR LIQUIDATION. Either party may
at any time by Notice summarily terminate the Agreement, any
Order or any part of an Order or suspend their performance without
penalty, if under the laws of any jurisdiction to which the other
party is subject, (i) such other party shall pass a resolution
for the winding up, dissolution or entering into of bankruptcy
proceedings, (ii) any Court shall make an order that such other
party shall be wound up other than for purposes of solvent
amalgamation or reconstruction, (iii) an administrator or
liquidator shall be appointed with respect to such other party,
(iv) an administrative receiver or manager on behalf of a creditor
shall be appointed with respect to such other party, or (v) if
circumstances shall arise which would entitle a court to make a
winding up order; provided always that any such termination shall
be without prejudice to any claim, action or remedy which shall
have accrued or which shall accrue thereafter to either party.
19.4 ACTIONS UPON TERMINATION BY THE CUSTOMER.
19.4.1 Upon termination of this Agreement or an Order or part of
an Order as provided in SECTIONS 19.1.1 OR 19.3, the
Supplier shall forthwith cease work and remove its work
force from the Site. The Supplier shall not within 30
(thirty) calendar days of such termination remove from the
Site any Equipment, Software, installation tools or
materials unless given permission to do so in writing by
the Customer. Within 30 (thirty) calendar days of
termination of the Agreement, the Customer may elect to
complete the purchase of any Equipment or Software that is
the subject of an outstanding Order and use the Supplier's
installation tools or materials. In such event, the
Customer will pay the Supplier the unpaid price of such
Equipment or Software and a fair price for use of such
installation tools and/or materials.
19.4.2 Upon termination of this Agreement or an Order or part of
an Order as provided for in SECTIONS 19.1.1 OR 19.3, the
Customer may, at its option, continue work either by itself
or by sub-contracting to a third party. If the System is
completed by the Customer or a third party and the total
cost incurred by the Customer in so completing the System
is greater than that which would have been incurred had
this Agreement or all or part of any Orders not been
terminated pursuant to SECTIONS 19.1.1 OR 19.3, then the
Supplier shall pay to the Customer such excess amount;
PROVIDED, HOWEVER, the Supplier's total liability for
claims ARISING OUT BREACH OF THIS AGREEMENT or any Order,
including claims based on Article 1641 and followings of
the CODE CIVIL, shall not exceed the lesser of 50% of the
total value of the Order under which a claim is made (or
the equivalent amount in EURO and/or local currency) and
US$3,000,000. Except as otherwise provided in this
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Agreement, including without limitation SECTION 12.5, the
payment of such excess amount shall be in full and final
settlement of the Supplier's liability for breach of
contract relating to the Orders so terminated under
SECTIONS 19.1.1 OR 19.3 to the extent the Customer elects
to complete one or more Systems not yet Accepted PROVIDED,
HOWEVER nothing in this SECTION 19.1.3 shall impair (i) the
ability of the Customer to collect liquidated damages from
the Supplier otherwise payable pursuant to SECTION 12.6;
(ii) Supplier's warranties under SECTION 13; (iii) the
Indemnities in SECTION 17; or (iv) the other remedies
provided for in this SECTION 19.
19.4.3 If the Customer has already paid the Supplier for work not
completed and subject to such termination pursuant to
SECTIONS 19.1.1 OR 19.3, then the Supplier shall promptly
repay such sum(s) to the Customer.
19.4.4 The Supplier shall, if so required by the Customer, within
14 (fourteen) calendar days of the date of termination of
this Agreement or an Order, assign to the Customer, without
payment, the benefit of any agreement, to the extent
allowable by such agreement, for supply of materials or
goods and/or execution of any work entered into for the
purposes of this Agreement or such Order(s).
19.4.5 In the event Customer terminates any Order in accordance
with SECTION 19.1.1 OR 19.3, Customer may, at its option:
(i) return to Supplier, freight collect, all Equipment and
Software delivered to Customer under the applicable Order,
in which event Supplier shall promptly refund to Customer
all amounts paid to Supplier (whether for Equipment,
Software or Services) with respect to such Order; or (ii)
retain so much of the Equipment or Software delivered under
such Order as it elects and return to Supplier, freight
collect, all other Equipment and Software delivered under
such Order, in which event Supplier shall promptly refund
to Customer all amounts (whether for Equipment, Software or
Services) paid to Supplier in respect of the Equipment,
Software and the installation thereof returned by Customer.
With respect to Equipment and Software which has not yet
been Accepted by Customer as described in SECTION 12, in
the event Customer exercises this right to return such
Equipment and Software and obtain a refund, such right is
in addition to Customer's right to obtain any liquidated
damages awardable under SECTION 12.5.
19.4.6 With respect to Systems not yet Accepted, the Customer
shall have the right to require the Supplier to (or to
charge the Supplier the cost of having a third-party, at
the Customer's option) de-commission, de-install and/or
extract, as the case may be, any items of Equipment,
Software or Subsystems (whether or not previously
Accepted), of such Systems.
19.4.7 The Customer may in addition to its other rights hereunder
terminate any Order or any part of an Order at its option
upon Notice to the Supplier if
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Supplier reaches the maximum allowable liquidated damages
under SECTION 12.6 with respect to such Order
19.5 TERMINATION OF THE AGREEMENT FOR CONVENIENCE.
19.5.1 The Customer shall, in addition to its rights to terminate
this Agreement for default pursuant to SECTIONS 19.2.1 OR
19.3 have the right to terminate this Agreement in whole or
in part for its convenience at any time by giving the
Supplier at least 90 (ninety) calendar days Notice of
termination specifying the extent to which the Agreement is
terminated and the date upon which such termination becomes
effective.
19.5.2 After receiving Notice of termination pursuant to SECTION
19.5.1, and except as otherwise directed by the Customer,
the Supplier shall: (1) stop work under the Agreement on
the date and to the extent specified; (2) place no further
orders with third parties except as may be necessary for
completing such portions of the Agreement as have not been
terminated; (3) terminate all contracts with third parties
entered into in connection with the Agreement to the
extent that they may relate to portions of the Agreement
terminated; and (4) take such action as may be necessary
or as the Customer may direct to protect and preserve the
Equipment, Software and Documentation which are in the
Supplier's possession and in which the Customer has or may
acquire an interest.
19.5.3 As a condition of termination of this Agreement, or part
thereof, pursuant to SECTION 19.5.1 for the Customer's
convenience, the Customer shall pay the Supplier for all
Equipment previously delivered to the Customer pursuant to
this Agreement, including the repayment of any Sales Volume
Discount if the volume, as a result of termination, falls
below the total quantities specified in such definition and
all other reasonable, out-of-pocket costs and expenses
directly related to complying with the Customer's
termination instructions. The Customer will reimburse the
Supplier for the reasonable, direct costs (as reflected on
a schedule to be provided by the Supplier and agreed to by
the Customer specifying in reasonable detail the charges
and the costs associated therewith) to remove and adjust
the Customer's specific configurations integrated into the
Equipment or Software required to bring it into a standard
configuration for the potential sale of such Equipment or
Software to another customer. The Supplier agrees that a
termination under SECTION 19.5.1 shall not constitute a
breach of or default under this Agreement by the Customer
and that the payments to the Supplier as provided in this
SECTION 19.5.3 shall constitute full payment of all claims
by Supplier against the Customer arising from a termination
pursuant to SECTION 19.5.1.
19.6 CONTINUING OBLIGATIONS. Except as provided in SECTION 19.1.2, if
the Customer terminates this Agreement or any part of an Order,
Supplier's obligations hereunder with respect to Equipment and
Software already delivered, Installed and not
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returned, and Customer's obligations with respect to payments for
Equipment not returned, shall continue in full force and effect.
19.7 LICENSES. In the event that the Supplier does not fulfill its
obligations under this Agreement, and such non-performance results
in (a) the Customer being compelled to pay any amounts to the
governmental entity that granted the Customer a license
(a "LICENSING AUTHORITY"), then the Supplier shall indemnify and
hold harmless the Customer for such amounts paid or payable by the
Customer, or (b) the Customer's loss of a license issued by any
Licensing Authority, notwithstanding any other provision of this
Agreement then the Supplier shall indemnify and hold harmless the
Customer for all out of pocket expenses (including any fees or
other amounts paid to the Licensing Authority for such license)
incurred in connection with the obtaining of such license and the
performance of the Customer's obligations under this Agreement
with regard to the System that is the subject of such License;
PROVIDED, HOWEVER, that the Supplier's Liability under this
SECTION 19.7 shall not exceed US $2 million.
19.8 CONSEQUENTIAL DAMAGES. Except as otherwise provided in SECTION
17 OR 19.7, in no event shall either party to this Agreement be
liable under this Agreement, or arising out of its termination,
whether as a result of breach of contract, warranty, or under tort
(other than if caused by an intentional tort), for any incidental
or consequential loss or damages of any nature whatsoever,
including, but not limited to, lost profits before or after
Acceptance, or for any damages arising from or attributable to
failure to realise expected savings, loss of data, capital
downtime costs, loss of use, loss of goodwill or loss of
anticipated or actual revenue or profit even if the Indemnitor has
been advised of the possibility of any such damages.
20. DISPUTE RESOLUTION
20.1 DISPUTE ESCALATION.
20.1.1 This Condition 20.1 shall only apply where both Parties
agree to its use in respect of any particular instance.
20.1.2 If in the opinion of either Party the other Party has
failed to comply with the requirements of this agreement or
Order, or to perform its obligations in a satisfactory
manner, then the dispute resolution procedure set forth in
this Condition 20.1 shall be invoked by said Party.
20.1.3 In order to expedite the prompt resolution of any disputes
which may arise hereunder the Parties agree that the
dispute resolution procedure set forth herein will be
employed by both Parties prior to either Party availing
itself of any other remedies against the other Party.
20.1.4 In the event that a dispute arises between the Parties then
the aggrieved Party shall provide the other Party with a
dispute Notice, and said problem will
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initially be referred to the "First Level" parties
identified in Condition 20.1.8 below.
20.1.5 In the event a given problem has not been resolved at the
First Level, or a corrective action plan of action has not
been mutually agreed upon, within 15 (fifteen) calendar
days of the giving of the dispute Notice, then either Party
shall have the option of escalating the dispute to the
"Second Level" representatives identified in Condition
20.1.8 below, by means of a Notice of escalation to the
other Party.
20.1.6 The Second Level representatives agree to use all
commercially reasonable efforts to meet within 15 (fifteen)
calendar days, at a mutually agreeable time and place, in
order to effect a resolution to the dispute.
20.1.7 If the dispute has not been resolved, or a corrective
action plan of action has not been mutually agreed upon
within 15 (fifteen) calendar days of said meeting or within
30 (thirty) calendar days of the date of the Notice of
escalation to said Second Level, then either Party may
pursue any other remedy or claim.
20.1.8 The designated representatives for each Party shall be as
set forth below:
FIRST LEVEL:
For Supplier: VP Public Carrier Accounts
For Customer: Vice President Engineering
SECOND LEVEL:
For Supplier: Vice President and Legal
Counsel of Nortel Plc
For Customer: Chief Technical Officer
of CompleTel Europe
20.2 GENERAL DISPUTES; ARBITRATION. All disputes arising out of or in
connection with this Agreement shall be finally settled under the
commercial arbitration rules of the International Chamber of
Commerce ("ICC") Rules of Arbitration and as set forth herein.
(1) Each party may select one arbitrator. Selection shall be
completed within 10 (ten) Working Days of the receipt of a
demand for arbitration. If either party fails to select an
arbitrator within such 10 (ten) Working Day period, the one
selected shall act as sole arbitrator. If no arbitrators
have been selected, one arbitrator shall be selected in
accordance with the ICC rules and shall act as
33
<PAGE>
sole arbitrator. If two arbitrators have been selected, the
two arbitrators selected shall select a third within 15
(fifteen) Working Days after their selection. If they fail
to do so, the third arbitrator shall be selected in
accordance with the ICC rules. The arbitrators shall set a
date of hearing no later than 60 (sixty) calendar days from
the date all arbitrators have been selected.
(2) All proceedings shall be conducted in the English language.
(3) The arbitration shall take place at a location to be agreed
upon by the parties. If the parties are unable to agree,
the arbitrators shall select a location in Paris, France
for the arbitration.
(4) The award of any arbitration shall be final, conclusive and
binding on the parties hereto.
(5) The arbitrators may award any legal or equitable remedy.
The arbitration award may include an award of attorney's
fees, in the amount of such fees, to the prevailing party,
if such an award is deemed by the arbitrators to be
reasonable and appropriate. Judgment upon any arbitration
award may be entered and enforced in any court of competent
jurisdiction.
21. INSURANCE
21.1 INSURANCE COVERAGES. The Supplier shall at all times during the
term of this Agreement, at its own cost and expense, carry and
maintain the insurance coverage, with limits not less than, as
described below:
(a) All risk insurance, in form and substance and with insurers
reasonably satisfactory to the Customer, covering all Equipment to be
delivered to the Customer the risk of loss to which has not passed to the
Customer (LIMITS: not less than 110% of the value of the Equipment
and/or Software being delivered).
(b) Comprehensive General Liabilities and Product Liability
Insurance covering claims for bodily injury, death, personal injury
sustained by any person, loss, injury or expense to any tangible property
occurring during or arising out of the performance of this Agreement,
including coverage for independent contractor's protection (required if
any work will be subcontracted), premises-operations, products/completed
operations, negligence and any other claim with respect to the public
and/or contractual liability assumed by the Supplier hereunder (LIMITS:
see attached EXHIBIT J.
21.2 PROOF OF INSURANCE. The Supplier shall furnish the Customer upon
reasonable request with proof, in the form of a certificate, that
all such insurance has been obtained and is in force. The
fulfilment of Supplier's obligations under this ARTICLE 21,
however, shall not otherwise relieve the Supplier of any liability
assumed hereunder or in any way modify the Supplier's obligations
to indemnify the Customer as set out in this Agreement.
34
<PAGE>
21.3 SUBCONTRACTOR INSURANCE. The Supplier shall require its
subcontractors who may enter upon the Customer's premises to
maintain insurance as described above or to otherwise be covered
by the Supplier's insurance.
21.4 BANKRUPTCY OF INSURANCE PROVIDER; FAILURE TO PAY CLAIMS.
Notwithstanding the requirements as to insurance to be carried,
the insolvency, bankruptcy or failure of any insurance company
carrying any of the above insurance, or failure of any such
insurance company to pay claims accruing, shall not be held to
waive any of the provisions of this Agreement or relieve the
Supplier from any of its obligations under this Agreement.
22. SUBCONTRACTORS
22.1 NOTICE OF PROPOSED SUBCONTRACTORS. The Supplier shall notify the
Customer of any proposed subcontractors that the Supplier intends
to use in the performance of the Supplier's obligations hereunder.
The Customer shall have 7 Working Days to notify the Supplier if
it objects to the use of any one or more proposed subcontractors,
in which case, the Supplier shall propose alternative
subcontractors to perform the work of such rejected subcontractor.
The Customer shall again have 5 Working Days to notify the
Supplier if it objects to any one or more of such proposed
substitute subcontractors. If the Customer objects to two
proposed subcontractors for the same task, then Suppler and the
Customer shall endeavour in good faith to agree on one alternative
subcontractor for such task. If the parties fail to agree within
5 (five) Working Days, either party may invoke the provisions of
SECTION 20 to attempt to agree on a third subcontractor for such
task. The requirements of this SECTION 22.1 shall not apply to
purchases of incidental or standard commercial supplies or raw
materials.
22.2 DELAYS IN SELECTING SUBCONTRACTOR. If the Customer shall reject
any Subcontractor as provided in SECTION 22.1, and the Supplier
reasonably believes it shall cause a delay in the ability of the
Supplier to meet the Target Acceptance Date, then Supplier shall
Notify Customer of the number of days it reasonably believes the
Target Acceptance Date should be extended as a result of the
delays in selecting a Subcontractor caused by operation of SECTION
22.1, but such number of days shall not exceed the number of
elapsed days between the date Customer first rejected a proposed
subcontractor and the date when a subcontractor for the relevant
task was selected. If the Customer disagrees with the Supplier's
numbers, the parties shall attempt in good faith to resolve the
dispute or either party may invoke the provisions of SECTION 20 to
resolve the disagreement.
22.3 CLAIMS BY SUBCONTRACTORS. In the event any subcontractor claims
the Supplier owes it money in connection with this Agreement or
the Supplier's performance of its obligations hereunder, (the
"Subcontractor Due Amount"), the Customer is entitled to withhold
payments of other amounts due to the Supplier equal in amount to
the Subcontractor Due Amount, unless the Customer obtains in its
judgement adequate assurances that the Customer will not be liable
for the Subcontractor Due Amount. Notwithstanding any other
provision in this Agreement to the contrary, such
35
<PAGE>
withholding by the Customer shall not result in a breach of the
Customers's obligations under SECTION 8 hereof or otherwise.
23. TRAINING
23.1 GENERAL. All Training Services and instructional aids,
documentation and other training-related materials shall, at no
additional charge, be provided in the English language.
The Supplier shall provide, as required by any Order(s), personnel
to conduct training and instructional aids appropriate for each
course, including books, pamphlets and diagrams.
The Customer may, without liability, terminate any Training
Services by giving the Supplier Notice 10 (ten) Working Days prior
to the Commencement Date.
If the Customer terminates any Training Services within 10 (ten)
Working Days of or after the Commencement Date, the parties will
agree to a reasonable fee for the Supplier's time thus far.
The Customer shall have the right to reproduce all Training
material for internal use subject to the SECTION entitled
"Confidential Information".
23.2 EXHIBIT G. Training shall be as provided in EXHIBIT G hereto.
24. COMPLIANCE WITH LAWS
24.1 CUSTOMER COMPLIANCE. In performance of this Agreement, Customer
shall comply in all material respects will all the material laws
of France applicable to it.
24.2 RESTRICTIONS ON EXPORT; CERTAIN COMMODITIES; TECHNICAL DATA. The
European Union and its Member States, as well as other countries
such as the United States, restrict the export of certain
commodities and technical data originating in the European Union
or those countries. Accordingly, the Customer's ability to
provide technical assistance or technical data hereunder,
including the provision of technology and know-how and
Information, and the Supplier's performance hereunder, are subject
to compliance with these restrictions. The parties hereto
acknowledge the existence of the laws and regulations such as
Council Regulation (EU) No. 3381/94 setting up a Community Regimen
for the Control of Export of Dual-Use Goods and the United States
Export and Control Laws and Regulations, and similar laws and
regulations of the EU Member States and other countries which may
be involved. The Supplier will have full responsibility for
compliance with all applicable import and export laws, rules,
regulations, orders and other requirements.
24.3 CUSTOMS LAWS; LICENSES; APPROVALS. The Supplier will have full
responsibility (i) for compliance with all applicable customs and
commercial policy laws, regulations, orders and other requirements
of the European Union and its Member
36
<PAGE>
States, and all other applicable countries, and in particular
Council Regulation (EEC) No. 2913/92 establishing a Community's
Customs Code, Commission Regulation No. 2454/93 establishing
Provisions for the Implementation of Council Regulation No.
2913/92, Council Regulation No. 384/96 on Protection against Dumped
Imports from Countries not members of the European Community and
Council Regulation No. 3284/94 on Protection against Subsidized
Imports from Countries not members of the European Community; and
(ii) for obtaining all necessary licenses and permits and for paying
for all fees and duties which may be required under the laws,
regulations, orders and other requirements mentioned in clause (i)
above.
24.4 SUPPLIER COMPLIANCE. In performance of this Agreement, the
Supplier shall comply in all material respects with all of the
material laws of France applicable to it. In performance of any
order submitted, the Supplier shall comply in all material
respects with all of the laws of each territory for which such
Order has been submitted, and applicable local laws, rules, codes
and regulations in all respects applicable to safety matters or
otherwise relating to the manufacture, delivery and Installation
of the Equipment and Software and shall, in a timely fashion such
that the schedule set forth in the applicable Accepted Order shall
not be delayed, obtain all necessary approvals and homologation
from the appropriate governmental authorities as are required for
the Equipment and Software. At the Customer's request, the
Supplier shall promptly furnish the Customer with evidence that
all such approvals and homologation have been obtained and are in
full force and effect.
24.5 SERVICES. All Services to be performed by the Supplier hereunder
shall be performed in accordance with all applicable national,
regional, provincial, or local laws, regulations, decrees,
ordinances or rules of any governmental entity. The Supplier
further agrees that the Equipment, Software and Systems will
conform to all applicable standards mandated by the governmental
authorities having jurisdiction for a System.
24.6 IMPORT/EXPORT CONTROLS. In support of SECTION 24.2 and not in
limitation thereof, the Supplier shall be responsible, at its cost
and expense, for obtaining all non-governmental third party and
governmental approvals, including but not limited to licenses and
permits, which may be required to export any System or components
thereof (including, without limitation, the Equipment and
Software) from its country of manufacture and, for Equipment and
Software which is being shipped DDP (Destination), to import any
System or such components thereof into such jurisdiction. The
Supplier shall also be responsible, at its sole cost and expense,
for obtaining all importation licenses and re-exportation licenses
for the tools, equipment and other supplies required by the
Supplier to perform its obligations under this Agreement.
24.7 FOREIGN CORRUPT PRACTICES ACT. The Supplier shall comply, at its
own expense, with the provisions of the United States Foreign
Corrupt Practices Act and all United States anti-boycott laws and
regulations, and with all similar laws, codes, requirements and
regulations applicable in all countries in which any Systems,
Equipment or Software are or are to be sold, Installed, delivered
or performed.
37
<PAGE>
25. SUPPLIER'S PERSONNEL
25.1 SUPPLIER'S PROJECT MANAGER. With respect to each System purchased
hereunder, the Supplier shall designate an employee to act as
"Project Manager" who is authorized to act on behalf of the
Supplier in all matters pertaining to this Agreement. The Project
Manager will act in such capacity and will reside, at the
Supplier's sole cost and expense, in the applicable territory in
which such System is or is to be located for a period of one (1)
year beyond the date on which the System is In-Service.
Responsibilities of the Project Manager will include coordination
of all contract responsibilities in such territory, integration of
contract efforts with others and technical liaison. The Project
Manager will be engaged to render full time services to the
applicable System for a period commencing no later than the date
hereof through at least one year after the date on which such
System is put In-Service. The Project Manager will be available
for consultation with the Customer during normal working hours
throughout the term of his engagement. Prior to the designation
of any Project Manager, or the appointment of a replacement
Project Manager, the Supplier shall introduce said person to the
Customer and the Customer shall have the right to approve said
person which approval shall not be unreasonably withheld. If the
Customer disapproves of any such person, whether initially or
after such person has commenced work under this Agreement, the
Supplier shall, upon the Customer's request, appoint another
person to act as Project Manager, such person to be reasonably
acceptable to the Customer.
25.2 INDEPENDENT CONTRACTOR. The Supplier hereby declares and agrees
that it is engaged in an independent business and will perform its
obligations under this Agreement as an Independent contractor and
not as the agent or employee of the Customer; that the persons
performing Services hereunder are not agents or employees of the
Customer; that the Supplier has and hereby retains the right to
exercise full control of and supervision over the performance of
the Supplier's obligations hereunder and full control over the
employment, direction, compensation and discharge of all employees
assisting in the performance of such obligations; that the
Supplier will be solely responsible for all matters relating to
payment of such employees, and all applicable national, state and
local laws, rules and regulations governing such matters;
including but not limited to social security payments, and that
the Supplier will be responsible for the Supplier's own acts and
those of the Supplier's agents, employees and subcontractors
during the performance of the Supplier's obligations under this
Agreement. Each Party's employees shall remain at all time under
the authority and the control of such Party. Each Party and its
employees are not entitled to unemployment insurance benefits from
the other Party as a result of performing under this Agreement.
Each Party is responsible for and shall pay all of its own
assessable income tax on amounts paid under this Agreement, and
make the necessary social security payments.
38
<PAGE>
26. RIGHT TO INSPECT
Subject to prior and reasonable Notice the Customer may inspect the
Supplier's manufacturing facilities and finished Equipment or Software
during regular business hours. Such inspections shall not relieve the
Supplier of any obligations under this Agreement, nor shall it be deemed
to be Acceptance. Upon request of the Customer the Supplier will provide
the Customer or its agent with access to the Supplier's quality control
activity results, data, reports, charts, procedures, manuals,
requirements, practices and methods for all Equipment and Software.
27. PUBLICITY
Prior to the publication or use by a party hereto of any advertising,
sales promotions, press releases or other publicity matters relating to
the Systems or the Equipment or Software or this Agreement in which the
names or logo of the other party is mentioned or can be reasonably
inferred, the party shall obtain the written consent of the other party.
Such consent shall not be unreasonably withheld.
28. SEVERABILITY
If any of the provisions of this Agreement shall be adjudged invalid or
unenforceable, such invalidity or unenforceability shall not invalidate
or render this Agreement unenforceable, but rather this Agreement shall
be construed as if not containing the particular invalid or unenforceable
provision or provisions, and the rights and obligations of the parties
shall be construed and enforced accordingly.
29. NOTICES
Notices and other communications to be given by one of the parties to the
other shall be transmitted in writing and shall be considered as properly
given if (a) delivered in person, (b) sent registered mail, return
receipt requested, or (c) by guaranteed overnight courier delivery,
addressed to the parties as follows:
To Supplier: Matra Nortel Communications
33, quai Paul Doumer
Paris La Defense
92415 Courbevoie Cedex - France
Attention: CompleTel Project Manager
with a copy to:
Matra Nortel Communications
33, quai Paul Doumer
Paris La Defense
92415 Courbevoie Cedex - France
Attention: Legal Department
39
<PAGE>
To Customer: CompleTel SAS
44, rue Washington
75408 Paris Cedex 08
Attention: Rick Clevenger, CTO
Any notice of communication sent under this Agreement shall be deemed
given upon receipt.
30. GOVERNING LAW
The construction, interpretation and performance of the Agreement shall
be governed by the laws of France.
31. ASSIGNMENT
Except as set forth below, neither party may assign or transfer this
Agreement or any rights or obligations hereunder without the prior
written consent of the other party (such consent not to be unreasonably
withheld or delayed).
31.1 ASSIGNMENT TO AFFILIATE. Notwithstanding anything to the contrary
in this Agreement, the Customer may sell or assign all or any
portion of its interests in this Agreement and in the Software and
its license thereof, or in any portion thereof, to one or more of
its Affiliates, without obtaining the prior consent of the
Supplier. Upon a sale or assignment made in conformity with this
SECTION 31.1, the Customer shall be relieved of its obligations
under this Agreement with respect to the interests assigned to
such Affiliate.
31.2 COLLATERAL ASSIGNMENT TO LENDER. Notwithstanding anything to the
contrary in this Agreement, the Customer may collaterally assign
its rights under this Agreement and in the Software and its
licence thereof, or in any portion thereof, to one or more lenders
as security, provided that the Customer shall remain liable for
its obligations to the Supplier hereunder.
31.3 ASSIGNMENT TO UNRELATED THIRD PARTIES. The Customer may sell or
assign all or any portion of its interests in this Agreement,
(including, without limitation, its rights in and under the
Software and the license thereof) in connection with the sale or
other transfer of all or substantially all of its assets, or the
sale or other transfer of its assets relating to the Systems
acquired hereunder, PROVIDED THAT the Customer obtains the prior
written approval of the Supplier, which approval may be withheld
only on the basis of the assignee's character or financial
capability or if the assignee is a direct competitor of the
Supplier, in each case as determined in the reasonable discretion
of the Supplier. Upon a sale or assignment made in conformity
with this SECTION 31.3, the Customer shall be relieved of its
obligations under this Agreement with respect to the interests
assigned to such third party.
40
<PAGE>
32. WAIVER
Except as specifically provided for in a waiver signed by duly authorized
representatives by the Customer and the Supplier, failure by either party
at any time to require performance by the other party or to claim a
breach of any provision of this Agreement shall not be construed as
affecting any subsequent breach or the right to require performance with
respect thereto or to claim a breach with respect thereto.
33. SECTION HEADINGS
SECTION headings are inserted herein for convenience only and shall not
affect the meaning or interpretation of this Agreement or any provision
hereof.
34. ENTIRE AGREEMENT
This Agreement, including all Exhibits attached hereto, (which are an
integral part of this Agreement and which are incorporated herein by
reference) comprises all the terms, conditions and agreements of the
parties hereto with respect to the subject matter herein, and save as
expressly provided herein, may not be altered or amended except in
writing signed by authorized representatives of each party hereto.
35. COUNTERPARTS
This Agreement may be executed in counterparts (including those
transmitted by facsimile), each of which shall be deemed an original and
all of which taken together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year last written below.
COMPLETEL SAS MATRA NORTEL COMMUNICATIONS SAS
By: /s/ Charles Menatti By: /s/ Directeur Generale
--------------------------- ---------------------------
Name: Charles Menatti Name:
------------------------- -------------------------
Title: President Title: Directeur Generale
------------------------ ------------------------
Date: Date:
------------------------- -------------------------
41
<PAGE>
EXHIBIT 12.1
COMPLETEL EUROPE N.V.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Stated in thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Period from
commencement
of operations
(January 8, 1998)
Three Months Ended Through
March 31, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Earnings available for fixed charges:
Net loss before income taxes $ (5,895) $ (7,561)
Add: Fixed charges 1,372 10
--------- ---------
Adjusted Earnings (4,523) (7,551)
Fixed charges:
Interest on indebtness (1,313) ---
Amortization of debt issuance costs (56) ---
Interest portion of rental and
lease expenses (1) (3) (10)
--------- ---------
(1,372) (10)
--------- ---------
Deficiency of earnings available to
cover fixed charges $ (5,895) $ (7,561)
--------- ---------
--------- ---------
</TABLE>
(1) The interest component of rental and lease expenses has been estimated
by taking the difference between the gross rent and lease expense and net
present value of rent and lease expense using the Company's cost of capital
of 14%, representing the coupon rate on the Company's outstanding senior
discount notes.
<PAGE>
EXHIBIT 21.1 SUBSIDIARIES
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation Assumed Names
- ---- ----------------------------- -------------
<S> <C> <C>
1. CompleTel LLC Delaware None
2. CompleTel Holdings LLC Delaware None
3. CompleTel (N.A.) N.V. Netherlands Antilles None
4. CompleTel Europe N.V. Netherlands None
5. CompleTel ECC B.V. Netherlands * None
6. CompleTel Holding I B.V. Netherlands * None
7. CompleTel Holding II B.V. Netherlands * None
8. CompleTel SAS France * None
9. CompleTel Services SAS France * None
10. CompleTel GmbH Germany * None
11. CompleTel U.K. Limited United Kingdom * None
12. CompleTel B.V. Netherlands * None
13. CompleTel SPC England * None
14. CableTel Management, Inc. Colorado CompleTel
(in Colorado)
15. Acces et Solutions Internet S.A.R.L. France *
16. Web International Network Limited United Kingdom * iPeople (in
United Kingdom)
</TABLE>
* Denotes entities that are also a subsidiary of CompleTel Europe N.V.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made part of this
registration statement.
Arthur Andersen LLP
/s/ Arthur Andersen LLP
Denver, Colorado,
July 2, 1999.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made part of this
registration statement.
Paris, France,
July 2, 1999.
Barbier Frinault & AssociEs
Arthur Andersen
/s/ Jean-Francois Ladurelle
---------------------------
Jean-Francois Ladurelle
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
COMPLETEL EUROPE N.V.
(Exact name of Registrant as specified in its charter)
Amsterdam, The Netherlands 98-0202823
(State of Incorporation) (I.R.S. Employer
Identification No.)
Washington Plaza-Immeuble Artois
44 rue Washington
75008 Paris CEDEX 08, France
(Address of Principal Executive Offices) (Zip Code)
<PAGE>
COMPLETEL LLC
(Exact name of Registrant as specified in its charter)
Delaware 52-2073805
(State of Incorporation) (I.R.S. Employer
Identification No.)
6300 South Syracuse Way
Suite 335
Englewood, Colorado 80111
(Address of Principal Executive Offices) (Zip Code)
14% SERIES B SENIOR DISCOUNT NOTES DUE 2009 OF
COMPLETEL EUROPE N.V.
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. GENERAL INFORMATION Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority is incorporated by reference to Registration Number 333-70709.
* Incorporated by reference to Registration Number 22-27000.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 25th day of June, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------------------
Richard H. Prokosch
Assistant Vice President
/s/ Harry H. Hall Jr.
- -----------------------------------
Harry H. Hall Jr.
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, U.S. BANK TRUST NATIONAL ASSOCIATION hereby consents that reports
of examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: June 25, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------------------
Richard H. Prokosch
Assistant Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SUMMARY CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF COMPLETEL EUROPE N.V. CONTAINED IN THE REGISTRANTATION STATEMENT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001089558
<NAME> COMPLETEL EUROPE N.V.
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 MAR-31-1999
<PERIOD-START> JAN-08-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 1,718,000 110,107,000
<SECURITIES> 0 0
<RECEIVABLES> 527,000 2,123,000
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,424,000 112,725,000
<PP&E> 3,417,000 14,387,000
<DEPRECIATION> (46,000) (184,000)
<TOTAL-ASSETS> 7,870,000 134,763,000
<CURRENT-LIABILITIES> 13,882,000 14,039,000
<BONDS> 0 71,834,000
0 0
0 0
<COMMON> 78,000 337,000
<OTHER-SE> (6,090,000) 48,553
<TOTAL-LIABILITY-AND-EQUITY> 7,870,000 134,763,000
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 134,000
<TOTAL-COSTS> 7,561,000 5,143,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 1,313,000
<INCOME-PRETAX> (7,561,000) (5,895,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (7,561,000) (5,895,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,561,000) (5,895,000)
<EPS-BASIC> 1.55 (0.39)
<EPS-DILUTED> 1.55 (0.39)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SUMMARY CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF COMPLETEL LLC CONTAINED IN THE REGISTRATION STATEMENT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001089554
<NAME> COMPLETEL LLC
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 MAR-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 3,744,000 111,161,000
<SECURITIES> 0 0
<RECEIVABLES> 537,000 2,133,000
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,495,000 113,808,000
<PP&E> 3,500,000 14,476,000
<DEPRECIATION> (59,000) (204,000)
<TOTAL-ASSETS> 10,042,000 135,946,000
<CURRENT-LIABILITIES> 5,272,000 11,732,000
<BONDS> 0 71,834,000
0 0
13,188,000 67,085,000
<COMMON> 737,000 1,834,000
<OTHER-SE> (9,155,000) (20,319)
<TOTAL-LIABILITY-AND-EQUITY> 10,042,000 135,946,000
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 134,000
<TOTAL-COSTS> 8,103,000 5,114,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 1,302,000
<INCOME-PRETAX> (8,092,000) (5,855,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (8,092,000) (5,855,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,092,000) (5,855,000)
<EPS-BASIC> (1,940) (1,617)
<EPS-DILUTED> (1,940) (1,617)
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
COMPLETEL EUROPE N.V.
OFFER TO EXCHANGE
14% SERIES B SENIOR DISCOUNT NOTES DUE 2009
FOR ANY AND ALL OF ITS OUTSTANDING
14% SENIOR DISCOUNT NOTES DUE 2009
PURSUANT TO THE PROSPECTUS, DATED __________, 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________,
___________, 1999 UNLESS EXTENDED ("THE EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
TO: U.S. BANK TRUST NATIONAL ASSOCIATION, EXCHANGE AGENT
By Mail: By Overnight Courier:
U.S. Bank Trust National Association U.S. Bank Trust National Association
180 East Fifth Street 180 East Fifth Street
St. Paul, MN 55101 St. Paul, MN 55101
Attn: Specialized Finance Dept. Attn: Specialized Finance Dept.
By Hand:
U.S. Bank Trust National Association
4th Floor Bond Drop Window
180 East Fifth Street
St. Paul, MN 55101
By Facsimile Transmission
(for Eligible Institutions only):
(651) 244-1537
Attention: Specialized Financed Department
Confirm by Telephone:
(651) 244-5011
For Information Call:
(651) 244-5011
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received the Prospectus,
dated _______________, 1999 (the "Prospectus"), of CompleTel Europe N.V., a
public company with limited liability organized under the laws of The
Netherlands ("CompleTel"), and this Letter of Transmittal (the "Letter"), which
together constitute CompleTel's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 14% Series B Senior Discount Notes due 2009 (the
"Exchange Notes") for each $1,000 principal amount of its outstanding 14% Senior
Discount Notes due 2009 (the "Old Notes") of which $147.5 million in aggregate
principal amount are outstanding.
<PAGE>
The Exchange Notes will accrete and bear interest at the same rate and on
the same terms as the Old Notes. From and after the date of issuance of the
Exchange Notes, the principal of the Exchange Notes will accrete at the rate of
14% per annum until February 14, 2004. Interest on the Exchange Notes will
accrue at the rate of 14% per annum after February 15, 2004 and will be payable
semiannually in arrears on February 15 and August 15 of each year, commencing
August 15, 2004.
This Letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus.
Holders of Old Notes whose certificates are not immediately available, or who
are unable to deliver their certificates or confirmation of the book-entry
tender of their Old Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility (a "Book-Entry Confirmation") and all other documents required
by this Letter to the Exchange Agent on or prior to the Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Please see Instruction 1 below. Delivery of Documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder of Old Notes promptly and
instruct such registered holder of Old Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing this Letter and
delivering its Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such beneficial owner's name or obtain a properly
completed power of attorney power from the registered holder of Old Notes. The
transfer of record ownership may take considerable time.
The undersigned has completed the appropriate boxes below and signed this
letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and aggregate principal
amount of the Old Notes should be listed on a separate signed schedule affixed
hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES (1) (2) (3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) OF AMOUNT OF 14% AGGREGATE PRINCIPAL
REGISTERED HOLDER(S) CERTIFICATE SENIOR DISCOUNT AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* NOTES DUE 2009 TENDERED**
- -------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
TOTAL
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered ALL of the Old Notes represented by the Old Notes indicated in
column 2. Please see Instruction 2, below.
- --------------------------------------------------------------------------------
2
<PAGE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _____________________________________________
Account Number ____________________, Transaction Code Number____________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s) Window Ticket Number (if any)
_______________________________ ___________________________________
Date of Execution of Notice of Name of Institution which
Guaranteed Delivery Guaranteed Delivery
_______________________________ ___________________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number _____________________
Transaction Code Number ____________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE ADDITIONAL COPIES
OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ______________________________
Address: ___________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to CompleTel the aggregate specified amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, CompleTel all right, title and interest
in and to such Old Notes as are being tendered hereby, and hereby appoints the
Exchange Agent as the true and lawful agent and attorney-in-fact (with full
knowledge that the Exchange Agent also acts as agent of CompleTel) of such
holder of Old Notes, (i) to transfer ownership of such Old Notes on the account
books maintained by The Depositary Trust Company (together, in any such case,
with all accompanying evidences of transfer and authenticity) to CompleTel and
(ii) to receive all benefits and otherwise exercise all rights and incidents of
beneficial ownership with respect to such Old Notes, all in accordance with the
terms of the Exchange Offer. The power of attorney granted in this paragraph
shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that CompleTel will acquire good and encumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same is accepted by CompleTel. The
undersigned hereby further represents that any Exchange Notes acquired in
exchange
3
<PAGE>
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such Exchange Notes, whether or not such person
is the undersigned, that neither the holder of such Old Notes nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes and that neither the holder of such Old
Notes nor any such other person is an "affiliate," as defined in Rule 405 under
the Securities Act of 1933, as amended (the "Securities Act"), of CompleTel.
The undersigned also acknowledges that this Exchange Offer is being made
based on interpretations by the staff of the Securities and Exchange Commission
(the "Commission") which lead CompleTel to believe that the Exchange Notes
issued in exchange for the Old Notes pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders thereof (other
than any such holder that is an "affiliate" of CompleTel within the meaning of
Rule 405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes. If the undersigned is a broker-dealer that
will receive Exchange Notes for its own account in exchange for Old Notes, it
represents that the Old Notes to be exchanged for the Exchange Notes were
acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes pursuant to the Exchange Offer; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. If any holder is
an affiliate of CompleTel or is engaged in or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by CompleTel to be necessary or desirable to complete the sale,
assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Old Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the Exchange Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
4
<PAGE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED
DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE
AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 BELOW)
Dated: ____________________________________________ 1999
--) X ______________________________________________________ (--
--) X ______________________________________________________ (--
SIGNATURE(S) OF OWNER OR AUTHORIZED SIGNATORY DATE
Area Code and Telephone Number _________________________
If a holder is tendering any Old Notes, this Letter
must be signed by the registered holder(s) as the name(s)
appear(s) on the certificate(s) for the Old Notes or by
any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If
signature is by a trustee, executor, administrator,
guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title.
Please see Instruction 3 below.
Name(s): ______________________________________________
______________________________________________
(PLEASE TYPE OR PRINT)
Capacity: ______________________________________________
Address: ______________________________________________
______________________________________________
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution: ______________________________ (--
(AUTHORIZED SIGNATURE)
________________________________________________________
(TITLE)
________________________________________________________
(NAME AND FIRM)
Dated: __________________________________________, 1999
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or
Exchange Notes are to be issued in the name of and sent to someone other than
the person or persons whose signature(s) appear(s) on this Letter above, or if
Old Notes delivered by book-entry transfer which are not accepted for exchange
are to be returned by credit to an account maintained at the Book-Entry Transfer
Facility other than the account indicated above.
Issue: Exchange Notes and/or Old Notes to:
Name(s) ________________________________________________________________________
(PLEASE TYPE OR PRINT)
________________________________________________________________________________
(PLEASE TYPE OR PRINT)
________________________________________________________________________________
(SOCIAL SECURITY OR EMPLOYER ID NO.)
Address ________________________________________________________________________
________________________________________________________________________________
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
/ / Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below.
________________________________________________________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or
Exchange Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above or to such person or persons at an
address other than shown in the box entitled "Description of Old Notes" on this
Letter above.
Mail: Exchange Notes and/or Old Notes to:
Name(s) ________________________________________________________________________
(PLEASE TYPE OR PRINT)
________________________________________________________________________________
(PLEASE TYPE OR PRINT)
Address ________________________________________________________________________
________________________________________________________________________________
(ZIP CODE)
- --------------------------------------------------------------------------------
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER OF
14% SERIES B DISCOUNT SENIOR NOTES DUE 2009
FOR ANY AND ALL OF THE OUTSTANDING
14% SENIOR DISCOUNT NOTES DUE 2009
OF COMPLETEL EUROPE N.V.
1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES.
This letter is to be completed by securityholders either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below.
Securityholders whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through
an Eligible Institution, as defined below, (ii) prior to the Expiration Date,
the Exchange Agent must receive from such Eligible Institution a properly
completed and duly executed Letter (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by CompleTel (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five trading days (on the New York Stock Exchange) after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, or a Book-Entry Confirmation, and any other
documents required by the Letter will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) the certificates for all physically tendered
Old Notes, in proper form for transfer, or Book-Entry Confirmation, as the case
may be, and all other documents required by this Letter, are received by the
Exchange Agent within five New York Stock Exchange trading days after the date
of execution of the Notice of Guaranteed Delivery. Holders who tender their Old
Notes using the Depository Trust Company "ATOP" procedure do not need to
complete a Letter.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that registered mail,
properly insured, with return receipt requested, be used and that the mailing be
made sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS.
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of Old
Notes--Aggregate Principal Amount Tendered." A reissued certificate
representing the balance of nontendered Old Notes will be sent to such tendering
holder, unless otherwise provided in the appropriate box on this Letter,
promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE
EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
7
<PAGE>
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however the Exchange Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted hereby
or separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by CompleTel, proper
evidence satisfactory to CompleTel of their authority to so act must be
submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF
A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (i) BY A REGISTERED HOLDER OF
OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) WHO HAS NOT COMPLETED
THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER, OR (ii) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which Exchange Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Old Notes not exchanged are to be
issued or sent, if different from the name or address of the person signing this
Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Securityholders tendering Old Notes by book-entry transfer may
request that Old Notes not exchanged be credited to such account maintained at
the Book-Entry Transfer Facility as such securityholder may designate hereon.
If no such instructions are given, such Old Notes not exchanged will be returned
to the name and address of the person signing this Letter.
8
<PAGE>
5. TRANSFER TAXES.
CompleTel will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however,
Exchange Notes and/or substitute Old Notes not exchanged are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed for any reason other than the transfer of Old
Notes to CompleTel or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the registered holder of any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 5, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER.
6. WAIVER OF CONDITIONS.
CompleTel reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
7. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Neither CompleTel, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a holder tendering Old Notes is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below or otherwise
establish a basis for exemption from backup withholding. If such holder is an
individual, the TIN is the holder's social security number. The Certification
of Payee Awaiting Taxpayer Identification Number should be completed if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the Exchange Agent is not provided
with the correct TIN, the holder may be subject to a $50 penalty imposed by the
Internal Revenue Service, and payments made to such holder with respect to Old
Notes or Exchange Notes may be subject to backup withholding.
Certain holders (including, among others, domestic corporations and certain
foreign individuals and foreign entities) are not subject to these backup
withholding and reporting requirements. Exempt holders should indicate their
exempt status on Substitute Form W-9. A foreign holder may qualify as an exempt
recipient by submitting to the Exchange Agent a properly completed Internal
Revenue Service Form W-8, signed under penalties of perjury, attesting to the
holder's exempt status. A Form W-8 can be obtained from the Exchange Agent.
9
<PAGE>
If backup withholding applies, the Exchange Agent is required to withhold
31 percent of any amount otherwise payable to the holder. Backup withholding is
not an additional United States federal income tax. Rather, the United States
federal income tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments made to a holder with respect to
Old Notes or Exchange Notes, the holder is required to provide the Exchange
Agent with: (i) the holder's correct TIN by completing the form below,
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
holder is awaiting a TIN) and that (A) such holder is exempt from backup
withholding, (B) such holder has not been notified by the Internal Revenue
Service that the holder is subject to backup withholding as a result of a
failure to report all interest or dividends, or (C) the Internal Revenue Service
has notified such holder that the holder is no longer subject to backup
withholding; and (ii) if applicable, an adequate basis for exemption.
What Number to Give the Exchange Agent
Each holder is required to give the Exchange Agent the TIN of the record
holder or holders of the Old Notes. If Old Notes are in more than one name or
are not in the name of the actual holder, consult the instructions on Internal
Revenue Service Form W-9, which may be obtained from the Exchange Agent, for
additional guidance on which TIN to report.
Certification of Payee Awaiting Taxpayer Identification Number
If the tendering holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certification of Payee Awaiting Taxpayer Identification Number, and return them
to the Exchange Agent. If such certificate is completed and the Exchange Agent
is not provided with the TIN within 60 days, the Exchange Agent will withhold
31 percent of all payments made thereafter until a TIN is provided to the
Exchange Agent.
10
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME: COMPLETEL EUROPE N.V.
- --------------------------------------------------------------------------------
SUBSTITUTE PART I--TAXPAYER
FORM W-9 IDENTIFICATION _____________________________
NUMBER--PLEASE PROVIDE Social Security Number
YOUR TIN IN THE BOX AT
RIGHT AND CERTIFY BY OR
SIGNING AND DATING BELOW.
DEPARTMENT OF THE _____________________________
TREASURY CHECK THIS BOX IF YOU ARE Employer Identification Number
INTERNAL REVENUE EXEMPT FROM BACKUP
SERVICE WITHHOLDING / /
------------------------------------------------------------
PART II--CERTIFICATION--I certify, under penalties of
perjury, that: (i) the number shown above on this form is
my correct TIN (or I am waiting for a TIN to be issued to
me) and (ii) I am not subject to backup withholding under
the provisions of section 3406(a)(1)(c) of the Internal
Revenue Code because (A) I am exempt from backup
PAYOR'S REQUEST withholding, (B) I have not been notified by the Internal
FOR TAXPAYER Revenue Service that I am subject to backup withholding as
IDENTIFICATION a result of a failure to report all interest or dividends,
NUMBER (TIN) or (C) the Internal Revenue Service has notified me that I
am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (ii)
above if you have been notified by the Internal Revenue
Service that you are currently subject to backup
withholding because of underreporting interest or
dividends on your tax return. However, if after being
notified by the Internal Revenue Service that you were
subject to backup withholding, you received another
notification from the Internal Revenue Service stating
that you are no longer subject to backup withholding, do
not cross out Item (ii) above.
Signature: ____________________________
Date: _________________________________
Name: _________________________________
(Please Print)
------------------------------------------------------------
PART III--CERTIFICATION OF PAYEE AWAITING TAXPAYER
IDENTIFICATION NUMBER--I certify, under penalties of
perjury, that a TIN has not been issued to me, and either
(i) I have mailed or delivered an application to receive a
TIN to the appropriate Internal Revenue Service Center or
Social Security Administration Office or (ii) I intend to
mail or deliver an application in the near future. I
understand that if I do not provide a TIN by the time of
payment, 31 percent of all payments made to me on account
of the Exchange Notes shall be retained until I provide a
TIN to the Exchange Agent and that, if I do not provide my
TIN within sixty (60) days, such retained amounts shall be
remitted to the Internal Revenue Service as backup
withholding and 31 percent of all reportable payments made
to me thereafter will be withheld and remitted to the
Internal Revenue Service until I provide a TIN.
Signature: _____________________________
Date: __________________________________
Name: __________________________________
(Please Print)
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN
CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY AMOUNTS PAID TO
YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING 14% SENIOR DISCOUNT NOTES DUE 2009
IN EXCHANGE FOR NEW
14% SERIES B SENIOR DISCOUNT NOTES DUE 2009
REGISTERED UNDER THE SECURITIES ACT OF 1933
OF
COMPLETEL EUROPE N.V.
Registered holders of outstanding 14% Senior Discount Notes due 2009 (the
"Old Notes") who wish to tender their Old Notes in exchange for a like principal
amount of new 14% Series B Senior Discount Notes due 2009 (the "Exchange Notes")
and whose Old Notes are not immediately available or who cannot deliver their
Old Notes and Letter of Transmittal (and any other documents required by the
Letter of Transmittal) to U.S. Bank Trust National Association (the "Exchange
Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery
or one substantially equivalent hereto. This Notice of Guaranteed Delivery may
be delivered by hand or sent by facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight courier) or letter
to the Exchange Agent. See "The Exchange Offer-Procedures for Tendering Old
Notes" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
U.S. BANK TRUST NATIONAL ASSOCIATION
By Mail: By Overnight Courier:
U.S. Bank Trust National Association U.S. Bank Trust National Association
180 East Fifth Street 180 East Fifth Street
St. Paul, MN 55101 St. Paul, MN 55101
Attn: Specialized Finance Dept. Attn: Specialized Finance Dept.
By Hand:
U.S. Bank Trust National Association
4th Floor Bond Drop Window
180 East Fifth Street
St. Paul, MN 55101
By Facsimile Transmission
(for Eligible Institutions only):
(651) 244-1537
Attention: Specialized Finance Department
Confirm by Telephone:
(651) 244-5011
For Information Call:
(651) 244-5011
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile transmission to
a number other than as set forth above will not constitute a valid delivery.
<PAGE>
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Letter of Transmittal),
such signature guarantee must appear in the applicable space provided on the
Letter of Transmittal for Guarantee of Signatures.
Ladies and Gentleman:
The undersigned hereby tenders the principal amount of Old Notes indicated
below, upon the terms and subject to the conditions contained in the Prospectus
dated ______________ of CompleTel Europe, N.V. (the "Prospectus"), receipt of
which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
NAME AND ADDRESS OF
REGISTERED HOLDER AS IT
APPEARS ON THE 14%
SENIOR DISCOUNT NOTES DUE
2009 ("OLD
NOTES")_________________________________________________________________________
(PLEASE PRINT)
CERTIFICATE NUMBER(S)
OF OLD
NOTES
TENDERED________________________________________________________________________
AGGREGATE PRINCIPAL
AMOUNT REPRESENTED
BY OLD NOTES____________________________________________________________________
PRINCIPAL AMOUNT
OF OLD NOTES
TENDERED _______________________________________________________________________
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Old Notes, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, and any other documents required by the Letter of Transmittal within
five trading days on the Nasdaq Stock Market's National Market after the date of
execution of this Notice of Guaranteed Delivery.
Name of Firm: __________________________
___________________________________
(Authorized signature)
Address: _______________________________
_______________________________ Name: _____________________________
(Zip Code)
Title: ____________________________
(please type or print)
Area Code and Telephone Number: ________
<PAGE>
Date: _____________________________
<PAGE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
