<PAGE>
As filed with the Securities and Exchange Commission on September 2, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
GlobeNet Communications Group Limited
(Exact name of registrant as specified in its charter)
Bermuda 4813
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
2 Carter's Bay Road Lin Gentemann
Southside, St. David's DDBX General Counsel
Bermuda GlobeNet Communications Group
(441) 296-9000 Limited
(Address, including zip code, and P.O. Box HM 3043
telephone number, including area code, of Hamilton HM NX
registrant's principal executive offices) Bermuda
(441) 296-9030
(Name, address, including zip code,
and telephone number, including area
code, of agent for service)
Copy to:
Eric S. Shube
Vinson & Elkins L.L.P.
1325 Avenue of the Americas
17th Floor
New York, NY 10019
(917) 206-8000
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable following the effectiveness of this
registration statement.
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 of 1933, 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 of 1933, 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 Proposed Proposed
of maximum maximum Amount of
securities to be Amount to be offering price aggregate offering registration
registered Registered per unit(1) price(1) fee
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13% Series B Senior
Notes due 2007 $300,000,000 100% $300,000,000 $83,400
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell the new notes until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell the new notes and it is not soliciting an offer to buy the new +
+notes in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated September 2, 1999
PROSPECTUS
$300,000,000
GlobeNet Communications Group Limited
Offer to Exchange
13% Series B Senior Notes Due 2007
[LOGO OF GLOBENET] For All Outstanding
13% Senior Notes Due 2007
The New Notes:
. The terms of the new notes are identical to the terms of the old notes,
except that the new notes will be registered under the Securities Act of 1933
and will not contain restrictions on transfer or provisions relating to
additional interest and will contain different administrative terms.
The Exchange Offer:
. Our offer to exchange new notes for old notes will be open until 5:00 p.m.
New York City time on , 1999, unless we extend the offer.
. All old notes that are validly tendered and not validly withdrawn will be
exchanged for an equal principal amount of new notes that are registered
under the Securities Act of 1933.
. Tenders of old notes may be withdrawn at any time prior to the expiration of
the exchange offer.
. The exchange of new notes for old notes will not be a taxable event for U.S.
federal income tax purposes.
-----------
You should carefully consider the risk factors beginning on page 10 of this
prospectus before participating in the exchange offer.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the new notes or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
-----------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................................................... 1
Risk Factors ......................................................... 10
Use of Proceeds....................................................... 22
Capitalization........................................................ 24
Unaudited Condensed Pro Forma Consolidated Financial Information...... 25
Selected Consolidated Financial Data.................................. 33
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 35
Business.............................................................. 42
Management............................................................ 62
Principal Shareholders................................................ 70
Certain Transactions.................................................. 75
Holdings' Bank Credit Facility........................................ 76
Description of the New Notes.......................................... 80
Exchange Offer........................................................ 121
Certain Income Tax Considerations..................................... 131
Plan of Distribution.................................................. 135
Legal Matters......................................................... 137
Chartered Accountants................................................. 137
Available Information................................................. 137
Glossary of Certain Technical Terms................................... 139
Index to Financial Statements......................................... F-1
</TABLE>
------------------------------------------------------------------------
In this prospectus, the "Company," "we," "ours" and "us" refer to GlobeNet
Communications Group Limited and its subsidiaries, unless the context indicates
otherwise. This prospectus uses a number of technical terms, such as RFS and
Gbps, that are not easily understandable. Certain technical terms used in this
prospectus are defined in the glossary which is included at the end of this
prospectus. Unless otherwise specified, all references to "$" or "dollars" are
to U.S. dollars.
The indenture governing the notes requires us to distribute to the holders
of the notes annual reports containing our financial statements audited by our
independent auditors and quarterly reports containing unaudited condensed
consolidated financial statements for the first three quarters of each fiscal
year.
i
<PAGE>
Service of Process and Enforcement of Liabilities
GlobeNet Communications Group Limited is a Bermuda company. A substantial
portion of our assets and our principal offices are located outside of the
United States. In addition, certain of our directors and officers are not
residents of the United States, and a substantial portion of the assets of
these persons is located outside the United States. As a result, it may be
difficult for you to enforce judgments obtained in United States courts against
our assets located outside the United States, and it may be difficult for you
to effect service of process within the United States upon these directors and
officers or to enforce judgments obtained in United States courts against them.
Furthermore, our legal counsel in Bermuda, Conyers Dill & Pearman, has advised
us that there is doubt as to the enforcement in Bermuda, in original actions or
in actions for enforcement of judgments of United States courts, of liabilities
predicated upon U.S. securities laws. We have appointed CT Corporation System,
1633 Broadway, New York, NY 10019, as our authorized agent for service of
process in any proceeding arising out of or relating to the notes or the
indenture instituted in federal or state court in the State of New York,
Borough of Manhattan, or brought under federal or state securities laws or
brought by the trustee.
Forward-Looking Statements
This prospectus includes forward-looking statements. We use words like
"believe," "anticipate," "expect," "estimate," "may," "will," "should" and
similar expressions to help identify these forward-looking statements. Forward-
looking statements contained in this prospectus include, for example,
statements concerning our plans to design, construct, operate and sell capacity
on our planned cable systems, expectations as to funding our future capital
requirements, developments with respect to regulatory and market conditions and
other discussions of future plans and strategies, anticipated developments and
other matters that involve predictions of future events.
We have based these forward-looking statements on our current expectations
and projections about future events. These forward-looking statements are
subject to risks and uncertainties, some of which may be outside of our
control, including, among other things:
. our failure to complete our planned cable systems within the currently
estimated time frame and budget,
. our failure to be early to market,
. our failure to sell capacity on our planned cable systems,
. our failure to obtain and maintain all necessary permits, licenses or
authorizations to construct, land and operate our planned cable systems,
. our failure to contract for or build any necessary backhaul facilities
to provide city-to-city connectivity on our planned cable systems,
. our failure to accurately project levels of demand for
telecommunications capacity,
. political, economic, legal or regulatory changes that negatively affect
our operations, and
. our failure to compete effectively in a rapidly evolving marketplace
characterized by intense price competition and incremental new capacity.
This list is only an example of some of the risks, uncertainties and
assumptions that may affect the forward-looking statements contained in this
prospectus. In light of these and other risks, uncertainties or assumptions,
the actual events or results may be very different from those expressed or
implied in the forward-looking statements in this prospectus or may not occur.
For additional factors that could affect the validity of our forward-looking
statements, you should carefully consider the risk factors beginning on page 10
and the other information in this prospectus. We do not intend to publish
updates or revisions of any forward-looking statement to reflect new
information, future events or otherwise.
ii
<PAGE>
Notice to New Hampshire Residents
Neither the fact that a registration statement or an application for a
license has been filed under Chapter 421-B of the New Hampshire Revised
Statutes with the State of New Hampshire nor the fact that a security is
effectively registered or a person is licensed in the State of New Hampshire
constitutes a finding by the directors of the Office of Securities Regulation
that any document filed under RSA 421-B is true, complete and not misleading.
Neither any such fact nor the fact that an exemption or exception is available
for a security or a transaction means that the directors of the Office of
Securities Regulation have passed in any way upon the merits or qualifications
of, or recommended or given approval to, any person, security or transaction.
It is unlawful to make, or cause to be made, to any prospective investor,
customer or client any representation inconsistent with the provisions of this
paragraph.
---------------------------
The new notes are not offered to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses (or in other circumstances that do not constitute an offer to the
public in the United Kingdom for the purposes of the Public Offers of
Securities Regulations 1995), and this prospectus may only be issued or passed
on to persons in the United Kingdom if these persons are of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or if these persons are persons to whom this prospectus
may otherwise lawfully be issued or passed on.
iii
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. Because this
is only a summary, it does not contain all of the information that may be
important to you. To understand all of the terms of the exchange offer and to
attain a more complete understanding of our business and financial situation,
you should read carefully the entire prospectus.
Our Company
We will provide our customers with customized and flexible city-to-city
international telecommunications network solutions. We will be a "carriers'
carrier" and our principal customers will be international telecommunications
providers. We are currently developing the Atlantica-1 Network, a high capacity
undersea fiber optic cable system that, together with terrestrial extensions,
will offer seamless connectivity between certain major cities in the United
States, Brazil, Venezuela, Bermuda and Argentina. In addition, we intend to
expand the reach of the Atlantica-1 Network by offering connectivity to other
countries in South America and Europe through a combination of commercial
arrangements, capacity purchases and further development of undersea or
terrestrial fiber optic cable systems. We are developing the Atlantica-1
Network to satisfy increasing bandwidth requirements for the transmission of
voice, data and video, particularly over the Internet, between North America
and South America.
We currently provide international telecommunications services to both
residential and commercial customers in Bermuda through our subsidiary
TeleBermuda International Limited ("TBI"). TBI, which commenced operations in
May 1997, is one of only two carriers licensed to provide international
telecommunications services to customers in Bermuda. In November 1997, we
successfully completed the deployment of the BUS-1 undersea fiber optic cable
system, which connects Bermuda and the United States. The BUS-1 system, which
will be incorporated into the Atlantica-1 Network, established us as a full-
service facilities-based provider of international long-distance service for
traffic originating and terminating in Bermuda. We do not intend to offer
telecommunications services to retail customers outside of Bermuda.
We are a Bermuda company. Our principal executive offices are located at 2
Carter's Bay Road, Southside, St. David's DDBX, Bermuda, and our phone number
is (441) 296-9000. Our common shares are publicly traded on the Bermuda Stock
Exchange under the symbol "GLOCOM."
Atlantica-1 Network
The Atlantica-1 Network will be a 22,500 km four fiber pair undersea fiber
optic cable system. Alcatel Submarine Networks and Alcatel Submarine Networks,
Inc. (collectively, "Alcatel") will design, construct and install the
Atlantica-1 Network for us under a turnkey contract. We believe that the
deployment of the Atlantica-1 Network will position us as one of the first
private undersea fiber optic cable systems that, together with terrestrial
extensions, will offer city-to-city connectivity between the United States,
Brazil, Venezuela, Bermuda and Argentina.
The Atlantica-1 Network will employ the most advanced undersea fiber optic
technology currently available. It will employ self-healing ring technology
that protects against outages caused by a system failure. The initial capacity
of the Atlantica-1 Network will be 40 Gbps of total capacity or 20 Gbps of
self-healing capacity. The system will be upgradeable to 1,280 Gbps of total
capacity or 640 Gbps of self-healing capacity. We will upgrade the system
incrementally in advance of expected demand.
1
<PAGE>
The principal components of the Atlantica-1 Network will be the primary
ring, the Rio extension and the Caracas extension:
. Primary Ring: The primary ring will connect Tuckerton, New Jersey, St.
David's, Bermuda, Fortaleza, Brazil, Punta Gorda, Venezuela and Boca
Raton, Florida. The ready for service, or RFS, date for the connection
from New Jersey to Brazil via Bermuda is September 2000, and the RFS date
for the full ring is December 2000. The cost of the primary ring is
approximately $502 million.
. Rio Extension: The Rio extension will connect Fortaleza, Brazil and Rio
de Janeiro, Brazil. The RFS date for the primary strand of the Rio
extension is February 2001, and the cost is approximately $119 million.
We have an option in our contract with Alcatel to build the secondary
strand of the Rio extension for approximately $112 million. We intend to
exercise this option unless we can obtain capacity on a terrestrial
system from a third party at a lower cost. We expect the target service
date to be approximately 18 months from the date of exercising the
option.
. Caracas Extension: The Caracas extension will connect Punta Gorda,
Venezuela and Caracas, Venezuela. We are currently negotiating with
Alcatel to build the Caracas extension. We estimate that the cost to
build the Caracas extension will be $10 million. We expect the targeted
service date to be in or about December 2000.
Financing Plan
We estimate that the total cost to build the Atlantica-1 Network, including
the secondary strand of the Rio extension, the Caracas extension, landing
stations and capital contingencies, will be approximately $825 million. This
estimate does not include potential costs, if any, associated with securing
terrestrial capacity, including any terrestrial extension to Buenos Aires,
Argentina. We also utilized approximately $57.2 million of the financing
described below to finance the repayment of certain existing indebtedness and
transaction costs. On July 14, 1999, we obtained approximately $986.0 million
of financing consisting of the following:
. we issued the old notes in an aggregate principal amount of $300 million,
. we issued 13,264,706 common shares (representing 67% of our common shares
on a fully diluted basis) and 1,000 Class B shares, which have special
voting rights, for an aggregate offering price of approximately $270.6
million to certain institutional investors in a private equity financing,
. our subsidiary GlobeNet Communications Holdings Ltd. ("Holdings") entered
into a credit agreement with Toronto Dominion (Texas) Inc., Credit Suisse
First Boston, New York branch, TD Securities (USA) Inc. and certain
lenders under which, subject to certain terms and conditions, Holdings
may borrow up to $400 million and may request an additional facility for
up to $50 million, and
. we retired subordinated loans in the principal amount of $13.5 million
when our subordinated lenders elected to effectively convert the
principal and $1.9 million of accrued interest on their subordinated
loans into 1,635,286 common shares.
On August 9, 1999, we accepted for repurchase 1,500,000 common shares held
by existing shareholders at $20.40 per share (less expenses) for an aggregate
price of $30.6 million. This repurchase price was paid out of a portion of the
proceeds of the private equity financing described above.
We are now offering to exchange new notes for the old notes. See "Use of
Proceeds" for a description of how we will use the proceeds of these offerings.
2
<PAGE>
Corporate Structure
The following table shows the organization of the Company and its principal
subsidiaries:
GLOBENET
COMMUNICATIONS GROUP
LIMITED (1)
(the "Company"--the issuer of the notes)
GLOBENET
COMMUNICATIONS
HOLDINGS LTD. (2)
("Holdings"--the borrower of up to
$450 million under the bank credit facility)
--------------------------------------------------------
ATLANTICA GLOBENET TELEBERMUDA
NETWORK COMMUNICATIONS LTD. INTERNATIONAL
(BERMUDA) LTD. LIMITED
(Internet services, (BUS-1 system;
including e-commerce) Bermuda based
telecommunications
(Atlantica-1 Network) services provider)
- --------
(1) Except for our ownership of Holdings, we have no independent business
operations.
(2) All of the subsidiaries of Holdings have guaranteed Holdings' bank credit
facility and have pledged substantially all of their assets as security for
this credit facility. See "Holdings' Bank Credit Facility."
3
<PAGE>
Summary of the Exchange Offer
On July 14, 1999, we completed a private offering of the old notes. We
entered into a registration rights agreement with the initial purchasers in the
private offering in which we agreed to deliver to you this prospectus and to
complete the exchange offer within 210 days after the date we issued the old
notes.
Exchange Offer..........
We are offering to exchange new notes for old notes.
Expiration Date......... The exchange offer will expire at 5:00 p.m. New York
City time, on , 1999, unless we decide to
extend it.
Condition to the We will not be required to accept old notes for
Exchange Offer......... exchange if the exchange offer or the making of any
exchange by a holder of the old notes would violate
any applicable law or interpretation of the staff of
the Securities and Exchange Commission. The exchange
offer is not conditioned upon any minimum aggregate
principal amount of old notes being tendered.
Procedures for
Tendering Old Notes.... To participate in the exchange offer, you must
complete, sign and date the letter of transmittal, or
a facsimile of the letter of transmittal, and
transmit it together with all other documents
required by the letter of transmittal, including the
old notes to be exchanged, to Bankers Trust Company,
as exchange agent, at the address indicated on the
cover page of the letter of transmittal. In the
alternative, you can tender your old notes by
following the procedures for book-entry transfer
described in this prospectus.
If your old notes are registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee, we urge you to contact that person
promptly to tender your old notes in the exchange
offer.
For more information on tendering your old notes,
please refer to the sections in this prospectus
entitled "Exchange Offer--Terms of the Exchange
Offer," "--Procedures for Tendering" and "--Book
Entry Transfer."
Guaranteed Delivery
Procedures............. If you wish to tender your old notes and you cannot
get your required documents to the exchange agent on
time, you may tender your old notes according to the
guaranteed delivery procedures described in "Exchange
Offer--Guaranteed Delivery Procedures" beginning on
page 128.
Withdrawal of Tenders... You may withdraw your tender of old notes at any time
prior to the expiration date. To withdraw, you must
have delivered a written or facsimile transmission
notice of withdrawal to the exchange agent at its
address indicated on the cover page of the letter of
transmittal before 5:00 p.m. New York City time on
the expiration date of the exchange offer. See
"Exchange Offer--Withdrawal of Tenders" beginning on
page 128.
4
<PAGE>
Acceptance of Old Notes
and Delivery of New If all conditions required for proper acceptance of
Notes.................. old notes are fulfilled, we will accept any and all
old notes that are properly tendered in the exchange
offer on or before 5:00 p.m. New York City time on
the expiration date. We will return any old note that
we do not accept for exchange to you without expense
as promptly as practicable after the expiration date.
We will deliver the new notes as promptly as
practicable after the expiration date and acceptance
of the old notes for exchange. Please refer to the
section in this prospectus entitled "Exchange Offer--
Terms of the Exchange Offer."
Fees and Expenses.......
We will bear all expenses related to the exchange
offer. Please refer to the section in this prospectus
entitled "Exchange Offer--Fees and Expenses."
Use of Proceeds......... We will not receive any proceeds from the issuance of
the new notes. We are making this exchange offer
solely to satisfy our obligations under our
registration rights agreement. Please refer to the
sections entitled "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital
Resources" for a discussion of our use of the
proceeds from the issuance of the old notes.
Consequences of Failure
to Exchange Old If you do not exchange your old notes in this
Notes.................. exchange offer, you will no longer be able to
obligate us to register the old notes under the
Securities Act of 1933 except in the limited
circumstances provided under our registration rights
agreement. In addition, you will not be able to
resell, offer to resell or otherwise transfer the old
notes unless they are registered under the Securities
Act of 1933, or unless you resell, offer to resell or
otherwise transfer them under an exemption from the
registration requirements of, or in a transaction not
subject to, the Securities Act of 1933. Please refer
to the section in this prospectus entitled "Risk
Factors--Failure to Properly Tender Old Notes in
Exchange Offer."
U.S. Federal Income Tax
Considerations......... The exchange of new notes for old notes in the
exchange offer will not be a taxable event for U.S.
federal income tax purposes. Please read "Certain
Income Tax Considerations" on page 131.
Exchange Agent..........
We have appointed Bankers Trust Company as exchange
agent for the exchange offer. You should direct
questions and requests for assistance, requests for
additional copies of this prospectus or of the letter
of transmittal and requests for the notice of
guaranteed delivery to the exchange agent addressed
as follows: BT Services Tennessee, Inc.,
Reorganization Unit, P.O. Box 292737, Nashville,
Tennessee 37229-2737. Eligible institutions may make
requests by facsimile at (615) 835-3701.
5
<PAGE>
Summary of Terms of the New Notes
The new notes will be identical to the old notes except that the new notes
are registered under the Securities Act of 1933 and will not have restrictions
on transfer, registration rights or provisions for additional interest and will
contain different administrative terms. The new notes will evidence the same
debt as the old notes, and the new notes and the old notes will be governed by
the same indenture.
The summary below describes the principal terms of the new notes. Certain of
the terms and conditions described below are subject to important limitations
and exceptions. You should read the discussion under the heading "Description
of the New Notes" beginning on page 80 for further information regarding the
new notes. References in this summary of terms of the new notes to "we" and
"our" refer only to GlobeNet Communications Group Limited and do not include
our subsidiaries.
Issuer.................. GlobeNet Communications Group Limited.
Notes Offered........... $300,000,000 principal amount of 13% Series B Senior
Notes due 2007.
Maturity................ July 15, 2007.
Interest................ Interest will accrue from July 14, 1999 or from the
most recent date to which interest has been paid on
the old notes, and will be payable on January 15 and
July 15, beginning on January 15, 2000.
Ranking................. The new notes are our senior obligations and will
rank equally with all of our existing and future
senior indebtedness, and will be senior to all of our
existing and future subordinated indebtedness. The
new notes will effectively rank behind all of our
secured obligations to the extent of the value of the
assets securing these obligations.
We are a holding company and the new notes will not
be guaranteed by any of our subsidiaries. The new
notes will effectively rank behind all existing and
future indebtedness and all other liabilities of our
subsidiaries, including up to $450 million of
indebtedness under Holdings' bank credit facility.
Optional Redemption..... We may redeem some or all of the new notes at any
time after July 15, 2004 at the redemption prices
listed under the heading "Description of the New
Notes--Optional Redemption," plus accrued and unpaid
interest, if any, to the redemption date.
Optional Redemption
After Certain Equity At any time prior to July 15, 2002, we may redeem up
Offerings.............. to 35% of the notes originally issued under the
indenture with funds that we raise in one or more
equity offerings at 113% of the principal amount of
the notes redeemed, plus accrued and unpaid interest,
as long as at least 65% of the aggregate principal
amount of the notes originally issued remains
outstanding after each redemption. See "Description
of the New Notes--Optional Redemption."
Optional Tax We may redeem all, but not fewer than all, of the new
Redemption............. notes at their principal amount, plus accrued and
unpaid interest, in the event of certain changes
affecting tax laws, as described under "Description
of the New Notes--Optional Tax Redemption."
6
<PAGE>
Change of Control....... If a change of control of the Company occurs, we must
give holders of the new notes the opportunity to sell
us their new notes at the price set forth under the
heading "Description of the New Notes--Change of
Control." We might not be able to repurchase the
notes presented following a change of control
because:
. we might not have enough funds at that time,
and
. the terms of our indebtedness or the
indebtedness of our subsidiaries may prevent
us.
Certain Indenture The indenture governing the new notes will contain
Provisions............. covenants limiting our ability and the ability of our
subsidiaries to:
. incur additional debt,
. pay dividends or distributions on our capital
stock or repurchase our capital stock,
. issue or sell capital stock of subsidiaries,
. make certain investments,
. sell assets,
. guarantee debt,
. restrict dividends or other payments to us,
. create certain liens,
. enter into transactions with affiliates, and
. merge, amalgamate, consolidate or sell
substantially all of our assets.
These covenants are subject to a number of important
limitations and exceptions that are described under
the heading "Description of the New Notes" and in the
indenture.
Failure to comply with these and the other covenants
under the indenture, a default in the payment of any
interest on or the principal of the new notes,
certain defaults on other indebtedness, certain
events relating to our bankruptcy and other customary
events may constitute events of default under the
indenture. The indenture provides that we are
required to provide annual certificates to the
trustee of our compliance with the indenture and to
otherwise notify the trustee of defaults within 10
days of becoming aware of the default.
Trustee................. The trustee under the indenture is Bankers Trust
Company.
Listing................. We do not intend to apply for listing of the new
notes on any securities exchange or for quotation of
the new notes in any automated dealer quotation
system.
Risk Factors
You should carefully consider the risk factors beginning on page 10 of this
prospectus before participating in the exchange offer.
7
<PAGE>
Summary Consolidated Financial Data
The following table sets forth summary consolidated financial data for the
Company. The summary consolidated statement of operations data for the fiscal
years ended December 31, 1998 and 1997 and for the ten months ended December
31, 1996 for the Company are derived from our consolidated financial statements
that have been audited by PricewaterhouseCoopers, Chartered Accountants, and
have been prepared in accordance with accounting principles generally accepted
in the United States. The summary consolidated financial data as at and for the
six months ended June 30, 1999 and June 30, 1998 are derived from our unaudited
interim consolidated financial statements for these periods and have been
prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, contain all adjustments necessary for the
fair statement of the results of operations for these periods. Operating
results for these six-month periods are not necessarily indicative of the
results of operations for a full year.
We are substantially increasing the scope and scale of our business with the
development of the Atlantica-1 Network. Accordingly, the summary consolidated
financial data presented below may not be indicative of our financial position
or results of operations in the future. You should read the summary
consolidated financial data in conjunction with our consolidated financial
statements and the notes thereto that are included elsewhere in this
prospectus. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
Fiscal Year Six Months
Ten Months Ended Ended
Ended December 31, June 30,
December 31, -------------------- -------------------
1996 1997 1998 1998 1999
------------ -------- ------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. -- $ 4,962 $26,724 $11,518 $13,122
Carrier charges and
other cost of sales.... -- 3,559 15,676 7,361 6,060
General and administra-
tive expenses.......... $ 3,377 5,085 9,342 4,548 4,704
------- -------- ------- ------- -------
Earnings (loss) before
interest, amortization,
income taxes, minority
interest and equity ac-
counted for
investment(1).......... (3,377) (3,682) 1,706 (391) 2,358
Interest on long-term
debt................... -- 750 3,542 1,585 1,577
Interest income......... (132) (169) (140) (9) (101)
Amortization of deferred
financing costs........ -- 305 321 160 160
Amortization of capital
assets................. 1 542 2,401 1,158 1,264
Accrued contingent in-
terest(2).............. -- 382 960 472 495
Provision for income
taxes.................. 14 53 36 17 19
Minority interest....... -- (249) (204) (204) --
(Earnings) loss from eq-
uity accounted
for investment......... -- -- (266) 209 --
------- -------- ------- ------- -------
Net loss................ $(3,260) $ (5,296) $(4,944) $(3,779) $(1,056)
======= ======== ======= ======= =======
Other Financial Data:
Capital expenditures.... $ 4,728 $ 45,104 $ 1,791 $ 644 $ 6,851
Ratio of earnings to
fixed charges.......... -- (3) -- (3) -- (3) -- (3) -- (3)
Cash provided by (used
in):
Operating activities.... (1,491) 5,420 (3,504) (8,941) 7,170
Financing activities.... 17,594 29,159 6,937 7,950 (3,651)
Investing activities.... (6,757) (43,108) (1,762) 279 (5,500)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
June 30, 1999
---------------------
Actual As Adjusted(4)
------ --------------
(dollars in
thousands)
<S> <C> <C>
Balance Sheet Data:
Cash...................................................... $1,051 $483,900
Capital assets, net....................................... 53,199 53,199
Total assets.............................................. 60,065 564,999
Total long-term debt (including current portion).......... 35,864 300,000(5)
Shareholders' equity...................................... 5,648 249,216
</TABLE>
- --------
(1) Earnings (loss) before interest, amortization, income taxes, minority
interest and equity accounted for investment is not a measure of
performance under U.S. GAAP, but is presented because we believe it is a
measure of performance that is commonly reported and widely used by
analysts, investors and other interested parties in our industry. It should
not be considered as an alternative to net loss as a measure of operating
performance or cash provided by (used in) operations as a measure of
liquidity.
(2) Accrued contingent interest represents the payment that would have had to
have been made by us if the warrants issued in connection with subordinated
loans to TBI had not been exercised by July 28, 2002. It is calculated at
7% per annum on the gross exercise price for the unexercised warrants from
the date of issue to the date of expiration. See note 9(c) to our audited
consolidated financial statements.
(3) Earnings were inadequate to cover fixed charges and accordingly the
deficiency of earnings available to cover fixed charges is as follows:
$3,246 for the ten months ended December 31, 1996, $5,243 for the year
ended December 31, 1997, $4,908 for the year ended December 31, 1998,
$3,762 for the six months ended June 30, 1998, and $1,037 for the six
months ended June 30, 1999. For the purposes of calculating the deficiency
of earnings available to cover fixed charges, earnings consists of earnings
(loss) before interest, amortization, income taxes, minority interest and
equity accounted for investment adjusted for interest income, amortization
of capital assets, minority interest, earnings (loss) from equity accounted
for investment and the interest component of rental expense, and fixed
charges consists of interest on long-term debt, amortization of deferred
financing costs, accrued contingent interest and the interest component of
rental expense.
(4) As Adjusted column reflects the private offering of the old notes, the
private equity financing and the exercise of warrants by our former
subordinated lenders, and our use of the net proceeds therefrom, the
payment of interest on one of our retired subordinated loans and the
conversion of interest on the other subordinated loan, our repurchase of
common shares of the Company from existing shareholders, the repayment of
TBI's credit facility and related interest, transaction costs, accrued
contingent interest and existing deferred financing costs. See
"Capitalization."
(5) Does not include any borrowings of up to $450 million under Holdings' bank
credit facility. Availability of these funds is subject to certain terms
and conditions. See "Holdings' Bank Credit Facility."
9
<PAGE>
RISK FACTORS
Before you tender the old notes in the exchange offer, you should carefully
consider the following risk factors and the other information in this
prospectus. The risks described below are not the only ones facing us. This
prospectus also contains forward-looking statements that involve risks and
uncertainties. See "Forward-Looking Statements." Our actual results could
differ materially from those anticipated in the forward-looking statements as a
result of certain factors, including the risks described below and elsewhere in
this prospectus.
Risk Factors Relating to the Notes
Failure to Properly Tender Old Notes in Exchange Offer--If you do not properly
tender your old notes, you will continue to hold unregistered old notes and
your ability to transfer old notes will be adversely affected.
We will only issue new notes in exchange for old notes that are timely and
properly tendered. Therefore, you should allow sufficient time to ensure timely
delivery of the old notes and you should carefully follow the instructions on
how to tender your old notes. Neither we nor the exchange agent are required to
tell you of any defects or irregularities with respect to your tender of old
notes.
If you do not exchange your old notes for new notes pursuant to the exchange
offer, the old notes you hold will continue to be subject to the existing
transfer restrictions. In general, the old notes may not be offered or sold
except under an exemption from, or in a transaction not subject to, the
Securities Act of 1933 and applicable state securities laws. We do not plan to
register old notes under the Securities Act of 1933.
If you continue to hold any old notes after the exchange offer is
consummated, you may have trouble selling them because there will be fewer old
notes outstanding. In addition, if a large number of old notes are not tendered
or are tendered improperly, the limited amount of new notes that would be
issued and outstanding after we consummate the exchange offer could lower the
market price of these new notes.
No Prior Market for the New Notes--An active trading market may not develop
for the new notes.
The new notes will be new securities for which there currently is no
established trading market. Although the new notes will be registered under the
Securities Act of 1933, we do not intend to apply for listing of the new notes
on any securities exchange or for quotation of the new notes in any automated
dealer quotation system (including The PORTAL Market). In addition, although
the initial purchasers of the old notes have informed us that they intend to
make a market in the new notes after the exchange offer, the initial purchasers
may stop making a market at any time. Accordingly, we cannot assure you that a
market for the new notes will develop. Furthermore, if a market were to
develop, the market price for the new notes may be adversely affected by
changes in our financial performance, changes in the overall market for similar
securities and the performance or prospects for companies in our industry.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the new notes.
Substantial Leverage--Our substantial indebtedness could adversely affect our
financial health and prevent us from fulfilling our obligations under the new
notes.
We have substantial debt and debt service requirements. As of August 15,
1999, we had consolidated indebtedness of approximately $300 million. Our
subsidiary Holdings may be able to borrow up to an additional $450 million
under its credit facility. Further, the indenture pursuant to which the notes
are issued and Holdings' bank credit facility may permit us to incur additional
debt, subject to certain limitations. See "Description of the New Notes" and
"Holdings' Bank Credit Facility."
10
<PAGE>
The amount of our debt could have important consequences to you. For
example, it could:
. make it more difficult for us to satisfy our obligations with respect to
the notes,
. increase our vulnerability to general adverse economic and industry
conditions,
. limit our ability to fund future capital expenditures, research and
development costs, working capital and other general corporate
requirements,
. require us to dedicate a substantial portion of our cash flow from
operations to make interest and principal payments on our indebtedness,
. limit our flexibility in planning for, or reacting to, changes in our
business and the industries in which we operate, and
. place us at a competitive disadvantage compared to competitors that have
less debt.
Ability to Service Debt--To service our debt, we will require a significant
amount of cash. Our ability to generate cash depends on many factors beyond
our control.
Our ability to pay the principal of and interest on our debt, including the
notes, depends upon the successful and timely completion of our systems,
including the Atlantica-1 Network, the successful and timely acquisition of
terrestrial extensions, our future operating performance and a number of other
factors, many of which are beyond our control.
If we are unable to generate sufficient cash flow to meet our debt service
requirements, we may have to obtain additional debt or equity financing,
refinance or restructure all or a portion of our existing debt or sell all or
a portion of our assets. Our ability to take any of these actions will depend
on our financial condition at the time and other factors, including general
market and economic conditions. See "--Covenant Restrictions" below for a
description of certain restrictions in the agreements governing our debt that
could limit our ability to take any of these actions. Accordingly, we cannot
assure you that any of these transactions would be possible. If, for any
reason, including a shortfall in anticipated cash flow, we are unable to meet
our debt service obligations, we would be in default under our existing debt
agreements.
Holding Company Structure--Our subsidiaries conduct all of our operations and
own all of our operating assets. The new notes will be structurally
subordinated to all of the liabilities of our subsidiaries.
We are a holding company. Our only material asset is our ownership of the
capital stock of Holdings. As a result, our ability to make required payments
on the notes depends on the performance of the businesses owned by our
subsidiaries and our subsidiaries' ability to distribute funds to us. Our
subsidiaries will have no obligation to pay amounts due on the notes, and none
of our subsidiaries will guarantee the notes. In addition, the applicable law
of the jurisdictions in which these subsidiaries are organized or contractual
or other obligations to which they are subject may limit their ability to pay
dividends or make payments on intercompany loans, including those made with
the proceeds of the offering of the old notes.
Holdings' bank credit facility and the related security, pledge, guarantee
and other documents will restrict our subsidiaries' ability to pay dividends,
make distributions or otherwise transfer funds to us. In addition, Holdings'
bank credit facility and these related instruments will prohibit Holdings from
making distributions to us from which we would otherwise expect to make
interest payments on the notes during the occurrence and continuance of
certain defaults or events of default under Holdings' bank credit facility and
the related instruments. See "Holdings' Bank Credit Facility."
As of August 15, 1999, our subsidiaries had no long-term debt outstanding
but may incur up to $450 million of additional debt under Holdings' bank
credit facility. The indenture will permit us and our subsidiaries to incur
additional indebtedness, including secured indebtedness, under certain
circumstances.
11
<PAGE>
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources" and "Description of the New
Notes--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock."
Covenant Restrictions--The terms of Holdings' bank credit facility, the
related security, pledge, guarantee and other documents, and the indenture
impose significant restrictions on our ability to take certain actions.
These restrictions will significantly limit or prohibit, among other
things, our ability and our subsidiaries' ability to:
. engage in unrelated business activities,
. incur additional indebtedness,
. repay indebtedness prior to stated maturities,
. sell assets,
. make investments,
. engage in transactions with shareholders and affiliates,
. issue capital stock,
. create liens, or
. engage in mergers, amalgamations or acquisitions.
These restrictions could also limit our ability and our subsidiaries'
ability to:
. obtain financing in the future,
. make needed capital expenditures,
. withstand a future downturn in our business or the economy in general, or
. otherwise conduct necessary corporate activities.
Our ability and our subsidiaries' ability to comply with these covenants
and restrictions may be affected by events beyond our control, including
prevailing economic and financial conditions. If we or our subsidiaries fail
to comply with these restrictions, it could lead to a default under the terms
of Holdings' bank credit facility, the related security, pledge, guarantee and
other documents or the indenture notwithstanding our ability and the ability
of our subsidiaries to meet our respective debt service obligations.
Financing Change of Control Offer--We may not be able to raise the funds
necessary to finance the change of control offer required by the indenture.
The indenture requires us, in the event of a change of control, to make an
offer to purchase the notes at a price equal to 101% of the principal amount
of the notes, plus accrued interest to the date of purchase. This provision
may be of limited value to holders of notes because, before making the offer
to purchase the notes, we would be required to (1) repay in full all of our
indebtedness under Holdings' bank credit facility and any other indebtedness
that would prohibit the purchase of the notes, or (2) obtain any requisite
consent to permit the purchase of the notes. If we are unable to do so, we
will be unable to offer to purchase the notes. Failure to offer to purchase
the notes would constitute an event of default under the indenture. We cannot
assure you that we will have sufficient funds available at the time of any
change of control to make any debt payment (including purchase of the notes)
as described above.
The events that constitute a change of control under the indenture may also
be events of default under Holdings' bank credit facility. An event of default
under Holdings' bank credit facility may permit the lenders
12
<PAGE>
to accelerate the outstanding debt under the credit facility and, if the debt
is not repaid, to foreclose on assets of our subsidiaries subject to security
interests. This would limit our ability to raise cash to purchase the new
notes.
Risk Factors Relating to the Company
Limited Operating History--We have a limited operating history and we have
never earned a profit.
We began providing telecommunications services in Bermuda in May 1997
through TBI. We have accumulated losses as of June 30, 1999 of $16.0 million
and have never earned a profit. In addition, our historical financial
information relates primarily to TBI's retail international telecommunications
business and not the international telecommunications network solutions
business we are entering with the construction of the Atlantica-1 Network.
Accordingly, you have very limited historical financial information upon which
to base your evaluation of our performance and an investment in the new notes.
You should consider our prospects in light of the risks, expenses and
difficulties frequently encountered by companies in an early stage of
development.
We intend to use most of the proceeds from the sale of the old notes and a
significant amount of additional capital to develop the Atlantica-1 Network and
terrestrial extensions. Until the principal segments of the network are
complete, we will continue to spend more building the network than we will earn
from selling capacity on it. Accordingly, we expect to experience negative cash
flows after capital expenditures while we are developing our network. Our
future success will depend substantially on sales of capacity on the Atlantica-
1 Network and any subsequent systems. We cannot be certain that we will be able
to realize our business plan, achieve operating profitability or generate
sufficient cash flow to service our debt (including the notes), capital
expenditures or working capital requirements.
Substantial Future Capital Requirements--Our future growth will require
substantial additional capital requirements that may exceed our budgeted
amounts and for which we may need to incur additional indebtedness.
Although we expect the net proceeds we received from the private offering of
the old notes, the net proceeds we received from the private equity financing
and future borrowings under Holdings' bank credit facility to be sufficient to
complete the development of the Atlantica-1 Network, we expect to need
significant amounts of additional capital to implement our business plan. In
addition to building the Atlantica-1 Network, we may in the future expand our
undersea fiber optic cable systems through the development of the Atlantica-2
Network. We expect the Atlantica-2 Network to have a comparable unit price per
kilometer to the Atlantica-1 Network and to require substantial capital to
develop.
If we cannot generate sufficient funds from operations, we may issue
additional debt or equity capital. Our ability to issue debt or equity may be
restricted by the provisions of the indenture, Holdings' bank credit facility,
and the related security, pledge, guarantee and other documents. We cannot
assure you that we will be able to arrange financing in the future or that if
we are able to do so, that we will be able to do so on terms that are favorable
to us. Our ability to arrange financing and the cost of the financing will
depend on many factors including:
. general economic and capital markets conditions and particular conditions
in the non-investment grade debt market,
. conditions in the telecommunications industry,
. regulatory developments,
. investor confidence and credit availability from banks and other lenders,
13
<PAGE>
. the success of the Atlantica-1 Network, and
. tax and securities laws that affect raising capital.
Changes in Terms of Holdings' Bank Credit Facility--Our lenders may change
the terms of Holdings' bank credit facility described in this prospectus.
These changes may adversely affect us.
The commitment letter for Holdings' bank credit facility provides that the
bank that is acting as arranger may, until October 15, 1999, in consultation
with us, change the structure, terms or pricing of any portion of the credit
facility if it determines that the changes are reasonably necessary to ensure
a successful syndication of the credit facility. Our approval is not required
for these changes. Accordingly, funds under Holdings' bank credit facility may
be made available on terms that are less favorable to us than those described
in this prospectus, and we may be unable to borrow the funds we need, in the
amounts and at the times necessary, to complete our business plan.
Completion of the Atlantica-1 Network--Failure to complete our network in a
timely manner could adversely affect our business.
In order to implement our business strategy and generate cash flows to
service our indebtedness, we must successfully complete the Atlantica-1
Network at the cost and in the time-frame currently estimated by us. We have
entered into a contract with Alcatel to design, engineer and construct the
Atlantica-1 Network on a turnkey basis. The construction of the Atlantica-1
Network will be affected by a wide variety of factors, uncertainties and
contingencies, many of which are beyond our or Alcatel's control, including
inclement weather and adverse changes in government regulations. We cannot
assure you that the anticipated cost of the Atlantica-1 Network will not be
exceeded or that it will be completed within the contemplated schedule. The
terms of the Alcatel contract obligate us to make periodic payments prior to
the completion of the Atlantica-1 Network. If we do not do so, then Alcatel
could suspend its work on the network. Any suspension could result in a
failure to meet a scheduled completion date. In addition, our contract with
Alcatel limits the damages that we could recover in the event of a breach by
Alcatel.
There are few manufacturers of materials used to build undersea fiber optic
cable systems and these manufacturers have a limited capacity that is reserved
in advance. Alcatel has reserved capacity for the Atlantica-1 Network. A
significant delay in our time-frame could cause us to be unable to obtain the
manufacturing capacity necessary to complete the network.
Our successful completion of the Atlantica-1 Network will also depend,
among other things, upon:
. our ability to manage its construction effectively,
. our ability to obtain appropriate regulatory authority to construct, land
and operate our network,
. Alcatel's ability to obtain all construction permits and licenses,
. third-party contractors, including Alcatel, performing their obligations
on schedule, and
. our ability to continue to obtain financing under Holdings' bank credit
facility.
Sales of Capacity; Realization of Other Revenues--Our ability to achieve our
business plan is dependent on selling capacity on our systems and realizing
additional revenues.
As of the date of this prospectus, we have only sold limited capacity on
the BUS-1 system and have not sold any capacity on the Atlantica-1 Network. We
cannot assure you that there will be sufficient demand to support our network,
that we will be able to sell capacity on our cable systems, or that these
sales will be on favorable terms. Two other competing undersea fiber optic
cable systems have been announced with capacity, technology and scheduled
completion dates that are expected to be similar to our network. These other
systems
14
<PAGE>
may adversely affect our ability to sell our capacity. If we are unable to
sell sufficient capacity on our cable systems or to sell capacity on favorable
terms, our ability to generate revenues and cash flows and service our
indebtedness could be adversely affected.
We intend to increase our revenues and profits by:
. upgrading capacity on the Atlantica-1 Network,
. developing or acquiring additional undersea fiber optic cable capacity,
. developing or purchasing terrestrial extensions in a cost effective
manner to provide connectivity from landing stations to major city
centers,
. introducing new products and services such as value-added offerings
through which a customer could use our Bermuda base of network operations
to generate cost-savings and minimize income taxes, and
. increasing TBI's market share in Bermuda through the introduction of
innovative product and service offerings at competitive prices.
For more information, see "Business." If we are unable to achieve these
objectives, our business, financial condition and results of operations could
be adversely affected.
Operations Risks--Our telecommunications network will be large and complex.
If our systems fail to operate properly our business may be adversely
affected.
The operation, administration, maintenance and repair of a large-scale,
complex telecommunications network requires the coordination and integration
of sophisticated and highly specialized hardware and software technologies and
equipment. The Atlantica-1 Network will employ certain components that have
never been used before in an undersea fiber optic cable system. The BUS-1
system also is subject to operational risks. The failure of the hardware or
software to function as required could render an undersea fiber optic cable
system unable to perform at design specifications. We cannot assure you that,
even if built to specifications, our systems will function as expected in a
cost-effective manner.
We expect each of our systems to have a design life of not less than 25
years; however, we cannot assure you of the actual useful life of any of these
systems. A number of factors will affect the useful life of each of our
systems, including, among other things:
. quality of construction,
. unexpected deterioration, and
. technological or economic obsolescence.
Failure of any of our systems to operate for its full design life,
particularly a failure occurring in the early years of the system, could have
a material adverse effect on our business, financial condition and results of
operations.
Risk of Network Failure--Our operations could be adversely affected if our
network fails, is damaged or fails to work as we have planned.
Our success is dependent upon our network providing competitive
reliability, capacity and security. Some of the risks to our network and
infrastructure include:
. physical damage,
. power loss,
15
<PAGE>
. capacity limitations,
. software defects,
. breaches of security, and
. disruptions beyond our control.
Although we will arrange for maintenance and repair services for our
network, the occurrence of any of these disruptions may cause interruptions in
service or reduced capacity for customers, any of which could have a material
adverse effect on our business, financial condition and results of operations.
Competition--Our businesses are very competitive and increased competition
could adversely affect us. In addition, many of our competitors have greater
resources than we do.
The international telecommunications industry is extremely competitive. We
face competition from existing and planned systems along each of our planned
routes. We will also compete with satellite providers and land-based cable
systems. Most of our competitors have substantially greater financial,
technical and marketing resources than we do. We will compete primarily on the
basis of price, availability, flexible provisioning, colocation services,
transmission quality and reliability, customer service and the locations our
systems connect.
Future sources of competition for the Atlantica-1 Network include:
. Americas-2, a new carriers' consortium cable system with a scheduled RFS
date in the third quarter of 1999 that will connect Brazil, Venezuela,
Florida and the Caribbean,
. South American Crossing, a new self-healing ring cable system being
developed by Global Crossing Ltd. that will link coastal countries in
South America to Global Crossing's planned Mid-Atlantic Crossing in St.
Croix, U.S.V.I. and Global Crossing's planned Pan American Crossing in
Ft. Amador, Panama, and
. the SAm-I cable system, a self-healing ring cable system being developed
by Telefonica Internacional S.A. and Tyco International Ltd. that will
connect the United States, Guatemala, Brazil, Argentina, Chile, Peru and
Colombia.
Global Crossing Ltd. has stated that South American Crossing is scheduled
to be available for service in the first quarter of 2001 and will be capable
of providing up to 1,280 Gbps of total capacity. Telefonica Internacional S.A.
and Tyco International Ltd. have stated that SAm-1 is scheduled to be
available for service in December 2000 and will be capable of providing up to
1,280 Gbps of total capacity. We cannot assure you that there will be
sufficient demand to support all of these systems or additional systems that
may be built, or that this competition will not have a material adverse effect
on our business, financial condition and results of operations.
Our existing business, the provision of retail telecommunications services
in Bermuda, is also very competitive. Our only licensed competitor in this
market, Cable & Wireless, has:
. substantially greater financial, technical and marketing resources,
. access to larger networks through inter-company relationships,
. a broader portfolio of services,
. stronger name recognition, and
. long-standing customer relationships.
16
<PAGE>
Dependence on Senior Management--If we lose members of our senior management
team, our business may be adversely affected.
We are dependent on the continued employment of our senior management team
in order to implement our business plan. Our business is managed by a small
number of key management and operating personnel who have been extensively
involved in our formation and the establishment of our key business
relationships. We cannot assure you that we will be able to retain our key
employees or that we can attract or retain other qualified personnel in the
future. We do not maintain any key person life insurance on the lives of any
of our management personnel.
Ability to Manage Growth--If we are unable to effectively manage our growth
and transition from a development company to an operating company our
business could be adversely affected.
Our planned growth and expansion will place significant demands on our
management and operations. Our ability to manage this growth successfully will
depend on, among other things:
. expanding our management resources, network infrastructure, information
and reporting systems and controls,
. expansion, training and management of our employee base, including
attracting and retaining skilled personnel,
. evaluating new markets,
. monitoring operations,
. controlling costs, and
. obtaining satisfactory interconnection agreements with other network
providers.
Dependence on Third Parties--We are dependent upon third parties to develop
and construct the Atlantica-1 Network, to provide terrestrial extensions to
our network and to maintain our network. TBI relies upon interconnection
agreements with third parties.
We and our customers depend and will continue to depend upon third parties,
such as carriers, Post, Telephone and Telegraph companies, or PTTs,
telecommunications facilities providers and suppliers, and local operating
companies, including the Bermuda Telephone Company, to:
. construct and maintain systems and provide equipment,
. provide access to certain origination and termination points of our
systems in various jurisdictions,
. construct and operate landing stations in certain of these jurisdictions,
. acquire rights of way, licenses and permits, and
. provide terrestrial capacity.
We cannot assure you that these third parties will perform their
contractual obligations or that they will not be subject to political or
economic events that may have a material adverse effect on our business,
financial condition and results of operations.
Tax Matters--We have assumed that a significant portion of our income will
not be subject to certain taxes. If our assumption is incorrect or if there
are changes in the prevailing tax laws, it could have an adverse impact on
our financial performance.
We believe that a significant portion of the income derived from our
undersea fiber optic systems will not be subject to tax by any of (1) Bermuda,
which currently does not have a corporate income tax, (2) Brazil, (3)
17
<PAGE>
Venezuela, or (4) certain other countries in which we will conduct activities
or in which our target customers will be located, including the United States.
However, we base our belief upon the anticipated nature and conduct of our
business, which may change, and upon our understanding of the tax laws of the
various countries in which we expect to have assets or conduct activities. Our
position is subject to review and possible challenge by taxing authorities and
to possible changes in law, which may have retroactive effect. We cannot
predict the amount of tax to which we may become subject. We cannot be certain
that any of the foregoing factors would not have a material adverse effect on
our business, financial condition and results of operations. For more
information, see "Certain Income Tax Considerations."
Year 2000 Problem--We could experience system failures and service disruptions
as a result of the Year 2000 Problem.
The year 2000 problem is the result of many computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations. If necessary modifications are not made, the year 2000
problem could have a material adverse impact on our business, financial
condition and results of operations. Furthermore, the systems of other
companies on which our systems rely may not be prepared for the year 2000, or
these companies may implement year 2000 preparations with systems that are
incompatible with our systems. In that event, our business, financial condition
and results of operations may be materially and adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Problem."
Significant Shareholders with Potentially Adverse Interests--Our significant
shareholders have interests that may not be aligned with yours.
The institutional investors named below or their affiliates purchased
approximately 67% of the common shares of the Company on a fully diluted basis
and Class B shares, which have special voting rights, in the private equity
financing:
. Boston Ventures Management, Inc.,
. Kelso & Company,
. Providence Equity Partners, Inc.,
. Spectrum Equity Investors,
. TD Capital Group Limited (an affiliate of one of the initial purchasers
of old notes),
. Capital Communications CDPQ Inc.,
. Sandler Capital Management,
. Ontario Municipal Employee Retirement Board and
. Nautilus Equity Investors LLC (whose managing member is an indirect
subsidiary of one of the initial purchasers of old notes).
There may be conflicts of interest between these investors and you if we
encounter financial difficulties or these investors cause us to pursue
transactions that could enhance their equity investment while involving risks
to your interests.
Certain of these investors, or their affiliates, currently have significant
investments in other telecommunications companies, and may in the future invest
in other entities engaged in the telecommunications business, some of which may
compete with us. These investors are under no obligation to bring us any
investment or business opportunities of which they are aware, even if
opportunities are within our scope and objectives. Conflicts may also arise in
the negotiation or enforcement of arrangements we may enter into with entities
in which these investors, or their affiliates, have an interest.
18
<PAGE>
Risk Factors Relating to the Industry
Rapidly Changing Industry--The introduction of new competition or new
technologies could adversely affect the way our customers value our products
and services.
The international telecommunications industry is changing rapidly due to,
among other things:
. the easing of regulatory constraints,
. the privatization of established carriers and PTTs,
. the expansion of telecommunications infrastructure,
. economic globalization, and
. the changing technology for all telecommunications industry sectors,
including cable, wireless and satellite.
Our business strategy and much of our planned growth is predicated upon the
continuation of the growth in demand for international telecommunications
capacity that has occurred over the past several decades and the continued
viability of fiber optic cable networks as a preferred means of transmitting
voice and data. We cannot assure you that this will occur.
The fiber optic cable transmission industry has realized significant per
unit cost reductions over the past several years resulting from technological
advances in fiber optics. These advances have caused prices for circuits to
decline. We anticipate that prices for our products and services specifically,
and network transmission capacity in general, will continue to decline over the
next several years, due primarily to the following:
. price competition as various network providers continue to install
networks that might compete with the Atlantica-1 Network,
. recent technological advances that result in substantial increases in the
transmission capacity of both new and, to a lesser extent, existing fiber
optic telecommunications networks, and
. strategic alliances or similar transactions, such as long-distance
capacity purchasing alliances among groups of carriers, that could
increase the parties' purchasing power.
If there is less demand than we expect or a bigger decline in prices per
circuit than we expect, there could be a material adverse effect on our
business, financial condition and results of operations.
Risks Associated with International Markets--We will operate in many foreign
markets and will be exposed to risks in those markets that may adversely
affect our performance.
We will be exposed to certain risks inherent in doing business on an
international level. These risks include:
. regulatory limitations restricting or prohibiting us from providing our
services,
. unexpected changes in regulatory requirements, tariffs, customs, duties
and other trade barriers,
. difficulties in staffing and managing foreign operations,
. political risks,
. fluctuations in currency exchange rates and restrictions on repatriation
of earnings,
. delays from customers, brokers or government agencies,
. potentially adverse tax consequences resulting from operating in multiple
jurisdictions with different tax laws, and
. an economic downturn in the countries in which we expect to do business.
19
<PAGE>
Foreign Exchange; Exchange Controls--Changes in currency exchange rates could
adversely affect our business.
Although we expect to invoice the majority of our sales in U.S. dollars and
we expect that the majority of our customers will incur maintenance and other
obligations denominated in U.S. dollars, we may be required to invoice some
customers in other currencies. As a result, sales from the Atlantica-1 Network
may result in our receiving a portion of our revenues in other currencies. To
the extent we receive revenues in currencies other than the U.S. dollar, we
will be subject to fluctuations in exchange rates.
Many of our prospective customers derive their revenues in currencies other
than U.S. dollars. These customers effectively will have to pay more for the
same maintenance if their currencies devalue relative to the U.S. dollar.
Furthermore, these customers may be or may become subject to exchange control
regulations that might restrict or prohibit the conversion of their revenue
currencies into U.S. dollars. We then may be unable to receive payment because
the customer may not have any U.S. dollars available to it.
Government Regulation--We and our customers are subject to substantial
government regulation in the United States and several other jurisdictions.
These regulations may affect our ability to operate our systems or offer
certain of our products.
We may, in the ordinary course of development, construction and operation
of our network, be required to obtain and maintain various permits, licenses
and other authorizations including undersea cable landing licenses in the
United States, Brazil, Bermuda, Venezuela and in any other foreign
jurisdictions where our cables may land and exist. Undersea cable landing
licenses can be issued for a term of years, subject to renewal. Moreover, the
licenses may subject our business and operations to varying forms of
regulation, which could change over the course of time. If we fail to obtain
or renew a license or if there is a material change in the nature of the
regulation to which we are subject, there could be a material adverse effect
on our business, financial condition and results of operations.
In addition, we must obtain various permits and licenses (including
environmental and natural resource licenses or permits) during the
construction phase of our cable systems. Although we expect that the
construction contracts for our cable systems will impose the responsibility of
acquiring and maintaining these construction permits and licenses on the
contractor, as is the case under our contract with Alcatel, we cannot assure
you that Alcatel or any other contractor will successfully obtain these
permits and licenses. If we or the contractor fail to obtain or maintain any
construction or operating license, there could be a material adverse effect on
our business, financial condition and results of operations. For more
information, see "Business--Regulation."
United States: On June 2, 1999 we submitted a submarine cable landing
license application to the Federal Communications Commission ("FCC") in the
United States. No comments or objections were filed with the FCC in response
to this application. While we expect to receive a landing license by the end
of 1999, we cannot be certain that we will be granted a landing license or
that we will receive this license within our time schedule. We cannot complete
the Atlantica-1 Network without a landing license for the United States and a
significant delay in obtaining the license could have a material adverse
effect on our business, financial condition and results of operations. See
"Business--Regulation--United States."
Brazil: We have submitted a written request to the Agencia Nacional de
Telecomunicacoes, or ANATEL, the telecommunications regulatory authority in
Brazil, seeking a determination as to the scope and nature of ANATEL's
authority to regulate undersea cable systems such as the Atlantica-1 Network.
ANATEL may determine that no regulatory authority is necessary to construct,
own and operate the Atlantica-1 Network or merely grant us an enabling act
that permits us to land the cable or require us to register the cable with
ANATEL. If ANATEL were to determine, however, that the offering of undersea
cable facilities is providing telecommunications services, and regulates us
accordingly, it would subject us to certain taxes and operational restrictions
that may have a material adverse effect on our business, financial condition
and results of operations. We may not be able to complete the Atlantica-1
Network unless ANATEL informs us whether its
20
<PAGE>
approval is necessary to land an undersea cable in Brazil. If ANATEL determines
that it must provide us authority before we can land the cable, we will need to
take appropriate action to procure this authority. Failure to obtain this
authority or a delay in the grant of the authority could have a material
adverse effect on our business, financial condition and results of operations.
See "Business--Regulation--Brazil and Venezuela--Brazil."
Our Brazilian subsidiary has submitted a telecommunications services license
application to ANATEL so that it can provide backhaul service in Brazil. While
we expect to be granted a license or other appropriate authority (or to be
informed that no license or authority is needed), we cannot assure you that we
will be granted any necessary license or other appropriate authority or that we
will receive this license or authority within our time schedule. If we do not
receive a license or authority in a timely manner, it could have a material
adverse effect on our business, financial condition and results of operations.
Under the current regulatory framework in Brazil only Embratel and Bonari
can offer international switched voice telephony services in Brazil. While the
government of Brazil has announced that restrictions on the provision of public
switched telephony will be eliminated in January 2002, we cannot assure you
that this deregulation will occur. If the restrictions are not ended, our
ability to offer facilities to companies providing international public
switched telephony services in Brazil may be limited. See "Business--
Regulation--Brazil and Venezuela--Brazil."
Venezuela: We have received written confirmation from the Comision Nacional
de Telecomunicaciones, or CONATEL, the telecommunications regulatory agency in
Venezuela, that we may construct and land the Atlantica-1 cable in Venezuela
without formal regulatory approval from CONATEL. Additionally, based on advice
provided to us by CONATEL, we do not believe that any CONATEL permits or
concessions are necessary to operate the cable or sell capacity on the cable.
However, if CONATEL were now to determine that a permit or concession was
necessary, we believe that a permit or concession would be issued by CONATEL in
a time frame consistent with the implementation schedule for the Atlantica-1
Network. Our inability to secure any necessary approvals in the required time
frame could have a material adverse impact on our business, financial condition
and results of operations.
We intend to submit to CONATEL an application for the appropriate licenses
that will permit us to provide backhaul services in Venezuela. While we expect
to be granted these licenses, we cannot assure you that we will be granted the
licenses we need, or that we will receive them within our time schedule. If we
do not receive the licenses in a timely manner, it could have a material
adverse effect on our business, financial condition and results of operations.
Under the current regulatory framework in Venezuela, only CANTV can offer
international public switched telephony services in Venezuela. Under the
Concession Agreement between the Republic of Venezuela and CANTV, in November
2000, the market will be opened for competition and licenses will be granted to
all other carriers seeking to provide switched voice services. If this does not
occur, our ability to offer facilities to companies offering public switched
telephony in Venezuela may be limited.
Bermuda: On January 10, 1997, TBI was granted an international carrier
license. The license is for a term of five years and is subject to renewal. We
cannot assure you that the government will renew our license. If the government
fails to renew our license, we will no longer be able to provide
telecommunications services in Bermuda and will be required to sell TBI's
telecommunications business.
TBI's international carrier license in Bermuda includes the landing rights
for undersea cables, subject to ministerial approval. We have received approval
from the Minister of Telecommunications to land and operate the cable for the
Atlantica-1 Network, but future changes in our license or applicable
regulations could have a material adverse effect on our business. In addition,
the Bermuda government has currently issued only two licenses to provide
telecommunications services in Bermuda. If the government fails to renew our
license or issues additional licenses to third parties, our business, financial
condition and results of operations could be materially adversely affected.
21
<PAGE>
USE OF PROCEEDS
New Notes
We will not receive any proceeds from the issuance of the new notes. We are
making this exchange offer solely to satisfy our obligations under our
registration rights agreement.
Financing Plan
We estimate that the total cost to build the Atlantica-1 Network, including
the secondary strand of the Rio extension, the Caracas extension, landing
stations and capital contingencies, will be approximately $825 million. This
estimate does not include potential costs, if any, associated with securing
terrestrial capacity, including any terrestrial extension to Buenos Aires,
Argentina.
As more fully described below, we have used and intend to use the net
proceeds we received from the private offering of the old notes, the net
proceeds we received from the private equity financing (other than the proceeds
that we used to repurchase common shares of the Company from existing
shareholders), the net proceeds from the exercise of warrants by our former
subordinated lenders, and availability under Holdings' bank credit facility to
fund:
. the cost to build the Atlantica-1 Network, including the secondary strand
of the Rio extension, the Caracas extension, landing stations and capital
contingencies,
. the repayment of our subordinated loans and TBI's credit facility,
. transaction costs,
. pre-RFS working capital requirements, and
. costs, if any, associated with our initial requirements for terrestrial
capacity.
As of August 15, 1999, we have spent approximately $98.6 million of these
funds to make an initial payment under our contract with Alcatel, to pay
certain interest on our subordinated loans, to repay TBI's credit facility, and
to pay transaction costs.
Private Offering of Old Notes
On July 14, 1999, we issued $300 million in aggregate principal amount of
old notes to the initial purchasers in an offering exempt from the registration
requirements of the Securities Act of 1933. The net proceeds we received from
this offering were approximately $288.9 million.
Private Equity Financing
On July 14, 1999, we received approximately $270.6 million from various
institutional investors in exchange for 13,264,706 newly issued common shares
that represent approximately 67% of our common shares on a fully diluted basis
and 1,000 Class B shares, which have special voting rights.
On August 9, 1999, we accepted for repurchase 1,500,000 common shares held
by existing shareholders at $20.40 per share (less expenses) for an aggregate
price of $30.6 million. This repurchase price was paid out of a portion of the
proceeds of the private equity financing.
In connection with this private equity financing, our former subordinated
lenders, one of whom is an indirect affiliate of one of the initial purchasers
of old notes and a subsidiary of TD Capital Group Limited, a shareholder of the
Company, exercised the warrants they obtained when they made subordinated loans
to us. The effect of this exercise was to convert the principal amount of their
$13.5 million of subordinated loans and, in the case of one of these lenders,
$1.9 million of accrued interest, into 1,635,286 common shares of the Company.
We paid accrued interest of $0.9 million owed to the other subordinated lender
out of the net proceeds of the private offering of the old notes and the
private equity financing, thus retiring the subordinated loans. One of the
subordinated lenders also acquired all of the common shares, Class A shares and
TBI Class A shares held by the other subordinated lender. The outstanding Class
A shares of the Company and TBI were then cancelled.
22
<PAGE>
Holdings' Bank Credit Facility
On July 14, 1999, our subsidiary Holdings entered into a credit agreement
with Toronto Dominion (Texas) Inc., Credit Suisse First Boston, and TD
Securities (USA) Inc. pursuant to which, subject to certain terms and
conditions, Holdings may borrow up to $400 million and may request an
additional facility for up to $50 million. As of August 15, 1999, Holdings had
not borrowed any money under this credit facility. See "Holdings' Bank Credit
Facility."
23
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at June 30, 1999 and as
adjusted to give effect to the items in footnote (1) below. You should read
this table in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and our unaudited consolidated
financial statements and notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of June 30, 1999
------------------------
Actual As Adjusted(1)
-------- --------------
(dollars in thousands)
<S> <C> <C>
Cash................................................... $ 1,051 $483,900
======== ========
Long-term debt:
TBI credit facility(2)............................... $ 20,527 --
Subordinated loans and retractable warrants(3)....... 13,500 --
Accrued contingent interest(4)....................... 1,837 --
Holdings' bank credit facility(5).................... -- --
13% Senior Notes due 2007............................ -- $300,000
-------- --------
Total long-term debt............................... 35,864 300,000
Shareholders' equity:
Share capital and additional paid-in capital......... 21,651 266,040
Deficit.............................................. (16,003) (16,824)
-------- --------
Total shareholders' equity......................... 5,648 249,216
-------- --------
Total capitalization................................... $ 41,512 $549,216
======== ========
</TABLE>
- --------
(1) As Adjusted column reflects (a) our use of the net proceeds that we
received from the private offering of the old notes, (b) our use of the net
proceeds that we received from the private equity financing, (c) our use of
the net proceeds from the exercise of warrants by our former subordinated
lenders, (d) the payment of interest on one of our retired subordinated
loans, (e) the conversion of interest on the other subordinated loan, (f)
our repurchase of common shares of the Company from existing shareholders,
(g) the repayment of TBI's credit facility (see note (2) below) and related
interest, (h) transaction costs, (i) accrued contingent interest, and (j)
deferred financing costs.
(2) In September 1997, TBI entered into a senior credit facility consisting of
a five-year, $25 million term loan agreement, and a five-year, $5 million
revolving credit facility. As at June 30, 1999, availability under the term
loan was permanently reduced to $20.2 million. Includes current portion of
$4.5 million. Excludes accrued interest of $46,000. This credit facility
was retired in connection with the private offering of old notes and the
private equity financing.
(3) Excludes accrued interest on our retired subordinated loans of $2.7
million.
(4) Accrued contingent interest represents the payment that would have had to
have been made by the Company if the warrants issued in connection with our
subordinated loans had not been exercised by July 28, 2002. It is
calculated at 7% per annum on the gross exercise price for the unexercised
warrants from the date of issue to the date of expiration. All the accrued
contingent interest was included in stated capital when the warrants were
exercised. See note 9(c) to our consolidated financial statements.
(5) Total availability could be up to $450 million. Availability of these funds
will be subject to certain terms and conditions. See "Holdings' Bank Credit
Facility."
24
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following condensed unaudited pro forma consolidated financial
information of the Company has been derived by the application of pro forma
adjustments to the Company's historical consolidated financial statements for
the year ended December 31, 1998 and for the six-month period ended June 30,
1999. The unaudited condensed pro forma consolidated balance sheet gives effect
to the private equity financing, the issuance of the notes, the application of
the proceeds therefrom and the other transactions described in the accompanying
notes as if they occurred on June 30, 1999. The unaudited condensed pro forma
consolidated statement of operations for the year ended December 31, 1998, and
for the six month period ended June 30, 1999, give effect to the transactions
as if they had occurred as of January 1, 1998.
The pro forma adjustments presented are based upon available information and
certain assumptions that we believe are reasonable under the circumstances.
These adjustments are directly attributable to the transactions referenced
above and are expected to have a continuing impact on our business, results of
operations and financial condition. Interest related to the debt issuance has
been expensed in this pro forma financial information. However, an element of
this interest will be capitalized during the time that the Atlantica-1 Network
is under construction. The amount to be capitalized is not readily determinable
at this time. The unaudited condensed pro forma consolidated balance sheet as
of June 30, 1999 and unaudited condensed pro forma statement of operations for
the six-month period ended June 30, 1999 were derived from the unaudited
consolidated financial statements included elsewhere in this prospectus. The
unaudited condensed pro forma consolidated statement of operations for the year
ended December 31, 1998 was derived from the audited consolidated financial
statements included elsewhere in this prospectus.
The unaudited condensed pro forma financial information should be read in
conjunction with the historical consolidated financial statements of the
Company and the notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," included elsewhere in this
prospectus.
The unaudited condensed pro forma financial information and related notes
are provided for informational purposes only and do not necessarily reflect the
results of operations or financial condition of the Company that would have
actually resulted had the events referred to above or in the notes to the
unaudited condensed pro forma financial information been consummated as of the
dates indicated and are not intended to project the Company's financial
condition or results of operations for any future period.
25
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(in thousands of dollars, except share and per share amounts)
<TABLE>
<CAPTION>
Pro forma
Historical adjustments Pro forma
---------- ----------- ---------
<S> <C> <C> <C>
Assets
Current assets
Cash...................................... $ 1,051 $482,849 (1) $483,900
Accounts receivable (net of allowance of
$141).................................... 2,882 -- 2,882
Other current assets...................... 667 -- 667
-------- -------- --------
4,600 482,849 487,449
Capital assets (9)........................ 53,199 -- 53,199
Other assets.............................. 2,266 22,085 (2) 24,351
-------- -------- --------
$ 60,065 $504,934 $564,999
======== ======== ========
Liabilities
Current liabilities
Accounts payable.......................... $ 4,332 $ (2,770)(3) $ 1,562
Accrued liabilities....................... 11,588 -- 11,588
Current portion of long-term debt......... 4,500 (4,500)(4) --
-------- -------- --------
20,420 (7,270) 13,150
Long-term debt (8)........................ 31,364 268,636 (5) 300,000
Deferred revenue.......................... 2,633 -- 2,633
-------- -------- --------
54,417 261,366 315,783
-------- -------- --------
Shareholders' equity
Share capital and additional paid-in
capital.................................. 21,651 244,389 (6) 266,040
Deficit................................... (16,003) (821)(7) (16,824)
-------- -------- --------
5,648 243,568 249,216
-------- -------- --------
$ 60,065 $504,934 $564,999
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this unaudited condensed pro
forma consolidated balance sheet.
26
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(in thousands of dollars, except share and per share amounts)
(1) Reflects adjustments relating to cash in connection with the financing for
the Atlantica-1 Network as follows:
<TABLE>
<S> <C>
Cash provided by:
Private equity financing (13,264,706 shares at $20.40 per
share with a par value of $1.50)............................ $ 270,600
Issuance of 1,000 Class B shares at their par value of
$1.50....................................................... 1
Issuance of the 13% Senior Notes due 2007.................... 300,000
Cash used for:
Repurchase of 1,500,000 common shares with a par value of
$1.50 from existing shareholders at $20.40 per share........ (30,600)
Estimated transaction fees and expenses...................... (35,744)
Repayment of TBI's credit facility and accrued interest
thereon..................................................... (20,573)
Payment of accrued interest related to the subordinated
loans....................................................... (835)
---------
$ 482,849
=========
</TABLE>
(2) Reflects transaction fees and expenses of $22,906 which have been deferred
in relation to the 13% Senior Notes due 2007 and Holdings' bank credit
facility, and the write-off of existing deferred financing costs of $821.
(3) Reflects the conversion of accrued interest on the subordinated loans by
one of our subordinated lenders and the payment of accrued interest on the
subordinated loan to the other subordinated lender and TBI's credit
facility as follows:
<TABLE>
<S> <C>
Accrued interest on the subordinated loans converted to equity
upon the exercise of the warrants............................. $ 1,889
Accrued interest on the subordinated loans paid in cash........ 835
Accrued interest on TBI's credit facility paid in cash......... 46
-------
$ 2,770
=======
</TABLE>
(4) Repayment of the current portion of TBI's credit facility of $4,500.
(5) Reflects adjustments relating to long-term debt in connection with the
financing for the Atlantica-1 Network as follows:
<TABLE>
<S> <C>
Repayment of TBI's credit facility of $20,527 less the
current portion of $4,500.................................. $ (16,027)
Repayment of the subordinated loans......................... (13,500)
Accrued contingent interest in connection with the exercise
of the warrants............................................ (1,837)
Issuance of the 13% Senior Notes due 2007................... 300,000
---------
$ 268,636
=========
</TABLE>
27
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(in thousands of dollars, except share and per share amounts)
(6) Reflects adjustments relating to share capital and additional paid-in
capital in connection with the financing for the Atlantica-1 Network as
follows:
<TABLE>
<S> <C>
Private equity offering of 13,264,706 common shares at $20.40
with a par value of $1.50..................................... $270,600
Issuance of 1000 Class B shares at their par value of $1.50.... 1
Repurchase of 1,500,000 common shares with a par value of $1.50
from existing shareholders at $20.40.......................... (30,600)
Estimated transaction fees and expenses relating to private
equity financing.............................................. (12,838)
Accrued contingent interest in connection with the exercise of
the warrants.................................................. 1,837
Conversion of the subordinated loans........................... 13,500
Accrued interest on the subordinated loans that has been
converted to equity upon the exercise of the warrants......... 1,889
--------
$244,389
========
</TABLE>
(7) Reflects the write-off of the existing deferred financing costs of $821.
(8) Holdings' bank credit facility for up to $450,000 has not been reflected as
availability of funds is subject to certain terms and conditions. In
addition, the structure, terms and pricing of the facility are subject to
change, under certain circumstances, at the discretion of the bank that is
acting as arranger until October 15, 1999.
(9) This presentation does not reflect the capitalization of interest related
to the Atlantica-1 Network. An element of this interest will be capitalized
during the time that the Atlantica-1 Network is under construction.
28
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended June 30, 1999
(in thousands of dollars, except share and per share amounts)
<TABLE>
<CAPTION>
Pro forma
Historical adjustments Pro forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenue................................... $13,122 -- $ 13,122
Carrier charges and other cost of sales... 6,060 -- 6,060
------- -------- --------
7,062 -- 7,062
General and administrative expenses (5)... 4,704 -- 4,704
------- -------- --------
Earnings before interest, amortization and
income taxes (4).......................... 2,358 -- 2,358
------- -------- --------
Interest on long-term debt................ 1,577 $ 17,939 (1) 19,516
Interest income........................... (101) -- (101)
Amortization of deferred financing costs.. 160 1,513 (2) 1,673
Amortization of capital assets............ 1,264 -- 1,264
Accrued contingent interest............... 495 (495)(3) --
------- -------- --------
3,395 18,957 22,352
------- -------- --------
Loss before income taxes.................. (1,037) (18,957) (19,994)
Provision for income taxes................ 19 -- 19
------- -------- --------
Net loss for the period................... $(1,056) $(18,957) $(20,013)
======= ======== ========
Basic and fully diluted loss per common
share..................................... $ (0.30) $ (1.18)
======= ========
</TABLE>
The accompanying notes are an integral part of this unaudited condensed pro
forma consolidated statement of operations.
29
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended June 30, 1999
(in thousands of dollars, except share and per share amounts)
(1) Reflects the incremental interest expense relating to the 13% Senior Notes
due 2007 and the elimination of the interest expense related to the
subordinated loans and TBI's credit facility, as follows:
<TABLE>
<S> <C>
13% Senior Notes due 2007..................................... $ 19,500
Interest expense related to the subordinated loans............ (768)
Interest expense related to TBI's credit facility............. (793)
--------
$ 17,939
========
</TABLE>
This presentation does not reflect the capitalization of interest related to
the Atlantica-1 Network. An element of this interest will be capitalized
during the time that the Atlantica-1 Network is under construction.
(2) Reflects the amortization of the deferred transaction fees and expenses in
relation to the 13% Senior Notes due 2007 and Holdings' bank credit
facility and the elimination of the amortization costs related to the
existing deferred financing costs, as follows:
<TABLE>
<S> <C>
Amortization related to the 13% Senior Notes due 2007 and
Holdings' bank credit facility............................... $ 1,673
Amortization expense related to the existing deferred
financing costs.............................................. (160)
--------
$ 1,513
========
</TABLE>
(3) Reflects the accrued contingent interest in connection with the exercise
of the warrants on the subordinated loans.
(4) Earnings before interest, amortization and income taxes is not a measure
of performance under U.S. GAAP, but is presented because we believe it is
a measure of performance that is commonly reported and widely used by
analysts, investors and other interested parties in our industry. It
should not be considered as an alternative to net loss as a measure of
operating performance or cash provided by (used in) operations as a
measure of liquidity.
(5) On April 12, 1999, we granted 540,000 options at an exercise price of
$9.00 with a ten-year term to certain directors and officers. These
options vest in three separate tranches subject to the Company meeting
certain milestones related to the Atlantica-1 Network. The first vesting
milestone on 515,000 of these options occurred on July 14, 1999 when the
financing for the Atlantica-1 Network was obtained. The difference between
the exercise price and the market value of the shares at the time of
vesting will be reflected as compensation expense.
30
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1998
(in thousands of dollars, except share and per share amounts)
<TABLE>
<CAPTION>
Pro forma
Historical adjustments Pro forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenue..................................... $26,724 -- $ 26,724
Carrier charges and other cost of sales..... 15,676 -- 15,676
------- -------- --------
11,048 -- 11,048
General and administrative expenses(5)...... 9,342 -- 9,342
------- -------- --------
Earnings before interest, amortization,
income taxes, minority interest and equity
accounted for investment(4)................ 1,706 -- 1,706
------- -------- --------
Interest on long-term debt.................. 3,542 $ 35,613(1) 39,155
Interest income............................. (140) -- (140)
Amortization of deferred financing costs.... 321 3,026(2) 3,347
Amortization of capital assets.............. 2,401 -- 2,401
Accrued contingent interest................. 960 (960)(3) --
------- -------- --------
7,084 37,679 44,763
------- -------- --------
Loss before income taxes, minority interest
and equity accounted for investment........ (5,378) (37,679) (43,057)
Provision for income taxes.................. 36 -- 36
------- -------- --------
Loss before minority interest and equity
accounted for investment................... (5,414) (37,679) (43,093)
Minority interest........................... 204 -- 204
Earnings from equity accounted for
investment................................. 266 -- 266
------- -------- --------
Net loss for the period..................... $(4,944) $(37,679) $(42,623)
======= ======== ========
Basic and fully diluted loss per common
share ..................................... $ (1.41) $ (2.52)
======= ========
</TABLE>
The accompanying notes are an integral part of this unaudited condensed pro
forma consolidatedstatement of operations.
31
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1998
(in thousands of dollars, except share and per share amounts)
(1) Reflects the incremental interest expense relating to the 13% Senior Notes
due 2007 and the elimination of interest expense related to the
subordinated loans and TBI's credit facility, as follows:
<TABLE>
<S> <C>
13% Senior Notes due 2007........................................ $39,000
Interest expense related to the subordinated loans............... (1,501)
Interest expense related to TBI's credit facility................ (1,886)
-------
$35,613
=======
</TABLE>
This presentation does not reflect the capitalization of interest related to
the Atlantica-1 Network. An element of this interest will be capitalized
during the time that the Atlantica-1 Network is under construction.
(2) Reflects the amortization of the deferred transaction fees and expenses in
relation to the 13% Senior Notes due 2007 and Holdings' bank credit
facility and the elimination of the amortization costs related to the
existing deferred financing costs, as follows:
<TABLE>
<S> <C>
Amortization related to the 13% Senior Notes due 2007 and
Holdings' bank credit facility................................ $3,347
Amortization expense related to the existing deferred financing
costs......................................................... (321)
------
$3,026
======
</TABLE>
(3) Reflects the accrued contingent interest in connection with the exercise of
the warrants on the subordinated loans.
(4) Earnings before interest, amortization, income taxes, minority interest and
equity accounted for investment is not a measure of performance under U.S.
GAAP, but is presented because we believe it is a measure of performance
that is commonly reported and widely used by analysts, investors and other
interested parties in our industry. It should not be considered as an
alternative to net loss as a measure of operating performance or cash
provided by (used in) operations or as a measure of liquidity.
(5) On April 12, 1999, we granted 540,000 options at an exercise price of $9.00
with a ten-year term to certain directors and officers. These options vest
in three separate tranches subject to the Company meeting certain
milestones related to the Atlantica-1 Network. The first vesting milestone
on 515,000 of these options occurred on July 14, 1999 when the financing
for the Atlantica-1 Network was obtained. The difference between the
exercise price and the market value of the shares at the time of vesting
will be reflected as compensation expense.
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company. The selected consolidated statement of operations data for the fiscal
years ended December 31, 1998 and 1997 and for the ten months ended December
31, 1996 and the selected consolidated balance sheet data as at December 31,
1998, 1997 and 1996 are derived from our consolidated financial statements that
have been audited by PricewaterhouseCoopers, Chartered Accountants, and have
been prepared in accordance with accounting principles generally accepted in
the United States. The selected consolidated financial data as at and for the
six months ended June 30, 1999 and June 30, 1998 are derived from our unaudited
interim consolidated financial statements for these periods and have been
prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, contain all adjustments necessary for the
fair statement of the results of operations for these periods. Operating
results for these six-month periods are not necessarily indicative of the
results of operations for a full year.
We are substantially increasing the scope and scale of our business with the
development of the Atlantica-1 Network. Accordingly, the selected consolidated
financial data presented below may not be indicative of our financial position
or results of operations in the future. You should read the selected
consolidated financial data in conjunction with our consolidated financial
statements and the notes thereto that are included elsewhere in this
prospectus. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
Fiscal Year Six Months
Ten Months Ended Ended
Ended December 31, June 30,
December 31, ------------------- ------------------
1996 1997 1998 1998 1999
------------ -------- ------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. -- $ 4,962 $26,724 $11,518 $13,122
Carrier charges and
other cost of sales.... -- 3,559 15,676 7,361 6,060
General and
administrative
expenses............... $ 3,377 5,085 9,342 4,548 4,704
------- -------- ------- ------- -------
Earnings (loss) before
interest, amortization,
income taxes, minority
interest and equity
accounted for
investment(1).......... (3,377) (3,682) 1,706 (391) 2,358
Interest on long-term
debt................... -- 750 3,542 1,585 1,577
Interest income......... (132) (169) (140) (9) (101)
Amortization of deferred
financing costs........ -- 305 321 160 160
Amortization of capital
assets................. 1 542 2,401 1,158 1,264
Accrued contingent
interest(2)............ -- 382 960 472 495
Provision for income
taxes.................. 14 53 36 17 19
Minority interest....... -- (249) (204) (204) --
(Earnings) loss from
equity accounted for
investment............. -- -- (266) 209 --
------- -------- ------- ------- -------
Net loss................ $(3,260) $ (5,296) $(4,944) $(3,779) $(1,056)
======= ======== ======= ======= =======
Balance Sheet Data (at
period end):
Current assets including
cash................... $12,530 $ 4,485 $ 7,235 $ 2,555 $ 4,600
Capital assets, net..... 4,731 49,299 47,612 47,783 53,199
Total assets............ 17,315 55,152 56,260 51,858 60,065
Total long-term debt
(including current
portion)............... -- 30,122 38,019 38,544 35,864
Shareholders' equity.... 16,725 11,648 6,704 7,869 5,648
Other Financial Data:
Capital expenditures.... $ 4,728 $ 45,104 $ 1,791 $ 644 $ 6,851
Ratio of earnings to
fixed charges.......... -- (3) -- (3) -- (3) -- (3) -- (3)
Cash provided by (used
in):
Operating activities.. $(1,491) $ 5,420 $(3,504) $(8,941) $ 7,170
Financing activities.. 17,594 29,159 6,937 7,950 (3,651)
Investing activities.. (6,757) (43,108) (1,762) 279 (5,500)
</TABLE>
33
<PAGE>
- --------
(1) Earnings (loss) before interest, amortization, income taxes, minority
interest and equity accounted for investment is not a measure of
performance under U.S. GAAP, but is presented because we believe it is a
measure of performance that is commonly reported and widely used by
analysts, investors and other interested parties in our industry. It should
not be considered as an alternative to net loss as a measure of operating
performance or cash provided by (used in) operations as a measure of
liquidity.
(2) Accrued contingent interest represents the payment that would have had to
have been made by us if the warrants issued in connection with our retired
subordinated loans had not been exercised by July 28, 2002. It is
calculated at 7% per annum on the gross exercise price for the unexercised
warrants from the date of issue to the date of expiration. See note 9(c) to
our audited consolidated financial statements.
(3) Earnings were inadequate to cover fixed charges and accordingly the
deficiency of earnings available to cover fixed charges is as follows:
$3,246 for the ten months ended December 31, 1996, $5,243 for the year
ended December 31, 1997, $4,908 for the year ended December 31, 1998,
$3,762 for the six months ended June 30, 1998, and $1,037 for the six
months ended June 30, 1999. For the purposes of calculating the deficiency
of earnings available to cover fixed charges, earnings consists of earnings
(loss) before interest, amortization, income taxes, minority interest and
equity accounted for investment adjusted for interest income, amortization
of capital assets, minority interest, earnings (loss) from equity accounted
for investment and the interest component of rental expense, and fixed
charges consists of interest on long-term debt, amortization of deferred
financing costs, accrued contingent interest and the interest component of
rental expense.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the discussion under this caption in conjunction with our
audited consolidated financial statements and unaudited interim consolidated
financial statements and the notes thereto included elsewhere in this
prospectus. Certain information contained in this section, including
information with respect to our plans and expectations for our business, is
forward-looking. You should carefully consider the factors set forth under the
captions "Forward-Looking Statements" and "Risk Factors" for a discussion of
important factors that could cause actual results to differ materially from any
forward-looking statements contained in this prospectus.
Overview
GlobeNet Communications Group Limited was incorporated and registered on
June 25, 1998 as a Bermuda exempt company as part of a reorganization of the
TBI group of companies. Under the reorganization, TBI, which was incorporated
on January 6, 1995, became our wholly owned subsidiary, and the issued shares
of TBI were exchanged for our common shares on a one-for-one basis with
substantially the same rights and privileges.
Historically, through our wholly owned subsidiary TBI, we have provided
retail international telecommunications services to, from and through Bermuda.
We plan to extend our business to become a provider of city-to-city
international telecommunications network solutions on a wholesale "carriers'
carrier" basis using a combination of undersea fiber optic cable systems and
terrestrial extensions. We are currently developing the Atlantica-1 Network, an
undersea fiber optic cable system, as part of this plan.
Our international telecommunications network solutions business is in the
development stage and, accordingly, our historical consolidated financial
information relates primarily to TBI's retail international telecommunications
business and is not necessarily indicative of future results.
We report our results in U.S. dollars, although historically a significant
portion of our revenues and expenses have been settled in Bermuda dollars,
which are pegged to the U.S. dollar at par. Therefore, currency fluctuations
have not affected the results of our existing operations. Substantially all of
our costs incurred in connection with the Atlantica-1 Network will be incurred
in U.S. dollars. While we expect to invoice a majority of our customers in U.S.
dollars, we may be required to invoice certain customers in other currencies.
To the extent we receive revenues in currencies other than U.S. dollars, our
results of operations may be impacted by currency fluctuations. See "Risk
Factors--Foreign Exchange; Exchange Controls."
Revenues
Revenues from international long-distance services are derived from the
number of minutes of use billed by us and are recorded as the services are
rendered, after deducting an estimate for the traffic for which revenue will
not be collected. Historically deductions have not been material. Revenues from
prepaid calling cards are recognized at the time of usage or upon expiration of
the card. Revenues from private line services are recognized as earned on a
monthly basis.
Customers may enter into agreements to purchase capacity from us in the form
of indefeasible rights of use, or IRUs, portable IRUs or capacity leases.
Revenue from the sale of capacity by us is recognized at the date a customer
first has access to the capacity, provided certain conditions are met. IRU and
portable IRU sales grant to the purchaser an indefeasible right to use the unit
of capacity sold for the time, usually the remaining life of the system, to
which the IRU applies. Once the IRU is granted to the purchaser, the purchase
price is non-refundable and the purchaser is required to pay operations,
administration and maintenance fees for as long as connectivity is maintained.
The proceeds from the long-term lease of capacity are deferred and amortized
over the term of the contract.
35
<PAGE>
Cost of Services
TBI's cost of services is comprised primarily of local access charges and
international termination costs. Local access charges are paid to the Bermuda
Telephone Company for each minute of traffic that we originate or terminate in
Bermuda. As of January 1, 1999, the Minister of Telecommunications and
Technology's December 1998 directive reduced TBI's local access charge to $0.15
per minute for both originating and terminating traffic. The directive mandated
a second reduction on July 1, 1999 to $0.10 per minute, with a subsequent rate
determination to be made in December 1999.
International terminations are completed through our correspondent carriers
and are charged to us on the basis of prevailing international settlement
rates. We receive return traffic on the major routes that effectively offset
our payments for Bermuda-originated traffic. Our primary correspondent carriers
are MCI WorldCom and British Telecom. The current settlement rates with
carriers in the United States and the United Kingdom, which comprise the
largest markets for Bermuda-originated traffic, are $0.35 per minute and the
equivalent of $0.48 per minute, respectively. The rates for international
terminations have declined recently and we expect they will continue to decline
as international conventions are modified and competition among international
carriers intensifies.
For our wholesale carriers' carrier business, costs to build our systems are
capitalized. The cost of capacity sales are calculated on a pro rata basis of
total capacity sold in relation to the estimated total capacity.
Operating Expenses
Our operating expenses include network expenses and general and
administrative costs incurred to sustain and expand our Bermuda operations, as
well as to plan and finance the intended construction of the Atlantica-1
Network. As our systems develop, additional resources will be required to
provide for operations and for sales of capacity. Prior to the RFS date for the
connection from Tuckerton, New Jersey to Fortaleza, Brazil via Bermuda, we will
enter into an agreement with a third party that will provide operation,
administration and maintenance services on our systems. Following this RFS
date, we expect to recover a substantial portion of our operating,
administration and maintenance costs from periodic payments by customers. The
amounts of these payments will be based on the pro rata capacity purchased by
the customer in relation to the total capacity of the system. Each customer's
pro rata share will be capped and therefore, our share of operation,
administration and maintenance costs will be higher at the outset and will
decline over time as capacity is sold.
Results of Operations
Six Months Ended June 30, 1999 Compared With Six Months Ended June 30, 1998
Revenues
Revenues increased to $13.1 million for the six months ended June 30, 1999
compared to $11.5 million for the six months ended June 30, 1998, an increase
of 13.9%. This increase was due primarily to an increase in commercial and
residential traffic carried over the BUS-1 system. Outbound revenues increased
to $9.9 million for the first half of 1999 compared to $8.4 million for the
first half of 1998, an increase of 17.9%, and inbound revenues increased to
$2.4 million for the first half of 1999 compared to $1.3 million for the first
half of 1998, an increase of 84.6%. The average rate per outbound minute
realized was $0.90 for the first half of 1999 compared to $.94 for the first
half of 1998. This reduction of $.04 per minute was due to a rate reduction for
commercial and residential customers introduced on April 1, 1999. Revenue from
TBI's debit card product increased to $474,000 for the first half of 1999
compared to $82,000 for the first half of 1998 when it was introduced. These
increases were offset by the lack of any IRU sales for the first half of 1999
compared to $1.5 million for the first quarter of 1998.
36
<PAGE>
Carrier Charges and Other Cost of Sales
Carrier charges and other cost of sales decreased to $6.1 million for the
first half of 1999 compared to $7.4 million for the first half of 1998, a
decrease of 17.6%. The first half of 1999 is the first period that reflects the
reduced local access charges payable to the Bermuda Telephone Company for
Bermuda originating and terminating traffic.
Local access charges for the first half of 1999 for Bermuda originating and
terminating traffic decreased to $2.6 million compared to $3.0 million for the
first half of 1998, a decrease of 13.3%. The decrease reflects the reduced
Bermuda Telephone Company charges but was offset largely by an increase in the
volume of traffic in the first half of 1999 as compared to 1998.
Foreign settlements for the first half of 1999 decreased to $3.4 million
compared to $3.8 million for the first half of 1998, a decrease of 10.5%.
During the first halves of 1999 and 1998, the settlement rate with U.S.
carriers was $0.35 per minute and with U.K. carriers was the equivalent of
$0.52 per minute.
The cost of the sale of cable capacity in the first half of 1998 totalled
$547,000. There were no capacity sales in the first half of 1999.
General and Administrative Expenses
General and administrative expenses increased from the first half of 1999
compared to the first half of 1998. These expenses for the first half of 1999
were $4.7 million compared to $4.5 million for the first half of 1998. This
increase reflects expenses in the first half of 1999 related to the start-up
and financing of the Atlantica-1 Network which were mitigated by a reduction in
the general and administrative expenses of TBI from the first half of 1998.
Amortization Expense
Amortization expense for the first half of 1999 increased to $1.4 million
from $1.3 million for the first half of 1998, an increase of 7.7%. This
increase resulted largely from the addition of network and telecommunications
equipment.
Interest on Long-Term Debt
Interest on long-term debt decreased to $1.58 million in the first half of
1999 from $1.59 million in the first half of 1998, a decrease of 0.6%. This
decrease resulted from lower than average borrowings in 1999 over 1998.
Year Ended December 31, 1998 Compared With Year Ended December 31, 1997
We began commercial operations in May 1997, initially providing service via
satellite pending the completion of the BUS-1 system in November 1997.
Accordingly, our results of operations for 1997 reflect only seven full months
of operation, as compared to the twelve months of operation in the 1998
results.
Revenues
Revenues increased to $26.7 million in 1998 compared to $5.0 million in
1997, an increase of 434.0%. This increase resulted primarily from an increase
in our market share in Bermuda and the sale of undersea fiber optic cable
capacity in 1998. Outbound revenues for 1998 increased to $18.4 million
compared to $4.5 million for 1997, an increase of 308.9%. Inbound revenues
increased to $5.7 million in 1998 compared to $0.4 million in 1997, an increase
of 1,325.0%. The average rate per outbound minute realized was $0.94 in 1998
and 1997.
Bulk capacity sales on the BUS-1 system to two major international carriers,
in the form of IRUs, were completed in 1998 for aggregate proceeds of $1.5
million. In addition, a Bermuda-based ISP leased bulk
37
<PAGE>
capacity on the BUS-1 system, for a 10- to 25-year term, at a total price of
$8.0 million. The proceeds from the IRU sales were recognized in 1998 while the
proceeds from the leased capacity are deferred and amortized over 25 years.
Carrier Charges and Other Cost of Sales
Carrier charges and other cost of sales increased to $15.7 million in 1998
compared to $3.6 million in the previous year, an increase of 336.1%. This
increase resulted primarily from higher traffic in 1998, partially offset by
the impact of reduced settlement rates with foreign carriers.
Local access charges for Bermuda originating and terminating traffic
increased to $7.3 million in 1998 compared to $1.5 million in 1997, an increase
of 386.7%. Local access charges for 1998 were levied on the basis of a
government approved tariff of $0.27 per minute for originating traffic and
$0.24 per minute for terminating traffic. These rates remained unchanged from
the previous year. The increase in the charges resulted from an increase in
traffic on our system.
Foreign settlements for 1998 totaled $7.6 million compared to $2.1 million
for the previous year, an increase of 261.9%. During 1998, the settlement rate
with U.S. carriers was reduced from $0.51 to $0.35 per minute and the U.K. rate
was reduced from the equivalent of $0.62 to $0.48 per minute. The increase in
the amount of charges resulted from an increase in traffic on our system.
The cost of the sale of cable capacity in 1998 totaled $547,000. There were
no capacity sales in 1997.
General and Administrative Expenses
General and administrative expenses in 1998 increased to $9.3 million
compared to $5.1 million for the previous year, an increase of 82.3%. This
increase resulted primarily from the cost of additional staff and marketing
expenditures required to acquire market share in Bermuda. Significant
additional staffing should not be required to expand and maintain the Bermuda
business. However, as the Atlantica-1 Network develops, staffing levels for
selling and network operations will be increased substantially.
Amortization Expense
Amortization expense increased to $2.7 million in 1998 compared to $0.8
million in the previous year, an increase of 237.5%. This increase is primarily
attributable to the addition of the BUS-1 system in November 1997. Amortization
expense related to the BUS-1 system was $1.8 million in 1998 compared to $0.2
million in the previous year, an increase of 800.0%.
Interest on Long-Term Debt
Interest on long-term debt increased to $3.5 million in 1998 compared to
$0.8 million in 1997, an increase of 337.5%. This increase resulted primarily
from higher average borrowings in 1998.
Year Ended December 31, 1997 Compared with Ten Months Ended December 31, 1996
We did not provide telecommunications services prior to 1997. Therefore, we
did not have any revenues or carrier charges and other cost of sales in the ten
months ended December 31, 1996. In addition, the periods are not directly
comparable because the period ended December 31, 1997 was for 12 months while
the period ended December 31, 1996 was for only 10 months.
Revenues
Revenues increased to $5.0 million in 1997. We had no revenues in 1996. On a
monthly basis outbound revenue increased from $0.3 million in June 1997 to $1.0
million in December 1997. Inbound traffic from MCI
38
<PAGE>
Worldcom and British Telecom began in August 1997 and contributed to
approximately 7% of the revenue for the 1997 year. At December 1997, inbound
traffic represented 10% of revenue for the month.
Carrier Charges and Other Cost of Sales
Carrier charges and other cost of sales increased to $3.6 million in 1997.
We had no carrier charges and other costs of sales in 1996. The cost of
services was relatively high in 1997 because the BUS-1 system did not become
operational until November 1997 and traffic was carried via satellite until
that time. Also, settlement rates with foreign carriers were relatively high in
1997 until volume-related price reductions were established with these
carriers.
General and Administrative Expenses
General and administrative expenses increased to $5.1 million in 1997
compared to $3.4 million in 1996, an increase of 50.0%. This increase resulted
largely from the development of network, sales and customer service
infrastructure to support our service offerings and operations.
Amortization Expense
Amortization expense increased to $847,000 in 1997 compared to $1,000 in
1996 as the BUS-1 system became operational.
Interest on Long-Term Debt
Interest on long-term debt increased to $750,000 in 1997 as our recently
retired subordinated loans and TBI's recently retired credit facility were
obtained to finance the BUS-1 system, and funds were drawn from these
facilities. We had no interest on long-term debt in 1996.
Liquidity and Capital Resources
Future Capital Expenditures and Capital Resources
The development of the Atlantica-1 Network will require us to make
significant capital expenditures in connection with building the undersea cable
system and the related landing stations, and securing terrestrial capacity to
connect the landing stations with major cities. We estimate the total cost to
build the Atlantica-1 Network, including the secondary strand of the Rio
extension, the Caracas extension, landing stations and capital contingencies,
will be $825 million. This estimate does not include potential capital costs,
if any, associated with securing terrestrial capacity, including any
terrestrial extension to Buenos Aires, Argentina. We are examining potential
terrestrial alternatives that would eliminate the need for building the
secondary strand of the Rio extension and the Caracas extension and reduce
costs accordingly. See "Business--Cable System Overview." We expect the primary
ring of the Atlantica-1 Network to be RFS in December 2000. We expect to use
the net proceeds we received from the private offering of the old notes, the
private equity financing (net of the proceeds we used to repurchase outstanding
shares of the Company from existing shareholders) and the exercise of warrants
by our former subordinated lenders, together with available funds under
Holdings' bank credit facility, to finance:
. the construction of the Atlantica-1 Network,
. transaction costs related to our financings,
. the repayment of our subordinated loans and TBI's credit facility,
. pre-RFS working capital requirements, and
. costs, if any, associated with our initial requirements for terrestrial
capacity.
39
<PAGE>
We have already repaid our subordinated loans and TBI's credit facility and
paid transaction costs from these funds. See "Use of Proceeds."
We may in the future build an additional undersea cable system, the
Atlantica-2 Network, to connect Bermuda to the United Kingdom and Southern
Europe if there is sufficient demand and available capital. We are also
considering other potential undersea fiber optic cable system routes that we
believe are currently underserved. We have not decided whether we will build
the Atlantica-2 Network and we do not believe that building the Atlantica-2
Network is necessary for the success of the Atlantica-1 Network. If we build
the Atlantica-2 Network or another undersea fiber optic cable system, we will
require additional financing.
Our expectations of required capital expenditures are based upon our current
estimates. Our actual capital expenditures could vary from our estimates and
these variations could be material. See "Risk Factors--Substantial Future
Capital Requirements."
Historical Capital Expenditures and Capital Resources
We have incurred significant operating losses and capital expenditures
related to the development of TBI. We have financed these expenditures through
a combination of borrowings under TBI's recently retired credit facility and
the recently retired subordinated loans, and equity contributions.
Total cash provided by (used in) operating activities during the six months
ended June 30, 1999 and fiscal years 1998 and 1997 was $7.2 million, $(3.5)
million and $5.4 million, respectively. Total cash provided by (used in)
investing activities during the six months ended June 30, 1999 and fiscal years
1998 and 1997 were $(5.5) million, $(1.8) million, and $(43.1) million,
respectively. TBI's projected capital expenditures for fiscal 1999 are
approximately $1.1 million, of which $0.4 million has already been spent as of
June 30, 1999. Although we do not expect further capital expenditures for TBI
to be significant, the development of the Atlantica-1 Network will require
significant additional financing. See "Use of Proceeds." Currently, our primary
sources of liquidity are cash flows from operations, net funds that we received
from our private offering of old notes and private equity financing, and
borrowing availability under Holdings' bank credit facility.
Total cash provided by (used in) financing activities during the six months
ended June 30, 1999 and fiscal years 1998 and 1997 was $(3.7) million, $6.9
million and $29.2 million, respectively. To fund the construction of the BUS-1
system, during 1997 we borrowed $16.7 million under TBI's retired credit
facility and $13.0 million under our retired subordinated loans. We borrowed an
additional $6.9 million under TBI's credit facility in 1998 to finance working
capital requirements and capital expenditures.
We used a portion of the net proceeds that we received from the private
offering of old notes and the private equity financing to repay TBI's credit
facility. The principal amount of the subordinated loans were also retired, and
accrued interest owed to one of the subordinated lenders was repaid, in
connection with the exercise of warrants by these subordinated lenders. We paid
accrued interest owed to the other subordinated lender out of the net proceeds
of the private offering of old notes and the private equity financing. See "Use
of Proceeds."
Seasonality
Our Bermuda operations experience seasonal fluctuations that are a function
of the volume of tourist traffic. Traffic declines during the winter months
when tourist traffic is low.
Year 2000 Problem
We are currently working to resolve the potential impact of the year 2000
problem on the processing of date-sensitive information by our computer systems
and programs. The year 2000 problem is the result of
40
<PAGE>
computer programs being written using two digits, rather than four, to indicate
the year. Any of our programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, which could result
in miscalculations or system failures and lead to disruptions in operations.
In 1998, we formed a year 2000 task force to conduct a comprehensive review
of our computer programs and systems to ensure that these programs and systems
will function properly and be year 2000 compliant. This review has included
both hardware and software systems and embedded technology systems. Remediation
has been or will be accomplished through a combination of hardware and software
upgrades, program changes and replacement of non-compliant systems. We do not
expect our remediation costs to be material.
We have completed approximately 98% of our year 2000 compliance process and
expect to have completed the entire process by October 1999. We completed our
internal compliance process in April 1999 and completed the inter-carrier
compliance process with the Bermuda Telephone Company in July 1999. We have
spoken with third-party vendors that supply our computer programs and systems
as well as various carrier parties that provide us services that are reliant
upon our computer programs or systems. As of April 1999, we successfully
completed all system updates and system tests on our switching equipment with
our equipment and software vendor Northern Telecom. We have also been advised
by our principal vendors and manufacturers of our other electronic equipment,
such as personal computers, that this equipment is year 2000 compliant. We have
also been advised by Data True, the subcontractor that provides billing
services for TBI's commercial accounts, that many of its software products are
year 2000 compliant and that it expects to be fully compliant by October 1999.
The Bermuda Telephone Company, the local exchange provider upon which we
rely to originate and terminate our international long-distance traffic in
Bermuda and to process billing for our residential customers, has advised us
that it has successfully completed system tests on its switching equipment with
its equipment and software vendor Northern Telecom, and that it is year 2000
compliant. We completed end-to-end testing with the Bermuda Telephone Company's
system in July 1999. Northern Telecom conducted the testing.
We believe that the costs of addressing potential problems will not have a
material adverse effect on our business, financial position or results of
operations unless our vendors and certain carrier parties fail to resolve year
2000 compliance issues in a timely manner.
We believe that the action plans that we have developed and the
implementation time frames that we have established adequately allow for
unexpected issues that might arise. However, if the Bermuda Telephone Company
is unable to provide services because of the year 2000 problem, then our
customers will not be able to complete their international long-distance calls.
To the extent that we experience any other year 2000 problems, we believe that
these problems would be more likely to result in errors in our billing and
record-keeping functions, rather than in the ability of the Atlantica-1
Network, which has an RFS date in December 2000 for the primary ring, or the
BUS-1 system to provide telecommunications capacity to customers. If these
billing and record-keeping errors were to occur, we believe that we have
adequate contingency plans to determine the correct billing and other
information.
Nevertheless, we cannot assure you that we will not experience any year 2000
problems, and it is difficult to predict the extent or magnitude of a year 2000
problem as it may affect us. To the extent that we experience material year
2000 problems and do not have a contingency plan in effect to remedy the
problem, our business, financial condition and results of operations could be
materially adversely affected. While we believe the occurrence of this scenario
is unlikely, a possible worst case scenario might include (1) our inability to
provide some or all of the services designed to be provided by the BUS-1 system
and the Atlantica-1 Network, (2) delays, inaccuracies or other difficulties
with respect to billing customers or the loss of customers records, and (3) our
key vendors not being able to provide goods and services on a timely basis. The
financial impact of any or all of these worst case scenarios has not been and
cannot be estimated by management with any degree of meaningful precision due
to the numerous uncertainties and variables associated with these scenarios.
41
<PAGE>
BUSINESS
Business Overview
We will provide our customers with customized city-to-city international
telecommunications network solutions on a wholesale "carriers' carrier" basis
using technologically advanced undersea fiber optic cable systems and
terrestrial extensions. We are currently developing the Atlantica-1 Network, a
high capacity, self-healing, undersea fiber optic cable system that, together
with terrestrial extensions, will offer seamless connectivity between certain
major cities in the United States, Brazil, Venezuela, Bermuda and Argentina. In
addition, we intend to expand the reach of the Atlantica-1 Network by offering
connectivity to other countries in South America and Europe through a
combination of commercial arrangements, capacity purchases and further
development of undersea or terrestrial fiber optic cable systems.
We are developing the Atlantica-1 Network to satisfy increasing bandwidth
requirements for the transmission of voice, data and video, particularly over
the Internet, between North America and South America. We intend to offer
customized and flexible provisioning of capacity at competitive prices to
international telecommunications service providers, including emerging and
established carriers, ISPs and value-added resellers. We expect that initially
the majority of our customers will be North American and European
telecommunications service providers or their South American affiliates.
The Atlantica-1 Network will be a 22,500 km four fiber pair undersea fiber
optic cable system. We have selected Alcatel to design, construct and install
the Atlantica-1 Network pursuant to a turnkey contract. The total activated
capacity of the Atlantica-1 Network initially will be 40 Gbps, but will be
upgradeable to 1,280 Gbps using dense wavelength division multiplexing, or
DWDM, technology. The primary ring of the Atlantica-1 Network will connect the
United States, Bermuda, Brazil and Venezuela. The connection from Tuckerton,
New Jersey to Fortaleza, Brazil via Bermuda is scheduled to be RFS by September
2000, with the full primary ring scheduled to be RFS by December 2000. We
believe that the deployment of the Atlantica-1 Network will position us as one
of the first private undersea fiber optic cable systems that, together with
terrestrial extensions, will offer city-to-city connectivity between the United
States, Brazil, Venezuela, Bermuda and Argentina.
In order to provide city-to-city connectivity, we will secure terrestrial
extensions, through either cash purchases or capacity swaps, from each
Atlantica-1 Network landing point to certain major cities in North America and
South America. We are currently in discussions with providers of backhaul
capacity to provide connectivity between the following cities, at a minimum:
. New York City, Boston, Washington, Atlanta and Miami in the United
States,
. Sao Paulo, Rio de Janeiro, Belo Horizonte, Brasilia and Fortaleza in
Brazil,
. Buenos Aires in Argentina,
. Caracas in Venezuela, and
. Hamilton in Bermuda.
The Atlantica-1 Network will also provide interconnection with Western
Europe through a number of transatlantic cable systems, including a planned
system in which we have a minor ownership interest --TAT-14.
We currently provide international telecommunications services to both
residential and commercial customers in Bermuda through our subsidiary TBI.
TBI, which commenced operations in May 1997, is one of only two carriers
licensed to provide international telecommunications services to customers in
Bermuda. In approximately two years, we have achieved a market share in excess
of one-third of the Bermuda outbound long-distance market. In November 1997, we
successfully completed the deployment of the BUS-1 system, which connects
Bermuda and the United States. The BUS-1 system, which will be incorporated
into the Atlantica-1 Network, established us as a full-service facilities-based
provider of international long-distance
42
<PAGE>
service for traffic originating and terminating in Bermuda. We do not intend to
offer telecommunications services to retail customers outside of Bermuda.
TBI's products include:
. switched international direct distance dialing,
. calling cards,
. debit/prepaid calling cards, and
. international private line services.
Market Opportunity
We are developing the Atlantica-1 Network to capitalize on a combination of
factors that are increasing the demand for telecommunications capacity to carry
voice, data and video between North America and South America. We hired IBM
Global Services, an independent telecommunications industry consultant, to
perform a demand assessment for the Atlantica-1 Network. IBM Global Services
analyzed trends in telecommunications, social, economic and technological
developments and conducted interviews with several carriers to assess the
demand for telecommunications capacity between North America and South America.
Based on this analysis, IBM Global Services believes that demand for
telecommunications capacity between North America and South America will grow
at a compound annual rate of approximately 60% to 70% from 1997 to 2004.
Increasing Global Demand for International Telecommunications Capacity
The dramatic increase in global demand for international telecommunications
capacity is being driven primarily by rapid increases in the use of high
bandwidth applications, and by a global trend towards privatization and
deregulation of telecommunications industries. Prior to 1995, growth in demand
for international telecommunications capacity was driven primarily by voice
traffic, which has grown by approximately 15% per year during the past decade.
However, we expect Internet and data traffic growth to significantly outpace
voice traffic growth. Internet traffic alone has grown at a rate of
approximately 100% per annum during the last three years. The growth in data
traffic globally is being generated by rapid increases in the use of high
bandwidth applications, such as Internet, e-commerce, video-on-demand,
corporate Intranets and Extranets, video-conferencing, electronic data
interchange, or EDI, transactions between businesses, CAD/CAM manufacturing
techniques, distance learning applications and medical applications. We expect
that growth in Internet and data traffic will be the largest driver of
increasing demand for international telecommunications capacity.
Deregulation and Privatization of South American Telecommunications Industries
Many South American countries have recently completed, or are in the process
of, deregulating and privatizing their telecommunications industries. Based on
the experience in other telecommunications markets, we expect that deregulation
and privatization in South America will:
. increase the development of telecommunications infrastructure and
teledensity,
. accelerate growth in domestic and international traffic, and
. lead to the creation of new international telecommunications service
providers.
Countries with low teledensities generally experience increased teledensity
after privatization of their telecommunications markets because of the creation
of more efficient, higher capacity terrestrial telecommunications networks that
make access to telecommunications services less expensive and more widely
available. Privatization also drives the emergence of new domestic and
international telecommunications
43
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service providers that typically offer enhanced services and lower pricing than
the incumbents. Many of these telecommunications service providers are seeking
to establish global high speed network facilities through the lease or purchase
of undersea fiber optic capacity from independent sources. We also expect
privatization to accelerate international traffic. The international accounting
rate/settlement system, which historically contributed to artificially high
international calling rates, is eroding. As a result, tariffs are declining and
the demand for international telecommunications services, which has
demonstrated significant price elasticity in deregulating countries, is
increasing and stimulating revenue growth. The presence of competitors in the
market has consistently produced accelerated growth in international traffic.
Brazil: In Brazil, the recent privatization and deregulation of the
telecommunications industry generated in excess of $19 billion in new
investment in 1998. The majority of this investment came from major U.S. and
European-based carriers, such as MCI WorldCom, Sprint International, Portugal
Telecom, Telefonica de Espana and Telecom Italia. The Brazilian government
expects investment in excess of $50 billion in new telecommunications
infrastructure over the next seven years, in part to meet a government mandate
to expand teledensity from approximately 11.5 phone lines per 100 people to
23.0 phone lines per 100 people by 2003. These teledensity levels are
relatively low compared to the approximately 60 phone lines per 100 people in
the United States and Canada. We expect that the anticipated investment in
telecommunications infrastructure, phased deregulation scheduled for completion
in 2002 and anticipated increase in teledensity will result in increased
international telecommunications traffic to and from Brazil.
Venezuela: Approximately $4.5 billion has been invested in Venezuela in the
telecommunications market since the privatization of CANTV, the incumbent
monopoly carrier, and the award of a wireless license to TelCel in 1991, and we
expect that an additional $3 to $4 billion will be invested over the next five
years. Venezuela has committed to opening its markets to competition for
facilities-based voice telephone services in all sectors of the market (local,
long-distance and international) by November 2000. We expect additional new
entrants in Venezuela over the next few years as deregulation and privatization
create market opportunities. We expect the Atlantica-1 Network to be a positive
factor influencing new entrants seeking reasonably priced, high quality
international telecommunications capacity.
Argentina: Argentina's privatization and deregulation schedule contemplates
licensing two long-distance service providers before November 1999, in addition
to the incumbents Telefonica de Argentina and Telecom Argentina, which
currently hold exclusive operating licenses for local and long-distance
telephony. Telefonica de Argentina operates in the southern half of the country
and Telecom Argentina operates in the northern half. We anticipate that the
Argentinean government will impose infrastructure expansion requirements
similar to Brazil's regulations in connection with market deregulation. We
expect that Argentina will experience similar growth as seen in other countries
post-deregulation and believe that the Atlantica-1 Network will be in a
position to serve as a feeder system for traffic between Argentina and much of
the rest of South America and North America.
Increasing Demand for Telecommunications Capacity Between North America and
South America
We expect that the increase in demand for bandwidth-intensive Internet and
data services in South America will be the primary stimulant of demand for
telecommunications capacity between North America and South America. According
to industry sources, Internet users in South America are expected to increase
from approximately 8.5 million in 1998 to approximately 34 million by the end
of 2000, representing one of the fastest growth rates in the world. As the
number of Internet users in South America increases, the concentration of
Internet hubs and corporate Intranets in the United States is expected to drive
increased growth in telecommunications traffic between North America and South
America.
In addition, we expect incoming and outgoing voice traffic between North
America and South America, which has grown at a compound annual rate of 21% per
annum over the past five years, will continue to contribute to the increase in
demand for bandwidth. The table below summarizes the volume and compound
44
<PAGE>
annual growth rates (CAGR) of outgoing and incoming international voice traffic
between North America and Brazil, Venezuela and Argentina for the period from
1995 to 1997:
Minutes of Telecommunications Traffic (in millions)
<TABLE>
<CAPTION>
Country: 1995 1996 1997 CAGR
-------- ---- ---- ----- ----
<S> <C> <C> <C> <C>
Brazil............................................... 391 511 676 31.4%
Venezuela............................................ 181 224 302 29.4%
Argentina............................................ 197 255 277 18.6%
--- --- ----- ----
Total.............................................. 769 990 1,255 27.8%
=== === ===== ====
</TABLE>
--------
Source: TeleGeography, 1997-1999
Limited Existing Telecommunications Capacity Between North America and South
America
The existing undersea fiber optic cable systems connecting the major cities
in North America and South America have limited capacity. While there has been
substantial development of east-west fiber optic network capacity in recent
years (both trans-Atlantic and trans-Pacific), there has been limited
development providing connectivity between North America and South America.
This limited availability presents a significant opportunity for a new,
independent north-south undersea fiber optic cable system such as the
Atlantica-1 Network.
Due to the scarcity of undersea fiber optic cable systems, a majority of
telecommunications traffic between North America and South America has
historically been transmitted via satellite. Satellite transmission is
generally considered to have some advantages over cable transmission with
respect to point-to-multipoint broadcast and "thin route" transmission, as
opposed to the more common point-to-point, high volume transmission for which
undersea cable systems usage is considered to be preferable. Satellites,
however, provide inferior quality versus fiber optic cable systems in terms of
transmission delay, voice quality and transmission throughput for data. In
addition, satellite transmission is substantially more expensive than fiber
optic cable systems on a per unit basis for heavy traffic routes. We believe
that the vast majority of the growth in demand for cable systems will be met
through undersea fiber optic cable systems, with satellites providing video
broadcast signals, route diversity, and restoration for non-ring and low
capacity fiber optic networks.
The existing undersea cable systems connecting North America and South
America have a number of shortcomings that limit their ability to meet the
projected rapid increase in demand for bandwidth. Much of the existing capacity
does not connect to Rio de Janeiro, Sao Paulo or Buenos Aires, and thus does
not directly provide access to major telecommunications traffic points of
origin and termination. The existing undersea cable systems utilize older
technology and therefore generally offer limited capacity and have limited
ability to upgrade. In addition, no undersea cable systems in the region
currently offer self-healing restoration capabilities. Therefore, restoration
may only be partial or non-existent. We believe that restoration is a
fundamental requirement for telecommunications service providers offering
state-of-the-art service levels, particularly for mission critical data
applications.
Finally, each of the existing undersea cable systems was developed on a
consortium basis, and all available capacity is currently committed to the
consortium members. Access to this capacity is available to third parties only
to the extent a consortium member, increasingly a competitor to potential
purchasers, is willing to resell its unused capacity, if any.
The planned development of two other new undersea cable systems in the
region with capacity, technology and scheduled completion dates similar to ours
has recently been announced. We believe that the limited existing availability
and the expected growth in demand for capacity represents a significant
opportunity for the
45
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Atlantica-1 Network and these other systems. See "Risk Factors--Competition"
and "Business--Competition."
Business Strategy
Our business strategy is to provide customized and seamless city-to-city
international telecommunications network solutions to wholesale purchasers,
including emerging and established telecommunications carriers, ISPs and value-
added resellers. Key elements of our strategy include:
Become a Preferred Independent Carriers' Carrier
We intend to be a carriers' carrier. We will provide to our target customers
an independent source of international telecommunications capacity with city-
to-city connectivity offered under an efficient one-stop-shop approach. We
believe that our independent status will be a significant marketing advantage
because we will not be perceived as competing with our customers. We believe
that our potential customers will be less inclined to purchase capacity from
their competitors if they have a readily available, technologically advanced
alternative through an independent provider. By purchasing from an independent
provider, customers can avoid subsidizing their competitors and providing them
access to sensitive traffic data.
Be Early to Market
We believe that the deployment of the Atlantica-1 Network will position us,
together with the two other recently announced systems that are expected to
have completion dates similar to ours, among the first private undersea fiber
optic cable systems to offer connectivity between North America and South
America. Further, we believe that we will be the first independent undersea
cable system to provide connectivity between North America and South America.
We expect this early to market presence to represent a competitive advantage
for the early participants in obtaining capacity commitments from major
carriers and ISPs because having an operational cable system will enable the
early participants to establish a foothold with major telecommunications
carriers and ISPs by meeting their rapidly increasing capacity needs. We also
believe that construction of undersea cable systems that would compete with
these early participants will be limited in the near future due to various
barriers to entry, including:
. the substantial capital required to develop undersea cable systems,
. the extensive lead time required for the development of cable systems,
. the strong global demand for the limited resources of major undersea
cable supply and construction companies, including competing demand for
production slots for newly announced systems, and
. the limited number of qualified personnel with the necessary experience
in the undersea cable industry.
Further, the ability of the Atlantica-1 Network and the other recently
announced undersea cable systems to upgrade capacity in advance of expected
demand at a substantially lower unit cost than the cost of original
construction could tend to discourage further undersea cable system development
between North America and South America.
Provide Customized and Flexible Network Solutions
We intend to provide customized solutions to meet the international
telecommunications capacity needs of our customers. We will offer:
. a broad range of bandwidth options, from smaller units of capacity (E-1s,
DS-3s) to larger units of capacity (STM-1s, STM-16s, STM-64s),
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<PAGE>
. flexible provisioning of capacity at competitive prices to enable our
customers to optimize their capacity purchase decisions based on their
unique requirements and competitive strategies. Our product packages will
include IRUs, portable IRUs and short-term leases with options to buy
IRUs, which will be offered under a variety of payment options,
. customers the ability to acquire capacity on shorter notice than has been
typically offered by traditional carrier consortium systems, allowing our
customers to minimize long-term capital commitments and reliance on long-
term demand projections, and
. a variety of network provisioning and maintenance services, collocation
facilities and technical support options, including offering our larger
customers access to a network management system which will give them
real-time control over their capacity, circuit reassignment and testing
requirements.
Develop a Technologically Advanced Network
The Atlantica-1 Network will be a technologically advanced, upgradeable,
undersea fiber optic cable system configured in a self-healing ring. We believe
the restoration capability of the Atlantica-1 Network will be a significant
competitive advantage over existing systems in the region, which must acquire
restoration capability from other systems or satellites. Further, the existing
systems in the region were designed and built with a limited ability to upgrade
capacity, and therefore must be supplemented by the construction of additional
undersea cable systems to increase capacity significantly.
Capitalize on Bermuda Advantage
We believe that our Bermuda location will be advantageous to our customers
in developing e-commerce and least-cost routing business opportunities as a
result of a combination of factors:
. favorable tax regime,
. strategic geographic location,
. favorable regulatory environment,
. stable political environment, and
. technologically advanced telecommunications infrastructure.
We intend to promote the hosting of customers' servers, databases and
related equipment in our facility in Bermuda to enable our customers to perform
their e-commerce functions in this strategic location.
Leverage Extensive Management Experience
We have assembled a strong management team and will continue to hire highly
qualified individuals. Our management team was responsible for the successful
financing and deployment of the BUS-1 system, one of the first private
international undersea fiber optic cable systems, and for the successful launch
of our long-distance business in Bermuda. Our management team also has
substantial international telecommunications network development and operating
experience with major international carriers, including MCI Worldcom and
Teleglobe. The team is led by Michael Kedar, our Chairman and Chief Executive
Officer, who founded TBI in 1995. Mr. Kedar, a well-known telecommunications
entrepreneur, also founded Call-Net Enterprises Inc. (Sprint Canada), one of
Canada's leading long-distance carriers, and Microcell Communications Inc., a
PCS provider in Canada.
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Cable System Overview
Atlantica-1 Network
The Atlantica-1 Network will be a 22,500 km four fiber pair undersea fiber
optic cable system. The Atlantica-1 Network is being engineered and constructed
using the latest in fiber optic technology, self-healing ring structures,
erbium doped fiber amplifier repeaters, LEAF, DWDM, system and equipment
redundancies and a fully integrated network management system. The
incorporation of this advanced technology will allow us to offer fully
redundant, self-healing capacity to our customers at competitive prices
relative to existing and planned systems.
The Atlantica-1 Network design contemplates system interconnection with
other existing and planned cable systems at various landing points in order to
provide customers with seamless and cost-effective connectivity to major cities
in Europe, the United States, Bermuda and South America.
The initial capacity of the Atlantica-1 Network will be 40 Gbps of total
capacity or 20 Gbps of self-healing capacity. The system will be upgradeable to
1,280 Gbps of total capacity or 640 Gbps of self-healing capacity. We will
upgrade the system incrementally in advance of expected demand. It may require
up to 12 months for an upgrade to be implemented. The Atlantica-1 Network will
incorporate the BUS-1 system for the portion of the primary ring from
Tuckerton, New Jersey to St. David's, Bermuda. The BUS-1 system will have an
initial total capacity of 40 Gbps or an initial self-healing capacity of 20
Gbps when incorporated into the Atlantica-1 Network. Modeling of the BUS-1
system performed by Alcatel indicates that the BUS-1 system could be capable of
achieving total capacity of 80 Gbps. Alcatel completed tests on the BUS-1
system on August 6, 1999 to determine its ultimate total capacity, and a final
report is expected in September 1999. Preliminary indications are that 40 Gbps
per fiber pair is achievable and that there is a possibility of achieving 80
Gbps per fiber pair. Once demand exceeds the BUS-1 system's ultimate total
capacity, we intend either to replace or supplement the system with a new
undersea cable at an anticipated cost of approximately $40 million.
The self-healing system will provide two forms of switching protection
against faults: span switching and ring switching. Span switching provides
protection between adjacent landing stations if the fault involves only one of
the two fiber strands. Ring switching provides protection if there is a fault
involving all fibers between adjacent landing stations. Self-healing capacity
is designed to protect customers against the effect of potential equipment and
cable failures. The Atlantica-1 Network's internal restoration system is
expected to react to failures in less than 300 milliseconds, with no noticeable
degradation in service or dropped calls. Without the ring configuration, users
would need to buy restoration services on alternate systems to ensure the
continuity of their network transmission. Restoration obtained on alternate
systems is subject to a delay of several hours from the time the fault occurs
until the traffic is rerouted.
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As shown in the chart below, the principal components of the Atlantica-1
Network will be the primary ring, the Rio extension and the Caracas extension.
<TABLE>
<CAPTION>
Segment Connections RFS Dates Estimated Cost(1)
------- ----------- --------- -----------------
<S> <C> <C> <C>
Primary Ring............ Tuckerton, New Jersey September 2000 (Tuckerton to $502 million(2)
St. David's, Bermuda Fortaleza via St. David's)
Fortaleza, Brazil December 2000 (full ring)
Punta Gorda, Venezuela
Boca Raton, Florida
Rio Extension........... Fortaleza, Brazil February 2001 (primary strand) $119 million(2)
Rio de Janeiro, Brazil Secondary strand(3) $112 million(2)
Caracas Extension(4).... Punta Gorda, Venezuela -- $10 million
Caracas, Venezuela
</TABLE>
- --------
(1) The estimated cost excludes landing station costs of approximately $45
million and capital contingencies of approximately $37 million. This
estimated cost also excludes potential costs, if any, associated with
securing terrestrial capacity, including any terrestrial extension to
Buenos Aires, Argentina.
(2) Fixed price under our turnkey contract with Alcatel.
(3) We have an option in our contract with Alcatel to build the secondary
strand of the Rio extension. We currently intend to exercise this option
unless we can obtain capacity on a terrestrial system from a third party at
a lower cost. If we do not exercise our option to build the secondary
strand, the cost of building the Rio extension will be $119 million, plus
the cost, if any, of obtaining capacity on a terrestrial network. We expect
the target service date to be approximately 18 months from the date of
exercising the option.
(4) We are currently negotiating with Alcatel to build the Caracas extension.
We will build the Caracas extension unless we can obtain capacity on a
terrestrial system at a lower cost and with the requisite operational
control. We estimate that the cost to build the Caracas extension will be
$10 million. We expect the targeted service date to be in or about December
2000.
Atlantica-2 Network
Assuming sufficient demand and available capital, we may in the future
expand the system to provide connectivity between Bermuda and Southern Europe,
including Spain, Portugal and France, as well as the United Kingdom, with the
Atlantica-2 Network.
We expect the Atlantica-2 Network to have a comparable unit price per
kilometer to the Atlantica-1 Network, but with newer technology, and to require
substantial capital to develop. We estimate that the Atlantica-2 Network could
have a potential RFS date as early as the fourth quarter of 2002. Our demand
and feasibility analyses regarding the Atlantica-2 Network are preliminary. We
will complete a more comprehensive analysis of the Atlantica-2 Network before
committing to its construction. We have no current commitment to build the
Atlantica-2 Network, and we do not believe that building the Atlantica-2
Network is necessary for the success of the Atlantica-1 Network. Further, there
are viable and possibly more suitable alternatives to serve Europe through
other cable systems.
Terrestrial Extensions to Key Markets
We will secure terrestrial extensions from each Atlantica-1 Network landing
point to certain major cities in North America and South America either through
strategic alliances with telecommunications service providers, with other
carriers or, if necessary, through our own construction. We are currently in
discussions with providers of backhaul capacity to provide connectivity between
the following cities, at a minimum: New York City, Boston, Washington, Atlanta
and Miami in the U.S.; Sao Paulo, Rio de Janeiro, Belo Horizonte, Brasilia and
Fortaleza in Brazil; Buenos Aires in Argentina; Caracas in Venezuela; and
Hamilton in Bermuda. We are also currently in discussions with major
telecommunications service providers who are contemplating the
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construction of terrestrial fiber networks that, if linked with the Atlantica-1
Network, would provide additional direct connectivity to major cities in Chile,
Peru and Colombia.
United States: The Atlantica-1 Network will have two landing stations in the
United States. One will be at or near the existing landing station for the BUS-
1 system in Tuckerton, New Jersey and the other, as presently contemplated,
will be in Boca Raton, Florida. The introduction of numerous new undersea cable
systems landing on the eastern seaboard in recent years, along with the rapid
construction of new competing major national terrestrial networks, has resulted
in the emergence of numerous suppliers of backhaul capacity capable of
connecting with the Atlantica-1 Network landing stations in the United States.
We have issued a request for proposal for the necessary terrestrial capacity to
15 potential suppliers and are in negotiations with some of these potential
suppliers. In some cases we may exchange capacity on the Atlantica-1 Network
for an equivalent value of backhaul capacity in the United States. We do not
foresee any difficulties in securing backhaul capacity in the United States.
Brazil: We are currently in negotiations with potential suppliers of
backhaul capacity in Brazil. We plan to purchase backhaul capacity in Brazil to
provide our customers with connectivity between Rio de Janeiro and the cities
of Sao Paulo, Belo Horizonte and Brasilia. We have committed to build the
primary strand of the Rio extension to connect Fortaleza and Rio de Janeiro at
a cost of $119 million. We also have an option in our contract with Alcatel to
build the secondary strand of the Rio extension at a cost of $112 million.
Although we currently intend to exercise our option with Alcatel to build the
secondary strand, we are examining the relative costs of buying terrestrial
capacity from Fortaleza to Rio de Janeiro. If cost effective, we will not
exercise our option to build the secondary strand of the Rio extension and
instead will obtain backhaul capacity from Fortaleza to Rio de Janeiro.
We are actively looking for a more cost effective terrestrial extension to
provide self-healing restoration for our Rio extension. We have identified
several companies planning to construct fiber optic networks from Fortaleza to
Rio de Janeiro. These companies include TeleMar (the incumbent licensee in the
northern region of Brazil), Embratel (the existing former monopoly carrier),
Bonari (a joint venture between Sprint/France Telecom/The National Grid) and
Canbra Telefonica S/A (Bell Canada International, Qualcomm, WLL International
and Vicunha). We believe that there will be significant development of
terrestrial capacity along this route over the next two years which will
provide us with several backhaul alternatives.
We have also identified several potential suppliers of backhaul capacity
from Rio de Janeiro to Sao Paulo, Belo Horizonte and Brasilia. These network
providers include both Embratel as well as the mirror licensee, Bonari. In
addition, alternative network providers including MetroRed (owned by Fidelity
and Boston Ventures, among others), Netstream (a subsidiary of Promon, a
premier Brazilian engineering company) and Pegasus have developed or are
developing networks that could provide us with our required backhaul capacity.
Venezuela: We have had discussions with both CANTV, the recently privatized
former monopoly, and TelCel, an affiliate of BellSouth International, with
regard to either the purchase of, or an exchange for, backhaul capacity from
Punta Gorda to Caracas. In the event we are unable to negotiate acceptable
arrangements with either domestic carrier, we may construct our own terrestrial
extensions. As another alternative, we are currently in negotiations with
Alcatel to build the Caracas extension. The cost of the Caracas extension,
which we estimate to be $10 million, is included in our projected capital cost
for the Atlantica-1 Network.
Argentina: We have identified several potential suppliers of backhaul
capacity between Rio de Janeiro, Brazil and Buenos Aires, Argentina. In
addition to the incumbent monopoly carrier, Telefonica Larga Distancia de
Argentina, several alternative network providers, such as MetroRed, are
building fiber optic networks. These networks should provide connectivity not
only between Buenos Aires and Rio de Janeiro, but also to the other major
cities in Argentina. We believe that the expected deregulation of Argentina in
2000 will result in the emergence of additional new market entrants. In the
event that we are unable to secure backhaul capacity from
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a third party, we are considering developing our own undersea cable system from
Rio de Janeiro to Buenos Aires.
Bermuda: We plan to have our new landing station in Bermuda located close to
our St. David's network operations center that currently houses both the BUS-1
system electronics as well as our international gateway switch. We will secure
backhaul capacity from St. David's to Hamilton that is sufficient to meet our
customers' demands.
Alcatel Contract and Cable Deployment Strategy
We have selected Alcatel, a global leader in the construction and
installation of undersea fiber optic cables, as the supplier for the Atlantica-
1 Network. We have entered into an agreement with Alcatel which provides that
Alcatel, on a turnkey basis, will:
. supply and install, at a fixed cost of approximately $502 million
(excluding landing stations), the undersea portion of the primary ring by
December 2000 (the connection from Tuckerton, New Jersey to Fortaleza,
Brazil via Bermuda is scheduled to be RFS in September 2000) equipped
with four fiber pairs and terminal equipment to support 20 Gbps of self-
healing capacity, including the upgrade of the BUS-1 system to use 20
Gbps of self-healing capacity,
. supply and install, at a fixed cost of approximately $119 million
(excluding landing stations), the primary strand of the Rio extension by
February 2001 equipped with four fiber pairs and terminal equipment to
support 20 Gbps of self-healing capacity,
. at our option, which will expire on December 30, 2001, supply and
install, at a fixed cost of approximately $112 million, the secondary
strand of the Rio extension equipped with four fiber pairs and terminal
equipment to support 20 Gbps of self-healing capacity. We estimate that
it will take approximately 18 months from the date we exercise our option
on the secondary strand of the Rio extension until the target service
date,
. seek and obtain on our behalf all permits and licenses (excluding landing
licenses) required to implement the undersea portion of the Atlantica-1
Network,
. provide all training required for the operation and maintenance of the
Atlantica-1 Network,
. pay liquidated damages in the event of certain failures by Alcatel to
deliver the Atlantica-1 Network by the scheduled RFS date for each of the
primary ring, the connection from Tuckerton, New Jersey to Fortaleza,
Brazil via Bermuda, and the primary strand of the Rio extension (up to
10% of the initial contract value over the first 100 days of delay), and
. at our option, which will expire on December 30, 2001, extend the
Atlantica-1 Network through additional undersea cable systems.
Certain factors may result in increased costs and later RFS dates than
discussed above. See "Risk Factors--Completion of the Atlantica-1 Network."
Pursuant to the contract, Alcatel has caused its ultimate parent company to
guarantee unconditionally, subject to certain limitations, the full and
punctual performance by Alcatel of its obligations under the contract. The
Alcatel contract also limits the damages that we could recover in the event of
a breach by Alcatel.
We are currently negotiating with Alcatel to design and construct the
Caracas extension and the landing stations (including obtaining all required
permits and licenses, except for landing licenses) on either a fixed cost or
cost-plus basis, at an additional estimated cost of $55 million. On August 11,
1999, we signed an intent to proceed letter with Alcatel for the fixed price
turnkey supply of all six undersea cable stations and the associated overland
routes from the cable stations to the cable beach landing points at an
estimated cost of approximately $45 million.
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We selected Alcatel as the system supplier on the basis of quality,
experience and price after reviewing competitive bids with several large
respected undersea cable suppliers. Alcatel, together with its ultimate parent
company, is a world leader in the development, manufacture, installation and
management of state-of-the-art undersea telecommunications cable networks,
transmission equipment, switching equipment and network management systems,
building upon the knowledge and expertise it has gained over the course of more
than 140 years of operating experience. Alcatel and its affiliates operate in
over 130 countries, and provides complete solutions and services to operators,
service providers, enterprises and consumers, ranging from backbone networks to
users' terminals.
Operations, Administration and Maintenance Costs
We will provide, or contract for the provision of, operations,
administration and maintenance services for the Atlantica-1 Network. For the
undersea fiber optic cable and terrestrial extensions, we expect to enter into
a contract with a third party at least six months prior to the RFS date for the
connection from Tuckerton, New Jersey to Fortaleza, Brazil via Bermuda to
provide operations, administration and maintenance services. There are a number
of potential providers of these services, including Alcatel and ACMA. For the
landing stations, we intend to train our personnel to provide operations,
administration and maintenance services at these facilities.
Sales and Marketing
Products and Services
We will offer a flexible range of product and pricing alternatives, at
competitive prices, designed to meet the needs of both emerging and established
carriers and telecommunications services providers, including ISPs and value-
added resellers.
We intend to offer a broad range of bandwidth options, from smaller units of
capacity (E-1s, DS-3s) to larger units of capacity (STM-1s, STM-16s, STM-64s).
We believe that this broad product offering is currently unavailable to
customers seeking connectivity between North America and South America. We will
package this capacity in a variety of ways, from standard IRUs to leases.
Customers purchasing standard IRUs prior to a segment RFS date will pay a
portion of the purchase price upon execution of a contract to buy an IRU, with
the balance of the purchase price due to the Company upon the applicable RFS
date for that segment. Payment plans may be made available to qualifying
purchasers, although we plan to encourage full payment for IRUs on an up-front
basis through advantageous pricing. IRU ownership typically provides for a
fixed connection on the system for the entire design life, normally up to 25
years. We intend to satisfy shorter term requirements for capacity through
leases, with options to convert the leases into IRUs.
In addition, we will offer our customers the ability to acquire capacity on
shorter notice than has been offered by the traditional carrier consortium
systems. This will enable customers to minimize long-term capital commitments
and reliance on long-term demand projections.
For capacity purchases smaller than STM-1s, we will also offer customers, at
a premium, portable IRUs. Portable IRUs will allow a carrier to reassign its
purchased capacity to a different city or station pair on the Atlantica-1
Network. To support this product offering, we will be required to reserve
approximately 15% of the portable capacity as idle capacity on our network.
Carriers will be allowed to use this idle capacity for reassignment on a first-
come, first-served basis, and carriers reassigning their circuits will be
required to surrender their current routing to us for use by others. We will
also provide large capacity purchasers with access to the network management
system that will enable these purchasers to monitor their network's performance
on a real-time basis from end-to-end, control their operations and perform
circuit provisioning as needed.
Purchasers of IRU capacity will pay their pro rata share of operations,
administration and maintenance charges based upon the level of expenses we
incur, or expect to incur, in the operation, administration and
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maintenance of our systems. We intend to offer our IRU customers a choice
between paying a one time operations, administration and maintenance charge, or
paying, on a periodic basis, a fixed charge subject to CPI adjustments and
cost-savings flow-through. For customers purchasing capacity under a lease
agreement, operations, administration and maintenance costs will be included in
the lease payments.
Our billing will be denominated in U.S. dollars wherever possible to
decrease our exposure to foreign currency risks. However, we might be required
to accept payment in local currencies for certain backhaul and other revenues
we receive from operations in certain foreign jurisdictions.
We intend to promote various value-added offerings through which a customer
could utilize our Bermuda network and network operations center to generate
cost savings and optimize its income tax planning. These offerings include
providing (1) turnkey e-commerce and web hosting services, including systems
for order processing, financial transactions, and network-based fulfillment of
digital product, (2) broadband transmission capacity and hosting facilities for
(i) web sites utilizing the customer's own e-commerce systems or (ii) databases
providing service such as disaster recovery backup protection, and (3)
collocation of switches or other equipment to perform traditional circuit-
switched least-cost routing or IP-based routing, including emerging
international IP-based voice services.
We believe that our infrastructure and operating presence in Bermuda should
attract a wholesale segment of the international telecommunications community
to utilize our switching gateway facilities, in conjunction with our Atlantica-
1 Network capacity, as part of a turnkey services and back office solution that
is more cost effective than existing options. With additional traffic volumes
from incremental hubbing activities, combined with our existing base of
traffic, we expect to negotiate favorable terms for international traffic
delivery and to reflect those low costs in rates to our collocated carrier
customers. We intend to be an international gateway in Bermuda for our target
customers.
Target Customers
We are focusing on providing capacity on our system to international
telecommunications service providers. Our target customer base includes many of
the larger North American carriers, South American carriers and new
telecommunications market entrants. We expect that initially the majority of
our customers will be North American and European telecommunication carriers or
their South American affiliates. Our target customers include, among others:
. incumbent long-distance carriers,
. competitive long-distance carriers,
. RBOCs,
. competitive local exchange carriers,
. former state owned monopoly carriers,
. new South American entrants,
. ISPs and data CLECs,
. wireless telephone companies,
. cable and telephony providers, and
. existing undersea cable systems in the region that require restoration.
We expect that many of our potential customers that do not currently offer
international long-distance services will obtain an international long-distance
license or be allowed to offer these services as a result of deregulation. We
also expect existing international long-distance carriers to expand the areas
for which they
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offer service. We believe that international connectivity will become
increasingly important to telecommunications service providers and their
customers.
Marketing Strategy
We intend to develop our own sales and marketing organization to promote
sales of capacity on the Atlantica-1 Network. We intend to have a senior sales
manager overseeing regional sales operations in the United States, Venezuela,
Brazil and Argentina. Each regional operation will handle the direct sales
within its geographic territory, consistent with our overall pricing strategy.
We may supplement our own sales force during our initial marketing effort, and
use third party sales agents that can function in a complementary manner. We
are in discussions with operators of other new cable systems to develop a joint
marketing program that would enable us to expand the reach of our systems by
marketing and promoting capacity on each other's systems.
We will utilize our long standing relationships, our own sales force and our
third party sales agents to identify and encourage early potential purchasers.
Our marketing strategy includes organizing capacity purchase meetings with
potential customers to elicit interest in our systems and identify and respond
to customer demands. In May 1999, we conducted an initial information meeting
in Washington, D.C., providing system features and preliminary pricing, which
attracted over 100 attendees from over 30 companies. We intend to organize
several additional meetings during our system development period to build
further relationships with our potential customers, and to encourage focused
one-on-one meetings to understand fully each potential customer's needs.
Network Operations Center
We currently operate a network operations center in Bermuda to support the
BUS-1 system. In connection with the Atlantica-1 Network, we will develop an
additional network operations center in Bermuda to provide total customer
support and be responsible for the overall operation and maintenance of the
Atlantica-1 Network. We expect to provide dedicated network operations center
personnel to support capacity purchasers in all aspects of capacity usage,
performance and maintenance. Additionally, the network operations center
personnel will provide interconnection coordination and support, both
administrative and technical, and will directly manage capacity provisioning,
network performance, network maintenance and repair, and network restoration.
Network operations center personnel also will serve as a single point of
contact for customer service provisioning, interconnect coordination support,
and any billing inquiry items. The network operations center personnel will
also provide assistance to purchasers to resolve issues with their applications
and interconnect arrangements. We intend to staff the network operations center
seven days a week and 24 hours per day.
Competition
The international telecommunications industry is extremely competitive. We
face competition from existing and planned undersea fiber optic cable systems
along each of our planned routes. We will also compete with satellite providers
and land-based cable systems. We will compete primarily on the basis of price,
availability, flexible provisioning, collocation, transmission quality and
reliability, customer service and the location of our systems. See "Risk
Factors--Competition."
Existing and Planned Cable Systems
Americas-1 is currently the only undersea cable system in service that
directly connects North America and South America. Americas-1 is a fully
utilized non-self-healing consortium cable system that uses other
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systems for its restoration. Americas-2, a consortium cable system currently
under construction, will connect various sites in the Caribbean, North America
and South America. Americas-2 is a non-self-healing collapsed ring system and
has an expected RFS date in the third quarter of 1999. The system is already
fully committed for its initial capacity and allocation of its upgrade capacity
is limited to consortium members. Unlike the Atlantica-1 Network, Americas-2
will not offer city-to-city connectivity and will have limited upgrade
capability.
There are also two other announced undersea cable systems that intend to
provide connectivity between North America and South America:
. South American Crossing, or SAC, is a new cable system being developed by
Global Crossing Ltd. that will link coastal countries in South America to
Global Crossing's Mid-Atlantic Crossing in St. Croix, U.S.V.I. and Global
Crossing's Pan American Crossing in Ft. Amador, Panama. Global Crossing
has stated that the South American Crossing system is scheduled for
completion in the first quarter of 2001 and will be capable of providing
up to 1,280 Gbps of total capacity.
. The SAm-I cable system is being developed by Telefonica Internacional
S.A. and Tyco International Ltd. and will connect South America, Central
America and the United States. Telefonica Internacional S.A. and Tyco
International Ltd. have stated that the SAm-I system is scheduled for
completion in December 2000 and will be capable of providing up to 1,280
Gbps of total capacity.
SAC is expected to be constructed by Alcatel or one of its affiliates, and
the SAM-I cable system is expected to be constructed by Tyco Submarine Systems
Ltd. Both of these announced systems are expected to have capacity and
technology similar to ours, although neither competitor will be operated as an
independent carriers' carrier. We believe that there will be sufficient demand
in the region to support the Atlantica-1 Network and the SAC and SAm-I undersea
cable systems. In particular we believe there will be demand for capacity from
an independent carriers' carrier. However, we expect these other systems to
receive commitments for capacity that we would have received in their absence
and we cannot assure you that there will be sufficient demand to support all of
these systems. See "Risk Factors--Competition" and "--Sales of Capacity;
Realization of Other Revenues."
Satellite Transmission
The Atlantica-1 Network will also face competition from existing and planned
satellite systems. When comparing cable transmission against satellite
transmission for high bandwidth and fixed network uses, we believe that cable
has several distinct advantages with respect to transmission delay and quality.
Cable transmission has a lower cost per circuit, higher capacity and longer
expected service life than satellite transmission. Satellite transmission is
generally considered to have some advantages over cable transmission with
respect to point-to-multipoint broadcast and "thin route" transmission, as
opposed to the more common point-to-point, high volume transmission for which
cable usage is considered to be preferable. Based on satellite transmission
cost and quality characteristics, we believe that satellite transmission does
not represent a viable competitor to a large capacity undersea cable system
such as the Atlantica-1 Network.
Bermuda Telecommunications Competition
The provision of retail telecommunications services in Bermuda is also very
competitive. Although TBI has gained market share in its first two years of
operations, our principal competitor in this market, Cable & Wireless, has
substantially greater financial, technical and marketing resources, access to
larger networks through inter-company relationships, a broader portfolio of
services, stronger name recognition and long-standing customer relationships.
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TBI/E-Commerce Business
TBI Overview
TBI is licensed to provide a broad range of international telecommunications
services, including voice, data, video and Internet, to business, residential
and government customers in Bermuda. TBI began commercial operations in May
1997, initially providing service via satellite pending the November 1997
completion of the BUS-1 system. All services are now carried exclusively over
the BUS-1 system using satellite for restoration. In 1998, TBI became our
wholly owned subsidiary as part of a reorganization.
In two years of operation, TBI has successfully achieved a market share in
excess of one-third of the Bermuda outbound long-distance market. TBI believes
that recent regulatory and commercial developments, including the substantial
reduction in the local access charges levied by the Bermuda Telephone Company
to the international carriers and the trend to lower international settlement
rates, will result in improved operating margins going forward.
We believe that the prospect for growth in Bermuda is significant based on
the expected continued expansion of the reinsurance and financial business
sectors, each of which are high volume consumers of international
telecommunications services. TBI's high quality network, combined with the
introduction of enhanced data and Internet services, is expected to fuel
continued growth in higher bandwidth applications.
We believe that we can successfully leverage our Bermuda-based facilities
by, among other things, developing a server farm where Internet and e-commerce
applications can be hosted in a secure, tax advantageous offshore environment.
Additional data services, including an Integrated Services Digital Network and
an enhanced store and forward facsimile product, are currently being tested and
commercial launch is scheduled for September 1999. Expanded calling card
services, targeted at both the commercial and residential markets, are also in
the final phase of implementation. Growth in sales of TBI's debit card product
is being facilitated through a distribution agreement with the largest
distributor of debit cards in Bermuda. Affinity programs have been introduced
that will leverage working relationships with various businesses and
organizations to extend attractive packages to their members and employees,
with the benefit of encouraging new growth as well as long-term retention.
TBI's customer retention rate has been over 96% per annum since commencement of
commercial service in May 1997.
Historically, the Bermuda Telephone Company's access charges were among the
highest in the world, at $0.27 per minute and $0.24 per minute for outgoing
calls and incoming calls, respectively. TBI's interconnection expense was
recently reduced as a result of a rate reduction mandated by the Bermuda
Minister of Telecommunications and Technology to a flat rate of $0.15 per
minute as of January 1, 1999. A further reduction to $0.10 per minute became
effective on July 1, 1999, with a subsequent rate determination expected in
December 1999 based on a thorough cost study of the Bermuda Telephone Company's
operations. Significant rate rebalancing is causing a commensurate increase in
local rates to offset some of the loss in revenues from the international
carriers.
Business Lines and Products
TBI provides international telecommunications services for traffic
originating and terminating in Bermuda using the BUS-1 system. We offer
services similar to those available from Cable & Wireless, the incumbent
carrier. We believe that our services provide a higher technical quality at
competitive prices to consumers and businesses. TBI also offers other products
and services that were previously not available in Bermuda and supports all
products and services with strong marketing and customer service. Unlike Cable
& Wireless, TBI provides direct billing to all of its commercial customers.
TBI's product offerings include:
Private Line Service: TBI provides dedicated point-to-point circuits for
lease on a full-time basis to commercial customers in Bermuda. As a supplement
to its traditional dedicated private line service offerings,
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TBI is implementing a private line and long-distance bundled service offering
which will provide high volume users with private lines at very competitive
rates.
Card Service: Prepaid and rechargeable card services were launched in the
summer of 1998 and can be utilized on and off Bermuda. A corporate calling card
was launched in May 1999.
Hubbing: TBI plans to promote additional hubbing activities through its
Bermuda gateway operations by providing worldwide low cost traffic delivery via
economical satellite access to operators in more remote locations not readily
served by undersea fiber cable systems. TBI also will promote least-cost
routing services to carriers in North America and South America on terms
comparable to those available in the United States, with the additional
potential to achieve greater savings based on Bermuda's favorable tax regime.
Data Services: We intend to launch Integrated Services Digital Network
services by September 1999. This will allow TBI to meet the service
requirements of the larger customers in the commercial segment, including high
quality access for Internet services and videoconferencing. In addition, we
will offer an enhanced store and forward facsimile product.
The Bermuda Advantage
We believe that Bermuda's strategic offshore location and favorable
regulatory and low-tax environment will make it a preferred operational base
for carriers and ISPs. As such, we see particular benefits of doing business in
Bermuda that enhance our strategic plan and create important competitive
advantages for our customers.
Bermuda does not currently levy sales, income or capital gains taxes. We
believe that the tax advantages of doing business in Bermuda are significant
enough to present a competitive advantage and encourage businesses to migrate
and establish an operating presence there. With the accelerating globalization
of business and heightened competitive pressures, we believe this business
strategy will be attractive to carrier customers, particularly larger carriers
with substantial traffic volumes, as well as companies offering Internet
services, including e-commerce and web hosting services.
Bulk Capacity Sales: We believe that certain multinational customers could
achieve tax benefits by establishing a Bermuda domiciled company to buy
transmission capacity on the Atlantica-1 Network (and other systems) and then
reselling this capacity to its affiliates on an arms' length basis. The
benefits of this arrangement will depend upon the factual circumstances and tax
planning strategies of each customer. We intend to offer these customers
capacity on Atlantica-1 and to supplement it with TBI's value-added services.
Value-Added Services: We intend to promote various value-added offerings
through which a customer could utilize our Bermuda network and network
operations center to generate cost savings and minimize income taxes. These
offerings include e-commerce and web hosting services as well as collocation of
switches and other equipment for least-cost routing and IP-based routing.
Specific services we plan to offer are:
. turnkey e-commerce and web hosting services, including systems for order
processing, financial transactions, and network-based fulfillment of
digital product,
. broadband transmission capacity and world-class hosting facilities for
web sites utilizing the customer's own e-commerce systems or databases
providing service such as disaster recovery backup protection,
. collocation of switches or other equipment to perform traditional
circuit-switched least cost routing or IP-based routing, including
emerging international IP-based voice services. Least-cost routing takes
advantage of the international settlement system to identify low cost
solutions for the one-way delivery of voice traffic made possible by the
liberalization and deregulation of many telecommunications markets around
the world, and
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. down-linking international satellite traffic through Bermuda, rather than
the United States, to the same ultimate destination at substantial cost
savings, along with the availability of other value-added services.
Regulation
Our undersea fiber optic cable facilities and telecommunications services,
including backhaul services, may be subject to regulation in each jurisdiction
where the Atlantica-1 Network and the BUS-1 system land. We currently have in
place all of the necessary licenses to land and provide services from the BUS-1
system. In order to implement fully the Atlantica-1 Network, it may be
necessary for us to obtain authority to land the cable and to offer
telecommunications services, including backhaul, to our customers in each
jurisdiction in which the cable lands.
Construction of the Atlantica-1 Network also requires the acquisition and
maintenance of various permits and licenses in the ordinary course of business,
including environmental and natural resource permits. Although the construction
contract for the Atlantica-1 Network imposes the responsibility of acquiring
and maintaining these licenses and permits on Alcatel, we cannot assure you
that Alcatel will successfully obtain these permits and licenses. Failure to
obtain these permits and licenses, as well as those required by applicable
telecommunications authorities, could have a material adverse effect on our
business, financial condition and results of operations. See "Risk Factors--
Government Regulation."
United States
In the United States, the laws and regulations pertaining to undersea cable
systems and telecommunications services are well developed and an established
set of rules and procedures exist. We have reviewed with Alcatel our various
options with respect to the most optimal landing locations. On June 2, 1999, we
submitted a cable landing license application to the FCC seeking authority to
land and operate the Atlantica-1 Network in Tuckerton, New Jersey (next to the
landing stations for the BUS-1 system) and Boca Raton, Florida. No comments or
objections were filed with the FCC in response to this application. Although we
cannot assure you that this license application will be granted, we have no
reason to believe that we will not be successful in obtaining the necessary
cable landing station license in the United States.
TBI's U.S. affiliate, TeleBermuda International L.L.C. ("TBI L.L.C."), was
formed in May 1996 as a limited liability company under the laws of the State
of Delaware. TBI L.L.C. holds the landing license for the BUS-1 system in the
United States issued by the FCC, as well as certain ownership and leasehold
rights with respect to BUS-1 system assets located in the United States. TBI
holds a 20% ownership interest in TBI L.L.C. and Elbac Cable Corporation
("Elbac") holds the remaining 80% ownership interest. In February 1999, TBI
L.L.C. filed an application with the FCC requesting authority for TBI to obtain
control over Elbac's interest in TBI L.L.C. Upon receipt of FCC approval, TBI
L.L.C. will become a wholly owned subsidiary of TBI, and TBI L.L.C. will
continue to hold the BUS-1 system landing license and operate the BUS-1 system
as currently licensed by the FCC.
TBI is authorized to operate in the United States as a common carrier
pursuant to Section 214 of the Communications Act of 1934, as amended. This
allows TBI to provide any telecommunications services, including backhaul
services, to or from the United States via any means, including our current and
future undersea fiber optic cable systems.
Brazil and Venezuela
In countries such as Brazil and Venezuela with recently privatized
telecommunications industries, many of the telecommunications laws and
regulations are relatively new and still evolving. In both of these countries,
there are no current statutes or regulations regarding the landing of undersea
fiber optic cable facilities. Accordingly, we have consulted with the
appropriate regulatory authorities in Brazil (ANATEL) and Venezuela
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(CONATEL). Based on these consultations, we believe that we are the first
private undersea fiber optic cable operator to request governmental approval to
land an international fiber optic cable system in either jurisdiction. These
consultations have indicated to us that the pro-competitive effects of
deregulation and the desire to attract foreign investment have created flexible
regulatory environments in Brazil and Venezuela that are receptive to projects
such as the Atlantica-1 Network.
The need for new undersea fiber optic cable systems is particularly strong
in these countries where former monopoly providers previously controlled access
to and from the country through their ownership of international capacity on
traditional consortium cable systems. Although competition in the provision of
telecommunications services has begun to be introduced in both jurisdictions,
the former monopoly carriers continue to control the existing inventory of
available undersea fiber optic capacity that lands in each country.
Accordingly, capacity remains scarce and very expensive. Government authorities
have indicated to us that the availability of alternative systems such as the
Atlantica-1 Network is necessary in order to establish a sustainable
competitive international market capable of delivering the economic and
technological benefits of privatization and deregulation.
Brazil: On March 2, 1999, we submitted a request to ANATEL seeking authority
to construct, land and operate the Atlantica-1 Network in Brazil. ANATEL has
informally indicated to us that they are considering three different responses
to our request:
(1) ANATEL may decline to regulate cable landings because this activity is
outside of its jurisdiction,
(2) ANATEL may issue to us an "enabling act" permitting us to land our
cable, or
(3) ANATEL may determine that we need to register our cable as a
telecommunications facility.
Based on our conversations with representatives of ANATEL, we anticipate
receiving a response from ANATEL permitting us to construct, land and operate
the Atlantica-1 Network in Brazil in the near future. Although we cannot assure
you that we will have the necessary authority to land the Atlantica-1 Network
in Brazil, we believe that we will be successful in securing any necessary
approvals in a timely manner. Failure to be allowed to land our cable in Brazil
could have a material adverse effect on our business, financial condition and
results of operations.
Established regulations and procedures exist for obtaining
telecommunications services licenses in Brazil. On March 2, 1999, our operating
subsidiary in Brazil submitted telecommunications services license applications
to ANATEL so that it can provide backhaul services in Brazil. Although we
cannot assure you that these applications will be granted, we have no reason to
believe that we will not be successful in obtaining these licenses.
It is our expectation that we will be able to sell or lease submarine cable
fiber optic facilities to all entities with authority to provide
telecommunication services in Brazil. Under the current regulatory regime in
Brazil only Embratel and Bonari have the appropriate authority to offer long-
distance and international switched voice telephony services in Brazil. ANATEL
is currently providing licenses on a routine basis for companies seeking to
offer international private network services. We do not expect regulatory
authority to be required for carrier-to-carrier contracts or the offering of
value-added services. Thus, today we should be able to sell our facilities to
the two public switched telephony licensees, all private line licensees and
value-added service providers. The government of Brazil has announced that in
January 2002, it will lift current restrictions on the number of licensees in
Brazil who may provide switched voice telephony. At that time, we should also
be able to offer our facilities to new competitive switched voice telephony
providers.
Venezuela: On March 16, 1999, we submitted a letter to CONATEL seeking
guidance on what licenses or permits from CONATEL may be necessary to land the
Atlantica-1 Network in Venezuela. In response to this letter, CONATEL informed
us in writing that no authorization or permit from CONATEL is required to
construct and land the Atlantica-1 Network in Venezuela. Based on advice
provided to us by CONATEL, we do
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not believe that any CONATEL permits or concessions are necessary to operate
the cable or sell capacity on the cable. However, if CONATEL were now to
determine that a permit or concession was necessary, we believe that a permit
or concession would be issued by CONATEL in a time frame consistent with the
implementation schedule for the Atlantica-1 Network. In order to provide
backhaul services in Venezuela, we must obtain a Private Network Concession,
which is required under Venezuelan law to install and operate a
telecommunications network for commercial purposes. We shortly plan to submit
an application to CONATEL for this license. Although we cannot assure you that
we will be granted this license, we have no reason to believe that we will not
be successful in obtaining it.
It is our expectation that we will be able to sell or lease submarine cable
fiber optic facilities to all entities with authority to provide
telecommunications and value added network services in Venezuela. Under the
existing regulatory framework in Venezuela, only CANTV can offer international
public switched telephony services in Venezuela. However, the Concession
Agreement between the Republic of Venezuela and CANTV provides that in November
2000 the telecommunications market will be open for additional competition and
the appropriate authority will be granted to a number of companies seeking to
offer switched voice telephony services. Currently, CONATEL is issuing
authority on a routine basis to companies seeking to offer international or
domestic private network services. Thus, today we can sell our facilities to
CANTV and private network and value added service providers. Additionally, in
November 2000 we will be able to sell facilities to newly licensed switched
voice telephony providers.
Bermuda
On January 10, 1997, TBI was granted an international carrier license under
which it is authorized to provide a broad range of international
telecommunications services in, from, to and in transit through Bermuda. The
license is for a term of five years and is subject to renewal. TBI pays a
licensing fee based on the greater of 6% of TBI's total revenues (net of
carrier settlements) in Bermuda or 20% of TBI's profit in Bermuda. Although TBI
believes it will be able to obtain a renewal of TBI's international carrier
license, the failure to secure this renewal could have a material adverse
effect on our business, financial condition and results of operations. TBI's
international carrier license also permits TBI to land additional cables in
Bermuda subject to the prior consent of the Minister of Telecommunications and
Technology. On March 31, 1999, TBI applied for the Minister's consent to land
the Atlantica-1 Network in Bermuda. On April 7, 1999, TBI received formal
written approval from the Minister to land the Atlantica-1 Network in Bermuda.
The Minister's consent is subject to receipt of various construction licenses
and permits which are required in the ordinary course of business.
Properties
We lease executive and administrative office space at our headquarters at 2
Carter's Bay Road, Southside, St. David's DDBX, Bermuda. We lease cable station
space in St. David's, Bermuda under a 12-year lease, which is renewable for an
additional nine-year term. We also lease cable station space in Tuckerton, New
Jersey under a lease that will expire when the BUS-1 system is retired from
service, which is expected to occur in 2022. In addition, we lease office space
in Hamilton, Bermuda, and in Canada in Markham, Ontario and Montreal.
We intend to purchase or lease property in (1) Punta Gorda, Venezuela, (2)
Fortaleza, Brazil, (3) Rio de Janeiro, Brazil, (4) Tuckerton, New Jersey, (5)
Boca Raton, Florida, and (6) Bermuda to build new cable landing stations.
Intellectual Property and Research and Development
We have no patents or registered trademarks. We claim trademark rights to
the following marks: "GlobeNet," "TeleBermuda," "TBI," "Atlantica," "Atlantica-
1," "Atlantica-2," "GlobeNet
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<PAGE>
Communications" and "GeoReach." We expect to file trademark applications with
respect to some or all of these trademarks within the next four months. The TBI
logo, GlobeNet logo and the Atlantica logo are our service marks.
We are not currently conducting any material research and development
activities.
Employees
As of August 15, 1999, we had 49 employees. We believe that our workforce is
highly capable and motivated and that our relations with our employees are
good. There have been no material changes in the number of our employees during
the past fiscal year.
Legal Proceedings
We are, from time to time, a party to litigation that arises in the normal
course of our business operations. We are not a party to any litigation the
resolution of which we expect to have a material adverse effect on our
business, financial condition and results of operations.
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<PAGE>
MANAGEMENT
Directors and Officers
The following table sets forth the names, ages and positions of our
directors and officers:
<TABLE>
<CAPTION>
Name(1) Age Position
- ------- --- --------
<S> <C> <C>
Michael Kedar......... 57 Chairman and Chief Executive Officer
Anthony Bolland....... 45 Director
Jeffrey G. Conyers.... 46 Director
Sebastien Rheaume..... 30 Director
Linda Dougherty....... 30 Director
George E. Matelich.... 43 Director
Kevin J. Maroni....... 36 Director
Harley J. Murphy...... 54 Director
Mark A. Pelson........ 37 Director
Scott K. Socol........ 46 Executive Vice President and Chief Operating Officer
Greg Belbeck.......... 44 Chief Financial Officer
Laurent Duplantie..... 44 Vice President, Engineering and Operations
Lin Gentemann......... 38 General Counsel, Vice President and Secretary
James Fitzgerald...... 52 Vice President, Bermuda Operations
</TABLE>
- --------
(1) We also expect to add two new independent directors to our board in the
near future.
Michael Kedar. Mr. Kedar, a citizen of Canada and founder of the Company,
has been the Company's Chairman and Chief Executive Officer since January 1995.
Prior thereto, he was the Chairman and Chief Executive Officer of Call-Net
Enterprises Inc., which he founded in 1986. In addition, Mr. Kedar founded
Microcell Communications, Inc., a PCS provider in Canada. Mr. Kedar holds an
Engineering degree from Ecole Superior Technique (Geneva, Switzerland). Mr.
Kedar's business address is 3100 Steeles Ave. E., Ste. 805, Markham, Ontario
L3R 8T3.
Anthony Bolland. Mr. Bolland, a citizen of the United Kingdom, has been a
director of the Company since July 1999. He has been a Managing Director of
Boston Ventures Management, Inc. since 1983. Boston Ventures, through its
partnerships, is an active investor in the media, telecommunications and
services industries. From 1975 to 1983, Mr. Bolland was an Officer of First
National Bank of Boston. Mr. Bolland holds an L.L.B. from Warwick University,
which he received in 1975. He is also a director of Ogden Corporation. Mr.
Bolland's business address is One Federal Street, 23rd Floor, Boston,
Massachusetts 02110.
Jeffrey G. Conyers. Mr. Conyers, a citizen of Bermuda, has been a director
of the Company since its inception and has served on the board of TBI since
January 1995. He is Chief Executive Officer for the First Bermuda Group of
Companies, responsible for Institutional and Retail Brokerage Services. Prior
to joining First Bermuda Securities Ltd. in 1991, he served as Assistant
Manager in the Private Banking/Trust division of the Bank of Bermuda. Mr.
Conyers currently holds licenses with the NASD as Registered Representative,
Registered Options Principal, Financial Operations Principal and as General
Securities Principal. He is a graduate of Trinity College, University of
Toronto (BA 1975). In addition to his responsibilities with First Bermuda
Securities and Bermuda Savings & Loan Ltd., Mr. Conyers is also a director of
numerous companies in Bermuda including Bermuda Aviation Services Ltd., The
Bermuda Rock Fund Ltd., and Bermuda Cablevision. Mr. Conyers' business address
is Chevron House, Ground Floor, 11 Church Street, Hamilton HM06, Bermuda.
62
<PAGE>
Sebastien Rheaume. Mr. Rheaume, a citizen of Canada, has been a director of
the Company since July 1999. Mr. Rheaume is a Manager at Capital Communications
CDPQ, Inc., a private subsidiary of the Montreal-based Caisse de depot et
placement du Quebec, the fund manager for public sector pension and insurance
plans in Quebec. This fund had total assets of $45 billion at the end of 1998.
Prior to joining Capital Communications CDPQ, Inc. in April 1999, Mr. Rheaume
was an Associate Director in the Corporate Finance/Mergers and Acquisitions
department of Bell Canada, a Senior Analyst in the Financial Strategy
department at Royal Bank of Canada, and Director of Finance in Kerr Financial
Corporation. Mr. Rheaume holds a B.Comm. degree from McGill University. He is a
Chartered Accountant and a Chartered Financial Analyst, and his business
address is 1981 Avenue McGill College, Montreal, Quebec H3A 3C7.
Linda Dougherty. Ms. Dougherty, a citizen of the United States, has served
on the board of the Company since March 1999. She is Vice-President and
Director, Merchant Banking, of TD Capital Group Limited and has more than eight
years of experience in the financial services industry. Prior to joining TD
Capital Group Limited, Ms. Dougherty was with TD Securities Inc. as a Vice-
President in Mergers and Acquisitions and Corporate Finance, specializing in
Project Finance (1993) and Communications (1994-1996). Prior to joining TD
Securities Inc., she was a regional South East Asian equities analyst with
James Capel in Singapore and a Consultant with Oliver, Wyman & Company, a
financial services consulting firm, in New York and London, England. Ms.
Dougherty graduated magna cum laude, Phi Beta Kappa from the Wharton School
(B.S.) and the College of Arts & Sciences (B.A.) of the University of
Pennsylvania. She also completed the Executive Development Program at the
Kellogg Graduate School of Management. Ms. Dougherty's business address is 55
King Street West, Toronto Dominion Bank Tower, 8th Floor, P.O. Box 1, Toronto
Dominion Center, Toronto, Ontario M5K 1A2.
George E. Matelich. Mr. Matelich, a citizen of the United States, has served
on the Company's board since July 1999. He is a Managing Director of Kelso &
Company, and has been with Kelso since 1985. Prior to joining Kelso he spent
two years in the Mergers and Acquisitions and Corporate Finance Departments at
Lehman Brothers Kuhn Loeb, where his responsibilities included the analysis,
evaluation and financing of leveraged buyouts, and the refinancing of more
mature buyout companies. His previous experience includes two years as a
consultant with Ernst & Whinney. Mr. Matelich is a Certified Public Accountant,
holds a Certificate in Management Accounting, and received a B.A. in Business
Administration, summa cum laude, from the University of Puget Sound and an
M.B.A. (Finance and Business Policy) from Stanford Graduate School of Business.
He is also a director of Humphreys Inc., MJD Communications and is a trustee of
the University of Puget Sound. Mr. Matelich's business address is 320 Park
Avenue, New York, NY 10022.
Kevin J. Maroni. Mr. Maroni, a citizen of the United States, has served on
the Company's board since July 1999. Mr. Maroni is a General Partner of
Spectrum Equity Investors. Spectrum is a leading private equity firm which
manages over $1 billion of capital for investment in telecommunications and
media companies. Prior to joining Spectrum in 1994, Mr. Maroni worked at Time
Warner, Inc. and Harvard Management Company. Mr. Maroni holds an MBA from
Harvard University and a BA from the University of Michigan. Mr. Maroni is a
director of CTC Communications Corp. (NASDAQ: CPTL); American Cellular Corp;
Pathnet, Inc., and Formus Communications Inc. His business address is One
International Place, 29th Floor, Boston, Massachusetts 02110.
Harley J. Murphy. Mr. Murphy, a citizen of Canada, has served on the
Company's board since its inception and has served on the board of TBI since
January 1995. He joined Wood Gundy in 1971 working in the Money Market,
Corporate Finance and International Investment Banking areas and is presently
Director and Vice-President of the Hamilton, Ontario operations. In 1982, he
co-founded and was President of Celtel Communications Corporation, which when
licensed along with Rogers Cantel, provided cellular services to Canadians. In
1985, he founded Metroplex Communications Inc., an affiliate of Page Canada,
the first privately-owned company to introduce nation-wide paging in Canada.
Mr. Murphy graduated in 1969 from the University of Toronto with a degree in
Industrial Engineering. His business address is 21 King Street West, Ste. 600,
Hamilton, Ontario L8P 4W7.
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<PAGE>
Mark A. Pelson. Mr. Pelson, a citizen of the United States, has served on
the Company's board since July 1999. Mr Pelson is a Principal of Providence
Equity Partners Inc., which he joined in August 1996. Prior to joining
Providence, he was a co-founder and director of TeleCorp, Inc., a wireless
telecommunications company. From 1989 to 1995, Mr. Pelson served in various
management positions with AT&T, with his most recent position being a general
manager of strategic planning and mergers and acquisitions. Mr. Pelson is also
a director of Language Line LLC, Carrier1 International S.A., and Madison River
Telephone Company, L.L.C. He received a B.A. from Cornell University and a J.D.
from Boston University. Mr. Pelson's business address is 50 Kennedy Plaza, 900
Fleet Center, Providence, Rhode Island 02903.
Scott K. Socol. Mr. Socol, a citizen of the United States, has been the
Company's Executive Vice President and Chief Operating Officer since May 1996.
Prior thereto, he was the Director of Operations from 1995 to 1996. From 1986
to 1994, Mr. Socol worked with MCI/MCI International with responsibility for
global expansion and management of operations of more than 20 international
offices located in the Atlantic Ocean region. Mr. Socol holds a B.A. from
Guilford College and a Juris Doctorate degree from the University of Georgia.
His business address is 3100 Steeles Ave. E., Ste. 805, Markham, Ontario L3R
8T3.
Greg Belbeck. Mr. Belbeck, a citizen of Canada, has been Chief Financial
Officer of the Company since February 1997. Prior to joining the Company in
1997, Mr. Belbeck worked for 14 years in accounting, corporate finance and
valuation at Price Waterhouse and two years in finance and business development
roles with two Canadian start-up telecommunications companies. Mr. Belbeck
holds a B.A. (economics) degree from York University, and a law degree from
Osgoode Law School. Mr. Belbeck is a Chartered Accountant and a Chartered
Business Valuator and his business address is 3100 Steeles Ave. E., Ste. 805,
Markham, Ontario L3R 8T3.
Laurent Duplantie. Mr. Duplantie, a citizen of Canada, has been Vice
President, Engineering and Operations, of the Company since October 1996. Prior
to joining the Company, he spent 15 years at Teleglobe Canada as Director of
Strategic Development and Director of Network Services promoting CANTAT-3 and
CANUS 1, and as Project Director for the construction of CANTAT-3. Mr.
Duplantie holds a Bachelor's degree in Engineering from l'Ecole Polytechnique
de Montreal. Mr. Duplantie's business address is 170 Taschereau Blvd., Ste.
310, La Prairie, Quebec J5R 5H6.
Lin Gentemann. Ms. Gentemann, a citizen of the United States, has been
General Counsel, Vice President, and Secretary of the Company since November
1997. Prior to joining the Company, Ms. Gentemann served as senior corporate
attorney at MCI from 1992 to 1997. Before joining MCI, Ms. Gentemann was an
associate with the law firm of Jones, Day, Reavis and Pogue. She holds a B.A.
from the University of Virginia and a Juris Doctorate degree from the
Washington College of Law, American University. Ms. Gentemann's business
address is P.O. Box HM 3043, Hamilton HM NX, Bermuda.
James Fitzgerald. Mr. Fitzgerald, a citizen of Canada, has been the
Company's Vice President, Bermuda Operations since 1999. He also has served as
TBI's General Manager since 1999, when he was promoted from Senior Vice
President of Marketing, Sales and Customer Service of TBI. Prior thereto, Mr.
Fitzgerald held senior management positions at Bell Canada, Northern Telecom
(Nortel), Unitel (AT&T Canada) and most recently, from 1995 to 1998, as
President & Chief Operating Officer of MTS Mobility, Inc., a Canadian regional
cellular provider. Mr. Fitzgerald holds a B.A. degree and a M.B.A. degree from
York University. His business address is 2 Carter's Bay Road, Southside, St.
David's, DDBX Bermuda.
Board of Directors
The affairs of the Company are governed by the board of directors. Our
directors are elected to one-year terms. Our board consists of 11 directors:
(1) two independent directors (who have not yet been nominated), one of whom is
to be nominated by the holders of a majority of the Class B shares, and both of
whom must be
64
<PAGE>
approved by a vote of the Class B shareholders (although two of the Class B
shareholders are excluded from the nomination and approval of the independent
directors), (2) six directors appointed by certain of the Class B shareholders,
and (3) three directors approved by a vote of the holders of our common shares,
although Class B shareholders are not permitted to vote their common shares.
Compensation Committee
Our board of directors has established a Compensation Committee. The purpose
of the Compensation Committee is to establish and submit to our board of
directors recommendations with respect to (1) compensation of our officers and
other key employees and (2) awards to be made under our share option and
incentive plan. Messrs. Conyers, Kedar and Murphy served on the 1998
Compensation Committee.
Compensation of Directors
Directors do not receive monetary compensation for their services as
directors. In 1997 and 1998 we granted our directors stock options representing
in the aggregate 85,000 common shares. To date in 1999 we granted our directors
(except Mr. Kedar) stock options representing in the aggregate 50,000 common
shares. We have not set aside or accrued any amounts during our last fiscal
year to provide pension, retirement or similar benefits for our directors and
officers.
Indemnification of Directors and Officers
Indemnification Agreements with Directors
We have entered into indemnity agreements with each of our directors.
Pursuant to the director indemnity agreements, we have agreed to indemnify and
save harmless each director, his/her heirs and legal representatives, to the
fullest extent permitted by law, against all costs, charges, liability,
damages, and expenses, including an amount paid to settle an action or to
satisfy a judgment, reasonably incurred by him/her in respect of any civil,
criminal or administrative action or proceeding to which he/she is made a party
by reason of, or in any connection with him/her, being or having been a
director if (1) the director acted in his/her capacity as a director and (2) in
the case of a criminal or administrative action or proceeding that is enforced
by a monetary penalty, the director had reasonable grounds for believing that
his/her conduct was lawful. Directors are required to obtain our consent to any
settlement of any civil, criminal or administrative action or proceeding.
Indemnification Agreements with Officers
We have entered into indemnity agreements with Michael Kedar, James
Fitzgerald, Laurent Duplantie, Scott Socol, Lin Gentemann and Greg Belbeck.
Pursuant to the indemnification agreements, we have agreed, to the fullest
extent permitted by our bye-laws and applicable law, to indemnify each
indemnitee against all expenses actually and reasonably incurred, judgments,
penalties, fines and amounts paid in settlement by such indemnitee if he/she
is, or is threatened to be made, a party to any threatened, pending, or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding as a result of
his/her status as an employee or officer of the Company (1) if, in a proceeding
other than a proceeding by or in the right of the Company, he/she acted in good
faith and in a manner reasonably believed to be in our best interests and, with
respect to a criminal proceeding, if he/she had no reasonable cause to believe
his/her conduct was unlawful and (2) if, in a proceeding brought by or in the
right of the Company to procure a judgment in its favor, to the extent such
indemnitee is successful, on the merits or otherwise, provided that if the
indemnitee is only partially successful in such proceeding, we agree to
indemnify him/her for such expenses actually and reasonably incurred by him/her
or on his/her behalf in connection with each successfully resolved claim, issue
or matter.
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<PAGE>
Bye-Laws
Our bye-laws provide that, subject to the Companies Act 1981 of Bermuda,
every director, officer and member of a committee constituted in accordance
with our bye-laws is indemnified by us against (1) all civil liabilities, loss,
damage, charge or expense incurred or suffered by him as a director, officer or
committee member while exercising his powers and discharging his duties under
the Companies Act 1981 of Bermuda and our bye-laws and (2) all liabilities
incurred by him as a director, officer or committee member in defending any
proceedings, whether civil or criminal, in which judgment is given in his favor
or in which he is acquitted, or in connection with any application under the
Companies Act 1981 of Bermuda in which relief from liability is granted to him
by the court. The indemnity extends to any person acting as a director, officer
or committee member in the reasonable belief that he has been so appointed or
elected notwithstanding any defect in such appointment or election provided,
however, that the indemnity does not extend to any matter which would render it
void pursuant to the Bermuda Act.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
Executive Compensation
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation for fiscal year 1998
for our Chief Executive Officer and the other four most highly compensated
executive officers (the "Named Executive Officers"):
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------- ---------------------
Awards
---------------------
Other Annual Securities Underlying
Name and Principal Position Salary Bonus Compensation Options
- --------------------------- -------- ------- ------------ ---------------------
<S> <C> <C> <C> <C>
Michael Kedar,
Chief Executive Officer... $144,750 $71,700 25,000
Scott K. Socol,
Executive Vice President
and
Chief Operating Officer... 154,962 53,625 $16,000 35,000
Lin Gentemann,
General Counsel, Vice
President and
Secretary................. 107,121 30,000 18,000 25,000
Laurent Duplantie,
Vice President,
Engineering and
Operations................ 83,333 30,000 25,000
Greg Belbeck,
Chief Financial Officer... 86,667 16,666 25,000
</TABLE>
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<PAGE>
OPTION GRANTS IN 1998
The following table sets forth option grants during fiscal year 1998 to the
Named Executive Officers:
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual Rates
Of Stock Price Appreciation
Individual Grants For Option Term
- -------------------------------------------------------------------------- ----------------------------
Number Of Percent Of
Securities Total Options
Underlying Granted To Exercise
Option Employees Price Expiration
Name Granted In Fiscal Year ($/Share) Date 5% 10%
- ------------------------ ---------- -------------- --------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael Kedar,
Chief Executive
Officer................ 25,000 11% $9.00 Dec. 31, 2008 $141,500 $356,000
Scott K. Socol,
Executive Vice
President and Chief
Operating Officer...... 35,000 15 9.00 Dec. 31, 2008 198,100 498,400
Lin Gentemann,
General Counsel, Vice
President and
Secretary.............. 25,000 11 9.00 Dec. 31, 2008 141,500 356,000
Laurent Duplantie,
Vice President,
Engineering and
Operations............. 25,000 11 9.00 Dec. 31, 2008 141,500 356,000
Greg Belbeck,
Chief Financial
Officer................ 25,000 11 9.00 Dec. 31, 2008 141,500 356,000
</TABLE>
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<PAGE>
AGGREGATED OPTION EXERCISES IN 1998 AND DECEMBER 31, 1998 OPTION VALUES
The following table sets forth options exercised by our Named Executive
Officers during fiscal year 1998 and the value of unexercised options for these
officers at the end of fiscal year 1998:
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value Of
Unexercised Unexercised
Options At In-The-Money
Fiscal Options At
Year-End Fiscal Year-End
------------- ----------------
Shares
Acquired On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
---- ----------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
Michael Kedar,
Chief Executive Officer... 0 0 54,900/45,100 $414,450/$20,100
Scott K. Socol,
Executive Vice President
and Chief Operating
Officer................... 0 0 40,750/51,750 268,250/16,750
Lin Gentemann,
General Counsel, Vice
President
and Secretary ............ 0 0 3,300/31,700 3,300/6,700
Laurent Duplantie,
Vice President,
Engineering and
Operations................ 0 0 3,300/31,700 3,300/6,700
Greg Belbeck,
Chief Financial Officer... 0 0 3,300/31,700 3,300/6,700
</TABLE>
1998 Share Option Plan
We adopted the 1998 Share Option and Incentive Plan on December 18, 1998.
Under this option plan, options to purchase common shares of the Company may be
granted to employees, board members and consultants or advisers to the Company
or any subsidiary. The purposes of the option plan are to enhance our ability
to attract and retain qualified individuals to advance our interests and to
provide financial incentives to these individuals to continue to serve us and
our subsidiaries and to improve our business results and earnings. The option
plan is currently administered by the board of directors of the Company which
has the authority to set specific terms and conditions of options granted under
the option plan and to administer the option plan. Options may be granted for a
term not to exceed ten years and are not transferable other than by will or the
laws of descent and distribution, except as otherwise approved by the board of
directors.
Each option may be exercised within the term specified in the option
agreement under which it was granted. In addition, an option may be exercised
as to vested shares within 90 days after the termination of the optionee's
employment, except that our board of directors, in its discretion, may annul
any option grant if the optionee is an employee of the Company or any
subsidiary and is terminated for cause. In the event of a termination due to an
optionee's death or disability, all options shall become exercisable and may be
exercised until the earlier of the first anniversary of such event or the
stated expiration date of the option. If our board of directors approves any
transaction that will result in a change of control of the Company, all options
shall become immediately exercisable for a period of fifteen days immediately
prior to the scheduled consummation of the event. Upon the consummation of any
such event, the option plan and all outstanding, unexercised options will
terminate unless the parties to the transaction provide otherwise.
The exercise price of all stock options is the fair market value of the
common shares of the Company on the date of grant. The option exercise price
may be paid in cash or, in the discretion of our board of directors, by the
delivery of common shares then owned by the optionee, or, in the discretion of
our board of directors, by a combination of these methods. The option agreement
may also permit that payment of the exercise price
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<PAGE>
may be made by delivering a properly executed exercise notice to us directing
that payment of the exercise price will be made by a broker acceptable to us
upon delivery of the common shares to the broker.
At August 15, 1999, we had outstanding under the option plan options for
223,719 common shares of the Company at a weighted average exercise price of
$9.0, of which 63,719 were exercisable. To date, options to purchase 40,281
common shares have been exercised under the option plan. Our board of directors
has the authority to grant options up to a maximum of 20% of the fully diluted
shares of the Company pursuant to a general mandate of our shareholders, which
expires annually unless re-approved.
1997 Stock Option Plan
TBI adopted the 1997 Stock Option and Incentive Plan on September 24, 1997.
In connection with the reorganization of the TBI group of companies, the
options to purchase common shares of TBI issued under this plan were exchanged
for options to purchase our common shares. Under this option plan, options to
purchase common shares of the Company were granted to directors, executive
management, senior management and senior staff of TBI. The purposes of the
option plan were to enhance TBI's ability to attract and retain qualified
individuals to advance its interests and to provide financial incentives to
these individuals to continue to serve TBI and to improve its business and
earnings. Options granted pursuant to this option plan were granted for a term
not to exceed ten years and are not transferable other than by will or the laws
of descent and distribution.
Each option may be exercised within the term specified in the option
agreement under which it was granted provided that all options must be
exercised within 10 years of the grant date or within 30 days of the optionee's
termination of employment with the Company for any reason other than retirement
or death, whichever occurs first. If the optionee's employment terminates
because of retirement as approved by the board of directors, the optionee may
exercise the options granted before retirement as the options vest but not
later than five years from the date of retirement. In the event of an
optionee's death, unless decided otherwise by the board of directors, the
estate of the optionee may exercise any options that had vested at the time of
the optionee's death within 12 months following the date of death. In the event
of an optionee's disability, unless decided otherwise by the board of
directors, the optionee may exercise the options granted before the
commencement of the disability as the options vest, but not later than five
years from the commencement of the disability. The exercise price of all stock
options is determined by the board of directors but may not be less than the
fair market value of the shares at the time of the grant.
At August 15, 1999, we had outstanding under the option plan options for
156,899 common shares of the Company at a weighted average exercise price of
$8.00 per share, of which 55,059 were exercisable. To date, options to purchase
10,101 common shares have been exercised under the option plan. No options to
purchase common shares of the Company have been issued under this plan since
December 31, 1997.
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<PAGE>
PRINCIPAL SHAREHOLDERS
Security Ownership of Certain Beneficial Owners and Managment
The following table sets forth certain information as of August 9, 1999
regarding the beneficial ownership of our common shares and Class B shares by:
. each person (or group as defined in Section 13(d)(3) of the Exchange
Act) who is known to us to be the beneficial owner of more than five
percent of our common shares or Class B shares,
. our directors and nominees,
. our Named Executive Officers, and
. our directors and executive officers as a group.
Unless otherwise noted and subject to community property laws, the persons
or entities in this table have sole voting and investment power with respect to
all shares owned by them. The information set forth in the table and footnotes
below has been provided to the Company by the shareholders listed below.
<TABLE>
<CAPTION>
Shares Beneficially
Name of Beneficial Total Number of Shares Owned Through
Title of Class Owner(1) Beneficially Owned Options Percent of Class
-------------- ----------------------- ---------------------- ------------------- ----------------
<C> <S> <C> <C> <C>
Common / Class B Boston Ventures Limited 2,941,176 / 199 -- 17.3% / 19.9%
Partnership V(2)
One Federal Street,
23rd Floor
Boston, MA 02110-2003
Common / Class B TD Capital Group 2,918,540 /197 -- 17.2% / 19.7%
Limited(3)
55 King Street
Toronto Dominion Bank
Tower, 8th Floor P.O.
Box 1 Toronto Dominion
Centre
Toronto, Ontario M5K
1AZ Canada
Common / Class B Kelso Investment 2,500,000 / 169 -- 14.7% / 16.9%
Associates VI, L.P.(4)
320 Park Avenue, 24th
Floor
New York, NY 10022
Common / Class B Providence Equity 1,508,378 / 98 -- 8.9% / 9.8%
Partners III, L.P.(5)
Fleet Center, 9th
Floor
50 Kennedy Plaza
Providence, RI 02903
Common / Class B Capital Communications 1,470,588 / 100 -- 8.6% / 10.0%
CDPQ, Inc.
1981 McGill College
Avenue
Montreal, Quebec H3A
3C7 Canada
Common / Class B Spectrum Equity 1,458,824 / 97 -- 8.6% / 9.7%
Investors III, L.P.(6)
One International
Place, 29th Floor
Boston, MA 02110
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Name of Beneficial Total Number of Shares Owned Through
Title of Class Owner(1) Beneficially Owned Options Percent of Class
-------------- ------------------------ ---------------------- ------------------- ----------------
<C> <S> <C> <C> <C>
Common Michael Kedar (Chairman 88,233 88,233 *
of the Board and Chief
Executive Officer)(7)
Common Jeffrey G. Conyers 87,814 *
(Director)(8) 76,610
Common Harley J. Murphy 46,666 *
(Director) 46,666
Common Linda Dougherty 5,000 *
(Director) 5,000
Common / Class B Anthony Bolland -- --
(Director) --
Common / Class B Kevin J. Maroni -- --
(Director) --
Common / Class B George E. Matelich -- --
(Director) --
Common / Class B Mark A. Pelson (Director) -- -- --
Common / Class B Sebastian Rheaume -- --
(Director) --
Common Scott K. Socol 73,094 68,446 *
(Executive Vice
President and Chief
Operating Officer)
Common Lin Gentemann (General 38,198 36,633 *
Counsel, Vice President
and Secretary)
Common Laurent Duplantie (Vice 36,633 36,633 *
President, Engineering
and Operations)
Common Greg Belbeck (Chief
Financial Officer) 36,633 36,633 *
Common All Directors and 412,271 -- 2.41%
Executive Officers as a
Group
</TABLE>
- --------
* Denotes ownership of less than one percent.
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed a "beneficial owner" of a security if he or she has or
shares the power to vote or direct the voting of such security or the power
to dispose or direct the disposition of such security. A person is also
deemed to be a beneficial owner of any securities that that person has the
right to acquire beneficial ownership of within 60 days. More than one
person may be deemed to be a beneficial owner of the same securities.
(2) Boston Ventures Company V, LLC is the general partner of Boston Ventures
Limited Partnership V, and by virtue of such status may be deemed to be the
beneficial owner of the shares owned by Boston Ventures Limited Partnership
V. Anthony Bolland, Roy Coppedge, Richard Wallace, James Wilson, Martha
Crowninshield and Barbara Genader are the managing directors of Boston
Ventures Company V, LLC, and by virtue of such status may be deemed to be
the beneficial owner of the shares beneficially owned directly or
indirectly by Boston Ventures Company V, LLC. Each of Anthony Bolland, Roy
Coppedge, Richard Wallace, James Wilson, Martha Crowninshield and Barbara
Genader disclaim such beneficial ownership.
(3) Toronto-Dominion Bank, the parent of TD Capital Group Limited, may be
deemed to share beneficial ownership of the shares beneficially owned
directly or indirectly by TD Capital Group Limited.
(4) Excludes 441,176 common shares and 30 Class B shares held by an affiliate
of Kelso Investment Associates VI, L.P. The general partner of Kelso
Investment Associates VI, L.P. may be deemed to share beneficial ownership
of the shares beneficially owned directly or indirectly by Kelso Investment
Associates VI, L.P. and the affiliate, but disclaims beneficial ownership
of these shares. Frank T. Nickell,
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<PAGE>
Thomas R. Wall, IV, George E. Matelich, Michael B. Goldberg, David I.
Wahrhaftig, Frank K. Bynum, Jr. and Philip E. Berney may be deemed to share
beneficial ownership of the shares beneficially owned directly or indirectly
by Kelso Investment Associates VI, L.P. and its affiliate by virtue of their
status as managing members of the affiliate and of the general partner of
Kelso Investment Associates VI, L.P., but disclaim such beneficial
ownership. Due to their common control, Kelso Investment Associates VI, L.P
and its affiliate could be deemed to beneficially own each others shares,
but disclaim such beneficial ownership.
(5) Excludes 11,230 common shares and 1 Class B share held by an affiliate of
Providence Equity Partners III, L.P. Providence Equity Partners III L.L.C.,
the general partner of Providence Equity Partners III, L.P., may be deemed
to share beneficial ownership of the shares beneficially owned directly or
indirectly by Providence Equity Partners III, L.P. and by the affiliate,
but disclaims beneficial ownership of these shares. Jonathan M. Nelson,
Glenn M. Creamer and Paul J. Salem may be deemed to share voting and
investment power with respect to the shares in which Providence Equity
Partners III L.L.C. has direct or indirect beneficial ownership, but each
disclaim such deemed beneficial ownership.
(6) Excludes 60,784 common shares and 2 Class B shares held by two affiliates
of Spectrum Equity Investors III, L.P. Spectrum Equity Associates III,
L.P., the general partner of Spectrum Equity Investors III, L.P., may be
deemed to share beneficial ownership of the shares beneficially owned
directly or indirectly by Spectrum Equity Investors III, L.P. and the
affiliates, but disclaims beneficial ownership of these shares. Brian B.
Applegate, William P. Collatos, Kevin J. Maroni and Randy Henderson may be
deemed to share beneficial ownership of the shares beneficially owned
directly or indirectly by Spectrum Equity Associates III, L.P. by virtue of
their status as general partners of Spectrum Equity Associates III, L.P.,
but disclaim such beneficial ownership.
(7) Excludes 752,621 common shares and 120,000 options held by TeleBermuda
(BVI) Limited, an investor holding company incorporated in the British
Virgin Islands in which Mr. Kedar holds preference shares that carry more
than 50% of the voting rights. Although Mr. Kedar may be deemed for
disclosure purposes to share beneficial ownership of the common shares and
options held by TeleBermuda (BVI) Limited by virtue of his ownership of the
preference shares, Mr. Kedar disclaims beneficial ownership of the common
shares and options held by TeleBermuda (BVI) Limited. Other than the fixed
equity represented by the preference shares, Mr. Kedar does not have any
equity interest in TeleBermuda (BVI) Limited.
(8) Excludes 19,622 common shares held by First Bermuda Securities Limited, in
which Mr. Conyers holds a 12% interest. Excludes 92,333 common shares held
by the Tel Trust, a trust for which Mr. Conyers serves as trustee.
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<PAGE>
Capital Structure
The Company is authorized to issue 24,000,000 common shares and 2,000 Class
B shares. The creation of the Class B shares was authorized by amendments to
our bye-laws in June 1999 and July 1999. As of August 15, 1999, there were
17,016,031 common shares outstanding and 1,000 Class B shares outstanding. The
approval of holders of 66.6% of all common shares is required before we can
sell all or substantially all of our assets or amalgamate. Holders of Class B
shares are our only shareholders permitted to hold shares representing more
than 35% of the aggregate issued share capital of the Company at any time or
shares representing more than 35% of the votes attaching to all issued shares
of the Company at any time.
Approval of the holders of a majority of the Class B shares is required
before we can amend our governing documents or dissolve. Moreover, pursuant to
an amended and restated securityholders' agreement (which is described below)
executed by the new investors in the private equity financing, the Company and
certain other shareholders, the approval of the holders of a majority of the
Class B shares is required before we can engage in certain transactions,
including:
. certain issuances of securities,
. declarations of dividends, distributions or redemptions,
. sales or leases of assets (other than in the ordinary course of
business) constituting more than 400 STM-1 circuits of capacity or more
than 25% of our other assets or a material interest in a material
subsidiary, in a single transaction or series of related transactions,
. incurring indebtedness (other than trade payables incurred in the
ordinary course of business and debt under Holdings' bank credit
facility or the notes) in excess of $25 million in aggregate principal
amount outstanding at any time,
. adoption of the annual budget and business plan,
. making equity investments, acquisitions or capital expenditures, other
than for maintenance of assets, that exceed, in the aggregate, the
budgeted amounts for these line items by more than 5%,
. amalgamations, mergers, wind-ups, reorganizations and certain other
fundamental changes,
. hiring or firing our chief executive officer or certain other members of
senior management,
. terminating or suspending construction under the Alcatel contract, or
. amending certain material contracts or licenses.
Amended and Restated Securityholders' Agreement
In connection with the private equity financing, the Company, TBI and
certain of our affiliates entered into an amended and restated securityholders'
agreement with Michael Kedar, TeleBermuda (BVI) Limited, IHI Hydro, Inc. (one
of our former subordinated lenders and an indirect affiliate of one of the
initial purchasers of old notes), and the new investors from the private equity
financing (the new investors together with Mr. Kedar, TeleBermuda (BVI) Limited
and IHI Hydro, Inc., the "Holders").
Pursuant to this agreement:
. the approval of holders of a majority of the Class B shares is required
for certain transactions, as described above,
. the Holders have preemptive rights to purchase their pro rata portions
of all new issuances by us of common shares or common share equivalents,
. the new investors have "drag-along" rights, pursuant to which they can
require the other Holders to sell their stock to a third party under
certain circumstances,
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<PAGE>
. the new investors and the Holders have "tag-along" rights, pursuant to
which they can participate in sales to third parties under certain
circumstances, and
. the new investors have "rights of first refusal" with respect to shares
held by each other new investor.
The agreement also provides that the Holders will be provided access to
certain of our financial and operating information prior to a qualified public
offering of $150 million ($100 million if agreed to by holders of a majority of
the Class B shares held by the new investors) in gross proceeds to us in either
the United States or Canada. Finally, the agreement places certain restrictions
on Mr. Kedar's ability to sell, directly or indirectly, his interests in the
Company and on his ability to compete with the Company, TBI or their various
subsidiaries for two years after the termination of his employment with us. In
addition, Jeffrey Conyers and certain members of senior management are parties
to the agreement for certain limited purposes, including restricting senior
management's ability to sell their interests in the Company.
Registration Rights Agreement
Pursuant to a registration rights agreement among the Company, the new
investors in the private equity financing and certain holders of common shares
(including certain members of senior management), the new investors have the
right to require that we file up to three registration statements for the
resale of their shares in the United States and/or Canada within six months
after the completion of a qualified underwritten public offering of common
shares in the United States with aggregate proceeds to the Company of $50
million, and the shareholders who are a party to this agreement have, subject
to customary cutback provisions, the right to participate in any registration
statement filed by us after the qualified public offering.
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<PAGE>
CERTAIN TRANSACTIONS
We have entered into the transactions described below with our officers,
directors or five percent shareholders or entities affiliated with our
officers, directors or five percent shareholders. See also "Management" for a
discussion of indemnity agreements entered with our officers and directors.
On September 15, 1997, TBI entered into a consulting services arrangement
with First Bermuda Securities Limited, of which Jeffrey Conyers is the Chief
Executive Officer. Under the arrangement as amended on March 23, 1999, First
Bermuda Securities Limited will, among other things, (1) assist TBI in the
development of a business plan and with regulatory compliance matters, (2)
provide advice with respect to strategic alternatives and ongoing regulatory
issues and (3) assist in the Atlantica-1 Network financing efforts in Bermuda.
First Bermuda Securities Limited will receive a fee of $6,250 per month for its
services through December 31, 1999.
In connection with our repurchase of common shares on August 9, 1999, First
Bermuda Securities Limited served as our repurchase agent. First Bermuda
Securities Limited received customary fees for its services.
Linda Dougherty, one of our directors, is a Vice President of TD Capital
Group Limited, which is an affiliate of one of the initial purchasers of the
old notes. An affiliate of TD Capital Group Limited had previously loaned $9.5
million to us in the form of secured subordinated loans with warrants to
acquire common shares of the Company. This affiliate exercised all its warrants
applying the $9.5 million principal amount of its subordinated loans and the
$1.9 million in accrued interest as the exercise consideration. TD Capital
Group Limited's affiliate used to own a majority of our Class A shares by
virtue of its subordinated loans and is a party to an amended and restated
securityholders' agreement entered in connection with the private equity
financing. TD Capital Group Limited's affiliate is also a party to the
registration rights agreement entered into in connection with the private
equity financing.
Another affiliate of TD Capital Group Limited received customary fees for
serving as an initial purchaser of the old notes, as the financial advisor and
placement agent in connection with the private equity financing and as the
arranger and administrative agent in connection with Holdings' bank credit
facility.
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<PAGE>
HOLDINGS' BANK CREDIT FACILITY
On July 14, 1999, Holdings entered a credit facility with Toronto Dominion
(Texas) Inc., as administrative agent for the lenders and issuer of letters of
credit, Credit Suisse First Boston, as syndication agent for the lenders, and
TD Securities (USA) Inc., as arranger.
The commitment letter for Holdings' bank credit facility provides that TD
Securities (USA) Inc. may, until October 15, 1999, in consultation with us,
change the structure, terms or pricing of any portion of the credit facility if
it determines that the changes are reasonably necessary to ensure a successful
syndication of the credit facility. Our approval is not required for these
changes.
The Facilities
The credit facility consists of $390 million of term facilities and a $10
million revolving credit facility, as follows:
<TABLE>
<S> <C>
Working
Capital
Loan: $ 10 million senior secured working capital revolver.
Term A
Loan: $ 60 million senior secured multiple draw term loan.
Term B
Loan: $ 80 million senior secured multiple draw term loan.
Term C
Loan: $150 million senior secured multiple draw term loan.
Term D
Loan: $100 million senior secured single draw term loan.
</TABLE>
The term C loan is subject to reduction in the event that we decide not to
exercise our option in our contract with Alcatel to build the secondary strand
of the Rio extension. Holdings may also request an additional facility of up to
$50 million to be available after the actual date of commercial operation on
terms no more restrictive than the terms of the other facilities. This
additional facility is subject to lender approval and restrictions imposed
relating to the Alcatel guarantee.
Use of Credit Facility Proceeds
The proceeds from borrowings under the credit facility will be used together
with the proceeds that we received from the private offering of old notes and
the private equity financing to fund, among other things, the development of
the Atlantica-1 Network, working capital requirements, including the payment of
interest on the notes, and capital expenditures.
Availability of Funds Under the Credit Facility
Availability of funds under the credit facility is subject to certain terms
and conditions. In addition, the term A loan is subject to a maximum of 5.0x
total debt leverage ratio of TBI and the term C loan is limited (1) unless and
until we elect to exercise our option to build the Rio extension and (2) by,
among other things, sales of capacity on the Atlantica-1 Network and/or the
provision of the Alcatel guarantee. See "--Alcatel Guarantee and Reimbursement
Agreement." We expect that the funds under the term D loan will be borrowed
prior to October 15, 1999 and will be placed in escrow pending, among other
things, the application of the net proceeds of the private offering of old
notes and the private equity financing.
Maturity of the Credit Facility
Except with respect to the term D loan, loans under the credit facility will
mature on June 30, 2005. The term D loan will mature on September 30, 2005.
There is no required amortization of the working capital loan prior to
maturity. Loans under terms A, B and C will amortize in eight semi-annual
installments commencing on December 31, 2001 and the term D loan will require
minimal amortization prior to maturity.
Prepayments
We are able to prepay outstanding loans under terms A, B and C and the
working capital loan at our option at any time without premium or penalty
(other than break funding payments), and the term D loan at
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<PAGE>
any time subject to a prepayment fee for payments prior to the third
anniversary of the credit facility (and subject to break funding payments), in
each case subject to certain notice and minimum prepayment requirements. In
addition, we are required to make mandatory prepayments of outstanding loans,
which will permanently reduce availability, in an amount equal to:
. 50% of excess cash flow (100% in the event that we are in default under
the credit facility or in breach of certain financial covenants); plus
. 50% of the net cash proceeds from any equity offering, with exceptions
for the private equity financing, additional equity proceeds of up to
$10 million, certain capital expenditures and other investments and for
building certain extensions of our network;
. the net cash proceeds from permitted future debt offerings, with certain
exceptions, including debt incurred for building certain extensions of
our network;
. the net cash proceeds from permitted asset sales, excluding sales of
capacity, above a minimum threshold amount and subject to a six-month
reinvestment period; and
. the net insurance proceeds related to a damaged or destroyed segment of
the Atlantica-1 Network that is not rebuilt or repaired.
Notwithstanding the above, lenders under the term D loan are able to decline
these prepayments, in which case the amounts that would have been applied to a
prepayment of these lenders' term D loans will instead be applied to a
prepayment of loans under terms A, B and C until these loans are paid in full
and then to the working capital loan.
Interest Rates
Borrowings under the loans under terms A, B and C and the working capital
loan bear interest at an initial rate per annum of LIBOR plus 3.50%, subject to
reductions down to LIBOR plus 3.00% based upon amounts outstanding or at an
alternate rate equal to the greater of the administrative agent's prime rate
and the federal funds effective rate plus 0.50% (the "ABR"), plus 2.50%,
subject to reductions down to ABR plus 2.00% based upon amounts outstanding.
Loans under term D bear interest at a rate of LIBOR plus 4.00% or ABR plus
3.00%. The default rate under the credit facility is 2.00% above the otherwise
applicable rate.
Guarantees
The obligations under the credit facility are guaranteed by all of Holdings'
present and future direct and indirect subsidiaries.
Security
The obligations under the credit facility are secured by substantially all
of the assets of Holdings and of its present and future direct and indirect
subsidiaries, including the capital stock of these subsidiaries. The
obligations under the credit facility are also secured by a pledge by us of the
shares of Holdings and certain other assets. Pursuant to this pledge agreement,
we agreed to certain restrictions, including restrictions on our ability to
incur additional indebtedness, create liens, make investments, make capital
expenditures, lease property, merge or transfer assets. In addition, we agreed
until the commercial operation date of the Atlantica-1 Network to limit our
business activities to our ownership of Holdings, activities related to the
notes and incidental activities.
Conditions
There are conditions precedent to initial borrowings under the credit
facility (except the funding into escrow of borrowings under the term D loan),
including (1) that the net proceeds from the private offering of old notes and
the private equity financing have been spent, and (2) the perfection of all
collateral not previously
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<PAGE>
perfected, establishment of any remaining waterfall and lockbox accounts,
receipt of any remaining guarantees and payment of all fees and expenses. In
addition, all borrowings are subject to satisfaction of conditions customarily
found in credit agreements for similar financings, including all
representations being true and complete, and meeting certain construction
milestones.
Negative Covenants
The credit facility contains customary restrictive covenants, including
covenants that limit, subject to certain exceptions, our subsidiaries' ability
to:
. incur indebtedness or issue guarantees;
. grant liens;
. sell assets;
. make investments;
. enter into additional contracts;
. make certain capital expenditures;
. declare and pay dividends or make distributions;
. make certain restricted payments;
. enter into transactions with affiliates;
. abandon the Atlantica-1 Network;
. enter into unrelated activities;
. make material amendments to key documents; and
. make alterations to the Atlantica-1 Network.
As described above under "--Security," the pledge agreement pursuant to
which we pledged our shares in Holdings to secure the obligations under the
credit facility contains negative covenants applicable to us.
Events of Default
The credit facility provides that the occurrence of certain events
constitute, subject in certain cases to notice and grace periods, events of
default. The events of default found in the credit facility include many of
those customarily found in credit agreements for similar financings, including:
. default under Atlantica-1 Network contracts;
. suspension of construction;
. change of control;
. breach of the minimum cumulative capacity revenue covenant;
. failure to complete the Atlantica-1 Network by a specified date; and
. certain declines in the rating of the parent of Alcatel providing the
Alcatel guarantee.
Alcatel Guarantee and Reimbursement Agreement
The ultimate parent company of Alcatel has initially guaranteed $100 million
of the term C loan, subject to adjustment. The guarantee will be reduced by (1)
the amount of sales of capacity on a dollar for dollar basis meeting specified
down payment requirements, as and when qualified contracts for these sales are
executed, and (2) revenue from capacity sales agreements that are not qualified
capacity sales agreements.
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<PAGE>
Holdings will, pursuant to the related reimbursement agreement, reimburse
Alcatel's ultimate parent company all amounts paid by it to the banks under the
guarantee and interest will accrue on the amount paid at the default rate under
the credit facility. The reimbursement agreement specifies restrictions on (1)
the incurrence by Holdings and our subsidiaries of indebtedness in excess of
$500 million in the aggregate, (2) payment of principal under the notes, and
(3) the granting of liens by Holdings and its subsidiaries other than in
respect of Holdings' bank credit facility and up to $50 million in principal
amount of purchase money debt. Holdings has the right, subject to limitations
in the credit facility, to prepay amounts outstanding under the reimbursement
agreement at any time and from time to time, in whole or in part, without
penalty or premium. Holdings is obligated to cause its subsidiaries to
guarantee the obligations under the reimbursement agreement and to grant a lien
on certain of their interests after the termination of the credit facility.
Blockage Events
In the event of and during the continuance of a blockage event under
Holdings' bank credit facility, Holdings will be prohibited from paying to us
the funds that would otherwise have been made available to make scheduled
interest payments on the notes. A "blockage event" is defined as a payment
default under the credit facility, an event of bankruptcy with respect to
Holdings, the Company, any subsidiary of Holdings or, for a period of time,
Alcatel, and certain other events of default under the credit facility,
including an event of default resulting from the failure to complete the
Atlantica-1 Network by June 30, 2001 (or December 31, 2001 if we exercise our
option to build the Rio extension) and an event of default arising from a
change in control of the Company. In addition, under certain circumstances
certain defaults under certain contracts relating to the Atlantica-1 Network
may constitute a blockage event.
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<PAGE>
DESCRIPTION OF THE NEW NOTES
General
The form and terms of the new notes are the same as the form and terms of
the old notes, except that the new notes have been registered under the
Securities Act of 1933, will not bear legends restricting the transfer thereof,
will not be entitled to registration rights under our registration rights
agreement, and will not contain provisions relating to additional interest. We
will issue the new notes under the indenture dated as of July 14, 1999 between
us and Bankers Trust Company, as trustee. The following description is a
summary of the material provisions of the indenture. We urge you to read the
indenture because it defines your rights as holders of the new notes. The terms
of the new notes include those stated in the indenture and those made part of
the indenture by reference to the U.S. Trust Indenture Act of 1939. You may
obtain a copy of the indenture from us.
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions". In this description, references to "we,"
"us," "our" and "the Company" refer only to GlobeNet Communications Group
Limited and not to any of its subsidiaries.
The old notes and the new notes will constitute a single class of debt
securities under the indenture. If the exchange offer is consummated, holders
of old notes who do not exchange new notes for their old notes will vote
together with holders of the new notes for all relevant purposes under the
indenture. Accordingly, in determining whether the required holders have given
any notice, consent or waiver or taken any other action permitted under the
indenture, any old notes that remain outstanding after the exchange offer will
be aggregated with the new notes, and the holders of the old notes and the new
notes will vote together as a single class. All references in this prospectus
to specified percentages in aggregate principal amount of the notes that are
outstanding means, at any time after the exchange offer is consummated, the
percentages in aggregate principal amount of the old notes and the new notes
then outstanding.
Brief Description of the New Notes
The new notes:
. will be our senior unsecured obligations;
. will be equal in right of payment to all of our future senior unsecured
Indebtedness;
. effectively will be subordinated in right of payment to all of our
existing and future secured Indebtedness to the extent of the value of
the assets securing this Indebtedness;
. are the obligations of a holding company and will not be guaranteed by
any of our Subsidiaries, and effectively will be subordinated to all
existing and future Indebtedness and other liabilities and commitments
(including trade payables and lease obligations) of our Subsidiaries; and
. will be senior in right of payment to any of our future subordinated
Indebtedness.
The indenture will permit us and our Subsidiaries to incur additional
Indebtedness, including secured Indebtedness.
As of August 15, 1999, we had no Indebtedness outstanding, other than the
notes, and our Subsidiaries had no debt outstanding. However, one of our
Subsidiaries, Holdings, may incur up to $450.0 million of Indebtedness under
its credit facility, defined in the indenture as the "New Credit Facility." See
"Risk Factors--Holding Company Structure."
As of the Issue Date, all of our Subsidiaries will be Restricted
Subsidiaries. However, under certain circumstances, we may designate current
and future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
are not subject to any of the restrictive covenants set forth in the indenture.
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<PAGE>
Principal, Maturity and Interest
The notes will be limited initially in aggregate principal amount of $300.0
million. We will issue the new notes in fully registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. The new notes will
mature on July 15, 2007.
Interest on the notes will accrue at the rate of 13% per annum and will be
payable semi-annually in arrears on each January 15 and July 15, commencing
January 15, 2000 to the persons who are registered holders on the immediately
preceding January 1 and July 1. Interest will accrue from the most recent date
to which interest has been paid on the old notes or, if no interest has been
paid, from July 14, 1999. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
Issuance of Additional Notes
We may issue up to $150.0 million aggregate principal amount of additional
notes having terms and conditions identical to the notes (the "additional
notes"), subject to compliance with the covenants contained in the indenture
and the New Credit Facility. Any additional notes will be part of the same
issue as the notes, will vote on all matters with the notes and will be
treated, together with the new notes and the old notes, as a single class of
securities under the indenture. Unless the context otherwise requires,
references in this prospectus to the old notes or the new notes do not include
the additional notes. Additional notes are not being offered by means of this
prospectus.
Methods of Receiving Payments on the Notes
The principal of, and premium, if any, and interest on the notes will be
payable, and the notes will be exchangeable and transferable, at the office or
agency of the Company in the City of New York maintained for these purposes.
This office initially will be the office of the trustee located at Four Albany
Street, New York, New York 10006. At our option, interest may be paid by check
mailed to the registered address of the holder.
Paying Agent and Registrar for the Notes
The trustee will be the initial paying agent and registrar for the notes. We
may change the paying agent or registrar without prior notice to the holders of
the notes, and we or any of our Subsidiaries may act as paying agent or
registrar.
Transfer and Exchange
A holder may transfer or exchange notes at the office or agency of the
paying agent and registrar in the City of New York maintained for these
purposes. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and we may
require a holder to pay any transfer taxes and similar fees required by law or
permitted by the indenture. We are not required to transfer or exchange any
note selected for redemption. Also, we are not required to transfer or exchange
any note for a period of 15 days before a selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes, other than with respect to the payment of additional amounts (as
defined below).
No Sinking Fund
The notes will not be entitled to the benefit of any sinking fund or other
mandatory redemption.
Foreign Restrictions
There are no restrictions imposed by Bermuda law or by our charter or other
constituent documents on the rights of non-Bermuda residents or non-Bermuda
owners of the new notes to hold the new notes or to receive payments of
interest or principal under the new notes.
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Optional Redemption
On or after July 15, 2004, we may redeem all or a part of the notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued
and unpaid interest, if any, thereon to the redemption date, if redeemed
during the twelve-month period beginning on July 15 of the years indicated
below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2004.............................................................. 106.500%
2005.............................................................. 103.250%
2006 and thereafter............................................... 100.000%
</TABLE>
In addition, at any time or from time to time prior to July 15, 2002, we
may redeem up to 35% of the aggregate principal amount of notes originally
issued under the indenture at a redemption price of 113% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
redemption date, with the proceeds from one or more Equity Offerings; provided
that:
(1) at least 65% of the aggregate principal amount of notes originally
issued under the indenture remain outstanding immediately after the
occurrence of any such redemption; and
(2) the redemption must occur within 90 days after the date of the
closing of the Equity Offering.
If fewer than all of the notes are to be redeemed at any time, the trustee
will select the notes to be redeemed on a pro rata basis, by lot or by such
other method as the trustee deems fair and appropriate. No notes of $1,000 or
less shall be redeemed in part. If any note is to be redeemed in part only,
the notice of redemption that relates to that note shall state the portion of
the principal amount thereof to be redeemed. Another note in principal amount
equal to the unredeemed portion of the original note will be issued in the
name of the holder thereof upon cancellation of the original note. Notes
called for redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on notes or portions of
them called for redemption.
Optional Tax Redemption
The notes will be subject to redemption, at our option, in the event that
we become obligated to pay any additional amounts (as defined below) as a
result of a change in any laws or regulations of any Taxing Authority or a
change in any official position regarding the application or interpretation
thereof, that is publicly announced or becomes effective on or after the Issue
Date. Upon the occurrence of any such tax change, we may, at any time prior to
90 days after such tax change, redeem all, but not part, of the notes at a
price equal to 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the redemption date. We will give written notice of any
such redemption not less than 30 nor more than 60 days prior to the redemption
date.
Payment of Additional Amounts
All payments made by or on behalf of us on or with respect to the notes
will be made free and clear of and without withholding of or deduction for or
on account of any present or future tax, duty, levy, impost, assessment or
other governmental charge (including any interest or penalties with respect
thereto) imposed or levied by or on behalf of any jurisdiction or any
political subdivision thereof or by any authority or agency therein or thereof
having power to tax (referred to below as "Taxes"), unless the withholding or
deduction of such Taxes is required by law.
If the Company or any other payor is required to withhold or deduct any
amount on account of Taxes from any payment made on or with respect to the
notes, we or such other payor will:
(1) make such withholding or deduction;
(2) remit the full amount deducted or withheld to the relevant
government authority in accordance with applicable law;
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(3) pay such additional amounts ("additional amounts") as may be
necessary so that the net amount received by each holder after such
withholding or deduction (including in respect of additional amounts) will
be not less than the amount the holder would have received if such Taxes
had not been required to be so withheld or deducted;
(4) furnish to the holders, within 30 days after the date the payment of
any Taxes is due, upon request certified copies of tax receipts evidencing
such payment by us or such other payor;
(5) indemnify and hold harmless each holder, other than an excluded
holder, from (a) any Taxes paid by such holder as a result of payments made
on or with respect to the notes, (b) any liability, including penalties,
interest and expenses, arising therefrom or with respect thereto and (c)
any Taxes imposed with respect to any reimbursement under (a) or (b), but
excluding any such taxes described in (i)(a) immediately below; and
(6) at least 30 days prior to each date on which any additional amounts
are payable, we will deliver to the paying agent (if not the Company) an
officers' certificate stating the amounts so payable and such other
information necessary to enable the paying agent to pay such additional
amounts to holders on the payment date.
Notwithstanding the foregoing, we or a successor corporation shall not be
required to make any payment to a holder of additional amounts for or on
account of:
(i) Any tax, assessment or other governmental charge that would not have
been imposed but for (a) the existence of any present or former connection
between such holder (an "excluded holder") (or between a fiduciary,
settlor, beneficiary or partner of, or possessor of a power over such
holder, if such holder is an estate, trust or partnership) and the taxing
jurisdiction or any political subdivision or territory or possession
thereof or area subject to its jurisdiction (other than the holding of a
new note or the receipt of payments or exercise of rights thereunder),
including, without limitation, such holder (or such fiduciary, settlor,
beneficiary, partner or possessor) being or having been a citizen or
resident thereof or being or having been present or engaged in a trade or
business therein or having or having had permanent establishment therein,
(b) the presentation of a new note, where presentation is required, for
payment on a date more than 30 days after (x) the date on which such
payment became due and payable or (y) the date on which payment thereof is
duly provided for, whichever occurs later (except to the extent that the
holder of such new note would have been entitled to additional amounts in
respect of such Taxes on presenting such new note for payment on any date
prior to such date), or (c) the presentation of a new note for payment in
Bermuda or any political subdivision thereof or therein, unless such new
note could not have been presented for payment elsewhere;
(ii) Except as otherwise provided, any estate, inheritance, gift, sales,
transfer, personal property or similar tax, assessment or other
governmental charge;
(iii) Any tax, assessment or other governmental charge that is imposed
or withheld by reason of the failure by the holder or the beneficial owner
of the note to comply with a written request of the Company addressed to
the holder and made at least 60 days prior to the first payment date with
respect to which the Company or any successor corporation shall apply this
clause (iii), (a) to provide information, documents or other evidence
concerning the nationality, residence or identity of the holder or such
beneficial owner or (b) to make and deliver any declaration or other
similar claim (other than a claim for refund of a tax, assessment or other
governmental charge withheld by the Company) or satisfy any information or
reporting requirements, which, in the case of (a) or (b), is required or
imposed by a statute, treaty, regulation or administrative practice of the
taxing jurisdiction as a precondition to exemption from all or part of such
tax, assessment or other governmental charge, provided, however, that the
limitations on the Companys or any successor corporations obligation to pay
additional amounts set forth in clauses (a) and (b) above shall not apply
if the provision of the information, documentation, declaration or other
evidence or reporting described in such clauses (a) and (b) would be
materially more onerous, in form, in procedure or in the substance of
information disclosed, to a holder or beneficial owner of a note than
comparable
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information or other applicable reporting requirements imposed or provided
for under United States tax law (such as Internal Revenue Service Form 1001
or W-8BEN); or
(iv) Any combination of items (i), (ii) and (iii) above.
Whenever in the indenture there is mentioned, in any context, the payment of
principal, premium, if any, redemption price, Change of Control Payment, offer
price and interest, or 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.
Change of Control
If a Change of Control occurs, each holder of notes will have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that holder's notes pursuant to the offer
described below (the "Change of Control Offer"). In the Change of Control
Offer, the Company will offer to repurchase notes at a purchase price in cash
equal to 101% of the aggregate principal amount of notes repurchased plus
accrued and unpaid interest, if any, thereon to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company will mail a notice to each holder (with a copy to the trustee)
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase notes on a date specified in such notice
(the "Change of Control Payment Date"), which date shall be no earlier than 30
days and no later than 60 days from the date such notice is mailed, pursuant to
the procedures required by the indenture and described in such notice. The
Company will comply with the requirements of 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 connection with the repurchase of the
notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the trustee the notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of notes or portions thereof being purchased by the
Company.
The paying agent will promptly mail to each holder of notes so tendered the
Change of Control Payment for such notes, and the trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
another note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such additional note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require the Company to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control, the indenture does not
contain provisions that permit the holders of the notes to require that the
Company repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
The New Credit Facility contains prohibitions of certain events with respect
to the Company, as guarantor thereunder, including events that would constitute
a Change of Control. If a Change of Control Offer is made, there can be no
assurance that the Company will have sufficient funds to purchase all of the
notes tendered by holders seeking to accept the Change of Control Offer. The
New Credit Facility restricts such a purchase of
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notes by the Company prior to repayment in full in cash of Indebtedness
outstanding under the New Credit Facility. Accordingly, any Change of Control
Offer would require the approval of the lenders thereunder. In addition, a
Change of Control may be an event of default under the New Credit Facility or
other indebtedness of the Company that may be incurred in the future.
Accordingly, the right of the holders of the notes to require the Company to
repurchase the notes may be of limited value if the Company cannot obtain the
required approval under the New Credit Facility. There can be no assurance that
in the event of a Change of Control the Company will be able to obtain the
necessary consents to consummate a Change of Control Offer. The failure of the
Company to make or consummate the Change of Control Offer or pay the applicable
Change of Control purchase price when due would result in an Event of Default
and would give the trustee and the holders of the notes and additional notes,
if any, the rights described under "Events of Default and Remedies."
In addition, the exercise by the holders of notes of their right to require
the Company to repurchase the notes upon a Change of Control could cause a
default, even if the Change of Control itself does not, due to the financial
effect of such repurchases on the Company. Finally, the Company's ability to
pay cash to the holders of notes upon a repurchase may be limited by the
Company's then existing financial resources. See "Risk Factors--Financing
Change of Control Offer."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a Change of Control Offer made by the
Company and purchases all notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a limited body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of notes to require the Company to
repurchase such notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
Certain Covenants
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, enter into any
guarantee of or otherwise become directly or indirectly liable, contingently or
otherwise (collectively, incur), with respect to any Indebtedness (including
Acquired Debt), other than Permitted Indebtedness, and the Company will not
issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any Disqualified Stock or shares of preferred stock,
except, that the Company or any Guarantor may incur Indebtedness (including
Acquired Debt) and issue Disqualified Stock if either:
(1) the Consolidated Leverage Ratio of the Company is less than 5.5 to
1.0 (prior to July 15, 2002), or 5.0 to 1.0 (subsequent to July 15, 2002);
or
(2) the Consolidated Capital Ratio of the Company is less than 2.5 to
1.0.
Indebtedness, Disqualified Stock or preferred stock of any Person which is
outstanding at the time such Person becomes a Restricted Subsidiary of the
Company (including upon designation of any Subsidiary or other Person as a
Restricted Subsidiary) or is merged with or into or consolidated with the
Company or a Restricted Subsidiary of the Company shall be deemed to have been
incurred at the time such Person becomes such a Restricted Subsidiary of the
Company or is merged with or into or consolidated with the Company or a
Restricted Subsidiary of the Company, as applicable.
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For purposes of determining compliance with any restriction on the
incurrence of Indebtedness denominated in a currency other than U.S. dollars,
the U.S. dollar-equivalent principal amount of such Indebtedness incurred
pursuant thereto shall be calculated based on the relevant currency exchange
rate in effect on the date that such Indebtedness was incurred (or, in the case
of Indebtedness under a revolving credit facility, at the time of commitment),
provided that if such Indebtedness is incurred to refinance other Indebtedness
denominated in a foreign currency, and such refinancing would cause the
applicable restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, such restriction shall
be deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. The principal amount of any Indebtedness
incurred to refinance other Indebtedness, if incurred in a different currency
from the Indebtedness being refinanced, shall be calculated based on the
currency exchange rate applicable to the currencies in which such respective
Indebtedness is denominated that is in effect on the date of such refinancing.
For purposes of determining any particular amount of Indebtedness under this
"Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, (1)
guarantees, Liens or obligations with respect to letters of credit or other
similar instruments supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (2) any Liens
granted pursuant to the equal and ratable provisions referred to in the "Liens"
covenant described below shall not be treated as giving rise to Indebtedness.
For purposes of determining compliance with this "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant, any other obligations of the obligor
on such Indebtedness arising under any Lien or letter of credit or other
similar instrument or obligation supporting such Indebtedness shall be
disregarded to the extent that the same secures the principal amount of such
Indebtedness.
The accrual of interest or the accretion of accreted value will not be
deemed an incurrence of Indebtedness for the purposes of this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant.
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, make any Restricted Payment unless at the time of
and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto, have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to clause (1) or (2) of the first
paragraph of the covenant described above under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the Issue Date (excluding
Restricted Payments permitted by clauses (2), (3), (4) and (6) of the next
succeeding paragraph), is less than the sum, without duplication, of
(a) the Applicable Percentage of the Consolidated Net Income of the
Company for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the Issue Date
to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such aggregate cumulative Consolidated Net
Income is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by the Company
since the Issue Date as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock and other than the issuance of Equity Interests in
connection with the Private Equity Financing) or from the issue or sale
since the Issue Date of Disqualified Stock or debt securities of the
Company or a Restricted Subsidiary that have been converted into or
exchanged for such Equity Interests (other than Equity Interests (or
Disqualified Stock or debt securities) sold to a
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Subsidiary of the Company), plus the aggregate net cash proceeds
received by the Company upon any such conversion or exchange, plus
(c) 100% of the net reduction in Investments on and after the Issue
Date, resulting (i) from payments of interest on Indebtedness,
dividends, repayments of loans or advances, or other transfers of
property (but only to the extent such interest, dividends, repayments
or other transfers of property are not included in the calculation of
Consolidated Net Income), in each case to the Company or any of its
Restricted Subsidiaries from any Person (including, without limitation,
from Unrestricted Subsidiaries of the Company) or (ii) from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(in each case, valued as provided in the definition of Investments set
forth below under the caption "--Certain Definitions"), in the case of
each of (i) and (ii) not to exceed in the case of any Person the amount
of Restricted Investments previously made by the Company or any of its
Restricted Subsidiaries in such Person (subsequent to the Issue Date)
and in each such case which was treated as a Restricted Payment (other
than any such Restricted Payment that was made pursuant to the
provisions of paragraphs (1) through (8) below).
The preceding provisions will not prohibit the following Restricted
Payments:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness of the Company subordinate to the notes or
of any Equity Interests of the Company or any Restricted Subsidiary in
exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, Equity
Interests of the Company (other than Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, retirement, repurchase or other
acquisition of any Indebtedness of the Company subordinate to the notes in
exchange for, or with the net cash proceeds from an incurrence of,
Permitted Refinancing Indebtedness;
(4) Investments made out of an amount not exceeding the net cash
proceeds of one or more sales (other than to a Subsidiary of the Company)
of Equity Interests (other than Disqualified Stock) of the Company;
provided that the amount of any such net cash proceeds that are utilized
for any such Investment shall be excluded from clause (3)(b) of the
preceding paragraph;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company pursuant to any management
equity subscription agreement or stock option agreement and the repurchase
of Equity Interests of the Company from employees, officers or directors of
the Company or any of its Restricted Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of
such officers, directors and employees in an aggregate amount not to exceed
$2.0 million in any calendar year (provided that unused amounts may be
carried over to succeeding next 12 month periods, subject to a maximum of
$4.0 million);
(6) Investments to the extent payment for which consists of Equity
Interests (other than Disqualified Stock) of the Company;
(7) pro rata dividends or other distributions made by a Restricted
Subsidiary of the Company to minority stockholders (or owners of an
equivalent interest in the case of a Restricted Subsidiary that is not a
corporation);
(8) the payment, purchase, redemption or other acquisition or retirement
of any Indebtedness of the Company that is expressly subordinated in right
of payment to the notes at a purchase price not greater than 101% of the
principal amount thereof, together with accrued interest, if any, thereon,
in the event of a Change of Control, in accordance with provisions that are
similar to the provisions described under the caption "Change of Control;"
provided, that prior to such purchase the Company has made the Change of
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Control Offer to all holders of the notes as provided under such caption
and has purchased all notes validly tendered for payment in connection with
such Change of Control Offer;
(9) the payment, purchase, redemption or other acquisition or retirement
out of any Excess Proceeds of any Indebtedness of the Company that is
expressly subordinated in right of payment to the notes at a purchase price
not greater than 100% of the principal amount thereof together with accrued
interest, if any, thereon, in the event the Company is required to make an
Asset Sale Offer, in accordance with provisions that are similar to the
provisions described under the caption "--Limitation on Certain Asset
Sales;" provided, that prior to such purchase the Company has made the
Asset Sale Offer to all holders of the notes as provided under such caption
and has purchased out of Excess Proceeds all notes validly tendered for
payment in connection with such Asset Sale Offer; and
(10) other Restricted Payments in an aggregate amount not to exceed $5.0
million;
provided, however, that no Default or Event of Default has occurred and is
continuing or will occur as a consequence thereof.
The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The Fair Market Value of any assets or securities that are required to be
valued by this covenant shall be determined by the Board of Directors of the
Company whose resolution with respect thereto shall be delivered to the
trustee. The Board of Directors' determination must be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if the Fair Market Value exceeds $10.0 million. Not later
than the date of making any Restricted Payment, the Company shall deliver to
the trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this "Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the indenture.
Limitation on Certain Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the assets or Equity Interests issued or sold or
otherwise disposed of; and
(2) at least 75% of the consideration received by the Company or the
Restricted Subsidiary is in the form of cash and/or Cash Equivalents and/or
Fiber Optic Assets, provided that (x) the amount of any Indebtedness of the
Company (other than Indebtedness that is expressly subordinated in right of
payment to the notes) or any Restricted Subsidiary that is assumed by the
transferee of any such assets pursuant to an agreement that unconditionally
releases the Company and its Restricted Subsidiaries from further liability
related to such Indebtedness, and (y) liabilities other than Indebtedness
for which any other Person assumes responsibility, shall in each case be
treated as cash for purposes of this covenant.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the Restricted Subsidiary may apply the Net Proceeds:
(1) to permanently reduce commitments under the New Credit Facility or
to permanently repay or retire outstanding Indebtedness incurred pursuant
to clause (1) of the definition of "Permitted Indebtedness", or
(2) to acquire Fiber Optic Assets.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the indenture.
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Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will
make an offer (an "Asset Sale Offer") to all holders of notes and may make an
offer to all holders of other Indebtedness that is pari passu with the notes
containing provisions similar to those set forth in the indenture with respect
to offers to purchase or redeem with the proceeds of sales of assets, to
purchase the maximum principal amount of notes and such other pari passu
Indebtedness that may be purchased out of the Excess Proceeds. The offer price
in any Asset Sale Offer will be equal to 100% of principal amount plus accrued
and unpaid interest, if any, thereon to the date of purchase and will be
payable in cash. If any Excess Proceeds remain after consummation of an Asset
Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by the indenture. If the aggregate principal amount of
notes and such other pari passu Indebtedness tendered into such Asset Sale
Offer exceeds the amount of Excess Proceeds, the trustee shall select the notes
and such other pari passu Indebtedness to be purchased on a pro rata basis.
Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be
reset at zero.
The Fair Market Value of any assets or securities that are required to be
valued by this covenant shall be determined by the Board of Directors of the
Company whose resolution with respect thereto shall be delivered to the
trustee. The Board of Directors' determination must be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if the Fair Market Value of such assets or securities
(excluding any Fiber Optic Assets) exceeds $10.0 million.
The New Credit Facility contains prohibitions of certain events with respect
to the Company, as a guarantor thereunder, including events that would
constitute an Asset Sale. In addition, the exercise by the holders of notes of
their right to require the Company to repurchase the notes upon an Asset Sale
could cause a default under agreements, even if the Asset Sale itself does not,
due to the financial effect of such repurchases on the Company. Finally, the
Company's ability to pay cash to the holders of notes upon a repurchase may be
limited by the Company's then existing financial resources. See "Risk Factors--
Financing Change of Control Offer".
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or otherwise cause or suffer
to exist or become effective any Lien of any kind on any asset or property now
owned or hereafter acquired, except Permitted Liens, unless the notes are
secured equally and ratably with the obligation so secured, so long as such
obligation is so secured.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to the Company or any of the Company's Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to the Company or any of the
Company's Restricted Subsidiaries;
(2) make loans or advances to the Company or any of the Company's
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of
the Company's Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness or other agreements as in effect on the Issue
Date and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings
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thereof, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
are not materially more restrictive, taken as a whole, with respect to such
encumbrances and restrictions than those contained in such Existing
Indebtedness, as in effect on the Issue Date;
(2) the indenture, the old notes and the new notes;
(3) the New Credit Facility, as in effect on the date of its execution
and as may be modified in accordance with the provisions of the commitment
letter relating to the New Credit Facility permitting certain changes in
connection with syndication, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are not materially more restrictive, taken as a whole, with
respect to such encumbrances and restrictions than those contained in the
New Credit Facility, as in effect on the date of its execution and as
modified in the manner described above;
(4) applicable law or any governmental or regulatory permit or license;
(5) any instrument governing Indebtedness or Capital Stock of, or
agreement binding on, a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or
in contemplation of such acquisition), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the indenture to be incurred;
(6) customary non-assignment provisions restricting subletting or
assignment in leases or other agreements entered into in the ordinary
course of business and consistent with past practices;
(7) Purchase Money Indebtedness or Vendor Financing Indebtedness that
imposes restrictions of the nature described in clause (3) of the preceding
paragraph, provided that such obligations are permitted to be incurred
under clause (6) or clause (7), as the case may be, of the definition of
"Permitted Indebtedness" set forth below;
(8) any agreement for the sale or other disposition of a Restricted
Subsidiary or any asset that restricts distributions by such Restricted
Subsidiary or transfer of such asset pending its sale or other disposition,
provided that the consummation of such transaction would not result in a
Default or an Event of Default, that such restriction terminates if such
transaction is not consummated and that the consummation or abandonment of
such transaction occurs within one year of the date such agreement was
entered into;
(9) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are not materially more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(10) Liens otherwise permitted to be incurred pursuant to the provisions
of the covenant described above under the caption "--Liens" that limit the
right of the Company or any of its Restricted Subsidiaries to dispose of
the assets subject to such Lien;
(11) customary limitations on the disposition or distribution of assets
or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business; and
(12) any encumbrance or restriction under any agreement relating to
Indebtedness incurred by a Restricted Subsidiary of the Company permitted
to be incurred under the covenant described above under "Incurrence of
Indebtedness and Issuance of Preferred Stock"; provided that the Company in
good faith determines (a) that, taken as a whole, the terms and conditions
of any such encumbrances or restrictions are not materially less favorable
to the holders than those in the New Credit Facility, and (b) that any such
encumbrance or restriction will not prevent such Restricted Subsidiary from
making dividends, distributions, loans or advances to the Company in
amounts sufficient for the Company, together with
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amounts otherwise available to the Company, to make mandatory payments of
principal, premium, if any, and interest and any additional amounts
pursuant to the terms of the notes and the indenture and pursuant to the
terms of any other Indebtedness of the Company.
Certain restrictions under the New Credit Facility substantially limit the
payment of dividends or distributions to the Company until the New Credit
Facility is retired. See "Risk Factors--Holding Company Structure" and
"Holdings' Bank Credit Facility."
Amalgamation, Merger, Consolidation or Sale of Assets
The Company may not, directly or indirectly: (1) amalgamate or consolidate
or merge with or into another Person (whether or not the Company is the
surviving or continuing corporation); or (2) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of its properties or assets, in
one or more related transactions, to another Person; unless:
(1) either: (a) the Company is the surviving or continuing corporation
or (b) the Person formed by, surviving or continuing after any such
amalgamation, consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, conveyance or other disposition is
made (the "Surviving Entity"), is a corporation organized or existing under
the laws of Bermuda or the United States, any state thereof or the District
of Columbia;
(2) the Surviving Entity (if other than the Company) assumes all then
existing obligations of the Company under the old notes, the new notes, the
indenture and the registration rights agreement, pursuant to agreements
reasonably satisfactory to the trustee;
(3) no Default or Event of Default (or an event that, with the passing
of time or giving of notice or both, would constitute an Event of Default)
is continuing or would occur immediately after giving effect to such
transactions;
(4) except in the case of the amalgamation, consolidation or merger of
the Company with or into a Wholly Owned Restricted Subsidiary, the Company
or the Surviving Entity will (A) immediately after such transaction after
giving pro forma effect thereto and to any related financing transactions,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to
clause (1) or (2) of the first paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock" and (B) will, immediately after such transaction, have Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction; and
(5) the Company delivers to the trustee an Officers' Certificate and an
opinion of counsel, each stating that such amalgamation, consolidation,
merger or transfer and such supplemental indenture, if any, comply with the
indenture.
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person.
Upon any amalgamation, consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the
foregoing, the Surviving Entity shall succeed to and be substituted for, and
may exercise every right and power of, the Company under the indenture with the
same effect as if such successor corporation had been named therein as the
Company and the Company shall be released from its obligations under the notes
and under the indenture, except with respect to any obligations that arise
from, or are related to, such transaction.
For purposes of the foregoing, the transfer (by assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more subsidiaries (other than to the Company or a Wholly Owned Restricted
Subsidiary), the Company's interest in which constitutes all or substantially
all of the properties and assets of the Company shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
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This covenant shall not apply to sales, assignments, transfers, conveyances
and other dispositions of telecommunications capacity made in the ordinary
course of business by the Company or a Restricted Subsidiary.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties, assets or securities to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with a Person that is not an Affiliate; and
(2) the Company delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of
Directors; provided that if there are no disinterested members of the
Board of Directors, the Company shall deliver an opinion as to the
fairness to the Company of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment banking
firm of national standing; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Company of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items will not be subject to the provisions of the prior
paragraph:
(1) (a) the entering into, maintaining or performance of any employment
contract, collective bargaining agreement, benefit plan, program or
arrangement, related trust agreement or any other similar arrangement for
or with any employee, officer or director heretofore or hereafter entered
into in the ordinary course of business, including vacation, health,
insurance, deferred compensation, retirement, savings or other similar
plans, (b) the payment of compensation, performance of indemnification or
contribution obligations, or an issuance, grant or award of stock, options
or other equity-related interests or other securities, to employees,
officers or directors in the ordinary course of business or (c) any
transaction with an officer or director in the ordinary course of business
not involving more than $100,000 in any one case;
(2) Affiliate Transactions in effect or approved by the Board of
Directors of the Company on or before the date of the indenture, including
any amendments thereto (provided that the terms of such amendments are not
materially less favorable to the Company than the terms of such agreement
prior to such amendment);
(3) transactions between or among the Company and any of the Company's
Restricted Subsidiaries;
(4) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company;
(5) any transaction consistent with commercially reasonable practices,
and approved by a majority of the disinterested members of the Board of
Directors of the Company; and
(6) Permitted Investments or Restricted Payments that are permitted by
the provisions of the indenture described above under the caption "--
Restricted Payments."
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Sale and Leaseback Transactions
The Company will not, and will not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction; provided that the Company or
any of its Restricted Subsidiaries may enter into a sale and leaseback
transaction if
(1) the Company (or such Restricted Subsidiary, as the case may be)
could have:
(a) incurred Indebtedness in an amount equal to the Attributable
Debt relating to such sale and leaseback transaction pursuant to either
of the Consolidated Leverage Ratio or Consolidated Capital Ratio tests
set forth in the first paragraph of the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described above under the caption "--Liens;"
(2) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the Fair Market Value (as determined in good faith by the
Board of Directors of the Company and set forth in an Officers' Certificate
delivered to the trustee) of the property that is the subject of such sale
and leaseback transaction; and
(3) the transfer of assets in such sale and leaseback transaction is
treated as an Asset Sale, and the Company applies the proceeds of such
transaction in compliance with the covenant described above under the
caption "--Limitation on Certain Asset Sales."
Issuances and Sales of Equity Interests in Restricted Subsidiaries
The Company:
(1) will not, and will not permit any of its Restricted Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Equity Interests
in any Restricted Subsidiary of the Company to any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company), unless
(a) such transfer, conveyance, sale, lease or other disposition is
of all the Equity Interests in such Restricted Subsidiary; and
(b) the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with the covenant
described above under the caption "--Limitation on Certain Asset
Sales;" and
(2) will not permit any Restricted Subsidiary of the Company to issue
any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company (except in a transaction that complies with (1) above);
provided, however, that this covenant will not prevent any sale or issuance of
Equity Interests of a Restricted Subsidiary, and the ownership by any Person of
such Equity Interests, where such Subsidiary following such sale or issuance
becomes a Fiber Optic Joint Venture, and any Investment in such Restricted
Subsidiary remaining after giving effect to such sale or issuance would have
been permitted to be made under any one or more of the first paragraph under
the Restricted Payments covenant, clause (10) of the second paragraph of such
covenant or under clause (7) of the definition of "Permitted Investments," and
the proceeds of such sale or issuance are applied in compliance with the
"Limitation on Certain Asset Sales" covenant.
Future Guarantees
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee any Indebtedness of the Company that is pari passu
with or subordinated to the notes, unless (1) such Restricted Subsidiary
previously has provided a Guarantee and (2) 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
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subrogation or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Guarantee, until payment in full of the outstanding principal amount of the
notes and any premium or accrued and unpaid interest thereon then due and
owing; provided that this paragraph shall not be applicable to any guarantee of
any Restricted Subsidiary (a) 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 or (b) of
Indebtedness incurred pursuant to clause (1) of the definition of "Permitted
Indebtedness." If the guaranteed Indebtedness is (1) pari passu with the notes,
then the guarantee of such guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Guarantee, or (2) subordinated to the notes, then the
guarantee of such guaranteed Indebtedness shall be subordinated to the
Guarantee, at least to the extent that the guaranteed Indebtedness is
subordinated to the notes.
Any Guarantee will include provisions applicable to the Guarantor
substantially similar to the provisions described under the captions "Payment
of Additional Amounts" and "--Amalgamation, Merger, Consolidation or Sale of
Assets." Notwithstanding the foregoing, any Guarantee by any Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (and the provisions corresponding
to those described under the caption "--Amalgamation, Merger, Consolidation or
Sale of Assets" will not be applicable in the event of) (1) any sale, exchange
or transfer (including by way of merger or consolidation), to any Person not an
Affiliate of the Company, of all of the Company's and each Restricted
Subsidiary's Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary (which sale, exchange, transfer or other transaction is
not prohibited by the indenture), (2) the legal or covenant defeasance of the
notes or satisfaction and discharge of the indenture, subject to customary
contingent reinstatement provisions, (3) the release or discharge of the
guarantee, assumption or other incurrence of liability that resulted in the
creation of such Guarantee, except a discharge or release by or as a result of
payment under such Guarantee or (4) the merger or consolidation of such
Restricted Subsidiary with and into the Company or another Subsidiary Guarantor
that is the surviving Person in such merger or consolidation.
Each Guarantee will be limited to the maximum amount that can be Guaranteed
by such Restricted Subsidiary under applicable law without rendering the
Guarantee voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors
generally.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Permitted Business.
Unrestricted Subsidiaries
The Board of Directors of the Company may designate, pursuant to a Board
Resolution, any Subsidiary (including any newly acquired or newly formed
Subsidiary) of the Company (other than Atlantica Network (Bermuda) Ltd.) to be
an Unrestricted Subsidiary so long as such Subsidiary has no Indebtedness other
than Non-Recourse Debt.
In addition, if a Restricted Subsidiary is designated as an Unrestricted
Subsidiary, the aggregate Fair Market Value of all outstanding Investments
owned by the Company and its Restricted Subsidiaries in the Subsidiary so
designated will be deemed to be an Investment made as of the time of such
designation and that designation will only be permitted if such Investment
would be permitted at that time.
Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
shall be evidenced to the trustee by filing with the trustee a certified copy
of the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the preceding
conditions.
The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary, provided that:
(1) no Default or Event of Default has occurred and is continuing
following such designation, and
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(2) the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the first paragraph of the
covenant described under "--Incurrence of Indebtedness and Issuance of
Preferred Stock" (treating any Indebtedness of such Unrestricted Subsidiary
as the incurrence of Indebtedness by a Restricted Subsidiary).
Such redesignation will increase the amount available for Restricted
Payments under the covenant described under the caption "--Restricted Payments"
as provided therein or Permitted Investments, as applicable.
Payments for Consent
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any holder of notes for or as an inducement to any consent, waiver
or amendment of any of the terms or provisions of the indenture or the notes
unless such consideration is offered to be paid and is paid to all holders of
the notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
Reports
For so long as any notes remain outstanding, the Company will furnish to the
holders the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act. Whether or not the Company is subject to Section
13(a) or 15(d) of the Exchange Act, the Company shall furnish to the holders
and the trustee (and, following the filing of the Exchange Offer Registration
Statement or Shelf Registration Statement, as the case may be, as contemplated
by the registration rights agreement, will file with the Commission so long as
permitted under the Exchange Act and by the Commission) (i) within 90 days
after the end of each fiscal year, annual reports on Form 10-K (or any
successor form), or within 120 days if on Form 20-F (or any successor form),
containing the information required to be contained therein (or required in
such successor form) and (ii) within 45 days after the end of each of the first
three fiscal quarters of each fiscal year, reports on Form 10-Q (or any
successor form), or within 60 days if on Form 6-K (or any successor form),
which, regardless of applicable requirements, shall, at a minimum, contain a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
additional amounts, if any, with respect to, the notes;
(2) default in payment when due of the principal of or premium, if any,
on the notes;
(3) failure by the Company or any of its Restricted Subsidiaries to make
or consummate a Change of Control Offer or Asset Sale Offer, respectively,
when required in accordance with the provisions described under the caption
"--Change of Control," or "--Certain Covenants--Limitation on Certain Asset
Sales," or to comply with the provisions described under the caption "--
Certain Covenants--Amalgamation, Merger, Consolidation, or Sale of Assets";
(4) failure by the Company or any of its Restricted Subsidiaries for 30
days after notice to comply with the provisions described under the
captions "--Change of Control" and "--Certain Covenants--Limitation on
Certain Asset Sales" (except for any failure governed by the preceding
clause (3)), or under the captions "--Certain Covenants--Restricted
Payments" and "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock";
(5) failure by the Company or any of its Restricted Subsidiaries for 60
days after notice to comply with any of the other agreements in the
indenture or the notes;
(6) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any
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of its Restricted Subsidiaries (or the payment of which is guaranteed by
the Company, or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the Issue Date,
if that default:
(a) is caused by a failure to pay at final maturity such
Indebtedness prior to the expiration of the grace period provided in
such Indebtedness (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been
a Payment Default or the maturity of which has been so accelerated, aggregates
$10.0 million or more;
(7) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments which are non-appealable aggregating in excess of $10.0
million (net of applicable insurance coverage which is acknowledged in
writing by the insurer), which judgments are not paid, discharged or stayed
for a period of 60 days;
(8) any Guarantee ceases to be in full force and effect or is declared
null and void or a Guarantor denies that it has any further liability under
a Guarantee, or gives notice to such effect (other than by reason of the
termination of the indenture or the release of the Guarantee in accordance
with the indenture) and such condition shall have continued for 30 days
after notice of such failure; and
(9) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to the Company, any Restricted Subsidiary that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary of the Company, all notes
outstanding will become due and payable immediately without further action or
notice. If any other Event of Default occurs and is continuing, the trustee by
notice to the Company or the holders of at least 25% in principal amount of the
notes then outstanding by notice to the Company and the trustee may declare all
the notes to be due and payable immediately.
At any time after a declaration of acceleration under the indenture, but
before a judgment or decree for payment of the money due has been obtained by
the trustee, the holders of a majority in aggregate principal amount of the
notes outstanding, by written notice to the Company and the trustee, may
rescind such declaration and its consequences if:
(1) the Company has paid or deposited with the trustee a sum sufficient
to pay
. all overdue interest on all notes,
. all unpaid principal of (and premium, if any, on) any notes
outstanding that has become due otherwise than by such declaration
of acceleration and interest thereon at the rate borne by the
notes,
. to the extent that payment of such interest is lawful, interest
upon overdue interest and overdue principal at the rate borne by
the notes, and
. all sums paid or advanced by the trustee under the indenture and
the reasonable compensation, expenses, disbursements and advances
of the trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on the notes that have
become due solely by such declaration of acceleration, have been cured or
waived. No such rescission will affect any subsequent default or impair any
right consequent thereon.
Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the notes because of an Event of Default specified
in clause (6) above shall have occurred and be continuing, such declaration of
acceleration shall be automatically annulled if the Indebtedness that is the
subject of such Event
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of Default has been discharged or the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness, and written notice
of such discharge or rescission, as the case may be, shall have been given to
the trustee by the Company and countersigned by the holders of such
Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days
after such declaration of acceleration in respect of the notes, and no other
Event of Default has occurred during such 30-day period which has not been
cured or waived during such period.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a
majority in principal amount of the notes then outstanding may direct the
trustee in its exercise of any trust or power. The trustee may withhold from
holders of the notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
premium, if any, or interest on, or the principal of, the notes.
Under the indenture, the Company shall be required to deliver to the trustee
annually a statement regarding compliance with the indenture. Within 10
business days of becoming aware of any Default or Event of Default, the Company
shall be required to deliver to the trustee a statement specifying such Default
or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company
or any of its Subsidiaries, in such capacity, shall have any liability for any
obligations of the Company or its Subsidiaries under the notes or the
indenture, or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations and those of any Guarantor discharged with respect to the notes
then outstanding ("Legal Defeasance") except for:
(1) the rights of holders of notes then outstanding to receive payments
in respect of the principal of, and premium, if any, and interest on such
notes when such payments are due from the trust referred to below;
(2) the Company's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and the Company's obligations in connection therewith;
(4) the Legal Defeasance provisions of the indenture; and
(5) the Company's obligations to pay additional amounts.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and those of any Guarantor released with respect
to certain covenants that are described in the indenture ("Covenant
Defeasance") and thereafter any omission to comply with those covenants shall
not constitute a Default or Event of Default with respect to the notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the trustee, in trust, for
the benefit of the holders of the notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, and premium, if any, and
interest on the notes then outstanding on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must
specify whether the notes are being defeased to maturity or to a particular
redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the trustee an opinion of counsel reasonably acceptable to the trustee
confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the Issue
Date, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel
shall confirm that, the holders of the notes then outstanding will not
recognize income, gain or loss for United States federal income tax
purposes as a result of such Legal Defeasance and will be subject to United
States federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred and the Company shall have delivered to the trustee an opinion of
counsel in Bermuda reasonably acceptable to the trustee confirming that the
holders of the notes then outstanding will not recognize income, gain or
loss for Bermuda tax purposes as a result of such Legal Defeasance and will
be subject to Bermuda tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the holders of the notes then outstanding will not
recognize income, gain or loss for United States federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
United States federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant
Defeasance had not occurred and the Company shall have delivered to the
trustee an opinion of counsel in Bermuda reasonably acceptable to the
trustee confirming that the holders of the notes then outstanding will not
recognize income, gain or loss for Bermuda tax purposes as a result of such
Covenant Defeasance and will be subject to Bermuda tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either: (a) on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit); or (b) insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which the Company or
any of its Restricted Subsidiaries is a party or by which the Company or
any of its Restricted Subsidiaries is bound;
(6) the Company must have delivered to the trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the holders of notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(8) the Company must deliver to the trustee an Officers' Certificate and
an opinion of counsel, in the case of the Officers' Certificate, stating
that all conditions precedent relating to the Legal Defeasance or the
Covenant Defeasance have been complied with and, in the case of the opinion
of counsel, that all conditions precedent providing for Legal Defeasance or
Covenant Defeasance have been complied with.
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Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
notes as set forth in the indenture), when:
(1) either:
(a) all notes that have been authenticated (except lost, stolen or
destroyed notes that have been replaced or paid and notes for whose
payment money has theretofore been deposited in trust and thereafter
repaid to the Company) have been delivered to the trustee for
cancellation; or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within
one year and the Company has irrevocably deposited or caused to be
deposited with the trustee as trust funds in trust solely for the
benefit of the holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be
sufficient without consideration of any reinvestment of interest, to
pay and discharge the entire indebtedness on the notes not delivered to
the trustee for cancellation for principal, premium, if any, and
accrued interest to the date of maturity or redemption;
(2) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute a
default under, any other material instrument to which the Company is a
party or by which the Company is bound;
(3) the Company has paid or caused to be paid all sums payable by it
under the indenture; and
(4) the Company has delivered irrevocable instructions to the trustee
under the indenture to apply the deposited money toward the payment of the
notes at maturity or the redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel to the trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
Indemnification for Judgment Currency Fluctuations
The obligations of the Company to any holder of notes shall, notwithstanding
any judgment in a currency (the "Judgment Currency") other than U.S. dollars
(the "Agreement Currency"), be discharged only to the extent that on the day
following receipt by such holder of notes or the trustee, as the case may be,
of any amount in the Judgment Currency, such holder of notes may in accordance
with normal banking procedures purchase the Agreement Currency with the
Judgment Currency. If the amount of the Agreement Currency so purchased is less
than the amount originally to be paid to such holder of notes or the trustee,
as the case may be, in the Agreement Currency, the Company will pay the
difference and if the amount of the Agreement Currency so purchased exceeds the
amount originally to be paid to such holder of notes or the trustee, as the
case may be, such holder of notes or the trustee, as the case may be, will pay
to or for the account of the Company such excess, provided that such holder of
notes or the trustee, as the case may be, shall not have any obligation to pay
any such excess as long as a Default by the Company in its obligations under
the notes or the indenture has occurred and is continuing, in which case such
excess may be applied by such holder of notes to such obligations.
Amendment, Supplement and Waiver
With the consent of holders of not less than a majority in aggregate
principal amount of the notes at the time outstanding, the Company and the
trustee are permitted to amend or supplement the notes, the indenture or any
supplemental indenture or modify the rights of the holders; provided that
without the consent of each holder affected, no amendment, supplement,
modification or waiver may (with respect to any notes held by a non-consenting
holder):
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
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(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes (other
than provisions relating to the covenants described above under the
captions "--Change of Control" and "--Certain Covenants--Limitation on
Certain Asset Sales");
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the notes (except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment default
that resulted from such acceleration);
(5) make any note payable in currency other than that stated in the
notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of or premium, if any, or interest on the notes;
(7) waive a redemption payment with respect to any note (other than a
payment required by the provisions described above under the captions "--
Change of Control" and "--Certain Covenants--Limitation on Certain Asset
Sales");
(8) cause the notes to become subordinate in right of payment to any
other Indebtedness;
(9) make any change that would adversely affect the rights of the
holders to receive additional amounts;
(10) modify the obligation of the Company to make a Change of Control
Offer at any time after the related Change of Control has occurred and the
Company has become obligated to make and consummate such Change of Control
Offer in accordance with the provisions of the covenant described under "--
Change of Control"; or modify the obligation of the Company to make an
Asset Sale Offer at any time after the related Asset Sale has been
completed and the Company has become obligated to make and consummate such
Asset Sale Offer in accordance with the provisions of the covenant
described under "--Certain Covenants--Limitation on Certain Asset Sales;"
or
(11) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any holder of notes,
the Company and the trustee may amend or supplement the indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of the Company's obligations to
holders of notes in the case of a merger, amalgamation or consolidation or
sale of all or substantially all of the Company's assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any such holder;
(5) to add Guarantees with respect to the notes;
(6) to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act
of 1939; or
(7) to issue additional notes. See "--Issuance of Additional Notes."
Concerning the Trustee
The holders of a majority in principal amount of the notes then outstanding
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur and be continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent person in the conduct of its
own affairs. Subject to such provisions, the trustee will be under no
obligation to
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exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless such holder shall have offered to the trustee security
and indemnity satisfactory to it against any loss, liability or expense.
Additional Information
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement without charge by writing to GlobeNet
Communications Group Limited, 2 Carter's Bay Road, Southside, St. David's,
Bermuda, Attention: General Counsel.
Governing Law
The indenture provides that the notes 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 laws to the extent that the application
of the law of another jurisdiction would be required thereby.
Enforceability of Judgments
Since a majority of the assets of the Company are outside the United States,
any judgments obtained in the United States against the Company, including
judgments with respect to the payment of principal, premium, interest,
additional amounts, Change of Control Payment, offer price, redemption price or
other amounts payable under the notes may be not collectible within the United
States.
The Company has been informed by its Bermuda counsel, Conyers Dill &
Pearman, that the laws of Bermuda permit an action to be brought in a court of
competent jurisdiction in Bermuda (a "Bermuda Court") on any final and
conclusive judgment in personam of any federal or state court located in the
Borough of Manhattan in The City of New York ("New York Court") that is not
impeachable as void or voidable under the internal laws of the State of New
York for a sum certain in respect of the enforcement of the indenture or the
notes if (i) the court rendering such judgment had jurisdiction over the
judgment debtor, as recognized by the Bermuda Court (and submission by the
Company in the indenture to the non-exclusive jurisdiction of the New York
Court will be sufficient for that purpose), (ii) such judgment was not obtained
by fraud or in a manner contrary to natural justice and the enforcement thereof
would not be inconsistent with public policy, as that term is applied by a
Bermuda Court, (iii) the enforcement of such judgment does not constitute,
directly or indirectly, the enforcement of such foreign revenue, expropriatory
or penal laws and (iv) the action to enforce such judgment is commenced within
the applicable limitation period. The Company has been advised by Conyers Dill
& Pearman that it knows of no reason, based upon public policy under the laws
of Bermuda for avoiding recognition of a judgment of a New York Court to
enforce the indenture or the notes.
Consent to Jurisdiction and Service
Pursuant to the indenture, the Company has irrevocably appointed CT
Corporation System as its agent for service of process in any suit, action, or
proceeding with respect to the indenture or the notes and for actions brought
under federal or state securities laws in any federal or state court located in
the Borough of Manhattan in The City of New York, and submitted to the non-
exclusive jurisdiction of any such court.
Book-Entry, Delivery and Form and Transfer
The new notes initially will be in the form of one or more registered global
notes without interest coupons. Upon issuance, the global notes will be
deposited with the trustee, as custodian for The Depository Trust Company
("DTC"), in New York, New York, and registered in the name of DTC or its
nominee for credit to the accounts of DTC's direct and indirect participants
(as defined below), some of which may be participating in DTC through the
Euroclear System ("Euroclear") and Cedelbank.
Transfer of beneficial interests in any global notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
(including, if applicable, those of Euroclear and Cedelbank), which may change
from time to time.
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The global notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the global notes may be
exchanged for notes in certificated form in certain limited circumstances. See
"--Transfer of Interests in Global Notes for Certificated Notes."
Initially, the trustee will act as paying agent and registrar. The notes may
be presented for registration of transfer and exchange at the offices of the
registrar.
Depositary Procedures
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "direct participants") and to facilitate the clearance and settlement of
transactions in those securities between direct participants through electronic
book-entry changes in accounts of participants. The direct participants include
securities brokers and dealers (including the initial purchasers of the old
notes), banks, trust companies, clearing corporations and certain other
organizations, including Euroclear and Cedelbank. Access to DTC's system is
also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a direct participant (collectively, the
"indirect participants").
DTC has advised the Company that, pursuant to DTC's procedures, (i) upon
deposit of the global notes, DTC will credit the accounts of the appropriate
direct participants, and (ii) DTC will maintain records of the ownership
interests of such direct participants in the global notes and the transfer of
ownership interests by and between direct participants. DTC will not maintain
records of the ownership interests of, or the transfer of ownership interests
by and between, indirect participants or other owners of beneficial interests
in the global notes. Direct participants and indirect participants must
maintain their own records of the ownership interests of, and the transfer of
ownership interests by and between, indirect participants and other owners of
beneficial interests in the global notes.
Investors in the global notes may hold their interests therein directly
through DTC if they are direct participants in DTC or indirectly through
organizations that are direct participants in DTC. Some investors in the global
notes may hold their interests therein directly through Euroclear or Cedelbank
or indirectly through organizations that are participants in Euroclear or
Cedelbank, or through organizations other than Euroclear and Cedelbank that are
direct participants in the DTC system. Morgan Guaranty Trust Company of New
York, Brussels office, is the operator and depository of Euroclear and
Citibank, N.A. is the operator and depository of Cedelbank (each a "Nominee" of
Euroclear and Cedelbank, respectively). Therefore, they will each be recorded
on DTC's records as the holders of all ownership interests held by them on
behalf of Euroclear and Cedelbank, respectively. Euroclear and Cedelbank must
maintain on their own records the ownership interests, and transfers of
ownership interests by and between, their own customers' securities accounts.
DTC will not maintain such records. All ownership interests in any global
notes, including those of customers' securities accounts held through Euroclear
or Cedelbank, will be subject to the procedures and requirements of DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that
they own. This may limit or curtail the ability to transfer beneficial
interests in a global note to such persons. Because DTC can act only on behalf
of direct participants, which in turn act on behalf of indirect participants
and others, the ability of a person having a beneficial interest in a global
note to pledge such interest to persons or entities that are not direct
participants in DTC, or to otherwise take actions in respect of such interests,
may be affected by the lack of physical certificates evidencing such interests.
For certain other restrictions on the transferability of the notes see "--
Transfers of Interests in Global Notes for Certificated Notes."
Except as described in "--Transfers of Interests in Global Notes for
Certificated Notes," owners of beneficial interests in the global notes will
not have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders
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thereof under the indenture for any purpose other than with respect to the
payment of additional amounts.
Under the terms of the indenture, the Company and the trustee will treat the
persons in whose names the notes are registered (including notes represented by
global notes) as the owners thereof for the purpose of receiving payments and
for any and all other purposes whatsoever. Payments in respect of the
principal, premium, additional amounts, if any, and interest on global notes
registered in the name of DTC or its nominee will be payable by the trustee to
DTC or its nominee as the registered holder under the indenture. Consequently,
neither the Company, the trustee nor any agent of the Company or the trustee
has or will have any responsibility or liability for (1) any aspect of DTC's
records or any direct participant's or indirect participant's records relating
to or payments made on account of beneficial ownership interests in the global
notes or for maintaining, supervising or reviewing any of DTC's records or any
direct participant's or indirect participants records relating to the
beneficial ownership interests in any global note or (2) any other matter
relating to the actions and practices of DTC or any of its direct participants
or indirect participants.
DTC has advised the Company that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
notes is to credit the accounts of the relevant direct participants with such
payment on the payment date in amounts proportionate to such direct
participant's respective ownership interests in the global notes as shown on
DTC's records. Payments by direct participants and indirect participants to the
beneficial owners of the notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
trustee or the Company. Neither the Company nor the trustee will be liable for
any delay by DTC or its direct participants or indirect participants in
identifying the beneficial owners of the notes, and the Company and the trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee as the registered owner of the notes for all purposes.
The global notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between direct participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between indirect participants (other than indirect
participants who hold an interest in the notes through Euroclear or Cedelbank)
who hold an interest through a direct participant will be effected in
accordance with the procedures of such direct participant but generally will
settle in immediately available funds. Transfers between and among indirect
participants who hold interests in the notes through Euroclear and Cedelbank
will be effected in the ordinary way in accordance with their respective rules
and operating procedures.
Cross-market transfers between direct participants in DTC, on the one hand,
and indirect participants who hold interests in the notes through Euroclear or
Cedelbank, on the other hand, will be effected by Euroclear's or Cedelbank's
respective nominee through DTC in accordance with DTC's rules on behalf of
Euroclear or Cedelbank; however, delivery of instructions relating to cross-
market transactions must be made directly to Euroclear or Cedelbank, as the
case may be, by the counterparty in accordance with the rules and procedures of
Euroclear or Cedelbank and within their established deadlines (Brussels time
for Euroclear and UK time for Cedelbank). Indirect participants who hold
interests in the notes through Euroclear and Cedelbank may not deliver
instructions directly to Euroclear's or Cedelbank's nominee. Euroclear or
Cedelbank will, if the transaction meets its settlement requirements, deliver
instructions to its respective nominee to deliver or receive interests on
Euroclear's or Cedelbank's behalf in the relevant global note in DTC, and make
or receive payment in accordance with normal procedures for same-day fund
settlement applicable to DTC.
Because of time zone differences, the securities accounts of an indirect
participant who holds an interest in the notes through Euroclear or Cedelbank
purchasing an interest in a global note from a direct participant in DTC will
be credited, and any such crediting will be reported to Euroclear or Cedelbank
during the European business day immediately following the settlement date of
DTC in New York. Although recorded in DTC's accounting records as of DTC's
settlement date in New York, Euroclear and Cedelbank customers will not have
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access to the cash amount credited to their accounts as a result of a sale of
an interest in a global note to a DTC participant until the European business
day for Euroclear or Cedelbank immediately following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of notes only at the direction of one or more direct
participants to whose account interests in the global notes are credited and
only in respect of such portion of the aggregate principal amount of the notes
to which such direct participant or direct participants has or have given
direction. However, if there is an event of default under the notes, DTC
reserves the right to exchange global notes (without the direction of one or
more of its direct participants) for legended notes in certificated form, and
to distribute such certificated forms of notes to its direct participants. See
"--Transfers of Interests in Global Notes for Certificated Notes."
Although DTC, Euroclear and Cedelbank have agreed to the foregoing
procedures to facilitate transfers of interests in the global notes among
direct participants, including Euroclear and Cedelbank, they are under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the trustee
shall have any responsibility for the performance by DTC, Euroclear or
Cedelbank or their respective direct and indirect participants of their
respective obligations under the rules and procedures governing any of their
operations.
DTC management is aware that some computer applications, systems, and the
like for processing data that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its participants and other members of the financial
community that it has developed and is implementing a program so that its
systems, as the same relate to the timely payment of distributions (including
principal and income payments) to securityholders, book-entry deliveries, and
settlement of trades within DTC, continue to function appropriately. This
program includes a technical assessment and a remediation plan, each of which
is complete. Additionally, DTC's plan includes a testing phase, which is
expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to:
(1) impress upon them the importance of such services being Year 2000
compliant; and (2) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition, DTC
is in the process of developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
The information in this section concerning DTC, Euroclear and Cedelbank and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Transfers of Interests in Global Notes for Certificated Notes
An entire global note may be exchanged for definitive notes in registered,
certificated form without interest coupons ("certificated notes") if:
. DTC (x) notifies the Company that it is unwilling or unable to continue
as depositary for the global notes and the Company thereupon fails to
appoint a successor depositary within 90 days or (y) has ceased to be a
clearing agency registered under the Exchange Act of 1934,
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. the Company, at its option, notifies the trustee in writing that it
elects to cause the issuance of certificated notes or
. there shall have occurred and be continuing a default or an event of
default with respect to the notes.
In any such case, the Company will notify the trustee in writing that, upon
surrender by the direct and indirect participants of their interest in such
global note, certificated notes will be issued to each person that such direct
and indirect participants and the DTC identify as being the beneficial owner of
the related notes.
Beneficial interests in global notes held by any direct or indirect
participant may be exchanged for certificated notes upon request to DTC, by
such direct participant (for itself or on behalf of an indirect participant),
to the trustee in accordance with customary DTC procedures. Certificated notes
delivered in exchange for any beneficial interest in any global note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such direct or indirect participants (in accordance with DTC's
customary procedures).
Neither the Company nor the trustee will be liable for any delay by the
holder of any global note or DTC in identifying the beneficial owners of notes,
and the Company and the trustee may conclusively rely on, and will be protected
in relying on, instructions from the holder of the global note or DTC for all
purposes.
Same Day Settlement and Payment
The indenture requires that payments in respect of the notes represented by
the global notes (including principal, premium, if any, interest and additional
amounts, if any) be made by wire transfer of immediately available same day
funds to the accounts specified by the holder of interests in such global note.
With respect to certificated notes, the Company will make all payments of
principal, premium, if any, interest and additional amounts, if any, by wire
transfer of immediately available same day funds to the accounts specified by
the holders thereof or, if no such account is specified, by mailing a check to
each such holder's registered address. The Company expects that secondary
trading in the certificated notes will also be settled in immediately available
funds.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged or amalgamated with or into or became a Subsidiary of such
specified Person, whether or not such Indebtedness is incurred in
connection with, or in contemplation of, such other Person merging or
amalgamating with or into, or becoming a Subsidiary of, such specified
Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Alcatel" means Alcatel, a French societe anonyme, or any Affiliate thereof,
and their respective successors and assigns.
"Alcatel Guaranty" means the guarantee to be given by Alcatel in favor of
the lenders under the New Credit Facility, together with any related
reimbursement agreement between or among the Company or any Restricted
Subsidiary and Alcatel, as such guarantee and reimbursement agreement may be
amended, amended and restated, supplemented, modified, renewed, extended,
refunded, restructured, replaced or refinanced, and in effect from time to
time.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
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"control," as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided that beneficial ownership of
10% or more of the Voting Stock of a Person shall be deemed to be control. For
purposes of this definition, the terms "controlling," "controlled by" and
"under common control with" shall have correlative meanings.
"Applicable Percentage" means 0% for each fiscal quarter commencing prior to
January 1, 2002 and 50% for each fiscal quarter thereafter.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than any sale, lease, conveyance or other disposition of
capacity (but not including a disposition of a dark fiber involving
transfer of title thereto, other than backhaul) on any cable system owned,
controlled or operated by the Company or any of its Restricted Subsidiaries
or of telecommunications capacity or transmission rights acquired by the
Company or any Restricted Subsidiary for use in a Permitted Business;
provided that the sale, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
indenture described above under the caption "--Change of Control" and/or
the provisions described above under the caption "--Certain Covenants--
Amalgamation, Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of the Company's Restricted
Subsidiaries or the sale of Equity Interests in any of its Subsidiaries,
Notwithstanding the preceding, the following items shall be deemed not to be
Asset Sales:
(1) any single transaction or series of related transactions that: (a)
involves assets having a Fair Market Value of less than $1.0 million; or
(b) results in net proceeds to the Company and its Restricted Subsidiaries
of less than $1.0 million;
(2) a transfer of assets between or among the Company and its Restricted
Subsidiaries or between Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted Subsidiary to the
Company or to a Wholly Owned Restricted Subsidiary;
(4) a Permitted Investment or a Restricted Payment that is permitted by
the covenant described above under the caption "--Certain Covenants--
Restricted Payments;"
(5) the sale of Fiber Optic Assets for which the Company or any
Restricted Subsidiary receives consideration substantially all of which is
Fiber Optic Assets and such consideration has an aggregate Fair Market
Value at least equal to the Fair Market Value of the Fiber Optic Assets so
sold;
(6) the sale, conveyance or other disposition of dark fiber on any cable
system utilized by the Company or any of its Restricted Subsidiaries for
backhaul capacity;
(7) the licensing of intellectual property of the Company or any of its
Restricted Subsidiaries in the ordinary course of business; and
(8) a disposition of obsolete or worn out equipment or equipment that is
no longer useful in the conduct of a Permitted Business and that is
disposed of in the ordinary course of business.
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
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"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act.
"Board of Directors" means, with respect to any Person, the board of
directors or other governing body of such Person, except that if such Person is
owned or managed by a single entity, it means the board of directors or other
governing body of such entity, or, in either case, any committee thereof duly
authorized to act on behalf of such board or governing body.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means any of the following:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than six months from the date of
acquisition;
(3) certificates of deposit and Eurodollar time deposits with maturities
of six months or less from the date of acquisition and overnight bank
deposits, in each case with any U.S. commercial bank having capital and
surplus in excess of $500 million and a Thompson Bank Watch Rating of "B"
or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Service, a division of
The McGraw-Hill Companies, Inc., or their successors, and in each case
maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1)-(5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than by
way of merger, amalgamation or consolidation and other than transmission
capacity in the ordinary course of business), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole to any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act and the rules
promulgated thereunder) other than a Restricted Subsidiary, or one or more
Permitted Holders, or a person or group of which no other person or group
other than one or more Permitted Holders is the Beneficial Owner, directly
or indirectly, of more than 50% of the Voting Stock of such transferee
Person, measured by voting power rather than number of shares, upon
consummation of such transaction or transactions;
(2) the adoption of a plan relating to the liquidation or dissolution of
the Company;
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(3) the consummation of any transaction (including, without limitation,
any merger, amalgamation or consolidation) the result of which is that any
"person" or "group" (as defined above), other than one or more Permitted
Holders, becomes the Beneficial Owner, directly or indirectly, of more than
50% of the Voting Stock of the Company, measured by voting power rather
than number of shares;
(4) during any period of two consecutive years beginning on or after the
Issue Date, Continuing Directors cease for any reason to constitute a
majority of the members of the Board of Directors of the Company; or
(5) the Company consolidates with, or merges or amalgamates with or
into, any Person, or any Person consolidates with, or merges or amalgamates
with or into, the Company, in any such event pursuant to a transaction in
which any of the outstanding Voting Stock of the Company is converted into
or exchanged for cash, securities or other property, other than any such
transaction where no "person" or "group" (as defined above), other than one
or more Permitted Holders, becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Stock, measured by voting power
rather than number of shares, of such surviving, continuing or transferee
Person, in each case immediately after giving effect to such issuance.
"Consolidated Capital Ratio" means, with respect to any Person, as of the
date of any incurrence of Indebtedness or issuance of Disqualified Stock, the
ratio of (1) the aggregate consolidated principal amount of Indebtedness of
such Person and its Restricted Subsidiaries (other than intercompany debt, and
excluding Hedging Obligations permitted under clause (10) of the definition of
"Permitted Indebtedness") and the liquidation preference of Disqualified Stock
of such Person and its Restricted Subsidiaries, in each case, outstanding at
the end of the most recent fiscal quarter for which a consolidated balance
sheet of such Person is available after giving pro forma effect to the
incurrence of such Indebtedness or the issuance of such Disqualified Stock, and
any other Indebtedness incurred or repaid or any other Disqualified Stock
issued, repurchased or retired since the date of such balance sheet to (2) the
Consolidated Net Worth of such Person as of such balance sheet date, after
giving pro forma effect to the issuance and repurchase or retirement of Equity
Interests (other than Disqualified Stock) since the date of such balance sheet.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized
in connection with an Asset Sale, to the extent such losses were deducted
in computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees
and charges incurred in respect of letter of credit, and net of the effect
of all payments, if any, pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing such Consolidated Net
Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period, to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus
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(5) non-cash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course of
business (and other than items reversing, offsetting or reducing any
accrual or reserve excluded pursuant to the preceding clause (4)), in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges
of, a Restricted Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of such Person only
to the extent that a corresponding amount would be permitted at the date of
determination to be divided or paid to such Person by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements (for purposes of the covenant described
under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock,"
excluding the New Credit Facility), instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Leverage Ratio" means, with respect to any Person, as of the
date of any incurrence of Indebtedness or issuance of Disqualified Stock, the
ratio of (1) the aggregate consolidated principal amount of Indebtedness of
such Person and its Restricted Subsidiaries (other than intercompany debt, and
excluding Hedging Obligations permitted under clause (10) of the definition of
"Permitted Indebtedness") and the consolidated liquidation preference of
Disqualified Stock of such Person and its Restricted Subsidiaries, in each
case, outstanding at the end of the most recent fiscal quarter for which a
consolidated balance sheet of such person is available, after giving pro forma
effect to the incurrence of such Indebtedness or the issuance of such
Disqualified Stock, and any other Indebtedness incurred or repaid and any other
Disqualified Stock issued, repurchased or retired since the date of such
balance sheet, to (2) the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for the most recently ended four fiscal quarters
immediately preceding the date of the incurrence of such Indebtedness or
issuance of such Disqualified Stock for which consolidated financial statements
of such Person are available.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary that is not a Guarantor
shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that
Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement (for
purposes of the covenant described under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock," excluding the New Credit
Facility), instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders, it being understood that the Net Income of any such
Restricted Subsidiary for such period shall be included in Consolidated Net
Income up to the aggregate amount of cash that such Restricted Subsidiary
could have paid pursuant to such dividends or similar distributions during
such period to the Company or any of its Restricted Subsidiaries;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and
(4) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders of such Person
and its Restricted Subsidiaries that are Restricted Subsidiaries as of such
date plus
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(2) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock, plus
(3) amortization reflected in the consolidated equity of common
stockholders in clause (1) above of amounts deducted in clauses (1) and (2)
below,
less,
(1) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business
made within 12 months after the acquisition of such business) subsequent to
the Issue Date in the book value of any asset owned by such Person or a
Restricted Subsidiary of such Person; and
(2) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"Continuing Director" means, any individual who at the beginning of the
period of determination:
(1) was a member of the Board of Directors; or
(2) was nominated for election or elected to such Board of Directors
with the approval of one or more Permitted Holders or a majority of the
directors who were members of such Board of Directors at the beginning of
such period or whose election or nomination was previously so approved.
"Default" means any event that is, or with the passage of time or the giving
of notice, or both, would be, an Event of Default.
"disinterested member" means, with respect to any transaction, a member of
the Board of Directors of the Company having no material financial interest in
or with respect to such transaction. A member of the Board of Directors of the
Company shall not be deemed to have such a financial interest solely by reason
of such member's holding Capital Stock of the Company, or any parent thereof of
which the Company is a Wholly Owned Subsidiary, or any options, warrants or
other rights in respect of such Capital Stock.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall
not constitute Disqualified Stock if the terms of such Capital Stock provide
that the Company may not repurchase or redeem any such Capital Stock pursuant
to such provisions unless such repurchase or redemption complies with the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any offering of common stock of the Company (other
than Disqualified Stock) other than to a Subsidiary of the Company, in which
the gross cash proceeds to the Company are at least $100.0 million.
"Existing Indebtedness" means Indebtedness of the Company or any of its
Restricted Subsidiaries outstanding on the Issue Date (other than the New
Credit Facility).
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"Fair Market Value" means, with respect to any asset or Property, the sale
value that would be obtained 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.
"Fiber Optic Assets" means assets, rights (contractual or otherwise) and
properties, whether tangible or intangible, used or intended for use in
connection with the development, ownership and operation of undersea fiber
optic cable systems (including complementary assets, such as backhaul capacity
and satellite-related assets).
"Fiber Optic Joint Venture" means any Person that is engaged in the
development, ownership and operation of undersea fiber optic cable systems
(including complementary assets, such as backhaul capacity and satellite
related assets).
"GAAP" means generally accepted accounting principles in effect from time to
time in Bermuda (or the United States of America, to the extent the Company's
consolidated financial statements at any time are prepared in accordance with
generally accepted accounting principles in effect in the United States of
America).
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness, and "guarantee" when used as
a verb shall have corresponding meaning.
"Guarantee" means the full and unconditional guarantee on a senior,
unsubordinated basis by any Guarantor of the Company's obligations under the
indenture and the notes. When used as a verb, "Guarantee" shall have
corresponding meaning.
"Guarantor" means any Restricted Subsidiary of the Company which executes
and delivers a Guarantee in accordance with the provisions of the covenant
described under the caption "--Certain Covenants--Future Guarantees."
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) currency exchange or interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange or interest rates.
"Indebtedness" means, with respect to any specified Person, any indebtedness
of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by (a) bonds, notes, debentures or similar instruments or
(b) letters of credit (or reimbursement agreements in respect thereof);
(3) representing Capital Lease Obligations;
(4) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable; or
(5) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
the specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person, which shall be deemed
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the lesser of the full amount of such Indebtedness and the Fair Market Value
of the property or asset so secured) and, to the extent not otherwise
included, the guarantee by such Person of any Indebtedness of any other
Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
The term "Indebtedness" shall not include obligations (1) with respect to
letters of credit or other similar instruments securing obligations (other
than obligations described in clause (1), (2)(a), (3) or (5) above) entered
into in the ordinary course of business, to the extent 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,
(2) in respect of performance, surety, judgment, appeal or other similar bonds
provided in the ordinary course of business or (3) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations in connection with the disposition of any business, assets or
Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Wholly Owned
Restricted Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the Fair
Market Value of the Equity Interests of such Restricted Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"Issue Date" means July 14, 1999, the first date on which any notes were
issued under the indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person and its Restricted Subsidiaries, determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends,
excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such Person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale, including, without limitation, legal,
accounting and investment banking fees, and sales
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commissions, and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof, in each case after taking into account any
available tax credits or deductions and any tax sharing arrangements and
amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets that were the subject of such Asset Sale.
"New Credit Facility" means the credit agreement entered into by GlobeNet
Communications Holdings Ltd., as borrower, and all of the borrower's
Subsidiaries, as guarantors, and TD Securities (USA) Inc., as arranger, and the
lenders named therein from time to time, and any ancillary documents executed
in connection therewith (including letters of credit and any guarantee and
security documents, including but not limited to the Alcatel Guaranty), as the
same may be amended, amended and restated, supplemented or otherwise modified
from time to time and any renewal, extension, refunding, restructuring,
replacement or refinancing thereof (whether with the original administrative
agent and lenders or other administrative agent or agents or other lenders
(including Alcatel upon its payment under its guarantee) and whether provided
under the original credit agreement or any other credit or other successor
agreements, including any agreement or agreements (1) extending or shortening
the maturity of any Indebtedness incurred thereunder or contemplated thereby,
(2) adding or deleting borrowers or guarantors thereunder or (3) increasing the
amount of Indebtedness incurred thereunder or available to be borrowed
thereunder to the extent permitted under the indenture).
"Non-Recourse Debt" means Indebtedness as to which neither the Company nor
any of its Restricted Subsidiaries (1) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (2) is directly or indirectly liable as a guarantor or otherwise
or (3) constitutes the lender.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any business that is the same as or related,
ancillary or complementary to any business of the Company or any of its
Restricted Subsidiaries on the Issue Date, including without limitation e-
commerce.
"Permitted Holders" means any of the following, and any of the respective
Affiliates or successors of any of the following: (1) Kelso Investment
Associates VI, L.P., KEP VI, L.L.C. and Kelso & Company, (2) Boston Ventures
Limited Partnership V and Boston Ventures Management, Inc., (3) Providence
Equity Partners III L.P., Providence Equity Operating Partners III L.P. and
Providence Equity Partners Inc., (4) Spectrum Equity Investors III, L.P., SEI
III Entrepreneurs Fund, L.P., Spectrum III Investment Managers' Fund, L.P. and
Spectrum Equity Investors, (5) TD Capital Group Limited, (6) Capital
Communications CDPQ Inc., (7) Sandler Capital Partners IV, L.P., Sandler
Capital Partners IV FTE L.P., SCM Communications CBO I LTD and Sandler Capital
Management, (8) Ontario Municipal Employee Retirement Board and (9) Nautilus
Equity Investors LLC.
"Permitted Indebtedness" means:
(1) the incurrence of Indebtedness under or in connection with the New
Credit Facility, including to the extent constituting Indebtedness, any
principal, premium, if any, interest, fees, charges, expenses,
reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof; provided that the aggregate principal
amount of all Indebtedness outstanding under the New Credit Facility after
giving effect to such incurrence does not exceed an amount equal to $450.0
million, less the aggregate amount of all repayments, mandatory or
optional, of the principal of any term Indebtedness under the New Credit
Facility (other than refinancings and repayments that are concurrently
reborrowed) that have actually been made since the date of the indenture,
provided that in any event the aggregate principal amount of Indebtedness
permitted to be outstanding under the New Credit Facility pursuant to this
clause (1) shall be no less than $100.0 million;
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(2) the incurrence of any contingent obligation to reimburse Alcatel in
connection with the Alcatel Guaranty or other obligations under the New
Credit Facility, provided that such Indebtedness under the New Credit
Facility is permitted to be incurred under clause (1) of this definition of
"Permitted Indebtedness";
(3) the provision by the Company or any of its Restricted Subsidiaries
of a guarantee of Indebtedness under the New Credit Facility;
(4) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(5) the incurrence by the Company of Indebtedness represented by the old
notes and the new notes and by any Restricted Subsidiary of any Guarantee;
(6) the incurrence by the Company or any Guarantor of Purchase Money
Indebtedness, provided that the amount thereof does not exceed 75% of the
Company's and its Restricted Subsidiaries' aggregate cost (determined in
accordance with GAAP in good faith by the Board of Directors of the
Company) of the construction, acquisition, development, engineering,
installation and improvement of the applicable Fiber Optic Assets;
(7) the incurrence by the Company or any of its Restricted Subsidiaries
of Vendor Financing Indebtedness, provided that the amount thereof does not
exceed 100% of the Company's and its Restricted Subsidiaries' aggregate
cost (determined in accordance with GAAP in good faith by the Board of
Directors of the Company) of the construction, acquisition, development,
engineering, installation and improvement of the applicable Fiber Optic
Assets, provided, further, that the aggregate amount thereof outstanding at
any time, including all Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (7), shall not
exceed $75.0 million; and provided, further, that the amount of
Indebtedness of Restricted Subsidiaries of the Company outstanding under
this clause (7) and clause (12) of this definition of "Permitted
Indebtedness", including all Indebtedness incurred to refund, refinance or
replace any such Indebtedness, shall not, in the aggregate, exceed $75.0
million at any one time;
(8) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace, Indebtedness that was
permitted by the indenture to be incurred under the first paragraph of the
covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock" or clauses (4), (5), (6), (7), (8) and (12) of
this definition of "Permitted Indebtedness;"
(9) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries and the issuance of preferred stock by a Restricted
Subsidiary to the Company or another Restricted Subsidiary of the Company;
provided, however, that:
(a) if the Company is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the notes; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness or preferred stock being held by a
Person other than the Company or a Restricted Subsidiary thereof and
(ii) any sale or other transfer of any such Indebtedness or preferred
stock to a Person that is not either the Company or a Restricted
Subsidiary thereof, shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause
(9);
(10) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred (a) for the purpose of fixing or
hedging interest or foreign currency exchange rate risk with respect to any
floating rate Indebtedness or foreign currency based Indebtedness,
respectively, that is permitted by the terms of this indenture to be
outstanding; provided that the notional amount of any such Hedging
Obligation does not exceed the amount of Indebtedness or other liability to
which such Hedging Obligation relates; or (b) for the purpose of fixing or
hedging currency exchange risk with respect to any currency exchanges made
in the ordinary course of business and not for purposes of speculation;
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(11) the incurrence of Indebtedness by the Company that is expressly
subordinated in right of payment to the notes, provided that:
(a) the terms of such Indebtedness do not permit any payments of
interest or principal prior to the Stated Maturity of such Indebtedness;
(b) the terms of such Indebtedness do not permit redemption or other
retirement of such Indebtedness prior to the Stated Maturity of such
Indebtedness;
(c) the terms of such Indebtedness do not provide for defaults or
other remedies and such Indebtedness is not subject to acceleration by
its terms, or otherwise;
(d) the Stated Maturity of such Indebtedness occurs after the Stated
Maturity of the notes; and
(e) the terms of such Indebtedness provide that in the event of any
payment or liquidation of the assets of the Company to creditors upon a
total or partial liquidation or dissolution or in a bankruptcy,
insolvency, receivership or similar proceeding relating to the Company,
no distributions to holders of such Indebtedness will be made until
distributions have been made with respect to all other Indebtedness of
the Company, other than other Indebtedness incurred pursuant to this
clause (11); and
(12) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred pursuant
to this clause (12), not to exceed $50.0 million; provided that the amount
of Indebtedness of Restricted Subsidiaries of the Company outstanding under
this clause (12) and clause (7) of this definition of "Permitted
Indebtedness" including all Indebtedness incurred to refund, refinance or
replace any such Indebtedness, shall not, in the aggregate, exceed $75.0
million at any one time.
"Permitted Investments" means:
(1) any Investment in the Company or in any Wholly Owned Restricted
Subsidiary of the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Wholly Owned Restricted
Subsidiary of the Company in a Person if as a result of such Investment:
(a) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of
the Company;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Certain
Covenants--Limitations on Certain Asset Sales";
(5) Investments in the form of intercompany Indebtedness to the extent
permitted under clause (9) of the definition of "Permitted Indebtedness";
(6) Hedging Obligations, provided that such Hedging Obligations
constitute Permitted Indebtedness permitted by clause (10) of the
definition of "Permitted Indebtedness";
(7) Investments made in Fiber Optic Joint Ventures, provided that the
aggregate amount of all Investments made pursuant to this clause (7) does
not exceed $45.0 million; provided that no more than $20.0 million of such
Investments shall be in Fiber Optic Joint Ventures over which the Company
does not have, directly or indirectly, the power to direct the policies,
management and affairs;
(8) Investments of the Company or any of its Restricted Subsidiaries
existing on the Issue Date;
(9) Investments in accounts and notes receivable, prepaid expenses and
deposits in the ordinary course of business; Investments in negotiable
instruments held for collection; and pledges or deposits constituting
Permitted Liens;
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(10) loans or advances made in the ordinary course of business to
officers, directors or employees of the Company or any of its Restricted
Subsidiaries for travel, entertainment and moving and other relocation
expenses; and
(11) any Investment acquired by the Company or any of its Restricted
Subsidiaries (a) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary, in each
case, in satisfaction of a judgment or in connection with or as a result of
a bankruptcy, workout, reorganization or recapitalization of the issuer of
such other Investment or accounts receivable or (b) as a result of a
foreclosure by the Company or any of its Restricted Subsidiaries with
respect to any secured Investment or other transfer of title with respect
to any secured Investment in default.
In calculating the amount of Investments under clause (7), such amount will
equal the aggregate Fair Market Value of Investments at the time such
Investments were made, less the amount of any net reduction in such Investments
resulting from the payment in cash of dividends, distributions or repayments or
from the receipt of proceeds of dispositions of such Investments, in each case
paid to the Company or any Restricted Subsidiary; provided that the sum of such
dividends, distributions, repayments or disposition proceeds may not exceed the
aggregate amount of Investments made under clause (7).
"Permitted Liens" means:
(1) Liens on assets of the Company or any Restricted Subsidiary of the
Company securing Indebtedness under the New Credit Facility permitted by
clause (1) of the definition of "Permitted Indebtedness" and all other
amounts payable under such Indebtedness or in respect thereof;
(2) Liens on assets of the Company or any Restricted Subsidiary of the
Company securing Indebtedness of the Company or any Restricted Subsidiary
of the Company permitted to be incurred under the indenture and all other
amounts payable under such Indebtedness or in respect thereof, the
principal amount of which Indebtedness shall not at any time exceed the
difference between (a) $450.0 million and (b) the principal amount of any
Indebtedness outstanding pursuant to clause (1) of the definition of
"Permitted Indebtedness";
(3) Liens in favor of the Company or its Restricted Subsidiaries;
(4) Liens on property of a Person existing at the time such Person is
merged or amalgamated with or into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were in
existence prior to the contemplation of such merger, amalgamation or
consolidation and do not extend to any assets other than those of the
Person merged or amalgamated with, or into or consolidated with the Company
or the Restricted Subsidiary;
(5) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition;
(6) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, licenses, obligations for utilities, statutory or
regulatory obligations, letters of credit, surety and appeal bonds,
government or other contracts, completion guarantees, performance and
return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment
of borrowed money);
(7) Liens existing on the Issue Date;
(8) Liens to secure Purchase Money Indebtedness permitted by clause (6)
of the definition of "Permitted Indebtedness" covering only the assets (or
portion thereof) acquired with such Indebtedness;
(9) Liens to secure Vendor Financing Indebtedness permitted by clause
(7) of the definition of "Permitted Indebtedness" covering only the assets
(or portion thereof) acquired with such Indebtedness;
(10) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent, or that in the aggregate are not material, or that
are being contested in good faith by appropriate
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proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity
with GAAP shall have been made therefor;
(11) Liens created for the benefit of the notes;
(12) Liens imposed by law or arising by operation of law, including,
without limitation, landlords' mechanics', carriers', warehousemen's,
materialmen's, suppliers' and vendors' Liens, Liens for master's and crew's
wages and other similar maritime Liens and mechanics' Liens, in each case
which are incurred in the ordinary course of business for sums not yet
delinquent or that have been bonded or are being contested in good faith,
if such reserves or other appropriate provisions, if any, as shall be
required by GAAP shall have been made with respect thereto;
(13) zoning restrictions, easements, license, covenants, reservations,
restrictions on the use of real property and defects, irregularities and
deficiencies in title to real property that do not, individually or in the
aggregate, materially affect the ability of the Company or any Restricted
Subsidiary to conduct its business and are incurred in the ordinary course
of business;
(14) Liens incurred or pledges and deposits made in the ordinary course
of business in connection with workers' compensation and unemployment
insurance and other types of social security and other similar legislation
or other insurance-related obligations (including, without limitation,
pledges or deposits securing liability to insurance carriers under
insurance or self-insurance arrangements);
(15) Liens securing obligations of the Company or any Restricted
Subsidiary of the Company under Hedging Obligations permitted to be
incurred under clause (10) of the definition of "Permitted Indebtedness";
(16) leases, subleases, licenses or sublicenses granted to others that
do not materially interfere with the ordinary course of business of the
Company and its Restricted Subsidiaries, taken as a whole;
(17) Liens encumbering property or assets under construction (and
related rights) in favor of a contractor or developer, or arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such property or assets;
(18) any interest or title of a lessor in the property subject to any
capital lease or operating lease;
(19) Liens (including extensions, renewals, and replacements thereof) on
property or assets of, or on shares of Capital Stock or Indebtedness of,
any Person existing (in the case of the original such Lien) at the time
such Person becomes, or becomes a part of, any Restricted Subsidiary of the
Company; provided that such Liens do not extend to or cover any property or
assets of the Company or any of its Restricted Subsidiaries other than the
property, assets, Capital Stock or Indebtedness so acquired (plus
improvements, accessions or proceeds in respect thereof) and were not
created in contemplation of such transaction;
(20) any Lien arising from (x) a judgment that does not, and upon the
expiration of any applicable grace period, will not, result in an Event of
Default and (y) any other judgment, but only, in the case of this clause
(y), so long as such Lien is adequately bonded and all appropriate legal
proceedings that may have been initiated for the review of such judgment,
decree or order shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired.
(21) Liens securing reimbursement obligations with respect to commercial
letters of credit incurred in the ordinary course of business which
encumber documents and other property relating to such letters of credit
and products and proceeds thereof;
(22) Liens arising out of consignment or similar arrangements for the
sale of goods in the ordinary course of business;
(23) Liens arising from filing Uniform Commercial Code financing
statements regarding leases, provided that such Liens do not extend to any
property or assets which are not leased property subject to such leases or
subleases;
(24) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
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(25) Liens on or sales or transfers of receivables (including related
rights);
(26) Liens on Capital Stock or other securities of an Unrestricted
Subsidiary that secure Indebtedness or other obligations of such
Unrestricted Subsidiary;
(27) any encumbrance or restriction (including, but not limited to, put
and call agreements) with respect to Capital Stock of any joint venture or
similar arrangement pursuant to any joint venture or similar agreement;
(28) Liens on cash set aside at the time of the incurrence of any
Indebtedness, or government securities purchased with such cash, in either
case to the extent that such cash or government securities pre-fund the
payment of interest on such Indebtedness and are held in an escrow account
or similar arrangement to be applied for such purpose;
(29) the escrow arrangement pursuant to which the proceeds of the
borrowings under the term D loan of the New Credit Facility will initially
be held; and
(30) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that
do not exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to refund, refinance or replace, other Indebtedness
of the Company or any of its Restricted Subsidiaries (other than intercompany
Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), and premium, if any, plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
equal to or later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life
to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is expressly subordinated in right of payment to the
notes, such Permitted Refinancing Indebtedness has a final maturity date
equal to or later than the final maturity date of, and is subordinated in
right of payment to, the notes on terms that taken as a whole are at least
as favorable to the holders of notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) except in the case of Indebtedness issued in exchange for, or the
net proceeds of which are used to refund, refinance or replace,
Indebtedness incurred pursuant to, and as permitted by, clause (7) or (12)
of the definition of "Permitted Indebtedness" (or other Permitted
Refinancing Indebtedness incurred in respect of such Indebtedness), such
Indebtedness is incurred either (a) by the Company or any Guarantor or (b)
by the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Private Equity Financing" means the private offering of common shares of
the Company that closed on the Issue Date.
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"Property" means, with respect to any Person, any interest of such Person in
any kind of property or asset, whether real, personal or mixed, or tangible or
intangible, including Capital Stock in, and other securities of, any other
Person.
"Purchase Money Indebtedness" means Indebtedness of the Company (including
Acquired Debt and Capital Lease Obligations, mortgage financings and purchase
money obligations) incurred for the purpose of financing or refinancing, all or
any part of the cost of construction, engineering, acquisition, installation,
development or improvement by the Company or any Restricted Subsidiary of any
Fiber Optic Assets of the Company or any Restricted Subsidiary and including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means any of the following:
(1) the declaration or payment of any dividend on or the making of any
other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger, amalgamation or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the
direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or to the Company or a Restricted
Subsidiary of the Company);
(2) the purchase, redemption or other acquisition or retirement for
value (including, without limitation, in connection with any merger,
amalgamation or consolidation involving the Company) of any Equity
Interests of the Company or any direct or indirect parent of the Company or
any Restricted Subsidiary of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the Company,
and other than the purchase by the Company of newly-issued or outstanding
Equity Interests of a Restricted Subsidiary or the purchase by a Restricted
Subsidiary of newly-issued or outstanding Equity Interests of another
Restricted Subsidiary);
(3) the making of any payment of principal on, or the purchase,
redemption, defeasance or other acquisition or retirement for value of, any
Indebtedness that is expressly subordinated in right of payment to the
notes, except a payment of principal at the Stated Maturity thereof; or
(4) the making of any Restricted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Significant Subsidiary" means any Subsidiary that would be a significant
subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, (1) with respect to any Indebtedness, the date
specified in the original documentation governing such Indebtedness as the
fixed date on which the final installment of principal of such Indebtedness is
due and payable and (2) with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(1) any corporation a majority of whose Capital Stock with voting power,
under ordinary circumstances, to elect directors is, at the date of
determination, directly or indirectly, owned by such Person (a
"subsidiary"), by one or more subsidiaries of such Person or by such Person
and one or more subsidiaries of such Person;
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(2) a partnership in which such Person or a subsidiary of such Person
is, at the date of determination, a general partner of such partnership; or
(3) any partnership, limited liability company or other Person in which
such Person, a subsidiary of such Person or such Person and one or more
subsidiaries of such Person, directly or indirectly, at the date of
determination, has (x) at least a majority ownership interest or (y) the
power to elect or appoint or direct the election or appointment of the
managing partner or member of such Person or, if applicable, a majority of
the directors or other governing body of such Person.
"Tax" means any tax, duty, levy, impost, assessment or other governmental
charge (including penalties, interest and any other liabilities related
thereto).
"Taxing Authority" means any government or political subdivision or
territory or possession or any authority therein or thereof having power to
tax.
"Unrestricted Subsidiary" means any Subsidiary designated as such pursuant
to the covenant described under the caption "Unrestricted Subsidiaries."
"Vendor Financing Indebtedness" means Indebtedness of the Company or any of
its Restricted Subsidiaries incurred pursuant to any agreements between the
Company or any of its Restricted Subsidiaries and one or more vendors or
lessors of Fiber Optic Assets used or intended for use in a Permitted Business
by the Company or any of its Restricted Subsidiaries (or any Affiliate of any
such vendor or lessor or any lender or group of lenders led by or arranged for
by any such vendor, lessor or Affiliate) providing financing for all or any
part of the cost of construction, engineering, acquisition, installation,
development or improvement by the Company or any of its Restricted Subsidiaries
of any Fiber Optic Assets from any such vendor or lessor (or any such Affiliate
or lender) and including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, as the same may be
amended, supplemented, modified or restated from time to time.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment;
by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Wholly Owned
Subsidiary of such Person that is a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares and shares required to be held by
nationals of any jurisdiction) shall at the time be owned by such Person and/or
by one or more Wholly Owned Subsidiaries of such Person.
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EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
In connection with the issuance of the old notes, we entered into a
registration rights agreement. Under the registration rights agreement, we
agreed to:
. use our reasonable best efforts to file a registration statement with the
Securities and Exchange Commission for an exchange of the new notes for
the old notes under the Securities Act of 1933 and to keep such
registration statement effective until the closing of such exchange
offer;
. use our reasonable best efforts to cause the exchange offer to be
consummated within 210 days following the original issuance of the old
notes;
. keep the exchange offer open for acceptance for a period of not less than
30 days after the date notice thereof is mailed to holders of the old
notes, or longer if required by applicable law; and
. accept for exchange all old notes duly tendered and not validly withdrawn
in the exchange offer in accordance with the terms of the exchange offer
registration statement and letter of transmittal.
As soon as practicable after the exchange offer registration statement
becomes effective, we will offer the holders of old notes who are not
prohibited by any law or policy of the Securities and Exchange Commission from
participating in this exchange offer the opportunity to exchange for their old
notes new notes registered under the Securities Act of 1933 that are
substantially identical to the old notes, except that the new notes will not
contain terms with respect to transfer restrictions, registration rights and
additional interest.
Under limited circumstances, we will use our reasonable best efforts to
cause the Securities and Exchange Commission to declare effective a shelf
registration statement with respect to the resale of the old notes and keep the
statement effective for up to two years after the effective date of the shelf
registration statement (or one year from the effective date of the shelf
registration statement if such registration statement is filed upon the request
of an initial purchaser, as described in the third bullet point below). These
circumstances include:
. if any changes in law or their interpretations by the staff of the
Securities and Exchange Commission do not permit us to effect the
exchange offer as contemplated by the registration rights agreement,
. if the exchange offer if not consummated within 210 days after July 14,
1999, and
. if any initial purchaser of the old notes so requests with respect to old
notes held by it and if such initial purchaser is not permitted pursuant
to applicable law or interpretation of the staff of the Securities and
Exchange Commission to participate in the exchange offer.
Additional interest will accrue on the notes at a rate of 0.5% per annum for
the first 90-day period and 0.25% per annum for each subsequent 90-day period
in the following circumstances:
. the exchange offer registration statement is not filed with the
Securities and Exchange Commission on or prior to the 60th day after July
14, 1999,
. the exchange offer registration statement is not declared effective on or
prior to the 180th day after July 14, 1999,
. the exchange offer is not consummated on or prior to the 210th day after
July 14, 1999,
. a shelf registration statement, if required, is not declared effective on
or prior to the 60th day after it is required to be filed, or
. the exchange offer registration statement or shelf registration statement
ceases to be effective after being declared effective without being
succeeded immediately by an additional registration statement filed and
declared effective.
Upon the filing of the exchange offer registration statement, the
effectiveness of the exchange offer registration statement, the consummation of
the exchange offer, the effectiveness of a shelf registration
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statement, or the effectiveness of a succeeding registration statement, as the
case may be, the interest rate borne by the notes from the date of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest rate; provided, however, that, if after any such reduction in
interest rate, a different event specified in the five clauses above occurs,
the interest rate may again be increased pursuant to the foregoing provisions.
To exchange your old notes for transferable new notes in the exchange offer,
you will be required to make the following representations:
. any new notes will be acquired in the ordinary course of your business;
. you have no arrangement or understanding with any person or entity to
participate in the distribution of the new notes;
. you are not engaged in and do not intend to engage in the distribution of
the new notes;
. if you are a broker-dealer that will receive new notes for your own
account in exchange for old notes, you acquired those notes as a result
of market-making activities or other trading activities and you will
deliver a prospectus, as required by law, in connection with any resale
of such new notes; and
. you are not our "affiliate," as defined in Rule 405 of the Securities
Act.
In addition, we may require you to deliver information to be used in
connection with the shelf registration statement in order to have your notes
included in the shelf registration statement and benefit from the provisions
regarding additional interest described in the preceding paragraphs. A holder
who sells old notes under the shelf registration statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers. Such a holder will also be subject to
the civil liability provisions under the Securities Act of 1933 in connection
with such sales and will be bound by the provisions of the registration rights
agreement that are applicable to such a holder, including indemnification
obligations.
The description of the registration rights agreement contained in this
section is a summary only. For more information, you may review the provisions
of the registration rights agreement that we filed with the Securities and
Exchange Commission as an exhibit to the registration statement of which this
prospectus is a part.
Resale of New Notes
Based on interpretations of the Securities and Exchange Commission staff in
no action letters issued to third parties, we believe that new notes issued
under the exchange offer may be offered for resale, resold and otherwise
transferred by you without further compliance with the registration and
prospectus delivery provisions of the Securities Act of 1933 if:
. you are not our "affiliate" within the meaning of Rule 405 under the
Securities Act of 1933;
. such new notes are acquired in the ordinary course of your business; and
. you do not intend to participate in the distribution of such new notes.
The Securities and Exchange Commission, however, has not considered the
exchange offer for the new notes in the context of a no action letter, and we
cannot assure you that the Securities and Exchange Commission would make a
similar determination as in the no action letters issued to these third
parties.
If you tender in the exchange offer with the intention of participating in
any manner in a distribution of the new notes, you
. cannot rely on such interpretations by the Securities and Exchange
Commission staff; and
. must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933 in connection with a secondary resale
transaction.
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Unless an exemption from registration is otherwise available, any security
holder intending to distribute new notes should be covered by an effective
registration statement under the Securities Act of 1933 containing the selling
security holder's information required by Item 507 of Regulation S-K under the
Securities Act of 1933. This prospectus may be used for an offer to resell,
resale or other retransfer of new notes only as specifically described in this
prospectus. Only broker-dealers that acquired the old notes as a result of
market-making activities or other trading activities may participate in the
exchange offer. Each broker-dealer that receives new notes for its own account
in exchange for old notes, where such old notes were acquired by such broker-
dealer as a result market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
the new notes. Please read the section captioned "Plan of Distribution" for
more details regarding the transfer of new notes.
Terms of the Exchange Offer
Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange any old notes
properly tendered and not withdrawn prior to the expiration date. We will issue
new notes in principal amount equal to the principal amount of old notes
surrendered under the exchange offer. Old notes may be tendered only for new
notes and only in integral multiples of $1,000.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered for exchange.
As of the date of this prospectus, $300,000,000 aggregate principal amount
of the old notes are outstanding. This prospectus and the letter of transmittal
are being sent to all registered holders of old notes. There will be no fixed
record date for determining registered holders of old notes entitled to
participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions of
the registration rights agreement, the applicable requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934 and the rules
and regulations of the Securities and Exchange Commission. Old notes that are
not tendered for exchange in the exchange offer will remain outstanding and
continue to accrue interest and will be entitled to the rights and benefits
such holders have under the indenture relating to the notes and the
registration rights agreement.
We will be deemed to have accepted for exchange properly tendered old notes
when we have given oral or written notice of the acceptance to the exchange
agent and complied with the applicable provisions of the registration rights
agreement. The exchange agent will act as agent for the tendering holders for
the purposes of receiving the new notes from us.
If you tender old notes in the exchange offer, you will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes. We
will pay all charges and expenses, other than certain applicable taxes
described below, in connecting with the exchange offer. It is important that
you read the section labeled "--Fees and Expenses" for more details regarding
fees and expenses incurred in the exchange offer.
We will return any old notes that we do not accept for exchange for any
reason without expense to their tendering holder as promptly as practicable
after the expiration or termination of the exchange offer.
Expiration Date
The exchange offer will expire at 5:00 p.m., New York City time on ,
1999, unless, in our sole discretion, we extend it.
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Extensions, Delays in Acceptance, Termination or Amendment
We expressly reserve the right, at any time or various times, to extend the
period of time during which the exchange offer is open. We may delay acceptance
of any old notes by giving oral or written notice of such extension to their
holders. During any such extensions, all old notes previously tendered will
remain subject to the exchange offer, and we may accept them for exchange.
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
old notes of the extension no later than 9:00 a.m., New York City time, on the
business day after the previously scheduled expiration date.
If any of the conditions described below under "--Conditions to the Exchange
Offer" have not been satisfied, we reserve the right, in our sole discretion
. to delay accepting for exchange any old notes,
. to extend the exchange offer, or
. to terminate the exchange offer,
by giving oral or written notice of such delay, extension or termination to the
exchange agent. Subject to the terms of the registration rights agreement, we
also reserve the right to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of old notes. If we amend the exchange offer in a manner
that we determine to constitute a material change, we will promptly disclose
such amendment by means of a prospectus supplement. The supplement will be
distributed to the registered holders of the old notes. Depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, we will extend the exchange offer if the exchange offer would
otherwise expire during such period.
Condition to the Exchange Offer
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any new notes for, any old notes, and we may
terminate the exchange offer as provided in this prospectus before accepting
any old notes for exchange, if the exchange offer, or the making of any
exchange by a holder of old notes, would violate applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission.
In addition, we will not be obligated to accept for exchange the old notes
of any holder that has not made to us the representations described under "--
Purpose and Effect of the Exchange Offer," "--Procedures for Tendering" and
"Plan of Distribution" and such other representations as may be reasonably
necessary under applicable Securities and Exchange Commission rules,
regulations or interpretations to make available to us an appropriate form for
registration of the new notes under the Securities Act of 1933.
We expressly reserve the right to amend or terminate the exchange offer, and
to reject for exchange any old notes not previously accepted for exchange, upon
the occurrence of any of the conditions to the exchange offer specified above.
We will give oral or written notice of any extension, amendment, non-acceptance
or termination to the holders of the old notes as promptly as practicable.
These conditions are for our sole benefit, and we may assert them or waive
them in whole or in part at any time or at various times in our sole
discretion. If we fail at any time to exercise any of these rights, this
failure will not mean that we have waived our rights. Each such right will be
deemed an ongoing right that we may assert at any time or at various times.
In addition, we will not accept for exchange any old notes tendered, and
will not issue new notes in exchange for any such old notes, if at such time
any stop order has been threatened or is in effect with respect
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to the registration statement of which this prospectus constitutes a part or
the qualification of the indenture relating to the notes under the Trust
Indenture Act of 1939.
Procedures for Tendering
How to Tender Generally
Only a holder of old notes may tender such old notes in the exchange offer.
To tender in the exchange offer, a holder must:
. complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal;
. have the signature on the letter of transmittal guaranteed if the letter
of transmittal so requires; and
. mail or deliver such letter of transmittal or facsimile to the exchange
agent prior to the expiration date; or
. comply with the automated tender offer program procedures of The
Depository Trust Company, or DTC, described below.
In addition, either:
. the exchange agent must receive old notes along with the letter of
transmittal;
. the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of such old notes into the exchange
agent's account at DTC according to the procedure for book-entry transfer
described below or a properly transmitted agent's message; or
. the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at its
address indicated on the cover page of the Letter of Transmittal prior to the
expiration date.
The tender by a holder that is not withdrawn prior to the expiration date
will constitute an agreement between the holder and us in accordance with the
terms and subject to the conditions described in this prospectus and in the
letter of transmittal.
The method of delivery of old notes, the letter of transmittal and all other
required documents to the exchange agent is at your election and risk. Rather
than mail these items, we recommend that you use an overnight or hand delivery
service. In all cases, you should allow sufficient time to assure delivery to
the exchange agent before the expiration date. You should not send the letter
of transmittal or old notes to us. You may request your brokers, dealers,
commercial banks, trust companies or other nominees to effect the above
transactions for you.
How to Tender if You Are a Beneficial Owner
If you beneficially own old notes that are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and you wish to
tender those notes, you should contact the registered holder promptly and
instruct it to tender on your behalf. If you are a beneficial owner and wish to
tender on your own behalf, you must, prior to completing and executing the
letter of transmittal and delivering your old notes, either:
. make appropriate arrangements to register ownership of the old notes in
your name; or
. obtain a properly completed bond power from the registered holder of old
notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
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Signatures and Signature Guarantees
You must have signatures on a letter of transmittal or a notice of
withdrawal (as described below) guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
that is a member of one of the recognized signature guarantee programs
identified in the letter of transmittal, unless the old notes are tendered:
. by a registered holder 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 member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondence in
the United States, or an eligible guarantor institution.
When You Need Endorsements or Bond Powers
If the letter of transmittal is signed by a person other than the registered
holder of any old notes, the old notes must be endorsed or accompanied by a
properly completed bond power. The bond power must be signed by the registered
holder as the registered holder's name appears on the old notes and a member
firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States, or an eligible
guarantor institution must guarantee the signature on the bond power.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, those
persons should so indicate when signing. Unless waived by us, they should also
submit evidence satisfactory to us of their authority to deliver the letter of
transmittal.
Tendering Through DTC's Automated Tender Offer Program
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the old notes to the exchange agent
in accordance with its procedures for transfer. DTC will then send an agent's
message to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, to the
effect that:
. DTC has received an express acknowledgment from a participant in its
automated tender offer program that is tendering old notes that are the
subject of such book-entry confirmation;
. such participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that such participant has received and agrees to be
bound by the applicable notice of guaranteed delivery; and
. the agreement may be enforced against such participant.
Determinations Under the Exchange Offer
We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered old notes and
withdrawal of tendered old notes. Our determination will be final and binding.
We reserve the absolute right to reject any old notes not properly tendered or
any old notes our acceptance of which would, in the opinion of our counsel, be
unlawful. We also reserve the right to waive any
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defect, irregularities or conditions of tender as to particular old notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, all defects or irregularities in connection with
tenders of old notes must be cured within such time as we shall determine.
Although we intend to notify holders of defects or irregularities with respect
to tenders of old notes, neither we, the exchange agent nor any other person
will incur any liability for failure to give such notification. Tenders of old
notes will not be deemed made until such defects or irregularities have been
cured or waived. Any old notes received by the exchange agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned to the tendering holder, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date.
When We Will Issue New Notes
In all cases, we will issue new notes for old notes that we have accepted
for exchange under the exchange offer only after the exchange agent timely
receives:
. old notes or a timely book-entry confirmation of such old notes into the
exchange agent's account at DTC; and
. a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
Return of Old Notes Not Accepted or Exchanged
If we do not accept any tendered old notes for exchange for any reason
described in the terms and conditions of the exchange offer or if old notes are
submitted for a greater principal amount than the holder desires to exchange,
the unaccepted or non-exchanged old notes will be returned without expense to
their tendering holder. In the case of old notes tendered by book-entry
transfer into the exchange agent's account at DTC according to the procedures
described below, such non-exchanged old notes will be credited to an account
maintained with DTC. These actions will occur as promptly as practicable after
the expiration or termination of the exchange offer.
Your Representations to Us
By signing or agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:
. any new notes that you receive will be acquired in the ordinary course of
your business;
. you have no arrangement or understanding with any person or entity to
participate in the distribution of the new notes;
. you are not engaged in and do not intend to engage in the distribution of
the new notes;
. if you are a broker-dealer that will receive new notes for your own
account in exchange for old notes, you acquired those notes as a result
of market-making activities or other trading activities and you will
deliver a prospectus, as required by law, in connection with any resale
of such new notes; and
. you are not our "affiliate," as defined in Rule 405 of the Securities
Act.
Book-Entry Transfer
The exchange agent will establish an account with respect to the old notes
at DTC for purposes of the exchange offer promptly after the date of this
prospectus. Any financial institution participating in DTC's system may make
book-entry delivery of old notes by causing DTC to transfer such old notes into
the exchange agent's account at DTC in accordance with DTC's procedures for
transfer. Holders of old notes who are unable to deliver confirmation of the
book-entry tender of their old notes into the exchange agent's account
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at DTC or all other documents required by the letter of transmittal to the
exchange agent on or prior to the expiration date must tender their old notes
according to the guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
If you wish to tender your old notes but your old notes are not immediately
available or you cannot deliver your old notes, the letter of transmittal or
any other required documents to the exchange agent or comply with the
applicable procedures under DTC's automated tender offer program prior to the
expiration date, you may tender if:
. the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an eligible guarantor institution,
. prior to the expiration date, the exchange agent receives from such
member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., commercial bank or
trust company having an office or correspondent in the United States, or
eligible guarantor institution either a properly completed and duly
executed notice of guaranteed delivery by facsimile transmission, mail or
hand delivery or a properly transmitted agent's message and notice of
guaranteed delivery:
. setting forth your name and address, the registered number(s) of your
old notes and the principal amount of old notes tendered,
. stating that the tender is being made thereby, and
. guaranteeing that, within three (3) New York Stock Exchange trading
days after the expiration date, the letter of transmittal or
facsimile thereof, together with the old notes 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 exchange agent receives such properly completed and executed letter
of transmittal or facsimile thereof, as well as all tendered old notes in
proper form for transfer or a book-entry confirmation, and all other
documents required by the letter of transmittal, within three (3) New
York Stock Exchange trading days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent you if you wish to tender your old notes according to the guaranteed
delivery procedures described above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw your
tender at any time prior to the expiration date.
For a withdrawal to be effective:
. the exchange agent must receive a written notice of withdrawal at one of
the addressees listed above under "Prospectus Summary--Summary of the
Exchange Offer--The Exchange Agent" or
. you must comply with the appropriate procedures of DTC's automated tender
offer program system.
Any notice of withdrawal must:
. specify the name of the person who tendered the old notes to be
withdrawn, and
. identify the old notes to be withdrawn, including the principal amount of
such old notes.
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 DTC to be credited with withdrawn old notes and otherwise comply
with the procedures of DTC.
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We will determine all questions as to the validity, form, eligibility and
time of receipt of notice of withdrawal, and our determination shall be final
and binding on all parties. We will deem any old notes so withdrawn 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 their holder without cost to the
holder or, in the case of old notes tendered by book-entry transfer into the
exchange agent's account at DTC according to the procedures described above,
such old notes will be credited to an account maintained with DTC for the old
notes. This return or crediting will take place as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. You may
retender properly withdrawn old notes by following one of the procedures
described under "--Procedures for Tendering" above at any time on or prior to
the expiration date.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by
telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or other soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the exchange
offer. They include:
. Securities and Exchange Commission registration fees;
. fees and expenses of the exchange agent and trustee;
. accounting and legal fees and printing costs; and
. related fees and expenses.
Transfer Taxes
We will pay all transfer taxes, if any, applicable to the exchange of old
notes under the exchange offer. The tendering holder, however, will be required
to pay any transfer taxes, whether imposed on the registered holder or any
other person, if:
. certificates representing old notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of old notes
tendered;
. tendered old notes are registered in the name of any person other than
the person signing the letter of transmittal; or
. a transfer tax is imposed for any reason other than the exchange of old
notes under the exchange offer.
If satisfactory evidence of payment of any transfer taxes payable by a note
holder is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to that tendering holder.
Consequences of Failure to Exchange
If you do not exchange new notes for your old notes under the exchange
offer, you will remain subject to the existing restrictions on transfer of the
old notes. In general, you may not offer or sell the old notes unless they are
registered under the Securities Act of 1933, or if the offer or sale is exempt
from registration under the Securities Act of 1933 and applicable state
securities laws. Except as required by the registration rights
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agreement, we do not intend to register resales of the old notes under the
Securities Act of 1933. See "Risk Factors--Failure to Properly Tender Old Notes
in Exchange Offer."
Accounting Treatment
We will record the new notes in our accounting records at the same carrying
value as the old notes, which is the aggregate principal amount of the old
notes, as reflected in our accounting records on the date of exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes in
connection with the exchange offer. The expenses of the exchange offer incurred
up to June 30, 1999 have been accrued and are reflected in the June 30, 1999
balance sheet as Other Assets.
Other
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered old notes in open market or
privately negotiated transactions, through subsequent exchange offers or
otherwise. We have no present plans to acquire any old notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any untendered old notes.
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CERTAIN INCOME TAX CONSIDERATIONS
Taxation of the Company
We believe that a significant portion of our income will not be subject to
tax in Bermuda, which currently has no corporate income tax, or other countries
in which we conduct activities or in which our customers are located, including
the United States. However, this belief is based upon the anticipated nature
and conduct of our business, which may change, and upon our understanding of
our position under the tax laws of the various countries in which we have
assets or conduct activities, which position is subject to review and possible
challenge by taxing authorities and to possible changes in law (which may have
retroactive effect). The extent to which certain taxing jurisdictions may
require us to pay tax or to make payments in lieu of tax cannot be determined
in advance. In addition, our operations and payments due to us may be affected
by changes in taxation, including retroactive tax claims or assessments of
withholding on amounts payable to us or other taxes assessed at the source, in
excess of the taxation anticipated by us based on our business contacts and
practices and the current tax regimes. We cannot assure you that these factors
will not have a material adverse effect on our business, financial condition
and results of operations.
Bermuda Tax Considerations
Under current Bermuda law, we are not subject to tax on income or capital
gains. Furthermore, we have obtained from the Bermuda Minister of Finance under
the Exempted Undertakings Tax Protection Act 1966 (as amended), an undertaking
that, in the event that Bermuda enacts any legislation imposing tax computed on
profits or income or computed on any capital asset, gain or appreciation or any
tax in the nature of estate duty or inheritance tax, then the imposition of
such tax will not be applicable to us or to any of our operations, or our
shares, debentures or other obligations, until March 28, 2016. This undertaking
does not, however, apply to TBI or prevent the application of any tax or duty
to persons ordinarily resident in Bermuda or of any tax payable pursuant to the
Land Tax Act 1967 or otherwise payable in relation to land leased to us.
As a condition to the grant of our international carrier license in Bermuda,
we were required to enter an agreement with the Bermuda Minister of Finance to
pay an ongoing license fee. Under the terms of the agreement, we are assessed a
fee equal to the greater of (i) six percent of our total revenue in Bermuda for
that period, and (ii) twenty percent of our profit in Bermuda for that period,
assessed on a historic cost depreciation basis and after allowing for
administrative and technical support costs not exceeding five percent of total
revenue in Bermuda.
For purposes of this license fee agreement, total revenue is defined by
reference to the Cable & Wireless Act to mean total revenue from Bermuda
sources, net of local and foreign settlements. The limitation on administrative
and technical support costs is intended to restrict the allocation of such
costs in the form of management fees from parent companies. There is no limit
on the deductibility of these costs to the extent that they are incurred
directly.
United States Federal Income Tax Considerations
Our United States subsidiaries will be subject to United States federal
income tax on their worldwide income regardless of its source (subject to
reduction by allowable foreign tax credits), and distributions by such United
States subsidiaries to us or our foreign subsidiaries generally will be subject
to United States withholding tax, which generally is imposed at a rate of 30%
unless reduced by the provisions of an applicable income tax treaty. We and our
non-United States subsidiaries would be subject to United States federal income
tax at regular corporate rates (and to United States branch profits tax) on
income that is effectively connected with the conduct of a trade or business in
the United States, and would be required to file federal income tax returns
reflecting that income. We and our non-United States subsidiaries anticipate
that we will not be subject to United States federal income tax because neither
we nor any of our non-United States subsidiaries expect to derive any such
effectively connected income. However, we base this belief upon the anticipated
nature and conduct of our business and the business of our non-United States
subsidiaries, which may change. Moreover,
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we cannot assure you that the Internal Revenue Service (the "IRS") will agree
with our positions in this regard.
Tax Considerations in Other Jurisdictions
Our subsidiaries that reside in other jurisdictions will be subject to tax
on some or all of their income. In addition, those jurisdictions may impose
withholding tax on distributions to such subsidiaries' parent. We anticipate
that we and our subsidiaries that do not reside in a particular jurisdiction
will not be subject to income taxation in that jurisdiction. Nonetheless, we
and our subsidiaries may be subject to withholding taxes imposed on payments
made to us and our subsidiaries by customers that reside in those countries.
Our belief as to this tax treatment is based upon the anticipated nature and
conduct of our business and that of our non-resident subsidiaries, which may
change. Moreover, we intend to conduct our operations to minimize the taxable
presence in any foreign jurisdiction outside Bermuda. However, we cannot assure
you that the taxing authorities in a jurisdiction will agree with our positions
in this regard.
Taxation of Noteholders
Certain Bermuda Tax Considerations
Under current Bermuda law, no income, withholding or other taxes or stamp or
other duties are imposed upon the issue, transfer or sale of the new notes or
on any payments thereunder. See "Taxation of the Company--Bermuda Tax
Considerations" for a description of the undertaking on taxes obtained by us
from the Bermuda Minister of Finance. There is no reciprocal tax treaty between
Bermuda and the United States regarding withholding taxes.
Certain United States Federal Income Tax Considerations
The following is a summary of certain United States federal income tax
considerations that apply to the exchange of the old notes for the new notes,
and ownership and disposition of the new notes by United States holders (as
defined below). Although the following summary does not describe all of the tax
considerations that may be relevant to you in light of your specific
circumstances, it describes the material United States federal income tax
consequences to a United States holder. We cannot assure you that the
conclusions set out below would be sustained by a court if challenged by the
IRS. We have not obtained, nor do we intend to obtain, a ruling from the IRS
with respect to the United States federal income tax consequences of this
Exchange Offer. This summary deals only with new notes that are held as capital
assets by United States holders that acquire new notes in exchange for old
notes that were purchased at their "issue price" and does not address federal
alternative minimum tax consequences or tax considerations applicable to United
States holders that may be subject to special tax rules, such as dealers or
traders in securities, financial institutions, insurance companies, tax-exempt
entities, United States holders that hold notes as a part of a straddle,
conversion transaction, constructive sale or other arrangement involving more
than one position, United States holders that have a principal place of
business or "tax home" outside the United States, United States holders whose
functional currency is not the United States dollar, and United States holders
that own notes through partnerships or other pass-through entities.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations (the "Regulations"),
rulings and judicial decisions thereunder as of the date of this prospectus;
any such authority may be repealed, revoked or modified, perhaps with
retroactive effect, so as to result in United States federal income tax
consequences different from those discussed below. We urge each prospective
purchaser to consult its own tax advisor with respect to the tax consequences
of an investment in the notes, including the application to its particular
situation of the tax considerations discussed below, as well as the application
of state, local, foreign or other federal tax laws.
You are a "United States holder" if you are a beneficial owner of the note
and you are (1) an individual who is a citizen or resident of the United
States, (2) a corporation or partnership created or organized in or
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under the laws of the United States or any political subdivision thereof, (3)
an estate, the income of which is subject to United States federal income
taxation regardless of its source, or (4) a trust if the administration of the
trust is subject to the primary supervision of a court within the United States
and one or more United States persons (as described in section 7701(a)(30) of
the Code) have the authority to control all substantial decisions of the trust.
You are a "Non-United States holder" if you are a beneficial owner of the notes
and are not a United States holder.
Taxation of United States Holders
Exchange of New Notes for Old Notes: Pursuant to the Regulations, the
exchange of the new notes for old notes in the exchange offer, see "Exchange
Offer," should not constitute a significant modification of the terms of the
notes, and, accordingly, the exchange should be treated as a "non-event" for
federal income tax purposes. Therefore, the exchange should have no federal
income tax consequences to United States holders of notes. The holding period
of a new note will include the holding period of the old note for which it was
exchanged, and the basis of a new note will be the same as the basis of the old
note for which it was exchanged.
Taxation of Interest: Interest on a new note will be taxable to a United
States holder as ordinary income at the time that such interest accrues or is
received, in accordance with the United States holder's regular method of
accounting for federal income tax purposes.
Effect of Change in Control or Optional Redemption: Upon a Change of
Control, we are required to offer to redeem all notes then outstanding for a
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest. Under the Regulations, such Change of Control redemption requirements
will not affect the yield or maturity date of the notes unless, based on all
the facts and circumstances as of the Issue Date, it was more likely than not
that a Change of Control giving rise to the redemption would occur. We will not
treat the Change of Control redemption provisions of the notes as affecting the
calculation of the yield to maturity of any note.
We, at our option, may redeem part or all of the notes at the times and for
the amounts described in "Description of the New Notes--Optional Redemption"
herein. The Regulations provide that for purposes of calculating the yield to
maturity of a debt instrument, an issuer will be treated as exercising any
option if its exercise would lower the yield of the debt instrument. However, a
redemption of the notes at the optional redemption prices would increase the
effective yield of such notes as calculated from the date of issuance.
Therefore, in accordance with the Regulations, as of the date of issuance of
the notes, the optional redemption provisions will not be taken into account in
calculating the yield to maturity of the notes.
Sale, Redemption or Retirement of New Notes: Upon the sale, redemption,
retirement at maturity or other taxable disposition of a new note, a United
States holder generally will recognize gain or loss equal to the difference
between the sum of cash plus the fair market value of all other property
received on the disposition (except to the extent such cash or property is
attributable to accrued but unpaid interest, which will be taxable as ordinary
income to the extent not previously taken into account) and the United States
holder's tax basis in the new note (generally the cost of the old note, see "--
Exchange of New Notes for Old Notes").
Gain or loss recognized on the sale or other taxable disposition of a new
note generally will be capital gain or loss and will be long-term capital gain
or loss if, at the time of the disposition, the new note has been held for more
than one year (including the holding period of the old note, see "--Exchange of
New Notes for Old Notes"). In the case of a United States holder who is an
individual, long term capital gains generally are subject to tax at a maximum
rate of 20%. The deductibility of capital losses is subject to limitations.
Taxation of Non-United States Holders
For United States federal income tax purposes, a non-United States holder
generally will not be subject to tax or withholding on distributions made with
respect to, and gains realized from the disposition of, new notes
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<PAGE>
unless such distributions and gains are attributable to an office or fixed
place of business maintained by such non-United States holder in the United
States.
Information Reporting and Backup Withholding
In general, information reporting requirements may apply to certain payments
of principal and interest on a new note, and to the payment of the proceeds of
the sale of a new note, to United States holders other than certain exempt
recipients (such as corporations). Backup withholding at a 31% rate will apply
to such payments if the United States holder fails to provide its taxpayer
identification number or certification of foreign or other exempt status,
provides an incorrect taxpayer identification number or fails to report in full
dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as a
credit against the United States holder's U.S. federal income tax liability and
may entitle such holder to a refund, provided that the required information is
furnished to the IRS.
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<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Securities and Exchange
Commission in no action letters issued to third parties, we believe that you
may transfer new notes issued under the exchange offer in exchange for the old
notes if:
. you acquire the new notes in the ordinary course of your business; and
. you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of such new notes.
You may not participate in the exchange offer if you are:
. our "affiliate" within the meaning of Rule 405 under the Securities Act;
or
. a broker-dealer that acquired old notes directly from us.
Broker-dealers receiving new notes in the exchange offer will be subject to
a prospectus delivery requirement with respect to resales of the new notes.
To date, the staff of the Securities and Exchange Commission has taken the
position that broker-dealers may fulfill their prospectus delivery requirements
with respect to transactions involving an exchange of securities such as this
exchange offer, other than a resale of an unsold allotment from the original
sale of the old notes, with the prospectus contained in the exchange offer
registration statement. Each broker-dealer that receives new notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such new notes. This prospectus,
and any amendment or supplement to this prospectus, may be used by a broker-
dealer in connection with resales of new notes received in exchange for old
notes where such old notes were acquired as a result of market-making
activities or other trading activities. We have agreed that, starting on the
expiration date and ending on the close of business 150 days after the
expiration date (subject to certain limitations set forth in the registration
rights agreement), we will make this prospectus, and any amendment or
supplement to this prospectus, available to any broker-dealer for use in
connection with any such resale. In addition, until such date all dealers
effecting transactions in the new notes may be required to deliver a
prospectus.
If you wish to exchange new notes for your old notes in the exchange offer,
you will be required to make representations to us as described in "Exchange
Offer--Purpose and Effect of the Exchange Offer" and
"--Procedures for Tendering--Your Representations to Us" in this prospectus and
in the letter of transmittal. In addition, if you are a broker-dealer who
receives new notes for your own account in exchange for old notes
that were acquired by you as a result of market-making activities or other
trading activities, you will be required to acknowledge that you will deliver a
prospectus in connection with any resale by you of such new notes.
We will not receive any proceeds from any sale of new notes by broker-
dealers. Broker-dealers who receive new notes for their own account in the
exchange offer may sell them 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 such
methods of resale;
. at market prices prevailing at the time of resale; and
. at prices related to such 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 any broker-dealer or the purchasers of any new notes. Any broker-dealer
that resells new notes it received for its own account in the exchange offer
and any broker or dealer that participates in a distribution of such new notes
may be deemed to be an "underwriter" within the meaning of the Securities Act
of 1933, and must deliver a prospectus meeting the requirements of
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<PAGE>
the Securities Act of 1933 in connection with any sale of the new notes. Any
profit on any resale of new notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act of 1933. 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 of 1933.
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<PAGE>
LEGAL MATTERS
The validity of the new notes will be passed upon for us by Vinson & Elkins
L.L.P., New York, New York (with respect to matters of United States law), and
Conyers Dill & Pearman, Hamilton, Bermuda (with respect to matters of Bermuda
law).
CHARTERED ACCOUNTANTS
The financial statements for the fiscal years ended December 31, 1998 and
1997 and for the ten month period ended December 31, 1996, included in this
prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers, Chartered Accountants, given on the authority of said
firm as experts in accounting and auditing.
AVAILABLE INFORMATION
Members of the general public have the right to inspect the public documents
of a Bermuda company that are available at the office of the Registrar of
Companies in Bermuda. These documents include our Memorandum of Association
(including our objects) and any alteration to our Memorandum of Association.
Our shareholders have the additional right to inspect our bye-laws, minutes of
general meetings and audited financial statements, which must be presented at
the annual general meeting.
The register of shareholders of a Bermuda company is also open to inspection
by shareholders without charge and to members of the general public upon the
payment of a fee. The register of shareholders is required to be open for
inspection for not less than two hours in any business day (subject to the
power to close the register for up to 30 days in each calendar year). A Bermuda
company is required to maintain its share register in Bermuda but may, subject
to the provisions of the Companies Act 1981 of Bermuda and related regulations
(the "Bermuda Act"), establish a branch register outside Bermuda. Our bye-laws
provide that, unless the board of directors otherwise determines, the share
register shall be open to inspection in the manner prescribed by the Bermuda
Act between 10:00 a.m. and 12:00 noon on every business day. A Bermuda company
is required to keep at its registered office a register of its directors and
officers that is open for inspection for not less than two hours in each day by
members of the public without charge. Bermuda law does not, however, provide a
general right for shareholders to inspect or obtain copies of any other
corporate records.
Upon consummation of the exchange offer, we will be subject to certain
reporting requirements of the Securities Exchange Act of 1934 and will file
reports, including reports on Form 10-K and 10-Q, and other information with
the Securities and Exchange Commission, so long as we are required or permitted
to do so. You can inspect and copy these reports and other information at the
Public Reference Room maintained by the Securities and Exchange Commission at:
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549,
and at the Securities and Exchange Commission's regional offices at:
7 World Trade Center
13th Floor
New York, NY 10048
and at:
Citicorp Center
500 West Madison Street
14th Floor
Chicago, Ill 60661-2511.
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<PAGE>
You may also obtain information on the operation of the Public Reference
Room by calling the Securities and Exchange Commission at 1-800-SEC-0330.
Finally, the Securities and Exchange Commission maintains an Internet site at
"http://www.sec.gov" that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the
Securities and Exchange Commission.
This prospectus constitutes part of a registration statement on Form S-4
filed by us with the Securities and Exchange Commission under the Securities
Act of 1933. This prospectus omits some of the information contained in the
registration statement, as permitted under the rules and regulations of the
Securities and Exchange Commission. Copies of the registration statement and
the exhibits thereto are on file at the offices of the Securities and Exchange
Commission and may be obtained from the Securities and Exchange Commission for
a prescribed fee or examined at its offices or on its Internet site, as
described above.
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<PAGE>
GLOSSARY OF CERTAIN TECHNICAL TERMS
Amplifier
A device used to boost the strength of an electronic or optical signal,
which is weakened (attenuated) as it passes through the transport network.
Amplifiers add gain to the signal by an amount equal to the loss in the
previous section of the network since the last amplification.
Backhaul Capacity
Terrestrial capacity from undersea cable landing stations to metropolitan
areas.
Bandwidth
A measure of information-carrying capacity on a communications channel.
1. The difference between the high and low frequencies of a transmission
band, expressed in cycles per second (Hertz) or in wavelengths
(nanometers). It is a measure of raw capacity without compression or coding
of the information signal. A voice transmission requires about 3 KHz and a
TV channel requires about 6 MHz.
2. Transmission capacity is expressed in bits per second. For example
megabits per second (Mbps) is a bit rate expressed in millions of bits per
second while gigabits per second (Gbps) is a bit rate expressed in billions
of bits per second.
Narrowband: Less than or equal to 64 kbps. Typical application: A single
voice channel.
Wideband: Digital rates between 64 kpbs and 1.544 Mbps (DS-1) or 2.048
Mbps (E-1s). Typical applications: Multiplexed voice channels,
LANs, bulk files transfer, video conferencing and multimedia.
Broadband: Greater than 44.736 Mbps (DS-3s) or 34.368 Mbps (E-3). Typical
applications: Broadcast quality video, Internet backbone.
Bit
A binary unit of information that can have either of two values, 0 or 1.
Contraction of binary digit:
<TABLE>
<S> <C> <C>
. kilobit = 1,000 bits
. megabit = 1 million bits
. gigabit = 1 billion bits
. terabit = 1 trillion bits
</TABLE>
Broadband
A transmission channel usually carrying a tremendous amount of information
at transmission speeds of 45 Mbps (45,000,000 bits per second) or greater. Some
facilities have transmission speeds in the billion of bits (gigabits per second
or Gbps).
1. A communications channel with bandwidth sufficiently large to carry
voice, data and video on a single channel.
2. Any voice communications channel having a bandwidth greater than a voice
grade channel.
. A bandwidth of 45 Mbps can carry 672 voice connections (North American
hierarchy)
. Using compression equipment 2,688 telephone grade communication channels
can be carried on one 45 Mbps broadband channel.
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CAD
Computer-Aided Design. A computer and its related software and terminals
used to design products.
CAM
Computer-Aided Manufacture. The actual production of goods implemented and
controlled by computers and robots.
Capacity
The information-carrying ability of a telecommunications system, as defined
by its design (number of fibers, system length, and opto/electronic equipment)
and its deployed equipment (amount of opto/electronics in the station) and
measured in bits per second. Capacity is sold in discrete units, usually system
interface levels such as E-1s (2.048 Mbps), DS-3s (44.736 Mbps) and STM-1s
(155.520 Mbps), that in the aggregate are the equivalent of total system
capacity.
Carrier
Third party provider of communications services by wire, fiber or radio.
Common Carrier:
A private company offering facilities or services to the general public on a
non-discriminatory basis and regulated as to market entry, practices, and rates
by various Federal and State authorities.
Private Carrier:
Services provided for internal use and free of most common carrier
regulations to allow discrimination in service provision or pricing.
CLECs
Competitive Local Exchange Carrier. A company that competes in the local
service market.
Compression
Algorithm that minimizes the redundancy in the signal to be transmitted.
Digital
Describes a method of storing, processing and transmitting information
through the use of distinct electronic or optic pulses representing the binary
digits 0 and 1. In communications they will modify a carrier at a selected
frequency. The precise signal transitions preclude any distortion such as
graininess or snow in the case of video transmission, or static or other
background distortion in the case of audio transmission.
Digital Transmission
Method of storing, processing and transmitting information through the use
of distinct electronic or optical pulses that represent the binary digits 0 and
1. Digital transmission and switching technologies employ sequences of these
pulses to represent information as opposed to a continuously variable analog
signal. The precise digital numbers preclude any distortion such as graininess
or snow in the case of video transmission, or static or other background
distortion in the case of audio transmission.
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DWDM
Dense Wavelength Division Multiplexing. A technique that employs more than
one light source and detector operating at different wavelengths and
simultaneously transmits optical signals through the same fiber while the
message integrity of each signal is preserved.
E-Commerce
Electronic Commerce. Using electronic information technologies to conduct
business between trading partners, possibly by EDI.
EDI
Electronic Data Interchange. A series of standards which facilitate
computer-to-computer exchanges of business documents between different
companies' computers over phone lines. These standards allow for the
transmission of purchase orders, shipping documents, invoices, invoice
payments, etc., between an enterprise and its "trading partners." A trading
partner in EDI parlance is a supplier, customer, subsidiary or any other
organization with which an enterprise conducts business.
EDFA
Erbium Doped Fiber Amplifier. A purely optical (as opposed to electronic)
device used to boost an optical signal. It contains several meters of glass
fiber doped with erbium ions. When the erbium ions are excited to a higher
energy state, the doped fiber changes from a passive medium to an active
amplifying medium.
Extranet
An Internet-like network which a company runs to conduct business with its
employees, its customers and/or suppliers. Extranets typically include Web
sites that provide information to internal employees and also have secure areas
to provide information to customers and external partners such as suppliers,
manufacturers and distributors.
Gbps
Gigabit per second. A data rate of 1 Gbps corresponds to 1 billion bits per
second.
Internet
A fabric of interconnected computer networks, originally known as the DARPA
(Defense Advanced Research Projects Agency) network connecting government and
academic sites. It currently links about 67 million people worldwide who use it
for everything from scientific research to simple e-mail.
Intranet
A private network that uses Internet software and Internet standards. In
essence, an Intranet is a private Internet reserved for use by people who have
been given authority and passwords necessary to use that network. Those people
are typically employees and often customers of a company.
IP
The Internet Protocol. IP is the most important of the protocols on which
the Internet is based. The Internet Protocol is a standard of describing
software that keeps traffic on the Internet, works addresses for different
nodes, routes outgoing messages and recognizes incoming messages. It allows a
packet to traverse multiple networks on the way to its final destination.
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IRU
Indefeasible Right of Use. A form of acquisition of undersea fiber optic
cable capacity. The owner of an IRU has the irrevocable right to use the
capacity for the time, usually the system design life (e.g., 25 years), and
bandwidth to which the IRU applies.
ISDN
Integrated Services Digital Network. A complex networking concept designed
to provide a variety of voice, data and digital interface standards. ISDN
incorporates many new enhanced services, such as high speed data file transfer,
desk top video conferencing, telepublishing, telecommunications, telepresence
learning (distance learning), remote collaboration (screen sharing), data
network linking and home information services.
ISP
Internet service provider. A vendor who provides access for customers
(companies and private individuals) to the Internet and the World Wide Web.
LAN
Local Area Network. A short distance data communications network (typically
within a building or campus) used to link together computers and peripheral
devices (such as printers) under some form of standard control.
LEAF
Large Effective Area Fiber. An advanced fiber for high-speed undersea
networks that has a large effective area relative to other fibers, thereby
providing increased capacity and other performance benefits.
Least-Cost Routing
Least-cost routing takes advantage of the international settlement system to
identify low cost solutions for the one-way delivery of voice traffic made
possible by the liberalization and deregulation of many telecommunications
markets around the world.
Mbps
Megabit per second. One Mbps corresponds to a data rate of 1 million bits
per second.
Mirror Licenses
License providing the same privileges and obligations as the incumbent
license holder.
Multimedia
The electronic conversation between two or more people or groups of people
in different places using two or more types of digitally integrated
communication for voice, sound, text, data, graphics, video, image or presence
at the same time. Applications include conferencing, presentations, training,
referencing, games, etc.
Multiplexing
An electronic or optical process that combines two or more lower bandwidth
transmissions into one higher bandwidth signal by splitting the total available
bandwidth into narrower bands (frequency division) or by allotting a common
channel to several transmitting sources one at a time in sequence (time
division).
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Multipoint
Pertaining or referring to a communications line to which three or more
stations are connected. It implies that the line physically extends from one
station to another until all are connected.
PTTs
Post, Telephone and Telegraph companies. International telecommunications
carriers that are generally under the control of the government in a country
that has not yet privatized its telecommunications markets.
RBOCs
Regional Bell Operating Companies. The local telephone companies established
as a result of the court ordered break-up in 1984 of AT&T.
Regenerators
An optoelectronic device receiving a low level optical signal converting it
from light to electrical form to reshape and retime the signal and reconverting
it to light for retransmission at the appropriate power level.
Repeater
Equipment that receives a low-power signal and retransmits it at a higher
power level. Repeaters contain either regenerators or amplifiers.
RFS
Ready for Service. The date of provisional acceptance or commercial service
of a cable system.
Wavelength
The distance between two crests of a signal or a carrier and is measured in
terms of meters, millimeters, nanometers, etc. In lightwave applications,
because of the extremely high frequencies, wavelength is measured in
nanometers.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as at December 31, 1998 and 1997.............. F-3
Consolidated Statements of Shareholders' Equity for the Years Ended Decem-
ber 31, 1998, 1997 and the Ten Month Period Ended December 31, 1996...... F-4
Consolidated Statements of Operations for the Years Ended December 31,
1998, 1997,
and the Ten Month Period Ended December 31, 1996......................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998, 1997, and the
Ten Month Period Ended December 31, 1996................................. F-6
Notes to Consolidated Financial Statements for the Years Ended December
31, 1998, 1997, and the
Ten Month Period Ended December 31, 1996................................. F-7
Unaudited Consolidated Balance Sheets as at June 30, 1999 and 1998........ F-19
Unaudited Consolidated Statements of Operations and Deficit for the Six
Months Ended
June 30, 1999 and 1998................................................... F-20
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1999 and 1998................................................... F-21
Notes to Unaudited Consolidated Financial Statements for the Six Months
Ended June 30, 1999
and 1998................................................................. F-22
</TABLE>
F-1
<PAGE>
AUDITORS' REPORT
February 22, 1999
To the Directors of
GlobeNet Communications Group Limited
We have audited the consolidated balance sheets of GlobeNet Communications
Group Limited (formerly TeleBermuda International Limited) as of December 31,
1998 and 1997 and the consolidated statements of operations, shareholders'
equity and cash flows for the years then ended and for the ten month period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1998 and 1997 and the results of its operations and its cash flows for the
years then ended and for the ten month period ended December 31, 1996 in
accordance with accounting principles generally accepted in the United States.
On February 22, 1999 we reported separately to the Directors of GlobeNet
Communications Group Limited on consolidated financial statements for the years
ended December 31, 1998 and 1997 and the ten month period ended December 31,
1996 prepared in accordance with generally accepted accounting principles in
Bermuda.
[logo]
Chartered Accountants
Hamilton, Bermuda
F-2
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
CONSOLIDATED BALANCE SHEETS
As at December 31, 1998 and 1997
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
1998 1997
------- -------
$ $
<S> <C> <C>
Assets
Current assets
Cash........................................................ 3,032 1,361
Accounts receivable (net of allowance of $80; 1997--$nil)... 1,847 1,270
Other receivables........................................... 655 1,654
Due from related party (note 4)............................. 1,363 --
Prepaid expenses and deposits............................... 338 200
------- -------
7,235 4,485
Capital assets (note 5)...................................... 47,612 49,299
Note receivable (note 6)..................................... 350 --
Other assets (note 7)........................................ 1,063 1,368
------- -------
56,260 55,152
======= =======
Liabilities
Current liabilities
Accounts payable (note 8)................................... 3,871 10,240
Accrued liabilities (note 8)................................ 4,971 1,063
Current portion of long-term debt (note 9).................. 3,000 --
------- -------
11,842 11,303
Long-term debt (note 9)...................................... 35,019 30,122
Deferred revenue (note 10(b))................................ 2,695 1,521
Minority interest (note 11).................................. -- 558
------- -------
49,556 43,504
======= =======
Shareholders' Equity
Share capital (notes 9(c) and 12)
Class A shares, 100 shares authorized 100 (1997--100) shares
issued and
outstanding
Common shares, 6,999,900 authorized 3,515,927 (1997--
3,515,927) shares issued and outstanding................... 5,274 5,274
Additional paid-in capital (note 12)........................ 16,377 16,377
Deficit..................................................... (14,947) (10,003)
------- -------
6,704 11,648
------- -------
56,260 55,152
======= =======
</TABLE>
Commitments and contingencies (notes 17, 18 and 21)
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1998, 1997 and the ten month period ended
December 31, 1996
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
Additional Total
Par paid-in shareholders'
Class A Common value capital Deficit equity
shares shares $ $ $ $
------- --------- ----- ---------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
February 29, 1996....... -- 1,369,916 1,299 694 (1,447) 546
Share options........... -- -- -- 1,845 -- 1,845
Share subscription
proceeds............... -- -- 756 -- -- 756
Fully paid shares issued
for cash............... -- 2,118,000 3,177 13,661 -- 16,838
Net loss for the
period................. -- -- -- -- (3,260) (3,260)
--- --------- ----- ------ ------- ------
December 31, 1996....... -- 3,487,916 5,232 16,200 (4,707) 16,725
Share options
exercised.............. -- 28,011 42 42 -- 84
Share options........... -- -- -- 135 -- 135
Shares issued........... 100 -- -- -- -- --
Net loss for the year... -- -- -- -- (5,296) (5,296)
--- --------- ----- ------ ------- ------
December 31, 1997....... 100 3,515,297 5,274 16,377 (10,003) 11,648
Net loss for the year .. -- -- -- -- (4,944) (4,944)
--- --------- ----- ------ ------- ------
December 31, 1998....... 100 3,515,927 5,274 16,377 (14,947) 6,704
=== ========= ===== ====== ======= ======
</TABLE>
F-4
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997
and the ten month period ended December 31, 1996
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
$ $ $
<S> <C> <C> <C>
Revenue (note 10)...................................... 26,724 4,962 --
Carrier charges and other cost of sales................ 15,676 3,559 --
------ ------ ------
11,048 1,403 --
General and administrative expenses (note 15).......... 9,342 5,085 3,377
------ ------ ------
Earnings (loss) before interest, amortization, income
taxes, minority interest and equity accounted for
investment............................................ 1,706 (3,682) (3,377)
------ ------ ------
Interest on long-term debt............................. 3,542 750 --
Interest income........................................ (140) (169) (132)
Amortization of deferred financing costs............... 321 305 --
Amortization of capital assets......................... 2,401 542 1
Accrued contingent interest (note 9(c))................ 960 382 --
------ ------ ------
7,084 1,810 (131)
------ ------ ------
Loss before income taxes and minority interest and
equity accounted for investment....................... (5,378) (5,492) (3,246)
Provision for income taxes............................. 36 53 14
------ ------ ------
Loss before minority interest and equity accounted for
investment............................................ (5,414) (5,545) (3,260)
Minority interest (note 11)............................ 204 249 --
Earnings before equity accounted for investment (note
11)................................................... 266 -- --
------ ------ ------
Net loss and comprehensive loss for the period......... (4,944) (5,296) (3,260)
====== ====== ======
Basic and fully diluted loss per common share (note
14)................................................... (1.41) (1.52) (1.89)
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997
and the ten month period ended December 31, 1996
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
------ ------- ------
$ $ $
<S> <C> <C> <C>
Operating activities
Net loss for the period.............................. (4,944) (5,296) (3,260)
Items not involving cash
Amortization of capital assets...................... 2,401 542 1
Write-down of other assets (note 7)................. 201 -- --
Amortization of deferred financing costs............ 321 305 --
Minority interest................................... (204) (249) --
Earnings from equity accounted for investment....... (266) -- --
Accrued contingent interest......................... 960 382 --
Granting of indefeasible rights of use and loss on
sale of capital assets............................. (970) -- --
Compensatory share options.......................... -- -- 1,845
------ ------- ------
Net change in non-cash working capital
Accounts receivable.................................. (577) (1,270) --
Other receivables.................................... 999 (1,654) --
Prepaid expenses and deposits........................ (138) 32 (230)
Accounts payable..................................... (6,369) 9,669 --
Accrued liabilities.................................. 2,416 536 395
Interest payable (note 16)........................... 1,492 510 --
Deferred revenue..................................... 1,174 1,521 --
Recoverable duties................................... -- 392 (392)
Subscriptions receivable............................. -- -- 150
------ ------- ------
Cash provided by (used in) operating activities....... (3,504) 5,420 (1,491)
------ ------- ------
Financing activities
Exercise of common share options..................... -- 84 --
Issuance of common shares............................ -- -- 17,594
Proceeds from issuance of long-term debt............. 9,350 29,740 --
Payments on long-term debt........................... (2,413) -- --
Deferred financing costs............................. -- (1,472) --
Loans provided by minority shareholders.............. -- 807 --
------ ------- ------
Cash provided by (used in) financing activities....... 6,937 29,159 17,594
------ ------- ------
Investing activities
Purchase of capital assets........................... (1,791) (45,104) (4,728)
Granting of indefeasible rights of use and proceeds
on sale of capital assets........................... 1,596 -- --
Change in other assets............................... (217) (19) (14)
Funds held in escrow................................. -- 2,015 (2,015)
Due from related party............................... (1,363) -- --
Note receivable...................................... (350) -- --
Proceeds from sale of equity accounted for
investment.......................................... 760 -- --
Advances to equity accounted for investment.......... (397) -- --
------ ------- ------
Cash provided by (used in) investing activities....... (1,762) (43,108) (6,757)
------ ------- ------
Increase (decrease) in cash for the period............ 1,671 (8,529) 9,346
Cash--Beginning of period............................. 1,361 9,890 544
------ ------- ------
Cash--End of period................................... 3,032 1,361 9,890
====== ======= ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1998 and 1997
and the ten month period ended December 31, 1996
(in thousands of U.S. dollars, except share and per share amounts)
1 Formation and operations
TeleBermuda International Limited ("TBI") was incorporated and registered on
January 6, 1995 as a local company pursuant to The Companies Act 1981
(Bermuda), for the purpose of establishing, providing, maintaining and
operating a public telecommunications service in Bermuda.
GlobeNet Communications Group Limited (the "Company") was incorporated and
registered on June 25, 1998 as a Bermuda exempt company as part of a
reorganization of the TeleBermuda group of companies. Under the reorganization
TBI became a wholly-owned subsidiary of the Company and the issued shares of
TBI were exchanged on a one for one basis with substantially the same rights
and privileges as before.
Following the reorganization, the Company incorporated certain subsidiaries.
GlobeNet Communications Limited ("GlobeNet"), a wholly-owned subsidiary of the
Company was incorporated on August 5, 1998 to be the operating company for
initiatives of the Company beyond the Bermuda market, GCG Holdings Ltda., 50%
owned by GlobeNet and 50% owned by TeleBermuda International (Canada) Limited,
a wholly-owned subsidiary of TBI, and GCG Services Ltda., 99% owned by GCG
Holdings Ltda. were incorporated in Brazil on December 10, 1998 to begin the
licensing process for fibre optic submarine cable landing and operating rights
in Brazil. As at December 31, 1998 these companies were inactive.
On May 17, 1996, TeleBermuda International, L.L.C. was incorporated as a
limited liability company, under the laws of Delaware primarily for the purpose
of holding a landing license for the Company's BUS-1 cable system in the United
States and to own the associated landing plant. TBI has a 20% interest in
TeleBermuda International L.L.C. subject to a put and call agreement to
purchase the remaining 80% for nominal consideration, which effectively gives
TBI control of this entity. As a result, this entity has been consolidated in
these financial statements.
TeleBermuda International (Canada) Limited was incorporated as a wholly-
owned subsidiary of TBI on September 16, 1996 for the purpose of providing
management services to the Company.
On January 10, 1997, TBI was granted its public telecommunications service
license in Bermuda under the provisions of the Telecommunications Act, 1986 and
the Public Telecommunication Service (Licence) Regulations, 1988 for a five-
year term.
In addition, TBI has an interconnection agreement with the Bermuda Telephone
Company ("BTC"), the domestic carrier, that enables the Company to directly
connect its operating facility with BTC in order to terminate traffic in and
receive traffic from Bermuda.
2 Summary of significant accounting policies
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States ("U.S. GAAP").
The following is a summary of the significant accounting policies followed in
the preparation of these consolidated financial statements.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and all of its subsidiary companies. Intercompany accounts and transactions
have been eliminated on consolidation.
F-7
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
Use of significant accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could significantly differ from
those estimates.
Revenue recognition
The Company provides telecommunication services and the granting or leasing
of indefeasible rights of use ("IRU") interests in its telecommunications
infrastructure.
The Company records as revenue the amount of telecommunications services
rendered, as measured primarily by the minutes of traffic processed, after
deducting an estimate of the traffic for which revenue will not be collected.
Service discounts and incentives are accounted for as a reduction of revenue
when granted, or where provided in relation to a service contract, rateably
over the contract period.
Revenue from the granting of an IRU in its telecommunications infrastructure
to third parties is recognized at the effective date of the contract provided
certain conditions are met. The Company considers the risks and rewards of
ownership to have transferred when the granting price is fixed on a non-
refundable basis, customers are responsible for their pro-rata share of the
costs for operating, maintaining and restoring the systems and the granting
term is for the operational life of the infrastructure sold pursuant to the
IRU.
Deferred revenue
Revenue from the lease of capacity in telecommunications infrastructure to
third party carriers is deferred and recognized over the term of the lease on a
straight-line basis. Revenue from the sale of prepaid calling cards is
recognized as the services are provided.
Capital assets
Capital assets are recorded at cost less accumulated amortization.
Amortization commences when an asset is put into service, and is calculated in
a systematic manner based on the expected useful lives of the assets as
follows:
<TABLE>
<CAPTION>
Asset category Basis Rate
-------------- ----- ----
<S> <C> <C>
Fibre optic submarine cable.......... straight-line 25 years
Network and telecommunications
equipment........................... straight-line 10 years
Leasehold improvements............... straight-line term of the lease
Computer equipment................... straight-line 3 years
Furniture and office equipment....... diminishing balance 20% per annum
Software............................. straight-line 5 years
</TABLE>
Deferred financing costs
Deferred financing costs represent debt issuance costs, which are amortized
over the estimated term of the related debt.
F-8
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
Investment
The Company's investment in Rocom TBI Limited is accounted for using the
equity method.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are
translated into U.S. dollars at exchange rates prevailing at the balance sheet
date. Revenues and expenses are translated into U.S. dollars at the average
rates of exchange prevailing at the dates of the respective transactions.
Transactions are translated into U.S. dollars at the exchange rates in effect
at the time the transactions occur. Exchange gains and losses arising on
translation are included in the operating results for the year.
The assets and liabilities of the non-Bermudian subsidiaries, which are
considered to be self-sustaining operations, are translated at the exchange
rate in effect at the balance sheet date. Revenues and expenses are translated
at average exchange rates prevailing during the year.
Financial instruments
The fair value of financial assets and liabilities represents the amount at
which these instruments could be exchanged in a current transaction between
willing parties. The carrying values of financial assets and liabilities as at
December 31, 1998 approximate their fair values, except for long-term debt for
which it is not practicable to determine fair value.
Income taxes
Under current Bermuda laws, the Company is not required to pay any taxes in
Bermuda on either income or capital gains. The Company has received an
undertaking from the Minister of Finance in Bermuda, pursuant to the Exempted
Undertakings Tax Protection Act 1966, which exempts the Company from any such
tax until March 28, 2016. Subsidiaries in other jurisdictions may be subject to
local taxes.
Recent accounting pronouncements
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities". This statement which is effective for fiscal years beginning after
December 15, 1998, requires costs incurred to open a new facility, introduce a
new product, commence a new operation or other similar activities to be
expensed as incurred. Management has not determined the impact of this
statement on its financial position, results of operations and cash flows.
3 Change in reporting currency
Effective January 1, 1998, the Company has adopted the U.S. dollar as its
reporting currency. Its previous currency was the Bermuda dollar. Since the
Bermuda dollar is pegged to the U.S. dollar on a one-to-one basis there are no
differences that arise as a result of this change in reporting currency.
4 Due from related party
On August 26, 1998 the Company loaned $1,292 (CAD $2,000) to MK Telecom
Network Inc., a company controlled by the Chairman and Chief Executive Officer
of the Company, for the purpose of securing an option for the Company to buy an
interest in a third party carrier. The loan bears interest at 15% per annum and
is due January 1999. Interest income for 1998 is $71 and has been included in
the due from related party balance.
Subsequent to year-end, this loan and all outstanding interest was collected
in full.
F-9
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
5 Capital assets
<TABLE>
<CAPTION>
1998
--------------------------
Accumulated
Cost amortization Net
------ ------------ ------
$ $ $
<S> <C> <C> <C>
Fibre optic submarine cable....................... 44,323 1,983 42,340
Network and telecommunications equipment.......... 4,415 549 3,866
Leasehold improvements............................ 944 140 804
Computer equipment................................ 470 167 303
Furniture and office equipment.................... 140 38 102
Software.......................................... 224 27 197
------ ----- ------
50,516 2,904 47,612
====== ===== ======
<CAPTION>
1997
--------------------------
Accumulated
Cost amortization Net
------ ------------ ------
$ $ $
<S> <C> <C> <C>
Fibre optic submarine cable....................... 44,884 225 44,659
Network and telecommunications equipment.......... 3,050 175 2,875
Leasehold improvements............................ 1,012 64 948
Computer equipment................................ 192 57 135
Furniture and office equipment.................... 446 16 430
Software.......................................... 252 -- 252
------ ----- ------
49,836 537 49,299
====== ===== ======
</TABLE>
6 Note receivable
On December 16, 1998, the Company sold its interest in Rocom TBI Limited for
total consideration of $820 ((Pounds)500), of which $410 ((Pounds)250) was
received in cash and the remaining $410 ((Pounds)250) is non-interest bearing,
due November 20, 2000. This note receivable has been reflected in these
financial statements at its discounted amount of $350 ((Pounds)213). The
effective rate of interest used to discount the note receivable is 8%.
7 Other assets
<TABLE>
<CAPTION>
1998 1997
----- -----
$ $
<S> <C> <C>
Deferred financing costs, net of accumulated amortization of
$626 (1997--$305)............................................ 981 1,302
Due from related party........................................ -- 19
Other......................................................... 82 14
Investment in GeoReach Partnership(a)......................... -- 33
----- -----
1,063 1,368
===== =====
</TABLE>
a) The GeoReach Partnership ("GeoReach") was formed on October 6, 1995
for the purpose of obtaining and exploiting an international carrier
licence in Canada. The original partners were the Chairman and Chief
Executive Officer of the Company and a Director of the Company. During the
year, GeoReach was dissolved, the assets were transferred to GeoReach
Telecommunications Inc. ("GeoReach Inc.") and the Company's 5% interest in
GeoReach Partnership was increased to 100% when the additional 95% was
acquired from the Chairman and Chief Executive Officer and a Director of
the Company for $124. Subsequently, due to a change in business strategy,
this investment was written off.
F-10
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
8 Accounts payable and accrued liabilities
Accounts payable are comprised as follows:
<TABLE>
<CAPTION>
1998 1997
----- ------
$ $
<S> <C> <C>
Trade payables.................................................. 777 8,666
Foreign carrier settlement payables............................. 3,037 1,411
Other payable................................................... 57 163
----- ------
3,871 10,240
===== ======
</TABLE>
Accrued liabilities are comprised as follows:
<TABLE>
<CAPTION>
1998 1997
----- -----
$ $
<S> <C> <C>
Interest payable................................................. 2,002 510
Foreign carrier accrual.......................................... 880 264
Equalization payment accrual..................................... 668 107
Other accruals................................................... 1,421 182
----- -----
4,971 1,063
===== =====
</TABLE>
9 Long-term debt
<TABLE>
<CAPTION>
1998 1997
------ ------
$ $
<S> <C> <C>
Term loan(a)................................................... 21,990 16,740
Operating credit facility(b)................................... 1,687 --
Subordinated debentures and retractable warrants(c)............ 13,000 13,000
Accrued contingent interest(c)................................. 1,342 382
------ ------
38,019 30,122
Less: Current portion.......................................... 3,000 --
------ ------
35,019 30,122
====== ======
</TABLE>
a) On July 28, 1997, the Company entered into a five-year term loan
agreement with a bank for up to $25,000 to finance capital expenditures.
During the year, the available credit on the term facility was reduced to
$21,990. As at December 31, 1998 the unused facility was $nil (1997--
$8,260). The loan bore interest at the London Interbank Offered Rate
("Libor") plus 2.25% for the period to July 28, 1998, and
F-11
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
subsequently at interest rates between Libor plus 1.75% and Libor plus
2.25% subject to reduction upon the Company meeting certain cashflow
criteria. At the option of the Company, the interest rate may be fixed or
converted to a floating rate based on the U.S. prime rate. During the year,
the average rate of interest incurred on this loan was 7.8% (1997--8.0%).
b) On July 28, 1997, the Company entered into a five year revolving
operating credit facility with a bank for up to $5,000 to finance the
Company's general working capital requirements. The facility bears interest
on the same terms as the term loan. As at December 31, 1998 the unused
facility was $3,313 (1997--$5,000). Any further draws on this facility will
require term lender approval. The average rate of interest incurred on this
loan in 1998 was 7.7%.
The principal repayments in respect of the term loan and operating line are
as follows:
<TABLE>
<CAPTION>
Fiscal year $
----------- ------
<S> <C>
1999................................................................. 3,000
2000................................................................. 6,000
2001................................................................. 6,000
2002................................................................. 8,677
------
23,677
======
</TABLE>
c) On July 28, 1997, the Company entered into a subordinated debenture
agreement with a financial institution and a vendor for up to $13,000 to
fund capital expenditures. As at December 31, 1998, the principal
outstanding under this loan was $13,000 (1997--$13,000), and is due for
repayment on July 28, 2002. The debenture bears interest at a rate of Libor
plus 5%. Interest accrues for the first two years and is payable on a
quarterly basis commencing July 28, 1999. The average rate of interest
incurred on the debenture in 1998 was 10.72% (1997--10.68%). Included in
accounts payable is accrued interest of $1,967 (1997--$455).
As part of the subordinated debentures agreement, the Company issued
up to 1,529,412 common share purchase warrants to the debenture holders.
The warrants are exercisable at prices between $8.50 and $9.25 per common
share. The Company may repurchase all outstanding warrants subsequent to
July 28, 1998, subject to certain covenants and conditions. The warrants
expire if unexercised on July 28, 2002, in which case, the Company is
required to make a non-exercise payment of up to $5,392, representing
additional contingent interest at 7% per annum on the gross exercise price
for the unexercised warrants from the date of issue to the date of expiry.
The warrants have anti-dilution protection rights whereby the exercise
price of the warrants and the number of common shares issuable by the
Company on exercise of the warrants will be increased or decreased in
certain events, including certain reorganizations and the issuance by the
Company of equity shares at a price which is less than the warrant exercise
price or less than the market price of the Company's common shares. The
Company will accrue the additional contingent interest at 7% per annum over
the five year term of the debt. Management estimates that any additional
value attributable to the equity component of the warrants is
insignificant.
All assets of the Company have been pledged as collateral against the term
loan, the operating credit facility and the subordinated debentures.
F-12
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
10 Granting of indefeasible rights of use to and leasing of the fibre optic
submarine cable
a) The Company has granted indefeasible rights of use ("IRU's") in its fibre
optic submarine cable to certain third party carriers for a period of 25 years
for $1,521. The costs recognized with the granting of the IRU's are calculated
on a pro-rata basis of total capacity granted in relation to the total cost of
the activated fibre optic submarine cable.
b) The Company has signed an agreement to lease capacity in its fibre optic
submarine cable to a third party. The term of the lease is for the greater of
25 years or the operational life of the fibre optic submarine cable. The
operational life can be no less than 10 years, otherwise the Company must
provide a refund to the third party, on a pro-rata basis for each year short of
the 10 year period. During the lease term, the Company is responsible for the
maintenance and operating costs associated with the fibre optic submarine cable
for the first four years and thereafter the lessee is responsible for payment
of a monthly charge for operating and maintenance costs. The lease also
requires that the Company have full restoration capacity as of January 1, 2000,
otherwise without such capacity, the lease may be terminated and a refund of
$4,400 would be required to be made by the Company. The total consideration for
this lease was $8,000, which was reduced by $135 as a result of an offset for a
receivable by the third party owing to the Company. During 1998, $2,865 was
received. $4,000 is due September 24, 1999 and $1,000 is due on September 24,
2000. The Company has recognized revenue of $263, related to this lease.
This agreement also entitles the third party to enter into a second lease of
capacity in the fibre optic submarine cable commencing on the third anniversary
of the September 24, 1998 activation date of the first circuit, expiring at the
same time as the first lease. The consideration for the second lease will be
$4,000 payable upon activation of the second circuit. Prior to signing the
second lease, the third party may elect not to proceed with the second lease at
a penalty of $250 payable to the Company.
11 Equity accounted for investment
TeleBermuda International (U.K.) Limited ("TBI-UK") was incorporated on June
19, 1996 for the purpose of acquiring and exploiting a license to provide
telecommunications services in the United Kingdom. On November 27, 1997, TBI-UK
changed its name to Rocom TBI Limited ("Rocom TBI"). During the year, this
company was used to establish a corporate joint venture in the United Kingdom
for the purpose of securing a gateway to Europe and the European market. On
December 16, 1998 the Company sold its 50% interest in Rocom TBI to its joint
venture partner.
12 Share capital
a) Authorized
The Company is authorized to issue 6,999,900 common shares with a par value
of $1.50 per share, and 100 Class A restricted voting shares with a par value
of $1.50 per share.
The Board of Directors has the authority to issue common shares, securities
convertible into common shares or grant options, up to a maximum of 20% of the
fully diluted shares of the Company pursuant to a general mandate of the
shareholders. This mandate will expire at the next annual meeting of the
shareholders, unless it is re-approved at that meeting.
F-13
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
b) Issued and outstanding shares
<TABLE>
<CAPTION>
Additional
Class A Common paid-in
Shares shares Par Value capital
------- --------- --------- ----------
$ $
<S> <C> <C> <C> <C>
February 29, 1996................... -- 1,369,916 1,299 694
Share options (i)................... -- -- -- 1,845
Share subscription proceeds (ii).... -- -- 756 --
Fully paid shares issued for cash
(iii).............................. -- 2,118,000 3,177 13,661
--- --------- ----- ------
December 31, 1996................... -- 3,487,916 5,232 16,200
--- --------- ----- ------
Share options exercised............. -- 28,011 42 42
Share options (iv).................. -- -- -- 135
Shares issued (v)................... 100 -- -- --
--- --------- ----- ------
December 31, 1997................... 100 3,515,927 5,274 16,377
--- --------- ----- ------
Share options exercised............. -- -- -- --
Shares issued....................... -- -- -- --
--- --------- ----- ------
December 31, 1998................... 100 3,515,927 5,274 16,377
=== ========= ===== ======
</TABLE>
All issued and outstanding common shares are fully paid.
i) 324,489 stock options (45,000 with an exercise price of $0.01 per
option, 32,500 with an exercise price of $1.00 per option and 196,989 with
an exercise price of $3.00 per option) reflected at their fair value.
ii) In May 1996, the Company advised the holders of the shares that were
uncalled at February 29, 1996 that it intended to make a call in respect of
all monies unpaid on these shares.
iii) In October 1996, the Company completed an initial public offering
on the Bermuda Stock Exchange and private placements in the United States,
Canada and the United Kingdom. Pursuant to these offerings, the Company
issued 2,118,000 shares for proceeds of $16,838 net of expenses of the
offering of $1,165.
iv) On July 28, 1997, 50,000 options were granted to non-employees.
Those options were granted with respect to a financing and have been
accounted for at fair value as deferred financing cost, amortized over the
five year term of the loan agreement.
v) On October 3, 1997 the members passed a bylaw to convert 100 of the
authorized common shares into 100 Class A restricted voting shares. Class A
shareholder approval is required for certain corporate matters. On that
date, 80 Class A shares were issued to the subordinated debenture holders,
and 20 shares were issued to a director of the Company for cash
consideration of $1.50 per share.
The Company is entitled to repurchase the Class A shares for cancellation,
at a price of $1.50 per share. This can occur in the event of the
repurchase or expiry of the debenture holders warrants, or in certain
circumstances involving the dilution of the debenture holders' equity
interest taken on a fully diluted basis.
Under the terms of the Company's credit agreement the Company's payment of
dividends is subject to restrictions related to the repayment terms of the term
loan, operating credit facility and subordinated debt.
F-14
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
13 Common share options
Under the terms of the 1998 Share Option and Incentive Plan, the Company,
upon the approval of the Board of Directors and shareholders of the Company,
awards options to employees, officers, directors of the Company and employees
of service providers. A summary of the outstanding common share purchase
option activities is as follows:
<TABLE>
<CAPTION>
Weighted
average
Beginning End of exercise
of period Granted Exercised Forfeited period price
--------- ------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996........ 302,500 50,000 -- -- 352,500 3.21
December 31, 1997........ 352,500 232,000 28,011 -- 556,489 5.22
December 31, 1998........ 556,489 263,000 -- 13,000 806,489 6.41
</TABLE>
These options expire on various dates from 2001 to 2009 and generally vest
over a three-year period.
The 1998 options have been approved by the Board of Directors and are
pending shareholder approval.
The following table summarizes information concerning outstanding and
exercisable options at December 31, 1998:
<TABLE>
<CAPTION>
Weighted average
remaining contractual Number of share
Exercise life (years) of options Number of options options exercisable at
Price outstanding outstanding December 31, 1998
-------- ----------------------- ----------------- ----------------------
<S> <C> <C> <C>
$0.01 7.10 45,000 45,000
1.00 2.40 32,500 32,500
3.00 3.00 196,989 196,989
8.50 3.75 50,000 50,000
8.00 7.77 219,000 115,820
9.00 10.00 263,000 --
------- -------
806,489 440,309
======= =======
</TABLE>
The weighted average exercise price of the options outstanding and the
options exercisable at December 31, 1998 are $6.41 and $4.49, respectively.
The weighted average fair value of the options granted in 1998 and 1997 are
$0.44 and $1.97, respectively.
The Company applies APB Opinion 25 ("Accounting for Stock Issued to
Employees") in accounting for its stock option plan (except for options
granted to employees of service providers), and, accordingly, does not
recognize compensation cost at the time options are granted unless the
exercise price is less than the market price of the stock on the date of
issue. Had the Company elected to recognize compensation cost based on the
fair value of the options granted at the grant date as prescribed by SFAS 123,
the pro forma effects to reported net loss for the period and basic and fully
diluted loss per common share, would be as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
$ $ $
<S> <C> <C> <C>
Net loss for the period--as reported..................... 4,944 5,296 3,260
Net loss for the period--pro forma....................... 5,047 5,296 3,260
Basic and fully diluted loss per common share--as
reported................................................. 1.41 1.52 1.89
Basic and fully diluted loss per common share--pro
forma................................................... 1.43 1.52 1.89
</TABLE>
F-15
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
The fair value of each option grant has been estimated using the Black-
Scholes option pricing model, using a volatility assumption of 20% (1997--20%;
1996--20%), expected life of 7 years (1997--7 years; 1996--7 years), a dividend
rate of nil (1997--nil; 1996--nil) and a risk-free interest rate of 5.28%
(1997--6.33%; 1996--6.60%).
The above pro forma effects on the net loss for the period may not be
representative of the effects on the net loss for the period for future periods
as option grants typically vest over several years and additional options are
generally granted each year.
14 Basic and fully diluted loss per common share
The basic loss per common share is calculated using the weighted average
number of common shares outstanding of 3,515,927 (1997--3,492,915; 1996--
1,722,916). The weighted average number of common shares on a fully diluted
basis is calculated on the same basis as the basic weighted average number of
shares as the Company is in a loss position and the effects of possible
conversion would be anti-dilutive.
15 General and administrative expenses
a) Director's service contract
In September 1997, the Company entered into a service agreement with First
Bermuda Securities Ltd., of which a Director of the Company is the CEO. Under
this agreement, First Bermuda Securities Ltd. provides the Company with various
financial and business advisory services. Payments made to First Bermuda
Securities in 1998 were $125 (1997--$145; 1996--$nil).
b) Rent expense
Included in general and administrative expenses is rent expense of $342
(1997--$242; 1996--$127).
c) Bad debt expense
Included in general and administrative expenses is bad debt expense of $114
(1997-$91; 1996-$ nil).
16 Supplemental cash flow information
Amounts paid for interest and income taxes are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ---- ----
$ $ $
<S> <C> <C> <C>
Interest..................................................... 1,901 540 --
Income taxes................................................. 36 51 10
</TABLE>
17 Commitments
The Company has entered into operating lease agreements for its premises.
Minimum lease commitments pursuant to these leases over the next five years and
thereafter are as follows:
<TABLE>
<CAPTION>
$
---
<S> <C>
Year ending December 31, 1999............................................ 198
2000..................................................................... 89
2001..................................................................... 68
2002..................................................................... 76
2003..................................................................... 88
Thereafter............................................................... 403
---
922
===
</TABLE>
F-16
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
In the normal course of business, the Company has also entered into a number
of contracts under which it is committed to the purchase and supply of
telecommunication services at fixed prices. It is not anticipated that losses
will be incurred on these contracts.
18 Contingencies
The Company is a defendant or interested party (note 21(a)) in various
lawsuits which have arisen in the ordinary course of business. At the present
time, the outcome of these cases is not determinable. No provision has been
made with respect to any of these claims in these financial statements.
The Company is contingently liable in respect of an irrevocable stand-by
letter of credit issued by a bank on its behalf in the amount of $55 (1997--
$75).
19 Segmented information
The Company operates predominantly in the telecommunications sector and
substantially all of the Company's business activity and services were
conducted in Bermuda during 1998, 1997 and 1996.
20 Uncertainty due to Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than
a date. The effects of the Year 2000 Issue may be experienced before, on, or
after January 1, 2000, and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems failure
which could affect an entity's ability to conduct normal business operations.
It is not possible to be certain that all aspects of the Year 2000 Issue
affecting the entity, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
21 Subsequent events
a) On January 8, 1999, the Bermuda Telephone Company ("BTC"), the domestic
carrier, filed a notice of appeal with the Supreme Court of Bermuda challenging
the Minister of Telecommunications' December 31, 1998 decision to mandate
certain reductions in the local access charges paid by international carriers,
including the Company, to domestic carriers commencing January 1, 1999. A
favourable ruling for BTC could nullify the existing access charge reduction
and could have retroactive effect commencing from January 1, 1999. The outcome
of this proceeding is currently not determinable.
b) On February 18, 1999 the Company signed a letter of intent to award
Alcatel Submarine Networks ("Alcatel") a supply contract to construct a fibre
optic submarine cable called Atlantica-1 between Hollywood (Fl, USA), Punto
Fijo (Venezuela), Fortaleza (Brazil), St. David's (Bermuda) and Tuckerton (NJ,
USA) for a contract price of $510,485, which amount is subject to amendment by
the mutual agreement of the parties. This letter of intent may be cancelled at
any time prior to June 15, 1999 with the Company's liability being limited to
the actual costs and expenditures authorized by the letter of intent up to a
maximum of $4,000. If a definitive supply contract is cancelled between the
parties, payment of the costs and expenditures incurred by Alcatel become
payable by the Company on June 15, 1999. The Company will render payment of
these costs from
F-17
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
(formerly TeleBermuda International Limited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands of U.S. dollars, except share and per share amounts)
either financing proceeds or the issuance of a note to Alcatel which shall be
subordinate to the existing financing facilities. As specified in the letter of
intent, the supply contract is anticipated to be signed by April 30, 1999,
which was subsequently extended to May 30, 1999, and construction of the cable
system to be completed by December 30, 2000. The Company is currently pursuing
financing initiatives to fund this commitment.
In February 1999 the Company reached an agreement in principle with one of
its debenture holders to secure an additional $500 to fund costs for planning
and financing initiatives on the Atlantica-1 project. The terms and conditions
of this additional funding are essentially the same as those for the Company's
existing subordinated debt and warrants.
c) Unaudited--Effective June 15, 1999, the authorized common shares of the
Company were increased by 10,499,900 to an aggregate total of 17,499,800 common
shares. In addition, the Company's bye-laws authorized the creation of 100
Class B shares. On July 12, 1999, the authorized common shares and Class B
shares of the Company were increased by 6,500,200 and 1,900, respectively.
d) Unaudited--On July 14, 1999 the Company secured financing totalling
$970,600 for the development and construction of the Atlantica-1 fibre optic
submarine cable system linking North America, Bermuda and South America. The
financing is comprised of the following components:
i) A private placement equity offering of shares issued at $20.40 per
share (par value $1.50) for aggregate proceeds of $270,600. The
Company subsequently used $30,600 of these proceeds to redeem
1,500,000 outstanding common shares at an aggregate price of $20.40
per common share from existing shareholders.
ii) The issuance of debt in the principal amount of $300,000 in the form
of 13% senior notes maturing July 15, 2007. Interest on these notes
accrues at a rate of 13% per annum, payable semi-annually in arrears
on each January 15 and July 15 commencing January 15, 2000. The notes
effectively rank behind all of the collateralized obligations of the
Company to the extent of the value of the assets collateralizing
these obligations.
iii) A bank credit facility ("Credit Facility") of up to $400,000, that
consists of various term facilities totalling $390,000 and a $10,000
revolving credit facility. All loans under the Credit Facility
mature on June 30, 2005 except for one of the term facilities of
$100,000 which matures on September 30, 2005. The interest rates on
the loans under the Credit Facility range from Libor plus 3.5% to
Libor plus 4.0% and availability of funds under the Credit Facility
is subject to certain terms and conditions. Substantially all of the
assets of GlobeNet Communications Holdings Ltd. and of its present
and future direct and indirect subsidiaries have been pledged as
collateral for the Credit Facility. In addition, Alcatel has
provided an initial guarantee subject to certain conditions and
adjustments of up to $100,000 for one of the term facilities.
The structure, terms and pricing of the Credit Facility are subject
to change at the discretion of the bank that is acting as arranger up
until October 15, 1999.
In addition, on July 14, 1999, $21,408 of the proceeds from the total
financing amount of $970,600, were used to pay the existing term loan,
operating credit facility and certain accrued interest on the
subordinated debentures. As well, all of the remaining obligations to the
subordinated debentureholders were retired when the subordinated
debentureholders elected to exercise their warrants and convert the
principal and remaining accrued interest on their subordinated debt into
1,635,286 common shares. The accrued contingent interest obligation was
included in state capital in connection with the exercise of the
warrants.
F-18
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEETS
As at June 30, 1999 and 1998
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
1999 1998
------- -------
$ $
<S> <C> <C>
Assets
Current assets
Cash........................................................ 1,051 649
Accounts receivable (net of allowance of $141; 1998--$20)... 2,882 955
Other receivables........................................... 66 751
Prepaid expenses and deposits............................... 601 200
------- -------
4,600 2,555
Capital assets............................................... 53,199 47,783
Note receivable.............................................. 366 --
Other assets................................................. 1,900 1,235
Equity accounted for investment.............................. -- 285
------- -------
60,065 51,858
======= =======
Liabilities
Current liabilities
Accounts payable............................................ 4,332 2,494
Accrued liabilities......................................... 11,588 2,651
Current portion of long-term debt (note 7).................. 4,500 3,000
------- -------
20,420 8,145
Long-term debt (note 7)...................................... 31,364 35,544
Deferred revenue............................................. 2,633 300
------- -------
54,417 43,989
------- -------
Shareholders' Equity
Share capital (notes 3, 4 and 7)
Class A shares, 100 shares authorized, par value $1.50 per
share
100 (1998-100) shares issued and outstanding
Class B shares, 100 shares authorized, par value $1.50 per
share
nil (1998-nil) shares issued and outstanding
Common shares, 17,499,800 authorized, par value $1.50 per
share
3,515,927 (1998--3,515,927) shares issued and outstanding.. 5,274 5,274
Additional paid-in capital (note 7).......................... 16,377 16,377
Deficit..................................................... (16,003) (13,782)
------- -------
5,648 7,869
------- -------
60,065 51,858
======= =======
</TABLE>
Commitments and contingencies (notes 5 and 6)
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
F-19
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
For the six months ended June 30, 1999 and 1998
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
1999 1998
------- -------
$ $
<S> <C> <C>
Revenue..................................................... 13,122 11,518
Carrier charges and other cost of sales..................... 6,060 7,361
------- -------
7,062 4,157
General and administrative expenses......................... 4,704 4,548
------- -------
Earnings (loss) before interest, amortization, income taxes,
minority interest and equity accounted for investment...... 2,358 (391)
------- -------
Interest on long-term debt.................................. 1,577 1,585
Interest income............................................. (101) (9)
Amortization of deferred financing costs.................... 160 160
Amortization of capital assets.............................. 1,264 1,158
Accrued contingent interest................................. 495 472
------- -------
3,395 3,366
------- -------
Loss before income taxes, minority interest and equity ac-
counted for investment..................................... (1,037) (3,757)
Provision for income taxes.................................. 19 17
------- -------
Loss before minority interest and equity accounted for in-
vestment................................................... (1,056) (3,774)
Minority interest........................................... -- 204
Loss from equity accounted for investment................... -- (209)
------- -------
Net loss for the period..................................... (1,056) (3,779)
Deficit--Beginning of period................................ (14,947) (10,003)
------- -------
Deficit--End of period...................................... (16,003) (13,782)
======= =======
Basic and fully diluted loss per common share............... (0.30) (1.07)
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
F-20
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1999 and 1998
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
1999 1998
------ ------
$ $
<S> <C> <C>
Operating activities
Net loss for the period....................................... (1,056) (3,779)
Items not involving cash
Amortization of capital assets.............................. 1,264 1,158
Write-down of other assets.................................. -- 174
Amortization of deferred financing costs.................... 160 160
Minority interest........................................... -- (204)
Loss from equity accounted for investment................... -- 209
Accrued contingent interest................................. 495 472
Granting of indefeasible rights of use and loss on sale of
capital assets............................................. -- (970)
Changes in non-cash working capital
Accounts receivable......................................... (1,035) 315
Other receivables........................................... 589 903
Prepaid expenses and deposits............................... (263) --
Accounts payable............................................ 461 (7,746)
Accrued liabilities......................................... 5,849 1,002
Interest payable............................................ 768 586
Deferred revenue............................................ (62) (1,221)
------ ------
Cash provided by (used in) operating activities............... 7,170 (8,941)
------ ------
Financing activities
Proceeds from issuance of long-term debt...................... 500 7,950
Payments on long-term debt.................................... (3,150) --
Increase in deferred financing costs.......................... (1,001) --
------ ------
Cash provided by (used in) financing activities............... (3,651) 7,950
------ ------
Investing activities
Purchase of capital assets.................................... (6,851) (644)
Granting of indefeasible rights of use and proceeds on sale of
capital assets............................................... -- 1,521
Change in other assets........................................ 4 (201)
Due from related party........................................ 1,363 --
Note receivable............................................... (16) --
Advances to equity accounted for investment................... -- (397)
------ ------
Cash provided by (used in) investing activities............... (5,500) 279
------ ------
Decrease in cash for the period............................... (1,981) (712)
Cash--Beginning of period..................................... 3,032 1,361
------ ------
Cash--End of period........................................... 1,051 649
====== ======
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
F-21
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 1999 and 1998
(in thousands of U.S. dollars, except share and per share amounts)
1 Formation and operations
GlobeNet Communications Group Limited (the "Company") was incorporated and
registered on June 25, 1998 as a Bermuda exempt company as part of a
reorganization of the TeleBermuda International Limited group of companies
("TBI"). Under the reorganization, TBI, which was incorporated on January 6,
1995, became a wholly-owned subsidiary of the Company and the issued shares of
TBI were exchanged on a one-for-one basis with substantially the same rights
and privileges.
The Company, through its subsidiaries, provides, maintains and operates a
public telecommunications service in Bermuda facilitated by its ownership of
its BUS-1 cable system between Bermuda and the United States. On January 10,
1997, TBI was granted its public telecommunications service licence in Bermuda
under the provisions of the Telecommunications Act, 1986 and the Public
Telecommunication Service (Licence) Regulations, 1988 for a five-year term.
In addition, TBI has an interconnection agreement with the Bermuda Telephone
Company ("BTC"), the domestic carrier, that enables the Company to directly
connect its operating facility with BTC in order to terminate traffic in and
receive traffic from Bermuda.
On June 16, 1999, the Company entered into a construction contract, subject
to certain terms and conditions, including the securing of financing to expand
its operations by building a fibre optic submarine cable system called
Atlantica-1 linking Bermuda, North and South America. Such financing was
secured on July 14, 1999 (note 7).
2 Interim consolidated financial statements
The unaudited consolidated balance sheets as at June 30, 1999 and 1998 and
the unaudited consolidated statements of operations and deficit and statements
of cash flows for the six-month periods then ended, in the opinion of
management, have been prepared on the same basis as the audited consolidated
financial statements and include all adjustments necessary for the fair
statement of the results of the interim periods. All adjustments reflected in
the consolidated financial statements are of a normal recurring nature. The
data disclosed in the notes to the consolidated financial statements for these
periods are also unaudited. Results for the six-month periods ended June 30,
1999 and 1998 are not necessarily indicative of the results to be expected for
the full year.
3 Share capital
Effective June 15, 1999, the authorized common shares of the Company were
increased by 10,499,900 to an aggregate total of 17,499,800 common shares. In
addition, the Company bye-laws authorized the creation of 100 Class B shares.
On July 12, 1999, the authorized common shares and Class B shares of the
Company were increased by 6,500,200 and 1,900, respectively.
4. Common share options
Under the terms of the 1998 Share Option and Incentive Plan, the Company,
upon the approval of the Board of Directors and shareholders of the Company,
awards options to employees, officers, directors of the Company and employees
of service providers.
F-22
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the six months ended June 30, 1999 and 1998
(in thousands of U.S. dollars, except share and per share amounts)
On April 12, 1999, the Company granted 540,000 options at an exercise price
of $9.00 with a ten-year term to certain officers and directors. These options
vest in three separate tranches based upon the Company meeting certain
milestones related to the Atlantica-1 project. The first vesting milestone on
515,000 of these options occurred on July 14, 1999 when total financing was
secured (note 7). The difference between the exercise price and the market
value of the shares at the time of vesting will be reflected as compensation
expense.
At June 30, 1999 there were 1,347,489 (1998--551,489) outstanding common
share purchase options at a weighted average exercise price of $7.45 (1998--
$5.20). During the six month period ended June 30, 1999, 4,000 (1998--5,000)
options were forfeited at a weighted average exercise price of $8.50 (1998--
$8.00). These options expire on various dates from 2001 to 2009 and generally
vest over a three-year period.
5 Commitments
On June 4, 1999, the Company signed a revised letter of intent to award
Alcatel Submarine Networks ("Alcatel") a supply contract to construct a fibre
optic submarine cable system called Atlantica-1 between Miami (Fl, USA), Camuri
(Venezuela), Fortalez (Brazil), St David's (Bermuda) and Tuckerton (NJ, USA)
for a total contract price of $620,861, (of which $6,000 has been recorded at
June 30, 1999), which amount is subject to amendment by the mutual agreement of
the parties.
Future payments are based upon a specified billing schedule and are due when
the corresponding project milestone has been achieved and engineer acceptance
has been provided. The future minimum payments, beyond the $6,000 that has been
recorded as at June 30, 1999, required in the next two years as a result of
this contract are as follows:
<TABLE>
<CAPTION>
$
<S> <C>
Six months ended December 31, 1999................................ 124,172
Six months ended June 30, 2000.................................... 242,345
Six months ended December 31, 2000................................ 248,344
-------
614,861
=======
</TABLE>
As disclosed in note 7, financing was secured on July 14, 1999 and as a
result, the Company made its initial payment under the billing schedule of
$62,086.
6 Contingencies
On January 8, 1999, the Bermuda Telephone Company ("BTC"), the Bermuda
domestic carrier, filed a notice of appeal with the Supreme Court of Bermuda
challenging the Minister of Telecommunications' ("Minister") December 31, 1998
decision to mandate certain reductions in the local access charges paid by
international carriers, including the Company, to domestic carriers commencing
January 1, 1999. The appeal was settled on March 23, 1999 without any impact to
the mandated reductions. The proceedings had been adjourned until June 23,
1999, at which time a hearing was scheduled for July 19, 1999 for purposes of
preserving BTC's rights in the event of a third party appeal. On July 19, 1999,
BTC abandoned the appeal.
F-23
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the six months ended June 30, 1999 and 1998
(in thousands of U.S. dollars, except share and per share amounts)
7 Subsequent events
On July 14, 1999 the Company secured financing totalling $970,600 for the
development and construction of the Atlantica-1 fibre optic submarine cable
system linking North America, Bermuda and South America. The financing is
comprised of the following components:
(i) A private placement equity offering of shares issued at $20.40 per
share (par value $1.50) for aggregate proceeds of $270,600. The Company
subsequently used $30,600 of these proceeds to redeem 1,500,000
outstanding common shares at an aggregate price of $20.40 per common
share from existing shareholders.
(ii) The issuance of debt in the principal amount of $300,000 in the form
of 13% senior notes maturing July 15, 2007. Interest on these notes
accrues at a rate of 13% per annum, payable semi-annually in arrears on
each January 15 and July 15 commencing January 15, 2000. The notes
effectively rank behind all of the collateralized obligations of the
Company to the extent of the value of the assets collateralizing these
obligations.
(iii) A bank credit facility ("Credit Facility") of up to $400,000, that
consists of various term facilities totalling $390,000 and a $10,000
revolving credit facility. All loans under the Credit Facility mature
on June 30, 2005 except for one of the term facilities of $100,000
which matures on September 30, 2005. The interest rates on the loans
under the Credit Facility range from Libor plus 3.5% to Libor plus
4.0% and availability of funds under the Credit Facility is subject
to certain terms and conditions. Substantially all of the assets of
GlobeNet Communications Holdings Ltd. and of its present and future
direct and indirect subsidiaries have been pledged as collateral for
the Credit Facility. In addition, Alcatel has provided an initial
guarantee subject to certain conditions and adjustments of up to
$100,000 for one of the term facilities.
The structure, terms and pricing of the Credit Facility are subject to
change at the discretion of the bank that is acting as arranger up
until October 15, 1999.
In addition, on July 14, 1999, $21,408 of the proceeds from the total
financing amount of $970,600, were used to pay the existing term loan,
operating credit facility and certain accrued interest on the subordinated
debentures. As well, all of the remaining obligations to the subordinated
debentureholders were retired when the subordinated debentureholders elected to
exercise their warrants and convert the principal and remaining accrued
interest on their subordinated debt into 1,635,286 common shares. The accrued
contingent interest obligation was included in stated capital in connection
with the exercise of the warrants.
F-24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything to you other than the information contained
in this prospectus. You should not rely on unauthorized information or
representations.
This prospectus does not offer to sell or ask for offers to buy any of the new
notes in any jurisdiction where it is unlawful, where the person making the
offer is not qualified to do so or to any person who can not legally be offered
the new notes.
The information in this prospectus is current only as of the date on its cover
and may change after that date. For any time after the cover date of this
prospectus we do not represent that our affairs are the same as described or
that the information in this prospectus is correct--nor do we imply those
things by delivering this prospectus or selling securities to you.
Until , 1999, all dealers that effect transactions in the new notes, 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$300,000,000
GlobeNet
Communications
Group Limited
Offer to Exchange
13% Series B Senior Notes Due 2007
For All Outstanding
13% Senior Notes Due 2007
[LOGO]
PROSPECTUS
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Indemnification Agreements with Directors
We have entered into indemnity agreements with each of our directors.
Pursuant to the director indemnity agreements, we have agreed to indemnify and
save harmless each director, his/her heirs and legal representatives, to the
fullest extent permitted by law, against all costs, charges, liability,
damages, and expenses, including an amount paid to settle an action or to
satisfy a judgment, reasonably incurred by him/her in respect of any civil,
criminal or administrative action or proceeding to which he/she is made a party
by reason of, or in any connection with him/her, being or having been a
director if (1) the director acted in his/her capacity as a director and (2) in
the case of a criminal or administrative action or proceeding that is enforced
by a monetary penalty, the director had reasonable grounds for believing that
his/her conduct was lawful. Directors are required to obtain our consent to any
settlement of any civil, criminal or administrative action or proceeding.
Indemnification Agreements with Officers
We have entered into indemnity agreements with Michael Kedar, James
Fitzgerald, Laurent Duplantie, Scott Socol, Lin Gentemann and Greg Belbeck.
Pursuant to the indemnification agreements, we have agreed, to the fullest
extent permitted by our bye-laws and applicable law, to indemnify each
indemnitee against all expenses actually and reasonably incurred, judgments,
penalties, fines and amounts paid in settlement by such indemnitee if he/she
is, or is threatened to be made, a party to any threatened, pending, or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding as a result of
his/her status as an employee or officer of the Company (1) if, in a proceeding
other than a proceeding by or in the right of the Company, he/she acted in good
faith and in a manner reasonably believed to be in our best interests and, with
respect to a criminal proceeding, if he/she had no reasonable cause to believe
his/her conduct was unlawful and (2) if, in a proceeding brought by or in the
right of the Company to procure a judgment in its favor, to the extent such
indemnitee is successful, on the merits or otherwise, provided that if the
indemnitee is only partially successful in such proceeding, we agree to
indemnify him/her for such expenses actually and reasonably incurred by him/her
or on his/her behalf in connection with each successfully resolved claim, issue
or matter.
Bye-laws
Our bye-laws provide that, subject to the Companies Act 1981 of Bermuda,
every director, officer and member of a committee constituted in accordance
with our bye-laws is indemnified by us against (1) all civil liabilities, loss,
damage, charge or expense incurred or suffered by him as a director, officer or
committee member while exercising his powers and discharging his duties under
the Companies Act 1981 of Bermuda and our bye-laws and (2) all liabilities
incurred by him as a director, officer or committee member in defending any
proceedings, whether civil or criminal, in which judgment is given in his favor
or in which he is acquitted, or in connection with any application under the
Companies Act 1981 of Bermuda in which relief from liability is granted to him
by the court. The indemnity extends to any person acting as a director, officer
or committee member in the reasonable belief that he has been so appointed or
elected notwithstanding any defect in such appointment or election provided,
however, that the indemnity does not extend to any matter which would render it
void pursuant to the Bermuda Act.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
II-1
<PAGE>
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
The following instruments and documents are included as exhibits to this
registration statement:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
3.1 Memorandum of Association of GlobeNet Communications Group Limited.
3.2 Bye-Laws of GlobeNet Communications Group Limited dated July 12, 1999.
4.1 Indenture between GlobeNet Communications Group Limited and Bankers
Trust Company, dated as of July 14, 1999.
4.2 Registration Rights Agreement among GlobeNet Communications Group
Limited, TD Securities (USA) Inc. and Credit Suisse First Boston
Corporation, dated as of July 14, 1999.
4.3(a) Credit Agreement among GlobeNet Communications Holdings Ltd., Various
Financial Institutions and Other Persons, Toronto Dominion (Texas)
Inc., Credit Suisse First Boston, and TD Securities (USA) Inc., dated
as of July 14, 1999.
4.3(b) Guaranty by Alcatel in favor of Lenders under Holdings' Bank Credit
Facility (see Exhibit 4.3(a)) and Toronto Dominion (Texas) Inc., dated
as of July 14, 1999.
4.3(c) Reimbursement Agreement between GlobeNet Communications Holdings Ltd.
and Alcatel, dated as of July 14, 1999.
5.1 Opinion of Vinson & Elkins L.L.P. regarding Legality of the New Notes.
5.2 Opinion of Conyers, Dill & Pearman regarding Legality of the New
Notes.
*10.1 Indemnity Agreement dated July 14, 1999 between Anthony Bolland and
GlobeNet Communications Group Limited. (Director)
10.2 Indemnity Agreement dated May 21, 1999 between Linda Dougherty and
GlobeNet Communications Group Limited. (Director)
*10.3 Indemnity Agreement dated July 14, 1999 between Sebastien Rheaume and
GlobeNet Communications Group Limited. (Director)
10.4 Indemnity Agreement dated July 14, 1999 between George E. Matelich and
GlobeNet Communications Group Limited. (Director)
10.5 Indemnity Agreement dated May 21, 1999 between Michael Kedar and
GlobeNet Communications Group Limited. (Director)
10.6 Indemnity Agreement dated May 21, 1999 between Harley J. Murphy and
GlobeNet Communications Group Limited. (Director)
10.7 Indemnity Agreement dated July 14, 1999 between Mark A. Pelson and
GlobeNet Communications Group Limited. (Director)
10.8 Indemnity Agreement dated May 21, 1999 between Jeffrey G. Conyers and
GlobeNet Communications Group Limited. (Director)
10.9 Indemnity Agreement dated July 14, 1999 between Kevin J. Maroni and
GlobeNet Communications Group Limited. (Director)
10.10 Indemnity Agreement dated May 21, 1999 between Michael Kedar and
GlobeNet Communications Group Limited. (Officer)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
10.11 Indemnity Agreement dated May 21, 1999 between Greg Belbeck and
GlobeNet Communications Group Limited. (Officer)
10.12 Indemnity Agreement dated May 21, 1999 between Lin Gentemann and
GlobeNet Communications Group Limited. (Officer)
10.13 Indemnity Agreement dated May 21, 1999 between Scott K. Socol and
GlobeNet Communications Group Limited. (Officer)
10.14 Indemnity Agreement dated May 21, 1999 between Laurent Duplantie and
GlobeNet Communications Group Limited. (Officer)
10.15 Indemnity Agreement dated July 15, 1999 between James Fitzgerald and
GlobeNet Communications Group Limited. (Officer)
10.16 Amended & Restated Securityholders' Agreement, dated July 14, 1999.
10.17 Project Development and Construction Contract Among Alcatel Submarine
Networks, Alcatel Submarine Networks, Inc. and Atlantica Network
(Bermuda) Ltd., dated as of June 16, 1999.
10.18 AT&T-SSI, Inc. Supply Contract (including Amendment), dated May 16,
1996.
10.19 1998 Share Option and Incentive Plan, dated December 18, 1998.
10.20 TBI 1997 Stock Option Plan, dated September 24, 1997.
12.1 Computation of Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of GlobeNet Communications Group Limited
23.1 Consent of PricewaterhouseCoopers
23.2 Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1)
23.3 Consent of Conyers, Dill & Pearman (contained in Exhibit 5.2)
24.1 Power of Attorney of Michael Kedar, dated August 30, 1999
24.2 Power of Attorney of Greg Belbeck, dated August 27, 1999.
24.3 Power of Attorney of Anthony Bolland, dated August 28, 1999.
*24.4 Power of Attorney of Jeffrey G. Conyers, dated , 1999.
24.5 Power of Attorney of Sebastien Rheaume, dated August 31, 1999.
24.6 Power of Attorney of Linda Dougherty, dated August 27, 1999.
24.7 Power of Attorney of George E. Matelich, dated August 30, 1999.
24.8 Power of Attorney of Kevin J. Maroni, dated August 30, 1999.
24.9 Power of Attorney of Harley J. Murphy, dated August 27, 1999.
*24.10 Power of Attorney of Mark A. Pelson, dated , 1999.
25.1 Statement of Eligibility of Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Letter to Clients
99.3 Form of Letter to Registered Holders and DTC Participants
99.4 Form of Notice of Guaranteed Delivery
</TABLE>
- --------
* To be filed by amendment
II-4
<PAGE>
(b) Financial Statement Schedules
Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the consolidated financial
statements or related notes and therefore has been omitted.
Item 22. Undertakings
The undersigned registrant hereby undertakes to respond to requests for
information that are 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
any 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.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Markham, Province of
Ontario, Country of Canada, on September 2, 1999.
GlobeNet Communications Group
Limited
/s/ Michael Kedar
By: _________________________________
Michael Kedar
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Michael Kedar Chairman of the Board and September 2, 1999
______________________________________ Chief Executive Officer
Michael Kedar (principal executive
officer)
/s/ Greg Belbeck Chief Financial Officer September 2, 1999
______________________________________ (principal financial
Greg Belbeck officer and principal
accounting officer)
/s/ Anthony Bolland Director September 2, 1999
______________________________________
Anthony Bolland
Director
______________________________________
Jeffrey G. Conyers
Director
______________________________________
Sebastien Rheaume
/s/ Linda Dougherty Director September 2, 1999
______________________________________
Linda Dougherty
/s/ George E. Matelich Director September 2, 1999
______________________________________
George E. Matelich
/s/ Kevin J. Maroni Director September 2, 1999
______________________________________
Kevin J. Maroni
Director
______________________________________
Harley J. Murphy
/s/ Mark A. Pelson Director (authorized September 2, 1999
______________________________________ representative in the
Mark A. Pelson United States)
</TABLE>
II-6
<PAGE>
FORM NO. 1a Exhibit 3.1
BERMUDA
THE COMPANIES ACT 1981
CONSENT
Pursuant to Section 6(l)
In exercise of the powers conferred upon him by section 6(l) of the Companies
Act 1981, the Minister of Finance hereby gives his consent to:-
GlobeNet Communications Group Limited
to be registered as an exempted Company under the Companies Act 1981. subject to
the provisions of the said Act.
Dated this 23rd day of June, 1998
/s/ illegible
Minister of Finance
<PAGE>
FORM NO. 6 Registration No. EC25116
BERMUDA
CERTIFICATE OF INCORPORATION
I hereby in accordance with section 14 of the Companies Act 1981 issue this
Certificate of Incorporation and do certify that on the 25th day of June, 1998
GlobeNet Communications Group Limited
was registered by me in the Register maintained by me under the provisions of
the said section and that the status of the said company is that of an exempted
company.
Given under my hand and the Seal of the
REGISTRAR OF COMPANIES this 30th day of
June, 1998.
/s/ illegible
------------------------
for Registrar of Companies
<PAGE>
FORM NO. 13
BERMUDA
THE COMPANIES ACT 1981
NOTICE OF ADDRESS OF REGISTERED OFFICE
Pursuant to section 62
Name of Company GlobeNet Communications Group Limited
----------------------------------------------------------------
In accordance with section 62(2) of the Companies Act, 1981, I hereby give
notice that the address of the registered office of the above-mentioned Company
is -
2. Carter's Bay Road
- --------------------------------------------------------------------------------
Southside, St.David's DD 02
- --------------------------------------------------------------------------------
P.O. Box DD 141, St. David's DD BX
- --------------------------------------------------------------------------------
Signed /s/ LIN GENTEMANN
--------------------------------
State whether Director or Secretary SECRETARY
--------------------------------
Date 23 December 1998
--------------------------------
<PAGE>
FORM NO. 7a Registration No. 25116
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF INCREASE OF SHARE CAPITAL
THIS IS TO CERTIFY that a Memorandum of Increase of Share Capital
of
GlobeNet Communications Group Limited
-------------------------------------
was delivered to the Registrar of Companies on the 24th day of July, 1998 in
accordance with section 45(3) of the Companies Act 1981 ("the Act").
Given under my hand this 10th
day of August, 1998.
/s/ illegible
-----------------------------
for Registrar of Companies
Capital prior to increase: US $ 12,000.00
------------------
Amount of increase: US $10,488,000.00
------------------
Present Capital: US $10,500,000.00
------------------
<PAGE>
FORM NO. 5 Registration No. EC25116
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF ASSOCIATION AND CONSENT
GRANTED BY THE MINISTER
THIS IS TO CERTIFY that a Memorandum of Association
of
GlobeNet Communications Group Ltd.
----------------------------------
and the consent granted by the Minister under section 6(l) of the Companies Act
1981 ("the Act") were delivered to the Registrar of Companies on the 25th day of
June, 1998 in accordance with the provisions of section 14(2) of the Act.
Given under my hand this 30th
day of June, 1998.
/s/ illegible
for Registrar of Companies
Minimum Capital of the Company: US$12,000.00
------------
Authorised Capital of the Company: US$12,000.00
------------
<PAGE>
Registration No.EC25116
BERMUDA
TAX ASSURANCE
WHEREAS the Minister of Finance ("the Minister"), pursuant to section 2 of the
Exempted Undertakings Tax Protection Act 1966, is authorised to enter into an
arrangement with any exempted undertaking upon application.
WHEREAS such undertakings may be given an assurance that in the event of there
being enacted in Bermuda any legislation imposing tax computed on profits or
income or computed on any capital asset, gain or appreciation, or any tax in the
nature of estate duty or inheritance tax, then the imposition of any tax
described herein shall not be applicable to such undertakings or to any of its
operations or the shares, debentures or other obligations of the said
undertakings.
THEREFORE the Minister, upon application, hereby grants the aforementioned
assurance to:
GlobeNet Communications Group Limited
("the Undertaking")
PROVIDED THAT this assurance shall not be construed so as to:
(i) prevent the application of any such tax or duty to such persons as are
ordinarily resident in these Islands; and
(ii) prevent the application of any tax payable in accordance with the
provisions of the Land Tax Act 1967 or otherwise payable in relation to
the land leased to the Undertaking.
THIS TAX ASSURANCE shall be in effect until the 28th day of March, 2016.
Given under my hand this
2nd day of July, 1998.
/s/ Jeremy Cox
Jeremy Cox
Acting Registrar of Companies
for MINISTER OF FINANCE
<PAGE>
FORM NO. 5 Registration No. EC25116
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF ASSOCIATION AND CONSENT
GRANTED BY THE MINISTER
THIS IS TO CERTIFY that a Memorandum of Association
of
GlobeNet Communications Group Ltd.
---------------------------------
and the consent granted by the Minister under section 6(l) of the Companies Act
1981 ("the Act") were delivered to the Registrar of Companies on the 25th day of
June, 1998 in accordance with the provisions of section 14(2) of the Act.
Given under my hand this 30th
day of June, 1998.
/s/ illegible
for Registrar of Companies
Minimum Capital of the Company: US$12,000.00
------------
Authorised Capital of the Company: US$12,000.00
------------
<PAGE>
FORM NO. 2
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(Section 7(l) and (2))
MEMORANDUM OF ASSOCIATION
OF
GlobeNet Communications Group Limited
(hereinafter referred to as "the Company")
1. The liability of the members of the Company is limited to the amount (if
any) for the time being unpaid on the shares respectively held by them.
2. We, the undersigned, namely:-
NAME/ADDRESS BERMUDIAN NATIONALITY NO. OF SHARES
STATUS SUBSCRIBED
Somers Corporate
Services Limited
A Bermuda Joint Stock Company 8000
48 St John's Road
Pembroke HM 07
Bermuda
do hereby respectively agree to take such number of shares as may be
allotted to us respectively by the provisional directors of the Company,
not exceeding the number of shares for which we have respectively
subscribed, and to satisfy such calls as may be made by the directors,
provisional directors or promoters of the Company in respect of the shares
allotted to us respectively.
3. The Company is to be an exempted Company as defined by the Companies Act
1981.
4. The Company has power to acquire or hold land situated in Bermuda required
for its business by way of lease or tenancy agreement for a term not
exceeding twenty-one (21) years.
<PAGE>
5. The authorised share capital of the Company is US$12,000.00 divided into
8000 shares of US$1.50 par value each. The minimum subscribed share capital
of the Company is US$12,000.00.
6. The objects for which the Company is formed and incorporated are -
See attached Schedule
7. The Company shall have the additional powers as set out in the Schedule
annexed hereto.
Signed by the subscriber in the presence of at least one witness attesting the
signature thereof -
/s/ /s/
_____________________________ ____________________________
(Subscriber(s) (Witness(es)
SUBSCRIBED this 26th day of May 1998.
<PAGE>
THE SCHEDULE
(referred to in Clause No. 6 of the Memorandum of Association)
(i) To carry on business as a holding company and to acquire and hold shares,
stocks, debentures stock, bonds, mortgages, obligations and securities of
any kind issued or guaranteed by any company, corporation or undertaking
of whatever nature and wherever constituted or carrying on business, and
shares, stock, debentures, and debenture stock, bonds, obligations and
other securities issued or guaranteed by any government, sovereign ruler,
commissioners, trust, local authority or other public body, whether in
Bermuda or elsewhere, and to vary, transpose, dispose of or otherwise
deal with from time to time as may be considered expedient any of the
Company's investments for the time being.
(ii) To acquire any such shares and other securities as mentioned in the
preceding paragraph by subscription, syndicate participation, tender,
purchase, exchange or otherwise and to subscribe for the same, either
conditionally or otherwise, and to guarantee the subscription thereof and
to exercise and enforce all rights and powers conferred by or incident to
the ownership thereof.
(iii) To co-ordinate the administration, policies, management, supervision,
control, research, planning, trading and any and all other activities of
any company or companies now or hereafter incorporated or acquired which
may be or may become a company, wherever incorporated, which is or
becomes a holding company or a subsidiary of, or affiliated with, the
Company within the meanings respectively assigned to those terms in The
Companies Act 1981 or, with the prior approval of the Minister of
Finance, any company or companies now or hereafter incorporated or
acquired with which the Company may be or become associated.
(iv) As set forth in paragraphs (b) to (n) and (p) to (u) inclusive of the
Second Schedule to The Companies Act, 1981.
<PAGE>
THE COMPANIES ACT 1981
FIRST SCHEDULE
(Section 11(l))
A company limited by shares may exercise all or any of the following powers
subject to any provision of the law or its memorandum -
1. to carry on any other business capable of being conveniently carried on in
connection with its business or likely to enhance the value of or making
profitable any of its property or rights;
2. to acquire or undertake the whole or any part of the business, property and
liabilities of any person carrying on any business that the company is
authorized to carry on;
3. to apply for register, purchase, lease, acquire, hold, use, control,
licence, sell, assign or dispose of patents, patent rights, copyrights,
trade marks, formulae, licences, inventions, processes, distinctive marks
and similar rights;
4. to enter into partnership or into any arrangement for sharing of profits,
union of interests, co-operation, joint venture, reciprocal concession or
otherwise with any person carrying on or engaged in or about to carry on or
engage in any business or transaction that the company is authorized to
carry on or engage in or any business or transaction capable of being
conducted so as to benefit the company;
5. to take or otherwise acquire and hold securities in any other body
corporate having objects altogether or in part similar to those of the
company or carrying on any business capable of being conducted so as to
benefit the company;
6. subject to section 96 to lend money to any employee or to any person having
dealings with the company or with whom the company proposes to have
dealings or to any other body corporate any of whose shares are held by the
company;
7. to apply for, secure or acquire by grant, legislative enactment,
assignment, transfer, purchase or otherwise and to exercise, carry out and
enjoy any charter, licence, power authority, franchise, concession, right
or privilege, that any government or authority or any body corporate or
other public body may be empowered to grant, and pay for, aid in and
contribute toward carrying it into effect and to assume any liabilities or
obligations incidental thereto;
8. to establish and support or aid in the establishment and support of
associations, institutions, funds or trusts for the benefit of employees or
former employees of the company or its predecessors, or the dependents or
connections of such
<PAGE>
-2-
employees or former employees, and grant pensions and allowances, and make
payments towards insurance or for any object similar to those set forth in
this paragraph, and to subscribe or guarantee money for charitable,
benevolent, educational or religious objects or for any exhibition or for
any public, general or useful objects;
9. to promote any company for the purpose of acquiring or taking over any of
the property and liabilities of the company or for any other purpose that
may benefit the company;
10. to purchase, lease, take in exchange, hire or otherwise acquire any
personal property and any rights or privileges that the company considers
necessary or convenient for the purposes of its business;
11. to construct, maintain, alter, renovate and demolish any buildings or works
necessary or convenient for its objects;
12. to take land in Bermuda by way of lease or letting agreement for a term not
exceeding twenty-one years, being land "bonafide" required for the purposes
of the business of the company and with the consent of the Minister granted
in his discretion to take land in Bermuda by way of lease or letting
agreement for a similar period in order to provide accommodation or
recreational facilities for its officers and employees and when no longer
necessary for any of the above purposes to terminate or transfer the lease
or letting agreement;
13. except to the extent, if any, as may be otherwise expressly provided in its
incorporating Act or memorandum and subject to the provisions of this Act
every company shall have power to invest the moneys of the Company by way
of mortgage of real or personal property of every description in Bermuda or
elsewhere and to sell, exchange, vary, or dispose of such mortgage as the
company shall from time to time determine;
14. to construct, improve, maintain, work, manage, carry out or control any
roads, ways, tramways, branches or sidings, bridges, reservoirs,
watercourses, wharves, factories, warehouses, electric works, shops, stores
and other works and conveniences that may advance the interests of the
company and contribute to, subsidize or otherwise assist or take part in
the construction, improvement, maintenance, working, management, carrying
out or control thereof;
15. to raise and assist in raising money for, and aid by way of bonus, loan,
promise, endorsement, guarantee or otherwise, any person and guarantee the
performance or fulfilment of any contracts or obligations of any person,
and in particular guarantee the payment of the principal of and interest on
the debt obligations of any such person;
16. to borrow or raise or secure the payment of money in such manner as the
company may think fit;
<PAGE>
-3-
17. to draw, make, accept, endorse, discount, execute and issue bills of
exchange, promissory notes, bills of lading, warrants and other negotiable
or transferable instruments;
18. when properly authorized to do so, to sell, lease, exchange or otherwise
dispose of the undertaking of the company or any part thereof as an
entirety or substantially as an entirety for such consideration as the
company thinks fit;
19. to sell, improve, manage, develop, exchange, lease, dispose of, turn to
account or otherwise deal with the property of the company in the ordinary
course of its business;
20. to adopt such means of making known the products of the company as may seem
expedient, and in particular by advertising, by purchase and exhibition of
works of art or interest, by publication of books and periodicals and by
granting prizes and rewards and making donations;
21. to cause the company to be registered and recognized in any foreign
jurisdiction, and designate persons therein according to the laws of that
foreign jurisdiction or to represent the company and to accept service for
and on behalf of the company of any process or suit;
22. to allot and issue fully-paid shares of the company in payment or part
payment of any property purchased or otherwise acquired by the company or
for any past services performed for the company;
23. to distribute among the members of the company in cash, kind, specie or
otherwise as may be resolved, by way of dividend, bonus or any other manner
considered advisable, any property of the company, but not so as to
decrease the capital of the company unless the distribution is made for the
purpose of enabling the company to be dissolved or the distribution, apart
from this paragraph, would be otherwise lawful;
24. to establish agencies and branches;
25. to take or hold mortgages, hypothecs, liens and charges to secure payment
of the purchase price, or of any unpaid balance of the purchase price, of
any part of the property of the company of whatsoever kind sold by the
company, or for any money due to the company from purchasers and others and
to sell or otherwise dispose of any such mortgage, hypothec, lien or
charge;
26. to pay all costs and expenses of or incidental to the incorporation and
organization of the company;
27. to invest and deal with the moneys of the company not immediately required
for the objects of the company in such manner as may be determined;
<PAGE>
-4-
28. to do any of the things authorized by this subsection and all things
authorized by its memorandum as principals, agents, contractors, trustees
or otherwise, and either alone or in conjunction with others;
29. to do all such other things as are incidental or conducive to the
attainment of the objects and the exercise of the powers of the company.
Every company may exercise its powers beyond the boundaries of Bermuda to
the extent to which the laws in force where the powers are sought to be
exercised permit.
<PAGE>
The Companies Act 1981
as amended
SECOND SCHEDULE (Section 11(2))
A company may by reference include in its memorandum any of the following
objects that is to say the business of:
(a) [insurance and reinsurance of all kinds;]*
(b) packaging of goods of all kinds;
(c) buying, selling and dealing in goods of all kinds;
(d) designing and manufacturing of goods of all kinds;
(e) mining and quarrying and exploration for metals, minerals, fossil
fuels and precious stones of all kinds and their preparation for
sale or use;
(f) exploring for, the drilling for, the moving, transporting and
refining petroleum and hydro carbon products including oil and oil
products;
(g) scientific research including the improvement, discovery and
development of processes, inventions, patents and designs and the
construction, maintenance and operation of laboratories and research
centres;
(h) land, sea and air undertakings including the land, ship and air
carriage of passengers, mails and goods of all kinds;
(i) ships and aircraft owners, managers, operators, agents, builders and
repairers;
(j) acquiring, owning, selling, chartering, repairing or dealing in
ships and aircraft;
(k) travel agents, freight contractors and forwarding agents;
(l) dock owners, wharfingers, warehousemen;
(m) ship chandlers and dealing in rope, canvas oil and ship stores of
all kinds;
(n) all forms of engineering;
(o) [developing, operating, advising or acting as technical consultants
to any other enterprise or business;]*
(p) farmers, livestock breeders and keepers, graziers, butchers, tanners
and processors of and dealers in all kinds of live and dead stock,
wool, hides, tallow, grain, vegetables and other produce;
(q) acquiring by purchase or otherwise and holding as an investment
inventions, patents, trade marks, trade names, trade secrets,
designs and the like;
(r) buying, selling, hiring, letting and dealing in conveyances of any
sort;
(s) employing, providing, hiring out and acting as agent for artists,
actors, entertainers of all sorts, authors, composers, producers,
directors, engineers and experts or specialists of any kind;
(t) to acquire by purchase or otherwise and hold, sell, dispose of and
deal in real property situated outside Bermuda and in personal
property of all kinds wheresoever situated; and
*[Deleted from Second Schedule as filed under The Companies Act 1981.]
<PAGE>
(u) to enter into any guarantee, contract of indemnity or suretyship and
to assure, support or secure with or without consideration or
benefit the performance of any obligation of any person or persons
and to guarantee the fidelity of individuals filling or about to
fill situations or trust or confidence.
<PAGE>
THE SCHEDULE
(referred to in Clause No. 7 of the Memorandum of Association)
(a) To borrow and raise money in any currency or currencies and to secure or
discharge any debt or obligation in any manner and in particular (without
prejudice to the generality of the foregoing) by mortgages of or charges
upon all or any part of the undertaking, the Company or by the creation and
issue of securities.
(b) To enter into any guarantee, contract of indemnity or suretyship and in
particular (without prejudice to the generality of the foregoing) to
guarantee, support or secure, with or without consideration, whether by
personal obligation or by mortgaging or charging all or any part of the
undertaking, property and assets (present and future) and uncalled capital
of the Company or both such methods or in any other manner, the performance
of any obligations or commitments, of, and the repayment or payment of the
principal amounts of and premiums, interest, dividends and other moneys
payable on or in respect or any securities or liabilities of, any person
including (without prejudice to the generality of the foregoing) any
company which is for the time being a subsidiary or a holding company of
the Company or another subsidiary or a holding company of the Company or
otherwise associated with the Company.
(c) To accept, draw, make, create, issue, execute, discount, endorse, negotiate
bills of exchange, promissory notes, and other instruments and securities,
whether negotiable or otherwise.
(d) To sell, exchange, mortgage, charge, let or rent, share of profit, royalty
or otherwise, grant licenses, easements, options, servitudes and other
rights over, and in any other manner deal with or dispose of, all or any
part of the undertaking, property and assets (present and future) of the
Company for any consideration and in particular (without prejudice to the
generality of the foregoing) for any securities.
(e) To issue and allot securities of the Company for cash or in payment or part
payment for any real or personal property purchased or otherwise acquired
by the Company or any services rendered to the Company or as security for
any obligation or amount (even if less than the nominal amount of such
securities)or for any other purpose.
(f) To grant pensions, annuities, or other allowances, including allowances on
death, to any directors, officers or employees or former directors,
officers or employees of the Company or any company which at any time is or
was a subsidiary or a holding company or another subsidiary of a holding
company of the Company or otherwise associated with the Company or of any
predecessor in business of any of them, and to the relations, connections
or dependents of any such persons, and to other persons whose service or
services have directly or indirectly been of benefit to the Company or whom
the Company considers have any moral claim on the Company or to their
relations, connections or dependents, and to establish or support any
associations, institutions, clubs, schools, building and housing schemes,
funds and trusts, and to make payments toward insurance or other
arrangements likely to benefit any such persons or otherwise advance the
interests of the Company or of its Members, and to subscribe, guarantee or
pay money for any purpose likely, directly or indirectly to further the
interests of the Company or of its Members for any national, charitable,
benevolent, educational, social, public, general or useful object.
(g) To purchase its own shares in accordance with the provisions of Section 42A
of The Companies Act 1981.
(h) To issue preference shares redeemable at the option of the holder, in
accordance with the provisions of Section 42 of the Companies Act 1981.
<PAGE>
Exhibit 3.2
B Y E - L A W S
OF
GlobeNet Communications Group Limited
I hereby certify that the within-written Bye-Laws are a true copy of the Bye-
Laws of
GlobeNet Communications Group Limited
as adopted by the Shareholders at the Special General Meeting held on July 12,
1999 in place of those adopted by the Shareholders at the Annual General Meeting
held on June 15, 1999.
/s/ JEFFREY CONYERS
-------------------
DIRECTOR
<PAGE>
<TABLE>
<CAPTION>
INDEX
-----
HEADING PAGE NO.
- ------- --------
<S> <C>
Interpretation 1
Registered Office 2
Share Capital 2-4
Share Rights 5
Modification of Rights 5
Shares 6
Certificates 6-7
Lien 7
Call on Shares 8
Forfeiture of Shares 8-9
Register of Members and Directors 10
Transfer of Shares 10-12
Transmission of Shares 12-13
Increase of Share Capital 13
Alteration of Share Capital 13-14
Reduction of Capital 14
General Meeting 14
Notice of General Meetings 14-15
Proceedings at General Meetings 15-16
Voting 16-18
Proxies and Corporate Representatives 18-19
Election, Vacancies and Removal of Directors 19-20
Vacation of Office 20-21
Alternate Directors 21-22
Directors' Fees and Additional Remuneration & Expenses 22
Directors' Interests 22-23
Power and Duties of the Board 23-24
Delegation of the Board's Power 24-25
Proceedings of the Board 25-26
Officers 27
Minutes 27
Secretary 27-28
The Common Seal 28
Dividends and Other Payments 28-30
Reserves 30
Capitalization of Profits 30-31
Record Dates 31
Accounting Records 31
Audit 31
Services of Notices and Other Documents 32
</TABLE>
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<TABLE>
<CAPTION>
INDEX
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HEADING PAGE NO.
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<S> <C>
Winding Up 32-33
Indemnity 33
Transfer by Way of Continuation 34
Alteration of Bye-Laws 34
</TABLE>
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<PAGE>
INTERPRETATION
1. (a) Definitions - In the Bye-Laws of the Company, unless the context
otherwise requires:
"appoint" includes "elect" and vice versa;
"Bermuda" means the Islands of Bermuda;
"Board" means the Board of Directors of the Company or the Directors
present at a meeting of the Directors at which there is a quorum;
"Bye-Laws" means these Bye-Laws in their present form and all other
Bye-Laws of the Company from time to time in force and effect;"
the Companies Acts" means every Bermuda statute from time to time in
force concerning companies insofar as the same applies to the Company;
"Company" means the company incorporated in Bermuda under the name of
GlobeNet Communications Group Limited on the 25th day of June, 1998;
"Member" means member of the Company;
"Memorandum" means the Memorandum of Association of the Company as
from time to time amended;
"Paid Up" means paid up or credited as paid up;
"Register" means the Register of Members of the Company;
"Seal" means the common seal of the Company or any facsimile thereof;
"Secretary" includes a temporary or assistant Secretary and any person
appointed by the Board to perform any of the duties of the Secretary.
(b) Interpretation
For the purposes of these Bye-Laws:
a corporation shall be deemed to be present in person if its
representative duly authorised pursuant to the Companies Acts is
present;
words importing the singular number only include the plural number and
vice versa;
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words importing the masculine gender only include the feminine and
neuter genders respectively;
words importing a person include an individual, partnership, company
or association or body of persons, whether corporate or un-
incorporate, trustee, executor, administrator and legal
representative;
reference to writing shall include typewriting, printing, lithography,
photography and other modes of representing or reproducing words in a
legible and non-transitory form;
save as aforesaid, any words or expressions defined in the Companies
Acts in force at the date when these Bye-Laws or any part hereof are
adopted shall bear the same meaning in these Bye-Laws or such part (as
the case may be).
REGISTERED OFFICE
2. The Registered Office of the Company shall be at such place in Bermuda as
the Board shall from time to time determine.
SHARE CAPITAL
2A.
(1) At the date of adoption of this Bye-Law, the authorised share capital of
the Company is $36,003,150.00 divided into 24,000,000 common shares having
a par value of $1.50 each (the "Common Shares"), 100 class A restricted
voting shares having a par value of $1.50 each (the "A Shares") and 2,000
class B restricted voting shares having a par value of $1.50 each (the "B
Shares").
(2) The holders of the Common Shares shall, subject to the rights of the
holders of the A Shares and the B Shares, and the provisions of these Bye-
Laws:
(a) be entitled to receive notice of, attend and vote at general meetings
of the Company;
(b) be entitled to such dividends as the Board may from time to time
declare;
(c) in the event of a winding up or dissolution of the Company, whether
voluntary or involuntary or for the purpose of a reorganisation or
otherwise or upon any distribution of capital, be entitled to the
surplus assets of the Company; and
(d) generally be entitled to enjoy all of the rights attaching to shares.
(3) [Intentionally Omitted]
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<PAGE>
(4) [Intentionally Omitted]
(5) [Intentionally Omitted]
(6) [Intentionally Omitted]
(7) Notwithstanding any other provisions of these Bye-Laws other than Bye-Law
2A(9), the holders of the B Shares shall:
(a) only be entitled to receive notice of, attend and vote at any general
meetings of the Company at which any of the matters referred to in
Bye-Law 2A (8) are considered, and only in respect of such matters;
(b) in the event of a winding up or dissolution of the Company, whether
voluntary or involuntary or for the purpose of a reorganisation or
otherwise or upon any distribution of capital, be entitled out of the
surplus assets of the Company to the return of the amount paid up on
such B Shares;
(c) in the case of IHI Hydro, Inc., Boston Ventures Limited Partnership V,
L.P., Kelso Investment Associates VI, L.P., KEP VI, L.L.C., Capital
Communications CDPQ, Inc., Sandler Capital Partners IV, L.P., Sandler
Capital Partners IV FTE, L.P., Ontario Municipal Employees Retirement
Board, Nautilus Equity Investors, L.L.C. and TD Capital Group Limited,
together as a class, in proportion to the number of B Shares held by
such Members (i) elect two Directors to the Board (and any Alternate
Directors thereto), one such Director to be elected from candidates
proposed by the Company's Officers (other than Directors), which
Directors shall (subject to paragraph (e) below) each be entitled to 5
votes at any meeting of the Board, provided that such Directors (and
Alternate Directors) shall not be employed in any capacity by a holder
of B Shares, and (ii) shall be exclusively entitled to remove such
Directors (and Alternate Directors); and
(d) in the case of Kelso Investment Associates VI, L.P., Boston Ventures
Limited Partnership V, L.P., Providence Equity Partners III L.P.,
Spectrum Equity Investor III, L.P., TD Capital Group Limited and
Capital Communications CDPQ, Inc., each appoint one Director to the
Board (and any Alternate Directors thereto) and shall be exclusively
entitled to remove such Director (and Alternate Directors), which
Directors shall (subject to paragraph (e) below) be entitled to the
following numbers of votes at any meeting of the Board:
Director appointed by Kelso Investment Associates VI, L.P. - 9
votes;
Director appointed by Boston Ventures Limited Partnership V, L.P.
- 9 votes;
Director appointed by Providence Equity Partners III L.P. - 1
vote;
Director appointed by Spectrum Equity Investors III, L.P. - 1
vote;
Director appointed by TD Capital Group Limited - 5 votes;
Director appointed by Capital Communications CDPQ, Inc. - 5
votes;
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<PAGE>
(e) in the case of Kelso Investment Associates VI, L.P., KEP VI, L.L.C.,
Boston Ventures Limited Partnership V, L.P., Providence Equity
Partners III L.P., Providence Equity Operating Partners III L.P.,
Spectrum Equity Investors III, L.P., SEI III Entrepreneurs' Fund,
L.P., Spectrum III Investment Mangers' Fund, L.P., TD Capital Group
Limited and Capital Communications CDPQ, Inc., be entitled by a
resolution approved by the holders of a majority of the B Shares held
by such Members who are "United States persons" within the meaning of
s.957(c) of the U.S. Internal Revenue Code of 1986 (as amended) to
amend the number of votes to which any of the Directors of the Company
are entitled so long as such amendment would not (as determined by
such Members) cause the Company to be treated as a "controlled foreign
corporation" for U.S. Federal Income Tax purposes, provided that no
such amendment shall reduce the proportionate number of votes to which
any Director elected or appointed pursuant to Bye-Laws 75 or 76 is
entitled in relation to the total number of votes to which all of the
Directors are entitled on the date that this Bye-Law first comes into
effect.
(8) Notwithstanding any other provisions of these Bye-Laws other than Bye-Law
2A(9), but subject as otherwise required by applicable law, any of the
following actions must be approved by the holders of a majority of the B
Shares in issue, and the Company shall not take any such action in the
absence of such approval:
(a) the amendment of the Memorandum or Bye-Laws, or any like corporate
proceedings under the laws of Bermuda which have the effect of
amending the attributes of the Common Shares or the B Shares or which
may otherwise have an adverse effect on a holder of Common Shares or B
Shares; and
(b) the taking or instituting of proceedings or passing of any resolution
for the winding-up, re-organization, amalgamation, merger,
continuation to another jurisdiction or dissolution of the Company or
any other transaction or scheme which would have a similar effect.
(9) The rights of holders of B Shares to appoint and remove directors set out
in Bye-Law 2A(7) shall terminate, and the approval of the holders of a
majority of the B Shares in issue set out in Bye-Law 2A(8) shall no longer
be required, upon the date on which a receipt or similar document in
respect of a Qualified Public Offering (as hereinafter defined) has been
issued to the Company.
(10) The holders of the B Shares shall have no other rights in respect of such B
Shares other than as expressly set out in this Bye-Law 2A or as required by
law.
(11) For purposes of this Bye-Law 2A, the following terms shall have the
following meaning:
"Qualified Public Offering" means an underwritten public offering of
Common Shares pursuant to a prospectus, registration statement, state
of material facts, or similar document filed with the relevant
regulatory body in the United States or Canada pursuant to which the
aggregate gross proceeds to the Company (prior to deducting any
underwriters' discounts and commissions), when added to the aggregate
gross proceeds to the Company (prior to
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<PAGE>
deducting any underwriters' discounts and commissions) from all
previous underwritten public offerings of Common Shares in the United
States and/or Canada, equal or exceed $150 million (or such lesser
amount, but not less than $100 million, as may be approved by the
holders of a majority of the B Shares) and following which the Common
Shares are listed for trading on the New York Stock Exchange or on the
Nasdaq stock market.
SHARE RIGHTS
3. Subject to Bye-Law 2A and to any special rights conferred on the holders of
any share or class of shares, any share in the Company may be issued with
or have attached thereto such preferred, deferred, qualified or other
special rights or such restrictions, whether in regard to dividend, voting,
return of capital or otherwise, as the Company may in general meeting
determine, or if there has not been any such determination or so far as the
same shall not make specific provision, as the Board may determine.
4. Subject to the Companies Acts and to Bye-Law 2A any preference shares may,
with the sanction of a resolution of the Members, be issued on terms:
(a) that they are to be redeemed on the happening of a specified event or
on a given date; and/or
(b) that they are liable to be redeemed at the option of the Company;
and/or
(c) if authorised by the Memorandum of the Company, that they are liable
to be redeemed at the option of the holder.
The terms and manner of redemption shall be provided for by way of amendment of
these Bye-Laws.
MODIFICATION OF RIGHTS
5. Subject to the Companies Acts, all or any of the special rights for the
time being attached to any class of shares for the time being issued may
from time to time (whether or not the Company is being wound up) be altered
or abrogated with the consent in writing of the holders of not less than
seventy-five percent of the issued shares of that class or with the
sanction of a resolution passed at a separate general meeting of the
holders of such shares voting in person or by proxy. To any such separate
general meeting, all the provisions of these Bye-Laws as to general
meetings of the Company shall mutatis mutandis apply, but so that the
necessary quorum shall be two or more persons holding or representing by
proxy any of the shares of the relevant class, that every holder of shares
of the relevant class shall be entitled on a poll to one vote for every
such share held by him and that any holder of shares of the relevant class
present in person or by proxy may demand a poll.
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<PAGE>
6. The special rights conferred upon the holders of any shares or class of
shares shall not, unless otherwise expressly provided in the rights
attaching to or the terms of issue of such shares, be deemed to be altered
by the creation or issue of further shares ranking pari passu therewith.
SHARES
7. Subject to the provisions of these Bye-Laws (including, without limitation,
Bye-Law 2A) the unissued shares of the Company (whether forming part of the
original capital or any increased capital) shall be at the disposal of the
Board, which may offer, allot, grant options over or otherwise dispose of
them to such persons, at such times and for such consideration and upon
such terms and conditions as the Board may determine.
8. The Board may in connection with the issue of any shares exercise all
powers of paying reasonable commission and brokerage fees conferred or
permitted by law.
9. Except as ordered by a court of competent jurisdiction or as required by
law, no person shall be recognised by the Company as holding any share upon
trust and the Company shall not be bound by or required in any way to
recognise (even when having notice thereof) any equitable, contingent,
future or partial interest in any share or any interest in any fractional
part of a share or (except only as otherwise provided in these Bye-Laws or
by law) any other right in respect of any share except an absolute right to
the entirety thereof in the registered holder.
CERTIFICATES
10. Unless the Board shall decide to the contrary prior to the issue of such
Shares, every holder of one or more shares of the Company shall be
entitled, at his option, to a share certificate stating the number and
class of shares held by him as shown on the Register. Such certificates
shall be in such form as the Board may from time to time approve. The
preparation, issue and delivery of certificates shall be governed by the
Companies Acts. In the case of a share held jointly by several persons,
delivery of a certificate to one of the several joint holders shall be
sufficient delivery to all. Subject to the foregoing, every holder of more
than one share of the Company shall be entitled to receive one certificate
for all his shares or several certificates each for 1 or more of his shares
upon payment of $5 for every certificate after the first or such less sum
as the Board shall from time to time determine. Subject to the foregoing,
where a holder of shares has sold part of his holding, he shall be entitled
to receive a certificate for the balance of his holding without charge.
11. If a share certificate is defaced, lost or destroyed it may be replaced
without fee but on such terms (if any) as to evidence and indemnity and to
payment of the costs and out of pocket expenses of the Company in
investigating such evidence and preparing such indemnity as the Board may
think fit and, in case of defacement, on delivery of the old certificate to
the Company.
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<PAGE>
12. All certificates for share or loan capital, or other securities of the
Company (other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions for
the time being relating thereto otherwise provide, be issued under the Seal
(or a facsimile thereof). The Board may by resolution determine, either
generally or in any particular case, that any signatures on any such
certificates need not be autographic but may be affixed to such
certificates by some mechanical means or may be printed thereon or that
such certificates need not be signed by any persons.
LIEN
13. The Company shall have a first and paramount lien on every share (not being
a fully paid share) for all moneys, whether presently payable or not,
called or payable, at a date fixed by or in accordance with the terms of
issue of such share in respect of such share, and the Company shall also
have a first and paramount lien on every share (other than a fully paid
share) standing registered in the name of a Member, whether singly or
jointly with any other person, for all the debts and liabilities of such
Member or his estate to the Company, whether the same shall have been
incurred before or after such notice to the Company of any interest of any
person other than such Member, and whether the time for the payment or
discharge of the same shall have actually arrived or not, and
notwithstanding that the same are joint debts or liabilities of such Member
or his estate and any other person, whether a Member or not. The Company's
lien on a share shall extend to all dividends payable thereof. The Board
may at any time, either generally or in any particular case, waive any lien
that has arisen or declare any share to be wholly or in part exempt from
the provisions of this Bye-Law.
14. The Company may sell, in such manner as the Board may think fit, any share
on which the Company has a lien but no sale shall be made unless some sum
in respect of which the lien exists is presently payable and not until the
expiration of fourteen days after a notice in writing, stating and
demanding payment of the sum presently payable and giving notice of the
intention to sell in default of such payment, has been served on the holder
for the time being of the share.
15. The net proceeds of sale by the Company of any shares on which it has a
lien shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is
presently payable, and any residue shall (subject to a like lien for debts
or liabilities not presently payable as existed upon the share prior to the
sale) be paid to the holder of the share immediately before such sale. For
giving effect to any such sale the Board may authorise some person to
transfer the share sold to the purchaser thereof. The purchaser shall be
registered as the holder of the share and he shall not be bound to see to
the application of the purchase money, nor shall his title to the share be
affected by any irregularity or invalidity in the proceedings relating to
the sale.
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<PAGE>
CALL ON SHARES
16. The Board may from time to time make calls upon the Members in respect of
any moneys unpaid on their shares (whether on account of the par value of
the share or by way of premium) and not by the terms of issue thereof made
payable at a date fixed by or in accordance with such terms of issue, and
each Member shall (subject to the Company serving upon him at least
fourteen days notice specifying the time or times and place of payment) pay
to the Company at the time or times and place of payment specified the
amount called on his shares. A call may be revoked or postponed as the
Board may determine.
17. A call may be made payable by installments and shall be deemed to have been
made at the time when the resolution of the Board authorizing the call was
passed.
18. The joint holders of any share shall be jointly and severally liable to pay
all calls in respect thereof.
19. If a sum called in respect of a share shall not be paid before or on the
day appointed for payment thereof the person from whom the sum is due shall
pay interest on the sum from the day appointed for the payment thereof to
the time of actual payment at such rate as the Board may determine, but the
Board shall be at liberty to waive payment of such interest wholly or in
part.
20. Any sum which, by the terms of issue of a share, becomes payable on
allotment or at any date fixed by or in accordance with such terms of
issue, whether on account of the nominal amount of the share or by way of
premium, shall for all the purposes of these Bye-Laws be deemed to be a
call duly made, notified and payable on the date on which, by the terms of
issue, the same becomes payable and, in the case of non-payment, all the
relevant provisions of these Bye-Laws as to payment of interest, forfeiture
or otherwise shall apply as if the sum had become payable by virtue of a
call duly made and notified.
21. The Board may on the issue of shares differentiate between the allottees or
holders as to the amount of calls to be paid and the times of payment.
FORFEITURE OF SHARES
22. If a Member fails to pay any call or installment of a call on the day
appointed for payment thereof, the Board may at any time thereafter during
such time as any part of such call or installment remains unpaid serve a
notice on him requiring payment of so much of the call or installment as is
unpaid, together with any interest which may have accrued.
23. The notice shall name a further day (not being less than fourteen days from
the date of the notice) on or before which, and the place where, the
payment required by the notice is to be made and shall state that, in the
event of non-payment on or before the day and at the place appointed, the
shares in respect of which such call is made or installment is payable will
be
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<PAGE>
liable to be forfeited. The Board may accept the surrender of any share
liable to be forfeited hereunder and, in such case, references in these
Bye-Laws to forfeiture shall include surrender.
24. If the requirements of any such notice as aforesaid are not complied with,
any share in respect of which such notice has been given may, at any time
thereafter before payment of all calls or installments and interest due in
respect thereof has been made, be forfeited by a resolution of the Board to
that effect. Such forfeiture shall include all dividends declared in
respect of the forfeited shares and not actually paid before the
forfeiture.
25. When any share has been forfeited, notice of the forfeiture shall be served
upon the person who was before forfeiture the holder of the share; but no
forfeiture shall be in any manner invalidated by any omission or neglect to
give such notice as aforesaid.
26. A forfeited share shall be deemed to be the property of the Company and may
be sold, re-offered or otherwise disposed of either to the person who was,
before forfeiture, the holder thereof or entitled thereto or to any other
person upon such terms and in such manner as the Board shall think fit, and
at any time before a sale, re-allotment or disposition the forfeiture may
be cancelled on such terms as the Board may think fit.
27. A person whose shares have been forfeited shall thereupon cease to be a
Member in respect of the forfeited shares but shall, notwithstanding the
forfeiture, remain liable to pay to the Company all moneys which at the
date of forfeiture were presently payable by him to the Company in respect
of the shares with interest thereon at such rate as the Board may determine
from the date of forfeiture until payment, and the Company may enforce
payment without being under any obligation to make any allowance for the
value of the shares forfeited.
28. An affidavit in writing that the deponent is a Director or the Secretary of
the Company and that a share has been duly forfeited on the date stated in
the affidavit shall be conclusive evidence of the facts therein stated as
against all persons claiming to be entitled to the share. The Company may
receive the consideration (if any) given for the share on the sale, re-
allotment or disposition thereof and the Board may authorise some person to
transfer the share to the person to whom the same is sold, re-allotted or
disposed of, and he shall thereupon be registered as the holder of the
share and shall not be bound to see to the application of the purchase
money (if any) nor shall his title to the share be affected by any
irregularity or invalidity in the proceedings relating to the forfeiture,
sale, re-allotment or disposal of the share.
REGISTER OF MEMBERS AND DIRECTORS
29. The Secretary shall establish and maintain the Register of Members and the
Register of Directors and Officers at the Registered Office in the manner
prescribed by the Companies Acts. Unless the Board otherwise determines,
the Register of Members shall be open to inspection in the manner
prescribed by the Companies Acts between 10:00 a.m. and 12:00
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<PAGE>
noon on every business day. Unless the Board so determines, no Member or
intending Member shall be entitled to have entered in the Register any
indication of any trust or equitable, contingent, future or partial
interest in any share or any interest in any fractional part of a share
and if any such entry exists or is permitted by the Board it shall not be
deemed to abrogate any of the provisions of Bye-Law 9. The Register of
Directors and Officers shall be open to inspection in the manner
prescribed by the Companies Acts between 10:00 a.m. and 12:00 noon on
every business day.
TRANSFER OF SHARES
30. Subject to the Companies Acts and to such of the restrictions contained in
these Bye-Laws as may be applicable, any Member may transfer all or any of
his shares by an instrument of transfer in the usual common form or in any
other form which the Board may approve. Transfers and other documents or
instructions relating to or affecting the title to any shares shall be
registered without payment of any fee (except where required by law).
Notwithstanding any other provision of these Bye-Laws, where any Member is
the holder of B Shares and Common Shares, no shares of either class may be
transferred by such Member unless a corresponding proportion of the shares
of the other class held by such Member is transferred to the same
transferee (except in connection with a non-negotiated public sale or a
registered sale of Common Shares on a United States national securities
exchange, the Nasdaq stock market, the Bermuda Stock Exchange or The
Toronto Stock Exchange, in which case, subject to the Companies Acts, a
corresponding proportion of B Shares shall be repurchased from such Member
by the Company for $1.50 per B Share).
30A. No shareholder (other than a shareholder that holds any B Shares or any
affiliates thereof) shall be entitled to hold, directly or indirectly,
shares representing more than thirty-five per cent (35%) of the aggregate
issued share capital of the Company at any time, or shares representing
more than thirty-five per cent (35%) of the votes attaching to all issued
shares of the Company at any time. In addition to any other restrictions
on transfer contained in these Bye-Laws or applicable law, the Board and
the officers of the Company shall not issue shares, and shall decline to
register any transfer of shares in the Company if such issuance or
transfer would, in the opinion of the Board, result in a violation of this
Bye-Law 30A. Notwithstanding any other provision of these Bye-Laws, if
thirty-five per cent (35%) or more of the aggregate issued share capital
of the Company or shares to which are attached thirty-five per cent (35%)
or more of the votes attached to all outstanding shares of the Company are
found to be held or owned directly or indirectly by the same person or
entity (other than a shareholder that holds any B Shares or any affiliates
thereof), the Board shall notify such person or entity that his, her or
its shareholdings are in violation of this Bye-Law 30A and such
shareholder shall be required, within seven days, to dispose of such
number of shares necessary to ensure that such shareholder no longer
holds, directly or indirectly, shares representing more than thirty-five
per cent (35%) of the aggregate issued share capital of the Company or
representing more than thirty five per cent (35%) of the votes attached to
all issued shares of the Company. If such shareholder fails to dispose of
the necessary number of shares within such seven day period, the required
number of shares shall be forfeited by a resolution of the Board to that
effect. Such forfeiture shall include all
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dividends declared in respect of the forfeited shares and not actually
paid before the forfeiture. Each share so forfeited may be dealt with by
the Company in the manner provided for in Bye-Laws 25 to 28, except that,
notwithstanding Bye-Law 26, the shares may not be disposed of to the
person who was, before the forfeiture, the holder of the shares. For the
purposes of this Bye-Law 30A, references to "issued share capital,"
"issued shares" and "outstanding shares" shall not include any Common
Shares or B Shares held by the holders of B Shares or any affiliates
thereof.
31. The instrument of transfer of a share shall be signed by or on behalf of
the transferor and where any share is not fully paid, the transferee and
the transferor shall be deemed to remain the holder of the share until the
name of the transferee is entered in the Register in respect thereof. All
instruments of transfer when registered may be retained by the Company.
The Board may, in its absolute discretion and without assigning any reason
therefor, decline to register any transfer of any share which is not a
fully-paid share. The Board may also decline to register any transfer
unless:
(a) the instrument of transfer is duly stamped and lodged with the
Company, accompanied by the certificate for the shares to which it
relates, and such other evidence as the Board may reasonably require
to show the right of the transferor to make the transfer,
(b) the instrument of transfer is in respect of only one class of share,
(c) where applicable, the permission of the Bermuda Monetary Authority
with respect thereto has been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this
Bye-Law and Bye-Laws 30 and 32.
32. If the Board declines to register a transfer it shall, within three months
after the date on which the instrument of transfer was lodged, send to the
transferee notice of such refusal.
33. No fee shall be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage,
power of attorney, distringas or stop notice, order of court or other
instrument relating to or affecting the title to any share, or otherwise
making an entry in the Register relating to any share.
TRANSMISSION OF SHARES
34. In the case of the death of a Member, the survivor or survivors, where the
deceased was a joint holder, and the estate representative, where he was
sole holder, shall be the only person recognised by the Company as having
any title to his shares; but nothing herein contained shall release the
estate of a deceased holder (whether the sole or joint) from any liability
in respect of any share held by him solely or jointly with other persons.
For the purpose of this Bye-Law, estate representative means the person to
whom probate or letters of
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administration has or have been granted in Bermuda or, failing any such
person, such other person as the Board may in its absolute discretion
determine to be the person recognised by the Company for the purpose of
this Bye-Law.
35. Any person becoming entitled to a share in consequence of the death of a
Member or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time
to time be required by the Board as to his entitlement, either be
registered himself as the holder of the share or elect to have some person
nominated by him registered as the transferee thereof. If the person so
becoming entitled elects to be registered himself, he shall deliver or
send to the Company a notice in writing signed by him stating that he so
elects. If he shall elect to have his nominee registered, he shall signify
his election by signing an instrument of transfer of such share in favour
of his nominee. All the limitations, restrictions and provisions of these
Bye-Laws relating to the right to transfer and the registration of
transfer of shares shall be applicable to any such notice of instrument of
transfer as aforesaid as if the death of the Member or other event giving
rise to the transmission had not occurred and the notice or instrument of
transfer was an instrument of transfer signed by such Member.
36. A person becoming entitled to a share in consequence of the death of a
Member or otherwise by operation of applicable law shall (upon such
evidence being produced as may from time to time be required by the Board
as to his entitlement) be entitled to receive and may give a discharge for
any dividends or other moneys payable in respect of the share, but he
shall not be entitled in respect of the share to receive notices of or to
attend or vote at general meetings of the Company or, save as aforesaid,
to exercise in respect of the share any of the rights or privileges of a
Member until he shall have become registered as the holder thereof. The
Board may at any time give notice requiring such person to elect either to
be registered himself or to transfer the share and if the notice is not
complied with within sixty days the Board may thereafter withhold payment
of all dividends and other moneys payable in respect of the shares until
the requirements of the notice have been complied with.
37. Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under Bye-
Laws 34, 35 and 36.
INCREASE OF SHARE CAPITAL
38. The Company may, subject to Bye-Law 2A, from time to time increase its
authorised share capital by such sum to be divided into shares of such par
value as the Company in general meeting shall prescribe.
39. Subject to Bye-Law 2A, the Company may, by the resolution increasing the
capital, direct that the new shares or any of them shall be offered in the
first instance either at par or at premium to all the holders for the time
being of shares of any class or classes in proportion to the number of
such shares held by them respectively or make any other provisions as to
the issue of the new shares.
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40. The new shares shall be subject to all the provisions of these Bye-Laws
with reference to lien, the payment of calls, forfeiture, transfer,
transmission and otherwise.
ALTERATION OF SHARE CAPITAL
41. The Company may, subject to Bye-Law 2A, from time to time in general
meeting:
(a) divide its shares into several classes and attach thereto
respectively any preferential, deferred, qualified or special rights,
privileges or conditions;
(b) consolidate and divide all or any of its share capital into shares of
larger par value than its existing shares;
(c) sub-divide its shares or any of them into shares of smaller par value
than is fixed by its Memorandum, so, however, that in the sub-
division the proportion between the amount paid and the amount, if
any, unpaid on each reduced share shall be the same as it was in the
case of the share from which the reduced share is derived;
(d) make provision for the issue and allotment of shares which do not
carry any voting rights; and
(e) cancel shares which, at the date of the passing of the resolution in
that behalf, have not been taken or agreed to be taken by any person,
and diminish the amount of its share capital by the amount of the
shares so cancelled.
Where any difficulty arises in regard to any division, consolidation, or
sub-division under this Bye-Law, the Board may settle the same as it
thinks expedient and, in particular, may arrange for the sale of the
shares representing fractions and the distribution of the net proceeds of
sale in due proportion amongst the Members who would have been entitled to
the fractions, and for this purpose the Board may authorise some person to
transfer the shares representing fractions to the purchaser thereof, who
shall not be bound to see to the application of the purchase money nor
shall his title to the shares be affected by any irregularity or
invalidity in the proceedings relating to the sale.
42. Subject to the Companies Acts, and to any confirmation or consent required
by law or these Bye-Laws, the Company may by resolution in general meeting
from time to time convert any preference shares into redeemable preference
shares.
REDUCTION OF CAPITAL
43. Subject to the Companies Acts, its Memorandum and any confirmation or
consent required by law or these Bye-Laws (including without limitation,
Bye-Law 2A), the Company may from time to time in general meeting
authorise the reduction of its issued share capital or any
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capital redemption reserve fund or any share premium or contributed
surplus account in any manner.
44. In relation to any such reduction, the Company may, subject to Bye-Law 2A,
in general meeting determine the terms upon which such reduction is to be
effected including in the case of a reduction of part only of a class of
shares, those share to be affected.
GENERAL MEETING
45. The Board shall convene and the Company shall hold general meetings as
Annual General Meetings in accordance with the requirements of the
Companies Acts at such times and places as the Board shall appoint. The
Board may, whenever it thinks fit, and shall, when required by the
Companies Acts, convene general meetings other than Annual General
Meetings which shall be called Special General Meetings.
NOTICE OF GENERAL MEETINGS
46. An Annual General Meeting shall be called by not less than seven days'
notice in writing and a Special General Meeting shall be called by not
less than seven days' notice in writing. The notice shall be exclusive of
the day on which it is served or deemed to be served and of the day for
which it is given, and shall specify the place, day and time of the
meeting, and, in the case of a Special General Meeting, the general nature
of the business to be considered. Notice of every general meeting shall be
given in any manner permitted by Bye-Laws 119 and 120 to all Members other
than such as, under the provisions of these Bye-Laws or the terms of issue
of the shares they hold, are not entitled to receive such notice from the
Company.
Notwithstanding that a meeting of the Company is called by shorter notice
than that specified in this Bye-Law, it shall be deemed to have been duly
called if it is so agreed:
(a) in the case of a meeting called as an Annual General Meeting, by all
Members entitled to attend and vote thereat; or
(b) in the case of any other meeting, by a majority in number of the
Members having the right to attend and vote at the meeting, being a
majority together holding not less than Ninety-five per cent (95%) in
nominal value of the shares given that right.
47. The accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission
to send such instrument of proxy to, or the non-receipt of notice of a
meeting or such instrument of proxy by, any person entitled to receive
such notice shall not invalidate the proceedings at that meeting.
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PROCEEDINGS AT GENERAL MEETINGS
48. No business shall be transacted at any general meeting unless a quorum is
present when the meeting proceeds to business, but the absence of a
quorum shall not preclude the appointment, choice or election of a
Chairman which shall not be treated as part of the business of the
meeting. Save as otherwise provided by these Bye-Laws, at least two
Members present in person or by proxy (or one Member if the Company only
has one Shareholder) and entitled to vote shall be a quorum for all
purposes.
49. If within five minutes (or such longer time as the Chairman of the
meeting may determine to wait) after the time appointed for the meeting,
a quorum is not present, the meeting, if convened on the requisition of
Members, shall be dissolved. In any other case, it shall stand adjourned
to such other day and such other time and place as the Chairman of the
meeting may determine and at such adjourned meeting two Members present
in person (whatever the number of shares held by them) shall be a quorum.
The Company shall give not less than five days' notice of any meeting
adjourned through want of a quorum and such notice shall state that two
Members present in person or by proxy (whatever the number of shares held
by them) (or one Member if the Company only has one Shareholder) shall be
a quorum.
50. Each Director shall be entitled to attend and speak at any general
meeting of the Company.
51. The Chairman (if any) of the Board or, in his absence, the President
shall preside as Chairman at every general meeting. If there is no such
Chairman or President, or if at any meeting neither of the Chairman nor
the President is present within five minutes after the time appointed for
holding the meeting, or if neither of them is willing to act as Chairman
the Directors present shall choose one of their number to act or if one
Director only is present he shall preside as Chairman if willing to act.
If no Director is present or, if each of the Directors present declines
to take the chair, the persons present and entitled to vote on a poll
shall elect one of their number to be Chairman.
52. The Chairman may, with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting) adjourn the meeting
from time to time and from place to place but no business shall be
transacted at the meeting from which the adjournment took place. When a
meeting is adjourned for three months or more, notice of the adjourned
meeting shall be given as in the case of an original meeting.
53. Save as expressly provided by these Bye-Laws, it shall not be necessary
to give any notice of any adjournment or of the business to be transacted
at an adjourned meeting.
VOTING
54.(a) Subject to Bye-Law 2A and Bye-Law 54(b), save where a greater majority is
required by the Companies Acts or these Bye-Laws, any question proposed
for consideration at any general meeting shall be decided on by a simple
majority of votes cast.
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(b) Notwithstanding any other provisions of these Bye-Laws, the Company
shall not take any of the following actions without the approval of a
Resolution passed by at least 66.6% of the votes cast in respect of such
Resolution:
(i) the sale of all, or substantially all, of the Company's assets;
(ii) the amalgamation of the Company; and
(iii) the amendment of this Bye-Law 54(b) or Bye-Law 127.
55. At any general meeting, a resolution put to the vote of the meeting
shall be decided on a show of hands unless (before or on the declaration
of the result of the show of hands or on the withdrawal of any other
demand for a poll) a poll is demanded by:
(a) the Chairman of the meeting; or
(b) at least three Members present in person or represented by proxy;
or
(c) any Member or Members present in person or represented by proxy and
holding between them not less than one-tenth of the total voting
rights of all the Members having the right to vote at such meeting;
or
(d) a Member or Members present in person or represented by proxy
holding shares conferring the right to vote at such meeting, being
shares on which an aggregate sum has been paid up equal to not less
than one tenth of the total sum paid up on all such shares
conferring such right.
Unless a poll is so demanded and the demand is not withdrawn, a
declaration by the Chairman that a resolution has, on a show of hands,
been carried or carried unanimously or by a particular majority or not
carried by a particular majority or lost shall be final and conclusive,
and an entry to that effect in the Minute Book of the Company shall be
conclusive evidence of the fact without proof of the number of votes
recorded for or against such resolution.
56. If a poll is duly demanded, the result of the poll shall be deemed to be
the resolution of the meeting at which the poll is demanded.
57. A poll demanded on the election of a Chairman, or on a question of
adjournment, shall be taken in such manner and either forthwith or at
such time at such meeting as the Chairman shall direct. It shall not be
necessary (unless the Chairman otherwise directs) for notice to be given
of a poll.
58. The demand for a poll shall not prevent the continuance of a meeting for
the transaction of any business other than the question on which the
poll has been demanded and it may be withdrawn at any time before the
close of the meeting or the taking of the poll, whichever is the
earlier.
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59. On a poll, votes may be cast either personally or by proxy.
60. A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
61. In the case of an equality of votes at a general meeting, whether on a
show of hands or on a poll, the Chairman of such meeting shall not be
entitled to a second or casting vote.
62. In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
Register in respect of the joint holding.
63. A Member who is a patient for any purpose of any statute or applicable law
relating to mental health or in respect of whom an order has been made by
any Court having jurisdiction for the protection or management of the
affairs of persons incapable of managing their own affairs may vote,
whether on a show of hands or on a poll, by his receiver, committee,
curator bonis or other person in the nature of a receiver, committee or
curator bonis appointed by such Court and such receiver, committee,
curator bonis or other person may vote on a poll by proxy, and may
otherwise act and be treated as such Member for the purpose of general
meetings.
64. No Member shall, unless the Board otherwise determines, be entitled to
vote at any general meeting unless all calls or other sums presently
payable by him in respect of any shares in the Company have been paid.
65. If (i) any objection shall be raised to the qualification of any voter or
(ii) any votes have been counted which ought not to have been counted or
which might have been rejected or (iii) any votes are not counted which
ought to have been counted, the objection or error shall not vitiate the
decision of the meeting or adjourned meeting on any resolution unless the
same is raised or pointed out at the Meeting or, as the case may be, the
adjourned meeting at which the vote objected to is given or tendered or at
which the error occurs. Any objection or error shall be referred to the
Chairman of the meeting and shall only vitiate the decision of the meeting
on any resolution if the Chairman decides that the same may have affected
the decision of the meeting. The decision of the Chairman on such matters
shall be final and conclusive.
PROXIES AND CORPORATE REPRESENTATIVES
66. The instrument appointing a proxy shall be in writing under the hand of
the appointor or of his attorney authorised by him in writing or, if the
appointor is a corporation, either under its seal or under the hand of an
officer, attorney or other person authorised to sign the same.
67. Unless the Company in General Meeting so determines, a proxy need not hold
any shares in the Company.
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68. Any Member may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office a proxy or (if a
corporation) an authorisation and such proxy or authorisation shall be
valid for all general meetings and adjournments thereof until notice of
revocation is received at the Registered Office. Where a standing proxy or
authorisation exists, its operation shall be deemed to have been suspended
at any general meeting or adjournment thereof at which the Member is
present or in respect to which the Member has specially appointed a proxy
or representative. The Board may from time to time require such evidence
as it shall deem necessary as to the due execution and continuing validity
of any such standing proxy or authorisation and the operation of any such
standing proxy or authorisation shall be deemed to be suspended until such
time as the Board determines that it has received the requested evidence
or other evidence satisfactory to it. Notwithstanding the foregoing, any
Member may irrevocably appoint a proxy, and in such case such proxy shall
be irrevocable in accordance with the instrument of appointment.
69. Subject to Bye-Law 68, the instrument appointing a proxy together with
such other evidence as to its due execution as the Board may from time to
time require, shall be delivered at the Registered Office (or at such
place as may be specified in the notice convening the meeting or in any
notice of any adjournment or, in either case, in any document sent
therewith) prior to the holding of the meeting or adjourned meeting at
which the person named in the instrument proposes to vote or, in the case
of a poll taken subsequently to the date of a meeting or adjourned
meeting, before the time appointed for the taking of a poll and in default
the instrument of proxy shall not be treated as valid.
70. Instruments of proxy shall be in any common form or in such other form as
the Board may approve and the Board may, if it thinks fit, send out with
the notice of any meeting forms of instrument of proxy for use at that
meeting. The instrument of proxy shall be deemed to confer authority to
demand or join in demanding a poll and to vote on any amendment of a
resolution put to the meeting for which it is given as the proxy thinks
fit. The instrument of proxy shall unless the contrary is stated therein
be valid as well for any adjournment of the meeting as for the meeting to
which it relates.
71. A vote given in accordance with the terms of an instrument of proxy shall
be valid notwithstanding the previous death or insanity of the principal,
or revocation of the instrument of proxy or of the authority under which
it was executed, provided that no intimation in writing of such death,
insanity or revocation shall have been received by the Company at the
Registered Office (or such other place as may be specified for the
delivery of instruments of proxy in the notice convening the meeting or
other documents sent therewith) one hour at least before the commencement
of the meeting or adjourned meeting, or the taking of the poll, at which
the instrument of proxy is used.
72. Subject to the Companies Acts, the Board may at its discretion waive any
of the provisions of these Bye-Laws related to proxies or authorisations
and, in particular, may accept such verbal or other assurances as it
thinks fit as to the right of any person to attend and vote on behalf of
any Member at general meetings.
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ELECTION, VACANCIES AND REMOVAL OF DIRECTORS
73. The Board shall consist of 11 Directors, eight of which shall be elected
or appointed pursuant to Bye-Law 2A(7) and three of which shall be elected
or appointed in accordance with Bye-Law 75 and, subject to the Companies
Acts and these Bye-Laws, shall serve until re-elected or until their
successors are elected or appointed in accordance with these Bye-Laws.
74. No person shall be eligible for election or to serve as a Director:
(a) if he is less than twenty-one years of age;
(b) if he is of unsound mind and has been so found by a Court in Bermuda
or elsewhere;
(c) if he is not an individual; or
(d) if he has the status of bankrupt.
75. The Company shall at the Annual General Meeting or at a Special General
Meeting elect three Directors to the Board from candidates proposed by the
Company's Officers (other than Directors), provided that no Member holding
B Shares shall be entitled to vote any Common Shares held by such Member
in respect of any such election. Each Director elected or appointed
pursuant to this Bye-Law 75 or Bye-Law 76 shall (subject to Bye-Law
2A(7)(e)) be entitled to 5 votes at any meeting of the Board. Without
prejudice to the power of the Company in general meeting to appoint any
person to be a Director pursuant to the foregoing, the Board, so long as a
quorum of Directors remains in office, shall have power at any time and
from time to time to appoint an individual to be a Director so as to fill
a vacancy arising as a result of any Director elected pursuant to this
Bye-Law 75 vacating his office, provided that a Director so appointed must
retire from office as at the end of the next following Annual General
Meeting of the Company, unless re-elected at such meeting.
76. The Company may in a Special General Meeting called for that purpose
remove a Director appointed pursuant to Bye-Law 75, provided notice of any
such meeting shall be served upon the Director concerned not less than 14
days before the meeting and he shall be entitled to be heard at that
meeting, and provided further that no Member holding B Shares shall be
entitled to vote any Common Shares held by such Member in respect of such
removal. Any vacancy created by the removal of a Director at a Special
General Meeting shall be filled, from candidates proposed by the Company's
Officers (other than Directors), at the meeting by the election of another
Director in his place, provided that no Member holding B Shares shall be
entitled to vote any Common Shares held by such Member in respect of such
election, or, in the absence of any such election, by the Board.
VACATION OF OFFICE
77. The office of a Director shall be vacated upon the happening of any of the
following events:
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(a) if he dies;
(b) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
(c) if he becomes of unsound mind or a patient for any purpose of any
statute or applicable law relating to mental health and the Board
resolves that his office is vacated;
(d) if he becomes bankrupt or compounds with his creditors;
(e) if he is prohibited by law from being a Director; or
(f) if he ceases to be a Director by virtue of the Companies Acts or is
removed from office pursuant to these Bye-Laws.
ALTERNATE DIRECTORS
78. The Company may in general meeting elect a person or persons qualified to
be Directors to act as Directors in the alternative to any of the
Directors of the Company (other than a Director elected pursuant to Bye-
Law 2A) or may authorise the Board to appoint such Alternate Directors,
provided that no Member holding B Shares shall be entitled to vote any
Common Shares held by such Member in respect of such election or
authorisation. Any Alternate Director appointed pursuant to this Bye-Law
78 may be removed by the Company in general meeting, provided that no
Member holding B Shares shall be entitled to vote any Common Shares held
by such Member in respect of such removal and, if appointed by the Board,
may be removed by the Board and, subject thereto, the office of Alternate
Director shall continue until the next annual election of Directors or, if
earlier, the date on which the relevant Director ceases to be a Director.
An Alternate Director may also be a Director in his own right and may act
as Alternate to more than one Director.
79. An Alternate Director shall be entitled to receive notices of all meetings
of Directors, to attend, be counted in the quorum and vote at any such
meeting at which any Director to whom he is alternate is not personally
present, and generally to perform all the functions of any Director to
whom he is alternate in his absence.
80. Every person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all
respects to the provisions of these Bye-Laws relating to Directors and
shall alone be responsible to the Company for his acts and defaults and
shall not be deemed to be the agent of or for any Director for whom he is
alternate. An Alternate Director may be paid expenses and shall be
entitled to be indemnified by the Company to the same extent mutatis
mutandis as if he were a Director. Every Person acting as an Alternate
Director shall be entitled to the same number of votes as the Director for
whom he acts as alternate (in addition to his own votes if he is also a
Director). The signature of an Alternate Director to any resolution in
writing of the Board or a committee of
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the Board shall, unless the terms of his appointment provides to the
contrary, be as effective as the signature of the Director or Directors to
whom he is alternate.
DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES
81. The amount, if any, of Directors' fees shall from time to time be
determined by the Company in general meeting and in the absence of a
determination to the contrary in general meeting, such fees shall be
deemed to accrue from day to day. Each Director may be paid his reasonable
travelling, hotel and incidental expenses in attending and returning from
meetings of the Board or committees constituted pursuant to these Bye-Laws
or general meetings and shall be paid all expenses properly and reasonably
incurred by him in the conduct of the Company's business or in the
discharge of his duties as a Director. Any Director who, by request, goes
or resides abroad for any purposes of the Company or who performs services
which in the opinion of the Board go beyond the ordinary duties of a
Director may be paid such extra remuneration (whether by way of salary,
commission, participation in profits or otherwise) as the Board may
determine, and such extra remuneration shall be in addition to any
remuneration provided for by or pursuant to any other Bye-Law.
DIRECTORS' INTERESTS
82. (a) A Director may hold any other office or place of profit with the
Company (except that of auditor) in conjunction with his office of
Director for such period and upon such terms as the Board may
determine, and may be paid such extra remuneration therefor (whether
by way of salary, commission, participation in profits or otherwise)
as the Board may determine, and such extra remuneration shall be in
addition to any remuneration provided for by or pursuant to any other
Bye-Law.
(b) A Director may act by himself or his firm in a professional capacity
for the Company (otherwise than as auditor) and he or his firm shall
be entitled to remuneration for professional services as if he were
not a Director.
(c) Subject to the provisions of the Companies Acts, a Director may
notwithstanding his office be a party to, or otherwise interested in,
any transaction or arrangement with the Company or in which the
Company is otherwise interested, and be a Director or other officer
of, or employed by, or a party to any transaction or arrangement
with, or otherwise interested in, any body corporate promoted by the
Company or in which the Company is interested. The Board may also
cause the voting power conferred by the shares in any other company
held or owned by the Company to be exercised in such manner in all
respects as it thinks fit, including the exercise thereof in favour
of any resolution appointing the Directors or any of them to be
directors or officers of such other company, or voting or providing
for the payment of remuneration to the director or officers of such
other company.
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(d) So long as, where it is necessary, he declares the nature of his
interest at the first opportunity at a meeting of the Board or by
writing to the Directors as required by the Companies Acts, a Director
shall not by reason of his office be accountable to the Company for
any benefit which he derives from any office or employment to which
these Bye-Laws allow him to be appointed or from any transaction or
arrangement in which these Bye-Laws allow him to be interested, and no
such transaction or arrangement shall be liable to be avoided on the
ground of any interest or benefit.
(e) Subject to the Companies Acts and any further disclosure required
thereby, a general notice to the Directors by a Director or officer
declaring that he is a director or officer or has an interest in a
person and is to be regarded as interested in any transaction or
arrangement made with that person, shall be a sufficient declaration
of interest in relation to any transaction or arrangement so made.
(f) Any Director who is materially interested in, any contract, or
proposed contract, transaction or other arrangement with the Company,
or who is a director or officer of, or has a material interest in any
person who is a party to a contract, or proposed contract, transaction
or other arrangement with the Company shall not vote on any resolution
to approve the contract, transaction or arrangement.
POWER AND DUTIES OF THE BOARD
83. Subject to the provisions of the Companies Acts and these Bye-Laws
(including, without limitation, Bye-Law 2A) and to any directions given by
the Company in general meeting, the Board shall manage the business of the
Company and may pay all expenses incurred in promoting and incorporating
the Company and may exercise all the powers of the Company. No alteration
of these Bye-Laws and no such direction shall invalidate any prior act of
the Board which would have been valid if that alteration had not been made
or that direction had not been given. The power given by this Bye-Law shall
not be limited by any special power given to the Board by these Bye-Laws
and a meeting of the Board at which a quorum is present shall be competent
to exercise all the powers, authorities and discretions for the time being
vested in or exercisable by the Board.
84. Subject to Bye-Law 2A, the Board may exercise all the powers of the Company
to borrow money upon the credit of the Company and to mortgage or charge
all or any part of the undertaking, property and assets (present and
future) and uncalled capital of the Company and to issue, re-issue, sell or
pledge debentures and other securities whether outright or as collateral
security for any debt, liability or obligation of the Company or of any
other person.
85. All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts
for money paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board shall
from time to time by resolution determine.
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86. The Board on behalf of the Company may provide benefits, whether by the
payment of gratuities or pensions or otherwise, for any person including
any Director or former Director who has held any executive office or
employment with the Company or with any body corporate which is or has been
a subsidiary or affiliate of the Company or a predecessor in the business
of the Company or of any such subsidiary or affiliate, and to any Member of
his family or any person who is dependent on him, and may contribute to any
fund and pay premiums for the purchase or provision of any such gratuity,
pension or other benefit, or for the insurance of any such person.
87. The Board may from time to time appoint one or more of its body to be a
managing director, joint managing director or an assistant managing
director or to hold any other employment or executive office with the
Company for such period and upon such terms as the Board may determine and
may revoke or terminate any such appointments. Any such revocation or
termination as aforesaid shall be without prejudice to any claim for
damages that such Director may have against the Company or the Company may
have against such Director for any breach of any contract of service
between him and the Company which may be involved in such revocation or
termination. Any person so appointed shall receive such remuneration (if
any) (whether by way of salary, commission, participation in profits or
otherwise) as the Board may determine, and either in addition to or in lieu
of his remuneration as a Director.
DELEGATION OF THE BOARD'S POWER
88. The Board may by power of attorney appoint any company, firm or person or
any fluctuating body of persons, whether nominated directly or indirectly
by the Board, to be the attorney or attorneys of the Company for such
purposes and with such powers, authorities and discretions (not exceeding
those vested in or exercisable by the Board under these Bye-Laws) and for
such period and subject to such conditions as it may think fit, and any
such power of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney and of such attorney
as the Board may think fit, and may also authorise any such attorney to
sub-delegate all or any of the powers, authorities and discretions vested
in him.
89. The Board may from time to time entrust to and confer upon any Director or
officer any of the powers exercisable by it upon such terms and conditions
with such restrictions as it thinks fit, and either collaterally with, or
to the exclusion of, its own powers, and may from time to time revoke or
vary all or any of such powers but no person dealing in good faith and
without notice of such revocation or variation shall be affected thereby.
90. The Board may from time to time delegate any of its powers, authorities and
discretions to committees, consisting of such person or persons (whether a
member or members of its body or not) as it thinks fit. Any committee so
formed shall, in the exercise of the powers, authorities and discretions so
delegated, conform to any regulations which may be imposed upon it by the
Board.
23
<PAGE>
PROCEEDINGS OF THE BOARD
91. The Board may meet for the dispatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any meeting
shall be determined by a majority of votes. In the case of an equality of
votes the motion shall be deemed to have been lost. A Director may, and the
Secretary on the requisition of a Director shall, at any time summon a
Board meeting. A meeting of the Board or a committee of the Board may be
held by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meeting to
communicate with each other simultaneously and instantaneously, and
participation in such a meeting shall constitute presence in person at such
meeting.
92. (a) Notice of a Board meeting shall be deemed to be duly given to a
Director if it is given to him personally, or sent to him by post,
cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory form at his last known address
or any other address given by him to the Company for this purpose. A
Director may waive notice of any meeting either prospectively or
retrospectively.
(b) The Board shall meet at least once in every calendar quarter at the
registered office of the Company in Bermuda or in such other place as
a majority of the Board may agree from time to time, and the period of
time between meetings shall be not more than 120 days. Such quarterly
meetings of the Board and any additional meetings of the Board shall
be called by the Company upon not less than five days' notice (or such
shorter period of time as may be agreed to by the Board with the
consent of all Directors elected pursuant to Bye-Law 2A). A quorum for
any meeting of the Board shall be a majority of all Directors,
provided that unless otherwise waived in writing by the Directors
elected pursuant to Bye-Law 2A, a quorum must include Directors
entitled to a majority of the total number of the votes of all
Directors. Notwithstanding the foregoing, if a quorum is not present
at a properly called meeting of the Board, such meeting shall be
postponed for not less than ten days, notice of which postponed
meeting shall be given immediately, and at such postponed meeting a
quorum shall be a majority of all Directors.
93. (a) Any Director who ceases to be a Director at a Board meeting may
continue to be present and to act as a Director and be counted in the
quorum until the termination of the Board meeting if no other Director
objects and if otherwise a quorum of Directors would not be present.
(b) Subject to Bye-Law 82 (f), a Director who to his knowledge is in any
way, whether directly or indirectly, interested in a contract or
proposed contract, transaction or arrangement with the Company and has
complied with the provisions of the Companies Acts and these Bye-Laws
with regard to disclosure of his interest shall be entitled to vote in
respect of any contract, transaction or arrangement in which he is
24
<PAGE>
so interested and if he shall do so his vote shall be counted, and he
shall be taken into account in ascertaining whether a quorum is
present.
94. So long as a quorum of Directors remains in office, the continuing
Directors may act notwithstanding any vacancy in the Board but, if no
quorum of Directors remains, the continuing Directors or a sole continuing
Director may act only for the purpose of calling a general meeting.
95. The Board may elect a Chairman of the Board from amongst its members. If no
Chairman of the Board is elected or he is absent, the President shall be
Chairman. If at any meeting neither the Chairman of the Board nor the
President is present within five minutes after the time appointed for
holding the same, the Directors present may choose one of their number to
be Chairman of the meeting.
96. The meetings and proceedings of any committee consisting of two or more
members shall be governed by the provisions contained in these Bye-Laws for
regulating the meetings and proceedings of the Board so far as the same are
applicable and are not superseded by any regulations imposed by the Board.
97. A resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board or by all the Members
of a committee for the time being shall be as valid and effectual as a
resolution passed at a meeting of the Board or, as the case may be, of such
committee duly called and constituted. Such resolution may be contained in
one document or in several documents in like form each signed by one or
more of the Directors or members of the committee concerned.
98. All acts done by the Board or by any Committee or by any person acting as a
Director or member of a committee or any person duly authorised by the
Board or any committee, shall, notwithstanding that it is afterwards
discovered that there was some defect in the appointment of any member of
the Board or such committee or person acting as aforesaid or that they or
any of them were disqualified or had vacated their office, be as valid as
if every such person had been duly appointed and was qualified and had
continued to be a Director, member of such committee or person as
authorised.
OFFICERS
99. The officers of the Company shall include a President and a Vice-President
or a Chairman and a Deputy Chairman who shall be Directors and shall be
appointed by the Board as soon as possible after the statutory meeting and
each annual general meeting. In addition, the Board may appoint any person
whether or not he is a Director to hold such other office as the Board may
from time to time determine. Any person elected or appointed pursuant to
this Bye-Law shall hold office for such period and upon such terms as the
Board may determine and the Board may revoke or terminate any such election
or appointment. Any such revocation or termination shall be without
prejudice to any claim for damages that such officer may have against the
Company or the Company may have against such officer for
25
<PAGE>
any breach of any contract of service between him and the Company which
may be involved in such revocation or termination. Save as provided in the
Companies Acts or these Bye-Laws, the powers and duties of the officers of
the Company shall be such (if any) as are determined from time to time by
the Board.
MINUTES
100. The Directors shall cause minutes to be made and books kept for the
purpose of recording:
(a) all appointments of officers made by the Directors;
(b) the names of the Directors and other persons (if any) present at each
meeting of Directors and of any committee;
(c) all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, and of committees; and
(d) all proceedings of managers (if any).
SECRETARY
101. The Secretary shall be appointed by the Board at such remuneration (if
any) and upon such terms as it may think fit and any Secretary so
appointed may be removed by the Board. The duties of the Secretary shall
be those prescribed by the Companies Acts together with such other duties
as shall from time to time be prescribed by the Board.
102. A provision of the Companies Acts or these Bye-Laws requiring or
authorising a thing to be done by or to a Director and the Secretary shall
not be satisfied by its being done by or to the same person acting both as
Director and as, or in the place of, the Secretary.
THE COMMON SEAL
103. (a) The Seal shall consist of a circular metal device with the name of
the Company around the outer margin thereof and the country and year
of incorporation across the centre thereof. Should the Seal not have
been received at the registered office in such form at the date of
adoption of this Bye-Law then, pending such receipt, any document
requiring to be sealed with the Seal shall be sealed by affixing a
red wafer seal to the document with the name of the Company, and the
country and year of incorporation type-written across the centre
thereof.
(b) The Board shall provide for the custody of the Seal, which Seal shall
only be used by authority of the Board or of a committee authorised
by the Board in that behalf. Subject to these Bye-Laws, any
instrument to which the Seal is affixed shall be signed by a Director
and the Secretary, or by any two Directors, or any person
26
<PAGE>
appointed by the Board for the purpose; provided that the Secretary
or a Director may affix the Seal over his signature only to
authenticate copies of these Bye-Laws, the minutes of any meeting or
any other documents requiring authentication.
(c) The Company may have for use in any place or places outside Bermuda
duplicate Seals each of which shall be a facsimile of the Common Seal
of the Company and, if the Directors so determine, with the addition
on its face of the name of every place where it is to be used.
DIVIDENDS AND OTHER PAYMENTS
104. Subject to Bye-Law 2A, the Board may from time to time declare dividends
to be paid to the Members according to their respective rights and
interests in the profits of the Company including such interim dividends
as appear to the Board to be justified by the position of the Company.
Subject to Bye-Law 2A, dividends may be paid in money or property or by
issuing fully paid shares of the Company. The Board may also pay any fixed
cash dividend which is payable on any shares of the Company half-yearly or
on such other dates, whenever the position of the Company, in the opinion
of the Board, justifies such payment. For the purpose of this Bye-Law,
contributed surplus shall be deemed not to be a profit of the Company and
shall not be taken account of in calculating the amount of the profits
available for distribution to the Members and shall not be available for
distribution other than in the manner provided for in Bye-Law 110.
105. Except insofar as the rights attaching to, or the terms of issue of, any
share otherwise provide:
(a) all dividends may be declared and paid according to the amounts paid
up on the shares in respect of which the dividend is paid: however
an amount paid up on a share in advance of calls shall not be
treated for the purpose of this Bye-Law as paid-up on the share; and
(b) dividends may be apportioned and paid pro rata according to the
amounts paid up on the shares during any portion of the period in
respect of which the dividend is paid.
106. The Board may deduct from any dividend or other moneys payable to a Member
by the Company on or in respect of any shares all sums of money (if any)
presently payable by him to the Company on account of calls or otherwise
in respect of shares of the Company.
107. No dividend or other moneys payable by the Company on or in respect of any
share shall bear interest against the Company.
108. Any dividend, interest or other sum payable in cash to the holder of
shares may be paid by cheque or warrant sent through the post addressed to
the holder at his address in the Register, or in the case of joint
holders, addressed to the holder whose name stands first in the Register
in respect of the shares at his registered address as appearing in the
Register or addressed to such person at such address as the holder or
joint holders may in writing direct. Every such
27
<PAGE>
cheque or warrant shall, unless the holder or joint holders otherwise
direct, be made payable to the order of the holder or, in the case of
joint holders, to the order of the holder whose name stands first in the
Register in respect of such shares, and shall be sent at his or their risk
and payment of the cheque or warrant by the bank on which it is drawn
shall constitute a good discharge to the Company. Any one of two or more
joint holders may give effectual receipts for any dividends or other
moneys payable or property distributable in respect of the shares held by
such joint holders.
109. Any dividend unclaimed for a period of seven years from the date scheduled
for payment of such dividend shall be forfeited and shall revert to the
Company and the payment by the Board of any unclaimed dividend, interest
or other sum payable on or in respect of the share into a separate account
shall not constitute the Company a trustee in respect thereof.
110. Subject to Bye-Law 2A, with the sanction of the Company in general
meeting, the Board may (a) declare a distribution to any Member out of
contributed surplus and (b) may direct payment or satisfaction of such
distribution or any dividend wholly or in part by the distribution of
specific assets, and in particular of paid-up shares or debentures of any
other company, and where any difficulty arises in regard to such
distribution or dividend the Board may settle as it thinks expedient, and
in particular, may authorise any person to sell and transfer any fractions
or may ignore fractions altogether, and may fix the value for distribution
or dividend purposes of any such specific assets and may determine that
cash payments shall be made to any members upon the footing of the values
so fixed in order to secure equality of distribution and may vest any such
specific assets in trustees as may seem expedient to the Board.
RESERVES
111. The Board may, before recommending or declaring any dividend, set aside
out of the profits of the Company, such sums as it thinks proper as
reserves which shall, at the discretion of the Board, be applicable for
any purpose to which the profits of the Company may be properly applied
and pending such application may, also at such discretion, either be
employed in the business of the Company or be invested in such investments
as the Board may from time to time think fit. The Board may also without
placing the same to reserve carry forward any profits which it may think
it prudent not to distribute.
CAPITALIZATION OF PROFITS
112. Subject to Bye-Law 2A, the Company may, upon the recommendation of the
Board, at any time and from time to time resolve in general meeting to the
effect that it is desirable to capitalize all or any part of any amount
for the time being standing to the credit of any reserve or fund which is
available for distribution or to the credit of any share premium account
or any capital redemption reserve fund and accordingly that such amount be
set free for distribution amongst the Members or any class of Members who
would be entitled thereto if distributed by way of dividend and in the
same proportions on the
28
<PAGE>
footing that the same be not paid in cash but be applied either in or
towards paying up amounts for the time being unpaid on any share in the
Company held by such Members respectively or in payment up in full of
unissued shares, debentures or other obligations of the Company, to be
allotted and distributed credited as fully paid amongst such Members or
partly in one way and partly in the other, and the Board shall give effect
to such resolution, provided that for the purpose of this Bye-Law, a share
premium account and a capital redemption reserve fund may be applied only
in paying up of unissued shares to be issued to such Members credited as
fully paid. Notwithstanding any other provisions of this Bye-Law, the
Board shall be entitled to capitalize all or any part of any amount for
the time being standing to the credit of any reserve or fund which is
available for distribution or to the credit of any share premium account
or any capital redemption reserve fund for the purpose of paying up in
part or in full, the balance of the par value of shares in the Company
allotted and issued, or to be allotted and issued, pursuant to the
exercise of share options granted with an exercise price which is less
than the par value of such shares.
113. Where any difficulty arises in regard to any distribution under the last
preceding Bye-Law the Board may settle the same as it thinks expedient
and, in particular, may authorise any person to sell and transfer any
fractions or may resolve that the distribution should be as nearly as may
be practicable in the correct proportion but not exactly so or may ignore
fractions altogether and may determine that cash payments should be made
to any Members in order to adjust the rights of all parties, as may seem
expedient to the Board. The Board may appoint any person to sign on behalf
of the persons entitled to participate in the distribution any contract
necessary or desirable for giving effect thereto and such appointment
shall be effective and binding upon the Members.
RECORD DATES
114. Notwithstanding any other provisions of these Bye-Laws, the Company in
general meeting or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of
identifying the persons entitled to receive notices of general meetings.
Any such record date may be on or at any time before or after any date on
which such dividend, distribution, allotment or issue is declared, paid or
made or such notice is dispatched. If no record date is fixed, the record
date for the aforesaid purposes shall be at the close of business on the
day on which the resolution relating to such dividend or right is passed
by the Board.
ACCOUNTING RECORDS
115. The Board shall cause to be kept accounting records sufficient to give a
true and fair view of the state of the Company's affairs and to show and
explain its transactions, in accordance with the Companies Acts.
29
<PAGE>
116. The records of account shall be kept at the Registered Office or at such
other place or places as the Board think fit, and shall at all times be
open to inspection by the Directors: PROVIDED that if the records of
account are kept at some place outside Bermuda, there shall be kept at an
office of the Company in Bermuda such records as will enable the Directors
to ascertain with reasonable accuracy the financial position of the
Company at the end of each three month period. No Member (other than an
officer of the Company) shall have any right to inspect any accounting
record or book or document of the Company except as conferred by law or
authorised by the Board or the Company in general meeting.
117. A copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which is
to be laid before the Company in general meeting, together with a copy of
the auditor's report, shall be sent to each person entitled thereto in
accordance with the requirements of the Companies Acts.
AUDIT
118. Save and to the extent that an audit is waived in the manner permitted by
the Companies Acts, auditors shall be appointed and their duties regulated
in accordance with the Companies Acts, and other applicable law and such
requirements not inconsistent with the Companies Acts as the Board may
from time to time determine.
SERVICE OF NOTICES AND OTHER DOCUMENTS
119. Any notice or other communication or document (including a share
certificate) may be served on or delivered to any Member by the Company
either personally or by sending it through the post (by airmail where
applicable) in a pre-paid letter addressed to such Member at his address
as appearing in the Register or by delivering it to or leaving it at such
registered address or, if sent to him at his registered address, by any
means of prepaid transmitted or recorded communication. In the case of
joint holders of a share, service or delivery of any notice or other
document on or to one of the joint holders shall for all purposes be
deemed as sufficient service on or delivery to all the joint holders. Any
notice or other document if sent by post shall be deemed to have been
served or delivered seven days after it was put in the post, and in
proving such service or delivery, it shall be sufficient to prove that the
notice or document was properly addressed, stamped and put in the post.
120. Any notice of a general meeting of the Company shall be deemed to be duly
given to a Member if it is sent to him by cable, telex, telecopier or
other mode of representing or reproducing words in a legible and non-
transitory form at his address as appearing in the Register or any other
address given by him to the Company for this purpose. Any such notice
shall be deemed to have been served twenty-four hours after its dispatch.
121. Any notice or other document delivered, sent or given to Members in any
manner permitted by these Bye-Laws, shall notwithstanding that such Member
is then dead or bankrupt or that any other event has occurred, and whether
or not the Company has notice of the death or
30
<PAGE>
bankruptcy or other event, be deemed to have been duly served or delivered
in respect of any share registered in the name of such Member as sole or
joint holder unless his name shall, at the time of the service or delivery
of the notice or document, have been removed from the Register as the
holder of the share, and such service or delivery shall for all purposes
be deemed as sufficient service or delivery of such notice or document on
all persons interested (whether jointly with or as claiming through or
under him) in the share.
WINDING UP
122. If the Company shall be wound up, the liquidator may, with the sanction of
a resolution of the Company and any other sanction required by the
Companies Acts, divide amongst the Members in specie or kind the whole or
any part of the assets of the Company (whether they shall consist of
property of the same kind or not) and may for such purposes set such
values as he deems fair upon any property to be divided as aforesaid and
may determine how such division shall be carried out as between the
Members or different classes of Members. The liquidator may, with the like
sanction, vest the whole or any part of such assets in trustees upon such
trust, for the benefit of the contributories as the liquidator, with the
like sanction, shall think fit, but so that no Member shall be compelled
to accept any shares or other assets upon which there is any liability.
INDEMNITY
123. Subject to the Companies Acts, every Director, officer of the Company and
member of a committee constituted under Bye-Law 90 (and his heirs and
legal representatives) shall be indemnified out of the funds of the
Company against all civil liabilities, loss, damage, charge or express
(including but not limited to an amount paid to settle an action, satisfy
a judgment, liabilities under contract, tort and statute or any applicable
foreign law or regulations and all reasonable legal and other costs and
expenses properly payable) incurred or suffered by him as such Director,
officer or committee member while exercising his powers and discharging
his duties under the Companies Acts and these Bye-Laws and the indemnity
contained in this Bye-Law shall extend to any person acting as a Director,
officer or committee member in the reasonable belief that he has been so
appointed or elected notwithstanding any defect in such appointment or
election PROVIDED ALWAYS that the indemnity contained in this Bye-Law
shall not extend to any matter which would render it void pursuant to the
Companies Acts.
124. Every Director, officer and member of a committee duly constituted under
Bye-Law 90 of the Company (including his heirs and legal representatives)
shall be indemnified out of the funds of the Company against all
liabilities incurred by him as such Director, officer or committee member
in defending any proceedings, whether civil or criminal, in which judgment
is given in his favour or in which he is acquitted, or in connection with
any application under the Companies Acts in which relief from liability is
granted to him by the court.
31
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125. To the extent that any Director, officer or member of a committee duly
constituted under Bye-Law 90 is entitled to claim an indemnity pursuant to
these Bye-Laws in respect of amounts paid or discharged by him, the
relative indemnity shall take effect as an obligation of the Company to
reimburse the person making such payment or effecting such discharge.
TRANSFER BY WAY OF CONTINUATION
126. If the Company is permitted in accordance with the provisions of the
Companies Acts it shall, subject to the provisions thereof, have the power
to register by way of continuation as a body corporate under the laws of
any jurisdiction outside Bermuda and to be discontinued in Bermuda.
ALTERATION OF BYE-LAWS
127. Subject to Bye-Law 2A and Bye-Law 54(b), these Bye-Laws may be amended
from time to time in the manner provided for in the Companies Acts.
32
<PAGE>
Exhibit 4.1
EXECUTION COPY
- --------------------------------------------------------------------------------
GLOBENET COMMUNICATIONS GROUP LIMITED
TO
BANKERS TRUST COMPANY,
Trustee
____________________
Indenture
Dated as of July 14, 1999
_____________________
$300,000,000
13% Senior Notes Due 2007
- --------------------------------------------------------------------------------
<PAGE>
GLOBENET COMMUNICATIONS GROUP LIMITED
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of July 14, 1999
Trust Indenture
Act Section Indenture Section
<TABLE>
<CAPTION>
<S> <C>
(S) 310(a)(1) ......................................... 607
(a)(2) ......................................... 607
(b) ......................................... 608
(S) 312(c) ......................................... 701
(S) 314(a) ......................................... 703
(a)(4) ......................................... 1007(a)
(c)(1) ......................................... 102
(c)(2) ......................................... 102
(e) ......................................... 102
(S) 315(b) ......................................... 601
(S) 316(a)(last .........................................
sentence) ......................................... 101 ("Outstanding")
(a)(1)(A) ......................................... 502, 512
(a)(1)(B) ......................................... 513
(b) ......................................... 508
(c) ......................................... 104(d)
(S) 317(a)(1) ......................................... 503
(a)(2) ......................................... 504
(b) ......................................... 1003
(S) 318(a) ......................................... 111
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PARTIES................................................................................................... 1
RECITALS OF THE COMPANY................................................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions............................................................................ 1
Acquired Debt........................................................................................ 2
Act.................................................................................................. 2
Additional Amount.................................................................................... 2
Additional Securities................................................................................ 2
Affiliate............................................................................................ 2
Agent Member......................................................................................... 3
Alcatel.............................................................................................. 3
Alcatel Guaranty..................................................................................... 3
Applicable Percentage................................................................................ 3
Applicable Procedures................................................................................ 3
Asset Sale........................................................................................... 3
Asset Sale Offer..................................................................................... 4
Attributable Debt.................................................................................... 4
Bankruptcy Laws...................................................................................... 4
Bankruptcy Order..................................................................................... 4
Beneficial Owner..................................................................................... 5
Board of Directors................................................................................... 5
Board Resolution..................................................................................... 5
Business Day......................................................................................... 5
Capital Lease Obligation............................................................................. 5
Capital Stock........................................................................................ 5
Cash Equivalents..................................................................................... 5
Change of Control.................................................................................... 6
Change of Control Offer.............................................................................. 7
Commission........................................................................................... 7
Company.............................................................................................. 7
Company Request or Company Order..................................................................... 7
</TABLE>
______________________________
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
ii
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Capital Ratio........................................................................... 7
Consolidated Cash Flow............................................................................... 7
Consolidated Leverage Ratio.......................................................................... 8
Consolidated Net Income.............................................................................. 9
Consolidated Net Worth............................................................................... 9
Continuing Director.................................................................................. 10
Corporate Trust Office............................................................................... 10
Corporation.......................................................................................... 10
Custodian............................................................................................ 11
Default.............................................................................................. 11
Defaulted Interest................................................................................... 11
Depositary or DTC.................................................................................... 11
disinterested member................................................................................. 11
Disqualified Stock................................................................................... 11
Equity Interests..................................................................................... 11
Equity Offering...................................................................................... 11
Event of Default..................................................................................... 11
Exchange Act......................................................................................... 11
Exchange Offer Registration Statement................................................................ 12
Existing Indebtedness................................................................................ 12
Fair Market Value.................................................................................... 12
Fiber Optic Assets................................................................................... 12
Fiber Optic Joint Venture............................................................................ 12
GAAP................................................................................................. 12
Global Securities and Global Security................................................................ 12
Government Securities................................................................................ 12
guarantee............................................................................................ 13
Guarantee............................................................................................ 13
Guarantor............................................................................................ 13
Hedging Obligations.................................................................................. 13
Holder............................................................................................... 13
Indebtedness......................................................................................... 13
Indenture............................................................................................ 14
Interest Payment Date................................................................................ 14
Investments.......................................................................................... 14
Issue Date........................................................................................... 15
Lien................................................................................................. 15
Material Subsidiary.................................................................................. 15
Maturity............................................................................................. 15
Net Income........................................................................................... 15
Net Proceeds......................................................................................... 15
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
Page
<S> <C>
New Credit Facility.................................................................................. 16
Non-Recourse Debt.................................................................................... 16
Obligations.......................................................................................... 16
Officers' Certificate................................................................................ 16
Opinion of Counsel................................................................................... 16
Outstanding.......................................................................................... 16
Paying Agent......................................................................................... 17
Permitted Business................................................................................... 17
Permitted Holders.................................................................................... 17
Permitted Indebtedness............................................................................... 18
Permitted Investments................................................................................ 20
Permitted Liens...................................................................................... 22
Permitted Refinancing Indebtedness................................................................... 25
Person............................................................................................... 26
Predecessor Security................................................................................. 26
Preferred Stock...................................................................................... 26
Private Equity Financing............................................................................. 26
Property............................................................................................. 26
Purchase Money Indebtedness.......................................................................... 26
Redemption Date...................................................................................... 26
Redemption Price..................................................................................... 27
Registration Rights Agreement........................................................................ 27
Regular Record Date.................................................................................. 27
Regulation S......................................................................................... 27
Responsible Officer.................................................................................. 27
Restricted Global Securities and Restricted Global Security.......................................... 27
Restricted Investment................................................................................ 27
Restricted Payment................................................................................... 27
Restricted Subsidiary................................................................................ 28
Securities Act....................................................................................... 28
Security and Securities.............................................................................. 28
Security Register and Securities Registrar........................................................... 28
Shelf Registration Statement......................................................................... 28
Significant Subsidiary............................................................................... 28
Special Record Date.................................................................................. 28
Stated Maturity...................................................................................... 28
Subsidiary........................................................................................... 28
Tax.................................................................................................. 29
Taxing Authority..................................................................................... 29
Trust Indenture Act or TIA........................................................................... 29
Trustee.............................................................................................. 29
</TABLE>
<PAGE>
iv
<TABLE>
<CAPTION>
Page
<S> <C>
U.S. Dollars or United States dollars................................................................ 29
Unrestricted Global Securities and Unrestricted Global Security...................................... 29
Unrestricted Subsidiary.............................................................................. 29
Vendor Financing Indebtedness........................................................................ 29
Vice President....................................................................................... 30
Voting Stock......................................................................................... 30
Weighted Average Life to Maturity.................................................................... 30
Wholly Owned Restricted Subsidiary................................................................... 30
Wholly Owned Subsidiary.............................................................................. 30
SECTION 102. Compliance Certificates and Opinions................................................... 30
SECTION 103. Form of Documents Delivered to Trustee................................................. 31
SECTION 104. Acts of Holders........................................................................ 32
SECTION 105. Notices, etc., to Trustee and Company.................................................. 33
SECTION 106. Notice to Holders; Waiver.............................................................. 33
SECTION 107. Effect of Headings and Table of Contents............................................... 34
SECTION 108. Successors and Assigns................................................................. 34
SECTION 109. Separability Clause.................................................................... 34
SECTION 110. Benefits of Indenture.................................................................. 34
SECTION 111. Governing Law.......................................................................... 34
SECTION 112. Conflict with Trust Indenture Act...................................................... 34
SECTION 113. Legal Holidays......................................................................... 35
SECTION 114. Agent for Service; Submission to Jurisdiction;
Waiver of Immunities............................................................. 35
SECTION 115. Conversion of Currency................................................................. 36
SECTION 116. Currency Equivalent.................................................................... 37
SECTION 117. No Recourse Against Others; Waiver and Release......................................... 37
SECTION 118. Reliance on Financial Data............................................................. 38
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally........................................................................ 38
SECTION 202. Restrictive Legend..................................................................... 39
SECTION 203. Form of Face of Security............................................................... 40
SECTION 204. Form of Reverse of Security............................................................ 43
SECTION 205. Form of Trustee's Certificate of Authentication........................................ 47
ARTICLE THREE
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THE SECURITIES
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SECTION 301. Title and Terms........................................................................ 47
SECTION 302. Denominations.......................................................................... 48
SECTION 303. Execution, Authentication, Delivery and Dating......................................... 48
SECTION 304. Temporary Securities................................................................... 50
SECTION 305. Registration, Registration of Transfer and Exchange.................................... 50
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities....................................... 52
SECTION 307. Payment of Interest; Interest Rights Preserved......................................... 52
SECTION 308. Persons Deemed Owners.................................................................. 54
SECTION 309. Cancellation........................................................................... 54
SECTION 310. Computation of Interest................................................................ 54
SECTION 311. CUSIP Number........................................................................... 54
SECTION 312. Book-Entry Provisions for Global Securities............................................ 55
SECTION 313. Special Transfer Provisions............................................................ 56
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture................................................ 58
SECTION 402. Application of Trust Money............................................................. 60
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default...................................................................... 60
SECTION 502. Acceleration of Maturity; Rescission and Annulment..................................... 62
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee........................ 64
SECTION 504. Trustee May File Proofs of Claim....................................................... 64
SECTION 505. Trustee May Enforce Claims Without Possession of Securities............................ 65
SECTION 506. Application of Money Collected......................................................... 65
SECTION 507. Limitation on Suits.................................................................... 66
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest............................................................. 66
SECTION 509. Restoration of Rights and Remedies..................................................... 67
SECTION 510. Rights and Remedies Cumulative......................................................... 67
SECTION 511. Delay or Omission Not Waiver........................................................... 67
SECTION 512. Control by Holders..................................................................... 67
SECTION 513. Waiver of Past Defaults................................................................ 68
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SECTION 514. Undertaking for Costs.................................................................. 68
SECTION 515. Waiver of Stay or Extension Laws....................................................... 69
ARTICLE SIX
THE TRUSTEE
SECTION 601. Defaults............................................................................... 69
SECTION 602. Certain Rights of Trustee.............................................................. 69
SECTION 603. Trustee Not Responsible for Recitals or Issuance of Securities......................... 71
SECTION 604. May Hold Securities.................................................................... 71
SECTION 605. Money Held in Trust.................................................................... 71
SECTION 606. Compensation and Reimbursement......................................................... 71
SECTION 607. Corporate Trustee Required; Eligibility................................................ 72
SECTION 608. Resignation and Removal; Appointment of Successor...................................... 72
SECTION 609. Acceptance of Appointment by Successor................................................. 74
SECTION 610. Merger, Conversion, Consolidation or Succession to Business............................ 74
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders........................................... 75
SECTION 702. Reports by Trustee..................................................................... 75
SECTION 703. Reports by Company..................................................................... 75
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms................................... 75
SECTION 802. Successor Substituted.................................................................. 76
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
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SECTION 901. Supplemental Indentures Without Consent of Holders..................................... 77
SECTION 902. Amendment, Supplement and Waiver with Consent of Holders............................... 77
SECTION 903. Execution of Supplemental Indentures................................................... 79
SECTION 904. Effect of Supplemental Indentures...................................................... 79
SECTION 905. Conformity with Trust Indenture Act.................................................... 79
SECTION 906. Reference in Securities to Supplemental Indentures..................................... 79
SECTION 907. Notice of Supplemental Indentures...................................................... 80
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and Interest................................... 80
SECTION 1002. Maintenance of Office or Agency....................................................... 80
SECTION 1003. Money for Security Payments to Be Held in Trust....................................... 81
SECTION 1004. Corporate Existence................................................................... 82
SECTION 1005. Payment of Taxes and Other Claims..................................................... 82
SECTION 1006. Maintenance of Properties............................................................. 82
SECTION 1007. Statement by Officers As to Default................................................... 83
SECTION 1008. Provision of Financial Statements..................................................... 83
SECTION 1009. Purchase of Securities upon Change of Control......................................... 84
SECTION 1010. Limitation on Incurrence of Indebtedness and Issuance
of Preferred Stock............................................................... 85
SECTION 1011. Limitation on Restricted Payments..................................................... 86
SECTION 1012. Limitation on Certain Asset Sales..................................................... 89
SECTION 1013. Restrictions on Liens................................................................. 90
SECTION 1014. Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries.......................................................... 91
SECTION 1015. Transactions with Affiliates.......................................................... 93
SECTION 1016. Limitation on Sale and Leaseback Transactions......................................... 94
SECTION 1017. Limitation on Issuances and Sales of Equity Interests in
Restricted Subsidiaries.......................................................... 95
SECTION 1018. Limitation on Future Guarantees....................................................... 96
SECTION 1019. Limitation on Business Activities..................................................... 97
SECTION 1020. Limitation on Unrestricted Subsidiaries............................................... 97
SECTION 1021. Limitation on Payments for Consent.................................................... 97
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SECTION 1022. Payment of Additional Amounts......................................................... 97
SECTION 1023. Waiver of Certain Covenants........................................................... 100
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption................................................................... 100
SECTION 1102. Applicability of Article.............................................................. 101
SECTION 1103. Election to Redeem; Notice to Trustee................................................. 101
SECTION 1104. Selection by Trustee of Securities to Be Redeemed..................................... 101
SECTION 1105. Notice of Redemption.................................................................. 101
SECTION 1106. Deposit of Redemption Price........................................................... 102
SECTION 1107. Securities Payable on Redemption Date................................................. 102
SECTION 1108. Securities Redeemed in Part........................................................... 103
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Legal Defeasance or
Covenant Defeasance.............................................................. 103
SECTION 1202. Legal Defeasance...................................................................... 103
SECTION 1203. Covenant Defeasance................................................................... 104
SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance................................. 104
SECTION 1205. Deposited Money and U.S. Government Securities to Be
Held in Trust; Other Miscellaneous Provisions.................................... 106
SECTION 1206. Reinstatement......................................................................... 107
TESTIMONIUM............................................................................................... 108
SIGNATURES AND SEALS...................................................................................... 108
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EXHIBITS
A-1 - Form of Certificate for Exchange or Registration of Transfer From
Restricted Global Additional Security to Unrestricted Global
Additional Security
A-2 - Form of Certificate for Transfer or Exchange After Two Year
<PAGE>
INDENTURE, dated as of July 14, 1999 between GlobeNet Communications
Group Limited, a Bermuda company (herein called the "Company") and Bankers Trust
Company, a New York banking corporation, Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 13% Senior
Notes Due 2007 (herein called the "Initial Securities") and 13% Series B Senior
Notes Due 2007 (the "Exchange Securities" and, together with the Initial
Securities, the "Securities"), of substantially the tenor and amount hereinafter
set forth, and to provide therefor the Company has duly authorized the execution
and delivery of this Indenture.
Upon the effectiveness of the Exchange Offer Registration Statement
(as defined herein), if any, or the effectiveness of the Shelf Registration
Statement (as defined herein), this Indenture will be subject to the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be part of
this Indenture and shall, to the extent applicable, be governed by such
provisions.
All things necessary have been done to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of each of the Company and the Trustee, in
accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
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(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and "self-
liquidating paper", as used in TA Section 311, shall have the meanings
assigned to them in the rules of the Commission adopted under the Trust
Indenture Act; and
(c) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Ten, are defined in that
Article.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged or amalgamated with or into or became a Subsidiary of such
specified Person, whether or not such Indebtedness is incurred in
connection with, or in contemplation of, such other Person merging or
amalgamating with or into, or becoming a Subsidiary of, such specified
Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Additional Amount" shall have the meaning set forth in Section 1022.
"Additional Securities" means Securities that are issued under a
supplemental indenture after the date that the Securities are first issued by
the Company and authenticated by a Trustee under this Indenture, which will rank
pari passu with the Securities initially issued in all respects (or in all
respects except for the payment of interest accruing prior to the issue date of
such Additional Securities or except for the first payment of interest following
the issue date of such Additional Securities).
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Agent Member" means any member of, or participants in, the
Depositary.
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"Alcatel" means Alcatel, a French societe anonyme, or any Affiliate
thereof, and their respective successors and assigns.
"Alcatel Guaranty" means the guarantee to be given by Alcatel in
favor of the lenders under the New Credit Facility, together with any related
reimbursement agreement between or among the Company or any Restricted
Subsidiary and Alcatel, as such guarantee and reimbursement agreement may be
amended, amended and restated, supplemented, modified, renewed, extended,
refunded, restructured, replaced or refinanced, and in effect from time to time.
"Applicable Percentage" means 0% for each fiscal quarter commencing
prior to January 1, 2002 and 50% for each fiscal quarter thereafter.
"Applicable Procedures" means applicable procedures of the
Depositary.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than any sale, lease, conveyance or other disposition of
capacity (but not including a disposition of a dark fiber involving
transfer of title thereto, other than backhaul) on any cable system owned,
controlled or operated by the Company or any of its Restricted Subsidiaries
or of telecommunications capacity or transmission rights acquired by the
Company or any Restricted Subsidiary for use in a Permitted Business;
provided that the sale, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by Section 1009 and/or
Article Eight and not by Section 1012; and
(2) the issuance of Equity Interests by any of the Company's
Restricted Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries;
Notwithstanding the preceding, the following items shall be deemed not
to be Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a Fair Market Value of less than $1.0 million;
or (b) results in net proceeds to the Company and its Restricted
Subsidiaries of less than $1.0 million;
(2) a transfer of assets between or among the Company and its
Restricted Subsidiaries or between Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted Subsidiary to the
Company or to a Wholly Owned Restricted Subsidiary;
(4) a Permitted Investment or a Restricted Payment that is permitted
by Section 1011;
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(5) the sale of Fiber Optic Assets for which the Company or any
Restricted Subsidiary receives consideration substantially all of which is
Fiber Optic Assets and such consideration has an aggregate Fair Market
Value at least equal to the Fair Market Value of the Fiber Optic Assets so
sold;
(6) the sale, conveyance or other disposition of dark fiber on any
cable system utilized by the Company or any of its Restricted Subsidiaries
for backhaul capacity;
(7) the licensing of intellectual property of the Company or any of
its Restricted Subsidiaries in the ordinary course of business; and
(8) a disposition of obsolete or worn out equipment or equipment that
is no longer useful in the conduct of a Permitted Business and that is
disposed of in the ordinary course of business.
"Asset Sale Offer" has the meaning set forth in Section 1012.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Laws" means the bankruptcy laws of Bermuda and of the
United States, any state or territory thereof or the District of Columbia, and
the law of any other jurisdiction relating to bankruptcy, insolvency, winding
up, liquidation, moratorium, reorganization or relief of debtors.
"Bankruptcy Order" means any court order made in a proceeding pursuant
to or within the meaning of any Bankruptcy Law, containing an adjudication of
bankruptcy or insolvency, or providing for liquidation, winding up, dissolution
or reorganization, or appointing a Custodian of a debtor or of all or any
substantial part of a debtor's property, or providing for the staying,
arrangement, adjustment or composition of indebtedness or other relief of a
debtor.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-
3 and Rule 13d-5 under the Exchange Act.
"Board of Directors" means, with respect to any Person, the board of
directors or other governing body of such Person, except that if such Person is
owned or managed by a single entity, it means the board of directors or other
governing body of such entity, or, in either case, any committee thereof duly
authorized to act on behalf of such board or governing body.
4
<PAGE>
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the City of New York
are authorized or obligated by law or executive order to close.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means any of the following:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than six months from the
date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition and overnight
bank deposits, in each case with any U.S. commercial bank having capital
and surplus in excess of $500 million and a Thompson Bank Watch Rating of
"B" or better;
(4) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
5
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(5) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Rating Service, a
division of The McGraw-Hill Companies, Inc., or their successors, and in
each case maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1)-(5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than
by way of merger, amalgamation or consolidation and other than transmission
capacity in the ordinary course of business), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole to any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act and the rules
promulgated thereunder) other than a Restricted Subsidiary, or one or more
Permitted Holders, or a person or group of which no other person or group
other than one or more Permitted Holders is the Beneficial Owner, directly
or indirectly, of more than 50% of the Voting Stock of such transferee
Person, measured by voting power rather than number of shares, upon
consummation of such transaction or transactions;
(2) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(3) the consummation of any transaction (including, without
limitation, any merger, amalgamation or consolidation) the result of which
is that any "person" or "group" (as defined above), other than one or more
Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of
more than 50% of the Voting Stock of the Company, measured by voting power
rather than number of shares;
(4) during any period of two consecutive years beginning on or after
the Issue Date, Continuing Directors cease for any reason to constitute a
majority of the members of the Board of Directors of the Company; or
(5) the Company consolidates with, or merges or amalgamates with or
into, any Person, or any Person consolidates with, or merges or amalgamates
with or into, the Company, in any such event pursuant to a transaction in
which any of the outstanding Voting Stock of the Company is converted into
or exchanged for cash, securities or other property, other than any such
transaction where no "person" or "group" (as defined above), other than one
or more Permitted Holders, becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Stock, measured by voting power
rather than number of shares, of such surviving, continuing or transferee
Person, in each case immediately after giving effect to such issuance.
"Change of Control Offer" has the meaning set forth in Section 1009.
6
<PAGE>
"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 Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, any Vice
President, its Chief Financial Officer, its Treasurer or an Assistant Treasurer,
and delivered to the Trustee.
"Consolidated Capital Ratio" means, with respect to any Person, as of
the date of any incurrence of Indebtedness or issuance of Disqualified Stock,
the ratio of (1) the aggregate consolidated principal amount of Indebtedness of
such Person and its Restricted Subsidiaries (other than intercompany debt, and
excluding Hedging Obligations permitted under clause (10) of the definition of
"Permitted Indebtedness" herein) and the liquidation preference of Disqualified
Stock of such Person and its Restricted Subsidiaries, in each case, outstanding
at the end of the most recent fiscal quarter for which a consolidated balance
sheet of such Person is available after giving pro forma effect to the
incurrence of such Indebtedness or the issuance of such Disqualified Stock, and
any other Indebtedness incurred or repaid or any other Disqualified Stock
issued, repurchased or retired since the date of such balance sheet to (2) the
Consolidated Net Worth of such Person as of such balance sheet date, after
giving pro forma effect to the issuance and repurchase or retirement of Equity
Interests (other than Disqualified Stock) since the date of such balance sheet.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale, to the extent such losses were
deducted in computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees
and charges incurred in respect of letter of credit, and net of the effect
of
7
<PAGE>
all payments, if any, pursuant to Hedging Obligations), to the extent that
any such expense was deducted in computing such Consolidated Net Income;
plus
(4) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses (excluding
any such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period, to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus
(5) non-cash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course of
business (and other than items reversing, offsetting or reducing any
accrual or reserve excluded pursuant to the preceding clause (4)), in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the
income or profits of, and the depreciation and amortization and other non-cash
charges of, a Restricted Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of such Person only to
the extent that a corresponding amount would be permitted at the date of
determination to be dividended or paid to such Person by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements (for purposes of Section 1010, excluding
the New Credit Facility), instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Subsidiary or its
stockholders.
"Consolidated Leverage Ratio" means, with respect to any Person, as
of the date of any incurrence of Indebtedness or issuance of Disqualified Stock,
the ratio of (1) the aggregate consolidated principal amount of Indebtedness of
such Person and its Restricted Subsidiaries (other than intercompany debt, and
excluding Hedging Obligations permitted under clause (10) of the definition of
"Permitted Indebtedness" herein) and the consolidated liquidation preference of
Disqualified Stock of such Person and its Restricted Subsidiaries, in each case,
outstanding at the end of the most recent fiscal quarter for which a
consolidated balance sheet of such person is available, after giving pro forma
effect to the incurrence of such Indebtedness or the issuance of such
Disqualified Stock, and any other Indebtedness incurred or repaid and any other
Disqualified Stock issued, repurchased or retired since the date of such balance
sheet, to (2) the Consolidated Cash Flow of such Person and its Restricted
Subsidiaries for the most recently ended four fiscal quarters immediately
preceding the date of the incurrence of such Indebtedness or issuance of such
Disqualified Stock for which consolidated financial statements of such Person
are available.
8
<PAGE>
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
--------
(1) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends
or distributions paid in cash to the specified Person or a Restricted
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary that is not a
Guarantor shall be excluded to the extent that the declaration or payment
of dividends or similar distributions by that Restricted Subsidiary of that
Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement (for
purposes of Section 1010, excluding the New Credit Facility), instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, it being
understood that the Net Income of any such Restricted Subsidiary for such
period shall be included in Consolidated Net Income up to the aggregate
amount of cash that such Restricted Subsidiary could have paid pursuant to
such dividends or similar distributions during such period to the Company
or any of its Restricted Subsidiaries;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and
(4) the cumulative effect of a change in accounting principles shall
be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of:
(1) the consolidated equity of the common stockholders of such Person
and its Restricted Subsidiaries that are Restricted Subsidiaries as of such
date plus
(2) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock, plus
9
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(3) amortization reflected in the consolidated equity of common
stockholders in clause (1) above of amounts deducted in clauses (1) and (2)
below,
less,
(1) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the Issue Date in the book value of any asset owned by such
Person or a Restricted Subsidiary of such Person; and
(2) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in
accordance with GAAP.
"Continuing Director" means, any individual who at the beginning of
the period of determination:
(1) was a member of the Board of Directors; or
(2) was nominated for election or elected to such Board of Directors
with the approval of one or more Permitted Holders or a majority of the
directors who were members of such Board of Directors at the beginning of
such period or whose election or nomination was previously so approved.
"Corporate Trust Office" means the principal corporate trust office
of the Trustee, at which at any particular time its corporate trust business
shall be administered, which office at the date of execution of this Indenture
is located at Four Albany Street, Attention: Corporate Trust and Agency
Service, New York, New York 10006, except that with respect to presentation of
Securities for payment or for registration of transfer or exchange, such term
shall mean the office or agency of the Trustee at which, at any particular time,
its corporate agency business shall be conducted.
"Corporation" includes corporations, associations, companies and
business trusts.
"Custodian" means any receiver, interim receiver, receiver and
manager, trustee, assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
"Default" means any event that is, or with the passage of time or the
giving of notice, or both, would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" or "DTC" means The Depositary Trust Company, New York,
New York, its successors or any other depository appointed in its stead in
accordance with this Indenture.
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"disinterested member" means, with respect to any transaction, a
member of the Board of Directors of the Company having no material financial
interest in or with respect to such transaction. A member of the Board of
Directors of the Company shall not be deemed to have such a financial interest
solely by reason of such member's holding Capital Stock of the Company, or any
parent thereof of which the Company is a Wholly Owned Subsidiary, or any
options, warrants or other rights in respect of such Capital Stock.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Securities mature. Notwithstanding the preceding sentence,
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall
not constitute Disqualified Stock if the terms of such Capital Stock provide
that the Company may not repurchase or redeem any such Capital Stock pursuant to
such provisions unless such repurchase or redemption complies with Section 1011.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any offering of common stock of the Company
(other than Disqualified Stock) other than to a Subsidiary of the Company, in
which the gross cash proceeds to the Company are at least $100.0 million.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company or any of
its Restricted Subsidiaries outstanding on the Issue Date (other than the New
Credit Facility).
"Fair Market Value" means, with respect to any asset or Property, the
sale value that would be obtained 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.
"Fiber Optic Assets" means assets, rights (contractual or otherwise)
and properties, whether tangible or intangible, used or intended for use in
connection with the
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development, ownership and operation of undersea fiber optic cable systems
(including complementary assets, such as backhaul capacity and satellite-related
assets).
"Fiber Optic Joint Venture" means any Person that is engaged in the
development, ownership and operation of undersea fiber optic cable systems
(including complementary assets, such as backhaul capacity and satellite related
assets).
"GAAP" means generally accepted accounting principles in effect from
time to time in Bermuda (or the United States of America, to the extent the
Company's consolidated financial statements at any time are prepared in
accordance with generally accepted accounting principles in effect in the United
States of America).
"Global Securities" and "Global Security" shall have the respective
meanings specified in Section 201.
"Government Securities" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely 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, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such 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 principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness, and "guarantee" when
used as a verb shall have corresponding meaning.
"Guarantee" means the full and unconditional guarantee on a senior,
unsubordinated basis by any Guarantor of the Company's obligations under this
Indenture and the Securities. When used as a verb, "Guarantee" shall have
corresponding meaning.
"Guarantor" means any Restricted Subsidiary of the Company which
executes and delivers a Guarantee in accordance with Section 1018.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under:
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(1) currency exchange or interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange or interest rates.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by (a) bonds, notes, debentures or similar instruments
or (b) letters of credit (or reimbursement agreements in respect thereof);
(3) representing Capital Lease Obligations;
(4) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable; or
(5) representing any Hedging Obligations;
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person, which shall be deemed the lesser of the full amount of
such Indebtedness and the Fair Market Value of the property or asset so secured)
and, to the extent not otherwise included, the guarantee by such Person of any
Indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(x) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount; and
(y) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
The term "Indebtedness" shall not include obligations (1) with respect
to letters of credit or other similar instruments securing obligations (other
than obligations described in clause (1), (2)(a), (3) or (5) above in this
definition of "Indebtedness") entered into in the ordinary course of business,
to the extent 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
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demand for reimbursement, (2) in respect of performance, surety, judgment,
appeal or other similar bonds provided in the ordinary course of business or (3)
arising from agreements providing for indemnification, adjustment of purchase
price or similar obligations in connection with the disposition of any business,
assets or Person.
"Indenture" means this instrument as originally executed and as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Securities.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Wholly Owned
Restricted Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the Fair
Market Value of the Equity Interests of such Restricted Subsidiary not sold or
disposed of in an amount determined as provided in Section 1011.
"Issue Date" means the first date on which any Securities were issued
under this Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Material Subsidiary" means any Restricted Subsidiary that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary of the Company.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or otherwise.
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"Net Income" means, with respect to any Person, the net income (loss)
of such Person and its Restricted Subsidiaries, determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends,
excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such Person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case after taking into account any available tax credits
or deductions and any tax sharing arrangements and amounts required to be
applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that were the subject of such Asset Sale.
"New Credit Facility" means the credit agreement to be entered into
by GlobeNet Communications Holdings Ltd., as borrower, and TD Securities (USA)
Inc., as arranger, and the lenders named therein from time to time, and any
ancillary documents executed in connection therewith (including letters of
credit and any guarantee and security documents, including but not limited to
the Alcatel Guaranty), as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time and any renewal, extension,
refunding, restructuring, replacement or refinancing thereof (whether with the
original administrative agent and lenders or other administrative agent or
agents or other lenders (including Alcatel upon its payment under the Alcatel
Guaranty) and whether provided under the original credit agreement or any other
credit or other successor agreements, including any agreement or agreements (1)
extending or shortening the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (2) adding or deleting borrowers or guarantors thereunder
or (3) increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder to the extent permitted under this Indenture).
"Non-Recourse Debt" means Indebtedness as to which neither the
Company nor any of its Restricted Subsidiaries (1) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (2) is directly or indirectly liable as a guarantor or
otherwise or (3) constitutes the lender.
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<PAGE>
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by the Chairman,
the President or a Vice President, and by the Chief Financial Officer,
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company and who shall be reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if such
--------
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands the Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities 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 Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor.
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<PAGE>
"Paying Agent" means any Person (including the Company or any of its
Subsidiaries acting as Paying Agent) authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company, which initially shall be the Trustee, and who may be changed by the
Company without prior notice to the Holders of the Securities.
"Permitted Business" means any business that is the same as or
related, ancillary or complementary to any business of the Company or any of its
Restricted Subsidiaries on the Issue Date, including without limitation
e-commerce.
"Permitted Holders" means any of the following, and any of the
respective Affiliates or successors of any of the following: (1) Kelso
Investment Associates VI, L.P., KEP VI, L.L.C. and Kelso & Company, (2) Boston
Ventures Limited Partnership V and Boston Ventures Management, Inc., (3)
Providence Equity Partners III L.P., Providence Equity Operating Partners III
L.P. and Providence Equity Partners Inc., (4) Spectrum Equity Investors III,
L.P., SEI III Entrepreneurs Fund, L.P., Spectrum III Investment Managers' Fund,
L.P. and Spectrum Equity Investors, (5) TD Capital Group Limited, (6) Capital
Communications CDPQ Inc., (7) Sandler Capital Partners IV, L.P., Sandler Capital
Partners IV FTE L.P., SCM Communications CBO I LTD and Sandler Capital
Management, (8) Ontario Municipal Employee Retirement Board and (9) Nautilus
Equity Investors LLC.
"Permitted Indebtedness" means
(1) the incurrence of Indebtedness under or in connection with the
New Credit Facility, including to the extent constituting Indebtedness, any
principal, premium, if any, interest, fees, charges, expenses,
reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof; provided that the aggregate principal
--------
amount of all Indebtedness outstanding under the New Credit Facility after
giving effect to such incurrence does not exceed an amount equal to $450.0
million, less the aggregate amount of all repayments, mandatory or
optional, of the principal of any term Indebtedness under the New Credit
Facility (other than refinancings and repayments that are concurrently
reborrowed) that have actually been made since the date of this Indenture,
provided that in any event the aggregate principal amount of Indebtedness
--------
permitted to be outstanding under the New Credit Facility pursuant to this
clause (1) shall be no less than $100.0 million;
(2) the incurrence of any contingent obligation to reimburse Alcatel
in connection with the Alcatel Guaranty or other obligations under the New
Credit Facility, provided that such Indebtedness under the New Credit
--------
Facility is permitted to be incurred under clause (1) of this definition of
"Permitted Indebtedness";
(3) the provision by the Company or any of its Restricted
Subsidiaries of a guarantee of Indebtedness under the New Credit Facility;
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(4) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(5) the incurrence by the Company of Indebtedness represented by the
Securities (excluding Additional Securities) and by any Restricted
Subsidiary of any Guarantee;
(6) the incurrence by the Company or any Guarantor of Purchase Money
Indebtedness, provided that the amount thereof does not exceed 75% of the
--------
Company's and its Restricted Subsidiaries' aggregate cost (determined in
accordance with GAAP in good faith by the Board of Directors of the
Company) of the construction, acquisition, development, engineering,
installation and improvement of the applicable Fiber Optic Assets;
(7) the incurrence by the Company or any of its Restricted
Subsidiaries of Vendor Financing Indebtedness, provided that the amount
--------
thereof does not exceed 100% of the Company's and its Restricted
Subsidiaries' aggregate cost (determined in accordance with GAAP in good
faith by the Board of Directors of the Company) of the construction,
acquisition, development, engineering, installation and improvement of the
applicable Fiber Optic Assets, provided, further, that the aggregate amount
--------
thereof outstanding at any time, including all Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause (7), shall not exceed $75.0 million; and provided, further, that the
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amount of Indebtedness of Restricted Subsidiaries of the Company
outstanding under this clause (7) and clause (12) of this definition of
"Permitted Indebtedness", including all Indebtedness incurred to refund,
refinance or replace any such Indebtedness, shall not, in the aggregate,
exceed $75.0 million at any one time;
(8) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace,
Indebtedness that was permitted by this Indenture to be incurred under the
first paragraph of Section 1010 or clauses (4), (5), (6), (7), (8) and (12)
of this definition of "Permitted Indebtedness";
(9) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries and the issuance of preferred stock by a
Restricted Subsidiary to the Company or another Restricted Subsidiary of
the Company; provided, however, that:
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(a) if the Company is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the Securities; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness or preferred stock being held by
a Person other
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than the Company or a Restricted Subsidiary thereof and (ii) any sale
or other transfer of any such Indebtedness or preferred stock to a
Person that is not either the Company or a Restricted Subsidiary
thereof, shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (9);
(10) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred (a) for the purpose
of fixing or hedging interest or foreign currency exchange rate risk with
respect to any floating rate Indebtedness or foreign currency based
Indebtedness, respectively, that is permitted by the terms of this
Indenture to be outstanding; provided that the notional amount of any such
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Hedging Obligation does not exceed the amount of Indebtedness or other
liability to which such Hedging Obligation relates; or (b) for the purpose
of fixing or hedging currency exchange risk with respect to any currency
exchanges made in the ordinary course of business and not for purposes of
speculation;
(11) the incurrence of Indebtedness by the Company that is expressly
subordinated in right of payment to the Securities, provided that:
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(a) the terms of such Indebtedness do not permit any payments of
interest or principal prior to the Stated Maturity of such Indebtedness;
(b) the terms of such Indebtedness do not permit redemption or
other retirement of such Indebtedness prior to the Stated Maturity of such
Indebtedness;
(c) the terms of such Indebtedness do not provide for defaults
or other remedies and such Indebtedness is not subject to acceleration
by its terms, or otherwise;
(d) the Stated Maturity of such Indebtedness occurs after the
Stated Maturity of the Securities; and
(e) the terms of such Indebtedness provide that in the event of
any payment or liquidation of the assets of the Company to creditors upon a
total or partial liquidation or dissolution or in a bankruptcy, insolvency,
receivership or similar proceeding relating to the Company, no
distributions to holders of such Indebtedness will be made until
distributions have been made with respect to all other Indebtedness of the
Company, other than other Indebtedness incurred pursuant to this clause
(11); and
(12) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (12), not to exceed $50.0 million;
provided that the amount of Indebtedness of Restricted Subsidiaries of the
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Company outstanding under this clause (12) and clause (7) of this
definition of "Permitted Indebtedness" including all Indebtedness incurred
to refund, refinance or replace any such Indebtedness, shall not, in the
aggregate, exceed $75.0 million at any one time.
"Permitted Investments" means:
(1) any Investment in the Company or in any Wholly Owned Restricted
Subsidiary of the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Wholly Owned Restricted
Subsidiary of the Company in a Person if as a result of such Investment;
(a) such Person becomes a Wholly Owned Restricted Subsidiary of
the Company; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or
is liquidated into, the Company or a Wholly Owned Restricted
Subsidiary of the Company;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with Section 1012;
(5) Investments in the form of intercompany Indebtedness to the
extent permitted under clause (9) of the definition of "Permitted
Indebtedness;"
(6) Hedging Obligations, provided that such Hedging Obligations
--------
constitute Permitted Indebtedness permitted by clause (10) of the
definition of "Permitted Indebtedness;"
(7) Investments made in Fiber Optic Joint Ventures, provided that the
aggregate amount of all Investments made pursuant to this clause (7) does
not exceed $45.0 million; provided that no more than $20.0 million of such
--------
Investments shall be in Fiber Optic Joint Ventures over which the Company
does not have, directly or indirectly, the power to direct the policies,
management and affairs;
(8) Investments of the Company or any of its Restricted Subsidiaries
existing on the Issue Date;
(9) Investments in accounts and notes receivable, prepaid expenses
and deposits in the ordinary course of business; Investments in negotiable
instruments held for collection; and pledges or deposits constituting
Permitted Liens;
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(10) loans or advances made in the ordinary course of business to
officers, directors or employees of the Company or any of its Restricted
Subsidiaries for travel, entertainment and moving and other relocation
expenses; and
(11) any Investment acquired by the Company or any of its Restricted
Subsidiaries (a) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary, in each
case, in satisfaction of a judgment or in connection with or as a result of
a bankruptcy, workout, reorganization or recapitalization of the issuer of
such other Investment or accounts receivable or (b) as a result of a
foreclosure by the Company or any of its Restricted Subsidiaries with
respect to any secured Investment or other transfer of title with respect
to any secured Investment in default.
In calculating the amount of Investments under clause (7) of this
definition of "Permitted Investments," such amount will equal the aggregate Fair
Market Value of Investments at the time such Investments were made, less the
amount of any net reduction in such Investments resulting from the payment in
cash of dividends, distributions or repayments or from the receipt of proceeds
of dispositions of such Investments, in each case paid to the Company or any
Restricted Subsidiary; provided that the sum of such dividends, distributions,
--------
repayments or disposition proceeds may not exceed the aggregate amount of
Investments made under clause (7) of this definition of "Permitted Investments."
"Permitted Liens" means:
(1) Liens on assets of the Company or any Restricted Subsidiary of
the Company securing Indebtedness under the New Credit Facility permitted
by clause (1) of the definition of "Permitted Indebtedness" and all other
amounts payable under such Indebtedness or in respect thereof;
(2) Liens on assets of the Company or any Restricted Subsidiary of
the Company securing Indebtedness of the Company or any Restricted
Subsidiary of the Company permitted to be incurred under this Indenture and
all other amounts payable under such Indebtedness or in respect thereof,
the principal amount of which Indebtedness shall not at any time exceed the
difference between (a) $450.0 million and (b) the principal amount of any
Indebtedness outstanding pursuant to clause (1) of the definition of
"Permitted Indebtedness";
(3) Liens in favor of the Company or its Restricted Subsidiaries;
(4) Liens on property of a Person existing at the time such Person is
merged or amalgamated with or into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were in
--------
existence prior to the contemplation of such merger, amalgamation or
consolidation and do not extend to any assets other than those of the
Person merged or amalgamated with, or into or consolidated with the Company
or the Restricted Subsidiary;
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(5) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
--------
Liens were in existence prior to the contemplation of such acquisition;
(6) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, licenses, obligations for utilities, statutory or
regulatory obligations, letters of credit, surety and appeal bonds,
government or other contracts, completion guarantees, performance and
return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment
of borrowed money);
(7) Liens existing on the Issue Date;
(8) Liens to secure Purchase Money Indebtedness permitted by clause
(6) of the definition of "Permitted Indebtedness" covering only the assets
(or portion thereof) acquired with such Indebtedness;
(9) Liens to secure Vendor Financing Indebtedness permitted by clause
(7) of the definition of "Permitted Indebtedness" covering only the assets
(or portion thereof) acquired with such Indebtedness;
(10) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent, or that in the aggregate are not material, or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
--------
appropriate provision as shall be required in conformity with GAAP shall
have been made therefor;
(11) Liens created for the benefit of the Securities;
(12) Liens imposed by law or arising by operation of law, including,
without limitation, landlords', mechanics', carriers', warehousemen's,
materialmen's, suppliers' and vendors' Liens, Liens for master's and crew's
wages and other similar maritime Liens and mechanics' Liens, in each case
which are incurred in the ordinary course of business for sums not yet
delinquent or that have been bonded or are being contested in good faith,
if such reserves or other appropriate provisions, if any, as shall be
required by GAAP shall have been made with respect thereto;
(13) zoning restrictions, easements, license, covenants, reservations,
restrictions on the use of real property and defects, irregularities and
deficiencies in title to real property that do not, individually or in the
aggregate, materially affect the ability of the Company or any Restricted
Subsidiary to conduct its business and are incurred in the ordinary course
of business;
(14) Liens incurred or pledges and deposits made in the ordinary
course of business in connection with workers' compensation and
unemployment insurance and
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other types of social security and other similar legislation or other
insurance-related obligations(including without limitation, pledges or
deposits securing liability to insurance carriers under insurance or self-
insurance arrangements);
(15) Liens securing obligations of the Company or any Restricted
Subsidiary of the Company under Hedging Obligations permitted to be
incurred under clause (10) of the definition of "Permitted Indebtedness";
(16) leases, subleases, licenses or sublicenses granted to others that
do not materially interfere with the ordinary course of business of the
Company and its Restricted Subsidiaries, taken as a whole;
(17) Liens encumbering property or assets under construction (and
related rights) in favor of a contractor or developer, or arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such property or assets;
(18) any interest or title of a lessor in the property subject to any
capital lease or operating lease;
(19) Liens (including extensions, renewals, and replacements thereof)
on property or assets of, or on shares of Capital Stock or Indebtedness of,
any Person existing (in the case of the original such Lien) at the time
such Person becomes, or becomes a part of, any Restricted Subsidiary of the
Company; provided that such Liens do not extend to or cover any property or
--------
assets of the Company or any of its Restricted Subsidiaries other than the
property, assets, Capital Stock or Indebtedness so acquired (plus
improvements, accessions or proceeds in respect thereof) and were not
created in contemplation of such transaction;
(20) any Lien arising from (x) a judgment that does not, and upon the
expiration of any applicable grace period, will not, result in an Event of
Default and (y) any other judgment, but only, in the case of this clause
(y), so long as such Lien is adequately bonded and all appropriate legal
proceedings that may have been initiated for the review of such judgment,
decree or order shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired.
(21) Liens securing reimbursement obligations with respect to
commercial letters of credit incurred in the ordinary course of business
which encumber documents and other property relating to such letters of
credit and products and proceeds thereof;
(22) Liens arising out of consignment or similar arrangements for the
sale of goods in the ordinary course of business;
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(23) Liens arising from filing Uniform Commercial Code financing
statements regarding leases, provided that such Liens do not extend to any
--------
property or assets which are not leased property subject to such leases or
subleases;
(24) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(25) Liens on or sales or transfers of receivables (including related
rights);
(26) Liens on Capital Stock or other securities of an Unrestricted
Subsidiary that secure Indebtedness or other obligations of such
Unrestricted Subsidiary;
(27) any encumbrance or restriction (including, but not limited to,
put and call agreements) with respect to Capital Stock of any joint venture
or similar arrangement pursuant to any joint venture or similar agreement;
(28) Liens on cash set aside at the time of the incurrence of any
Indebtedness, or government securities purchased with such cash, in either
case to the extent that such cash or government securities prefund the
payment of interest on such Indebtedness and are held in an escrow account
or similar arrangement to be applied for such purpose;
(29) the escrow arrangement pursuant to which the proceeds of the
borrowings under the Term D Loan of the New Credit Facility will initially
be held; and
(30) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations
that do not exceed $5.0 million at any one time outstanding and that (a)
are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to refund, refinance or replace, other Indebtedness
of the Company or any of its Restricted Subsidiaries (other than intercompany
Indebtedness); provided that:
--------
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), and premium, if any, plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
equal to or later than the final maturity date of, and has a Weighted
Average Life to Maturity
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equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is expressly subordinated in right of payment to the
Securities, such Permitted Refinancing Indebtedness has a final maturity
date equal to or later than the final maturity date of, and is subordinated
in right of payment to, the Securities on terms that taken as a whole are
at least as favorable to the Holders of Securities as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) except in the case of Indebtedness issued in exchange for, or the
net proceeds of which are used to refund, refinance or replace,
Indebtedness incurred pursuant to, and as permitted by clause (7) or (12)
of the definition of "Permitted Indebtedness" (or other Permitted
Refinancing Indebtedness incurred in respect of such Indebtedness), such
Indebtedness is incurred either (a) by the Company or any Guarantor or (b)
by the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Persons preferred or preference stock whether now outstanding or issued
after the date of this Indenture, and includes, without limitation, all classes
and series of preferred or preference stock.
"Private Equity Financing" means the private offering of common
shares of the Company scheduled to close on the Issue Date, whether or not such
offering closes on some date other than the Issue Date.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including Capital Stock in, and other securities of, any
other Person.
"Purchase Money Indebtedness" means Indebtedness of the Company
(including Acquired Debt and Capital Lease Obligations, mortgage financings and
purchase money obligations) incurred for the purpose of financing or
refinancing, all or any part of the cost of
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construction, engineering, acquisition, installation, development or improvement
by the Company or any Restricted Subsidiary of any Fiber Optic Assets of the
Company or any Restricted Subsidiary and including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as the same may be amended, supplemented, modified or
restated from time to time.
"Redemption Date", when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company, TD Securities (USA) Inc. and Credit Suisse First
Boston Corporation dated as of the date of this Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 1 or July 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.
"Responsible Officer", when used with respect to the Trustee, means
any managing director, any director, any vice president, any assistant vice
president, any associate 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 knowledge of
and familiarity with the particular subject.
"Restricted Global Securities" and "Restricted Global Security" shall
have the respective meanings specified in Section 201.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means any of the following:
(1) the declaration or payment of any dividend on or the making of any
payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger, amalgamation or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the
direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or to the Company or a Restricted
Subsidiary of the Company);
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(2) the purchase, redemption or other acquisition or retirement for
value (including, without limitation, in connection with any merger,
amalgamation or consolidation involving the Company) of any Equity
Interests of the Company or any direct or indirect parent of the Company or
any Restricted Subsidiary of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the Company,
and other than the purchase by the Company of newly-issued or outstanding
equity Interests of a Restricted Subsidiary or the purchase by a Restricted
Subsidiary of newly-issued or outstanding Equity Interests of another
Restricted Subsidiary);
(3) the making of any payment of principal on, or the purchase,
redemption, defeasance or other acquisition or retirement for value of,
any Indebtedness that is expressly subordinated in right of payment to the
Securities, except a payment of principal at the Stated Maturity thereof;
or
(4) the making of any Restricted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Security" and "Securities" have the meaning stated in the first
recital of this Indenture and more particularly means any Securities
authenticated and delivered under this Indenture and includes any Additional
Securities that may be issued under a supplemental indenture.
"Security Register" and "Securities Registrar" have the respective
meanings specified in Section 305.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
significant subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means, (1) with respect to any Indebtedness, the
date specified in the original documentation governing such Indebtedness as the
fixed date on which the final installment of principal of such Indebtedness is
due and payable and (2) with respect to any installment of interest or principal
on any series of Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation
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governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(1) any corporation a majority of whose Capital Stock with voting
power, under ordinary circumstances, to elect directors is, at the date of
determination, directly or indirectly, owned by such Person (a
"subsidiary"), by one or more subsidiaries of such Person or by such Person
and one or more subsidiaries of such Person;
(2) a partnership in which such Person or a subsidiary of such Person
is, at the date of determination, a general partner of such partnership; or
(3) any partnership, limited liability company or other Person in
which such Person, a subsidiary of such Person or such Person and one or
more subsidiaries of such Person, directly or indirectly, at the date of
determination, has (x) at least a majority ownership interest or (y) the
power to elect or appoint or direct the election or appointment of the
managing partner or member of such Person or, if applicable, a majority of
the directors or other governing body of such Person.
"Tax" means any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).
"Taxing Authority" means any government or political subdivision or
territory or possession or any authority therein or thereof having power to tax.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force at the date as of which this Indenture was executed, except as
provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"U.S. Dollars" or "United States dollars" each mean the legal
currency of the United States of America.
"Unrestricted Global Securities" and "Unrestricted Global Security"
shall have the respective meanings specified in Section 201.
"Unrestricted Subsidiary" means any Subsidiary designated as such
pursuant to Section 1020.
"Vendor Financing Indebtedness" means Indebtedness of the Company or
any of its Restricted Subsidiaries incurred pursuant to any agreements between
the Company or any of
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its Restricted Subsidiaries and one or more vendors or lessors of Fiber Optic
Assets used or intended for use in a Permitted Business by the Company or any of
its Restricted Subsidiaries (or any Affiliate of any such vendor or lessor or
any lender or group of lenders led by or arranged for by any such vendor, lessor
or Affiliate) providing financing for all or any part of the cost of
construction, engineering, acquisition, installation, development or improvement
by the Company or any of its Restricted Subsidiaries of any Fiber Optic Assets
from any such vendor or lessor (or any such Affiliate or lender) and including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment;
by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Wholly
Owned Subsidiary of such Person that is a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares and shares required to be held by
nationals of any jurisdiction) shall at the time be owned by such Person and/or
by one or more Wholly Owned Subsidiaries of such Person.
SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture (including any covenant compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with and, upon the request of the Trustee, an Opinion of Counsel
stating that in the opinion of such counsel all such conditions precedent, if
any, have been complied with, except that in the case of any such application or
request as to which the
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furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, 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
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by any
Person, and the date of holding the same, shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
--------
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.
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(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. Notices, etc., to Trustee and Company
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust and Agency Services, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office: 2 Carter's Bay
Road, Southside, St. David's DDBX, Bermuda, Attention: Corporate Secretary,
or at any other address previously furnished in writing to the Trustee by
the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at the address of such
Holder as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice mailed to a Holder in the manner herein prescribed
shall be conclusively deemed to have been received by such Holder, whether or
not such Holder actually receives such notice. 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 or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any
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manner of giving such notice as shall be satisfactory to the Trustee shall be
deemed to be a sufficient giving of such notice for every purpose hereunder.
SECTION 107. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Securities Registrar and their successors hereunder and the Holders, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS.
SECTION 112. Conflict with Trust Indenture Act.
---------------------------------
Prior to the effectiveness of the Exchange Offer Registration
Statement or the effectiveness of the Shelf Registration Statement, the Trust
Indenture Act shall apply as a matter of contract to this Indenture for purposes
of interpretation, construction and defining the rights and obligations
hereunder. Upon the effectiveness of the Exchange Offer Registration Statement
or the effectiveness of the Shelf Registration Statement, this Indenture shall
be subject to the provisions of the Trust Indenture Act that are required to be
part of this Indenture and shall, to the extent applicable, be governed by such
provisions. If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such provision or requirement of the Trust Indenture Act shall
control.
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If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
SECTION 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal (or premium, if any) or interest 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 or Redemption Date or at the
Stated Maturity or Maturity; provided that no interest shall accrue for the
--------
intervening period.
SECTION 114. Agent for Service; Submission to Jurisdiction; Waiver
-----------------------------------------------------
of Immunities.
- -------------
By the execution and delivery of this Indenture, the Company (i)
acknowledges that it has, by separate written instrument, irrevocably designated
and appointed CT Corporation Systems, 1633 Broadway, New York, N.Y. 10019, as
its authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to the Securities or this Indenture that may be
instituted in any federal or state court in the State of New York, 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 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 it (mailed or delivered to the
Company's Corporate Secretary at its principal office as specified in Section
105(2)) 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
actions, 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 this Indenture shall
be in full force and effect.
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, the
Company hereby irrevocably waives such immunity in respect of its obligations
under this Indenture and the Securities, to the extent permitted by law.
SECTION 115. Conversion of Currency.
----------------------
The Company covenants and agrees that the following provisions shall
apply to conversion of currency in the case of the Securities and this
Indenture:
34
<PAGE>
(a) (i) If for the purpose of obtaining judgment in, or enforcing
the judgment of, any court in any country, it becomes necessary to convert
into a currency (the "judgment currency") an amount due in U.S. Dollars,
then the conversion shall be made at the rate of exchange prevailing on the
Business Day before the day on which the judgment is given or the order of
enforcement is made, as the case may be (unless a court shall otherwise
determine).
(ii) If there is a change in the rate of exchange prevailing between
the Business Day before the day on which the judgment is given or an order
of enforcement is made, as the case may be (or such other date as a court
shall determine), and the date of receipt of the amount due, the Company
will pay such additional amount (or, as the case may be, be refunded such
lesser amount), if any, as may be necessary so that the amount paid in the
judgment currency when converted at the rate of exchange prevailing on the
date of receipt will produce the amount in U.S. Dollars originally due.
(b) In the event of the winding-up of the Company at any time while
any amount or damages owing under the Securities and this Indenture, or any
judgment or order rendered in respect thereof, shall remain outstanding,
the Company shall indemnify and hold the Holders and the Trustee harmless
against any deficiency arising or resulting from any variation in rates of
exchange between (1) the date as of which the equivalent of the amount in
U.S. Dollars due or contingently due under the Securities and this
Indenture (other than under this subsection (b)) is calculated for the
purposes of such winding-up and (2) the final date for the filing of proofs
of claim in such winding-up. For the purpose of this subsection (b), the
final date for the filing of proofs of claim in the winding-up of the
Company shall be the date fixed by the liquidator or otherwise in
accordance with the relevant provisions of applicable law as being the
latest practicable date as at which liabilities of the Company may be
ascertained for such winding-up prior to payment by the liquidator or
otherwise in respect thereto.
(c) The obligations contained in subsections (a)(ii) and (b) of this
Section 115 shall apply irrespective of any waiver or extension granted by
any Holder (other than with respect to the Holder granting the waiver or
extension) or the Trustee and shall continue in full force and effect
notwithstanding any judgment or order or the filing of any proof of claim
in the winding-up of the Company for a liquidated sum in respect of amounts
due hereunder (other than under subsection (b) above) or under any such
judgment or order. In the case of subsection (b) above, the amount of such
deficiency shall not be deemed to be reduced by any variation in rates of
exchange occurring between the said final date and the date of any
liquidating distribution.
(d) The term "rate(s) of exchange" shall mean the rate of exchange
quoted by Bankers Trust Company at its central foreign exchange desk in its
head office in New York City at 12:00 noon (New York City time) for
purchases of U.S. Dollars with the judgment currency other than U.S.
Dollars referred to in subsections (a) and (b) above and includes any
premiums and costs of exchange payable.
35
<PAGE>
(e) The Trustee shall have no duty or liability with respect to
monitoring or enforcing this Section 115 and shall have no liability to the
Holders due to fluctuations in currency rates.
SECTION 116. Currency Equivalent.
-------------------
Except as provided in Section 115, for purposes of the construction of
the terms of this Indenture or of the Securities, in the event that any amount,
including any amounts owed by the Company to the Trustee, is stated herein in
the currency of one nation (the "First Currency"), as of any date such amount
shall also be deemed to represent the amount in the currency of any other
relevant nation (the "Other Currency") which is required to purchase such amount
in the First Currency at the rate of exchange quoted by the Bankers Trust
Company at its central foreign exchange desk in its head office in New York City
at 12:00 noon (New York City time) on the date of determination.
SECTION 117. No Recourse Against Others; Waiver and Release.
----------------------------------------------
NO DIRECTOR, OFFICER, EMPLOYEE, INCORPORATOR OR SHAREHOLDER OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES, IN SUCH CAPACITY, SHALL HAVE ANY LIABILITY
FOR ANY OBLIGATIONS OF THE COMPANY OR ITS SUBSIDIARIES UNDER THE SECURITIES OR
THIS INDENTURE OR FOR ANY CLAIM BASED ON, IN RESPECT OF OR BY REASON OF SUCH
OBLIGATIONS OR THEIR CREATION. EACH HOLDER BY ACCEPTING ANY OF THE SECURITIES
WAIVES AND RELEASES ALL SUCH LIABILITY. THE WAIVER AND RELEASE ARE PART OF THE
CONSIDERATION FOR THE ISSUANCE OF THE SUBSIDIARIES.
SECTION 118. Reliance on Financial Data.
--------------------------
In computing any amounts under this Indenture:
(i) to the extent relevant in computing any amounts under this
Indenture, the Company shall use audited financial statements of the
Company, its Subsidiaries, any Person that would become a Subsidiary in
connection with the transaction that requires the computation and any
Person from which the Company or a Subsidiary has acquired an operating
business, or is acquiring an operating business in connection with the
transaction that requires the computation (each such Person whose financial
statements are relevant in computing any particular amount, a "Relevant
Person") for the period or portions of the period to which the computation
relates for which audited financial statements are available on the date of
computation and unaudited financial statements and other current financial
data based on the books and records of the Relevant Person or Relevant
Persons, as the case may be, to the extent audited financial statements for
the period or any portion of the period to which the computation relates
are not available on the date of computation, and
36
<PAGE>
(ii) the Company shall be permitted to rely in good faith on the
financial statements and other financial data derived from the books and
records of any Relevant Person that are available on the date of the
computation.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
---------------
The Securities and the Trustee's certificate of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or system on which
the Securities may be listed or eligible for trading or as may, consistently
herewith, be determined by the officers executing such Securities, as evidenced
by their execution of the Securities. Any portion of the text of any Security
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Security.
The definitive Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the officers of the Company executing such Securities, as
evidenced by their execution of such Securities.
Initial Securities offered and sold to "qualified institutional
buyers" (as defined in Rule 144A ("Rule 144A") under the Securities Act) in
reliance on Rule 144A shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons substantially in the form set forth in this Article (each a
"Restricted Global Security" and collectively the "Restricted Global
Securities"), deposited with, or on behalf of, the Depositary or with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The Restricted Global
Securities will be registered in the name of a nominee of the Depositary and
deposited with the Trustee on behalf of the purchasers thereof. The aggregate
principal amount of each Restricted Global Security may from time to time be
increased or decreased by adjustments made on the records of the Depositary or
its nominee, or of the Trustee, as custodian for the Depositary or its nominee,
as hereinafter provided.
Initial Securities offered and sold in reliance on Regulation S shall
be issued in the form of one or more permanent global Securities in definitive,
fully registered form without interest coupons substantially in the form set
forth in this Article (each an "Unrestricted Global Security" and collectively
the "Unrestricted Global Securities," and, together with the Restricted Global
Security, the "Global Securities" or each individually, a "Global Security"),
deposited with, or on behalf of, the Depositary or with the Trustee, as
custodian for the Depositary, duly
37
<PAGE>
executed by the Company and authenticated by the Trustee as hereinafter
provided. Each Unrestricted Global Security will be registered in the name of a
nominee of the Depositary and deposited with the Trustee on behalf of the
purchasers thereof, and, if any such purchaser so elects, for the account of the
Euroclear System ("Euroclear") or Cedelbank. The aggregate principal amount of
the Unrestricted Global Security may from time to time be increased or decreased
by adjustments made on the records of the Depositary or its nominee, or of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
SECTION 202. Restrictive Legend
------------------
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case as
provided for in the Registration Rights Agreement, the Restricted Global
Security shall bear the following legend (the "Private Placement Legend") on the
face thereof:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT OF 1933 IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING WITH THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT OF 1933, (3) TO AN INSTITUTION THAT IS AN ACCREDITED INVESTOR WITHIN
THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT OF 1933 IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, (4) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE
UNITED STATES."
38
<PAGE>
SECTION 203. Form of Face of Security
------------------------
The Securities are to be substantially in the following forms:
Unless this Security is presented by an authorized representative of
The Depository Trust Company, a New York corporation (55 Water Street, New York,
New York) ("DTC") to the Corporation or its agent for registration of transfer,
exchange or payment, and any Security issued is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of DTC and
any payment hereon is made to Cede & Co. (or such other person as requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein./*/
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of DTC or a nominee of
DTC. This Security is exchangeable for Securities registered in the name of a
Person other than DTC or its nominee only 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 DTC to a nominee of DTC or by a nominee of DTC to
DTC or another nominee of DTC) may be registered except in limited
circumstances.*
GLOBENET COMMUNICATIONS GROUP LIMITED
13% [Series B]/**/ Senior Note Due 2007
CUSIP: ________
No. __________ $______________
GlobeNet Communications Group Limited, a Bermuda company (herein
called the "Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to _________________ or registered assigns, the principal sum of
____________________ Dollars [(or such other amount that may from time to time
be indicated on the records of the Trustee as a result of increases or decreases
by adjustments made on the records of the Trustee as the custodian for the
Depository, in
____________________________
/*/ Include only for Global Securities
/**/ Include only for Exchange Securities
39
<PAGE>
accordance with the rules and procedures of the Depository)]/*/ on July 15,
2007, at the office or agency of the Company referred to below, and to pay cash
interest thereon and semi-annually thereafter, on January 15 and July 15 in each
year, from the most recent Interest Payment Date to which cash interest has been
paid or duly provided for, at the rate of 13% per annum [subject to adjustment
as provided below]/**/ until the principal hereof is paid or duly provided for,
and (to the extent lawful) to pay on demand interest on any overdue interest at
the rate borne by the Securities from the date on which such overdue interest
becomes payable to the date payment of such interest has been made or duly
provided for [subject to adjustment as provided below]/***/
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the January 1 or July 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date, and such defaulted interest,
and (to the extent lawful) interest on such defaulted interest at the rate borne
by the Securities, may be paid to the Person in whose name this Security (or one
or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or may be paid at any time in
any other lawful manner, all as more fully provided in said Indenture. Payment
of the principal of (and premium, if any, on) and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the City of New York, or at such other office or agency of the Company as may be
maintained for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
-------- -------
option of the Company (i) by check mailed to the address of the Person entitled
thereto as such address shall appear on the Security Register, or (ii) by wire
transfer of such interest in immediately available funds to an account located
in the United States maintained by the Depository.
[The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated as of July 14, 1999, between the Company
and the Initial Purchasers named therein. In the event that (i) (a) the Company
has not filed a registration statement (the "Exchange Offer Registration
Statement"), with the Securities and Exchange Commission (the "Commission") with
respect to a registered offer (the "Exchange Offer") to exchange this Security
for a security (an "Exchange Security") with terms identical in all material
respects to this Security (except that such security will not contain terms with
respect to registration rights
______________________
/*/ Include only for Global Securities
/**/ Include only for Initial Securities
/***/ Include only for Initial Securities
40
<PAGE>
or transfer restrictions, and provisions regarding interest and Liquidated
Interest (described below) will be modified or eliminated, as appropriate) on or
prior to the 60th day after July 14, 1999, or (b) the Exchange Offer
Registration Statement has not been declared effective under the Securities Act
on or prior to the 180th day after July 14, 1999, or (c) the Exchange Offer has
not been consummated on or prior to the 210th day after July 14, 1999; or (ii)
in lieu thereof, the shelf registration statement (the "Shelf Registration
Statement") under the Securities Act that has been filed by the Company, as
promptly as practicable, covering resales of this Security has not been declared
effective on or prior to the 60th day after such filing; or (iii) either the
Exchange Offer Registration Statement or, if applicable, the Shelf Registration
Statement is declared effective but thereafter ceases to be effective (subject
to certain exceptions) in connection with resales of this Security or Exchange
Securities in accordance with and during the periods specified in the
Registration Rights Agreement without being succeeded immediately by an
additional registration statement filed and declared effective, in each case (i)
through (iii) upon the terms and conditions set forth in the Registration Rights
Agreement (each such event referred to in clauses (i) through (iii), a
"Registration Default"), then additional interest ("Liquidated Interest") will
accrue (in addition to any stated interest on the Securities) from and including
the date on which any such Registration Default shall occur to but excluding the
date on which all Registration Defaults have been cured. Liquidated Interest
will be payable at a rate per annum equal to 0.5% of the principal amount of the
Securities during the first 90-day period following such Registration Default
and shall increase by 0.25% per annum of the principal amount of the Securities
for each subsequent 90-day period, but in no event shall such rates exceed 1.00%
per annum in the aggregate regardless of the number of Registration Defaults or
any other circumstance. The amount of accrued Liquidated Interest shall be
determined on the basis of the number of days actually elapsed.]*
Securities that remain outstanding after the consummation of the
Exchange Offer and Exchange Securities issued for the Initial Securities in
connection with the Exchange Offer will be treated as a single class of
securities under the Indenture.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
_____________________________
* Include only for Initial Securities.
41
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: GLOBENET COMMUNICATIONS
GROUP LIMITED
BY_______________________________
Attest:
_______________________________
Authorized Signature
SECTION 204. Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of securities of the
Company designated as its 13% [Series B]* Senior Notes Due 2007 (herein called
the "Securities"), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal amount up to $450,000,000, which may
be issued under an indenture (herein called the "Indenture") dated as of July
14, 1999 between the Company and Bankers Trust Company, as trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties, obligations and immunities thereunder of the Company, the Trustee and
the Holders of the Securities, and of the terms upon which the Securities are,
and are to be, authenticated and delivered.
The Company will pay to the Holders such Additional Amounts as may
become payable under Section 1022 of the Indenture.
The Securities are subject to redemption upon not less than 30 nor
more than 60 days notice, at any time on or after July 15, 2004, as a whole or
in part, at the election of the Company, at a Redemption Price equal to the
percentage of the principal amount set forth below if redeemed during the 12-
month period beginning July 15, of the years indicated:
__________________________
* Include for Exchange Securities only.
42
<PAGE>
Redemption
Year Price
------ -----------
2004 106.500%
2005 103.250%
and thereafter at 100% of the principal amount, together in the case of any such
redemption with accrued interest, if any, to the Redemption Date, all as
provided in the Indenture.
In addition, at any time or from time to time prior to July 15, 2002,
the Company may redeem up to 35% of the aggregate principal amount of Securities
originally issued under the Indenture at a redemption price of 113% of the
principal amount thereof, plus accrued and unpaid interest, if any, thereon to
the redemption date, with the proceeds from one or more Equity Offerings;
provided that:
(1) at least 65% of the aggregate principal amount of Securities
originally issued under the Indenture remain outstanding immediately after
the occurrence of any such redemption; and
(2) the redemption must occur within 90 days after the date of the
closing of the Equity Offering.
The Securities are also subject to redemption at the option of the
Company, in whole but not in part, at 100% of the principal amount in the event
that the Company becomes obligated to pay Additional Amounts in respect of the
Securities.
In the case of any redemption of Securities, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities, of record
at the close of business on the relevant Record Date referred to on the face
hereof. Securities (or portions thereof) for whose redemption and payment
provision is made in accordance with the Indenture shall cease to bear interest
from and after the Redemption Date.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof.
Upon the occurrence of a Change of Control, the Holder of this
Security may require the Company, subject to certain limitations provided in the
Indenture, to repurchase this Security at a purchase price in cash in an amount
equal to 101% of the principal amount thereof plus accrued and unpaid interest.
43
<PAGE>
The Securities are not entitled to the benefit of any sinking fund.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company on this Security and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Security.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by or on behalf of the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent or waiver is made upon
this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registerable on the Security
Register of the Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for such purpose in
the City of New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Securities Registrar
duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Securities, of authorized denominations and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
As provided for in the Indenture, the Company may, subject to certain
limitations, from time to time, without notice to or the consent of the Holders,
create and issue Additional Securities so that such Additional Securities shall
be consolidated and form a single series with the Securities initially issued by
the Company and shall have the same terms as to status, redemption or otherwise
as the Securities originally issued. Any Additional Securities shall be issued
with the benefit of an indenture supplemental to the Indenture.
44
<PAGE>
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Security for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any agent shall be affected by notice to
the contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS.
SECTION 205. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
The Trustee's certificate of authentication shall be in substantially
the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Dated: ____________________
This is one of the Securities referred to in the within-mentioned
Indenture.
[NAME OF TRUSTEE,]
as Trustee
By__________________________________
Authorized Signatory
45
<PAGE>
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $450,000,000 (of
which $300,000,000 was issued, authenticated and delivered on the date hereof),
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906, 1009, 1012 or 1108.
The Securities shall be known and designated as the "13% Senior Notes
Due 2007" of the Company. Their Stated Maturity shall be July 15, 2007, and
they shall bear interest at the rate of 13% per annum from July 14, 1999, or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, payable in arrears on January 15, 2000 and semi-annually
thereafter on January 15 and July 15 in each year and at said Stated Maturity,
until the principal thereof is paid or duly provided for.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company maintained for such
purpose in the City of New York (which initially will be the office of the
Trustee located at Four Albany Street, New York, New York 10006), or at such
other office or agency of the Company as may be maintained for such purpose;
provided, however, that, at the option of the Company, interest may be paid by
- -------- -------
check mailed to addresses of the Persons entitled thereto as such addresses
shall appear on the Security Register.
Additional Securities ranking pari passu with the Securities issued
the date hereof may be created and issued from time to time by the Company
without notice or consent to the Holders and shall be consolidated with and form
a single series with the Securities initially issued and shall have the same
terms as to status, redemption or otherwise as the Securities originally issued,
provided that, the aggregate principal amount of Securities issued shall be no
- --------
more than U.S.$450,000,000; and provided further that, the Company's ability to
-------- -------
issue Additional Securities shall be subject to the Company's compliance with
Section 1010. Any Additional Securities shall be issued with the benefit of an
indenture supplemental to this Indenture.
The Securities shall be redeemable as provided in Article Eleven.
At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Events of Default thereunder may be defeased as provided in Article Twelve.
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SECTION 302. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its
Chairman, its Executive Vice President or its Chief Financial Officer, under its
corporate seal reproduced thereon and attested by its Secretary or an Assistant
Secretary. The signature of any of these officers on the Securities may be
manual or facsimile signatures of the present or any future such authorized
officer and may be imprinted or otherwise reproduced on the Securities. The
seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
The Trustee shall authenticate Securities for original issue in an
aggregate principal amount not to exceed $450,000,000 upon receipt of a Company
Order, which shall specify the amount of Securities to be authenticated, the
names of the Persons in which such Securities shall be registered and the date
on which such Securities are to be authenticated and direct the Trustee to
authenticate such Securities together with an Officers' Certificate certifying
that all conditions precedent to the issuance of such Securities contained
herein have been complied with.
The Company may, without prior notice to the Holders, enter into an
appropriate agency agreement with any Securities Registrar, Paying Agent or co-
registrar not a party to this
47
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Indenture, which shall implement the provisions of this Indenture that relate to
such agent. The Company shall notify the Trustee of the name and address of any
such agent. If the Company fails to maintain a Securities Registrar or Paying
Agent, the Trustee shall perform such duties and shall be entitled to
appropriate compensation therefor pursuant to Section 606. The Company or any of
its Subsidiaries may act as Paying Agent, Securities Registrar, co-registrar or
transfer agent.
The Company initially appoints the Trustee as Securities Registrar and
Paying Agent in connection with the Securities.
In case the Company, pursuant to Article Eight, shall be consolidated
or merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which the Company shall have been merged, or the
Person which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article Eight, any of the Securities authenticated
or delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Securities executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon Company Request of
the successor Person, shall authenticate and deliver Securities as specified in
such request for the purpose of such exchange. If Securities shall at any time
be authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Securities, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such new name.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 1002,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the Trustee shall
authenticate
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and deliver in exchange therefor a like principal amount of definitive
Securities of authorized denominations. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers and exchanges of Securities. The Security
Register shall be in written form or any other form capable of being converted
into written form within a reasonable time. At all reasonable times, the
Security Register shall be open to inspection by the Trustee. The Trustee is
hereby initially appointed as security registrar (the "Securities Registrar")
for the purpose of registering Securities and transfers and exchanges of
Securities as herein provided. The Company may change the Securities Registrar
without prior notice to the Holders of the Securities, and the Company or any of
its Subsidiaries may act as Securities Registrar.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount (including an exchange of Initial Securities for Exchange Securities),
upon surrender of the Securities to be exchanged at such office or agency.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive, provided that no exchange
--------
of Initial Securities for Exchange Securities shall occur until an Exchange
Offer Registration Statement shall have been declared effective by the
Commission (confirmed in an Officers' Certificate) and that the Initial
Securities to be exchanged for the Exchange Securities shall be canceled by the
Trustee.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Securities
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer, in form satisfactory to the Company and the Securities Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
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No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any Tax that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 304, 906, 1009, 1012 or 1108 not involving any transfer.
The Company shall not be required (i) to register the transfer of or
exchange any Security during a period beginning at the opening of business 15
days before the selection of Securities to be redeemed under Section 1104 and
ending at the close of business on the day of such mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If (i) any mutilated Security is surrendered to the Trustee, or (ii)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any Tax that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
50
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SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company maintained for such purpose pursuant to Section
1002; provided, however, that each installment of interest may at the Company's
-------- -------
option be paid by (i) mailing a check for such interest, payable to or upon the
written order of the Person entitled thereto pursuant to Section 308, to the
address of such Person as it appears in the Security Register or (ii) transfer
to an account located in the United States maintained by the Depositary.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date, and in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given in the
manner provided for in Section 106, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange or
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<PAGE>
system on which the Securities may be listed or eligible for trading, and
upon such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
---------------------
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Sections 305 and 307) interest on such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and none
of the Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly canceled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or in
exchange for any Securities canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company unless
by Company Order the Company shall direct that canceled Securities be returned
to it.
SECTION 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
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<PAGE>
SECTION 311. CUSIP Number.
------------
The Company in issuing the Securities may use a "CUSIP" number (if
then generally in use), and if so, the Trustee may use the CUSIP numbers in
notices of redemption or exchange as a convenience to Holders; provided,
--------
however, that any such notice may state that no representation is made as to the
- -------
correctness or accuracy of the CUSIP number printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities. The Company shall promptly notify the
Trustee in writing of any change in the CUSIP number of the Securities.
SECTION 312. Book-Entry Provisions for Global Securities.
-------------------------------------------
(a) The Global Securities initially shall (i) be registered in the
name of the Depositary or the nominee of such Depositary, (ii) be deposited
with, or on behalf of, the Depositary or with the Trustee, as custodian for
Depositary and (iii) if a Restricted Global Security, bear the legend set forth
in Section 202.
The Depositary or its nominee shall be the Holder of the Global
Securities, and owners of beneficial interests in the Securities represented by
the Global Securities shall hold such interests pursuant to the Applicable
Procedures. Any such owner's beneficial ownership of any such Securities will
be shown only on, and the transfer of such ownership interest shall be effected
only through, records maintained by the Depositary or its nominee. Investors in
an Unrestricted Global Security may hold their interests in an Unrestricted
Global Security through Euroclear or Cedelbank, if they are participants in such
systems, or indirectly through organizations which are participants in such
systems. Euroclear and Cedelbank will hold interests in an Unrestricted Global
Security on behalf of their participants through customers' securities accounts
in their respective names on the books of their respective depositories, which,
in turn, will hold such interests in an Unrestricted Global Security in
customers' securities accounts in the depositories' names on the books of the
Depositary. All interests in a Global Security, including those held through
Euroclear or Cedelbank, may be subject to the Applicable Procedures.
(b) Transfers of any Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in any
Global Security may be transferred in accordance with the rules and procedures
of the Depositary and the provisions of Section 312. Unless (i) the Depositary
notifies the Company that it is unwilling or unable to continue as depositary
for a Global Security or ceases to be a "Clearing Agency" registered under the
Exchange Act or announces an intention permanently to cease business or does in
fact do so and a successor Depositary is not appointed by the Company within 90
days of such notice, (ii) a Default or an Event of Default has occurred and is
continuing with respect to a Global Security, (iii) in the case of a Global
Security held for the account of Euroclear or Cedelbank, Euroclear or Cedelbank,
as the case may be, is closed for business for 14 continuous Business Days or
announces an intention to cease or permanently ceases business, or (iv) the
Company notifies the Trustee in writing that it elects to cause the issuances of
the Securities in certificated form,
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<PAGE>
owners of beneficial interests in a Global Security will not be entitled to have
any portions of such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Securities in definitive form and
will not be considered the owners or holders of the Global Security.
(c) Securities issued in exchange for a Global Security or any
portion thereof pursuant to the last sentence of subsection (b) of this Section
shall be issued in definitive, fully registered form, without interest coupons,
shall have an aggregate principal amount equal to that of such Global Security
or portion thereof to be so exchanged, shall be registered in such names and be
in such authorized denominations as the Depositary shall designate and shall
bear any legends required hereunder. Any Global Security to be exchanged in
whole shall be surrendered by the Depositary to the Trustee, as Securities
Registrar. With regard to any Global Security to be exchanged in part, either
such Global Security shall be so surrendered for exchange or, if the Trustee is
acting as custodian for the Depositary or its nominee with respect to such
Global Security, the principal amount thereof shall be reduced, by an amount
equal to the portion thereof to be so exchanged, by means of an appropriate
adjustment made on the records of the Trustee. Upon any such surrender or
adjustment, the Trustee shall authenticate and deliver the Security issuable on
such exchange to or upon the order of the Depositary or an authorized
representative thereof. In the event of the occurrence of any of the events
specified in the last sentence of subsection (b) of this Section 312, the
Company will promptly make available to the Trustee a reasonable supply of
certificated Securities in definitive form.
(d) Neither the Company nor the Trustee shall have at any time any
responsibility or liability to any owner of any beneficial interest in any
Security or to any other person for any error, omission, action or failure to
act on the part of the Depositary, Euroclear or Cedelbank with respect to
payment, when due, to any such owner of the principal, premium, if any, and
interest on the Securities, proper recording of beneficial ownership of
Securities, proper transfers of such beneficial ownership or any notices to
beneficial owners or any other matter of similar or different kind pertaining to
the Securities.
SECTION 313. Special Transfer Provisions.
---------------------------
Unless and until (i) an Initial Security is sold under an effective
Registration Statement, or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Exchange Offer Registration Statement,
in each case pursuant to the Registration Rights Agreement, the following
transfer provisions shall apply:
(a) Restricted Global Security to Unrestricted Global Security. If,
----------------------------------------------------------
at any time, an owner of a beneficial interest in a Restricted Global
Security deposited with the Depositary (or the Trustee as custodian for the
Depositary) wishes to transfer its interest in such Restricted Global
Security to a Person who is required or permitted to take delivery thereof
in the form of an interest in an Unrestricted Global Security, such owner
shall, subject to the Applicable Procedures, exchange or cause the exchange
of such beneficial interest for an equivalent beneficial interest in an
Unrestricted Global Security as provided in this Section 313(a). Upon
receipt by the Trustee of (1) instructions given
54
<PAGE>
in accordance with the Applicable Procedures from an Agent Member directing
the Trustee to credit or cause to be credited a beneficial interest in an
Unrestricted Global Security in an amount equal to the beneficial interest
in the Restricted Global Security to be exchanged, (2) a written order
given in accordance with the Applicable Procedures containing information
regarding the participant account of the Depositary to be credited with
such increase, and (3) a certificate substantially in the form of Exhibit
A-1 hereto given by the owner of such beneficial interest, the Trustee, as
Securities Registrar, shall instruct the Depositary to reduce or cause to
be reduced the aggregate principal amount of the Restricted Global Security
and to increase or cause to be increased the aggregate principal amount of
the Unrestricted Global Security by the principal amount of the beneficial
interest in the Restricted Global Security to be exchanged, to credit or
cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Unrestricted Global Security
equal to the reduction in the aggregate principal amount of the Restricted
Global Security, and to debit, or cause to be debited, from the account of
the Person making such exchange or transfer the beneficial interest in the
Restricted Global Security that is being exchanged or transferred.
(b) Unrestricted Global Security to Restricted Global Security. If,
----------------------------------------------------------
at any time, an owner of a beneficial interest in an Unrestricted Global
Security deposited with the Depositary (or with the Trustee as custodian
for the Depositary) wishes to transfer its interest in such Unrestricted
Global Security to a Person who is required or permitted to take delivery
thereof in the form of an interest in a Restricted Global Security, such
owner shall, subject to the Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent beneficial interest in a
Restricted Global Security, as provided in this Section 313(b). Upon
receipt by the Trustee of (1) instructions given in accordance with the
Applicable Procedures from an Agent Member, directing the Trustee, as
Securities Registrar, to credit or cause to be credited a beneficial
interest in a Restricted Global Security equal to the beneficial interest
in an Unrestricted Global Security to be exchanged, and (2) a written order
given in accordance with the Applicable Procedures containing information
regarding the participant account of the Depositary to be credited with
such increase, the Trustee, as Securities Registrar, shall instruct the
Depositary to reduce or cause to be reduced the aggregate principal amount
of the Unrestricted Global Security and to increase or cause to be
increased the aggregate principal amount of the Restricted Global Security
by the principal amount of the beneficial interest in the Unrestricted
Global Security to be exchanged, and the Trustee, as Securities Registrar,
shall instruct the Depositary, concurrently with such reduction, to credit
or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Restricted Global Security equal
to the reduction in the aggregate principal amount of the Unrestricted
Global Security and to debit or cause to be debited from the account of the
Agent Member acting for the Person making such transfer the beneficial
interest in the Unrestricted Global Security that is being transferred.
(c) Restricted Global Security to Unrestricted Global Security After
----------------------------------------------------------------
Two Years. If the holder of a beneficial interest in the Restricted Global
---------
Security wishes at
55
<PAGE>
any time after July 14, 2001 to (A) transfer such interest to a Person who
wishes to take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Security or (B) to exchange such interest for a
beneficial interest in an Unrestricted Global Security, such transfer or
exchange may be effected, subject to the Applicable Procedures, only in
accordance with this Section 313(c). Upon receipt by the Trustee of (1) in
the case of a transfer or exchange of an interest in a Restricted Global
Security, instructions given in accordance with the Applicable Procedures
from an Agent Member directing the Trustee to credit or cause to be
credited a beneficial interest in an Unrestricted Global Security in an
amount equal to the beneficial interest in the Restricted Global Security
to be so transferred or exchanged, (2) a written order given in accordance
with the Applicable Procedures containing information regarding the
participant account of the Depositary and the Euroclear or Cedelbank
account (if applicable) to be credited with such beneficial interest and
(3) a certificate substantially in the form of Exhibit A-2 hereto given by
the holder of such beneficial interest, the Trustee, as Securities
Registrar, shall instruct the Depositary to reduce the principal amount of
the Restricted Global Security, and to increase the principal amount of the
Unrestricted Global Security, by the principal amount of the beneficial
interest in the Restricted Global Security to be so transferred or
exchanged, and to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in the
Unrestricted Global Security having a principal amount equal to the amount
by which the principal amount of the Restricted Global Security was reduced
upon such transfer or exchange.
(d) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, each Holder of and each owner of a beneficial interest in
such Security acknowledges the restrictions on transfer of such Security
set forth in this Indenture and in the Private Placement Legend and agrees
that it will transfer such Security only as provided in this Indenture.
The Trustee shall have no duty or liability with respect to any Holder's or
beneficial owner's compliance with the Private Placement Legend or this
Section 313(d).
The Securities Registrar shall retain copies of all letters, notices
and other written communications received pursuant to this Section 313. 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 Securities Registrar.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
Securities expressly provided for
56
<PAGE>
herein) and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture when:
(1) either:
(a) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been deposited
in trust with the Trustee or any Paying Agent or segregated and held
in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(b) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year
under arrangements reasonably satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at
the expense of, the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee, as
trust funds in trust solely for the benefit of Holders, cash in U.S.
Dollars, non-callable Government Securities, or a combination thereof,
in an amount sufficient, without consideration of any reinvestment
interest, to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest to the date of such
deposit (in the case of Securities which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be;
(2) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other material instrument to which the
Company is a party or by which the Company is bound;
(3) the Company has paid or caused to be paid all other sums payable
by the Company under the Indenture;
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(4) the Company has delivered irrevocable instructions to the Trustee
under this Indenture to apply the deposited money toward the payment of the
Securities at Stated Maturity or the Redemption Date, as the case may be;
and
(5) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest on, or Additional Amounts,
if any, with respect to, any Security when it becomes due and payable, and
continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity; or
(3) failure by the Company or any of its Restricted Subsidiaries to
make or consummate a Change of Control Offer or Asset Sale Offer,
respectively, when required in accordance with Section 1009 or Section
1012, or to comply with Article Eight; or
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(4) failure by the Company or any of its Restricted Subsidiaries for
30 days after notice to comply with Section 1009 and Section 1012 (except
for any failure governed by the preceding clause (3)), or Section 1010 and
Section 1011; or
(5) default in the performance, or breach, of any covenant or
agreement of the Company in this Indenture (other than a default in the
performance, or breach, of a covenant or agreement which is specifically
dealt with elsewhere in this Section), and continuance of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(6) there shall have occurred one or more defaults by the Company or
any of its Subsidiaries under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company, or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the Issue Date, if that default:
(a) is caused by a failure to pay at final maturity such
Indebtedness prior to the expiration of the grace period provided in
such Indebtedness (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to
its express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more; or
(7) the Company or any of its Restricted Subsidiaries shall fail to
pay final judgments which are non-appealable which require the payment in
money, either individually or in an aggregate amount, that is more than
$10,000,000 (net of applicable insurance coverage which is acknowledged in
writing by the insurer), which judgments are not paid, discharged or stayed
for a period of 60 days; or
(8) any Guarantee ceases to be in full force and effect or is
declared null and void or a Guarantor denies that it has any further
liability under a Guarantee, or gives notice to such effect (other than by
reason of the termination of this Indenture or the release of the Guarantee
in accordance with this Indenture) and such condition shall have continued
for 30 days after notice of such failure; or
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(9) the Company or any Restricted Subsidiary pursuant to or under or
within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding;
(b) consents to the entry of a Bankruptcy Order in an
involuntary case or proceeding or the commencement of any case against
it;
(c) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(d) makes a general assignment for the benefit of its creditors
or files a proposal or other scheme of arrangement involving the
rescheduling or composition of its Indebtedness;
(e) files a petition in bankruptcy or an answer or consent
seeking reorganization or relief for the Company or any Restricted
Subsidiary; or
(f) consents to the filing of such petition in bankruptcy or the
taking possession by a Custodian of it or any substantial part of its
property; or
(10) a court of competent jurisdiction in any involuntary case or
proceeding enters a Bankruptcy Order against the Company or any Restricted
Subsidiary, and such Bankruptcy Order remains unstayed and in effect for 30
consecutive days; or
(11) a Custodian shall be appointed out of court for the Company or
any Restricted Subsidiary, or with respect to all or any substantial part
of the property of the Company or any Restricted Subsidiary, or any
encumbrancer shall take possession of all or any substantial part of the
property of the Company or any Restricted Subsidiary.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than an Event of Default specified in
Section 501(9), 501(10) or 501(11)) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Securities Outstanding may declare the principal amount of all the
Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon the Company's receipt
of any such written notice such principal amount shall become immediately due
and payable. If an Event of Default specified in Section 501(9), 501(10) or
501(11) occurs and is continuing with respect to the Company, any Restricted
Subsidiary that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary of
the Company, then the principal amount of all the Securities 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 Company will deliver to the
Trustee, within 10 days after becoming aware of the occurrence thereof, notice
of any acceleration referred to in this Section 502.
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At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in principal amount of the Securities Outstanding, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
(B) all overdue interest on all Outstanding Securities;
(C) all unpaid principal of (and premium, if any, on) any
Outstanding Securities which has become due otherwise than by such
declaration of acceleration, and interest on such unpaid principal at the
rate borne by the Securities; and
(D) to the extent that payment of such interest is lawful,
interest on overdue interest and overdue principal at the rate borne by the
Securities; and
(2) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a declaration
of acceleration in respect of the Securities because of an Event of Default
specified in Section 501(6) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have been given to the Trustee by the Company and countersigned by
the holders of such Indebtedness or a trustee, fiduciary or agent for such
holders, within 30 days after such declaration of acceleration in respect of the
Securities, and no other Event of Default has occurred during such 30-day period
which has not been cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
The Company covenants that if:
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(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon written demand of the Trustee, pay to the Trustee for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal (and premium, if any) and interest, and
interest on any overdue principal (and premium, if any) and, to the extent that
payment of such interest shall be legally enforceable, upon any overdue
installment of interest, at the rate borne by the Securities, and, in addition
thereto, 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.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such 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
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and advances of the Trustee, its agents and counsel) and of the Holders
allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
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 the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize 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 Securities
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 505. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities.
- ----------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
and as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
------------------------------
Any money or other property collected by the Trustee pursuant to this
Article shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities 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 Securities for principal (and premium, if
any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
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SECTION 507. Limitation on Suits.
-------------------
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- --------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article Twelve)
and in such Security of the principal of (and premium, if any) and (subject to
Section 307) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
Section 509. 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
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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 Trustee
and the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, 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.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders 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.
SECTION 512. Control by Holders.
------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities shall have the right to 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, provided that:
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not
consenting.
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SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities may on behalf of the Holders of all the
Securities, by notice to the Trustee, waive any existing Default or Event of
Default hereunder and its consequences, except a continuing Default or Event of
Default:
(1) in respect of the payment of the principal of (or premium, if
any) or interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security 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 thereon.
SECTION 514. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder by its acceptance
of any Security shall be deemed to have agreed, that any court may in its
discretion require, 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, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding more
than 25% in principal amount of the Outstanding Securities, or to any suit
instituted by any Holder for the enforcement of the payment of the principal of
(or premium, if any) or interest on any Security on or after the respective
Stated Maturities expressed in such Security or in the coupons for such interest
(or, in the case of redemption, on or after the Redemption Date).
SECTION 515. Waiver of Stay or Extension 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 wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) 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.
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ARTICLE SIX
THE TRUSTEE
SECTION 601. Defaults.
--------
(a) If a Default or Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
its own affairs.
(b) Within 90 days after the occurrence of any Default hereunder, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in the
-------- -------
case of a Default in the payment of the principal of (or premium, if any) or
interest on any Security, 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 determines that the withholding of such notice is in the interest of the
Holders; and provided further that in the case of any Default of the character
-------- -------
specified in Section 501(5) no such notice to Holders shall be given until at
least 60 days after the occurrence thereof.
SECTION 602. Certain Rights of Trustee.
-------------------------
Subject to the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may 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 believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter 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, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and
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protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(5) 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 pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture.
The Trustee shall not be required 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.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
---------------------------------------------------
Securities.
- ----------
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder. The Trustee shall not be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 604. May Hold Securities.
-------------------
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The Trustee, any Paying Agent, any Securities Registrar or any other
agent of the Company or of the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to TIA Sections
310(b) and 311, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Paying Agent, Securities Registrar or such
other agent.
SECTION 605. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 606. Compensation and Reimbursement.
------------------------------
The Company agrees:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation, expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense, including reasonable counsel fees and
expenses, incurred without negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such
obligations of the Company, the Company and the Holders agree that the Trustee
shall have a claim prior to the Securities upon all property and funds held or
collected by the Trustee as such.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(9), (10) or (11), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such services are intended to
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constitute expenses of administration under any applicable Federal or State
bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture and the resignation or removal of the Trustee under Section 608 (to
the extent that any compensation or reimbursement obligation arises prior to
such resignation or removal).
SECTION 607. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of Federal, State, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 609 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least six
months, or
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(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 610. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
- --------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
In case at that time any of the Securities shall not have been authenticated,
any successor Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor Trustee. In all such
cases such certificates shall have the full force and effect which this
Indenture provides for the certificate of authentication of the Trustee shall
have; provided, however, that the right to adopt the certificate of
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authentication of any predecessor Trustee or to authenticate Securities in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders.
--------------------------------------------
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that none of the Company or the Trustee or any
agent of either of them shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders in accordance
with TIA Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee.
------------------
Within 60 days after May 15 of each year commencing with the first May
15 after the first issuance of Securities, the Trustee shall transmit to the
Holders, in the manner and to the extent provided in TIA Section 313(c), a brief
report dated as of such May 15 if required by TIA Section 313(a).
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SECTION 703. Reports by Company.
------------------
The Company shall file with the Trustee and deliver to the Holders of
Securities the reports and other information required to be provided by it
pursuant to and in accordance with Section 1008.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms.
----------------------------------------------------
(a) The Company shall not, directly or indirectly: (1) amalgamate or
consolidate or merge with or into another Person (whether or not the Company is
the surviving or continuing corporation); or (2) sell, assign, transfer, convey
or otherwise dispose of all or substantially all of its properties or assets, in
one or more related transactions, to another Person; unless:
(1) either: (a) the Company is the surviving or continuing
corporation or (b) the Person formed by, surviving or continuing after any
such amalgamation, consolidation or merger (if other than the Company), or
to which such sale, assignment, transfer, conveyance or other disposition
is made (the "Surviving Entity"), is a corporation organized or existing
under the laws of Bermuda or the United States, any state thereof or the
District of Columbia;
(2) the Surviving Entity (if other than the Company) assumes all then
existing obligations of the Company under the Securities, the Exchange
Securities, this Indenture and the Registration Rights Agreement, pursuant
to agreements reasonably satisfactory to the Trustee;
(3) no Default or Event of Default (or an event that, with the
passing of time or giving of notice or both, would constitute an Event of
Default) is continuing or would occur immediately after giving effect to
such transactions;
(4) except in the case of the amalgamation, consolidation or merger
of the Company with or into a Wholly Owned Restricted Subsidiary, the
Company or the Surviving Entity will (A) immediately after such transaction
after giving pro forma effect thereto and to any related financing
transactions, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to clause (a)(1) or (a)(2) of Section 1010 and (B)
immediately after such transaction, have Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately
preceding the transaction; and
(5) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that, in the opinion of such officer or
counsel, such
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amalgamation, consolidation, merger or transfer and such supplemental
indenture, if any, are permitted under this Indenture and that all
conditions precedent thereto, if any, have been satisfied.
(b) For purposes of this Section and Section 802, the transfer (by
assignment, sale or otherwise) of all or substantially all of the properties and
assets of one or more of the Company's Subsidiaries (other than to the Company
or a Wholly Owned Restricted Subsidiary), the Company's interest in which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
(c) Notwithstanding clauses (a) through (b), this Section shall not
apply to sales, assignments, transfers, conveyances and other dispositions of
telecommunications capacity made in the ordinary course of business by the
Company or a Restricted Subsidiary.
SECTION 802. Successor Substituted.
---------------------
Upon any amalgamation, consolidation or merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
801, the Surviving Entity 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 herein as the Company and
the Company shall be released from its obligations under the Securities and
under this Indenture, except with respect to any obligations that arise from, or
are related to, such transaction.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture; provided that such action shall not adversely affect
--------
the interests of the Holders in any material respect;
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
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(3) to evidence the succession of another Person to the Company and
to provide for the assumption of the Company's obligations to Holders of
Securities in the case of a merger, amalgamation or consolidation or sale
of all or substantially all of the Company's assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of Securities or that does not adversely affect the
legal rights under this Indenture of any such Holder;
(5) to add Guarantees with respect to the Securities;
(6) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture
Act; or
(7) to issue Additional Securities as provided in Section 301.
SECTION 902. Amendment, Supplement and Waiver with Consent of
------------------------------------------------
Holders.
- -------
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may amend or supplement the Securities, this
Indenture or any indenture supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such amendment, supplement,
-------- -------
modification or waiver shall, with respect to any Securities held by a non-
consenting Holder, without the consent of the Holder of each Outstanding
Security affected thereby:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
Security or alter the provisions with respect to the redemption of the
Securities (other than related provisions within Section 1009 and Section
1012);
(3) reduce the rate of or change the time for payment of interest on
any Security;
(4) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Securities (except a rescission
of acceleration of the Securities by the Holders of at least a majority in
aggregate principal amount of the Securities and a waiver of the payment
default that resulted from such acceleration);
(5) make any Security payable in currency other than that stated in
the Securities;
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(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Securities to receive
payments of principal of or premium, if any, or interest on the Securities;
(7) waive a redemption payment with respect to any Security (other
than a payment required by Section 1009 and Section 1012);
(8) cause the Securities to become subordinate in right of payment to
any other Indebtedness;
(9) make any change that would adversely affect the rights of the
Holders to receive Additional Amounts;
(10) modify the obligation of the Company to make a Change of Control
Offer at any time after the related Change of Control has occurred and the
Company has become obligated to make and consummate such Change of Control
Offer in accordance with Section 1009; or modify the obligation of the
Company to make an Asset Sale Offer at any time after the related Asset
Sale has been completed and the Company has become obligated to make and
consummate such Asset Sale Offer in accordance with Section 1012; or
(11) make any change in the preceding amendment and waiver provisions.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that, in the opinion of such officer or counsel, the
execution of such supplemental indenture is authorized or permitted by this
Indenture and that all conditions precedent thereof, if any, have been
satisfied. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise and that all conditions precedent
thereto, if any, have been satisfied.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
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SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form reasonably approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures.
---------------------------------
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Security affected,
in the manner provided for in Section 106, setting forth in general terms the
substance of such supplemental indenture.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and Interest.
---------------------------------------------------
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the City of New York, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Corporate Trust Office of the Trustee shall be
such office or agency of the Company, unless the Company shall designate and
maintain some other office or agency for one or more of such purposes. The
Company will give prompt written notice to the Trustee of any change in the
location of any such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company
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hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of the City of New York) where the Securities
may be presented or surrendered for any or all such purposes and may from time
to time rescind any such designation; provided, however, that no such
-------- -------
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in 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 any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (or premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal of (or premium,
if any) or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or before each due date of the principal of (or premium,
if any) or interest on any Securities, deposit with a Paying Agent a sum
sufficient to pay the principal (and premium, if any) or interest so becoming
due, such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of such action or any
failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any
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Paying Agent to pay, to the Trustee all sums held in trust by the Company or
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Company or such Paying Agent; and,
upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (or premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal, premium or interest has become due and payable shall be paid to
the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof,
subject to any defenses to payment, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Company
as trustee thereof, shall thereupon cease; provided, however, that the Trustee
-------- -------
or such Paying Agent, before being required to make any such repayment, may at
the expense of the Company cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, the City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
-------------------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and each
Subsidiary; provided, however, that the Company shall not be required to
-------- -------
preserve any such right or franchise if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all Taxes levied or imposed upon
the Company or any Subsidiary or upon the income, profits or property of the
Company or any Subsidiary and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a lien upon the property of the
Company or any Subsidiary; provided, however, that the Company shall not be
-------- -------
required to pay or discharge or cause to be paid or discharged any such Tax or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
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SECTION 1006. Maintenance of Properties.
-------------------------
The Company will cause all properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary 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 and advantageously
conducted at all times; provided, however, that nothing in this Section shall
-------- -------
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. Statement by Officers As to Default.
-----------------------------------
(a) The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year, a brief certificate from the principal executive
officer, principal financial officer or principal accounting officer as to his
or her knowledge of the Company's compliance with all conditions and covenants
under this Indenture. For purposes of this Section 1008(a), such compliance
shall be determined without regard to any period of grace or requirement of
notice under this Indenture.
(b) Within ten Business Days of any officer of the Company becoming
aware that any Default has occurred and is continuing under this Indenture, the
Company shall deliver to the Trustee by appropriate means an officers'
certificate specifying such Default.
SECTION 1008. Provision of Financial Statements.
---------------------------------
(a) For so long as any Initial Securities remain outstanding, the
Company will furnish without cost to the Holders the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(b) Whether or not the Company is subject to Section 13(a) or 15(d)
of the Exchange Act, the Company shall furnish to the Holders and the Trustee
(and, following the filing of the Exchange Offer Registration Statement or Shelf
Registration Statement, as the case may be, as contemplated by the Registration
Rights Agreement, will file with the Commission so long as permitted under the
Exchange Act and by the Commission) (i) within 90 days after the end of each
fiscal year, annual reports on Form 10-K (or any successor form), or within 120
days if on Form 20-F (or any successor form), containing the information
required to be contained therein (or required in such successor form) and (ii)
within 45 days after the end of each of the first three fiscal quarters of each
fiscal year, reports on Form 10-Q (or any successor form), or within 60 days if
on Form 6-K (or any successor form), which, regardless of applicable
requirements, shall, at a minimum, contain a "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
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SECTION 1009. Purchase of Securities upon Change of Control.
---------------------------------------------
(a) Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require that the Company repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Securities pursuant to the offer described herein (a "Change of Control Offer").
Pursuant to a Change of Control Offer, the Company shall offer to repurchase
Securities at a purchase price in cash equal to 101% of the aggregate principal
amount of Securities repurchased plus accrued and unpaid interest, if any,
thereon to the date of purchase (the "Change of Control Payment"). Within 30
days following any Change of Control, the Company shall mail a notice to each
Holder (with a copy to the Trustee) describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Securities on a
date specified in such notice (the "Change of Control Payment Date"), which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed, pursuant to the procedures required by this Indenture and
described in such notice. The Company shall comply with the requirements of
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 connection
with the repurchase of the Securities as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful:
(1) accept for payment all Securities or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Securities or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee the Securities so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Securities or portions thereof being purchased by the
Company.
(c) The Paying Agent will promptly mail to each Holder of Securities
so tendered the Change of Control Payment for such Securities, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Security equal in principal amount to any unpurchased
portion of the Securities surrendered, if any; provided that each such new
--------
Security will be in a principal amount of $1,000 or an integral multiple
thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
(d) The provisions of this Section that require the Company to make a
Change of Control Offer following a Change of Control shall be applicable
regardless of whether any other provisions of this Indenture are applicable.
Except as set forth in this Section, no Holder of Securities shall have any
right to require the Company to repurchase or redeem the Securities in the event
of takeover, recapitalization or other similar transaction.
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(e) Notwithstanding clauses (a) through (d) of this Section, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements of this Section and
purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 1010. Limitation on Incurrence of Indebtedness and Issuance
-----------------------------------------------------
of Preferred Stock.
- ------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, enter
into any guarantee of or otherwise become directly or indirectly liable,
contingently or otherwise (collectively, incur), with respect to any
Indebtedness (including Acquired Debt), other than Permitted Indebtedness, and
the Company shall not issue any Disqualified Stock and shall not permit any of
its Restricted Subsidiaries to issue any Disqualified Stock or shares of
Preferred Stock, except, that the Company or any Guarantor may incur
Indebtedness (including Acquired Debt) and issue Disqualified Stock if either:
(1) the Consolidated Leverage Ratio of the Company is less than 5.5
to 1.0 (prior to July 15, 2002), or 5.0 to 1.0 (subsequent to July 15,
2002); or
(2) the Consolidated Capital Ratio of the Company is less than 2.5 to
1.0.
(b) Indebtedness, Disqualified Stock or Preferred Stock of any Person
which is outstanding at the time such Person becomes a Restricted Subsidiary of
the Company (including upon designation of any Subsidiary or other Person as a
Restricted Subsidiary) or is merged with or into or consolidated with the
Company or a Restricted Subsidiary of the Company shall be deemed to have been
incurred at the time such Person becomes such a Restricted Subsidiary of the
Company or is merged with or into or consolidated with the Company or a
Restricted Subsidiary of the Company, as applicable.
(c) For purposes of determining compliance with any restriction on
the incurrence of Indebtedness denominated in a currency other than U.S.
Dollars, the U.S. Dollar-equivalent principal amount of such Indebtedness
incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date that such Indebtedness was incurred (or, in
the case of Indebtedness under a revolving credit facility, at the time of
commitment), provided that if such Indebtedness is incurred to refinance other
--------
Indebtedness denominated in a foreign currency, and such refinancing would cause
the applicable restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, such restriction shall
be deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. The principal amount of any Indebtedness incurred
to refinance other Indebtedness, if incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.
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(d) For purposes of determining any particular amount of Indebtedness
under this Section, (1) guarantees, Liens or obligations with respect to letters
of credit or other similar instruments supporting Indebtedness otherwise
included in the determination of such particular amount shall not be included
and (2) any Liens granted pursuant to the equal and ratable provisions referred
to in the "Liens" covenant in Section 1013 shall not be treated as giving rise
to Indebtedness. For purposes of determining compliance with this Section, any
other obligations of the obligor on such Indebtedness arising under any Lien or
letter of credit or other similar instrument or obligation supporting such
Indebtedness shall be disregarded to the extent that the same secures the
principal amount of such Indebtedness.
(e) The accrual of interest or the accretion of accreted value will
not be deemed an incurrence of Indebtedness for the purposes of this Section.
SECTION 1011. Limitation on Restricted Payments.
---------------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment unless at
the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to clause (1) or (2) of
Section 1010(a); and
(3) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments declared or made after the Issue Date
(excluding Restricted Payments permitted by clauses (2), (3), (4) and (6)
of paragraph (b) of this Section), is less than the sum, without
duplication, of
(i) the Applicable Percentage of the Consolidated Net Income
of the Company for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the Issue
Date to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of
such Restricted Payment (or, if such aggregate cumulative Consolidated
Net Income is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the
Company since the Issue Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock and other than the issuance of Equity
Interests in connection with the Private Equity Financing) or from the
issue or sale since the Issue Date of Disqualified Stock or debt
securities of the Company or a Restricted Subsidiary that have been
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converted into or exchanged for such Equity Interests (other than
Equity Interests (or Disqualified Stock or debt securities) sold to a
Subsidiary of the Company), plus the aggregate net cash proceeds
received by the Company upon any such conversion or exchange, plus
(iii) 100% of the net reduction in Investments on and after the
Issue Date, resulting (A) from payments of interest on Indebtedness,
dividends, repayments of loans or advances, or other transfers of
property (but only to the extent such interest, dividends, repayments
or other transfers of property are not included in the calculation of
Consolidated Net Income), in each case to the Company or any of its
Restricted Subsidiaries from any Person (including, without
limitation, from Unrestricted Subsidiaries of the Company) or (B) from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(in each case, valued as provided in the definition of Investments),
in the case of each of (A) and (B) in this subsection not to exceed in
the case of any Person the amount of Restricted Investments previously
made by the Company or any of its Restricted Subsidiaries in such
Person (subsequent to the Issue Date) and in each such case which was
treated as a Restricted Payment (other than any such Restricted
Payment that was made pursuant to the provisions of clauses (b)(1)
through (b)(8) of this Section).
(b) Notwithstanding paragraph (a) of this Section, the following
Restricted Payments will not be prohibited:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would have
complied with this Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness of the Company subordinate to the
Securities or of any Equity Interests of the Company or any Restricted
Subsidiary in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company)
of, Equity Interests of the Company (other than Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized
--------
for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (a)(3)(ii) of this Section;
(3) the defeasance, redemption, retirement, repurchase or other
acquisition of any Indebtedness of the Company subordinate to the
Securities in exchange for, or with the net cash proceeds from an
incurrence of, Permitted Refinancing Indebtedness;
(4) Investments made out of an amount not exceeding the net cash
proceeds of one or more sales (other than to a Subsidiary of the Company)
of Equity Interests (other than Disqualified Stock) of the Company;
provided that the amount of any such net cash proceeds that are utilized
--------
for any such Investment shall be excluded from clause (a)(3)(ii) of this
Section;
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(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company pursuant to any management
equity subscription agreement or stock option agreement and the repurchase
of Equity Interests of the Company from employees, officers or directors of
the Company or any of its Restricted Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of
such officers, directors and employees in an aggregate amount not to exceed
$2.0 million in any calendar year (provided that unused amounts may be
carried over to succeeding next 12 month periods, subject to a maximum of
$4.0 million);
(6) Investments to the extent payment for which consists of Equity
Interests (other than Disqualified Stock) of the Company;
(7) pro rata dividends or other distributions made by a Restricted
Subsidiary of the Company to minority stockholders (or owners of an
equivalent interest in the case of a Restricted Subsidiary that is not a
Corporation);
(8) the payment, purchase, redemption or other acquisition or
retirement of any Indebtedness of the Company that is expressly
subordinated in right of payment to the Securities at a purchase price not
greater than 101% of the principal amount thereof, together with accrued
interest, if any, thereon, in the event of a Change of Control, in
accordance with Section 1009; provided that prior to such purchase the
--------
Company has made the Change of Control Offer to all Holders of the
Securities as provided under such caption and has purchased all Securities
validly tendered for payment in connection with such Change of Control
Offer;
(9) the payment, purchase, redemption or other acquisition or
retirement out of any Excess Proceeds of any Indebtedness of the Company
that is expressly subordinated in right of payment to the Securities at a
purchase price not greater than 100% of the principal amount thereof
together with accrued interest, if any, thereon, in the event the Company
is required to make an Asset Sale Offer, in accordance with Section 1012;
provided that prior to such purchase the Company has made the Asset Sale
--------
Offer to all Holders of the Securities as provided under such Section 1012
and has purchased out of Excess Proceeds all Securities validly tendered
for payment in connection with such Asset Sale Offer; and
(10) other Restricted Payments in an aggregate amount not to exceed
$5.0 million;
provided, however, that except in the case of clause (b)(1), no Default or Event
- -------- -------
of Default has occurred and is continuing or will occur as a consequence
thereof.
(c) The amount of all Restricted Payments (other than cash) shall be
the Fair Market Value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The Fair Market Value of any assets or securities that are required to
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be valued by this covenant shall be determined by the Board of Directors of the
Company whose resolution with respect thereto shall be delivered to the Trustee.
The Board of Directors' determination must be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if the Fair Market Value exceeds $10.0 million. Not later than the date
of making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
SECTION 1012. Limitation on Certain Asset Sales.
---------------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the assets or Equity Interests issued or sold or
otherwise disposed of; and
(2) at least 75% of the consideration received by the Company or the
Restricted Subsidiary is in the form of cash and/or Cash Equivalents and/or
Fiber Optic Assets, provided that (x) the amount of any Indebtedness of the
--------
Company (other than Indebtedness that is expressly subordinated in right of
payment to the Securities) or any Restricted Subsidiary that is assumed by
the transferee of any such assets pursuant to an agreement that
unconditionally releases the Company and its Restricted Subsidiaries from
further liability related to such Indebtedness, and (y) liabilities other
than Indebtedness for which any other Person assumes responsibility, shall
in each case be treated as cash for purposes of this Section.
(b) Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company or the Restricted Subsidiary may apply the Net Proceeds:
(1) to permanently reduce commitments under the New Credit Facility
or to permanently repay or retire outstanding Indebtedness incurred
pursuant to clause (1) of the definition of "Permitted Indebtedness", or
(2) to acquire Fiber Optic Assets.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture.
(c) Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the preceding paragraph will constitute Excess Proceeds.
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company
shall make an offer (an "Asset Sale Offer") to all Holders of Securities and may
make an offer to all holders of other
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Indebtedness that is pari passu with the Securities containing provisions
similar to those set forth in this Indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets, to purchase the maximum
principal amount of Securities and such other pari passu Indebtedness that may
be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer
will be equal to 100% of principal amount plus accrued and unpaid interest, if
any, thereon to the date of purchase and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by this Indenture.
If the aggregate principal amount of Securities and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Securities and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds will be reset at zero.
(d) The Fair Market Value of any assets or securities that are
required to be valued by this Section shall be determined by the Board of
Directors of the Company whose resolution with respect thereto shall be
delivered to the Trustee. The Board of Directors' determination must be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the Fair Market Value of such assets or
securities (excluding any Fiber Optic Assets) exceeds $10.0 million.
SECTION 1013. Restrictions on Liens.
---------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or otherwise
cause or suffer to exist or become effective any Lien of any kind on any asset
or property now owned or hereafter acquired, except Permitted Liens, unless the
Securities are secured equally and ratably with the obligation so secured, so
long as such obligation is so secured.
SECTION 1014. Dividends and Other Payment Restrictions Affecting
--------------------------------------------------
Restricted Subsidiaries.
- -----------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital
Stock to the Company or any of the Company's Restricted Subsidiaries, or
with respect to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to the Company or any of the
Company's Restricted Subsidiaries;
(2) make loans or advances to the Company or any of the Company's
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of
the Company's Restricted Subsidiaries.
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(b) However, the preceding restrictions will not apply to
encumbrances or restrictions existing under or by reason of:
(1) Existing Indebtedness or other agreements as in effect on the
Issue Date and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals,
--------
increases, supplements, refundings, replacement or refinancings are not
materially more restrictive, taken as a whole, with respect to such
encumbrances and restrictions than those contained in such Existing
Indebtedness, as in effect on the Issue Date;
(2) this Indenture, the Securities and the Exchange Securities;
(3) the New Credit Facility, as in effect on the date of its
execution and as may be modified in accordance with the provisions of the
commitment letter relating to the New Credit Facility permitting certain
changes in connection with syndication, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
--------
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are not materially more restrictive, taken as a whole, with
respect to such encumbrances and restrictions than those contained in the
New Credit Facility, as in effect on the date of its execution and as
modified in the manner described above;
(4) applicable law or any governmental or regulatory permit or
license;
(5) any instrument governing Indebtedness or Capital Stock of, or
agreement binding on, a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or
in contemplation of such acquisition), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
--------
permitted to be incurred by the terms of this Indenture;
(6) customary non-assignment provisions restricting subletting or
assignment in leases or other agreements entered into in the ordinary
course of business and consistent with past practices, if any;
(7) Purchase Money Indebtedness or Vendor Financing Indebtedness that
imposes restrictions of the nature described in clause (a)(3) of this
Section, provided that such obligations are permitted to be incurred under
--------
clause (6) or clause (7), as the case may be, of the definition of
"Permitted Indebtedness" in this Indenture;
(8) any agreement for the sale or other disposition of a Restricted
Subsidiary or any asset that restricts distributions by such Restricted
Subsidiary or transfer of such
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asset pending its sale or other disposition, provided that the consummation
--------
of such transaction would not result in a Default or an Event of Default,
that such restriction terminates if such transaction is not consummated and
that the consummation or abandonment of such transaction occurs within one
year of the date such agreement was entered into;
(9) Permitted Refinancing Indebtedness, provided that the
--------
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are not materially more restrictive, taken as a
whole, than those contained in the agreements governing the Indebtedness
being refinanced;
(10) Liens otherwise permitted to be incurred pursuant to Section 1013
that limit the right of the Company or any of its Restricted Subsidiaries
to dispose of the assets subject to such Lien;
(11) customary limitations on the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business; and
(12) any encumbrance or restriction under any agreement relating to
Indebtedness incurred by a Restricted Subsidiary of the Company permitted
to be incurred under Section 1010; provided that the Company in good faith
--------
determines (a) that, taken as a whole, the terms and conditions of any such
encumbrances or restrictions are not materially less favorable to the
Holders than those in the New Credit Facility, and (b) that any such
encumbrance or restriction will not prevent such Restricted Subsidiary from
making dividends, distributions, loans or advances to the Company in
amounts sufficient for the Company, together with amounts otherwise
available to the Company, to make mandatory payments of principal, premium,
if any, and interest and any Additional Amounts pursuant to the terms of
the Securities and this Indenture and pursuant to the terms of any other
Indebtedness of the Company.
SECTION 1015. Transactions with Affiliates.
----------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties, assets or securities to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliated Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary with a Person that is not an Affiliate; and
(2) the Company delivers to the Trustee:
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(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with this covenant and that such Affiliate
Transaction has been approved by a majority of the disinterested
members of the Board of Directors; provided that if there are no
--------
disinterested members of the Board of Directors, the Company shall
deliver an opinion as to the fairness to the Company of such Affiliate
Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion as to the fairness to the Company
of such Affiliate Transaction from a financial point of view issued
by an accounting, appraisal or investment banking firm of national
standing.
The following items will not be subject to the provisions of the prior
paragraph:
(1) (a) the entering into, maintaining or performance of any
employment contract, collective bargaining agreement, benefit plan, program
or arrangement, related trust agreement or any other similar arrangement
for or with any employee, officer or director heretofore or hereafter
entered into in the ordinary course of business, including vacation,
health, insurance, deferred compensation, retirement, savings or other
similar plans, (b) the payment of compensation, performance of
indemnification or contribution obligations, or an issuance, grant or award
of stock, options or other equity-related interests or other securities, to
employees, officers or directors in the ordinary course of business or (c)
any transaction with an officer or director in the ordinary course of
business not involving more than $100,000 in any one case;
(2) Affiliate Transactions in effect or approved by the Board of
Directors of the Company on or before the date of this Indenture, including
any amendments hereto (provided that the terms of such amendments are not
--------
materially less favorable to the Company than the terms of such agreement
prior to such amendment);
(3) transactions between or among the Company and any of the
Company's Restricted Subsidiaries;
(4) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company;
(5) any transaction consistent with commercially reasonable
practices, and approved by a majority of the disinterested members of the
Board of Directors of the Company; and
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(6) Permitted Investments or Restricted Payments that are permitted
by Section 1011.
SECTION 1016. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
--------
the Company or any of its Restricted Subsidiaries may enter into a sale and
leaseback transaction if:
(1) the Company (or such Restricted Subsidiary, as the case may be)
could have:
(a) incurred indebtedness in an amount equal to the Attributable
Debt relating to such sale and leaseback transaction pursuant to
either of the Consolidated Leverage Ratio or Consolidated Capital
Ratio tests set forth in Section 1010(a); and
(b) incurred a Lien to secure such Indebtedness pursuant to
Section 1013;
(2) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the Fair Market Value (as determined in good faith by
the Board of Directors of the Company and set forth in an Officers'
Certificate delivered to the Trustee) of the property that is the subject
of such sale and leaseback transaction; and
(3) the transfer of assets in such sale and leaseback transaction is
treated as an Asset Sale, and the Company applies the proceeds of such
transaction in compliance with Section 1012.
SECTION 1017. Limitation on Issuances and Sales of Equity Interests
-----------------------------------------------------
in Restricted Subsidiaries.
- --------------------------
The Company:
(1) shall not, and shall not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Restricted Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the
Company), unless:
(a) such transfer, conveyance, sale, lease or other disposition
is of all the Equity Interests in such Restricted Subsidiary; and
(b) the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with Section
1012; and
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(2) will not permit any Restricted Subsidiary of the Company to issue
any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company (except in a transaction that complies with (1) of this Section);
provided, however, that this Section does not prevent any sale or issuance of
- -------- -------
Equity Interests of a Restricted Subsidiary, and the ownership by any Person of
such Equity Interests, where such Subsidiary following such sale or issuance
becomes a Fiber Optic Joint Venture, and any Investment in such Restricted
Subsidiary remaining after giving effect to such sale or issuance would have
been permitted to be made under any one or more of the clauses (1) through (3)
of Section 1011(a), clause (b)(10) of Section 1011 or under clause (7) of the
definition of "Permitted Investments", and the proceeds of such sale or issuance
are applied in compliance with Section 1012.
SECTION 1018. Limitation on Future Guarantees.
-------------------------------
(a) The Company shall not permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company that is pari passu
with or subordinated to the Securities, unless (1) such Restricted Subsidiary
previously has provided a Guarantee and (2) such Restricted Subsidiary waives,
and will not in any manner whatsoever claim or take the benefit or advantage of,
any rights of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Guarantee, until payment in full
of the outstanding principal amount of the Securities and any premium or accrued
and unpaid interest thereon then due and owing; provided that this paragraph
--------
shall not be applicable to any guarantee of any Restricted Subsidiary (a) 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 or (b) of Indebtedness incurred pursuant to clause (1) of
the definition of "Permitted Indebtedness. If the guaranteed Indebtedness is
(1) pari passu with the Securities, then the guarantee of such guaranteed
Indebtedness shall be pari passu with, or subordinated to, the Guarantee, or (2)
subordinated to the Securities, then the guarantee of such guaranteed
Indebtedness shall be subordinated to the Guarantee, at least to the extent that
the guaranteed Indebtedness is subordinated to the Securities.
(b) Any Guarantee will include provisions applicable to the Guarantor
substantially similar to those in Section 1022 and Article Eight.
Notwithstanding the foregoing, any Guarantee by any Restricted Subsidiary may
provide by its terms that it shall be automatically and unconditionally released
and discharged upon (and corresponding provisions to those in Article Eight will
not be applicable in the event of) (1) any sale, exchange or transfer (including
by way of merger or consolidation), to any Person not an Affiliate of the
Company, of all of the Company's and each Restricted Subsidiary's Capital Stock
in, or all or substantially all the assets of, such Restricted Subsidiary (which
sale, exchange, transfer, or other transaction is not prohibited by the
Indenture), (2) the legal or covenant defeasance of the Securities or
satisfaction and discharge of this Indenture, subject to customary contingent
reinstatement
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provisions, (3) the release or discharge of the guarantee, assumption or other
incurrence of liability that resulted in the creation of such Guarantee, except
a discharge or release by or as a result of payment under such Guarantee or (4)
the merger or consolidation of such Restricted Subsidiary with and into the
Company or another Subsidiary Guarantor that is the surviving Person in such
merger or consolidation.
(c) Each Guarantee will be limited to the maximum amount that can be
Guaranteed by such Restricted Subsidiary under applicable law without rendering
the Guarantee voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
SECTION 1019. Limitation on Business Activities
---------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than a Permitted Business.
SECTION 1020. Limitation on Unrestricted Subsidiaries.
---------------------------------------
(a) The Board of Directors of the Company may designate, pursuant to
a Board Resolution, any Subsidiary (including any newly acquired or newly formed
Subsidiary) of the Company (other than Atlantica Network (Bermuda) Ltd.) to be
an Unrestricted Subsidiary so long as such Subsidiary has no Indebtedness other
than Non-Recourse Debt.
(b) If a Restricted Subsidiary is designated as an Unrestricted
Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned
by the Company and its Restricted Subsidiaries in the Subsidiary so designated
will be deemed to be an Investment made as of the time of such designation and
that designation will only be permitted if such Investment would be permitted at
that time.
(c) Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with clauses (a)
and (b) of this Section.
The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary, provided that:
--------
(1) no Default or Event of Default has occurred and is continuing
following such designation, and
(2) the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 1010(a) (treating
any Indebtedness of such Unrestricted Subsidiary as the incurrence of
Indebtedness by a Restricted Subsidiary).
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Such redesignation will increase the amount available for Restricted
Payments under Section 1011 as provided therein or Permitted Investments, as
applicable.
SECTION 1021. Limitation on Payments for Consent.
----------------------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration to or for
the benefit of any Holder of Securities for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of this Indenture or the
Securities unless such consideration is offered to be paid and is paid to all
Holders of the Securities that consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
SECTION 1022. Payments of Additional Amounts.
------------------------------
(a) All payments made by or on behalf of the Company on or with
respect to the Securities shall be made free and clear of and without
withholding of or deduction for or on account of any present or future Taxes
imposed or levied by or on behalf of any jurisdiction or any political
subdivision thereof or by any authority or agency therein or thereof having
power to tax, unless the withholding or deduction of such Taxes is required by
law.
(b) If the Company or any other payor shall at any time be required
to withhold or deduct any amount on account of Taxes from any payment made on or
with respect to the Securities, the Company or such other payor shall:
(1) make such withholding or deduction;
(2) remit the full amount deducted or withheld to the relevant
government authority in accordance with applicable law;
(3) pay to each Holder of Securities such additional amounts
("Additional Amount") as may be necessary so that the net amount received
by each Holder after such withholding or deduction (including in respect of
Additional Amounts) shall not be less than the amount the Holder would have
received if such Taxes had not been required to be so withheld or deducted;
(4) furnish to the Holders, within 30 days after the date the payment
of any such Taxes is due, upon request, certified copies of tax receipts
evidencing such payment by the Company or such other payor;
(5) indemnify and hold harmless each Holder (other than an Excluded
Holder) from (A) any Taxes paid by such Holder as a result of payments made
on or with respect to the Securities, (B) any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto
and (C) any Taxes imposed with respect to any reimbursement under (A) or
(B), but excluding any such taxes described in (c)(i)(A) of this Section
and
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(6) at least 30 days prior to each date on which any Additional
Amounts are payable, the Company will deliver to Paying Agent (if not the
Company) an Officers' Certificate stating the amounts so payable and such
other information necessary to enable the Paying Agent to pay such
Additional Amounts to Holders on the payment date.
(c) Notwithstanding clauses (a) and (b) of this Section 1022, the
Company or a successor corporation shall not be required to make any payment to
a Holder of Additional Amounts for or on account of:
(i) Any Tax that would not have been imposed but for (A) the
existence of any present or former connection between such Holder (an
"Excluded Holder") (or between a fiduciary, settlor, beneficiary or partner
of, or possessor of a power over such Holder, if such Holder is an estate,
trust or partnership) and the taxing jurisdiction or any political
subdivision or territory or possession thereof or area subject to its
jurisdiction (other than the holding of a Security or the receipt of
payments or exercise of rights thereunder), including, without limitation,
such Holder (or such fiduciary, settlor, beneficiary, partner or possessor)
being or having been a citizen or resident thereof or being or having been
present or engaged in a trade or business therein or having or having had
permanent establishment therein, (B) the presentation of a Security (where
presentation is required) for payment on a date more than 30 days after (x)
the date on which such payment became due and payable or (y) the date on
which payment thereof is duly provided for, whichever occurs later (except
to the extent that the Holder of such Security would have been entitled to
Additional Amounts in respect of such Taxes on presenting such Security for
payment on any date prior to such date), or (c) the presentation of a
Security for payment in Bermuda or any political subdivision thereof or
therein, unless such Security could not have been presented for payment
elsewhere;
(ii) Except as otherwise provided, any estate, inheritance, gift,
sales, transfer, personal property or similar Tax;
(iii) Any Tax that is imposed or withheld by reason of the failure by
the Holder or the beneficial owner of the Security to comply with a written
request of the Company addressed to the Holder and made at least 60 days
prior to the first payment date with respect to which the Company or any
successor corporation shall apply this clause (iii), (A) to provide
information, documents or other evidence concerning the nationality,
residence or identity of the Holder or such beneficial owner or (B) to make
and deliver any declaration or other similar claim (other than a claim for
refund of a tax, assessment or other governmental charge withheld by the
Company) or satisfy any information or reporting requirements, which, in
the case of (A) or (B), shall at any time be required or imposed by a
statute, treaty, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of such tax,
assessment or other governmental charge, provided, however, that the
-------- -------
limitations on the Company's or any successor corporations' obligation to
pay Additional Amounts set forth in clauses (A) and (B) above shall not
apply if the provision of information, documentation, declaration or other
evidence or reporting described in such clauses (A) and (B) would be
materially
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more onerous, in form, in procedure or in the substance of information
disclosed, to a Holder or beneficial owner of a Security than comparable
information or other information or other applicable reporting requirements
imposed or provided for under United States tax law (such as Internal
Revenue Service Form 1001 or W-8BEN); or
(iv) Any combination of items (i), (ii) and (iii) above.
(d) All references in this Indenture, in any context, to the
payment of principal, premium, if any, Redemption Price, Change of Control
Payment, offer price and interest, or any other amount payable under or with
respect to any Security shall be deemed to include the payment of Additional
Amounts to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof.
SECTION 1023. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 1007 through 1021, inclusive,
if before or after the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Securities, by Act of such
Holders, waive such compliance in such instance with such term, provision or
condition, but no such waiver shall extend to or affect such term, provision or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full force
and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
-------------------
The Securities may be redeemed, at the election of the Company, as a
whole or from time to time in part, at any time on or after July 15, 2004,
subject to the conditions and at the Redemption Prices specified in the form of
Security, together with accrued interest to the Redemption Date. In addition,
up to 35% of the aggregate principal amount of the Securities originally issued
under this Indenture may be redeemed, at the election of the Company, as a whole
or from time to time in part, at any time prior to July 15, 2002, subject to the
conditions and at a redemption price specified in the form of Security, together
with accrued interest to the Redemption Date. The Securities are also subject
to redemption, in whole but not in part, at 100% of the principal amount in the
event the Company becomes obligated to pay Additional Amounts in respect of the
Securities.
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SECTION 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, on a pro rata basis, by lot or by such other method as
the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions of the principal of Securities; provided,
--------
however, that no such partial redemption shall reduce the portion of the
- -------
principal amount of a Security not redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
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(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice
which relates to such Security shall state that on and after the Redemption
Date, upon surrender of such Security, the holder will receive, without
charge, a new Security or Securities of authorized denominations for the
principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section
1107) will become due and payable upon each such Security, or the portion
thereof, to be redeemed, and that interest thereon will cease to accrue on
and after said date, and
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and accrued interest on, all
the Securities which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security
for redemption in accordance with said notice, such Security shall be paid by
the Company at the Redemption Price, together with accrued interest, if any, to
the Redemption Date; provided, however, that installments of interest whose
-------- -------
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
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If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Securities.
SECTION 1108. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part (pursuant to the
provisions of this Article) shall be surrendered at the office or agency of the
Company maintained for such purpose pursuant to Section 1002 (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing),
and the Company shall execute, and the Trustee shall authenticate and deliver to
the Holder of such Security, upon the cancellation of such surrendered Security,
without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, and in the name of such Holder in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Legal Defeasance or
----------------------------------------------
Covenant Defeasance.
- -------------------
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 1202 or Section 1203 be
applied to all Outstanding Securities upon compliance with the conditions set
forth below in this Article Twelve.
SECTION 1202. Legal Defeasance.
----------------
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company and any Guarantor shall be deemed
to have been discharged from their respective obligations with respect to all
Outstanding Securities on the date the conditions set forth in Section 1204 are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Securities, which shall thereafter
be deemed to be "Outstanding" only for the purposes of Section 1205 and the
other Sections of this Indenture referred to in (A) and (B) below, and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Securities to receive,
solely from the trust fund described in Section 1204 and as more fully set forth
in such Section, payments in respect of the principal of (and premium, if any,
on) and interest on such Securities when such payments are due, (B) the
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Company's obligations with respect to such Securities under Sections 304, 305,
306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder, (D) this Section 1202 and (E) the Company's obligations to
pay Additional Amounts. Subject to compliance with this Article Twelve, the
Company may exercise its option under this Section 1202 notwithstanding the
prior exercise of its option under Section 1203 with respect to the Securities.
SECTION 1203. Covenant Defeasance.
-------------------
Upon the Companys exercise under Section 1201 of the option applicable
to this Section 1203, the Company and any Guarantor shall be released from their
obligations under any covenant contained in Section 801(a)(4) and in Sections
1007 through 1021 with respect to the Outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Securities shall thereafter be deemed not to be
"Outstanding" for the purposes of such covenant, including any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Outstanding Securities, the Company
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document, and such omission to comply shall not constitute a
Default or an Event of Default, but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby.
SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance.
-----------------------------------------------------
The following shall be the conditions to application of either Section
1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 607 who shall agree to comply with the provisions of this
Article Twelve applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
cash in U.S. Dollars in an amount, or (B) non-callable Government
Securities which through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later than
one day before the due date of any payment, money in an amount, or (C) a
combination thereof, 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, and which shall be
applied by the Trustee (or other qualifying trustee) to pay and discharge,
the principal of (and premium, if any) and interest on the Outstanding
Securities on the Stated Maturity (or Redemption Date, if applicable) of
such principal (and premium, if any) or installment of interest; provided
--------
that the Trustee shall have been irrevocably instructed to
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<PAGE>
apply such money or the proceeds of such Government Securities to said
payments with respect to the Securities and any such other amounts due the
Trustee under Section 606. Before such a deposit, the Company may give to
the Trustee, in accordance with Section 1103 hereof, a notice of its
election to redeem all of the Outstanding Securities at a future date in
accordance with Article Eleven hereof, which notice shall be irrevocable.
Such irrevocable redemption notice, if given, shall be given effect in
applying the foregoing.
(2) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds to
be applied to such deposit) or, insofar as paragraphs (9), (10) and (11) of
Section 501 hereof are concerned, at any time during the period ending on
the 91st day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period).
(3) Such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or
any of its Restricted Subsidiaries is a party or by which the Company or
any of its Restricted Subsidiaries is bound.
(4) In the case of an election under Section 1202, the Company shall
have delivered to the Trustee an Opinion of Counsel confirming that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the Issue Date, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the Holders
of the Outstanding Securities will not recognize income, gain or loss for
United States federal income tax purposes as a result of such Legal
Defeasance and will be subject to United States federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred and the Company shall
have delivered to the Trustee an Opinion of Counsel in Bermuda reasonably
acceptable to the Trustee confirming that the Holders of the outstanding
Securities will not recognize income, gain or loss for Bermuda tax purposes
as a result of such Legal Defeasance and will be subject to Bermuda tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred.
(5) In the case of an election under Section 1203, the Company shall
have delivered to the Trustee an Opinion of Counsel reasonably acceptable
to the Trustee confirming that the Holders of the Outstanding Securities
will not recognize income, gain or loss for United States federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
United States federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant
Defeasance had not occurred and the Company shall have delivered to the
Trustee an Opinion of Counsel in Bermuda reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Securities will not
recognize income, gain or loss for
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Bermuda tax purposes as a result of such Covenant Defeasance and will be
subject to Bermuda tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred.
(6) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company shall deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Securities over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in the case of the Officers'
Certificate, stating that all conditions precedent relating to either the
Legal Defeasance under Section 1202 or the Covenant Defeasance under
Section 1203 (as the case may be) have been complied with and, in the case
of the Opinion of Counsel, that all conditions precedent providing for
Legal Defeasance or Covenant Defeasance have been complied with.
SECTION 1205. Deposited Money and U.S. Government Securities to Be
----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions.
- ---------------------------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Securities (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1205, the "Trustee") pursuant to Section 1204 in respect of the
Outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Securities
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Securities held by it as provided in
Section 1204 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be
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<PAGE>
required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1206. Reinstatement.
-------------
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1205 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1202 or 1203, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1205; provided, however, that if the Company makes any payment of
-------- -------
principal of (or premium, if any) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
103
<PAGE>
This Indenture may be signed in any number of counterparts each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
GLOBENET COMMUNICATIONS
GROUP LIMITED
[SEAL] By /s/ LIN GENTEMANN
___________________________________
Title: Vice President and Secretary
Attest: /s/ GREG BELBECK
_______________________________
Title: Chief Financial Officer
BANKERS TRUST COMPANY, Trustee
[SEAL] By /s/ EDNORA G. LINARES
_________________________________
Title: Assistant Vice President
Attest: /s/ MARC PARILLA
_______________________________
Title: Assistant Vice President
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<PAGE>
EXHIBIT A-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER FROM RESTRICTED GLOBAL ADDITIONAL SECURITY TO
UNRESTRICTED GLOBAL ADDITIONAL SECURITY
Bankers Trust Company
Four Albany Street
New York, N.Y. 10006
Re: 13% Senior Notes due July 15, 2007 of GlobeNet Communications Group
Limited
Reference is hereby made to the Indenture, dated as of July 14, 1999,
between GlobeNet Communications Group Limited, as issuer (the "Company"), and
Bankers Trust Company, as trustee (the "Indenture"). Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $_______ principal amount of Securities which
are evidenced by a Restricted Global Security (CUSIP No. __________) and held
with the Depositary in the name of ____________________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the
Securities to a Person who will take delivery thereof in the form of an equal
principal amount of Securities evidenced by an Unrestricted Global Security
(CUSIP No. __________).
In connection with such request and in respect of such Securities, the
Transferor hereby certifies that such transfer has been effected in compliance
with the transfer restrictions applicable to the Global Securities and pursuant
to and in accordance with Rule 903, Rule 904 or Rule 144 under the United States
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor hereby further certifies that:
(A) if the transfer has been effected pursuant to Rule 903 or Rule
904:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either:
(a) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on
its behalf reasonably believed and believes that the transferee was
outside the United States; or
(b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither the
Transferor nor any person
<PAGE>
acting on its behalf knows that the transaction was prearranged with a
buyer in the United States;
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as
applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(B) If the transfer has been effected pursuant to Rule 144, the
Securities have been transferred in a transaction permitted by Rule 144 under
the Securities Act.
Upon giving effect to this request to exchange a beneficial interest
in such Restricted Global Security for a beneficial interest in such
Unrestricted Global Security, the resulting beneficial interest shall be subject
to the restrictions on transfer applicable to such Unrestricted Global Security,
if any, pursuant to the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
_______________________________________
[Insert Name of Transferor]
By: __________________________________
Name:
Title:
Dated: ____________, ____
2
<PAGE>
EXHIBIT A-2
FORM OF CERTIFICATE FOR TRANSFER OR EXCHANGE AFTER TWO YEARS
Bankers Trust Company
Four Albany Street
New York, N.Y. 10006
Re: 13% Senior Notes due July 15, 2007 of GlobeNet Communications Group
Limited
Reference is hereby made to the Indenture, dated as of July 14, 1999,
between GlobeNet Communications Group Limited, as issuer (the "Company"), and
Bankers Trust Company, as trustee (the "Indenture"). Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
[For transfers: This letter relates to $____________ principal
amount of Securities which are evidenced by a Restricted Global Security (CUSIP
No. ____________) and held with the Depositary in the name of
______________________ [and held for the benefit of _________________] (the
"Beneficial Owner"). The Beneficial Owner has requested that its beneficial
interest in such Securities be transferred to a Person that will take delivery
thereof in the form of an equal principal amount of Securities evidenced by an
Unrestricted Global Security (CUSIP No. ____________).
In connection with such request and in respect of such Securities, the
Beneficial Owner does hereby certify that upon such transfer, (a) a period of at
least two years will have elapsed since [__________, _____], (b) the Beneficial
Owner during the three months preceding the date of such transfer was not an
"affiliate" of the Company (as defined in Rule 144 under the Securities Act),
and it was not acting on behalf of such an affiliate and (c) such Person to whom
such transfer is being made is not an "affiliate" of the Company.]
[For exchanges: This letter relates to $_______________ principal
amount of Securities that are evidenced by a Restricted Global Security (CUSIP
No. __________) and held with the Depositary in the name of [__________________]
[and held for the benefit of ______________] (the "Beneficial Owner"). The
Beneficial Owner has requested that its beneficial interest in such Securities
be exchanged for a beneficial interest in an equal principal amount of
Securities evidenced by an Unrestricted Global Security (CUSIP No.
___________________).
In connection with such request and in respect of such Securities, the
Beneficial Owner does hereby certify that, upon such exchange, (a) it will be
the beneficial owner of such Securities, (b) a period of at least two years will
have elapsed since [_________, _____] and (c) the Beneficial Owner will not be,
and during the three months preceding the date of such
<PAGE>
exchange will not have been, an "affiliate" of the Company (as defined in Rule
144 under the Securities Act), and it is not acting on behalf of such an
affiliate.]
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated: [Insert Name of Beneficial Owner]
By: ____________________________________
Name:
Title:
A-2-2
<PAGE>
Exhibit 4.2
EXECUTION COPY
- --------------------------------------------------------------------------------
Registration Rights Agreement
Date as of July 14, 1999
between
GlobeNet Communications Group Limited
and
TD Securities (USA) Inc.
and
Credit Suisse First Boston Corporation
- --------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated
July 14, 1999 is made and entered into among GLOBENET COMMUNICATIONS GROUP
LIMITED (the "Issuer"), a Bermuda company, TD SECURITIES (USA) INC. and CREDIT
SUISSE FIRST BOSTON CORPORATION (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated July
8, 1999 between the Issuer and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Issuer to the Initial Purchasers
of $300,000,000 aggregate principal amount of the Issuer's 13% Senior Notes due
2007 (the "Initial Notes"). In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Issuer has agreed to provide to the Initial
Purchasers and their direct and indirect transferees the registration rights set
forth in this Agreement. The execution of this Agreement is a condition to the
closing under the Purchase Agreement.
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:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
--------
to time, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
--------
from time to time, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
The term "broker-dealer" means any broker or dealer registered with
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the SEC under the 1934 Act.
"Closing Time" shall mean the Closing Time as defined in the Purchase
------------
Agreement.
"Depositary" shall mean The Depository Trust Company, or any other
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depositary appointed by the Issuer; provided, however, that such depositary
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must have an address in the Borough of Manhattan in the City of New York.
"Exchange Notes" shall mean the 13% Senior Notes due 2007 issued by
--------------
the Issuer under the Indenture containing terms identical to the Initial
Notes (except that (i) interest thereon shall accrue from the last date on
which interest was paid on the Initial Notes or, if no such interest has
been paid, from the date on which the Initial Notes were issued (ii) the
transfer restrictions thereon pertaining to United States securities laws
shall be eliminated and (iii) provisions relating to an increase in the
stated rate of interest thereon shall be eliminated), to be offered to
Holders of Registrable Notes in exchange for Initial Notes pursuant to the
Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the Issuer of
--------------
Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof.
<PAGE>
2
"Exchange Offer Registration" shall mean a registration under the 1933
---------------------------
Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
-------------------------------------
registration statement on Form F-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Holders" shall mean the Initial Purchasers, for so long as they own
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any Registrable Notes, and each of their successors, assigns and direct and
indirect transferees who become registered holders of Registrable Notes
under the Indenture.
"Indenture" shall mean the Indenture relating to the Initial Notes and
---------
Exchange Notes dated as of July 14, 1999 between the Issuer and Bankers
Trust Company, as trustee, as the same may be amended from time to time in
accordance with the terms thereof.
"Initial Notes" shall have the meaning set forth in the preamble of
-------------
this Agreement.
"Initial Purchasers" shall have the meaning set forth in the preamble
------------------
of this Agreement.
"Issuer" shall have the meaning set forth in the preamble of this
------
Agreement and also includes the Issuer's successors.
"Majority Holders" shall mean the Holders of a majority of the
----------------
aggregate principal amount of outstanding Registrable Notes; provided that
--------
whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the
Issuer or any of its affiliates (as such term is defined in Rule 405 under
the 1933 Act) shall be disregarded in determining whether such consent or
approval was given by the Holders of such required percentage or amount.
"Managing Underwriters" means the investment banker or investment
---------------------
bankers and manager or managers that shall administer an underwritten
offering determined in accordance with Section 4 hereof.
"Original Issue Date" shall mean the date on which the Initial Notes
-------------------
are issued under the Indenture.
"Participating Broker-Dealer" shall have the meaning set forth in
---------------------------
Section 3(f) hereof.
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, trust, unincorporated organization or other legal entity
or a government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Notes covered by a Shelf Registration Statement,
and by all other amendments and supplements to a prospectus, including
post-effective amendments, and in each case including all material
incorporated by reference therein.
<PAGE>
3
"Purchase Agreement" shall have the meaning set forth in the preamble
------------------
of this Agreement.
"Registrable Notes" shall mean the Initial Notes; provided, however,
----------------- -------- -------
that the Initial Notes shall cease to be Registrable Notes when (i) a
Registration Statement with respect to such Initial Notes shall have been
declared effective under the 1933 Act and such Initial Notes shall have
been disposed of pursuant to such Registration Statement, (ii) such Initial
Notes may be distributed to the public pursuant to Rule 144(k) (or any
similar provision then in force, but not Rule 144A) under the 1933 Act,
(iii) such Initial Notes shall have ceased to be outstanding, (iv) such
Initial Notes have been exchanged by a person other than a broker-dealer
for Exchange Notes upon consummation of the Exchange Offer or (v) following
the exchange by a Participating Broker-Dealer in the Exchange Offer of an
Initial Note for an Exchange Note, the date on which that Exchange Note is
sold to a purchaser who receives from that Participating Broker-Dealer on
or before the date of that sale a copy of the Prospectus.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance by the Issuer with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all
fees and expenses incurred in connection with compliance with state or
other securities or blue sky laws and compliance with the rules of the NASD
(including reasonable fees and disbursements of United States and local
counsel for any underwriters or Holders in connection with state or other
securities or blue sky qualification, if any, of any of the Exchange Notes
or Registrable Notes), (iii) all expenses of any Persons in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements,
certificates representing the Registrable Notes or Exchange Notes and other
documents relating to the performance of and compliance with this
Agreement, (iv) all rating agency fees, (v) all fees and expenses incurred
in connection with the listing, if any, of any of the Registrable Notes on
any securities exchange or exchanges, (vi) all fees and disbursements
relating to the qualification of the Indenture under applicable securities
laws, (vii) the fees and disbursements of counsel for the Issuer and of the
independent public accountants of the Issuer, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, (viii) the fees and expenses of a "qualified
independent underwriter" if required by Schedule E of the By-Laws of the
NASD in connection with the offering of the Registrable Notes, (ix) the
fees and expenses of the Trustee, and any escrow agent or custodian, and
(x) any fees and disbursements of the underwriters customarily required to
be paid by issuers or sellers of securities (but excluding fees and
disbursements of counsel for the Initial Purchasers in connection with the
Exchange Offer Registration Statement, except to the extent such fees and
disbursements are incurred at the request of the Issuer) and the reasonable
fees and expenses of any special experts retained by the Issuer in
connection with any Registration Statement, but excluding (except as
otherwise provided herein) fees of United States counsel and Bermudian
counsel, if any, to the underwriters or the Holders and underwriting
discounts and commissions and transfer taxes, if any, relating to the sale
or disposition of Registrable Notes by a Holder.
"Registration Statement" shall mean any registration statement of the
----------------------
Issuer which covers any of the Exchange Notes or Registrable Notes pursuant
to the provisions of this Agreement, and all amendments and supplements to
any such Registration Statement, including post-effective
<PAGE>
4
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Rule 144" shall mean Rule 144 promulgated under the 1933 Act or any
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successor rule thereto.
"SEC" shall mean the Securities and Exchange Commission.
---
"Shelf Registration" shall mean a registration effected pursuant to
------------------
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
----------------------------
statement of the Issuer pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the Registrable Notes on an appropriate form
under Rule 415 under the 1933 Act, or any similar rule that may be adopted
by the SEC, and all amendments and supplements to 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.
"Trustee" shall mean Bankers Trust Company or any other trustee with
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respect to the Initial Notes under the Indenture.
2. Registration Under the 1933 Act. (a) Exchange Offer
------------------------------- --------------
Registration. To the extent not prohibited by any applicable law or applicable
- ------------
interpretation of the staff of the SEC, the Issuer shall use its reasonable best
efforts to (A) file within 60 days after the Original Issue Date with the SEC an
Exchange Offer Registration Statement covering the offer by the Issuer to the
Holders to exchange all of the Registrable Notes for Exchange Notes, (B) cause
such Exchange Offer Registration Statement to be declared effective by the SEC
within 180 days after the Original Issue Date, (C) cause such Registration
Statement to remain effective until the closing of the Exchange Offer and (D)
consummate the Exchange Offer within 210 days after the Original Issue Date.
The Exchange Notes will be issued under the Indenture. Upon the effectiveness
of the Exchange Offer Registration Statement, the Issuer shall promptly commence
the Exchange Offer, it being the objective of such Exchange Offer to enable each
eligible Holder (other than Participating Broker-Dealers) electing to exchange
Registrable Notes for Exchange Notes to trade such Exchange Notes from and after
their receipt without any limitations or restrictions under the 1933 Act.
In connection with the Exchange Offer, the Issuer shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days after
the date notice thereof is mailed to the Holders (or longer if required by
applicable law);
(iii) use the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Registrable Notes at any
time prior to 5:00 P.M. New York City time on the last business day on
which the Exchange Offer shall remain open by sending to the institution
specified in the notice a telegram, telex, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Registrable
Notes
<PAGE>
5
delivered for exchange, and a statement that such Holder is withdrawing its
election to have such Notes exchanged; and
(v) otherwise comply in all material respects with all applicable
laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the
Issuer shall:
(i) accept for exchange Registrable Notes duly tendered and not
validly withdrawn pursuant to the Exchange Offer in accordance with the
terms of the Exchange Offer Registration Statement and the letter of
transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes so accepted for exchange by the Issuer;
and
(iii) cause the Trustee promptly to authenticate and deliver Exchange
Notes to each Holder of Registrable Notes equal in principal amount to the
principal amount of the Registrable Notes of such Holder so accepted for
exchange.
Interest on each Exchange Note will accrue from the last date on which
interest was paid on the Registrable Notes surrendered in exchange therefor or,
if no interest has been paid on such Registrable Notes, from the Original Issue
Date. The Exchange Offer shall not be subject to any conditions, other than
that the Exchange Offer, or the making of any exchange by a Holder, does not
violate applicable law or any applicable interpretation of the staff of the SEC.
Each Holder of Registrable Notes (other than Participating Broker-Dealers) who
wishes to exchange such Registrable Notes for Exchange Notes in the Exchange
Offer shall represent that (i) it is not an affiliate (as defined in Rule 405
under the 1933 Act) of the Issuer, (ii) any Exchange Notes to be received by it
are being acquired in the ordinary course of business and (iii) at the time of
the commencement, and at the consummation, of the Exchange Offer it has, and
will have, no arrangement with any Person to participate in the distribution
(within the meaning of the 1933 Act) of the Exchange Notes, and each such Holder
shall have made such other representations as may be reasonably necessary under
applicable SEC rules, regulations or interpretations to render the use of Form
F-4 or another appropriate form under the 1933 Act available. Any Holder that
does not or cannot make any of the foregoing representations, or that is
otherwise prohibited by any law or policy of the SEC from participating in the
Exchange Offer, shall not be eligible to participate in the Exchange Offer. To
the extent permitted by law, the Issuer shall inform the Initial Purchasers of
the names and addresses of the Holders to whom the Exchange Offer is made, and
the Initial Purchasers shall have the right to contact such Holders and
otherwise facilitate the tender of Registrable Notes in the Exchange Offer.
(b) Shelf Registration. (i) If, because of any change in law or
------------------
applicable interpretations thereof by the Staff of the SEC, the Issuer is not
permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof,
or (ii) if for any other reason the Exchange Offer is not consummated within 210
days after the Original Issue Date, or (iii) upon the request of an Initial
Purchaser (with respect to any Registrable Notes which they acquired directly
from the Issuer) if such Initial Purchaser holds Registrable Notes which it
acquired directly from the Issuer, and if such Initial Purchaser is not
permitted, in the opinion of counsel to such Initial Purchaser, pursuant to
applicable law or interpretation of the staff of the SEC to participate in the
Exchange Offer, the Issuer shall, at its cost,
<PAGE>
6
(A) as promptly as practicable, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the Registrable
Notes by the Holders from time to time in accordance with the methods of
distribution elected by the Majority Holders of such Registrable Notes and
set forth in such Shelf Registration Statement, and use its reasonable best
efforts to cause such Shelf Registration Statement to be declared effective
by the SEC by the 60th day after such filing. In the event that the Issuer
is required to file a Shelf Registration Statement upon the request of an
Initial Purchaser pursuant to clause (iii) above, the Issuer shall file and
have declared effective by the SEC both an Exchange Offer Registration
Statement pursuant to Section 2(a) with respect to all Registrable Notes
and a Shelf Registration Statement (which may be a combined Registration
Statement with the Exchange Offer Registration Statement) with respect to
offers and sales of Registrable Notes held by the Initial Purchasers after
completion of the Exchange Offer; provided that, with respect to Exchange
Notes received by the Initial Purchasers in exchange for any portion of an
unsold allotment of Initial Notes, the Issuer may, if permitted by current
interpretations by the staff of the SEC, file a post-effective amendment to
the Exchange Offer Registration Statement containing the information
required by Regulation S-K Items 507 and/or 508, as applicable, in
satisfaction of its obligations under this Section 2(b) with respect
thereto, and any such Exchange Offer Registration Statement, as so amended,
shall be referred to herein as, and governed by (for so long as such
interpretation of the SEC shall continue to be effective) the provisions
herein applicable to, a Shelf Registration Statement;
(B) use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the Prospectus forming
part thereof to be usable by Holders for a period of two years from the
date the Shelf Registration Statement is declared effective by the SEC (or
one year from the date the Shelf Registration Statement is declared
effective if such Shelf Registration Statement is filed upon the request of
an Initial Purchaser pursuant to clause (iii) above) or such shorter period
which will terminate when (i) all of the Registrable Notes covered by the
Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement, (ii) the date on which, in the opinion of counsel
to the Issuer, all of the Registrable Notes then held by the Holders (which
are not affiliates of Issuers) may be sold by such Holders in the public
United States securities markets without registration under the 1933 Act
pursuant to Rule 144(k) under the 1933 Act or any successor provision
thereto or (iii) the date on which there ceases to be outstanding any
Registrable Notes; and
(C) notwithstanding any other provisions hereof, use its reasonable
best efforts to ensure that (x) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
supplement thereto comply in all material respects with the 1933 Act and
the rules and regulations thereunder, (y) any Shelf Registration Statement
and any amendment thereto do not, upon effectiveness, 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 not
misleading and (z) any Prospectus forming part of any Shelf Registration
Statement and any supplement to such Prospectus (as amended or supplemented
from time to time) do not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements, in
light of the circumstances under which they were made, not misleading.
The Issuer further agrees, if necessary, to supplement or amend the
Shelf Registration Statement if reasonably requested by the Majority Holders
with respect to information relating to the Holders and otherwise as required by
Section 3(b) below, to use all reasonable efforts to cause any such
<PAGE>
7
amendment to become effective and such Shelf Registration to become usable as
soon as thereafter practicable and to furnish to the Holders of Registrable
Notes copies of any such supplement or amendment promptly after its being used
or filed with the SEC.
(c) Expenses. The Issuer shall be liable for and pay all Registration
--------
Expenses in connection with the registration pursuant to Section 2(a) or 2(b)
and (x) in the case of any Shelf Registration Statement (including any combined
Registration Statement as contemplated in section 2(b)(A) hereof) will reimburse
the Holders and the Initial Purchasers for the reasonable fees and disbursements
of one firm or counsel designated in writing by the Majority Holders to act as
counsel for the Holders of the Registrable Notes in connection therewith and (y)
in the case of an Exchange Offer Registration Statement, will reimburse the
Initial Purchasers for the reasonable fees and disbursements of one firm or
counsel in connection therewith, to the extent such fees and disbursements are
incurred at the request of the Issuer. Each Holder shall pay all expenses of
its counsel other than as set forth in the preceding sentence, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Notes pursuant to the Shelf
Registration Statement.
(d) Effective Registration Statement. (i) The Issuer will be deemed
--------------------------------
not to have used its reasonable best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if it voluntarily
takes any action that would result in any such Registration Statement not being
declared effective or in the Holders of Registrable Notes covered thereby not
being able to exchange or offer and sell such Registrable Notes during that
period unless (A) such action is required by applicable law or (B) such action
is taken by the Issuer in good faith and for valid business reasons (not
including avoidance of the Issuer's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Issuer promptly thereafter
complies with the requirements of Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to Section
2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
-------- -------
effective, the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference until the offering of Registrable Notes pursuant to
such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that (i) the Exchange
-------------------------
Offer Registration Statement is not filed with the SEC on or prior to the 60th
day after the Original Issue Date, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 180th day after the
Original Issue Date, (iii) the Exchange Offer is not consummated on or prior to
the 210th day after the Original Issue Date, (iv) a Shelf Registration Statement
with respect to the Registrable Notes, if required, is not declared effective on
or prior to the 60th day after it is required to be filed pursuant to Section
2(b) or (v) the Exchange Offer Registration Statement or the Shelf Registration
Statement is declared effective but thereafter ceases to be effective (except
pursuant to Section 2(d)(ii)) without being succeeded immediately by an
additional registration statement filed and declared effective (each such event
referred to in clauses (i) through (v) above, a "Registration Default"), the per
annum interest rate borne by the Initial Notes shall be increased by an amount
equal to one-half of one percent (0.5%) with respect to the first 90-day period
following such Registration Default, payable in cash on each interest payment
date,
<PAGE>
8
such interest rate to increase by an additional one-quarter of one percent
(0.25%) for each subsequent 90-day period until such Registration Default has
been cured. Notwithstanding the foregoing, the maximum aggregate increase from
the original interest rate borne by the Initial Notes shall in no event exceed
one percent (1.0%) per annum. Upon the cure of the Registration Default by (v)
the filing of the Exchange Offer Registration Statement after the 60-day period
described in clause (i) above, (w) the effectiveness of the Exchange Offer
Registration Statement after the 180-day period described in clause (ii) above,
(x) the consummation of the Exchange Offer after the 210-day period described in
clause (iii) above, (y) the effectiveness of a Shelf Registration Statement when
required after the 60-day period described in clause (iv) above, or (z) the
effectiveness of a succeeding registration statement described in clause (v)
above, the interest rate borne by the Initial Notes from the date of such
filing, effectiveness or consummation, as the case may be, will be reduced to
the original interest rate borne by the Initial Notes if no other Registration
Default exists; provided, however, that if, after any such reduction in interest
rate, a different Registration Default occurs, the interest rate will again be
increased pursuant to the foregoing provisions.
(f) Specific Enforcement. Without limiting the remedies available to
--------------------
the Initial Purchasers and the Holders, the Issuer acknowledges that any failure
by the Issuer to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Issuer's obligations under
Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations of
-----------------------
the Issuer with respect to the Registration Statements pursuant to Sections 2(a)
and 2(b) hereof, the Issuer shall:
(a) prepare and file with the SEC a Registration Statement, within
the time period specified in Section 2 hereof, on the appropriate form
under the 1933 Act, which (i) shall be selected by the Issuer, (ii) shall,
in the case of a Shelf Registration, be available for the sale of the
Registrable Notes by the selling Holders thereof and (iii) shall comply as
to form in all material respects with the requirements of the applicable
form and include or incorporate by reference all financial statements
required by the SEC to be filed therewith, and use its reasonable best
efforts to cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary under
applicable law to keep such Registration Statement effective for the
applicable period; cause each Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule
424 under the 1933 Act; and comply with the provisions of the 1933 Act with
respect to the disposition of all securities covered by each Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Notes, at least ten days prior to filing, that a Shelf
Registration Statement with respect to the Registrable Notes is being filed
and advising such Holders that the distribution of Registrable Notes (or an
amendment thereto) will be made in accordance with the method elected by
the Majority Holders
<PAGE>
9
and designated by the Majority Holders in a notice given by them to the
Issuer; and (ii) furnish to each Holder of Registrable Notes, to counsel
for the Initial Purchasers, to counsel for the Holders and to each
underwriter of an underwritten offering of Registrable Notes, if any,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and such
other documents as such Holder, counsel or underwriter may reasonably
request, including, if such Holder, counsel or underwriter so requests,
financial statements and schedules and, if the Holder so requests, all
exhibits (including those incorporated by reference) in order to facilitate
the public sale or other disposition of the Registrable Notes pursuant to
the Shelf Registration Statement; and (iii) subject to the last paragraph
of this Section 3, consent to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Registrable Notes
covered by the Shelf Registration Statement in connection with the offering
and sale of the Registrable Notes covered by the Prospectus or any
amendment or supplement thereto;
(d) use its reasonable best efforts to register or qualify the
Registrable Notes under all applicable state securities or "blue sky" laws
of such jurisdictions as the Majority Holders of Registrable Notes covered
by a Registration Statement or, in the case of an underwritten offering of
Registrable Notes, the Managing Underwriter of such underwritten offering,
if any, shall reasonably request in writing by the time the applicable
Registration Statement is declared effective by the SEC, to cooperate with
the Holders in connection with any filings required to be made with the
NASD, keep each such registration or qualification effective during the
period such Registration Statement is required to be effective and do any
and all other acts and things requested in writing by such Majority Holders
or Managing Underwriters which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such jurisdiction
of such Registrable Notes owned by such Holder; provided, however, that the
-------- -------
Issuer shall not be required to (i) qualify as a foreign corporation or as
a dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d) or (ii) take any action which
would subject it to general service of process or taxation in any such
jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes and counsel for the Initial Purchasers promptly and, if
requested by such Holder or counsel, confirm such advice in writing
promptly (i) when a Registration Statement has become effective and when
any post-effective amendments and supplements thereto become effective,
(ii) of any request by the SEC or any state securities authority for post-
effective amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, during the period a Registration Statement is effective,
the representations and warranties of the Issuer contained in any
underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to the Registrable Notes cease to be true and
correct in all material respects, (v) of the receipt by the Issuer of any
notification with respect to the suspension of the qualification of the
Registrable Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (vi) of the happening of
any event or the discovery of any facts during the period a Shelf
Registration Statement is effective which makes any statement made in such
Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Registration
<PAGE>
10
Statement or Prospectus in order to make the statements therein not
misleading and (vii) of any determination by the Issuer that a post-
effective amendment to a Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Notes for Exchange Notes for the resale of such Exchange Notes,
(ii) furnish to each broker-dealer who desires to participate in the
Exchange Offer, without charge, as many copies of each Prospectus included
in the Exchange Offer Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, as such broker-dealer
may reasonably request, (iii) include in the Exchange Offer Registration
Statement a statement to the effect that any broker-dealer which holds
Registrable Notes acquired for its own account as a result of market-making
activities or other trading activities (a "Participating Broker-Dealer")
and who receives Exchange Notes for Registrable Notes pursuant to the
Exchange Offer may be a statutory underwriter and must deliver a Prospectus
meeting the requirements of the 1933 Act in connection with any resale of
such Exchange Notes, (iv) subject to the last paragraph of this Section 3,
hereby consent to the use of the Prospectus forming part of the Exchange
Offer Registration Statement or any amendment or supplement thereto by any
broker-dealer whose market-making activities were done with the Issuer's
prior consent in connection with the sale or transfer of the Exchange Notes
covered by the Prospectus or any amendment or supplement thereto in
accordance with the 1933 Act, and (v) include in the transmittal letter or
similar documentation to be executed by an exchange offeree in order to
participate in the Exchange Offer the following provision:
"If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. If the undersigned is a broker-
dealer, the undersigned represents that it will receive Exchange Notes
for its own account in exchange for Registrable Notes, it represents
that the Registrable Notes to be exchanged for 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 1933 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 1933 Act";
and (y) a statement to the effect that by making the acknowledgment
described in subclause (x) and by delivering a Prospectus in connection
with the exchange of Registrable Notes, the broker-dealer will not be
deemed to admit that it is an underwriter within the meaning of the 1933
Act;
(B) to the extent any Participating Broker-Dealer participates in the
Exchange Offer, the Issuer shall use its reasonable best efforts to cause
to be delivered at the request of an entity representing the Participating
Broker-Dealers (which entity shall be the TD Securities (USA) Inc., unless
it elects not to act as such representative) only one, if any, "cold
comfort" letter with respect to the Prospectus in the form existing on the
last date for which exchanges are accepted pursuant to the Exchange Offer
and with respect to each subsequent amendment or supplement, if any,
effected during the period specified in clause (C) below; and
<PAGE>
11
(C) to the extent any Participating Broker-Dealer who became such as a
result of market-making activities or other trading activities done with
the Issuer's prior consent participates in the Exchange Offer, the Issuer
shall use its reasonable best efforts to keep the Exchange Offer
Registration Statement continuously effective for a period of 150 days
following the closing of the Exchange Offer or such shorter period that
will terminate when such Participating Broker-Dealers have completed all
resales subject to applicable prospectus delivery requirements; provided,
however, that the Issuer shall not be required to maintain the
effectiveness of the Exchange Offer Registration Statement for more than 90
days following the consummation of the Exchange Offer unless the Issuer has
been notified in writing on or prior to the 90/th/ day following the
consummation of the Exchange Offer by such Participating Broker-Dealer that
it has received Exchange Notes as to which it will be required to deliver a
prospectus upon resale; and
(D) the Issuer shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement as would
otherwise be contemplated by Section 3(b) hereof, or take any other action
as a result of this Section 3(f), for a period exceeding the period for
which the Issuer is required to use its reasonable best efforts to maintain
the effectiveness of the Exchange Offer Registration Statement pursuant to
Section 3(f)(C) above and Participating Broker-Dealers shall not be
authorized by the Issuer to, and shall not, deliver such Prospectus after
such period in connection with resales contemplated by this Section 3.
(g) (i) in the case of an Exchange Offer, furnish counsel for the
Initial Purchasers and, (ii) in the case of a Shelf Registration, furnish
counsel for the Holders of Registrable Notes, with copies of any request by
the SEC or any state securities authority for amendments or supplements to
a Registration Statement and Prospectus or for additional information;
(h) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement as soon as
practicable and provide immediate notice to each Holder of the withdrawal
of any such order;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes included within the coverage of such Shelf Registration,
without charge, at least one conformed copy of each Registration Statement
and any post-effective amendment thereto (without documents incorporated
therein by reference or exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold and not
bearing any restrictive legends; and cause such Registrable Notes to be in
such denominations (consistent with the provisions of the Indenture) in a
form eligible for deposit with the Depositary and registered in such names
as the selling Holders or the underwriters, if any, may reasonably request
in writing at least two business days prior to the closing of any sale of
such Registrable Notes pursuant to such Shelf Registration Statement;
(k) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Section
3(e)(vi) hereof, use its reasonable best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file any
other required
<PAGE>
12
document so that, as thereafter delivered to the purchasers of the
Registrable Notes, such Prospectus will not contain at the time of such
delivery any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Issuer agrees
to notify each Holder to suspend use of the Prospectus as promptly as
practicable after the occurrence of such an event, and each Holder hereby
agrees to suspend use of the Prospectus until the Issuer has amended or
supplemented the Prospectus to correct such misstatement or omission. At
such time as such public disclosure is otherwise made or the Issuer
determines that such disclosure is not necessary, in each case to correct
any misstatement of a material fact or to include any omitted material
fact, the Issuer agrees promptly to notify each Holder of such
determination and to furnish each Holder such numbers of copies of the
Prospectus, as amended or supplemented, as such Holder may reasonably
request;
(l) obtain a CUSIP number for all Exchange Notes, or Registrable
Notes, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with printed certificates
for the Exchange Notes or the Registrable Notes, as the case may be, in a
form eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust Indenture
Act of 1939, as amended (the "TIA"), in connection with the registration of
the Exchange Notes, or Registrable Notes, as the case may be, (ii)
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and (iii) execute, and use its
reasonable best efforts to cause the 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 the Indenture to be so
qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions (including those reasonably requested in writing by the
Majority Holders) in order to expedite or facilitate the disposition of
such Registrable Notes and in such connection, 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 Holders of
such Registrable Notes and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters
in similar underwritten offerings as may be reasonably requested in
writing by them;
(ii) obtain opinions of counsel to the Issuer and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any, and the
Holders of a majority in principal amount of the Registrable Notes
being sold) addressed to each selling Holder and the underwriters, if
any, covering the matters customarily covered in opinions requested in
sales of securities or underwritten offerings and such other matters
as may be reasonably requested by such Holders and underwriters;
<PAGE>
13
(iii) obtain "cold comfort" letters and updates thereof from the
Issuer's independent certified public accountants addressed to the
underwriters, if any, and will use reasonable best efforts to have
such letters addressed to the selling Holders of Registrable Notes,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters in
connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Notes, which agreement shall be in
form, substance and scope customary for similar offerings;
(v) if an underwriting agreement is entered into in the case
of an underwritten offering, cause the same to set forth
indemnification provisions and procedures substantially equivalent to
the indemnification provisions and procedures set forth in Section 5
hereof with respect to the underwriters and all other parties to be
indemnified pursuant to said Section; and
(vi) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings.
The items set forth above in this Section 3(n) shall be done at (i) the
effectiveness of such Registration Statement (and, if appropriate, each
post-effective amendment thereto) and (ii) each closing under any
underwriting or similar agreement as and to the extent required thereunder.
In the case of any underwritten offering, the Issuer shall provide written
notice to the Holders of all Registrable Notes of such underwritten
offering at least 30 days prior to the filing of a prospectus supplement
for such underwritten offering. Such notice shall (x) offer each such
Holder the right to participate in such underwritten offering, (y) specify
a date, which shall be no earlier than 10 days following the date of such
notice, by which such Holder must inform the Issuer of its intent to
participate in such underwritten offering and (z) include the instructions
such Holder must follow in order to participate in such underwritten
offering;
(o) in the case of a Shelf Registration, make available for inspection
by representatives of the Holders of the Registrable Notes and any
underwriters participating in any disposition pursuant to a Shelf
Registration Statement and any U.S. counsel or accountant retained by such
Holders or underwriters, all pertinent financial and other records,
pertinent corporate documents and properties of the Issuer reasonably
requested by any such persons, and cause the respective officers,
directors, employees, and any other agents of the Issuer to supply all
information reasonably requested by any such representative, underwriter,
special counsel or accountant in connection with a Registration Statement;
provided that any such records, documents, properties and such information
--------
that is designated in writing by the Issuer, in good faith, as confidential
("Confidential Information") at the time of delivery of such Confidential
Information shall not be made available for inspection unless and until
such representative, underwriter, special counsel or accountant signs a
confidentiality agreement reasonably satisfactory to the Issuer pursuant to
which the Confidential Information will be kept confidential by any such
representative, underwriter, special counsel or accountant and shall be
used only in connection with such Registration Statement, unless disclosure
thereof is made in connection
<PAGE>
14
with a court proceeding or required by law, or such information has become
available (not in violation of this agreement) to the public generally or
through a third party without an accompanying obligation of
confidentiality;
(p) (i) a reasonable time prior to the filing of any Exchange Offer
Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or
supplement to a Prospectus, provide a copy of such document to the Initial
Purchasers, and make such changes in any such document prior to the filing
thereof as the Initial Purchasers or their counsel may reasonably request;
(ii) in the case of a Shelf Registration, a reasonable time prior to filing
any Shelf Registration Statement, any Prospectus forming a part thereof,
any amendment to such Shelf Registration Statement or amendment or
supplement to such Prospectus, provide copies of such document to the
Holders of Registrable Notes, to the Initial Purchasers, to counsel on
behalf of the Holders and to the underwriter or underwriters of an
underwritten offering of Registrable Notes, if any, and make such changes
in any such document prior to the filing thereof as the Holders of
Registrable Notes, the Initial Purchasers on behalf of such Holders, the
Initial Purchasers' counsel and any underwriter may reasonably request; and
(iii) cause the representatives of the Issuer to be available for
discussion of such document as shall be reasonably requested by the Holders
of Registrable Notes, the Initial Purchasers on behalf of such Holders or
any underwriter and shall not at any time make any filing of any such
document of which such Holders, the Initial Purchasers on behalf of such
Holders, the Initial Purchasers' counsel or any underwriter shall not have
previously been advised and furnished a copy or to which such Holders, the
Initial Purchasers on behalf of such Holders, the Initial Purchasers'
counsel or any underwriter shall reasonably object in writing;
(q) in the case of a Shelf Registration, use its reasonable best
efforts to cause all Registrable Notes to be listed on any securities
exchange on which similar debt securities issued by the Issuer are then
listed if requested by the Majority Holders or by the underwriter or
underwriters of an underwritten offering of Registrable Notes, if any;
(r) in the case of a Shelf Registration, use its reasonable best
efforts to cause the Registrable Notes to be rated with the appropriate
rating agencies, if so requested by the Majority Holders or by the
underwriter or underwriters of an underwritten offering of Registrable
Notes, if any, unless the Registrable Notes are already so rated;
(s) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering at least 12 months which shall satisfy the provisions of Section
11(a) of the 1933 Act and Rule 158 thereunder; and
(t) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter and its U.S. counsel.
In the case of a Shelf Registration Statement, the Issuer may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Notes to furnish to the Issuer, within 20 days after the
Issuer has requested such information, such information regarding such
<PAGE>
15
Holder and the proposed distribution by such Holder of such Registrable Notes as
the Issuer may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees (a)
to furnish the information requested to be furnished pursuant to the immediately
preceding sentence within the time period specified therein and (b) that, upon
receipt of any notice from the Issuer of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(ii)-(vi)
hereof, such Holder will forthwith discontinue disposition of Registrable Notes
pursuant to a Registration Statement, and will not deliver any Prospectus
forming a part thereof, until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof or
written notice from the Issuer that the use of the Prospectus may be resumed,
and, if so directed by the Issuer, such Holder will deliver to the Issuer (at
the Issuer's expense) all copies in its possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Notes current at the time of receipt of such notice. If the Issuer
shall give any such notice to suspend the disposition of Registrable Notes
pursuant to a Shelf Registration Statement as a result of the happening of any
event or the discovery of any facts, each of the kind described in Section
3(e)(vi) hereof, the Issuer shall be deemed to have used its reasonable best
efforts to keep the Shelf Registration Statement effective during such period of
suspension provided that the Issuer shall use its reasonable best efforts to
file and have declared effective (if an amendment) as soon as practicable an
amendment or supplement to the Shelf Registration Statement and shall extend the
period during which the Registration Statement shall be maintained effective
pursuant to this Agreement by the number of days during the period from and
including the date of the giving of such notice to and including the date when
the Holders shall have received copies of the supplemented or amended Prospectus
necessary to resume such dispositions or written notice from the Issuer that the
use of the Prospectus may be resumed.
4. Underwritten Registrations. If any of the Registrable Notes
--------------------------
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Majority Holders of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Issuer.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
5. Indemnification and Contribution. (a) In connection with any
--------------------------------
Exchange Offer Registration Statement or Shelf Registration Statement, the
Issuer shall indemnify and hold harmless the Initial Purchasers, each Holder
covered by such Registration Statement, including Participating Broker-Dealers,
each underwriter who participates in an offering of Registrable Notes, their
respective affiliates, and their respective directors, officers, employees,
agents and each Person, if any, who controls any of such parties within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, 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) pursuant to which Exchange Notes or Registrable
Notes were registered under the 1933 Act, including all documents
<PAGE>
16
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 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, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
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
Issuer; and
(iii) against any and all expenses whatsoever, as incurred (including
the fees and disbursements of counsel chosen by any indemnified party),
reasonably incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any court or governmental
agency or body, commenced or threatened in connection with, or any claim
whatsoever based upon, any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) of this Section 5(a);
provided, however, 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 made in reliance upon and in
conformity with written information furnished to the Issuer by the Initial
Purchasers, any Holder, including Participating Broker-Dealers, or any
underwriter expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto). This
indemnity agreement will be in addition to any liability which the Issuer may
otherwise have;
(b) In the case of a Shelf Registration, each Holder agrees, severally
and not jointly, to indemnify and hold harmless the Issuer, the Initial
Purchasers, each underwriter who participates in an offering of Registrable
Notes and the other selling Holders and each of their respective directors and
officers (including each officer of the Issuer who signed the Registration
Statement) and each Person, if any, who controls the Issuer, the Initial
Purchasers, any underwriter or any other selling Holder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all
loss, liability, claim, damage and expense 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 the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
information furnished to the Issuer by or on behalf of such Holder, as the case
may be, expressly for use in the Registration Statement (or any amendment
thereto), or the Prospectus (or any amendment or supplement thereto); provided,
however, that no such Holder shall be liable for any claims hereunder in excess
of the amount of net proceeds received by such Holder from the sale of
Registrable Notes pursuant to such Shelf Registration Statement;
(c) Each indemnified party under this Section 5 shall give notice in
writing as promptly as reasonably practicable to each indemnifying party of any
action commenced against it in
<PAGE>
17
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 did not otherwise learn of such action and is not
materially prejudiced as a result of such failure, and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. 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 asset forth below); provided, however, that such counsel
-------- -------
shall be 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
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel 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 named parties to any
such action (including any impleaded parties) 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 the indemnified party to employ separate
counsel at the expense of the indemnifying party. In no event shall the
indemnifying parties be liable for the fees and expenses of more than one
counsel (in addition to any local 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 thereof), unless such settlement, compromise or consent (i)
includes an unconditional 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 and the indemnifying party is obligated to reimburse the indemnified
party under the foregoing provisions of this Section 5, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 5(a)(ii) hereof effected without its written consent if (i) such
settlement is entered into more than 45 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) If the indemnification provided for in any of the indemnity
provisions set forth in this Section 5 is for any reason unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses
<PAGE>
18
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuer on the one
hand, the Initial Purchasers on another hand, and the Holders on another hand,
from the offering of the Exchange Notes or Registrable Notes included in such
offering or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Issuer on the one hand, the Initial Purchasers on another hand, and the
Holders on another hand, in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations. The relative fault of the Issuer,
the Initial Purchasers, and the Holders, respectively, shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Issuer, the Initial Purchasers or
the Holders and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Issuer,
the Initial Purchasers and the Holders of the Registrable Notes agree that it
would not be just and equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by another method of allocation which does not take
account of the equitable considerations referred to above in this Section 5. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 5 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by an governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any 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 1933 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 5, each Person, if any, who
controls each Initial Purchaser or a Holder within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Initial Purchaser or such Holder, and each director of the
Issuer, each officer of the Issuer who signed the Registration Statement, and
each Person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Issuer. The parties hereto agree that any underwriting
discount or commission or reimbursement of fees paid to the Initial Purchasers
pursuant to the Purchase Agreement shall not be deemed to be a benefit received
by the Initial Purchasers in connection with the offering of the Exchange Notes
or Registrable Notes included in such offering.
6. Miscellaneous. (a) Rule 144 and Rule 144A. The Issuer
------------- ----------------------
covenants that it will (i) furnish to the Holders of Registrable Notes the
information and reports required to be furnished by Section 1008 of the
Indenture, (ii) deliver such information to a prospective purchaser as is
necessary to permit sales pursuant to Rule 144A under the 1933 Act, and (iii)
take such further action that is reasonable in the circumstances, in each case,
to the extent required from time to time to enable such Holder to sell its
Registrable Notes without registration under the 1933 Act within the limitation
of the exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may
be amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may
be amended from time to time, or (z) any similar rules or regulations hereafter
adopted by the SEC. Upon the written request of any Holder of Registrable
Notes, the Issuer will deliver to such Holder a written statement as to whether
it has complied with such requirements.
<PAGE>
19
(b) No Inconsistent Agreements. The Issuer has not entered into and
--------------------------
the Issuer on or after the date of this Agreement will not enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Notes 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
Issuer's other issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Issuer has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification, supplement, waiver
or departure; provided, however, that no amendment, modification, supplement or
-------- -------
waiver or consent to any departure from the provisions of Section 5 hereof shall
be effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or any air courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Issuer by means of a notice given in accordance with the provisions of this
Section 6(d), which address initially is, with respect to the Initial
Purchasers, the addresses set forth in the Purchase Agreement; and (ii) if to
the Issuer, initially at the Issuer's address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(d).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; at the time
received, if mailed or sent by air courier; when answered back, if telexed; and
when receipt is acknowledged, by recipient's telecopy operator, if telecopied.
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 specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
--------
permit any assignment, transfer or other disposition of Registrable Notes in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Registrable Notes, in any manner,
whether by operation of law or otherwise, such Registrable Notes shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Registrable Notes, 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,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to receive
the benefits hereof.
(f) Third Party Beneficiary. Each Initial Purchaser shall be a third
-----------------------
party beneficiary to the agreements made hereunder between the Issuer, on the
one hand, and the Holders, on the other
<PAGE>
20
hand, and shall have the right to enforce such agreements directly to the extent
it deems such enforcement necessary or advisable to protect its rights or the
rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Agent for Service; Submission to Jurisdiction; Waiver of
--------------------------------------------------------
Immunities. By the execution and delivery of this Agreement, the Issuer (i)
- ----------
irrevocably designates and appoints CT Corporation System (or any successor)
(together with any successor, the "Agent for Service"), as its authorized agent
upon which process may be served in any suit or proceeding arising out of or
relating to this Agreement or the transactions, that may be instituted in any
federal or state court in the State of New York, or brought under United States
federal or state securities laws, and acknowledges that the Agent for Service
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 the Agent for Service (or any successor) and written notice of said service
to the Issuer, shall be deemed in every respect effective service of process
upon the Issuer in any such suit or proceeding. The Issuer 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 Agent for Service in full force and effect so long as any of
the Initial Notes or Exchange Notes shall be outstanding.
To the extent that the Issuer 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.
(l) Judgment Currency. In respect of any judgment or order give or
-----------------
made for any amount due hereunder that is expressed and paid in a currency (the
"judgment currency") other than U.S. dollars, the Issuer will indemnify each
Initial Purchaser, each Holder and any underwriter against any loss incurred by
each Initial Purchaser, such Holder or such underwriter as a result of any
variation as between (i) the rate of exchange at which the U.S. dollar amount is
converted into the judgment currency for the purpose of such judgment or order
and (ii) the rate of exchange at which such Initial Purchaser, such Holder or
such underwriter is able to purchase U.S. dollars with the amount of judgment
currency actually received by such Initial Purchaser, such Holder or such
underwriter. The foregoing indemnity shall constitute a separate and
independent obligation of the Issuer and shall continue in full force and
<PAGE>
21
effect notwithstanding any such judgment or order as aforesaid. The term "rate
of exchange" shall include any premiums and costs of exchange payable in
connection with the purchase of or conversion into U.S. dollars.
<PAGE>
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GLOBENET COMMUNICATIONS GROUP LIMITED
/s/ Lin Gentemann
By: ____________________________
Name: Lin Gentemann
Title: Vice President and
Secretary
Agreed and accepted as of
the date first above
written:
TD SECURITIES (USA) INC.
/s/ Rod F. Ashtaryeh
By: __________________________
Name: Rod F. Ashtaryeh
Title: Managing Director
CREDIT SUISSE FIRST BOSTON CORPORATION
/s/ Malcolm Price
By: __________________________
Name: Malcolm Price
Title: Managing Director
<PAGE>
Exhibit 4.3(a)
[EXECUTION COPY]
- --------------------------------------------------------------------------------
Credit Agreement,
dated as of
July 14, 1999,
among
GlobeNet Communications Holdings Ltd.,
as the Borrower,
Various Financial Institutions
And Other Persons,
as the Lenders,
Toronto Dominion (Texas) Inc.,
as the Administrative Agent and the Issuer,
and
Credit Suisse First Boston,
as the Syndication Agent.
----------------------------------
TD Securities (USA) Inc.,
as the Arranger and Book Runner.
----------------------------------
Construction, Working Capital and Term Financing of the
Atlantica-1 Fiber-optic Submarine Cable System.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. Defined Terms............................................... 2
SECTION 1.02. Classification of Loans and Borrowings...................... 37
SECTION 1.03. Terms Generally............................................. 37
SECTION 1.04. Accounting Terms; GAAP...................................... 38
ARTICLE II
THE COMMITMENTS
---------------
SECTION 2.01. Commitments................................................. 38
SECTION 2.02. Loans and Borrowings........................................ 39
SECTION 2.03. Requests for Borrowings..................................... 40
SECTION 2.04. Special Provisions for Working Capital Loans................ 41
SECTION 2.05. Letters of Credit........................................... 42
SECTION 2.06. Funding of Borrowings....................................... 46
SECTION 2.07. Interest Elections.......................................... 47
SECTION 2.08. Termination and Reduction of Commitments.................... 48
SECTION 2.09. Repayment of Loans; Evidence of Debt........................ 49
SECTION 2.10. Optional Prepayments of Loans............................... 51
SECTION 2.11. Mandatory Prepayments....................................... 52
SECTION 2.12. Fees........................................................ 54
SECTION 2.13. Interest.................................................... 55
SECTION 2.14. Alternate Rate of Interest; Illegality...................... 55
SECTION 2.15. Increased Costs............................................. 56
SECTION 2.16. Break Funding Payments...................................... 57
SECTION 2.17. Taxes....................................................... 58
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. 59
SECTION 2.19. Mitigation Obligations; Replacement of Lenders.............. 61
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 3.01. Financial Condition......................................... 62
SECTION 3.02. No Change................................................... 62
<PAGE>
SECTION 3.03. Organization; Powers........................................ 63
SECTION 3.04. Authorization; Enforceability............................... 63
SECTION 3.05. Corporate Structure......................................... 63
SECTION 3.06. Compliance with Law......................................... 63
SECTION 3.07. No Legal Bar................................................ 64
SECTION 3.08. Governmental Actions........................................ 64
SECTION 3.09. Litigation.................................................. 64
SECTION 3.10. Environmental Matters....................................... 64
SECTION 3.11. No Default; Event of Default................................ 64
SECTION 3.12. Properties.................................................. 64
SECTION 3.13. Taxes....................................................... 65
SECTION 3.14. Federal Regulations......................................... 65
SECTION 3.15. ERISA....................................................... 65
SECTION 3.16. Investment Company Act...................................... 65
SECTION 3.17. Security Documents.......................................... 65
SECTION 3.18. Principal Place of Business................................. 65
SECTION 3.19. Disclosure.................................................. 65
SECTION 3.20. Sufficiency of System Contracts............................. 66
SECTION 3.21. Immunity.................................................... 66
SECTION 3.22. Export Control.............................................. 66
SECTION 3.23. Foreign Corrupt Practices Act............................... 66
SECTION 3.24. Intellectual Property....................................... 66
SECTION 3.25. Year 2000 Compliance........................................ 67
SECTION 3.26. Subordination of Certain Payments........................... 67
ARTICLE IV
CONDITIONS
----------
SECTION 4.01. Conditions Precedent to Effectiveness....................... 67
SECTION 4.02. Conditions Precedent to Availability of Term D Loans and to
Initial Credit Extensions (other than Term D Loans)....... 72
SECTION 4.03. Conditions Precedent to All Credit Extensions............... 74
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
SECTION 5.01. Financial Statements and Other Information.................. 76
SECTION 5.02. Reports..................................................... 77
SECTION 5.03. Payment of Obligations...................................... 78
SECTION 5.04. Conduct of Business; System Completion...................... 78
SECTION 5.05. Existence................................................... 78
SECTION 5.06. Compliance with Laws........................................ 78
<PAGE>
SECTION 5.07. Performance of Agreements................................... 79
SECTION 5.08. Taxes and Claims............................................ 79
SECTION 5.09. Notices..................................................... 79
SECTION 5.10. Insurance................................................... 79
SECTION 5.11. Fiscal Year................................................. 79
SECTION 5.13. Environmental Matters....................................... 80
SECTION 5.14. Operating Budgets; Operating Plans.......................... 80
SECTION 5.15. Governmental Actions........................................ 81
SECTION 5.16. Cooperation with Independent Engineer....................... 82
SECTION 5.17. Spare Parts................................................. 82
SECTION 5.18. Interest Rate Protection.................................... 82
SECTION 5.19. Revenue Account............................................. 82
SECTION 5.20. Maintenance of Process Agent................................ 82
SECTION 5.21. System Operation and Maintenance............................ 82
SECTION 5.22. Event of Loss............................................... 82
SECTION 5.23. Books and Records; Inspection Rights........................ 83
SECTION 5.24. Export Control.............................................. 83
SECTION 5.25. Foreign Corrupt Practices Act............................... 83
SECTION 5.26. Further Assurances.......................................... 83
SECTION 5.27. Intellectual Property....................................... 83
SECTION 5.28. Future Subsidiaries......................................... 84
SECTION 5.29. Post-Closing Collateral; Mortgages.......................... 85
SECTION 5.30. TBI......................................................... 86
SECTION 5.31. Achievement of Commercial Operation Date.................... 86
ARTICLE VI
NEGATIVE COVENANTS
------------------
SECTION 6.01. Indebtedness................................................ 86
SECTION 6.02. Liens....................................................... 87
SECTION 6.03. Fundamental Changes......................................... 87
SECTION 6.04. Sale of Assets.............................................. 87
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions... 88
SECTION 6.06. Restricted Payments......................................... 89
SECTION 6.07. Amendment of System Contracts, etc.......................... 89
SECTION 6.08. Supply Contract............................................. 90
SECTION 6.09. Addition to Configuration................................... 91
SECTION 6.10. Permitted System Upgrades................................... 91
SECTION 6.11. Leases...................................................... 92
SECTION 6.12. Change of Office............................................ 92
SECTION 6.13. Change of Name.............................................. 92
SECTION 6.14. Transactions with Affiliates................................ 92
SECTION 6.15. Sale and Leaseback.......................................... 92
SECTION 6.16. Approval of Additional Contracts............................ 92
<PAGE>
SECTION 6.17. Capital Expenditures........................................ 93
SECTION 6.18. Limitations on Transfer and Issuance of Interests........... 93
SECTION 6.19. Unrelated Activities; Abandonment; New Subsidiaries......... 93
SECTION 6.20. Set-off..................................................... 94
SECTION 6.21. Changes in Capital Budget................................... 94
SECTION 6.22. Payment of Construction Costs............................... 94
SECTION 6.23. Sales of Capacity........................................... 94
SECTION 6.24. Financial Covenants......................................... 95
SECTION 6.25. Amendments, etc. of Organizational and Other Documents...... 96
SECTION 6.26. Management and Advisory Fees, etc........................... 96
SECTION 6.27. Immunity.................................................... 96
ARTICLE VII
EVENTS OF DEFAULT
-----------------
SECTION 7.01. Non-Payment of Obligations.................................. 96
SECTION 7.02. Breach of Warranty.......................................... 97
SECTION 7.03. Non-Performance of Certain Covenants and Obligations........ 97
SECTION 7.04. Involuntary Bankruptcy Proceeding, etc...................... 97
SECTION 7.05. Voluntary Bankruptcy Proceeding, etc........................ 98
SECTION 7.06. Judgments................................................... 98
SECTION 7.07. ERISA....................................................... 98
SECTION 7.08. Impairment of Security, etc................................. 98
SECTION 7.09. Commercial Operation........................................ 98
SECTION 7.10. Impairment of System Contract............................... 98
SECTION 7.11. Default Under System Contract............................... 99
SECTION 7.12. Liquidated Damages.......................................... 99
SECTION 7.13. Revocation of Landing License, etc.......................... 99
SECTION 7.14. Change in Control........................................... 99
SECTION 7.15. Default on Other Indebtedness............................... 99
SECTION 7.16. Delay in Construction or Installation....................... 100
SECTION 7.17. Term C Loan Guarantor....................................... 100
ARTICLE VIII
ACCOUNTS
--------
SECTION 8.01. Creation of Accounts........................................ 101
SECTION 8.02. Required Deposits into the Accounts......................... 101
SECTION 8.03. Deposits Held as Cash Collateral and Deposits in the
Borrower Equity Proceeds Account.......................... 103
SECTION 8.04. Source of Payments; Deposits Irrevocable.................... 104
SECTION 8.05. Books of Account; Statements................................ 104
<PAGE>
SECTION 8.06. Location of the Accounts.................................... 104
SECTION 8.07. Construction Account........................................ 104
SECTION 8.08. Revenue Account............................................. 105
SECTION 8.09. Special Payment Account..................................... 110
SECTION 8.10. Debt Reserve Account........................................ 110
SECTION 8.11. Parent Interest Reserve Account............................. 110
SECTION 8.12. Operating Reserve Account................................... 111
SECTION 8.13. Insurance Proceeds Account.................................. 111
SECTION 8.14. Clean-Up Account............................................ 112
SECTION 8.15. Sales and Issuances Proceeds Account........................ 112
SECTION 8.16. Construction Contingency Reserve Account.................... 113
SECTION 8.17. Current Account............................................. 114
SECTION 8.18. Backhaul Reserve Account.................................... 114
SECTION 8.19. System Upgrade Reserve Account.............................. 114
SECTION 8.20. Subsidiary Accounts......................................... 114
SECTION 8.21. Borrower Equity Proceeds Account............................ 115
SECTION 8.22. Checking Accounts........................................... 115
SECTION 8.23. Release of Excess Amounts................................... 115
SECTION 8.24. Acceleration................................................ 116
SECTION 8.25. Investment.................................................. 116
SECTION 8.26. Value....................................................... 116
SECTION 8.27. Other Determinations; Additional Accounts................... 116
SECTION 8.28. Sales of Permitted Investments.............................. 116
SECTION 8.29. Available Cash.............................................. 117
SECTION 8.30. Purchaser Escrow Arrangements............................... 117
SECTION 8.31. Termination................................................. 117
SECTION 8.32. Conflicts With Other Loan Documents......................... 117
ARTICLE IX
THE ADMINISTRATIVE AGENT, OTHER AGENTS
AND AGENT RELATED PERSONS
--------------------------------------
SECTION 9.01. Authorization and Action.................................... 117
SECTION 9.02. Exculpation of, and Reliance by, Agent Related Persons...... 118
SECTION 9.03. Agent Related Persons and Affiliates........................ 118
SECTION 9.04. Lender Credit Decision...................................... 119
SECTION 9.05. Indemnification............................................. 119
SECTION 9.06. Collateral and Guaranty Matters............................. 120
SECTION 9.07. Successor Administrative Agent.............................. 120
SECTION 9.08. Notice of Guaranty Draw..................................... 121
<PAGE>
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.01. Notices..................................................... 121
SECTION 10.02. Waivers; Amendments......................................... 122
SECTION 10.03. Expenses; Indemnity; Damage Waiver.......................... 123
SECTION 10.04. Successors and Assigns; Consent and Agreement............... 125
SECTION 10.05. Limited Recourse............................................ 128
SECTION 10.06. Survival.................................................... 128
SECTION 10.07. Counterparts; Integration; Effectiveness.................... 128
SECTION 10.08. Severability................................................ 129
SECTION 10.09. Right of Setoff............................................. 129
SECTION 10.10. Governing Law; Jurisdiction; Consent to Service of Process.. 129
SECTION 10.11. WAIVER OF JURY TRIAL........................................ 130
SECTION 10.12. Headings.................................................... 130
SECTION 10.13. Replacement of Independent Engineer or Insurance Consultant. 130
SECTION 10.14. Confidentiality............................................. 130
SCHEDULES
Schedule 1.01(a) -- Equity Investors
Schedule 1.01(b) -- Qualified Purchasers
Schedule 2.01 -- Lenders; Commitments
Schedule 2.09 -- Principal Amortization Table
Schedule 3.05(a) -- Borrower Capital Structure
Schedule 3.05(b) -- Subsidiaries
Schedule 3.08 -- Governmental Actions
Schedule 3.13 -- Taxes
Schedule 3.17 -- Collateral Filings
Schedule 3.18 -- Places of Business
Schedule 5.10 -- Insurance
EXHIBITS
Exhibit A-1 -- Form of Working Capital Note
Exhibit A-2 -- Form of Term Note
Exhibit B-1 -- Form of Borrowing Request
Exhibit B-2 -- Form of Issuance Request
Exhibit B-3 -- Form of Borrowing Certificate
Exhibit C -- Form of Continuation/Conversion Notice
Exhibit D -- Form of Assignment and Acceptance
<PAGE>
Exhibit E -- Form of Parent Pledge Agreement
Exhibit F -- Form of Borrower Pledge and Security Agreement
Exhibit G -- Form of Subsidiary Pledge and Security Agreement
Exhibit H -- Form of Subsidiary Guaranty
Exhibit I -- Form of Closing Date Certificate
Exhibit J -- Form of Construction Progress Certificate
Exhibit K -- Form of Expense Certificate
Exhibit L -- Form of Article VIII Certificate
Exhibit M -- Form of Participation Certificate
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of July 14, 1999, among GLOBENET COMMUNICATIONS
HOLDINGS LTD., a company organized and existing under the laws of Bermuda (the
"Borrower"), the Lenders, TORONTO DOMINION (TEXAS) INC., as administrative agent
--------
for the Lenders (in such capacity, the "Administrative Agent") and Issuer,
--------------------
CREDIT SUISSE FIRST BOSTON, as syndication agent for the Lenders (in such
capacity, the "Syndication Agent"), and TD SECURITIES (USA) INC., as arranger
-----------------
(in such capacity, the "Arranger").
--------
W I T N E S S E T H :
-------------------
WHEREAS, capitalized terms used herein (including the preamble above) and
--------
not otherwise defined herein shall have the meanings assigned to them in Section
-------
1.01 of this Agreement;
- ----
WHEREAS, the Borrower (together with one or more of the Subsidiaries)
proposes to develop, construct, own, provide and sell capacity on a four fiber
pair, fiber-optic submarine cable system to be known as the Atlantica-1
Submarine Cable System, which is intended to be used to provide direct
telecommunications service between and among the United States mainland,
Bermuda, Venezuela and Brazil, and shall include within it the previously
constructed two fiber pair, fiber-optic submarine cable system known as BUS-1;
WHEREAS, in order to provide for the design, development, construction and
installation of the System, ANBL has entered into the Supply Contract with the
Contractor;
WHEREAS, the Contractor's obligations under the Supply Contract are being
guaranteed by the Supply Contract Guarantor pursuant to, and subject to the
limitations set forth in, the Supply Contract Guaranty;
WHEREAS, in order to finance a portion of the design, development,
construction and installation of the System, Parent, the Borrower's parent, has
(a) issued equity to the Equity Investors and (b) issued the Parent Senior
Notes, and has agreed, in turn, to make cash equity contributions to the
Borrower with the proceeds of such issuances in an aggregate amount equal to the
Net Equity Funding Commitment;
WHEREAS, in order to finance the remaining portion of the design,
development, construction and installation of the System and for other purposes
as set forth herein, the Borrower is entering into this Agreement pursuant to
which the Lenders and the Issuer have
<PAGE>
agreed, subject to the terms and conditions set forth herein, to make certain
Credit Extensions to the Borrower; and
WHEREAS, as a condition to and in furtherance of the foregoing, and in
order to secure and support the Borrower's obligations to the Lenders and the
Issuer under the Loan Documents, Parent, the Borrower and the Subsidiaries will
enter into the Security Documents to which they are parties, the Subsidiaries
will enter into the Subsidiary Guaranty and the Term C Loan Guarantor will enter
into the Term C Loan Guaranty;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained 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
DEFINITIONS
-----------
SECTION 1.01. Defined Terms. As used in this Agreement, the following
-------------
terms shall have the meanings specified below:
"ABR" when used in reference to any Loan or Borrowing, refers to whether
---
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Alternate Base Rate.
"Accounts" means, collectively, the Construction Account, the Revenue
--------
Account, the Special Payment Account, the Debt Reserve Account, the Parent
Interest Reserve Account, the Operating Reserve Account, the Insurance Proceeds
Account, the Clean-Up Account, the Sales and Issuances Proceeds Account, the
Construction Contingency Reserve Account, the Current Account, the Backhaul
Reserve Account, the System Upgrade Reserve Account, the Subsidiary Accounts and
each other collateral account created hereunder, together with each sub-account
of such accounts, established and maintained pursuant to Article VIII. Accounts
------------
shall not include the Borrower Equity Proceeds Account or any Checking Account.
"Additional Contracts" means any contract entered into by the Borrower or
--------------------
any Subsidiary after the Closing Date (other than the OA&M Agreement, any
Intercompany Agreement, employment contracts and contracts involving less than
$1,000,000 annually).
"Additional Material Contract" means each Additional Contract designated as
----------------------------
an Additional Material Contract" in accordance with Section 6.16.
------------
"Additional Non-Material Contract" means each Additional Contract
--------------------------------
designated as an AAdditional Non-Material Contract" in accordance with Section
-------
6.16.
- ----
-2-
<PAGE>
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for
------------------
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" is defined in the preamble and includes each of its
-------------------- --------
successors hereunder.
"Affiliate" means, with respect to a specified Person, another Person
---------
(other than a subsidiary of the Person specified) that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified.
"Agent Related Persons" means the Administrative Agent, the Syndication
---------------------
Agent, the Issuer, the Arranger and their respective officers, directors,
partners, agents, employees and Affiliates and Subsidiaries.
"Agreement" means, on any date, this Credit Agreement as originally in
---------
effect on the Closing Date and as thereafter amended, supplemented, amended and
restated or otherwise modified from time to time and in effect on such date.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
-------------------
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"ANBL" means Atlantica Network (Bermuda) Ltd., a company organized and
----
existing under the laws of Bermuda and a direct, wholly-owned subsidiary of the
Borrower.
"Applicable Percentage" means, with respect to any Lender, the percentage
---------------------
of the total Commitments represented by such Lender's Commitments; provided
--------
that, for purposes of this definition, Lenders obligated to purchase
participations in Working Capital Loans pursuant to Section 2.04(a) shall be
---------------
deemed to have a Working Capital Loan Commitment in an amount (the
"Participation Amount") equal to such participation obligations, and the Working
- ---------------------
Capital Lenders' Working Capital Loan Commitments shall be deemed to be ratably
reduced by such participation obligations. If the Commitments have terminated
or expired, the Applicable Percentages shall be determined based upon the
Commitments most recently in effect, giving effect to any assignments.
"Applicable Rate" means, for any day, (a) for Working Capital Loans, Term A
---------------
Loans, Term B Loans and Term C Loans, 2.50% with respect to any ABR Loans and
3.50% with respect to any Eurodollar Loans, and (b) for Term D Loans, 3.00% with
respect to any ABR Loans and 4.00% with respect to any Eurodollar Loans. The
Applicable Rate for Working Capital Loans, Term A Loans, Term B Loans and Term C
Loans shall be reduced in each case
-3-
<PAGE>
by .25% per annum from and after the date upon which the aggregate outstanding
principal amount of Term Loans and Term Loan Commitments is reduced as a result
of repayments and reductions thereof to less than or equal to $280,000,000, and
shall be reduced by an additional .25% per annum from and after the date upon
which the aggregate outstanding principal amount of Term Loans and Term Loan
Commitments is reduced as a result of repayments and reductions thereof to less
than or equal to $165,000,000; provided that, if on the date the aggregate
--------
outstanding principal amount of the Term Loans is so reduced, a Designated Event
or Default shall have occurred and be continuing, the Applicable Rate shall not
be reduced as aforesaid until the date no Designated Event or Default shall have
occurred and be continuing.
"Arranger" is defined in the preamble.
-------- --------
"Article VIII Certificate" means each certificate of the Borrower,
------------------------
substantially in the form of Exhibit L, delivered pursuant to Article VIII.
--------- ------------
"Assignment and Acceptance" means an assignment and acceptance entered into
-------------------------
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 10.04), and accepted by the Administrative Agent,
-------------
substantially in the form of Exhibit D or any other form approved by the
---------
Administrative Agent.
"Availability Period" means,
-------------------
(a) with respect to any Working Capital Loan (other than a Working
Capital Loan made to reimburse an LC Disbursement in accordance with
Section 2.05(e)), the period from and including the Closing Date to, but
---------------
excluding, the earlier of (i) if the Commercial Operation Date does not
occur prior to the Guaranteed Completion Date, the Guaranteed Completion
Date, and (ii) the Maturity Date;
(b) with respect to any Working Capital Loan made to reimburse an LC
Disbursement under any Letter of Credit in accordance with Section 2.05(e),
---------------
the period from and including the date the related Letter of Credit is
issued to, but excluding, the earliest of (i) the date such Letter of
Credit is terminated in accordance with its terms (other than by reason of
a drawing thereunder), (ii) the date such LC Disbursement is reimbursed in
accordance with Section 2.05(e) from funds other than the proceeds of a
---------------
Loan, (iii) the date which is five Business Days after the date the
Borrower receives notice of such LC Disbursement and (iv) the Maturity
Date;
(c) with respect to Term A Loans, the period from and including the
Closing Date to, but excluding, the Guaranteed Completion Date; provided
--------
that up to $15,000,000 in aggregate principal amount of Term A Loans may be
made after the Commercial Operation Date to but excluding the date that is
six months after the Commercial Operation Date for the purposes of paying
interest on the Loans, making intercompany advances to Parent (evidenced by
intercompany promissory notes pledged to the Secured Parties) so long as no
Blockage Event has occurred and is continuing to pay interest on
-4-
<PAGE>
the Parent Senior Notes and any Parent Additional Notes, and to pay
Backhaul Service Costs, subject in any event to Section 4.03 (including
------------
Section 4.03(h));
---------------
(d) with respect to Term B Loans, the period from and including the
Closing Date to, but excluding, the earliest of (i) if the Commercial
Operation Date does not occur prior to the Guaranteed Completion Date, the
Guaranteed Completion Date, (ii) if the Commercial Operation Date does
occur prior to the Guaranteed Completion Date, the date on which the
Contractor has received payment in full of all amounts due under the Supply
Contract, and (iii) the Commercial Operation Date; and
(e) with respect to Term C Loans, the period from and including the
Closing Date to, but excluding, the earliest of (i) if the Commercial
Operation Date does not occur prior to the Guaranteed Completion Date, the
Guaranteed Completion Date, (ii) if the Commercial Operation Date does
occur prior to the Guaranteed Completion Date, the date on which the
Contractor has received payment in full of all amounts due under the Supply
Contract, and (iii) the Commercial Operation Date.
(f) with respect to Term D Loans, the period from and including the
Closing Date to, but excluding, the earliest of (i) the date of completion
of syndication of the Term D Commitment and (iii) September 30, 1999.
"Backhaul Capacity" means capacity on inland telecommunication systems
-----------------
which can be connected (directly or indirectly) to any cable station on the
System.
"Backhaul Reserve Account" means the special account designated by that
------------------------
name established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Backhaul Service" means the acquisition and the sale, lease and other
----------------
disposition of Backhaul Capacity, and activities incidental thereto.
"Backhaul Service Costs" means all costs of the Borrower and the
----------------------
Subsidiaries directly and solely related to the acquisition of Backhaul Capacity
and the related payments in respect of OA&M Expenses.
"Backhaul Service Revenue" means the cash revenue (net of sales
------------------------
commissions) received by the Borrower and the Subsidiaries from the sales or
swaps of Backhaul Capacity and from related payments in respect of operation,
administration and maintenance charges from customers, but, in any event,
without duplication with respect to payments received by the Subsidiaries from
the Borrower or any Subsidiary under any Intercompany Agreement.
"Blockage Event" means the occurrence and continuance of (a) a Default
--------------
arising under Section 7.01, 7.04 or 7.05, (b) a Default arising under Section
------------ ---- ---- -------
7.11 (but only if such Default is with respect to the Operator or the Contractor
- ----
during the period of time the Operator or the Contractor, as the case may be, is
being replaced in accordance with the terms of such
-5-
<PAGE>
Section 7.11, (c) an Event of Default arising under Section 7.03 with respect
- ------------ ------------
only to the covenants contained in Article VI, (d) an Event of Default arising
----------
under Sections 7.09 or 7.13, in each case, upon the affirmative vote of the
------------- ----
Majority Lenders, or (e) an Event of Default arising under Section 7.14.
------------
"Board" means the Board of Governors of the Federal Reserve System of the
-----
United States of America.
"Borrower" is defined in the preamble.
-------- --------
"Borrower Equity Proceeds Account" means the special account established by
--------------------------------
the Administrative Agent pursuant to Section 8.01(c).
---------------
"Borrower Pledge and Security Agreement'" means the Pledge and Security
---------------------------------------
Agreement, dated as of the date hereof, substantially in the form of Exhibit F,
---------
made by the Borrower in favor of the Secured Parties, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time, including as supplemented by the Foreign Subsidiary Pledge Supplements.
"Borrowing" means Loans of the same Class and Type, made, converted or
---------
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.
"Borrowing Certificate" means a certificate of the Borrower, substantially
---------------------
in the form of Exhibit B-3.
-----------
"Borrowing Date" means the last Business Day of each calendar month.
--------------
"Borrowing Request" means a notice from the Borrower, substantially in the
-----------------
form of Exhibit B-1. Each Borrowing Request shall specify the information
-----------
specified in Section 2.03 and set forth (a) all costs which have been incurred
------------
and which are to be paid with the proceeds of the proposed Borrowing (with all
applicable invoices attached) and (b) that the proposed Borrowing will not
violate or conflict with any other agreement to which the Borrower, any of the
Subsidiaries or Parent is a party, including the Term C Loan Guaranty
Reimbursement Agreement (during any Term C Loan Guaranteed Period) and the
Parent Senior Note Documents, accompanied by calculations in reasonable detail
of remaining baskets available for Indebtedness and related matters. The final
Borrowing Request delivered at the end of the Availability Period shall include
a statement certifying all costs set forth in the Capital Budget which have not
yet been funded, which costs will be prefunded into the Clean-Up Account.
"BUS-1" means the two fiber pair, fiber-optic cable system known as ABUS-
-----
1", with an initial capacity of 20 Gb/s, with one working fiber pair and one
protective fiber pair, connecting St. David's, Bermuda and Tuckertown, New
Jersey.
-6-
<PAGE>
"Business Day" means any day that is not a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
--------
the term "Business Day" shall also exclude any day on which banks are not open
------------
for dealings in dollar deposits in the London interbank market.
"Capacity" means, collectively, System Capacity and Backhaul Capacity.
--------
"Capacity Revenue" means, collectively, System Capacity Revenue and
----------------
Backhaul Service Revenue.
"Capacity Sales Agreements" means all agreements for the sale or lease or
-------------------------
other disposition of Capacity entered into between the Borrower or any
Subsidiary and any other Person, expressly permitting the Lien of the
Administrative Agent thereon with respect to the Borrower's and the applicable
Subsidiaries' interests in such agreements, as each may be amended,
supplemented, amended and restated or otherwise modified from time to time in
accordance with and subject to the terms and conditions hereof.
"Capacity Swap Agreements" means all agreements for the exchange of
------------------------
Capacity on the System for capacity or rights of use on other telecommunications
systems, all expressly permitting the Lien of the Administrative Agent thereon
with respect to the Borrower's and the applicable Subsidiaries' interests in
such agreements, as each may be amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with and subject to the terms
and conditions hereof.
"Capital Budget" is defined in Section 4.01(h).
-------------- ---------------
"Capital Costs" means all costs and expenses incurred or to be incurred by
-------------
the Borrower or any Subsidiary in connection with the design, development,
installation, construction, completion, start-up and testing of the System (and
shall include, in any event, all interest and other financing costs during
construction incurred or to be incurred by the Borrower, any Subsidiary (if
permitted pursuant to Section 6.01) and the Parent (pursuant to the Parent
------------
Senior Note Documents)), all payments under Hedging Agreements and all OA&M
Expenses, SG&A Expenses and Term C Loan Guaranty Fees with respect to the System
to the extent set forth in the Capital Budget, all of the above as set forth in
the then current Capital Budget.
"Capital Lease Obligations" of any Person, means the obligations of such
-------------------------
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Casualty Proceeds" means all payments received by the Administrative
-----------------
Agent, the
-7-
<PAGE>
Borrower or any Subsidiary from any insurer in respect of casualty to or loss of
property, all awards and proceeds in respect of a taking, but excluding business
interruption insurance or delayed opening of business insurance and payments in
respect of liability policies.
"Casualty Proceeds Deposits" is defined in Section 8.13(a).
-------------------------- ---------------
"Certificate of Commercial Acceptance" is defined in the Supply Contract.
------------------------------------
"Certificate of Final Acceptance" is defined in the Supply Contract.
-------------------------------
"Certificate of Provisional Acceptance" is defined in the Supply Contract.
-------------------------------------
"Change in Control" means and shall be deemed to have occurred if (a) there
-----------------
shall occur any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Borrower and the Subsidiaries (other than sales of Capacity) to any Person or
group of related Persons for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended (a "Group"), together with any Affiliates
-----
thereof; (b) the holders of Equity Interests of the Borrower shall approve any
plan or proposal for the liquidation or dissolution of the Borrower; (c) any
Person or Group (other than the Permitted Holders) shall become, after the
Closing Date, the owner, directly or indirectly, beneficially or of record, of
Voting Interests representing more than 35% of the total voting power of all
Voting Interests of Parent or the Borrower; (d) any AChange of Control" as
defined in the Parent Senior Note Documents shall occur; (e) the Borrower shall
cease to be a 100% owned, direct subsidiary of Parent, with all ownership
interests in the Borrower held by all Persons free and clear of all consensual
Liens except Liens in favor of the Administrative Agent (for the benefit of the
Secured Parties); (f) Parent shall cease to control a majority of the seats on
the Board of Directors of the Borrower; or (g) the six Equity Investors with the
largest ownership interest in Parent on the Closing Date, as set forth on
Schedule 1.01(a), together with their respective Affiliates, shall cease to own
- ----------------
and control, directly, at least 51% of all the Voting Interests and ownership
interests on a fully diluted basis in Parent, other than as a result of one or
more public offerings of common stock of Parent or as a result of dilution from
primary issuances of common stock of Parent, so long as, in any event, no Person
or Group (other than the Permitted Holders) shall become, after the Closing
Date, the owner, directly or indirectly, beneficially or of record of voting or
ownership interests which are larger than the aggregate voting and ownership
interests of the three of the six Equity Investors with the largest ownership
interest in Parent on the Closing Date, as set forth on Schedule 1.01(a),
----------------
together with the interests of their respective Affiliates.
"Change in Law" means (a) the adoption of any law, rule or regulation after
-------------
the Closing Date, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
Closing Date or (c) compliance by any Lender, any parent of any Lender or the
Issuer with any request, guideline or directive of any Governmental Authority
made or issued after the Closing Date (whether or not having the force of law).
-8-
<PAGE>
"Checking Accounts" is defined in Section 8.22.
----------------- ------------
"Class" when used in reference to any Loan or Borrowing, refers to whether
-----
such Loan, or the Loans comprising such Borrowing, are Working Capital Loans or
Term Loans and, when used in reference to any Commitment, refers to whether such
Commitment is a Working Capital Loan Commitment or a Term Loan Commitment.
"Clean-Up Account" means the special account designated by that name
----------------
established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Closing Date" means the date on which this Agreement shall have been
------------
executed and delivered by the parties hereto and the conditions specified in
Section 4.01 have been satisfied or waived.
- ------------
"Closing Date Certificate" means a certificate of a Responsible Officer of
------------------------
the Borrower, substantially in the form of Exhibit I.
---------
"Code" means the United States Internal Revenue Code of 1986, as amended
----
from time to time.
"Collateral" means any and all ACollateral" as defined in any applicable
----------
Security Document; provided that, notwithstanding anything to the contrary
--------
herein or therein, Collateral shall not include the Net Equity Proceeds, the
Parent Senior Note Proceeds, the proceeds of the Parent Post-Closing Equity
Offering, the proceeds of the Parent Terrestrial Build-Out Offering, the
proceeds of the Parent Additional Senior Note Offering, amounts on deposit in
the Borrower Equity Proceeds Account, amounts on deposit in the Checking
Accounts and all interest earned on all of the foregoing.
"Commercial Operation Date" means the earlier of (a) the date the
-------------------------
Certificate of Commercial Acceptance is issued with respect to the System and
(b) the date the Certificate of Provisional Acceptance is issued with respect to
the System.
"Commitment" means the Working Capital Loan Commitment, the Term A Loan
----------
Commitment, the Term B Loan Commitment, the Term C Loan Commitment or the Term D
Loan Commitment, or a combination thereof (as the context requires).
"Commitment Letter" means the commitment letter, dated July 8, 1999, from
-----------------
the Arranger and the Syndication Agent to Parent, the Borrower, TBI and ANBL.
"Confidential Memorandum" means the Confidential Information Memorandum,
-----------------------
dated July, 1999, with respect to the GlobeNet Communications Holdings Ltd.
US$400,000,000 Senior Secured Credit Facilities distributed by the Arranger.
"Consolidated Interest Expense" means, with respect to the Borrower and the
-----------------------------
-9-
<PAGE>
Subsidiaries for any period, the sum of (a) gross interest expense (including
all cash and accrued interest expense) of the Borrower and the Subsidiaries for
such period on a consolidated basis and (b) interest on the Parent Senior Notes
and any Parent Additional Notes paid by Parent during such period.
"Consolidated Net Income" means, for any period for a Person, net income of
-----------------------
such Person and its subsidiaries determined on a consolidated basis in
accordance with GAAP for such period.
"Construction Account" means the special account designated by that name
--------------------
established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Construction Contingency Reserve Account" means the special account
----------------------------------------
designated by that name established by the Administrative Agent pursuant to
Section 8.01(a).
- ---------------
"Construction Progress Certificate" means a certificate from the Contractor
---------------------------------
(and countersigned by ANBL and the Independent Engineer), substantially in the
form of Exhibit J.
---------
"Consultants" means, collectively, the Independent Engineer, the Market
-----------
Consultant and the Insurance Consultant.
"Contest" means, with respect to any Tax, Lien, claim or obligation, a
-------
contest pursued in good faith and by appropriate proceedings diligently
conducted, so long as (a) adequate reserves in accordance with GAAP have been
established with respect thereto, (b) no Lien shall have been filed in
connection therewith or any Lien filed in connection therewith shall have been
removed from the record by the bonding thereof and (c) the failure to pay such
Tax, Lien, claim or obligation during the pendency of such contest could not
reasonably be expected to have a Material Adverse Effect.
"Continuation/Conversion Notice" means a request by the Borrower to convert
------------------------------
or continue a Working Capital Loan or a Term Loan in accordance with Section
-------
2.07, substantially in the form of Exhibit C.
- ---- ---------
"Contractor" means, collectively, Alcatel Submarine Networks, a societe
----------
anonyme organized and existing under the laws of France, and Alcatel Submarine
Networks, Inc., a corporation organized and existing under the laws of the state
of Delaware.
"Contractor Consent" means the Consent and Agreement, dated as of the date
------------------
hereof, among the ANBL, the Contractor and the Administrative Agent with respect
to the assignment by the Borrower of its rights and interests under the Supply
Contract, as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or any agreement, instrument, judgment, order,
decree or other undertaking to
-10-
<PAGE>
which such Person is a party or by which it or any of its property is bound.
"Contract Variation" means any amendment, supplement, waiver, consent or
------------------
other modification to the Supply Contract and shall include any AContract
Variation" as such term is defined in the Supply Contract.
"Control" means the possession, directly or indirectly, of (a) the power to
-------
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise and/or
(b) the ownership of 10% or more of the Voting Interests with respect to a
Person. "Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Credit Extension" means, as the context may require, (a) the making of a
----------------
Loan by a Lender or (b) the issuance of any Letter of Credit, or the extension
of any expiration date of any previously issued Letter of Credit, by the Issuer.
"Current Account" means the special account designated by that name
---------------
established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Debt Reserve Account" means the special account designated by that name
--------------------
established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Debt Reserve Amount" means, at any time of determination, an amount equal
-------------------
to six months of anticipated interest on the Loans using the interest rate in
effect as of such date with respect to the Loans plus an amount equal to the
next scheduled principal payment on the Loans.
"Debt Service" means, as of any date of determination, (a) all scheduled
------------
principal, interest (determined by multiplying the amount of Indebtedness (other
than any intercompany Indebtedness) outstanding on such date by the applicable
interest rate on such date), commitment fee (determined by multiplying the
amount of the unused portion of the Commitments as of such date by the rate set
forth in Section 2.12(a)) and similar items required to be paid in cash by the
---------------
Borrower and the Subsidiaries on Indebtedness on a pro forma basis over the next
--- -----
four fiscal quarters commencing after such date (excluding amounts paid under
Rate Protection Agreements and amounts due under the Supply Contract) plus (b)
----
all interest scheduled to be paid in cash by Parent on the Parent Senior Notes
and on any Parent Additional Notes on a pro forma basis over the next four
--- -----
fiscal quarters commencing after such date.
"Debt Service Coverage Ratio" means, on any date of determination, the
---------------------------
ratio of (a) EBITDA for the twelve-month period ended on such date for which
financial statements are available to (b) Debt Service as of such date.
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
-11-
<PAGE>
"Defaulting Lender" means any Lender with respect to which a Lender Default
-----------------
is in effect.
"Designated Agents" means, collectively, the Administrative Agent and the
-----------------
Syndication Agent.
"Designated Event" means, as of any Principal Payment Date, the Borrower's
----------------
failure to be in compliance with Section 6.24 as of such Principal Payment Date,
------------
as set forth in the certificate delivered by the Borrower to the Administrative
Agent in accordance with Section 5.02(c), or the failure of the Borrower to
---------------
deliver such a certificate when required under Section 5.02(c), and such
---------------
Designated Event shall be deemed to continue until such time as the Borrower
shall have delivered a certificate under Section 5.02(c) indicating compliance
---------------
with Section 6.24 and the Borrower shall in fact be in compliance with Section
------------ -------
6.24.
- ----
"Dispute Account" is defined in the Supply Contract.
---------------
"Dollars" or "$" means the lawful money of the United States of America.
------- -
"EBITDA" means, for any period for a Person, Consolidated Net Income for
------
such period of such Person, plus, without duplication and (other than with
----
respect to amounts included in clause (b) of the definition of Consolidated
----------
Interest Expense) to the extent deducted from revenue in determining
Consolidated Net Income for such period (a) the aggregate amount of Consolidated
Interest Expense for such period, (b) the aggregate amount of letter of credit
fees paid during such period, (c) the aggregate amount of income tax expense for
such period, (d) all amounts attributable to depreciation and amortization for
such period and (e) all non-cash, non-recurring charges during such period, and
minus or plus, without duplication and to the extent added to revenue in
- ----- ----
determining Consolidated Net Income for such period, all non-cash, non-recurring
gains or losses during such period, in each case determined in accordance with
GAAP.
"Environmental Laws" means all applicable laws, rules, permits, orders and
------------------
regulations relating to the protection of the environment and natural resources,
and all similar items under the laws of each jurisdiction (including the United
States, Bermuda, Venezuela and Brazil), where the Borrower and the Subsidiaries
are incorporated and/or operate.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law
or (b) the release or threatened release of any Hazardous Materials into the
environment.
"Equity Contributions" means each contribution of cash equity by Parent to
--------------------
the Borrower to fund the development, construction, installation or ownership of
the System.
"Equity Funding Commitment" means $540,000,000.
-------------------------
-12-
<PAGE>
"Equity Interests" means any and all shares, interests, participation,
----------------
membership interests or other equivalents (however designated) of capital stock
of a corporation, and any and all equivalent ownership interests in a Person
(other than a corporation).
"Equity Investors" means the Persons listed on Schedule 1.01(a).
---------------- ----------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any entity (whether or not incorporated) that,
---------------
together with the Borrower, is treated as a single employer under Section 414(b)
or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section
412 of the Code, is treated as a single employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
-----------
4043(c) of ERISA or the regulations issued thereunder with respect to a Plan
(other than an event for which the 30-day notice period is waived under
applicable PBGC regulations); (b) the failure to make a required contribution to
any Plan sufficient to give rise to a lien under Section 302(f) of ERISA; (c)
the existence with respect to any Plan of an Aaccumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the taking of any steps by the Borrower or any of its
ERISA Affiliates to terminate any Plan, if such termination could result in any
liability under Title IV of ERISA with respect to such Plan; (f) the receipt by
the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any
notice relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (g) the incurrence by the Borrower or any of its
ERISA Affiliates of any liability with respect to the withdrawal or partial
withdrawal, within the meaning of Section 4063 of ERISA, from any multiple-
employer Plan; or (h) the receipt by the Borrower or any ERISA Affiliate of any
notice from any Multiemployer Plan concerning the imposition of Withdrawal
Liability or a determination that a Multiemployer Plan is, or is expected to be,
insolvent or in reorganization, within the meaning of Title IV of ERISA.
"Eurodollar" when used in reference to any Loan or Borrowing, refers to
----------
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" is defined in Article VII.
---------------- -----------
"Event of Loss" means (a) the actual loss or constructive total loss of all
-------------
or substantially all of any Segment of the System or (b) the loss, destruction
or damage of any material portion of a Segment of the System.
"Excess Cash Flow" means, for each semi-annual period ending on a Principal
----------------
Payment
-13-
<PAGE>
Date (or, with respect to the initial Principal Payment Date, the period
from the Commercial Operation Date to the initial Principal Payment Date), all
cash Revenue received during such period by the Borrower and the Subsidiaries
and available to the Borrower from the Revenue Account after the application of
the amounts set forth in clauses first through seventh of Section 8.08(d) in
------------- ------- ---------------
accordance with the terms of Article VIII.
------------
"Excluded Taxes" means, with respect to the Administrative Agent, any other
--------------
Agent, any Lender, the Issuer or any other recipient of any payment to be made
by or on account of any obligation of the Borrower hereunder, (a) Taxes imposed
by the jurisdiction under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which
its applicable lending office is located or Taxes imposed as a result of the
recipient conducting activities in such jurisdiction unrelated to the Credit
Extensions, (b) any branch profits Taxes imposed by the United States or any
similar Tax imposed by any other jurisdiction in which any Lender's principal
office or applicable lending office is located and (c) in the case of a Lender,
any United States federal withholding Tax that is imposed on interest payable to
such Lender hereunder unless, subject to Section 10.04 with respect to
-------------
assignees, (i) such withholding Tax is the result of a Change in Law and (ii)
such Lender has complied with the provisions of Section 2.17(e).
---------------
"Expense Certificate" means each certificate of the Borrower, substantially
-------------------
in the form of Exhibit K, delivered pursuant to Section 8.08(b).
--------- ---------------
"Federal Funds Effective Rate" means, for any day, the weighted average
----------------------------
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fee Letters" means, collectively, the fee letters, each dated July 8,
-----------
1999, among (a) the Arranger, Parent, the Borrower, TBI and ANBL, and (b) the
Syndication Agent, Parent, the Borrower, TBI and ANBL.
"Filing Statements" means all UCC financing statements (Form UCC-1) or
-----------------
other similar financing statements and UCC termination statements (Form UCC-3)
required to be executed, delivered and filed pursuant to the Loan Documents.
"Foreign Subsidiary Pledge Supplements" means all supplements to the
-------------------------------------
Borrower Pledge and Security Agreement and/or the Subsidiary Pledge and Security
Agreement in respect of Subsidiaries of the Borrower incorporated outside the
United States of America, in form and substance reasonably satisfactory to the
Administrative Agent, as the same may be amended, supplemented, amended and
restated or otherwise modified from time to time.
-14-
<PAGE>
"GAAP" means generally accepted accounting principles in the United States
----
of America.
"GCL" means GlobeNet Communications Limited, a company organized and
---
existing under the laws of Bermuda and a direct, wholly-owned subsidiary of the
Borrower.
"Governmental Action" means all permits, authorizations, registrations,
-------------------
consents, approvals, notices and licenses of or with any Governmental Authority
that are required in connection with the construction, installation and
operation of the System, including all Landing Licenses.
"Governmental Authority" means the government of any nation (including the
----------------------
United States of America) or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
--------- ---------
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
---------------
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided that the term Guarantee shall not include endorsements for
--------
collection or deposit in the ordinary course of business.
"Guaranteed Completion Date" means, if the Rio Ring Option is exercised,
--------------------------
December 31, 2001, otherwise, June 30, 2001.
"Hazardous Materials" means all materials defined as hazardous substances
-------------------
under the Federal Comprehensive Environmental Response, Compensation and
Liability Act, petroleum or petroleum distillates, or friable asbestos or
friable asbestos containing materials, and all similar items under the laws of
each jurisdiction (including the United States, Bermuda, Venezuela and Brazil)
where the Borrower and the Subsidiaries are incorporated and/or operate.
"Hedging Agreement" means any interest rate protection agreement, foreign
-----------------
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement;
provided that copies of any such agreements are provided to the Administrative
- --------
Agent promptly after execution thereof.
-15-
<PAGE>
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person in
respect of the deferred purchase price of property or services (excluding
current accounts payable incurred in the ordinary course of business), (d) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (e) all Guarantees by such Person of
Indebtedness of others, (f) all Capital Lease Obligations of such Person, (g)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty, (h) all obligations under
Hedging Agreements and (i) all obligations, contingent or otherwise, of such
Person in respect of bankers' acceptances.
"Indemnified Taxes" means Taxes other than (a) Excluded Taxes and (b) Other
-----------------
Taxes.
"Independent Engineer" means iT-International Telecom Ltd. or such other
--------------------
engineer or engineering firm as may be appointed by the Administrative Agent in
accordance with Section 10.13 and the Supply Contract.
-------------
"Initial Contract Price" is defined in the Supply Contract.
----------------------
"Initial Principal Payment Date" means December 31, 2001 (or if such day is
------------------------------
not a Business Day, the immediately preceding Business Day).
"Insurance Consultant" means Sedgwick & Sedgwick or such other insurance
--------------------
consulting firm as may be appointed by the Administrative Agent in accordance
with Section 10.13.
-------------
"Insurance Proceeds Account" means the special account designated by that
--------------------------
name established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Intercompany Agreement" means each agreement among or between the Borrower
----------------------
and/or one or more of the Subsidiaries with respect to, among other things, the
allocation of Revenue, OA&M Expenses and SG&A Expenses, in form and substance
reasonably satisfactory to the Administrative Agent, as the same may be amended,
supplemented, amended and restated or otherwise modified from time to time in
accordance with and subject to the terms and conditions hereof.
"Interconnect Agreements" means each agreement entered into by the Borrower
-----------------------
and/or the Subsidiaries with another Person providing for the connection of the
System to any other fiber-optic networks, including Backhaul interconnections.
"Interest Payment Date" means (a) with respect to any ABR Loan, the last
---------------------
Business Day of each March, June, September and December and (b) with respect to
any Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in
-16-
<PAGE>
the case of a Eurodollar Borrowing with an Interest Period of more than three
months' duration, each day prior to the last day of such Interest Period that
occurs at intervals of three months' duration after the first day of such
Interest Period.
"Interest Period" means, with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three, six or, if
available to all Lenders, nine months thereafter, as the Borrower may elect;
provided that (a) if any Interest Period would end on a day other than a
- --------
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (b) any Interest Period that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest Period and
(c) Interest Periods shall be selected so that sufficient funds are available
without breakage to make scheduled amortization payments on the Loans. For
purposes hereof, the date of a Borrowing initially shall be the date on which
such Borrowing is made and thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.
"Issuance Request" means a Letter of Credit request and certificate duly
----------------
executed by the Borrower, substantially in the form of Exhibit B-2.
-----------
"Issuer" means Toronto Dominion (Texas) Inc. and/or any of its Affiliates
------
reasonably satisfactory to the Borrower, in its capacity as the issuer of the
Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.05(i).
- ---------------
"Landing Countries" means, at any time of determination, each country in
-----------------
which the System is landed or planned to land at such time. As of the date of
this Agreement, the System is planned to land in the United States of America,
Bermuda, Venezuela and Brazil.
"Landing License" means, with respect to any Landing Country, the
---------------
telecommunications license (if a license is required) issued by a Governmental
Authority in such Landing Country permitting the System to land in such Landing
Country.
"LC Disbursement" means a payment made by the Issuer pursuant to a Letter
---------------
of Credit.
"LC Exposure" means, at any time of determination, the sum of (a) the
-----------
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time, but LC Exposure does
not include any ABR Working Capital Borrowing referred to in Section 2.05(e).
---------------
The LC Exposure of any Lender at any time of determination shall be its
Applicable Percentage of the total LC Exposure at such time.
"Lender Default" means (a) the refusal (which has not been retracted) of a
--------------
Lender to
-17-
<PAGE>
make available its portion of any Borrowing or to fund its portion of
any unreimbursed payment under Section 2.05(e) or (b) a Lender having notified
---------------
the Administrative Agent and/or the Borrower that it does not intend to comply
with its obligations under Section 2.01 or under Section 2.05, in the case of
------------ ------------
either clause (a) or clause (b) above, as a result of the appointment of a
---------- ----------
receiver or conservator with respect to such Lender at the direction or request
of any regulatory agency or authority.
"Lenders" means the financial institutions and other Persons listed on
-------
Schedule 2.01 as lenders hereunder and any other Person that shall become a
- -------------
party hereto as a lender hereunder pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto as a lender pursuant
to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant to this
----------------
Agreement.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
Eurodollar Borrowing for such Interest Period shall be the average rate (rounded
upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal New York office of each Reference Lender in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset (a) any mortgage, deed of trust,
----
lien, pledge, hypothecation, encumbrance, charge, security interest or similar
encumbrance in, on or of such asset and (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
(or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset.
"Liquidated Damages" means payments made by the Contractor or the Supply
------------------
Contract Guarantor under Article 22 of the Supply Contract.
"Loan Documents" means, collectively, this Agreement, the Notes, the Fee
--------------
Letters, the Security Documents, the Term C Loan Guaranty, the Subsidiary
Guaranty, each Rate Protection Agreement, any certificate issued or delivered
pursuant to any of the foregoing documents and any other document which sets
forth that it is to be considered a "Loan Document".
-18-
<PAGE>
"Loan Parties" means, collectively, Parent, the Borrower and each
------------
Subsidiary.
"Loans" means, collectively, the Working Capital Loans and the Term Loans.
-----
"Majority Lenders" means, at any time of determination, Non-Defaulting
----------------
Lenders having Working Capital Exposures, LC Exposure, outstanding Term Loans
and unused Commitments representing more than 51% of the sum of the total
Working Capital Exposures, LC Exposure, outstanding Term Loans, and unused
Commitments of such Non-Defaulting Lenders at such time.
"Market Consultant" means IBM Global Services or such other market
-----------------
consultant firm as may be appointed by the Borrower and the Administrative
Agent.
"Material Adverse Effect" means a material adverse effect on (a) the System
-----------------------
or the ownership thereof, (b) the business, assets, revenues, results of
operations, financial condition or, until the Closing Date, prospects (to the
extent such effect is actually known to the Borrower and not disclosed in the
Offering Memorandum) of the Borrower and the Subsidiaries taken as a whole, (c)
the ability to achieve the Commercial Operation Date by the Guaranteed
Completion Date, (d) the ability of (i) the Borrower, (ii) any of the
Subsidiaries (other than immaterial Subsidiaries identified as such by the
Designated Agents), (iii) the Contractor, (iv) the Supply Contract Guarantor or
(v) the Term C Loan Guarantor (only during any Term C Loan Guaranteed Period),
to perform their respective obligations under the Loan Documents or the Systems
Contracts to which it is a party or (e) the validity or enforceability of the
Loan Documents or the Lenders' rights and remedies under the Loan Documents.
"Material Impact" means (a) a material adverse effect on the Lenders, (b) a
---------------
material adverse effect on the Collateral contemplated on the date hereof to be
granted to the Administrative Agent (including under Section 5.29, but excluding
------------
Collateral not comprising the System as contemplated on the date hereof), or the
Lenders' position with respect thereto, (c) a Material Adverse Effect, (d) an
adverse effect on the revenues of the Borrower and the Subsidiaries taken as a
whole or (e) a material delay in obtaining, or a material risk in not obtaining,
or in the termination or revocation of, a material Governmental Action necessary
to complete or operate the System as contemplated on the date hereof.
"Material Operating Budget Deviation" means, with respect to the Operating
-----------------------------------
Budget for any Operating Year, the payment of any OA&M Expense which would
result in total operating costs for such Operating Year (after giving effect to
all other payments of OA&M Expenses in such Operating Year, including all other
cost overruns and underruns or other savings with respect to any budget
category) exceeding the total operating costs set forth in the Operating Budget
for such Operating Year, and such excess, when added to the "Cumulative
Overruns" for all prior Operating Years, would exceed an amount equal to 15% of
the ABenchmark Costs" for all Operating Years to the date of measurement
(including the current Operating Year). For purposes of this definition,
"Benchmark Costs" shall be the total operating costs for each Operating Year set
- ----------------
forth in the Operating Plan, and "Cumulative Overruns" shall be, at any time,
-------------------
-19-
<PAGE>
an amount equal to the excess of (a) the sum of the actual operating costs for
each complete Operating Year ended over (b) the sum of the Benchmark Costs for
----
each such complete Operating Year ended.
"Material System Contracts" means, collectively, all System Contracts other
-------------------------
than Capacity Sales Agreements, Capacity Swap Agreements, any Intercompany
Agreement, the Payment Escrow Agreement and any Additional Non-Material
Contract.
"Maturity Date" means (a) with respect to Working Capital Loans, Term A
-------------
Loans, Term B Loans and Term C Loans, June 30, 2005, and (b) with respect to
Term D Loans, September 30, 2005.
"Monthly Expense Transfer Date" is defined in clause (i) of Section
----------------------------- ---------- -------
8.08(b).
"Moody's" means Moody's Investors Service, Inc.
-------
"Mortgages" means the mortgages, deeds of trust and other instruments
---------
required to be executed and delivered by Loan Parties owning real property
pursuant to the terms of this Agreement (including Section 5.29 hereof),
------------
creating, in favor of the Secured Parties, Liens on such real property, as
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA.
"Net Cash Proceeds" means (a) with respect to the sale, transfer, lease or
-----------------
other disposition of any asset (excluding Capacity) by the Borrower or any
Subsidiary, an amount certified in reasonable detail by a Responsible Officer of
the Borrower to the Lenders as the excess, if any, of (i) the sum of cash
received in connection with such sale, transfer, lease or other disposition over
(ii) the sum of (A) amounts placed in escrow or held as a reserve, in accordance
with GAAP, against any liabilities associated with such sale or disposition
(except that, to the extent and as of the time any such amounts are released
from such reserve, such amounts shall constitute Net Cash Proceeds), (B) amounts
paid to minority interest holders of such asset and the principal amount of any
Indebtedness (other than Indebtedness under this Agreement) which is secured by
any such asset and which is required to be repaid in connection with the sale,
transfer, lease or other disposition thereof, (C) the reasonable out-of-pocket
expenses incurred or to be incurred by the Borrower or such Subsidiary in
connection with such sale, transfer, lease or other disposition and (D)
provision for taxes attributable to such sale, transfer, lease or other
disposition (as estimated by the Borrower in good faith; provided that to the
--------
extent such estimate shall have exceeded the amount of taxes actually paid, such
difference shall thereupon constitute Net Cash Proceeds), (b) with respect to
the issuance of any Equity Interests by Parent (or any parent corporation
thereof) or the Borrower, an amount certified in reasonable detail by a
Responsible Officer of Parent or the Borrower, as the case may be, to the
Lenders as the excess of (i) the sum of the cash received in connection with
such issuance over
-20-
<PAGE>
(ii) the underwriting discounts and commissions (if any) and other reasonable
fees, out-of-pocket expenses and other costs incurred or to be incurred by
Parent or the Borrower in connection with such issuance and (c) with respect to
the incurrence of Indebtedness by Parent (or any parent corporation thereof)
(including the Parent Additional Debt Offering and the Parent PIK Offering) or
the Borrower, an amount certified in reasonable detail by a Responsible Officer
of Parent or the Borrower, as the case may be, to the Lenders as the excess of
(i) the sum of the cash received in connection with such incurrence of
Indebtedness over (ii) the reasonable fees, out-of-pocket expenses and other
costs incurred or to be incurred by Parent or the Borrower in connection with
such incurrence of Indebtedness; provided that, in any event, Net Cash Proceeds
--------
shall not include (A) the Parent Senior Note Proceeds, (B) the Net Equity
Proceeds, (C) the proceeds of the Parent Terrestrial Build-Out Offering, (D) the
Parent Post-Closing Equity Offering, (E) the proceeds of the Parent Additional
Senior Note Offering, (F) the capital contribution to the Borrower of the
proceeds from the issuances referred to in clauses (A) through (F) above or (G)
----------- ---
Permitted Subordinated Debt.
"Net Equity Funding Commitment" means an amount equal to the Equity Funding
-----------------------------
Commitment minus an amount equal to the sum of (a) the fees, out-of-pocket
expenses and other costs incurred by Parent in connection with the issuance of
the Parent Senior Notes and the issuance of its Equity Interests on or prior to
the Closing Date and (b) the reasonable fees, out-of-pocket expenses and other
costs incurred by Parent or the Borrower (directly or through any of the
Subsidiaries) and paid by Parent, the Borrower or any Subsidiary in connection
with the transactions contemplated hereby; provided that the amounts set forth
--------
in clauses (a) and (b) are consistent with the Capital Budget.
----------- ---
"Net Equity Proceeds" is defined in Section 4.01(l).
------------------- ---------------
"Non-Defaulting Lender" means and includes each Lender other than a
---------------------
Defaulting Lender.
"Notes" means, collectively, the Term Notes and the Working Capital Notes.
-----
"Notice of Guaranty Draw" is defined in the Term C Loan Guaranty.
-----------------------
"OA&M Agreement" means an Operations, Administration and Maintenance
--------------
Agreement to be entered into between the Borrower (and one or more Subsidiaries)
and the Operator, in form and substance reasonably satisfactory to the
Administrative Agent, as the same may be amended, supplemented, amended and
restated or otherwise modified from time to time in accordance with and subject
to the terms and conditions hereof.
"OA&M Expenses" means all operation, administration and maintenance
-------------
expenses with respect to the System which are payable by the Borrower or any
Subsidiary (including all sales, excise and similar taxes, all other taxes and
duties payable by the Borrower or such Subsidiary and all payments owing to the
Operator under the OA&M Agreement in respect of work performed thereunder);
provided that OA&M Expenses shall not include (i) amounts payable in
- --------
-21-
<PAGE>
respect of Permitted System Upgrades and Permitted Costs, (ii) any non-cash
expenses, (iii) income and franchise taxes payable by any Subsidiary and (iv)
all payments made to the Subsidiaries under any Intercompany Agreement.
"Obligations" means all obligations (monetary or otherwise, whether
-----------
absolute or contingent, matured or unmatured) of each Loan Party arising under
or in connection with a Loan Document.
"Obligors" means, collectively, the Borrower, Parent, the Subsidiaries, the
--------
Contractor (until the expiration of the Warranty Period under and as defined in
the Supply Contract), the Term C Loan Guarantor (only during any Term C Loan
Guaranteed Period) and, prior to the performance of all obligations under the
Supply Contract Guaranty, the Supply Contract Guarantor.
"Offering Memorandum" means the Offering Memorandum, dated July 8, 1999,
-------------------
with respect to Parent's US$300,000,000 13% Senior Notes due 2007 proposed to be
issued pursuant to the Parent Senior Note Documents.
"Operating Budget" is defined in Section 5.14(a).
---------------- ---------------
"Operating Budget Deviation" means, with respect to the Operating Budget
--------------------------
for any Operating Year, the payment of any OA&M Expense which would result in
total operating costs for such Operating Year (after giving effect to all other
payments of OA&M Expenses in such Operating Year, including all other cost
overruns and underruns or other savings with respect to any budget category)
exceeding the total operating costs set forth in the Operating Budget for such
Operating Year by more than 5%.
"Operating Plan" is defined in Section 5.14(a).
-------------- ---------------
"Operating Reserve Account" means the special account designated by that
-------------------------
name established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Operating Reserve Amount" means, at any time of determination, an amount
------------------------
equal to six months of anticipated operating expenses in accordance with the
then current Operating Budget of the Borrower and the Subsidiaries.
"Operating Year" means, initially, the period from the date the Primary
--------------
Ring becomes operational to the following December 31st and, thereafter, each
ensuing calendar year.
"Operator" means the Person designated by the Borrower and/or any of the
--------
Subsidiaries with the consent of the Designated Agents, from time to time, as
the operator under the OA&M Agreement.
"Other Taxes" means any and all present or future stamp or documentary
-----------
Taxes, charges
-22-
<PAGE>
or similar levies arising from any payment hereunder or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement, other
than any such Taxes imposed solely as a result of the recipient conducting
activities in the relevant jurisdiction unrelated to the Credit Extensions.
"Parent" means GlobeNet Communications Group Limited, a company organized
------
and existing under the laws of Bermuda and the direct owner of all of the Equity
Interests of the Borrower.
"Parent Additional Debt Offering" means one or more issuances of up to
-------------------------------
$50,000,000 in the aggregate of unsecured Indebtedness of Parent (with the
ability to pay current interest and with terms and conditions no more
restrictive than those contained in the Parent Senior Note Documents), the
proceeds of which are to be applied as a prepayment of the Loans pursuant to
Section 2.11(c).
- ---------------
"Parent Additional Notes" means any notes issued by Parent pursuant to the
-----------------------
Parent Additional Senior Note Offering and the Parent Additional Debt Offering.
"Parent Additional Senior Note Offering" means one or more issuances of up
--------------------------------------
to an additional $50,000,000 in the aggregate of unsecured Indebtedness of
Parent pursuant to either (a) the Parent Senior Note Documents or (b) other
documentation with terms and conditions no more restrictive than those contained
in the Parent Senior Note Documents, in each case with the ability to pay
current interest and, in each case, the proceeds of which are to be contributed
to the Borrower and to be used for System Activities.
"Parent Expenses" means all reasonable and necessary expenses incurred by
---------------
Parent in connection with the conduct of its business.
"Parent Interest Reserve Account" means the special account designated by
-------------------------------
that name established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Parent Interest Reserve Amount" means, at any time of determination, an
------------------------------
amount equal to six months of anticipated interest on the Parent Senior Notes
and any Parent Additional Notes.
"Parent PIK Offering" means one or more issuances of unsecured Indebtedness
-------------------
or preferred stock of Parent which has (a) no principal payments, redemptions,
repurchases, sinking funds or prepayments prior to the date which is one year
after the payment in full in cash of all Loans and other obligations hereunder
and under the Loan Documents and the termination of all Commitments, (b) no cash
interest or dividend payments, and (c) interest or dividend rate, interest or
dividend payment date, subordination, covenants, defaults and other terms and
conditions no more restrictive than those contained in the Parent Senior Note
Documents, the proceeds of which are to be applied as a prepayment of the Loans
pursuant to Section 2.11(c) or in accordance with Sections 6.09 or 6.10.
--------------- ------------- ----
-23-
<PAGE>
"Parent Pledge Agreement" means the Pledge Agreement, dated as of the date
-----------------------
hereof, substantially in the form of Exhibit E, made by Parent in favor of the
---------
Secured Parties, as the same may be amended, supplemented, amended and restated
or otherwise modified from time to time.
"Parent Post-Closing Equity Offering" means one or more issuances of up to
-----------------------------------
$10,000,000 in the aggregate after the Closing Date of equity by Parent.
"Parent Senior Note Documents" means, collectively, (a) the Senior Note
----------------------------
Securities Purchase Agreement, dated as of July 8, 1999, among Parent and the
purchasers named therein, (b) the Indenture, dated as of July 14, 1999, between
Parent and Bankers Trust Company as Trustee, with respect to the Parent Senior
Notes, and (c) the Parent Senior Notes issued pursuant to such Indenture, in
each case as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with and subject to the terms
and conditions of the Parent Pledge Agreement.
"Parent Senior Note Proceeds" is defined in Section 4.01(m).
--------------------------- ---------------
"Parent Senior Notes" means the senior notes issued by Parent pursuant to
-------------------
the Parent Senior Note Documents.
"Parent Terrestrial Build-Out Offering" means one or more issuances of
-------------------------------------
unsecured Indebtedness or preferred stock of Parent which has (a) no principal
payments, redemptions, repurchases, sinking funds or prepayments prior to the
date which is one year after the payment in full in cash of all Loans and other
obligations hereunder and under the Loan Documents and the termination of all
Commitments, (b) no cash interest or dividend payments, and (c) interest or
dividend rate, interest or dividend payment date, subordination, covenants,
defaults and other terms and conditions no more restrictive than those contained
in the Parent Senior Note Documents, the proceeds of which are to be applied as
set forth in Section 2.08(f).
---------------
"Participation Amount" is defined in the definition of Applicable
--------------------
Percentage.
"Participation Certificate" is defined in clause (ii) of Section 2.04(a).
------------------------- ----------- ---------------
"Payment Escrow Agent" is defined in the Supply Contract.
--------------------
"Payment Escrow Agreement" is defined in the Supply Contract.
------------------------
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Perfectible Collateral" is defined in Section 3.17.
---------------------- ------------
"Permitted Activities" means, with respect to the Borrower and the
--------------------
Subsidiaries, (a)
-24-
<PAGE>
System Activities, (b) activities otherwise contemplated by the System Contracts
and the Loan Documents, (c) with respect to TBI and GCL, telecommunications-
related activities (including Internet related activities), and (d) with respect
to each of the above activities, activities incidental thereto.
"Permitted Costs" means (a) all amounts due under the Supply Contract
---------------
(including, in respect of Permitted System Upgrades), (b) any and all amounts
due in connection with any change to the configuration of the System permitted
under Section 6.09, (c) any and all amounts due in respect of any capital
------------
expenditure permitted under Section 6.17 and (d) any other amount applied to
------------
costs of the type set forth in Section 8.08(b), Section 8.08(c) or in clauses
--------------- --------------- -------
first through seventh of Section 8.08(d).
- ----- ------- ---------------
"Permitted Encumbrances" means any one or more of the following:
----------------------
(a) Liens imposed by law for taxes that are not yet due or are being
contested in accordance with Section 5.03;
------------
(b) (i) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens relating to the construction of the System
or (ii) other Liens arising in the ordinary course of business and securing
obligations that are not overdue by more than 60 days or are being
contested in accordance with Section 5.03;
------------
(c) any Liens on any portion of the System arising by operation of
law through the Contractor (or any of its subcontractors);
(d) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(e) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business;
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
Borrower or any Subsidiary;
(g) Liens arising under any Loan Document;
(h) Liens arising under the Payment Escrow Agreement;
(i) the rights of any purchaser of Capacity with respect to the use
of portions of the System as set forth or referred to in a Capacity Sales
Agreement or a Capacity Swap
-25-
<PAGE>
Agreement;
(j) Liens arising out of judgments or awards with respect to which
appeals or other proceedings for review are being prosecuted in good faith
and by appropriate proceedings diligently conducted and for the payment of
which adequate reserves have been provided or other provisions reasonably
satisfactory to the Administrative Agent have been made; and
(k) Liens arising under that certain security agreement, dated as of
August 27, 1997, between TeleBermuda International LLC and TBI.
"Permitted Holders" means each of the Equity Investors and their respective
-----------------
Affiliates.
"Permitted Investments" means any one or more of the following:
---------------------
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, a
credit rating of at least A-1 from S&P or at least P-1 from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and overnight sweep accounts, money
market deposit accounts issued or offered by, (i) the Administrative Agent
or any of its Affiliates, (ii) any Lender or (iii) any other bank which has
a combined capital and surplus and undivided profits of not less than
$250,000,000;
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered
----------
into with a financial institution satisfying the criteria described in
clause (c) above; and
----------
(e) with respect to the investment of funds on deposit in the Payment
Escrow Agreement, investments permitted by the Payment Escrow Agreement.
"Permitted Subordinated Debt" means Indebtedness of the Borrower which has
---------------------------
(a) no principal payments, redemptions, repurchases, sinking funds or
prepayments prior to the date which is one year after the payment in full in
cash of all Loans and other obligations hereunder and under the Loan Documents
and the termination of all Commitments, (b) no cash interest payments, and (c)
interest rate, interest payment date, subordination, covenants, defaults and
other terms and conditions reasonably satisfactory to the Designated Agents;
provided that, in
- --------
-26-
<PAGE>
any event, such Permitted Subordinated Debt is incurred solely for the purposes
specifically set forth in this Agreement.
"Permitted System Upgrades" means upgrades to the System contemplated by
-------------------------
Article 48 of the Supply Contract.
"Person" means any natural person, corporation, limited liability company,
------
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any employee pension benefit plan (other than a Multiemployer
----
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Plan of Work" means the plan of work attached as Appendix 3 to the Supply
------------
Contract, as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with and subject to the terms
and conditions hereof.
"Pledge Agreements" means, collectively, the Parent Pledge Agreement, the
-----------------
Borrower Pledge and Security Agreement and the Subsidiary Pledge and Security
Agreement.
"Primary Ring" means that portion of the System consisting of Segment 1,
------------
Segment 2, Segment 3, Segment 4 and Segment 5.
"Prime Rate" means the rate of interest per annum established by the
----------
Administrative Agent as its prime or reference or base rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is effective. The Prime Rate
is not necessarily the lowest rate of interest charged to borrowers.
"Principal Payment Date" means each June 30 and December 31 (or, if such
----------------------
day is not a Business Day, the immediately preceding Business Day) commencing
with the Initial Principal Payment Date.
"Projections" means the Borrower's reasonably detailed operating
-----------
projections for the System (as of the Closing Date and as updated by the
Borrower pursuant to the terms hereof), initially certified and delivered to the
Administrative Agent on the Closing Date, which reflect the reasonable expected
case (and not worst case) projections of the revenues, operating expenses, cash
flow, debt service and other related items for the System.
"Qualified Capacity Agreements" means (a) Capacity Sales Agreements then in
-----------------------------
full force and effect with Qualified Purchasers and (b) Capacity Swap Agreements
then in full force and effect with Qualified Purchasers.
-27-
<PAGE>
"Qualified Capacity Revenue" means, as of any date of determination, (a)
--------------------------
all cash revenue (net of sales commissions) received by the Borrower and the
Subsidiaries under Qualified Capacity Agreements and any other Capacity Sales
Agreements and Capacity Swap Agreements, (b) amounts due prior to the Maturity
Date under Qualified Capacity Agreements (the "Pre-Maturity Date Capacity
--------------------------
Revenue") if at least 10% of such Pre-Maturity Date Capacity Revenue has been
- -------
paid in cash as a down payment, and (c) ten times the down payment amount of
Pre-Maturity Date Capacity Revenue where less than 10% of such Pre-Maturity Date
Capacity Revenue has been paid in cash as a down payment.
"Qualified Purchasers" means, collectively, (a) the Persons listed on
--------------------
Schedule 1.01(b), (b) any Person whose long-term senior unsecured debt rating is
- ----------------
rated BBB- or better from Standard & Poor's Rating Services or Baa3 or better
from Moody's Investors Services, Inc., (c) any Person whose payment obligations
under a Capacity Sales Agreement or a Capacity Swap Agreement are fully backed
by a letter of credit or a guaranty, in each case on terms and from Persons
reasonably satisfactory to the Administrative Agent, and (d) any other Person
with the consent of the Designated Agents.
"Rate Protection Agreement" means, collectively, any interest rate swap,
-------------------------
cap, collar or similar agreement entered into by the Borrower or any of the
Subsidiaries under which the counterparty of such agreement is (or at the time
such agreement was entered into, was) a Lender or an Affiliate of a Lender.
"Ready for Commercial Acceptance" is defined in the Supply Contract.
-------------------------------
"Ready for Provisional Acceptance" is defined in the Supply Contract.
--------------------------------
"Reference Lenders" means Toronto Dominion (Texas) Inc. and two other
-----------------
Lenders determined by the Administrative Agent in consultation with the
Borrower, and any successors thereto determined by the Administrative Agent in
consultation with the Borrower.
"Register" is defined in Section 10.04(c).
-------- ----------------
"Reimbursement Obligation" is defined in Section 2.05(e).
------------------------ ---------------
"Related Fund" means, with respect to any Lender which is a fund that
------------
invests in loans, any other fund that invests in loans and is controlled by the
same investment advisor as such Lender or by an Affiliate of such investment
advisor.
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and subsidiaries and the respective directors, officers and
employees of such Person and such Person's Affiliates and subsidiaries.
"Remaining Asset Value" means, on any date of determination, (a) the sum of
---------------------
the aggregate amount of (i) unsold System Capacity consisting of STM-1s, (ii)
unsold Backhaul
-28-
<PAGE>
Capacity owned by the Borrower and the Subsidiaries and (iii) System Capacity to
be achieved by Permitted System Upgrades which have been contracted for as of
such date, multiplied by (b) the average price of the then five most recent
----------
sales of both STM-1s on the System and Backhaul Capacity, as applicable,
occurring within one year of such date (or, if there are less than five, all of
such sales of STM-1s or Backhaul Capacity, as applicable, occurring within one
year of such date).
"Remaining Asset Value to Borrower Debt Ratio" means, on any date of
--------------------------------------------
determination, the ratio of (a) Remaining Asset Value as of such date to (b) the
sum of all Indebtedness of the Borrower and the Subsidiaries under clauses (a),
-----------
(c) and (j) of Section 6.01 (other than items comprising clause (h) of the
- --- --- ------------
definition of Indebtedness) as of such date.
"Required Balance" means (a) with respect to the Debt Reserve Account, the
----------------
Debt Reserve Amount, (b) with respect to the Operating Reserve Account, the
Operating Reserve Amount and (c) with respect to the Parent Interest Reserve
Account, the Parent Interest Reserve Amount.
"Required Lenders" means, at any time of determination, Non-Defaulting
----------------
Lenders having Working Capital Exposures, LC Exposure, outstanding Term Loans
and unused Commitments representing more then 66-2/3% of the sum of the total
Working Capital Exposures, LC Exposures, outstanding Term Loans and unused
Commitments of such Non-Defaulting Lenders at such time.
"Requirement of Law" means, as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule, judgment, decree, order or regulation of any
Governmental Authority, and any determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" means, with respect to any matter, with respect to
-------------------
any Person, the President, any Vice President, Assistant Vice President,
Treasurer or Assistant Treasurer of such Person, or any other officer of such
Person who in the normal performance of his operational responsibility would
have knowledge of such matter and the requirements, if any, with respect
thereto.
"Restricted Payment" means any dividend or other distribution (whether in
------------------
cash, securities or other property) with respect to any Equity Interests of the
Borrower or any Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any such Equity Interests of the Borrower or any Subsidiary (or in respect of
any Permitted Subordinated Debt) or any option, warrant or other right to
acquire any such Equity Interests of the Borrower or any Subsidiary.
"Revenue" means, for any period, all revenue (net of applicable sale
-------
commissions, if
-29-
<PAGE>
any) received by the Borrower and the Subsidiaries during such period, including
(a) System Capacity Revenue, (b) Backhaul Service Revenue, (c) the sale, lease,
transfer or other disposition of any of its assets, (d) all payments made by
insurers under business interruption policies, (e) all payments received under
Hedging Agreements after the Commercial Operation Date and (f) all refunds of
VAT; provided that Revenue shall not include Special Payments, Casualty
--------
Proceeds, Net Cash Proceeds or any proceeds referred to in the last proviso of
the definition of Net Cash Proceeds.
"Revenue Account" means the special account designated by that name
---------------
established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Rio Ring Option" means the option available to ANBL under Article 50 of
---------------
the Supply Contract which, if exercised, would expand the System to include a
four fiber pair, single strand segment from Rio de Janeiro, Brazil to Fortaleza,
Brazilas described under Option B in Appendix IB to the Supply Contract.
"Sales and Issuances Proceeds Account" means the special account designated
------------------------------------
by that name established by the Administrative Agent pursuant to Section
-------
8.01(a).
- -------
"Scheduled RFS Date" is defined in the Supply Contract.
------------------
"Secured Parties" means, collectively, the Lenders, the Administrative
---------------
Agent, the Syndication Agent, the Arranger, the Issuer, each counterparty to a
Rate Protection Agreement and, in each case, each of their respective
successors, transferees and assigns.
"Security Documents" means, collectively, the Pledge Agreements and the
------------------
Mortgages.
"Segment" means Segment 1, Segment 2, Segment 3, Segment 4, Segment 5 or
-------
Segment 6, as the case may be.
"Segment 1" means the segment of the System from Tuckertown, New Jersey to
---------
Boca Raton, Florida, and landing in locations capable of interconnecting with
major telecommunications carriers.
"Segment 2" means the segment of the System from Boca Raton, Florida to
---------
Punta Gorda, Venezuela, and landing in locations capable of interconnecting with
major telecommunications carriers.
"Segment 3" means the segment of the System from Punta Gorda, Venezuela to
---------
Fortaleza, Brazil, and landing in locations capable of interconnecting with
major telecommunications carriers.
"Segment 4" means the segment of the System from Fortaleza, Brazil to St.
---------
David's, Bermuda, and landing in locations capable of interconnecting with major
telecommunications
-30-
<PAGE>
carriers.
"Segment 5" means the segment of the System from St. David's, Bermuda to
---------
Tuckertown, New Jersey, including BUS-1, and landing in locations capable of
interconnecting with major telecommunications carriers.
"Segment 6" means the four fiber pair, single strand segment of the System
---------
from Fortaleza, Brazil to Rio de Janeiro, Brazil, and landing in locations
capable of interconnecting with major telecommunications carriers.
"SG&A Expenses" means selling, general and administrative expenses (other
-------------
than sales commissions) incurred by the Borrower and the Subsidiaries in the
ordinary course of business.
"Special Payment Account" means the special account designated by that name
-----------------------
established by the Administrative Agent pursuant to Section 8.01(a).
---------------
"Special Payments" means (a) all payments made by the Contractor under the
----------------
Supply Contract and all other payments made by the Contractor or the Supply
Contract Guarantor in respect of any breach or failure by the Contractor to
perform its obligations under the Supply Contract, whether as a result of any
proceeding, settlement or otherwise, and (b) all payments under insurance
policies maintained by the Borrower or any Subsidiary to compensate for a delay
in the commencement of operations of the System.
"S&P" means Standard & Poor's Ratings Services.
---
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
----------------------
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
"Subsidiary" means, with respect to any Person (the "parent") at any date,
---------- ------
any corporation, company, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, company, limited liability company, partnership, association
or other entity that is, as of such date, otherwise Controlled, by the parent or
one or
-31-
<PAGE>
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent.
"Subsidiary" means any subsidiary of the Borrower.
----------
"Subsidiary Accounts" means, collectively, the special accounts established
-------------------
by the Administrative Agent pursuant to Section 8.01(b).
---------------
"Subsidiary Guaranty" means the Guaranty Agreement, dated as of the date
-------------------
hereof, substantially in the form of Exhibit H, made by each of the Subsidiaries
---------
party thereto in favor of the Secured Parties, as the same may be amended,
supplemented, amended and restated or otherwise modified from time to time.
"Subsidiary Pledge and Security Agreement" means the Pledge and Security
----------------------------------------
Agreement, dated as of the date hereof, substantially in the form of Exhibit G,
---------
made by each of the Subsidiaries party thereto in favor of the Secured Parties,
and each other security agreement made by a Subsidiary in favor of the Secured
Parties in accordance with Section 5.29, as the same may be amended,
------------
supplemented, amended and restated or otherwise modified from time to time,
including as supplemented by the Foreign Subsidiary Pledge Supplements.
"Subsidiary Transfer Date" means the last Business Day of each February,
------------------------
May, August and November occurring after the date the Primary Ring becomes
operational or, with respect to any Subsidiary, such other dates as such
Subsidiary designates in writing to the Administrative Agent.
"Subsidiary Transfer Payment" means, with respect to any Subsidiary as of
---------------------------
any Subsidiary Transfer Date, to the extent permitted by applicable law, all
amounts on deposit in such Subsidiary's Subsidiary Account as of such date, net
of all Taxes due (or to become due) from such Subsidiary and all OA&M Expenses
and SG&A Expenses anticipated to be incurred by such Subsidiary prior to the
next Subsidiary Transfer Date (or such lesser amount as may be permitted under
applicable law to be distributed by such Subsidiary to its parent).
"Supply Contract" means the Project Development and Construction Contract,
---------------
dated as of June 16, 1999, among the Contractor and ANBL, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with and subject to the terms and conditions hereof.
"Supply Contract Guarantor" means Alcatel, a societe anonyme organized and
-------------------------
existing under the laws of France, in its capacity as guarantor under the Supply
Contract Guaranty.
"Supply Contract Guarantor Consent" means the Consent and Agreement to be
---------------------------------
entered into among the Borrower, the Supply Contract Guarantor and the
Administrative Agent with respect to the assignment by the Borrower of its
rights and interests under the Supply Contract Guaranty, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time.
-32-
<PAGE>
"Supply Contract Guaranty" means the Guaranty, dated as of July 14, 1999,
------------------------
made by the Supply Contract Guarantor in favor of ANBL, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with and subject to the terms and conditions hereof.
"Syndication Agent" is defined in the preamble.
----------------- --------
"System" means the four fiber pair, fiber-optic submarine cable system to
------
be known as the Atlantica-1 Submarine Cable System, consisting of Segment 1,
Segment 2, Segment 3, Segment 4 and Segment 6 (with an initial capacity of 20
Gb/s on each of two fiber pairs, one working fiber pair and one protective fiber
pair, with each fiber pair upgradeable to 320 Gb/s), and Segment 5, including
all landing stations on each Segment, and Backhaul Capacity in Venezuela owned
by the Borrower or a Subsidiary and constructed pursuant to the Supply Contract,
as the same may be modified from time to time in accordance with and subject to
the terms and conditions hereof (including any modification resulting from the
exercise of the Rio Ring Option).
"System Activities" means (a) all activities related to the design,
-----------------
development, engineering, acquisition, installation, construction, landing,
completion, disposition, financing, start-up, testing, operation, ownership,
possession, maintenance, use and (to the extent permitted in accordance with
this Agreement) modification of the System, (b) Backhaul Service and (c)
exchanges of Capacity and other capacity permitted in accordance with the first
sentence of Section 6.23.
------------
"System Capacity" means capacity on the System.
---------------
"System Capacity Revenue" means the cash revenue (net of sales commissions)
-----------------------
received by the Borrower and the Subsidiaries from the sales or swaps of System
Capacity and from related payments in respect of operation, administration and
maintenance charges from customers, but, in any event, without duplication with
respect to payments received by the Subsidiaries from the Borrower or any
Subsidiary under any Intercompany Agreement.
"System Contracts" shall be the collective reference to the Supply
----------------
Contract, the Supply Contract Guaranty, the Contractor Consent, the Supply
Contract Guarantor Consent, the Capacity Sales Agreements, the Capacity Swap
Agreements, the Payment Escrow Agreement, the OA&M Agreement, the Term C Loan
Guaranty Reimbursement Agreement, each Intercompany Agreement and each
Additional Contract.
"System Final Completion" means the date on which the Certificate of Final
-----------------------
Acceptance shall have been issued with respect to the System in accordance with
the terms of the Supply Contract, as certified by the Independent Engineer.
"System Upgrade Reserve Account" means the special account designated by
------------------------------
that name established by the Administrative Agent pursuant to Section 8.01(a).
---------------
-33-
<PAGE>
"Taxes" means any and all present or future taxes, levies, imposts, duties,
-----
deductions, charges or withholdings imposed by any Governmental Authority.
"TBI" means TeleBermuda International Limited, a company organized and
---
existing under the laws of Bermuda and a direct, wholly-owned subsidiary of the
Borrower.
"TBI Leverage Ratio" means, at any time, the ratio of (a) the sum of (i)
------------------
the aggregate outstanding principal amount of Term A Loans (including any Term A
Loans to be made in connection with the proposed Borrowing) at such time and
(ii) all Indebtedness of TBI at such time (excluding Indebtedness owed by TBI to
the Borrower or any Subsidiary or under the Subsidiary Guaranty) to (b) EBITDA
of TBI for the twelve-month period then most recently ended.
"Term A Loan Commitment" means (a) as to all Lenders, $60,000,000, and (b)
----------------------
as to any Lender, its obligation to make Term A Loans to the Borrower in an
aggregate amount not to exceed at any one time outstanding the amount set forth
opposite such Lender's name on Schedule 2.01 under the heading "Term A Loan
-------------
Commitment" or, in the case of a Lender that is an assignee, the amount of such
assigning Lender's Term A Loan Commitment assigned to such assignee pursuant to
Section 10.04(b) in each case as such amount may be adjusted from time to time
- ----------------
as provided herein, including pursuant to Section 2.01(b).
---------------
"Term A Loans" is defined in Section 2.01(a).
------------ ---------------
"Term A Note" is defined in Section 2.09(e).
----------- ---------------
"Term B Loan Commitment" means (a) as to all Lenders, $80,000,000, and (b)
----------------------
as to any Lender, its obligation to make Term B Loans to the Borrower in an
aggregate amount not to exceed at any one time outstanding the amount set forth
opposite such Lender's name on Schedule 2.01 under the heading "Term B Loan
-------------
Commitment" or, in the case of a Lender that is an assignee, the amount of such
assigning Lender's Term B Loan Commitment assigned to such assignee pursuant to
Section 10.04(b) in each case as such amount may be adjusted from time to time
- ----------------
as provided herein.
"Term B Loans" is defined in Section 2.01(a).
------------ ---------------
"Term B Note" is defined in Section 2.09(e).
----------- ---------------
"Term C Loan Commitment" means (a) as to all Lenders, $150,000,000, and (b)
----------------------
as to any Lender, its obligation to make Term C Loans to the Borrower in an
aggregate amount not to exceed at any one time outstanding the amount set forth
opposite such Lender's name on Schedule 2.01 under the heading "Term C Loan
-------------
Commitment" or, in the case of a Lender that is an assignee, the amount of such
assigning Lender's Term C Loan Commitment assigned to such assignee pursuant to
Section 10.04(b), in each case as such amount may be adjusted from time to time
- ----------------
as provided herein, including pursuant to Sections 2.01(b) and 2.08(f).
---------------- -------
-34-
<PAGE>
"Term C Loan Guaranteed Period" means any period during which Term C Loans
-----------------------------
are outstanding that are being guaranteed pursuant to the Term C Loan Guaranty.
"Term C Loan Guarantor" means Alcatel, a societe anonyme organized and
---------------------
existing under the laws of France, in its capacity as guarantor under the Term C
Loan Guaranty.
"Term C Loan Guaranty" means the Guaranty, dated as of July 14, 1999, made
--------------------
by the Term C Loan Guarantor in favor of the Secured Parties, in form and
substance reasonably satisfactory to the Administrative Agent, as the same may
be amended, supplemented, amended and restated or otherwise modified from time
to time in accordance with and subject to the terms and conditions hereof.
"Term C Loan Guaranty Fees" means the fees due to the Term C Loan Guarantor
-------------------------
pursuant to the Term C Loan Guaranty Reimbursement Agreement in respect of the
Term C Loan Guaranty.
"Term C Loan Guaranty Reimbursement Agreement" means the Reimbursement
--------------------------------------------
Agreement, dated as of July 14, 1999, between the Borrower and the Term C Loan
Guarantor, in form and substance reasonably satisfactory to the Administrative
Agent, as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with and subject to the terms
and conditions hereof.
"Term C Loans" is defined in Section 2.01(a).
------------ ---------------
"Term C Note" is defined in Section 2.09(e).
----------- ---------------
"Term D Loan Commitment" means (a) as to all Lenders, $100,000,000, and (b)
----------------------
as to any Lender, its obligation to make Term D Loans to the Borrower in an
aggregate amount not to exceed at any one time outstanding the amount set forth
opposite such Lender's name on Schedule 2.01 under the heading "Term D Loan
-------------
Commitment" or, in the case of a Lender that is an assignee, the amount of such
assigning Lender's Term D Loan Commitment assigned to such assignee pursuant to
Section 10.04(b) in each case as such amount may be adjusted from time to time
- ----------------
as provided herein.
"Term D Loans" is defined in Section 2.01(a).
------------ ---------------
"Term D Note" is defined in Section 2.09(e).
----------- ---------------
"Term Loan" means a Term A Loan, a Term B Loan, a Term C Loan or a Term D
---------
Loan, as the case may be.
"Term Loan Commitment" means the Term A Loan Commitment, the Term B Loan
--------------------
Commitment, the Term C Loan Commitment or the Term D Loan Commitment, as the
case may be.
-35-
<PAGE>
"Term Note" means a Term A Note, a Term B Note, a Term C Note or a Term D
---------
Note, as the case may be.
"Termination Date" means, with respect to any Loan, the last day of the
----------------
Availability Period for such Loan.
"Transfer" is defined in Section 6.04.
-------- ------------
"Type" when used in reference to any Loan or Borrowing, refers to whether
----
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
"UCC" means the Uniform Commercial Code as in effect from time to time in
---
the State of New York; provided that if, with respect to any Filing Statement or
--------
by reason of any provisions of law, the perfection or the effect of perfection
or non-perfection of the security interests granted to the Administrative Agent
pursuant to any Loan Document is governed by the Uniform Commercial Code as in
effect in a jurisdiction of the United States other than New York, AUCC" means
the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions of such Loan Document and any Filing
Statement relating to such perfection or effect of perfection or non-perfection.
"Voting Interests" means, with respect to any Person, any class or classes
----------------
of Equity Interests (or other rights) in such Person entitling the holders
thereof to vote under ordinary circumstances in the election of , or to appoint,
members of the board of directors or other governing body of such Person.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result
--------------------
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
"Working Capital Exposure" means, with respect to any Lender at any time,
------------------------
the outstanding principal amount of such Lender=s Working Capital Loans and/or
participation interests in Working Capital Loans at such time.
"Working Capital Lender" means any Lender designated as such on the
----------------------
signature pages hereof, together with its successors and assigns.
"Working Capital Loan Commitment" means (a) as to all Working Capital
-------------------------------
Lenders, $10,000,000, and (b) as to any Working Capital Lender, its obligation
to make Working Capital Loans to the Borrower and acquire participations in
Letters of Credit in an aggregate amount not to exceed at any one time
outstanding the amount set forth opposite such Working Capital Lender's name on
Schedule 2.01 under the heading "Working Capital Loan Commitment" or, in the
- -------------
case of any Working Capital Lender that is an assignee, the amount of the
assigning Lender's Working Capital Loan Commitment assigned to such assignee
pursuant to Section 10.04 in each
-------------
-36-
<PAGE>
case as such amount may be adjusted from time to time as provided herein.
"Working Capital Loan Percentage" means, with respect to any Lender other
-------------------------------
than a Working Capital Lender, the percentage set forth opposite the name of
such Lender on Schedule 2.01 under the heading "Working Capital Loan
-------------
Percentage".
"Working Capital Loans" is defined in Section 2.01(a).
--------------------- ---------------
"Working Capital Note" is defined in Section 2.09(e).
-------------------- ---------------
SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
--------------------------------------
Agreement, Loans may be classified and referred to by Class (e.g., a "Working
----
Capital Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
----
(e.g., a "Eurodollar Working Capital Loan"). Borrowings also may be classified
----
and referred to by Class (e.g., a "Working Capital Borrowing") or by Type (e.g.,
---- ----
a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Working
----
Capital Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
---------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented, amended and restated or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's permitted successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time.
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<PAGE>
ARTICLE II
THE COMMITMENTS
---------------
SECTION 2.01. Commitments. (a) Subject to the terms and conditions set
-----------
forth herein, (i) each Working Capital Lender severally agrees to make working
capital loans ("Working Capital Loans") to the Borrower from time to time during
---------------------
the Availability Period in an aggregate principal amount that will not result in
such Working Capital Lender's Working Capital Exposure exceeding such Working
Capital Lender's Working Capital Loan Commitment, (ii) each Lender severally
agrees to make term A loans ("Term A Loans") to the Borrower from time to time
------------
during the Availability Period in an aggregate principal amount not to exceed
such Lender's Term A Loan Commitment, (iii) each Lender severally agrees to make
term B loans ("Term B Loans") to the Borrower from time to time during the
------------
Availability Period in an aggregate principal amount not to exceed such Lender's
Term B Loan Commitment, (iv) each Lender severally agrees to make term C loans
("Term C Loans") to the Borrower from time to time during the Availability
------------
Period in an aggregate principal amount not to exceed such Lender's Term C Loan
Commitment, and (v) each Lender severally agrees to make term D loans ("Term D
------
Loans") to the Borrower from time to time during the Availability Period in an
- -----
aggregate principal amount not to exceed such Lender's Term D Loan Commitment;
provided that no Lender shall be required to make any Term Loan if, after giving
- --------
effect thereto, the sum of the outstanding Term Loans (in each case, after
giving effect to the Term Loans requested to be made on such date) exceed the
Term Loan Commitments of all Lenders. Within the foregoing limits and subject
to the terms and conditions set forth herein, the Borrower may borrow, prepay
and reborrow Working Capital Loans. Amounts repaid in respect of Term Loans may
not be reborrowed.
(b) At any time on up to two occasions during the Availability Period
applicable to both Term A Loans and Term C Loans, the Borrower may, upon five
Business Days' prior irrevocable written notice delivered to the Administrative
Agent and with the consent of the Administrative Agent (not to be unreasonably
withheld), elect to reallocate any portion of the then unused Term A Loan
Commitment to the Term C Loan Commitment. Any such reallocation will
automatically reduce the Term A Loan Commitment and increase the Term C Loan
Commitment by a corresponding amount and, upon the effectiveness of such
reallocation, the Term A Loan Commitment and Term C Loan Commitment of each of
the Lenders shall be ratably adjusted to reflect such reallocation. Upon a
reallocation pursuant to this Section, the Borrower shall execute and deliver
new Term Notes to each of the Lenders that hold Term Notes at such time to
reflect the reallocated Commitments of such Lenders. The Administrative Agent
shall distribute to the Borrower and the Lenders a schedule reflecting the
modified Commitments in effect after giving effect to a reallocation pursuant to
this paragraph.
(c) By written request furnished to the Administrative Agent, the Borrower
may request that such of the Lenders who desire to do so may provide an
additional financing facility to the Borrower in an aggregate principal amount
of up to $50,000,000 to be available only after the Commercial Operation Date.
The Administrative Agent shall furnish a copy of any such request
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<PAGE>
promptly to all of the Lenders. Each Lender shall make a determination, in its
sole discretion, as to whether it desires to participate in such facility and,
subject to the Administrative Agent's written consent (after consulting with the
Borrower), the amount of its desired participation. The terms and conditions of
any such facility shall be determined by the Lenders electing to participate
therein, but such terms and conditions (i) shall be no more restrictive than the
terms contained in this Agreement and (ii) shall (unless the Term C Loan
Guarantor otherwise agrees or until all of the Borrower's obligations under the
Term C Loan Guaranty are discharged in full) require that (A) there shall be
cumulative Qualified Capacity Revenue of at least $50,000,000 prior to any draw
thereon, and (B) no payments shall have been made under the Term C Loan Guaranty
prior to any draw thereon, and such facility shall otherwise be governed by the
terms of this Agreement (as the same may be amended with the prior written
consent of the Majority Lenders to include such facility).
SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part
--------------------
of a Borrowing consisting of Loans of the same Class and Type made by the
Lenders ratably in accordance with their respective Commitments of the
applicable Class. The failure of any Lender to make any Loan required to be
made by it shall not relieve any other Lender of its obligations hereunder;
provided that the Commitments of the Lenders are several and no Lender shall be
- --------
responsible for any other Lender's failure to make Loans as required.
(b) Each Working Capital Borrowing and Term Loan Borrowing may be ABR
Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request
in accordance herewith.
(c) Each Eurodollar Borrowing and each ABR Borrowing shall be in an
aggregate amount that is not less than $500,000, in the case of a Working
Capital Borrowing, and not less than $5,000,000, in the case of a Term Loan
Borrowing; provided that any such Borrowing may be in an aggregate amount that
--------
is equal to the entire unused balance of the total Working Capital Loan
Commitment, Term A Loan Commitment, Term B Loan Commitment, Term C Loan
Commitment or Term D Loan Commitment, as the case may be, or in an amount that
is required to finance the reimbursement of an LC Disbursement as contemplated
by Section 2.05(e). Borrowings of more than one Type and Class may be
---------------
outstanding at the same time; provided that there shall not at any time be more
--------
than a total of eight Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or to elect to convert or continue, any
Eurodollar Borrowing if the Interest Period requested with respect thereto would
end after the Maturity Date.
SECTION 2.03. Requests for Borrowings. To request a Working Capital
-----------------------
Borrowing or a Term Loan Borrowing, the Borrower shall notify the Administrative
Agent of such request by delivering a Borrowing Request to the Administrative
Agent (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of the proposed Borrowing or
(b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City
time, one Business Day before the date of the proposed Borrowing; provided that
--------
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<PAGE>
any such notice of an ABR Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.05(e) may be given not later than
---------------
11:00 a.m., New York City time, on the date of the proposed Borrowing. Each
such Borrowing Request shall be irrevocable and shall specify the following
information in compliance with Section 2.02:
------------
(a) whether the requested Borrowing is to be a Working Capital
Borrowing, a Term A Loan Borrowing, a Term B Loan Borrowing, a Term C Loan
Borrowing and/or a Term D Loan Borrowing;
(b) the aggregate amount of the requested Borrowing;
(c) the date of such Borrowing, which shall be (A) in the case of
Term Loans, a Borrowing Date and (B) in the case of Working Capital Loans,
a Business Day;
(d) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
(e) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period".
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an ABR Borrowing. Promptly following receipt of a Borrowing
Request in accordance with this Section, the Administrative Agent shall advise
each applicable Lender of the details thereof and of the amount of such Lender's
Loan to be made as part of the requested Borrowing. With respect to Term D
Loans, the Borrower shall, at the end of the Availability Period for Term D
Loans (after notice from the Administrative Agent), deliver an irrevocable
Borrowing Request for the entire amount of the Term D Loan Commitment.
SECTION 2.04. Special Provisions for Working Capital Loans.
--------------------------------------------
(a) Participations in Working Capital Loans.
---------------------------------------
(i) By the making of a Working Capital Loan and without further
action on the part of the Working Capital Lenders, the Working Capital
Lenders hereby ratably grant to each Lender that is not a Working Capital
Lender, and each Lender that is not a Working Capital Lender hereby
acquires ratably from the Working Capital Lenders, a participation in such
Working Capital Loan equal to such Lender's Working Capital Loan Percentage
of the aggregate amount of such Working Capital Loan. Each Lender that is
not a Working Capital Lender acknowledges and agrees that its obligation to
acquire a participation pursuant to this paragraph in respect of each
Working Capital Loan is absolute and unconditional and shall not be
affected by any circumstance
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<PAGE>
whatsoever, including the occurrence and continuance of a Default, a
Designated Event, an Event of Default or a Material Adverse Effect or
reduction or termination of the Commitments, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever.
(ii) If any Event of Default described in Section 7.04 or 7.05 shall
------------ ----
have occurred, each Lender (other than a Working Capital Lender)
immediately and automatically shall, and at other times, from time to time,
promptly upon request by the Working Capital Lenders delivered to the
Administrative Agent (which shall promptly notify each Lender thereof),
transfer immediately to the Administrative Agent for credit to the Working
Capital Lenders, in immediately available funds, the amount of its
participation set forth in clause (i). If requested to do so by such other
----------
Lender, the Working Capital Lenders will deliver to such other Lender,
promptly following receipt of such funds, a participation certificate,
substantially in the form of Exhibit M (the "Participation Certificate"),
--------- -------------------------
dated the date of receipt of such funds and in the amount of such Lender's
participation.
(iii) So long as any Lender that is not a Working Capital Lender or a
Defaulting Lender has fulfilled any obligation to make payments to the
Administrative Agent for the account of the Working Capital Lenders
pursuant to clause (i) above, upon (and only upon) receipt by the
----------
Administrative Agent for the account of the Working Capital Lenders of
immediately available funds from the Borrower in respect of interest or
commitment fees relating to the Working Capital Loans, the Working Capital
Lenders shall promptly remit, through the Administrative Agent, to the
Lenders which are not Working Capital Lenders an amount equal to their pro
rata share of the Applicable Rate paid with respect to outstanding Working
Capital Loans and an amount equal to their pro rata share of such
commitment fees.
(iv) Upon (and only upon) receipt by the Administrative Agent for the
account of the Working Capital Lenders of immediately available funds from
the Borrower as payment in respect of principal of or interest on a Working
Capital Loan with respect to which a Lender (other than a Working Capital
Lender) has paid the Administrative Agent for the account of the Working
Capital Lenders for such Lender's participation in such Working Capital
Loan pursuant to clause (i) above, the Administrative Agent will pay to
----------
each such Lender which is not a Defaulting Lender, in the same funds as
those received by the Administrative Agent for the account of the Working
Capital Lenders, such Lender's pro rata share of such funds, and the
Working Capital Lenders shall receive their pro rata share of any funds of
any Lender that did not so pay the Administrative Agent for the account of
the Working Capital Lenders.
(b) Acknowledged Privity. The Borrower expressly agrees that, in respect
--------------------
of each Lender's funded participation interest in any Working Capital Loan, such
Lender shall be deemed to be in privity of contract with the Borrower and have
the same rights and remedies against the Borrower under the Loan Documents as if
such funded participation interest in such
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<PAGE>
Working Capital Loan were a Working Capital Loan.
(c) Obligation to Participate in Working Capital Loans Absolute. Each
-----------------------------------------------------------
Lender's obligation in accordance with this Agreement to purchase participation
interests in Working Capital Loans, as contemplated by this Section 2.04, as a
------------
result of the making of a Working Capital Loan, shall be absolute and
unconditional and without recourse to or representation or warranty by the
Working Capital Lenders and shall not be affected by any circumstance, including
(i) any set-off, counterclaim, recoupment, defense or other right which such
Lender may have against the Working Capital Lenders, the Borrower or any other
Person for any reason whatsoever; (ii) the occurrence or continuance of a
Default, an Event of Default, a Designated Event or a Material Adverse Effect;
or (iii) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and
----------------- -------
conditions set forth herein, the Borrower may request the issuance of, and the
Issuer shall issue on any Business Day on which the conditions precedent set
forth in Section 4.02 are satisfied (or waived by the Majority Lenders), a
------------
Letter of Credit. In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of any form of letter
of credit application or other agreement submitted by the Borrower to, or
entered into by the Borrower with, the Issuer relating to any Letter of Credit,
the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
---------------------------------------------------------------------
To request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or fax (or transmit by other electronic communication if arrangements for doing
so have been approved by the Issuer) to the Issuer and the Administrative Agent
(at least three Business Days in advance of the requested date of issuance,
amendment, renewal or extension) an Issuance Request requesting the issuance of
a Letter of Credit, or identifying the Letter of Credit to be amended, renewed
or extended, the date of issuance, amendment, renewal or extension, the date on
which such Letter of Credit is to expire (which shall comply with paragraph (c)
-------------
of this Section), the stated amount of such Letter of Credit, the name and
address of the beneficiary thereof and such other information as shall be
necessary to prepare, amend, renew or extend such Letter of Credit. The
Borrower also shall submit a letter of credit application on the Issuer's
standard form in connection with any request for a Letter of Credit. A Letter
of Credit shall be issued, amended, renewed or extended only if, after giving
effect to such issuance, amendment, renewal or extension (i) the LC Exposure for
all Letters of Credit then outstanding shall not exceed $2,000,000 and (ii) the
sum of the aggregate principal amount of the Working Capital Loans then
outstanding and the LC Exposure shall not exceed the total Working Capital Loan
Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at or prior to
---------------
the close of business on the date which is one year after the date of the
issuance of such Letter of Credit, but in no event later than one Business Day
before the Maturity Date.
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<PAGE>
(d) Participation. By the issuance of a Letter of Credit (or an amendment
-------------
to a Letter of Credit increasing the amount thereof) and without any further
action on the part of the Issuer or the Lenders, the Issuer hereby grants to
each Lender, and each Lender hereby acquires from the Issuer, a participation in
such Letter of Credit equal to such Lender's Applicable Percentage of the
aggregate amount available to be drawn under such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to the Administrative Agent, for the account
of the Issuer, such Lender's Applicable Percentage of each LC Disbursement made
by the Issuer and not reimbursed by the Borrower on the date due as provided in
paragraph (e) of this Section, or of any reimbursement payment required to be
- -------------
refunded to the Borrower for any reason. Each Lender acknowledges and agrees
that its obligation to acquire a participation pursuant to this paragraph in
respect of each Letter of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a
Default, a Designated Event, an Event of Default or a Material Adverse Effect or
reduction or termination of the Commitments, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuer shall make any LC Disbursement in respect
-------------
of a Letter of Credit, the Borrower shall reimburse (its "Reimbursement
-------------
Obligation") such LC Disbursement by paying to the Administrative Agent an
- ----------
amount equal to such LC Disbursement not later than 2:00 p.m., New York City
time, on the date that such LC Disbursement is made, if the Borrower shall have
received notice of such LC Disbursement prior to 10:00 a.m., New York City time,
on such date, or, if such notice has not been received by the Borrower prior to
such time on such date, then not later than 2:00 p.m., New York City time, on
(i) the Business Day that the Borrower receives such notice, if such notice is
received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii)
the Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that the Borrower may, subject to the conditions to borrowing set forth
- --------
herein, request in accordance with Section 2.03 that such payment be financed
------------
with an ABR Working Capital Borrowing in an equivalent amount and, to the extent
so financed, the Borrower's obligation to make such payment shall be discharged
and replaced by the resulting ABR Borrowing. If the Borrower fails to make such
payment when due, or if any payment by the Borrower must be returned or restored
(by reason of a bankruptcy proceeding or otherwise), the Administrative Agent
shall notify each Lender of the applicable LC Disbursement, the payment then due
from the Borrower in respect thereof and such Lender's Applicable Percentage
thereof. Promptly following receipt of such notice, each Lender shall pay to
the Administrative Agent its Applicable Percentage of the payment then due from
the Borrower, in the same manner as provided in Section 2.06 with respect to
------------
Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to
------------ ------- --------
the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the Issuer the amounts so received by it from the Lenders.
Promptly following receipt by the Administrative Agent of any payment from the
Borrower pursuant to this paragraph, the Administrative Agent shall distribute
such payment to the Issuer or, to the extent that Lenders have made payments
pursuant to this paragraph to reimburse the Issuer and are Non-Defaulting
Lenders, then to such Non-Defaulting Lenders and the Issuer as their
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<PAGE>
interests may appear. Any payment made by a Lender pursuant to this paragraph to
reimburse the Issuer for any LC Disbursement (other than the funding of ABR
Loans as contemplated above) shall not constitute a Loan and shall not relieve
the Borrower of its obligation to reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
--------------------
Disbursements as provided in paragraph (e) of this Section, and each Lender's
-------------
obligation to reimburse the Issuer for any LC Disbursement, shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement irrespective of any event or circumstance that
would constitute a legal or equitable discharge of the Borrower's obligations
hereunder, and irrespective of any other circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement, any
Loan Document, any Letter of Credit, or of any Letter of Credit application
or other agreement between the Issuer and an account party;
(ii) any amendment or waiver of or any consent to departure from the
provisions of this Agreement or any other Loan Document in accordance with
the terms thereof;
(iii) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
permitted transferee of any Letter of Credit (or any Person for whom any
such beneficiary or any such transferee may be acting), the Administrative
Agent, the Issuer, any Lender or any other Person, whether in connection
with this Agreement, any Letter of Credit, the transactions contemplated
hereby or by the other Loan Documents or any unrelated transaction
(including an underlying transaction between the Borrower and the
beneficiary named in any such Letter of Credit);
(iv) any draft, demand, certificate or other document presented under
or in connection with any Letter of Credit proving to be forged, fraudulent
or invalid in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) any payment by the Issuer acting in good faith under any Letter
of Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment made
by the Issuer under any Letter of Credit to any Person reasonably believed
by it to be a trustee in bankruptcy, debtor-in-possession, assignee for the
benefit of creditors, liquidator, receiver or other representative of or
successor to any beneficiary or any transferee of any Letter of Credit,
including any arising in connection with any insolvency proceeding;
(vi) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any
guarantee or other obligation, for all or any of the obligations of the
Borrower in respect of any Letter of Credit; or
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<PAGE>
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Borrower or a guarantor;
provided that the foregoing shall not be construed to excuse the Issuer from
- --------
liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable law) suffered by the Borrower
that are caused by the Issuer's failure to exercise the agreed standard of care
(as set forth below) in determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. Neither the
Administrative Agent, the Syndication Agent, the Arranger, the Issuer nor the
Lenders, nor any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder,
or any error, omission, interruption, loss or delay in transmission or delivery
of any draft, notice or other communication under or relating to any Letter of
Credit (including any document required to make a drawing thereunder), any error
in interpretation of technical terms or any consequence arising from causes
beyond the control of the Issuer; provided that the foregoing shall not be
--------
construed to excuse the Issuer from liability to the Borrower to the extent of
any direct damages (as opposed to consequential damages, claims in respect of
which are hereby waived by the Borrower to the extent permitted by applicable
law) suffered by the Borrower that are caused by the Issuer's failure to
exercise the agreed standard of care (as set forth below) in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof. The parties hereto expressly agree that the Issuer shall have
exercised the agreed standard of care in the absence of gross negligence or
wilful misconduct on the part of the Issuer; provided that it is understood and
--------
agreed that the Issuer may accept documents that appear on their face to be in
substantial compliance with the terms of a Letter of Credit, without
responsibility for further investigation, and may make payment upon presentation
of documents that appear on their face to be in substantial compliance with the
terms of such Letter of Credit; provided further that (i) the Issuer shall have
--------
the right, in its sole discretion, to decline to accept such documents and to
make such payment if such documents are not in strict compliance with the terms
of such Letter of Credit and (ii) the Borrower shall have in any event waived
any right it may have to object to payment by the Issuer against documents
presented to it unless expressly objected to in writing within 10 days after
such payment and, if requested in writing by the Borrower, delivery to the
Borrower of such documents by the Issuer. The Issuer agrees to promptly notify
the Borrower of each LC Disbursement.
(g) Disbursement Procedures. The Issuer shall, promptly following its
-----------------------
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuer shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by facsimile) of
such demand for payment and whether the Issuer has made or will make an LC
Disbursement thereunder.
(h) Interim Interest. If the Issuer shall make any LC Disbursement, then,
----------------
unless the Borrower shall reimburse such LC Disbursement in full on the date
such LC Disbursement is
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<PAGE>
made, the unpaid amount thereof shall bear interest, for each day from and
including the date such LC Disbursement is made to but excluding the date that
the Borrower reimburses such LC Disbursement, at the rate per annum then
applicable to ABR Term Loans; provided that, if the Borrower fails to reimburse
--------
such LC Disbursement when due pursuant to paragraph (e) of this Section
-------------
(including pursuant to an ABR Borrowing in accordance with Section 2.03), then
------------
Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall
- ---------------
be for the account of the Issuer, except that interest accrued on and after the
date of payment by any Lender pursuant to paragraph (e) of this Section to
-------------
reimburse the Issuer shall be for the account of such Lender to the extent of
such payment.
(i) Replacement of the Issuer. The Issuer may be replaced at any time by
-------------------------
written agreement among the Borrower, the Administrative Agent, the replaced
Issuer, the successor Issuer and any beneficiary of a Letter of Credit. The
Administrative Agent shall notify the Lenders of any such replacement of the
Issuer. At the time any such replacement shall become effective, the Borrower
shall pay all unpaid fees accrued for the account of the replaced Issuer
pursuant to Section 2.12(b). From and after the effective date of any such
---------------
replacement, (i) the successor Issuer shall have all the rights and obligations
of the Issuer under this Agreement with respect to Letters of Credit to be
issued thereafter and (ii) references herein to the term "Issuer" shall be
deemed to refer to such successor or to any previous Issuer, or to such
successor and all previous Issuers, as the context shall require. After the
replacement of an Issuer hereunder, the replaced Issuer shall remain a party
hereto and shall continue to have all the rights and obligations of an Issuer
under this Agreement with respect to Letters of Credit issued by it prior to
such replacement (unless such Letters of Credit are replaced with new Letters of
Credit issued by the successor Issuer), but shall not be required to issue
additional Letters of Credit.
SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each
---------------------
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders. The Administrative Agent will make such Loans available
to the Borrower by promptly crediting the amounts so received, in like funds, to
the Construction Account; provided that ABR Term Loans made to finance the
--------
reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be
---------------
remitted by the Administrative Agent to the Issuer.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
-------------
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender agrees to pay to the Administrative Agent forthwith on demand
such corresponding amount with interest thereon, for each day from and including
the date such amount is made available to the Borrower to but excluding the date
of payment to the Administrative Agent, at the Federal Funds
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<PAGE>
Effective Rate for three days and at the Alternate Base Rate thereafter. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
SECTION 2.07. Interest Elections. (a) Each Borrowing shall initially be
------------------
of the Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Article II. The Borrower may elect different options with respect to
----------
different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by delivering a
Continuation/Conversion Notice to the Administrative Agent by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
------------
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such Continuation/Conversion Notice
shall be irrevocable and shall specify the following information in compliance
with Section 2.02:
------------
(i) the Borrowing to which such Continuation/Conversion Notice
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified pursuant
to clauses (iii) and (iv) below shall be specified for each resulting
------------- ----
Borrowing);
(ii) the effective date of the election made pursuant to such
Continuation/Conversion Notice, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Continuation/Conversion Notice requests a Eurodollar Borrowing but
does not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration. Promptly following receipt
of a Continuation/Conversion Notice, the Administrative Agent shall advise each
Lender of the details thereof and of such Lender's portion of each resulting
Borrowing.
(c) If the Borrower fails to deliver a timely Continuation/Conversion
Notice with respect
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<PAGE>
to a Eurodollar Borrowing prior to the end of the Interest Period applicable
thereto, then, unless such Borrowing is repaid as provided herein, at the end of
such Interest Period such Borrowing shall be converted to an ABR Borrowing.
Notwithstanding any contrary provision hereof, if an Event of Default or
Designated Event has occurred and is continuing and the Administrative Agent, at
the request of the Majority Lenders, so notifies the Borrower, then, so long as
an Event of Default or Designated Event is continuing (i) no outstanding
Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii)
unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing
at the end of the Interest Period applicable thereto.
SECTION 2.08. Termination and Reduction of Commitments. (a) Unless
----------------------------------------
previously terminated, the Commitments shall terminate on the applicable
Termination Date.
(b) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Commitments under paragraph (c) of this Section at least
-------------
five Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Promptly following
receipt of any notice, the Administrative Agent shall advise the Lenders of the
contents thereof. Each notice delivered by the Borrower pursuant to this
Section shall be irrevocable and any termination or reduction of the Commitments
shall be permanent. Each reduction of the Commitments of any Class shall be
made ratably among the Lenders in accordance with their respective Commitments
of such Class.
(c) The Borrower may at any time terminate, or from time to time reduce,
the Commitments of any Class; provided that (i) each reduction of the Term Loan
--------
Commitments shall be made pro rata among all Term Loan Commitments, (ii) each
--- ----
reduction of the Commitments shall be in a minimum aggregate principal amount of
$5,000,000 and integral multiples of $1,000,000 in excess thereof, (iii) the
Borrower shall not terminate or reduce the Commitments of any Class if, after
giving effect to any concurrent prepayment of the Loans in accordance with
Section 2.10 or 2.11, (A) with respect to the Working Capital Loan Commitments,
- ------------ ----
the aggregate principal amount of the outstanding Working Capital Loans and LC
Exposure would exceed the Working Capital Loan Commitments or (B) with respect
to the Term Loan Commitments, the aggregate principal amount of the outstanding
Term Loans would exceed the applicable Term Loan Commitments, and (iv) the
Borrower shall not terminate or reduce the Term Loan Commitments if the
remaining Term Loan Commitments, together with other funds available to the
Borrower, would not, in the reasonable judgment of the Administrative Agent
(upon consultation with the Independent Engineer), be sufficient to pay the
remaining amounts owing under the Supply Contract and the other costs necessary
to complete the System.
(d) The Working Capital Loan Commitments shall be automatically and
permanently reduced upon and in the amount of any payments made thereon pursuant
to Section 2.09(a) and, after all Term Loans have been repaid in full, in the
---------------
amount of any mandatory prepayments made thereon pursuant to Section 2.11.
------------
(e) The Commitments shall be automatically and permanently reduced upon and
in the
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<PAGE>
amount of any payments made pursuant to clause eleventh of Section 8.08(a).
--------------- ---------------
(f) Until such time as the Borrower has provided the Administrative Agent
with written notification of its election to exercise the Rio Ring Option,
$112,000,000 of the Term C Loan Commitment shall be unavailable. If the
Borrower has not made an election with respect to the Rio Ring Option by
December 31, 1999, the Term C Loan Commitment shall be automatically and
permanently reduced by $112,000,000. If, however, the Borrower has elected not
to exercise the Rio Ring Option, but has elected one of the alternatives set
forth below by December 31, 1999, the Term C Loan Commitment shall be
automatically and permanently reduced by $23,000,000, with the remaining
$89,000,000 of the previously unavailable portion available only to pay
reasonable and necessary receipted costs for the design, construction and
installation of either (a) a terrestrial connection between Rio de Janeiro,
Brazil and Fortaleza, Brazil or (b) a west coast connection, in either case with
the consent of the Designated Agents, the Required Lenders and Lenders
comprising at least 66 2/3% of the number of Lenders at such time, and with the
approval of the Independent Engineer (which approval shall not be unreasonably
withheld); provided that so long as no Event of Default has occurred and is
--------
continuing at the time of such election and with the consent of the Independent
Engineer (which consent shall not be unreasonably withheld), the Borrower may
build such connections without the consent of any of the Lenders if all of the
costs for such design, construction and installation and of required maintenance
are funded entirely with the proceeds of the Parent Terrestrial Build-Out
Offering on terms and conditions reasonably satisfactory to the Designated
Agents.
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower
------------------------------------
hereby unconditionally promises to repay the Working Capital Loans in full on
the Maturity Date, and hereby unconditionally promises to repay the Term Loans
in eight semi-annual installments on Principal Payment Dates, commencing on
December 31, 2001, in percentages of the total outstanding principal amount of
the Term Loans as of the first day after the end of the Availability Period, as
set forth on Schedule 2.09.
-------------
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent acting for this purpose as an agent of the
Borrower, shall maintain the Register pursuant to Section 10.04(c) and a
----------------
subaccount therein for each Lender, in which it shall record (i) the amount of
each Loan and each obligation evidenced by a Note made hereunder, the Class and
Type thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the Register and the accounts maintained pursuant
to paragraph (b) or (c) of this Section shall constitute prima facie evidence of
------------- --- ----- -----
the existence and
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<PAGE>
amounts of the Obligations recorded therein; provided that the failure of any
--------
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative Agent
by any Lender, the Borrower will execute and deliver to such Lender, as
applicable, (i) a promissory note of the Borrower payable to the order of such
Lender and its registered assigns evidencing the Working Capital Loans of such
Lender and substantially in the form of Exhibit A-1 with appropriate insertions
-----------
as to date and principal amount (each a "Working Capital Note"), (ii) a
--------------------
promissory note of the Borrower payable to the order of such Lender and its
registered assigns evidencing the Term A Loans of such Lender and substantially
in the form of Exhibit A-2 with appropriate insertions as to date and principal
-----------
amount (each a "Term A Note"), (iii) a promissory note of the Borrower payable
-----------
to the order of such Lender and its registered assigns evidencing the Term B
Loans of such Lender and substantially in the form of Exhibit A-2 with
-----------
appropriate insertions as to date and principal amount (each a "Term B Note"),
-----------
(iv) a promissory note of the Borrower payable to the order of such Lender and
its registered assigns evidencing the Term C Loans of such Lender and
substantially in the form of Exhibit A-2 with appropriate insertions as to date
-----------
and principal amount (each a "Term C Note"), and (v) a promissory note of the
-----------
Borrower payable to the order of such Lender and its registered assigns
evidencing the Term D Loans of such Lender and substantially in the form of
Exhibit A-2 with appropriate insertions as to date and principal amount (each a
- -----------
"Term D Note"). Thereafter, the Loans evidenced by any such Note and interest
-----------
thereon shall at all times (including after assignment pursuant to Section
-------
10.04) be represented by one or more Notes payable to the order of the payee
named therein and its registered assigns. Each Lender is hereby authorized to
endorse the date and amount of any Loans on the grid attached to any Note, and
any entries made thereon shall constitute prima facie evidence of the existence
----- -----
and amounts of the Obligations recorded therein; provided that the failure of
--------
any Lender to maintain such accounts or any error therein shall not in any
manner affect the obligation of the Borrower to repay the Loans in accordance
with the terms of this Agreement. A Note and the obligation evidenced thereby
may be assigned or otherwise transferred in whole or in part only by
registration of such assignment or transfer of such Note and the obligation
evidenced thereby in the Register (and each Note shall expressly so provide).
Any assignment or transfer of all or part of an obligation evidenced by a Note
shall be registered in the Register only upon surrender for registration of
assignment or transfer of the Note evidencing such obligation, accompanied by an
Assignment and Acceptance duly executed by the assignor thereof, and thereupon,
if requested by the assignee, one or more new Notes shall be issued to the
designated assignee and the old Note shall be returned by the Administrative
Agent to the Borrower marked "canceled". No assignment of a Note and the
obligation evidenced thereby shall be effective unless it shall have been
recorded in the Register by the Administrative Agent as provided in this
subsection 2.09(e).
- ------------------
SECTION 2.10. Optional Prepayments of Loans. (a) The Borrower shall
----------------------------
have the right at any time and from time to time to prepay any Class of Loans in
whole or in part, without premium or penalty except as set forth in paragraph
---------
(c) below, subject to prior notice in
- ---
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<PAGE>
accordance with paragraph (b) below and subject to the provisions of Section
-------
2.16.
- ----
(b) The Borrower shall notify the Administrative Agent in writing or by
telephone (confirmed by facsimile) of any optional prepayment hereunder, not
later than 11:00 a.m., New York City time, five Business Days before the date of
prepayment. Each such notice shall be irrevocable and shall specify, in the
case of any prepayment of Loans, the date and amount of prepayment and whether
the prepayment is (i) of Term Loans, Working Capital Loans or a combination
thereof and (ii) of Eurodollar Loans, ABR Loans or a combination thereof, and,
in each case if a combination thereof, the principal amount allocable to each.
Promptly following receipt of any such notice, the Administrative Agent shall
advise the Lenders of the contents thereof. Partial optional prepayments shall
be in a minimum aggregate principal amount of $5,000,000 and integral multiples
of $1,000,000 in excess thereof. Optional prepayments shall be accompanied by
accrued interest to the extent required by Section 2.13. Without in any way
------------
limiting the obligation of the Borrower to confirm in writing any notice it may
give hereunder by telephone, the Administrative Agent may act prior to receipt
of written confirmation without liability upon the basis of such telephonic
notice believed by the Administrative Agent in good faith to be from a
Responsible Officer of the Borrower (or a designee of such Responsible Officer).
In each such case the Borrower hereby waives the right to dispute the
Administrative Agent's record of the terms of any such telephonic notice.
(c) With respect to any prepayment of Term D Loans, the Borrower shall pay
to the Lenders having outstanding Term D Loans a prepayment fee on the principal
amount of Term D Loans so prepaid equal to (i) 3.00% of the principal amount of
such Term D Loans prepaid for any prepayment of such Term D Loans made on or
prior to the first anniversary of the Closing Date, (ii) 2.00% of the principal
amount of such Term D Loans prepaid for any prepayment of such Term D Loans made
after the first anniversary but on or prior to the second anniversary of the
Closing Date, (iii) 1.00% of the principal amount of such Term D Loans prepaid
for any prepayment of such Term D Loans made after the second anniversary but on
or prior to the third anniversary of the Closing Date, and (iv) 0% thereafter.
(d) Optional prepayments of the Term Loans shall be applied to the
outstanding principal amount of all Term Loans pro rata among each tranche of
--- ----
Term Loans (with the amount of such prepayment of the Term Loans being applied
one-half to the remaining installment payments thereof in the direct order of
maturity and one-half to the remaining installment payments thereof in the
inverse order of maturity). Notwithstanding the foregoing, any Lender that has
Term D Loans outstanding may elect not to have its pro rata share of such Term D
--- ----
Loans prepaid, and upon any such election the Administrative Agent shall apply
the amount that otherwise would have prepaid such Lender's Term D Loans to a
prepayment of the outstanding principal amount of Term A Loans, Term B Loans and
Term C Loans until paid in full, and then to the repayment of the outstanding
principal amount of Working Capital Loans.
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<PAGE>
SECTION 2.11. Mandatory Prepayments. (a) The Borrower shall prepay the
---------------------
outstanding Loans with Revenue in accordance with the terms of Section 8.08(a).
---------------
(b) On each Principal Payment Date, the Borrower shall prepay the
outstanding Loans in an amount equal to 50% (or, if as of such date a Default or
a Designated Event shall have occurred and be continuing, 100%) of Excess Cash
Flow determined as of such date, in each case in accordance with the terms of
Section 8.08(d).
- ---------------
(c) The Borrower shall prepay the Loans promptly after the receipt of Net
Cash Proceeds, as follows:
(i) by an amount equal to 50% of the Net Cash Proceeds of any new
issuance after the Closing Date of Equity Interests of the Borrower or
Parent or any capital contribution made to Parent after the Closing Date in
accordance with Section 8.15(a); provided that the Borrower shall not be
--------------- --------
required to make any such prepayment (A) if such Net Cash Proceeds are
immediately applied to the payment of Permitted Costs or are being held
(for no more than 60 days, unless such Net Cash Proceeds are being held for
the payment of Permitted Costs, or (B) if such Net Cash Proceeds are being
held to pay an identified cost with the consent of the Administrative Agent
(which consent shall not be unreasonably withheld) in the Construction
Account, the Revenue Account or the Clean-Up Account, as the case may be,
in accordance with Section 8.15(a);
---------------
(ii) by an amount equal to 100% of the Net Cash Proceeds of an
incurrence of Indebtedness by the Borrower or Parent after the Closing Date
(other than Indebtedness permitted by Section 6.01, but subject in any
------------
event to the limitations contained in Section 6.01) in accordance with
------------
Section 8.15(b); and
---------------
(iii) by an amount equal to 100% of the Net Cash Proceeds of any
Transfer of any asset of the Borrower or the Subsidiaries (other than (A)
Transfers permitted pursuant to clause (a), (b) and (d) of Section 6.04 and
---------- --- --- ------------
(B) Transfers resulting in aggregate Net Cash Proceeds not exceeding
$500,000 during any fiscal year of the Borrower) in accordance with Section
-------
8.15(c); provided that the Borrower shall not be required to make any such
------- --------
prepayment if such Net Cash Proceeds are, within six months of receipt,
reinvested in the Borrower's or any Subsidiary's business (other than for
Permitted System Upgrades).
(d) If an Event of Loss shall occur, unless the affected portion of the
System is being restored, rebuilt or replaced in accordance with Section 5.22,
------------
the Borrower shall, on the third Business Day following the date on which
insurance, condemnation or expropriation proceeds are received with respect to
such Event of Loss, prepay the Loans in an amount equal to the insurance
proceeds received in accordance with Section 8.13(d).
---------------
(e) After the payment in full of all Capital Costs, the Borrower shall
prepay the Loans with funds made available to it for prepayments of the Loans
under Section 8.24.
------------
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<PAGE>
(f) After the prepayment in full of all Loans, prepayments shall be made
in accordance with the foregoing clauses to cash collateralize LC Exposure as if
such LC Exposure were Loans.
(g) Mandatory prepayments shall be accompanied by accrued interest to the
extent required by Section 2.13.
------------
(h) All mandatory prepayments of the Loans shall be applied (i) first, to
-----
the mandatory prepayment of the outstanding principal amount of all Term Loans
pro rata among each tranche of Term Loans (with the amount of such prepayment of
- --- ----
the Term Loans being applied one-half to the remaining installment payments
thereof in the direct order of maturity and one-half to the remaining
installment payments thereof in the inverse order of maturity), (ii) second,
------
once all Term Loans have been paid in full, to the mandatory prepayment of the
outstanding principal amount of all Working Capital Loans (and the concurrent
permanent reduction in the Commitments therefor), and (iii) third, once all
-----
Working Capital Loans have been paid in full, to the cash collateralization of
LC Exposure. Notwithstanding the foregoing, any Lender that has Term D Loans
outstanding may elect not to have its pro rata share of such Term D Loans
--- ----
prepaid, and upon any such election, the Administrative Agent shall apply the
amount that otherwise would have prepaid such Lender's Term D Loans in
accordance with clauses (i) through (iii) above.
----------- -----
(i) Upon making a mandatory prepayment pursuant to this Section, the
Borrower shall have the right (i) first, to apply such prepayment to the ABR
Loans and to any and all Eurodollar Loans having Interest Period(s) ending on
the date of such prepayment and (ii) then, with respect to Eurodollar Loans
having Interest Period(s) ending on a day other than the date of such
prepayment, to deposit cash in a cash collateral account, on terms and subject
to documentation reasonably satisfactory to the Administrative Agent, sufficient
to prepay in full such Eurodollar Loans (together with accrued interest thereon)
at the end of the applicable Interest Period(s). Any amounts so deposited shall
be held in a cash collateral account and shall be applied to the prepayment of
the applicable Eurodollar Loans at the end of the current Interest Periods
applicable thereto. The Administrative Agent shall, upon the written request of
the Borrower, invest funds in any such cash collateral account in overnight
investments constituting Permitted Investments.
SECTION 2.12. Fees. (a) The Borrower agrees to pay to the
----
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at the rate of 1.50% per annum on the average daily unused portion
of the Commitments of such Lender during the period from the Closing Date to but
excluding the date on which such Commitment terminates. Accrued commitment fees
shall be payable in arrears on the last Business Day of each March, June,
September and December of each year and on the date on which the Commitments
terminate, commencing on the first such date to occur after the date hereof.
All commitment fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day). For purposes of computing commitment fees with
respect to the Term Loan Commitments, a Term Loan Commitment of a
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<PAGE>
Lender shall be deemed to be used to the extent of the outstanding Term Loans of
such Lender. For purposes of computing commitment fees relating to Working
Capital Loan Commitment, the Working Capital Loan Commitment shall be deemed to
be used to the extent of the outstanding Working Capital Loans.
(b) The Borrower agrees to pay (i) to the Administrative Agent for the
account of each Lender a participation fee with respect to its participation in
each Letter of Credit, which shall accrue at a rate per annum equal to the
Applicable Rate applicable to interest on Eurodollar Loans on the average daily
amount of such Lender's LC Exposure in respect of such Letter of Credit
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the date such Letter of Credit is issued to
but excluding the date on which such Letter of Credit is terminated, and (ii) to
the Issuer a fronting fee (as referred to in the Fee Letter with the
Administrative Agent), which shall accrue at the rate of .25% per annum on the
average daily stated amount of each outstanding Letter of Credit (as such stated
amount may be reduced in accordance with the terms of such Letter of Credit)
issued by the Issuer during the period from and including the date such Letter
of Credit is issued to but excluding the date on which such Letter of Credit is
terminated. Participation fees and fronting fees accrued through and including
the last Business Day of each March, June, September and December of each year
shall be payable on such Business Day, commencing on the first such date to
occur after the issuance of a Letter of Credit; provided that all such fees
--------
shall be payable on the date on which such Letter of Credit terminates. All
participation fees and fronting fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, the Arranger
and the Syndication Agent, for their own accounts, the fees payable in the
amounts and at the times separately agreed upon between such Persons and the
Borrower and certain of its Affiliates in the Fee Letters.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuer, in
the case of fees payable to it) for distribution, in the case of commitment fees
and participation fees, to the Lenders.
SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing
--------
shall bear interest at a rate per annum equal to the Alternate Base Rate plus
the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at
a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in
effect for such Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on any
Loan or any fee or other amount payable by the Borrower hereunder is not paid
when due, whether at stated maturity, upon acceleration or otherwise, all
amounts payable hereunder shall bear interest after such amounts become due
(including after as well as before judgment) at a rate per annum equal
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<PAGE>
to (i) in the case of the principal of any Loan, 2% plus the rate otherwise
applicable to such Loan as provided above or (ii) in the case of any other
amount, 2% plus the rate applicable to ABR Loans as provided above.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
--------
to paragraph (c) of this Section shall be payable on demand, (ii) in the event
-------------
of any repayment or prepayment of any Loan, accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment, (iii) in the event of any conversion of any Eurodollar Borrowing
prior to the end of the current Interest Period therefor, accrued interest on
such Loan shall be payable on the effective date of such conversion and (iv) all
accrued interest shall be payable upon termination of the Commitments.
(e) All interest hereunder shall be computed on the basis of a year of 360
days, except that interest computed by reference to the Alternate Base Rate at
times when the Alternate Base Rate is based on the Prime Rate shall be computed
on the basis of a year of 365 days (or 366 days in a leap year), and in each
case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day).
SECTION 2.14. Alternate Rate of Interest; Illegality. (a) If prior to
--------------------------------------
the commencement of any Interest Period for a Eurodollar Borrowing:
(i) the Administrative Agent determines (which determination shall
be conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as
applicable, for such Interest Period; or
(ii) the Administrative Agent is advised by the Majority Lenders
that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period will not adequately and fairly reflect the cost to such
Lenders of making or maintaining their Loans included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or facsimile as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any
Continuation/Conversion Notice that requests the conversion of any Borrowing to,
or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
(b) Notwithstanding any other provision of this Agreement, if on or after
the date of this Agreement, the adoption of or any change in any applicable law
or in the interpretation or application thereof shall make it unlawful for any
Lender to make or maintain Eurodollar Loans as contemplated by this Agreement,
such Lender shall give telephonic or facsimile notice thereof
-55-
<PAGE>
to the Administrative Agent and the Borrower as soon as practicable (and, with
respect to any such telephonic notice, the party delivering the same agrees to
confirm such notice in writing) and (i) the commitment of such Lender hereunder
to make Eurodollar Loans and continue Eurodollar Loans as such shall forthwith
be canceled and (ii) such Lender's Loans then outstanding as Eurodollar Loans,
if any, shall be converted automatically to ABR Loans on the respective last day
of the then current Interest Periods with respect to such Loans or within such
earlier period as required by law. If any such conversion of a Eurodollar Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 2.16.
------------
SECTION 2.15. Increased Costs. (a) If any Change in Law shall:
---------------
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account
of, or credit extended or participated in by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or the Issuer; or
(ii) impose on any Lender or the Issuer any other condition
affecting this Agreement or Eurodollar Loans made by such Lender or any
Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuer of participating in, issuing or maintaining any Letter of Credit or to
reduce the amount of any sum received or receivable by such Lender or the Issuer
hereunder (whether of principal, interest or otherwise), then the Borrower will
pay to such Lender or the Issuer, as the case may be, such additional amount or
amounts as will compensate such Lender or the Issuer, as the case may be, for
such additional costs incurred or reduction suffered; provided that Section 2.17
-------- ------------
and not this Section 2.15 shall apply to any Change in Law affecting any Taxes.
------------
(b) If any Lender or the Issuer determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on the capital of such Lender, the Issuer or any holding company for
such Lender or the Issuer as a consequence of this Agreement or the Loans made
by, or participation in Letters of Credit held by, such Lender, or the Letters
of Credit issued by the Issuer, to a level below that which such Lender, the
Issuer or the holding company for such Lender or Issuer could have achieved but
for such Change in Law (taking into consideration such Lender's or the Issuer's
policies with respect to capital adequacy), then from time to time the Borrower
will pay to such Lender, the Issuer, or such Lender's or the Issuer's holding
company, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuer for any such reduction suffered.
(c) If any Lender or the Issuer becomes entitled to claim compensation
pursuant to this Section, such Lender shall promptly notify the Borrower (with a
copy to the Administrative
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Agent) of the event by reason of which it has become so entitled. A written
notice by a Lender or the Issuer setting forth the amount or amounts necessary
to compensate such Lender or the Issuer or such holding company, as the case may
be, as specified in paragraph (a) or (b) of this Section delivered to the
------------- ---
Borrower (with a copy to the Administrative Agent), shall constitute prima facie
----- -----
evidence of the correctness of the amount claimed.
(d) The Borrower shall pay such Lender or the Issuer, as the case may be,
all amounts payable pursuant to the foregoing provisions of this Section 2.15
------------
within 10 days after receipt of certification thereof from such Lender or the
Issuer. Failure or delay on the part of any Lender or the Issuer to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender's or the Issuer's right to demand such compensation; provided that the
Borrower shall not be required to compensate a Lender or the Issuer pursuant to
this Section for any increased costs or reductions incurred more than six months
prior to the date that such Lender or the Issuer, as the case may be, notifies
the Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender's or the Issuer's intention to claim compensation
therefor.
SECTION 2.16. Break Funding Payments. In the event of (a) the payment of
----------------------
any principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto, (b) the conversion of any Eurodollar Loan other than
on the last day of the Interest Period applicable thereto or (c) the failure to
borrow, convert, continue or prepay any Eurodollar Loan on the date specified in
any notice delivered pursuant hereto, then, in any such event, the Borrower
shall compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Loan, the loss to any Lender attributable to
any such event shall be equal to the excess, if any, of (i) the amount of
interest that such Lender would pay for a deposit equal to the principal amount
of such Loan for the period from the date of such payment, conversion or failure
to the last day of the then current Interest Period for such Loan (or, in the
case of a failure to borrow, convert or continue, the duration of the Interest
Period that would have resulted from such borrowing, conversion or continuation)
if the interest rate payable on such deposit were equal to the Adjusted LIBO
Rate for such Interest Period, over (ii) the amount of interest that such Lender
would earn on such principal amount for such period if such Lender were to
invest such principal amount for such period at the interest rate that would be
bid by such Lender (or an affiliate of such Lender) for dollar deposits from
other banks in the eurodollar market at the commencement of such period. A
written notice by any Lender setting forth any amount or amounts that such
Lender is entitled to receive pursuant to this Section shall be delivered by
such Lender to the Borrower (with a copy to the Administrative Agent) and shall
constitute prima facie evidence of the correctness of the amount claimed.
----- -----
SECTION 2.17. Taxes. (a) Any and all payments by or on account of any
-----
obligation of the Borrower hereunder shall be made free and clear of and without
deduction for any Taxes, except to the extent imposed by applicable law. If the
Borrower shall be required by applicable law to deduct any Taxes from such
payments (including payments described in clause (i) below), then (i) if such
Taxes are Indemnified Taxes or Other Taxes, the sum payable shall, subject to
compliance with Section 2.17(c), be increased as necessary so that after making
---------------
all required
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<PAGE>
deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent, Lender or Issuer (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes not described in
Section 2.17(a) to the relevant Governmental Authority in accordance with
- ---------------
applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each Lender and
the Issuer, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent, such Lender or the Issuer, as the case may be, and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, except as a result of the gross negligence or willful misconduct of the
Administrative Agent, such Lender or the Issuer whether or not such Indemnified
Taxes or Other Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. The Administrative Agent, any Lender or the
Issuer, as the case may be, shall promptly notify the Borrower and the
Administrative Agent of the assertion of any claim against the Administrative
Agent, such Lender or the Issuer, as the case may be, relating to Indemnified
Taxes or Other Taxes by the applicable Governmental Authority. A certificate as
to the amount of such payment or liability delivered to the Borrower by a Lender
or the Issuer, or by the Administrative Agent on its own behalf or on behalf of
a Lender or the Issuer, shall constitute prima facie evidence of the correctness
----- -----
of the amount claimed.
(d) As soon as reasonably practicable after any payment of any Taxes by
the Borrower to a Governmental Authority pursuant to clauses (a) or (b) above,
----------- ---
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.
(e) Without in any way affecting the obligation of the Borrower under
clause (i) of Section 2.17(a) to pay any increased amount only on account of
- ---------- ---------------
Indemnified Taxes or Other Taxes, each Lender organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its execution
and delivery of this Agreement or on the date of the Assignment and Acceptance
pursuant to which it becomes a Lender, as the case may be, and from time to time
thereafter if requested in writing by the Borrower or the Administrative Agent
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower and the Administrative Agent with United States Internal Revenue
Service form W-8BEN or W-8ECI, as appropriate, or any successor or other form
prescribed by the United States Internal Revenue Service, certifying that such
Lender is exempt from or entitled to a reduced rate of United States federal
withholding tax on payments of interest pursuant to this Agreement or the Notes.
At the reasonable request of the Borrower, any Lender that is legally entitled
to an exemption from or reduction of any Tax which is an Indemnified Tax or
Other Tax under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times reasonably requested by the Borrower
or at such times as are otherwise prescribed by applicable
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law, such properly completed and executed documentation prescribed by applicable
law as will permit such payments to be made without withholding or subject to
withholding at a reduced rate. If any form or document referred to in this
subsection (e) requires the disclosure of information (other than information
necessary to compute the tax payable or information required by the relevant
taxing authority to secure such exemption or reduction with respect to
withholding tax and that is necessary to secure such exemption from or reduction
of withholding tax) that the Lender reasonably considers to be confidential, the
Lender shall give notice thereof to the Borrower and shall not be obligated to
include in such form or document such confidential information.
(f) If any Lender, the Issuer or the Administrative Agent receives a
refund in respect of any Indemnified Tax or Other Tax paid by the Borrower, or
as to which it has been indemnified by the Borrower, which refund in the good
faith judgment of such Person is allocable to such payment made pursuant to this
Section, it shall promptly notify the Borrower of such refund and shall, within
20 days of receipt, repay such refund to the Borrower (together with any
interest with respect thereto received from the relevant taxing authority). In
any event, each Lender shall have the right to arrange its tax affairs as it, in
its sole discretion, deems most advantageous to it and nothing shall require a
Lender to disclose its tax returns or other confidential fiscal or tax
information to the Borrower.
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-
------------------------------------------------------
offs. (a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or under Section 2.15, 2.16 or 2.17, or otherwise) prior to 12:00
------------ ---- ----
noon, New York City time, on the date when due, in immediately available funds,
without set-off or counterclaim. Subject to Article VIII, all such payments
------------
shall be made to the Administrative Agent at its offices at 909 Fannin, Suite
1700, Houston, Texas 77010, except payments to be made directly to the Issuer as
expressly provided herein and except that payments pursuant to Sections 2.15,
-------------
2.16, 2.17 and 10.03 shall be made directly to the Persons entitled thereto.
- ---- ---- -----
The Administrative Agent shall distribute any such payments (including payments
received pursuant to Article VIII) received by it for the account of any other
------------
Person to the appropriate recipient promptly following receipt thereof. Except
as set forth herein, if any payment hereunder shall be due on a day that is not
a Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be
applied, subject to the provisions of Article VIII, (i) first, to pay interest
------------
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, to pay principal and unreimbursed LC Disbursements then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such parties.
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(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or participation in LC Disbursements resulting in
such Lender receiving payment of a greater proportion of the aggregate amount of
its Loans and participation in LC Disbursements and accrued interest thereon
than the proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) a participation in
the Loans and LC Disbursements of the other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and participation in LC Disbursements; provided that (i)
--------
if any such participation is purchased and all or any portion of the payment
giving rise thereto is recovered, such participation shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participation in LC Disbursements to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this paragraph shall apply).
(d) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuer hereunder that the Borrower
will not make such payment, the Administrative Agent may assume that the
Borrower has made such payment on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders or the Issuer, as the
case may be, the amount due. In such event, if the Borrower has not in fact made
such payment, then each of the Lenders or the Issuer, as the case may be,
severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender or Issuer with interest thereon, for each
day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the Federal Funds
Effective Rate for three days and at the Alternate Base Rate thereafter.
(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.05(d) or (e), 2.06(b) or 2.18(d), then the Administrative
--------------- --- ------- -------
Agent may, in its discretion or, as to Section 2.05(d) or (e), as may be
--------------- ---
required by the Issuer (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Administrative Agent for the account of
such Lender to satisfy such Lender's obligations under such Sections until all
such unsatisfied obligations are fully paid.
SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If
----------------------------------------------
any Lender requests compensation under Section 2.15, or if the Borrower is
------------
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then such
------------
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.15 or 2.17,
------------ ----
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<PAGE>
as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender.
(b) If any Lender requests compensation under Section 2.15 which is not
------------
being requested by the Lenders generally, or if the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.17, or if any Lender becomes a
------------
Defaulting Lender, then the Borrower may, at its sole expense and effort, upon
notice to such Lender and the Administrative Agent, so long as no Default or
Designated Event shall have occurred and is continuing, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 10.04), all its interests, rights and
-------------
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the Borrower shall have received the prior
--------
written consent of the Administrative Agent and the Issuer, which consent shall
not unreasonably be withheld or delayed, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans and
participation in LC Disbursements, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.15 or payments required
------------
to be made pursuant to Section 2.17, such assignment will result in a reduction
------------
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.
(c) If a Lender changes its applicable lending office (other than pursuant
to paragraph (d) below) and the effect of such change, as of the date of such
change, would be to cause the Borrower to become obligated to pay any additional
amount under Section 2.15 or 2.17, the Borrower shall not be obligated to pay
------------ ----
such additional amount.
(d) If a condition or an event occurs which would, or would upon the
passage of time or giving of notice, result in the payment of any additional
amount to any Lender by the Borrower pursuant to Section 2.15 or 2.17, or which
------------ ----
would make any Lender's participation in the transactions contemplated by the
Loan Documents illegal, such Lender shall promptly notify the Borrower and the
Administrative Agent and shall take such steps as may reasonably be available to
it to mitigate the effects of such condition or event (which shall include
efforts to rebook the Loans held by such Lender at another lending office, or
through another branch or an affiliate, of such Lender); provided that such
--------
Lender shall not be required to take any step that, in its reasonable judgment,
would be materially disadvantageous to its business or operations or would
require it to incur additional costs (unless the Borrower agrees to fund such
costs in a manner satisfactory to such Lender).
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Administrative Agent, the
Syndication Agent, the Arranger, the Issuer and the Lenders on the Closing Date
and on the date of each Borrowing as set forth in this Article.
SECTION 3.01. Financial Condition. The Borrower has heretofore furnished to
-------------------
the Lenders (a) Parent's audited consolidated balance sheet and statements of
income, shareholders' equity and cash flow for the fiscal year ended December
31, 1998 and (ii) Parent's unaudited consolidated and consolidating balance
sheets as of May 31, 1999, in each case, certified by a Responsible Officer of
Parent or the Borrower, as the case may be, such audited statements accompanied
by the audit report of PriceWaterhouseCoopers. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flow of Parent as of such date and for such period in
accordance with generally accepted accounting principles in Bermuda (with a
reconciliation to GAAP), subject to year-end adjustments and the absence of
notes, comparative statements and reconciliation to GAAP in the case of the
unaudited statements. The Borrower has also heretofore delivered to the
Administrative Agent and the Lenders a pro forma balance sheet for the Borrower
---------
and the Subsidiaries as of the Closing Date (giving pro forma effect to the full
funding of the Net Equity Commitment hereunder).
SECTION 3.02. No Change. Since May 31, 1999 (for the period until the
---------
Commercial Operation Date), and since the Commercial Operation Date (for the
period from and after the Commercial Operation Date), there has been no
development or event and no change which has had or could reasonably be expected
to have a Material Adverse Effect; provided that an adverse change in sales or
--------
prospective sales of Capacity whether or not based on changes or perceived
changes in external market conditions (including as a result of increased
competition or introductions or applications of new technology) will not, in and
of itself (or because of any related reduction in net income), provide a basis
that an event described above has occurred.
SECTION 3.03. Organization; Powers. Each of the Borrower and the
--------------------
Subsidiaries is duly organized, validly existing and, except for Georeach
Telecommunications Inc. until no later than 90 days after the Closing Date, in
good standing under the laws of the jurisdiction of its organization, and is
qualified to do business in such jurisdiction and in each other jurisdiction in
which 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.
SECTION 3.04. Authorization; Enforceability. (a) Each of the Borrower and
-----------------------------
the Subsidiaries has full corporate power and authority to conduct its business
as proposed to be conducted by it in respect of the System, to execute, deliver
and perform each Loan Document and Material System Contract to which it is a
party and to take all action as may be necessary to complete the transactions
contemplated hereunder.
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<PAGE>
(b) Each of the Borrower and the Subsidiaries has taken all necessary
corporate action to authorize the Borrowings and other Credit Extensions
hereunder by the Borrower, to grant the Liens provided for in the Security
Documents to which it is a party and to authorize the execution, delivery and
performance of this Agreement and each other Loan Document and Material System
Contract to which it is a party.
(c) Each of this Agreement and each other Loan Document and Material
System Contract to which the Borrower or any Subsidiary is a party has been duly
executed and delivered by the Borrower or such Subsidiary, as the case may be,
and constitutes a legal, valid and binding obligation of the Borrower or such
Subsidiary, enforceable against the Borrower or such Subsidiary in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
SECTION 3.05. Corporate Structure. (a) The only shareholder of the Borrower
-------------------
is Parent. As of the Closing Date, the capital structure of the Borrower and the
Subsidiaries is as set forth on Schedule 3.05(a).
-------------
(b) As of the Closing Date, the only subsidiaries of the Borrower are set
forth on Schedule 3.05(b), and each of ANBL, GCL and TBI are wholly-owned direct
----------------
subsidiaries of the Borrower. From and after the Closing Date, the only
subsidiaries of the Borrower not listed on Schedule 3.05(b) are those, if any,
----------------
created and capitalized in accordance with and subject to Sections 6.05 and
-------------
6.19.
- ----
SECTION 3.06. Compliance with Law. The Borrower and the Subsidiaries are in
-------------------
compliance with all Requirements of Law as of the Closing Date except to the
extent of any non-compliance which could not reasonably be expected to have a
Material Adverse Effect, and, as of any date representations and warranties are
made or deemed made under this Agreement subsequent to the Closing Date, are in
compliance with all Requirements of Law except to the extent of any non-
compliance which could not reasonably be expected to have a Material Adverse
Effect.
SECTION 3.07. No Legal Bar. The execution, delivery and performance by the
------------
Borrower and the Subsidiaries of each Loan Document and Material System Contract
to which it is a party and the Borrowings by the Borrower hereunder and the use
of the proceeds thereof and the granting of all Liens under the Security
Documents (a) will not violate or result in a default under any Requirement of
Law binding on such Person or its assets, (b) will not violate or result in a
default under any material Contractual Obligation of such Person and (c) will
not result in the creation or imposition of any Lien on any asset of the
Borrower or any Subsidiary except Permitted Encumbrances.
SECTION 3.08. Governmental Actions. To the best knowledge of the Borrower,
--------------------
Schedule 3.08 sets forth all Governmental Actions that are required to be
- -------------
obtained by the Borrower, any Subsidiary or the Contractor in connection with
the construction, installation,
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development, ownership and operation of the System. To the best knowledge of the
Borrower, no Landing License is required in 5enezuela. By written notice to the
Administrative Agent, the Borrower shall be permitted to amend and supplement
such Schedule from time to time as may be appropriate, including in connection
with any amendment or supplement to the schedule provided by the Contractor
under Article 7(H) of the Supply Contract.
SECTION 3.09. Litigation. There are no actions, suits or proceedings by or
----------
before any arbitrator or Governmental Authority pending against or, to the
knowledge of the Borrower, threatened (a) by or against the Borrower, any other
Loan Party or the System which could reasonably be expected to have a Material
Adverse Effect or (b) with respect to any Loan Document.
SECTION 3.10. Environmental Matters. No violation of Environmental Laws
---------------------
exists with respect to the System, the Borrower, any Subsidiary or any of their
respective properties or assets owned or operated by them which in each case
could reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Borrower, no other violation of Environmental Law exists which
could reasonably be expected to have a Material Adverse Effect.
SECTION 3.11. No Default; Event of Default. None of the Borrower or any
----------------------------
other Loan Party is in default under any System Contract or Loan Document as of
the Closing Date. As of any date representations and warranties are made or
deemed made under this Agreement subsequent to the Closing Date, (a) none of the
Borrower or any other Loan Party is in default under any System Contract which
could reasonably be expected to have a Material Adverse Effect and (b) no
Default, Event of Default or Designated Event has occurred and is continuing.
SECTION 3.12. Properties. The Borrower and each Subsidiary has good
----------
title to, valid leasehold interests in or an indefeasible right to use all its
real and personal property material to its business free and clear of all Liens,
except for Permitted Encumbrances and minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.
SECTION 3.13. Taxes. To the best knowledge of the Borrower, as of the
-----
Closing Date, neither the Borrower, any of the Subsidiaries nor the System is
subject to any material tax in any jurisdiction, except for taxes set forth on
Schedule 3.13. Each of the Borrower and the Subsidiaries has timely filed or
- -------------
caused to be filed all tax returns and reports required to have been filed by
such Person and has paid or caused to be paid all Taxes shown to be due on such
returns except Taxes subject to a Contest.
SECTION 3.14. Federal Regulations. The Borrower is not engaged nor will
-------------------
it engage in the business of extending credit for the purpose of "purchasing" or
"carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulations U and X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. No part of the
proceeds of the Loans will be used for "purchasing" or "carrying" any
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<PAGE>
"margin stock" as so defined or for any purpose which violates the provisions of
the Regulations of such Board of Governors.
SECTION 3.15. ERISA. No ERISA Event has occurred or is reasonably
-----
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
have a Material Adverse Effect, and no contribution failure has occurred with
respect to any Plan sufficient to give rise to a lien under Section 302(f) of
ERISA.
SECTION 3.16. Investment Company Act. Neither the Borrower nor any
----------------------
Subsidiary is an "investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940.
SECTION 3.17. Security Documents. The recordings, filings and possessions
------------------
set forth on Schedule 3.17 are, on and as of the Closing Date, all the
-------------
recordings, filings, possessions and other actions necessary and appropriate to
establish, protect and perfect the Secured Parties' security interest in the
right, title, estate and interest of the Borrower and the Subsidiaries in and to
the Collateral which can be perfected by the filing of Uniform Commercial Code
financing statements or by possession by the Administrative Agent or pursuant to
Bermuda law (the "Perfectible Collateral"). The Security Documents are effective
----------------------
to create in favor of the Secured Parties valid and enforceable first Liens on,
and first security interests in, all right, title, estate and interest of the
Borrower and the Subsidiaries in and to the Perfectible Collateral.
SECTION 3.18. Principal Place of Business. As of the Closing Date, the
---------------------------
principal place of business or registered office of business, as applicable, of
the Borrower and each Subsidiary is set forth on Schedule 3.18, and such
-------------
principal places of business and registered offices shall not be changed without
the prior written consent of the Administrative Agent (such consent not to be
unreasonably withheld).
SECTION 3.19. Disclosure. The written factual information furnished by (or
----------
based on written information furnished by) the Borrower to the Lenders in
connection with the System or the negotiation of the Loan Documents (including
the information contained in the Offering Memorandum and the Confidential
Memorandum) (excluding any financial projections and other estimates or views of
future circumstances), taken as a whole, does not contain, as of the Closing
Date, any untrue statements of material fact and does not omit to state, as of
the Closing Date, any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
materially misleading and all written factual information hereafter furnished by
(or based on information furnished by) the Borrower to the Lenders in connection
with this Agreement or the System shall not contain any untrue statements of
material fact and will not omit to state any material fact necessary in order to
make the statements contained therein, in light of the circumstances under which
they were made, not materially misleading. The costs set forth in the Capital
Budget reflect, as of the Closing Date, the Borrower's best estimates of all
costs necessary for the construction, installation and financing of the System.
The Projections delivered by the Borrower to the Designated Agents on
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the Closing Date in accordance with Section 4.01(j) have been prepared in good
---------------
faith and have been based on assumptions which were reasonable at the time
prepared. The Operating Plan delivered with the initial Operating Budget has
been, and the Operating Budget for each ensuing Operating Year, as of the date
delivered to the Administrative Agent in accordance with the terms hereof, shall
have been, prepared by the Borrower in good faith and have been based on
assumptions which were reasonable at the time prepared. The Borrower has
disclosed, prior to the Closing Date, all material liabilities, direct and
contingent, of Parent and TBI not otherwise disclosed in the financial
statements referred to in Section 3.01.
------------
SECTION 3.20. Sufficiency of System Contracts. As of any date this
-------------------------------
representation is made or deemed to be made, the services to be performed and
other rights and interests granted or to be granted or obtained pursuant to or
as required by the System Contracts and the Loan Documents comprise all of the
material services, materials and property interests required to perform the
System Activities being performed as of such date.
SECTION 3.21. Immunity. Neither the Borrower nor any Subsidiary is entitled
--------
to claim for itself, any of its assets or the System immunity from suit,
execution, attachment or other legal process in any proceeding in any
jurisdiction in connection with any of the Loan Documents or System Contracts to
which it is a party.
SECTION 3.22. Export Control. Each of the Borrower and the Subsidiaries is
--------------
in compliance in all material respects with all U.S. export laws and regulations
applicable to it.
SECTION 3.23. Foreign Corrupt Practices Act. None of the Borrower, any
-----------------------------
Subsidiary or any of its officers, directors, employees, agents or affiliates,
acting on its behalf, has taken any action in connection with the System that
violates the Foreign Corrupt Practices Act of the United States, if applicable.
SECTION 3.24. Intellectual Property. Each of the Borrower and the
---------------------
Subsidiaries owns or is licensed or otherwise has the right to use (and has
maintained in full force and effect and has not abandoned) or obtain all of the
trademarks, copyrights, patents, licenses and other intellectual property rights
that are reasonably necessary for the operation of its businesses, without
conflict with the rights of any other Person and free of Liens (other than
Permitted Encumbrances), except where the failure to have any such rights could
not reasonably be expected to have a Material Adverse Effect.
SECTION 3.25. Year 2000 Compliance. Each of the Borrower and the
--------------------
Subsidiaries has reviewed the areas within its business and operations which
could be adversely affected by, and has developed or is developing a program to
address on a timely basis, the "Year 2000 Problem" (that is, the risk that
computer applications used by such Person may be unable to recognize and
properly perform date-sensitive functions involving certain dates prior to and
any date after December 31, 1999). Except as set forth in the Offering
Memorandum, based on such review and program, the Year 2000 Problem could not
reasonably be expected to have a Material Adverse Effect.
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<PAGE>
SECTION 3.26. Subordination of Certain Payments. Notwithstanding any
---------------------------------
bankruptcy, insolvency, reorganization, amalgamation, moratorium or similar
proceeding in respect of the Borrower, during any Term C Loan Guaranteed Period,
(a) all payment obligations of the Borrower to the Term C Loan Guarantor (other
than the payment of Term C Loan Guaranty Fees) pursuant to the Term C Loan
Guaranty Reimbursement Agreement (the "Guaranty Reimbursement Payments") will be
-------------------------------
subordinated to all Obligations, including the Obligation to pay principal of
and interest on the Loans and fees in connection therewith, (b) such
subordination of the Guaranty Reimbursement Payments will be enforceable against
the Term C Loan Guarantor by the Lenders and (c) all Obligations constitute
"Senior Obligations" under and for purposes of the Term C Loan Guaranty
Reimbursement Agreement. All payments to the Term C Loan Guarantor made by the
Borrower or from the liquidation of its property will be subject to such
subordination. The Borrower acknowledges that the Administrative Agent, the
Syndication Agent, the Arranger and each Lender is entering into this Agreement,
and has agreed to extend the Credit Extensions, in reliance upon the
subordination of the Guaranty Reimbursement Payments.
ARTICLE IV
CONDITIONS
----------
SECTION 4.01. Conditions Precedent to Effectiveness. This Agreement shall
-------------------------------------
become effective upon the fulfillment of, or waiver by the Majority Lenders of,
each of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received,
--------------
with a counterpart for each Lender, each of the following documents:
(i) this Agreement, duly executed and delivered by each of
the parties hereto;
(ii) the Parent Pledge Agreement, duly executed and
delivered by Parent and the Administrative Agent, together with (A)
certificates representing all of the Equity Interests of the Borrower,
(B) undated share transfer forms for such Equity Interests, executed
in blank and delivered by a duly authorized officer of Parent and (C)
duly executed intercompany promissory notes by the Borrower, each
endorsed in blank;
(iii) the Borrower Pledge and Security Agreement, duly
executed and delivered by the Borrower and the Administrative Agent,
together with (A) certificates representing all of the Equity
Interests of ANBL, TBI and GCL, (B) undated share transfer forms for
such Equity Interests, executed in blank and delivered by a duly
authorized officer of the Borrower and (C) duly executed intercompany
promissory notes by ANBL, TBI and GCL, each endorsed in blank;
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<PAGE>
(iv) the Subsidiary Pledge and Security Agreement, duly
executed and delivered by each Subsidiary party thereto and the
Administrative Agent, together with (A) certificates representing all
of the Equity Interests of each direct subsidiary of each such
Subsidiary and (B) undated share transfer forms or stock powers, as
applicable, for such Equity Interests, executed in blank and delivered
by a duly authorized officer of the applicable Subsidiary and (C) duly
executed intercompany promissory notes by each such Subsidiary, each
endorsed in blank;
(v) the Subsidiary Guaranty, duly executed and delivered
by each Subsidiary; and
(vi) the Term C Loan Guaranty, duly executed and delivered
by the Term C Loan Guarantor.
(b) System Contracts. The Administrative Agent shall have received
----------------
each of the following documents, in each case in form and substance
reasonably satisfactory to the Designated Agents and duly certified as a
true and complete copy thereof and as being in full force and effect by a
Responsible Officer of the Borrower as of the Closing Date:
(i) the Supply Contract;
(ii) the Supply Contract Guaranty; and
(iii) the Term C Loan Guaranty Reimbursement Agreement.
(c) Legal Opinions. The Administrative Agent shall have received,
--------------
with a counterpart for each Lender, the following executed legal opinions,
each dated the Closing Date and in each case in form and substance
reasonably satisfactory to the Designated Agents:
(i) the legal opinion of Conyers Dill & Pearman, Bermuda
counsel to the Loan Parties;
(ii) the legal opinion of Vinson & Elkins L.L.P., special
New York and U.S. regulatory counsel to the Loan Parties;
(iii) the legal opinion of Travieso, Evans, Hughes, Arria,
Rengel & Paz, special Venezuelan counsel to the Loan Parties, with
respect to the Landing License in Venezuela;
(iv) the legal opinion of Mundie & Advogados, special
Brazilian counsel to the Loan Parties, with respect to the Landing
License in Brazil;
(v) the legal opinion of in-house counsel to the
Contractor;
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<PAGE>
(vi) the legal opinion of in-house counsel to the Term C
Loan Guarantor and the Supply Contract Guarantor; and
(vii) the legal opinion of Thelen, Reid & Priest, New York
counsel to the Contractor, the Term C Loan Guarantor and the Supply
Contract Guarantor.
(d) Independent Engineer's Report. The Administrative Agent shall be
-----------------------------
satisfied that it shall receive the final report of the Independent
Engineer, in form and substance reasonably satisfactory to the Designated
Agents, within 10 Business Days after the Closing Date.
(e) Market Consultant's Report. The Administrative Agent shall be
--------------------------
satisfied that it shall receive the final report of the Market Consultant,
in form and substance reasonably satisfactory to the Designated Agents,
within 10 Business Days after the Closing Date.
(f) Insurance Consultant's Report. The Administrative Agent shall be
-----------------------------
satisfied that it shall receive a report of the Insurance Consultant, in
form and substance reasonably satisfactory to the Designated Agents, within
10 Business Days after the Closing Date, which report shall address the
adequacy of the insurance required to be maintained by the Contractor under
the Supply Contract (other than as to levels of self-insurance and
deductibles) as well as the adequacy of the insurance proposed to be
maintained by the Borrower and the Subsidiaries.
(g) Insurance. The Administrative Agent shall have received a
---------
certificate of the Insurance Consultant stating that all required insurance
policies to be maintained by the Borrower and the Subsidiaries on the
Closing Date pursuant to this Agreement have been obtained and are in full
force and effect.
(h) Capital Budget. The Administrative Agent shall have received,
--------------
with a copy for each Lender, a construction and capital budget and
construction drawdown schedule (including a drawdown schedule with respect
to the Loans) (as amended in accordance with the terms hereof, the
"Capital Budget"), in form and substance reasonably satisfactory to the
---------------
Designated Agents, which sets forth all Capital Costs to be incurred prior
to System Final Completion.
(i) Governmental Actions. The Administrative Agent shall have
--------------------
received evidence reasonably satisfactory to the Designated Agents that the
Borrower and the Subsidiaries have appropriately filed, or caused to be
filed, all necessary applications for the issuance of all Governmental
Actions, except such Governmental Actions determined to be immaterial by
the Administrative Agent and the Independent Engineer and except for the
application in 5enezuela with respect to Backhaul Service, and the
Administrative Agent shall have received certified true copies of each of
the foregoing and shall have no reason to believe any of the same shall not
be granted in a reasonable period of time.
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<PAGE>
(j) Projections. The Administrative Agent shall have received, with
-----------
a copy for each Lender, a copy of the Projections, certified as of the
Closing Date by a Responsible Officer of the Borrower as being prepared in
good faith and based on reasonable assumptions.
(k) Security Interests (Recordings and Filings). Each of the
-------------------------------------------
documents and instruments set forth on Schedule 3.17 shall have been
-------------
delivered to the Administrative Agent for recording or filing or
possession, or shall have been recorded or filed in the respective places
or offices set forth on Schedule 3.17, and any and all recording and filing
-------------
fees with respect thereto shall have been paid.
(l) Equity Contributions. The Designated Agents shall be reasonably
--------------------
satisfied that Parent has received a capital contribution or proceeds from
new equity issuances of at least $240,000,000 (the "Net Equity Proceeds"),
-------------------
and that such amount (net of the fees and expenses set forth in the Capital
Budget) has been contributed as a capital contribution to the Borrower.
(m) Issuance of Parent Senior Notes. The Designated Agents shall be
-------------------------------
reasonably satisfied that Parent has received an amount equal to at least
$300,000,000 in gross cash proceeds from the issuance of the Parent Senior
Notes (the "Parent Senior Note Proceeds"), and that such amount (net of the
---------------------------
fees and expenses set forth in the Capital Budget) has been contributed as
a capital contribution to the Borrower.
(n) Repayment of Indebtedness. All Indebtedness of the Borrower and
-------------------------
the Subsidiaries outstanding prior to the Closing Date and set forth in the
Capital Budget shall have been repaid in full.
(o) Certain Payments. The Designated Agents shall be reasonably
----------------
satisfied that (a) provisions has been made for the initial payment to the
Contractor required under the Supply Contract and (b) the Term C Loan
Guarantor has received the initial payment due to it prior to the Closing
Date pursuant to the Term C Loan Guaranty.
(p) No Violation of Law. The consummation of the transactions
-------------------
contemplated by the Loan Documents and by the System Contracts shall not
violate any Requirement of Law (except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect).
(q) Financial Statements. The Administrative Agent shall have
--------------------
received the financial statements referred to in Section 3.01, certified as
------------
such by a Responsible Officer of the Borrower.
(r) Fees and Expenses. The Administrative Agent, the Arranger and
-----------------
the Syndication Agent shall have received all fees due and payable on or
before the Closing Date, and the Administrative Agent and the Arranger
shall have received all expenses
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<PAGE>
(including counsel fees and expenses) due and payable by the Borrower to
the Administrative Agent and the Arranger on or prior to the Closing Date
to the extent then invoiced.
(s) Agent for Service of Process. The Administrative Agent shall
----------------------------
have received evidence reasonably satisfactory to the Designated Agents
that the Borrower and each other Loan Party that does not have an office in
the United States has irrevocably appointed an agent in New York, New York
for service of process.
(t) Corporate Proceedings. The Administrative Agent shall have
---------------------
received a copy of the resolutions, in form and substance reasonably
satisfactory to the Designated Agents, of the Board of Directors of each of
Parent, the Borrower and each Subsidiary authorizing, as applicable, (i)
the execution, delivery and performance of this Agreement and the other
Loan Documents and System Contracts to which it is a party, (ii) with
respect to the Borrower only, the Borrowings contemplated hereunder and
(iii) the granting by it of the Liens created pursuant to the Security
Documents to which it is a party, certified by the Secretary or an
Assistant Secretary of such Person as of the Closing Date, which
certificate shall be in form and substance reasonably satisfactory to the
Designated Agents and shall state that the resolutions thereby certified
are in full force and effect and have not been amended, modified, revoked
or rescinded.
(u) Incumbency Certificate. The Administrative Agent shall have
----------------------
received a certificate of each of Parent, the Borrower and each Subsidiary,
dated the Closing Date, as to the incumbency and signature of the officers
of such Person executing any Loan Document or System Contract, in form and
substance reasonably satisfactory to the Designated Agents, executed by the
President or any 5ice President and the Secretary or any Assistant
Secretary of such Person.
(v) Corporate Documents. The Administrative Agent shall have
-------------------
received true and complete copies of the memorandum of association and bye-
laws (or such other organizational and governing documents) of each of
Parent, the Borrower and each Subsidiary, certified as of the Closing Date
as complete and correct copies thereof by a Responsible Officer of such
Person.
(w) Closing Date Certificate. The Administrative Agent shall have
------------------------
received the Closing Date Certificate, dated the Closing Date and duly
executed by a Responsible Officer of the Borrower, stating that (a) no
default in any material respect as to the Borrower or the Subsidiaries has
occurred and is continuing under any System Contract and (b) to the best
knowledge of the Borrower, no default in any material respect as to any
other party thereto has occurred and is continuing under any System
Contract, together with all attachments thereto.
(x) Representations and Warranties. All representations and
------------------------------
warranties made by the Borrower and each other Obligor in any Loan Document
or System Contract shall be
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<PAGE>
true and correct in all material respects when made (unless any such
representation or warranty relates solely to an earlier date, in which case
it shall have been true and correct in all material respects as of such
earlier date).
(y) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing as of the Closing Date.
(z) Satisfactory Documentation. All documentation shall be
--------------------------
reasonably satisfactory to the Designated Agents.
The Administrative Agent shall notify the Borrower and the Lenders of the
Closing Date, and such notice shall be conclusive and binding.
SECTION 4.02. Conditions Precedent to Availability of Term D Loans and to
-----------------------------------------------------------
Initial Credit Extensions (other than Term D Loans). The availability to the
- ---------------------------------------------------
Borrower of the Term D Loans (after the funding of the proceeds of such Term D
Loans into the Construction Account) and the obligation of each Lender to make
its initial Loans (other than Term D Loans) available on the occasion of the
initial Borrowing of Loans (other than Term D Loans), and, if applicable, of the
Issuer to issue its initial Letter of Credit, shall be subject to the
fulfillment of, or waiver by the Majority Lenders of, each of the following
conditions precedent:
(a) Equity Contributions. Unless such Borrowing is comprised solely
--------------------
of Working Capital Loans and/or Term A Loans to be used for working capital
purposes, the Administrative Agent shall have received evidence reasonably
satisfactory to the Designated Agents that the Borrower has spent (or,
simultaneously with the application of the proceeds of such Borrowing, will
have spent) an amount equal to the Net Equity Funding Commitment on System
Activities, the payment of transaction and other costs, and the repayment
of Indebtedness, all in accordance with the Capital Budget.
(b) Governmental Actions (other than Landing Licenses). Unless such
--------------------------------------------------
Borrowing is comprised solely of Working Capital Loans and/or Term A Loans
to be used for working capital purposes, the Administrative Agent shall
have received a certificate of a Responsible Officer of the Borrower
stating that each Governmental Action (other than Landing Licenses) set
forth on Schedule 3.08 which is required in accordance with such Schedule
-------------
(as such Schedule may be amended or supplemented in accordance with Section
-------
3.08) to be obtained on or prior to the date of such Borrowing shall have
----
been duly obtained, except for those Governmental Actions specifically
described in such certificate (the "Delinquent Governmental Actions") which
-------------------------------
have not been obtained by the date of such Borrowing; provided that (i) the
--------
failure to obtain any such Delinquent Governmental Action by the date of
such Borrowing could not reasonably be expected to have a Material Adverse
Effect and (ii) if requested by the Administrative Agent and to the extent
applicable (i.e., such matter is within the expertise of counsel), the
----
Borrower shall deliver an opinion of appropriate regulatory counsel, in
form and substance reasonably satisfactory to the Designated Agents,
stating
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<PAGE>
that such counsel has no reason to believe that such Delinquent
Governmental Actions could not be obtained in due course.
(c) Landing Licenses. Unless such Borrowing is comprised solely of
----------------
Working Capital Loans and/or Term A Loans to be used for working capital
purposes, the Administrative Agent shall have received (i) a certificate of
a Responsible Officer of the Borrower stating that each Landing License set
forth on Schedule 3.08 which is required in accordance with such Schedule
-------------
to be obtained on or prior to the date of such Borrowing shall have been
duly obtained or, with respect to any required Landing License which has
not been so obtained by such date (the "Delinquent Landing Licenses"), such
---------------------------
certificate shall set forth the details associated with any such delay and
be accompanied by an opinion of the Borrower's regulatory counsel, in form
and substance reasonably satisfactory to the Designated Agents, stating
that there should be no material impediment to receiving such Delinquent
Landing License and that it is reasonable to expect that such Delinquent
Landing License will be obtained within three months after the date set
forth on Schedule 3.08 for the procurement of such Delinquent Landing
-------------
License. Once issued, each Landing License shall be in full force and
effect and shall not be subject to any appeal or contest where there is a
material risk that such Landing License will be revoked.
(d) Additional Collateral. The Administrative Agent shall have
---------------------
received all Collateral required to be delivered pursuant to this Agreement
and the other Loan Documents and not delivered on the Closing Date,
together with all documents and instruments, and the completion of all
filings and recordings, required in connection therewith.
(e) System Contracts. The Administrative Agent shall have received
----------------
copies of each System Contract (other than Capacity Sales Agreements and
Capacity Swap Agreements) entered into after the Closing Date, in each case
duly certified as a true and complete copy thereof and as being in full
force and effect by a Responsible Officer of the Borrower.
(f) Legal Opinions. The Administrative Agent shall have received,
--------------
with a counterpart for each Lender, opinions of legal counsel for the Loan
Parties relating to all guaranties and Collateral not theretofore opined to
as the Administrative shall reasonably request, which legal opinions shall
be in form and substance reasonably satisfactory to the Designated Agents.
SECTION 4.03. Conditions Precedent to All Credit Extensions. The
---------------------------------------------
obligation of each Lender to make a Loan on the occasion of any Borrowing
(including the initial Borrowing), and of the Issuer to issue, renew or extend
the maturity or expiration date of any Letter of Credit, shall be subject to the
fulfillment of, or waiver by the Majority Lenders of, each of the following
conditions precedent:
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<PAGE>
(a) Representations and Warranties. All representations and
------------------------------
warranties made by the Borrower and each other Loan Party in any Loan
Document shall be true and correct in all material respects when made
(unless any such representation or warranty relates solely to an earlier
date, in which case it shall have been true and correct in all material
respects as of such earlier date).
(b) No Event of Default or Event of Loss. No payment Default or
------------------------------------
Event of Default shall have occurred and be continuing on such date, and no
Event of Loss shall have occurred and be continuing on such date (i) which
Event of Loss could reasonably be expected to have a Material Adverse
Effect or (ii) prior to the Commercial Operation Date, with respect to
which Event of Loss the cost to repair is in excess of $2,500,000 unless
(A) the Borrower is able to certify (as confirmed by the Independent
Engineer) in its reasonable judgment that the System can be completed by
the Guaranteed Completion Date with the Loans, equity and insurance
payments available to it or (B) the risk of loss with respect to that
portion of the System giving rise to the Event of Loss is borne by the
Contractor under the Supply Contract.
(c) No Change in Law. No Change in Law shall have occurred that
----------------
would make any Lender's participation in the transactions contemplated by
the Loan Documents illegal (unless the aggregate Commitment or Commitments
of such Lender or Lenders comprised less than 5% of the aggregate
Commitment of all the Lenders and the Independent Engineer shall have
certified to the Designated Agents that sufficient funding is available to
pay the portion of the Commitments which may not be funded due to such
Change in Law).
(d) No Force Majeure. No event of force majeure shall exist which at
----------------
such time permits any party (other than the Borrower or any Subsidiary) to
any Material System Contract to terminate such Material System Contract
(other than, except during any Term C Loan Guaranteed Period, the Term C
Loan Guaranty Reimbursement Agreement).
(e) Construction Progress Certificate. Unless such Borrowing is
---------------------------------
comprised solely of Working Capital Loans, Term A Loans to be used for
working capital purposes and/or Term D Loans to be funded into the
Construction Account, the Administrative Agent shall have received a
Construction Progress Certificate; provided that if such Construction
--------
Progress Certificate indicates that the Independent Engineer or ANBL is
disputing any invoice under the Supply Contract, the proceeds of the Loans
will be placed into the Dispute Account in accordance with the terms of the
Supply Contract and the Payment Escrow Agreement.
(f) Borrowing Request. The Administrative Agent shall have received
-----------------
a Borrowing Request in accordance with Section 2.03, with appropriate
------------
insertions and attachments, executed by a Responsible Officer of the
Borrower.
(g) Borrowing Certificate. The Administrative Agent shall have
---------------------
received a
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<PAGE>
Borrowing Certificate, dated the date of such Borrowing, with appropriate
insertions and attachments, executed by a Responsible Officer of the
Borrower.
(h) Term A Loans. If such Borrowing is comprised in whole or in part
------------
of Term A Loans, the TBI Leverage Ratio shall be less than or equal to
5.00:1, as set forth in reasonable detail in a certificate, dated the date
of such Borrowing, delivered to the Administrative Agent by the chief
financial officer or controller of the Borrower.
(i) Term C Loans. If such Borrowing is comprised in whole or in part
------------
of Term C Loans, (a) the sum of (i) the cumulative Qualified Capacity
Revenue as of the date of such Borrowing and (ii) the aggregate amount of
Term C Loans guaranteed under the Term C Loan Guaranty, is equal to or
greater than all Term C Loans to be outstanding after giving effect to such
Borrowing, as set forth in reasonable detail in a certificate, dated the
date of such Borrowing, delivered to the Administrative Agent by a
Responsible Officer of the Borrower, together with certified true copies of
any Qualified Capacity Agreements then in effect, (b) unless the Term C
Loan Guarantor otherwise agrees or until all of the Borrower's obligations
under the Term C Loan Guaranty are discharged in full, at least 50% of the
aggregate Term A Loan Commitment and all of the aggregate Term B Loan
Commitment shall have been funded prior to the date of such Borrowing, and
(c) the Borrower has certified in writing to the Administrative Agent that
all Term C Loan Guaranty Fees due and payable as of the date of such
Borrowing have been, or contemporaneously with such Borrowing will be, paid
in full.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees and other Obligations payable hereunder
and under the Loan Documents shall have been paid in full, all Letters of Credit
shall have expired or terminated (or shall have been cash collateralized on
terms reasonably acceptable to the Administrative Agent and the Issuer) and all
LC Disbursements shall have been reimbursed, the Borrower covenants and agrees
with the Administrative Agent, the Syndication Agent, the Arranger, the Issuer
and the Lenders as set forth in this Article.
SECTION 5.01. Financial Statements and Other Information. The Borrower
------------------------------------------
shall deliver to the Administrative Agent, with a copy for each Lender, the
following:
(a) within 90 days after the end of each fiscal year of the Borrower,
its audited consolidated balance sheet and related statements of
operations, shareholders' equity and cash flows as of the end of and for
such year, accompanied by unaudited consolidating statements for the
Borrower and the Subsidiaries for such year setting forth in each case in
comparative form the figures for the previous fiscal year, all such
consolidated
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<PAGE>
statements reported on by independent public accountants of recognized
national standing (without qualification or exception as to the scope of
such audit), and all such consolidating statements certified by a
Responsible Officer of the Borrower, in each case to the effect that such
financial statements present fairly in all material respects the financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower commencing with the fiscal
quarter ending June 30, 1999 (or, with respect to the fiscal quarter ending
June 30, 1999, 60 days after the end of such fiscal quarter), its
consolidated balance sheet and related statements of operations,
shareholders' equity and cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, accompanied by
consolidating statements for the Borrower and the Subsidiaries for
comparable periods, setting forth in each case in comparative form the
figures for the corresponding period or periods of (or, in the case of the
balance sheet, as of the end of) the previous fiscal year, all certified by
a Responsible Officer of the Borrower as presenting fairly in all material
respects the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Responsible Officer of the
---------- ---
Borrower certifying to such officer's knowledge whether a Default or
Designated Event has occurred and, if a Default or Designated Event has
occurred, specifying the details thereof and any action taken or proposed
to be taken with respect thereto;
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm, if available from
------ ---
such accounting firm, that reported on such financial statements (which
certificate may be limited to accounting matters and may disclaim
responsibility for legal interpretations) stating whether they obtained
knowledge during the course of their examination of such financial
statements of any Default or Designated Event (which certificate may be
limited to the extent permitted by accounting rules or guidelines);
(e) if there has been a material Change in Law with respect to or
affecting Collateral which could reasonably be expected to adversely affect
the Lenders or there have been material additions to, or changes in, or a
change in location of, a material portion of, the Collateral, at the
reasonable request of the Administrative Agent, an opinion of counsel
addressed to the Administrative Agent and the Lenders covering such
collateral security in a manner reasonably satisfactory to the
Administrative Agent; and
(f) such other information respecting the conditions or operations,
financial or otherwise, of the Borrower or any Subsidiary as the
Administrative Agent or any Lender
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<PAGE>
may from time to time reasonably request.
SECTION 5.02. Reports. (a) The Borrower shall deliver to the
-------
Administrative Agent, with a copy for each Lender, within 15 days after the end
of each calendar quarter (commencing with the calendar quarter ending on
December 31, 1999), a report which sets forth the aggregate sales of Capacity as
at the end of such quarter, the amount of Capacity remaining to be sold, any
terminations of sales of Capacity during such quarter, the purchase price
therefor and the date such payments shall become (or became) due. The Borrower
shall have no obligation to provide copies or otherwise disclose the contents of
individual Capacity Sales Agreements or Capacity Swap Agreements to any party
hereto, except the Borrower shall permit the Administrative Agent to review and
retain a copy of Capacity Sales Agreements and Capacity Swap Agreements (but, so
long as no Event of Default or Designated Event has occurred and is continuing,
not to make further copies thereof), so long as such information is kept subject
to the confidentiality obligation contained in Section 10.14 hereof; provided
------------- --------
(i) such disclosure shall always be deemed to have been clearly marked as
confidential and (ii) the exceptions set forth in clauses (d), (e), (f) and (g)
----------- --- --- ---
of Section 10.14 shall not be applicable to the confidentiality obligation set
-------------
forth herein so long as no Event of Default or Designated Event shall have
occurred or be continuing.
(b) The Borrower shall deliver to the Administrative Agent, promptly after
its receipt, such other reports (excluding ordinary correspondence) regarding
the System, the Borrower or the Subsidiaries as the Contractor or the Operator
is required to provide to the Borrower under the System Contracts, and shall
deliver to the Administrative Agent promptly upon receipt or transmission,
copies of all amendments, material waivers, written consents and other
modifications (including all material Contract 5ariations) under any Material
System Contract, and the Borrower shall use reasonable efforts to give to the
Administrative Agent in advance of execution, drafts of amendments to any
Material System Contract.
(c) The Borrower shall deliver to the Administrative Agent, within three
Business Days prior to each Principal Payment Date (but effective as of such
Principal Payment Date), a certificate of a Responsible Officer of the Borrower
setting forth reasonably detailed calculations demonstrating the Borrower's
compliance with Section 6.24.
------------
(d) The Borrower shall assist and cooperate with the Independent Engineer
in providing the Lenders with such reports as the Lenders through the
Administrative Agent shall reasonably request of the Independent Engineer
(including a monthly construction progress report).
(e) Concurrently with the obtaining of any Landing License or a ruling
that no Landing License is necessary (or as soon thereafter as is reasonably
practicable), the Borrower shall furnish to the Administrative Agent an
appropriate and favorable opinion of counsel to the effect that such Landing
License is in full force and effect and the only telecommunications license from
the applicable Governmental Authority necessary for the landing and operation of
the System as described in the applicable application or that no such Landing
License is necessary.
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(f) At least one Business Day prior to each Principal Payment Date, the
Borrower shall deliver to the Administrative Agent a certificate setting forth
the Required Balance with respect to the Debt Reserve Account, the Parent
Interest Reserve Account and the Operating Reserve Account as of such date.
SECTION 5.03. Payment of Obligations. The Borrower shall, and shall cause
----------------------
each of the Subsidiaries to, pay at or before maturity or before they become
delinquent, as the case may be, all its material obligations of whatever nature,
except where the amount or validity thereof is subject to a Contest.
SECTION 5.04. Conduct of Business; System Completion. The Borrower and the
--------------------------------------
Subsidiaries shall engage solely in Permitted Activities. The Borrower shall
diligently enforce all of its rights under the Supply Contract and the Supply
Contract Guaranty and shall cooperate with, and take all reasonable action that
it can to assist, the Contractor to complete the System in accordance with the
terms of the Supply Contract.
SECTION 5.05. Existence. The Borrower shall, and shall cause each of the
---------
Subsidiaries to, do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its legal existence and take all reasonable
action to maintain all rights, privileges and franchises material, necessary or
desirable in the normal conduct of its business except those as to which the
failure to maintain such rights, privileges and franchises could not reasonably
be expected to have a Material Adverse Effect; provided that the foregoing shall
--------
not prohibit any merger, consolidation, liquidation or dissolution permitted
under Section 6.03.
------------
SECTION 5.06. Compliance with Laws. The Borrower shall, and shall cause
--------------------
each of the Subsidiaries to, comply in all material respects with all
Requirements of Law applicable to it or its property, except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.07. Performance of Agreements. The Borrower shall, and shall
-------------------------
cause each of the Subsidiaries to, observe in all material respects the
covenants and agreements of the Borrower and the Subsidiaries contained in the
Material System Contracts.
SECTION 5.08. Taxes and Claims. (a) The Borrower shall, and shall cause
----------------
each of the Subsidiaries to, pay and discharge all Taxes lawfully imposed on it
or on its income or profits, or on any of its property prior to the date on
which penalties attach thereto unless such Tax is subject to a Contest.
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(b) The Borrower shall use reasonable best efforts to maintain and keep in
full force and effect all clearance rulings, decrees or similar items necessary
to continue the Borrower's, ANBL's, GCL's and each other Bermuda Subsidiary's
(other than TBI) exemption from the impositions of any Tax or similar charge
(other than Taxes and other charges set forth on Schedule 3.13) under the laws
-------------
of Bermuda on the Borrower, such other entities and their respective assets and
revenues.
SECTION 5.09. Notices. The Borrower shall, promptly after a Responsible
-------
Officer of the Borrower has knowledge thereof, give written notice to the
Administrative Agent of (a) the occurrence of a Default or Event of Default, (b)
any payment default under any Contractual Obligation of the Borrower or any
Subsidiary or any other such default that could reasonably be expected to have a
Material Adverse Effect, (c) any litigation or similar proceeding affecting the
Borrower, any of the Subsidiaries or the System concerning any Governmental
Action or which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect, (d) the occurrence of any ERISA Event that alone or
together with any other ERISA Events that have occurred, could reasonably be
expected to result in liability in an aggregate amount in excess of $1,000,000,
(e) the execution of any Additional Contract (together with a copy thereof), (f)
any material event constituting force majeure under the Supply Contract or any
----- -------
other material delay in the construction of the System, (g) any loss or damage
to the Collateral in excess of $250,000 (whether or not insured), (h) the
cancellation or revocation of any material Governmental Action or insurance
maintained by the Borrower, (i) any Lien (other than Permitted Encumbrances)
against any collateral security or the System, (j) no less than five Business
Days prior thereto, any Transfers set forth in Section 6.04(e) and on a semi-
---------------
annual basis, all Transfers set forth in clauses (c) and (g) of Section 6.04,
----------- --- ------------
and (k) any other development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.
SECTION 5.10. Insurance. The Borrower shall at all times carry and
---------
maintain or cause to be carried and maintained insurance in accordance with the
provisions set forth on Schedule 5.10. All such insurance shall comply with the
-------------
other provisions set forth on Schedule 5.10.
-------------
SECTION 5.11. Fiscal Year. The fiscal year of the Borrower and the
-----------
Subsidiaries shall be the twelve-month period ending on December 31 of each
year.
SECTION 5.12. Use of Proceeds. The Borrower shall apply the proceeds of
---------------
Credit Extensions
(a) with respect to the Term Loans, to make intercompany advances
and/or equity contributions to certain Subsidiaries (evidenced, in the case
of intercompany advances, by intercompany promissory notes pledged to the
Secured Parties) to finance the construction and installation of the System
and to make intercompany advances and/or equity contributions to GCL
(evidenced, in the case of intercompany advances, by intercompany
promissory notes pledged to the Secured Parties), and to pay fees and
expenses directly related thereto, in each case in accordance with the
Capital Budget;
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(b) with respect to the Term A Loans, (i) for working capital
purposes of the Borrower and the Subsidiaries and, in accordance with the
Capital Budget, for capital expenditures of TBI and GCL, and (ii) after the
Commercial Operation Date, for certain purposes as set forth in clause (c)
----------
of the definition of "Availability Period";
(c) with respect to the Working Capital Loans, to pay fees and
expenses related to the System, for working capital purposes of the
Borrower and the Subsidiaries and, in accordance with the Capital Budget,
for capital expenditures of TBI and GCL.
(d) With respect to all Loans, (i) prior to the Commercial Operation
Date, to pay interest on the Loans, Term C Loan Guaranty Fees and, so long
as no Blockage Event has occurred and is continuing, to make intercompany
advances to Parent (evidenced by intercompany promissory notes pledged to
the Secured Parties) to pay interest on the Parent Senior Notes and any
Parent Additional Notes, and (ii) to pay Backhaul Service Costs in an
aggregate amount not exceed $25,000,000 (provided that the remaining Term
--------
Loan Commitments, together with other funds available to the Borrower
would, in the reasonable judgment of the Administrative Agent, be
sufficient to pay the remaining amounts owing under the Supply Contract and
the other costs necessary to complete the System).
(e) With respect to Letters of Credit, for general corporate purposes
of the Borrower and the Subsidiaries.
SECTION 5.13. Environmental Matters. The Borrower shall, and shall cause
---------------------
each of the Subsidiaries to, comply in all material respects with any and all
applicable Environmental Laws, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect.
SECTION 5.14. Operating Budgets; Operating Plans. (a) Within 30 days of
----------------------------------
the date that the Primary Ring becomes operational, and after prior review by,
and the approval of, the Administrative Agent and the Independent Engineer
(which approval shall not be unreasonably withheld), the Borrower will adopt (i)
an operating budget detailing anticipated costs in connection with operating the
System (an "Operating Budget") for the initial Operating Year and (ii) an
----------------
operating plan updating the Projections (the "Operating Plan") for the period
--------------
from the first day of the initial Operating Year through the Maturity Date which
shall set forth the anticipated costs and revenues, by Operating Year, in
connection with operating the System during such period.
(b) Within 60 days of the commencement of each subsequent Operating Year,
and after prior review by and discussion with the Designated Agents and the
Independent Engineer, the Borrower will adopt an Operating Budget for such
Operating Year; provided that (i) any Operating Budget that provides for total
--------
costs in excess of 105% of the total costs set forth in the Operating Plan for
such Operating Year shall not be adopted without the prior written consent of
the Designated Agents and (ii) any Operating Budget which provides for total
operating costs in
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excess of the operating costs set forth in the Operating Plan for such Operating
Year, and such excess, when added to the Cumulative Overruns for all Operating
Years, would exceed an amount equal to 15% of the Benchmark Costs for all prior
Operating Years to date (including the current Operating Year), shall not be
adopted without the prior written consent of the Majority Lenders. For purposes
hereof, "Benchmark Costs" shall be the total operating costs for each Operating
---------------
Year set forth in the Operating Plan, and "Cumulative Overruns" shall be, at any
-------------------
time of determination, an amount equal to the difference between (a) the sum of
the actual operating costs for each complete Operating Year ended and (b) the
sum of Benchmark Costs for each such complete Operating Year ended; Cumulative
Overruns may be a negative number.
(c) The Borrower shall, simultaneously with the delivery of each Operating
Budget (other than the initial Operating Budget), deliver to the Administrative
Agent (for informational purposes only), an update of the Operating Plan.
(d) The Borrower shall deliver copies of the Operating Budgets for each
such Operating Year promptly to the Administrative Agent.
(e) The Borrower shall, promptly following its decision, if any, not to
exercise the Rio Ring Option, deliver to the Administrative Agent, a revised
Operating Budget, Operating Plan and set of the Projections, in each case
reasonably satisfactory to the Designated Agents.
SECTION 5.15. Governmental Actions. The Borrower shall (a) promptly make,
--------------------
or cause to make, all filings for all Governmental Actions required in
connection with the construction, installation or operation of the System as
soon as reasonably possible and in accordance with the Plan of Work (and, in any
event, in time to comply with the dates for procurement of Governmental Actions
set forth on Schedule 3.08), (b) assist the Contractor where necessary or
-------------
appropriate in all follow-up necessary to obtain on a timely basis all such
Governmental Actions and (c) from and after the date that any Segment or the
System is Ready for Commercial Acceptance or Ready for Provisional Acceptance,
maintain (or cause the Operator under the System Contracts to maintain) in full
force and effect all material Governmental Actions as are at the time necessary
in order to operate and maintain such Segment or the System, as applicable,
except where the failure to file or maintain such Governmental Actions could not
reasonably be expected to have a Material Adverse Effect.
SECTION 5.16. Cooperation with Independent Engineer. The Borrower shall,
-------------------------------------
and shall cause each Subsidiary to, keep the Independent Engineer fully informed
on a timely basis with respect to the design of, and other material matters
relating to, the System, and shall meet (and, to the extent within its control,
cause the Contractor to meet) the Independent Engineer at reasonable times and
upon reasonable notice to discuss any and all of the foregoing.
SECTION 5.17. Spare Parts. The Borrower shall, on and after the
-----------
Commercial Operation Date, maintain, or cause the Operator to maintain, spare
parts with respect to the System as are customary for the submarine fiber-optic
cable industry.
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SECTION 5.18. Interest Rate Protection. The Borrower shall enter into
------------------------
Rate Protection Agreements by or within 90 days after the Borrowing of at least
$25,000,000 of Term Loans hereunder, and thereafter within 90 days after
Borrowings of increments of at least $25,000,000 in the aggregate in excess
thereof, with respect to 50% of the outstanding principal amount of the Term
Loans for a period of not less than three years (or such other period or amount
as shall be reasonably satisfactory to the Borrower and the Administrative
Agent), in each case pursuant to documents reasonably satisfactory to the
Borrower and the Administrative Agent, in order to hedge the Borrower's interest
rate exposure on the Loans from and after such date.
SECTION 5.19. Revenue Account. The Borrower shall, and shall cause the
---------------
Subsidiaries to, deposit all of their respective Revenue (other than those being
applied to the immediate prepayment of the Loans) directly into the Revenue
Account or the applicable Subsidiary Account as required by Article VIII.
------------
SECTION 5.20. Maintenance of Process Agent. The Borrower shall, and shall
----------------------------
cause each of the Subsidiaries that does not maintain an office in New York to,
maintain in New York, New York a Person acting as agent to receive on its behalf
service of process.
SECTION 5.21. System Operation and Maintenance. The Borrower shall, and
--------------------------------
shall cause the Subsidiaries to, from and after any Segment or the System is
Ready for Commercial Acceptance or Ready for Provisional Acceptance, cause such
Segment or the System, as the case may be, to be operated and maintained in an
efficient, reasonable and business-like manner in accordance with the terms of
the System Contracts.
SECTION 5.22. Event of Loss. If an Event of Loss shall occur and no Event
-------------
of Default shall have occurred and be continuing and (a) in the Independent
Engineer's reasonable opinion it is feasible to restore, rebuild or replace the
affected portion of the System within one year, (b) in the Designated Agents'
reasonable opinion (upon consultation with the Independent Engineer) there are
or will be sufficient funds available to the Borrower (including from proceeds
of insurance) to restore, rebuild or replace the affected portion of the System
so that the System will be able to operate on a commercially feasible basis (and
in any event on a basis sufficient to pay the Loans and all other Obligations
owing to the Lenders prior to the Maturity Date), and (c) in the Independent
Engineer's reasonable opinion, it is reasonably likely that the Borrower and the
Subsidiaries will have as and when needed all rights of way and permits
necessary to restore, rebuild or replace the affected portion of the System,
then the Borrower, at its sole cost and expense, shall restore, rebuild or
replace the affected portion of the System.
SECTION 5.23. Books and Records; Inspection Rights. The Borrower shall,
------------------------------------
and shall cause each of the Subsidiaries to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower shall,
and shall cause each of the Subsidiaries to, permit any representative of the
Lenders designated by the Administrative Agent, upon reasonable prior notice, to
visit and inspect its properties, to examine and make copies from its books and
records (other than examining and making copies with respect to Capacity Sales
Agreements and
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Capacity Swap Agreements, except to the extent set forth in Section 5.02(a)),
---------------
and to discuss its affairs, finances and condition with its officers and (at the
Borrower's expense during the continuance of a Default) its independent
accountants, all at such reasonable times and as often as reasonably requested.
SECTION 5.24. Export Control. The Borrower shall, and shall cause each of
--------------
the Subsidiaries to, comply in all material respects with all U.S. export laws
and regulations.
SECTION 5.25. Foreign Corrupt Practices Act. The Borrower shall, and
-----------------------------
shall cause each of the Subsidiaries to, comply in all material respects with
the Foreign Corrupt Practices Act of the United States, if applicable.
SECTION 5.26. Further Assurances. The Borrower shall cause to be promptly
------------------
and duly taken, executed, acknowledged and delivered all such further acts,
documents and assurances as the Administrative Agent from time to time may
reasonably request in order to carry out more effectively the intent and
purposes of this Agreement and the other Loan Documents, including with respect
to the maintenance of perfection of all Collateral that is perfectible and the
proper grant and perfection of Liens on perfectible assets hereafter acquired by
the Borrower or any of the Subsidiaries.
SECTION 5.27. Intellectual Property. (a) The Borrower shall not, and
---------------------
shall not permit any of the Subsidiaries to, do any act, or omit to do any act,
whereby any of the Borrower's or any Subsidiary's intellectual property may
lapse or become abandoned or dedicated to the public or unenforceable, unless
such lapse, abandonment, dedication or unenforceability could not reasonably be
expected to have a Material Adverse Effect.
(b) In no event shall the Borrower or any Subsidiary, or any of their
respective agents, employees, designees or licensees, file an application for
the registration of any intellectual property with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, unless it
promptly informs the Administrative Agent.
(c) The Borrower shall take, and shall cause the Subsidiaries to take, all
reasonably necessary steps, including in any proceeding before the United States
Patent and Trademark Office, the United States Copyright Office, and any foreign
counterpart of either, to maintain and pursue any application (and to obtain the
relevant registration) filed with respect to, and to maintain any registration
of, any material item of intellectual property, including the filing of
applications for renewal, affidavits of use, affidavits of incontestability and
opposition, interference proceedings and the payment of appropriate fees, except
where the failure to so maintain, obtain or pursue could not reasonably be
expected to have a Material Adverse Effect.
SECTION 5.28. Future Subsidiaries. Without limiting the effect of any
-------------------
restriction contained herein upon any Person becoming, after the Closing Date,
either a direct or indirect Subsidiary of the Borrower, or upon the Borrower
acquiring additional Equity Interests of any
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new or existing Subsidiary, if any Person shall become a Subsidiary after the
Closing Date,
(a) The Borrower shall cause such Person to become a party to (i) the
Subsidiary Guaranty or a guaranty in substantially the form of the
Subsidiary Guaranty, and (ii) the Subsidiary Pledge and Security Agreement
or a pledge or security agreement in substantially the form of the
Subsidiary Pledge and Security Agreement, in either case, with such
modifications as the Administrative Agent may reasonably request or consent
to, in a manner reasonably satisfactory to the Administrative Agent;
(b) the Borrower shall pledge or cause to be pledged to the Secured
Parties all of the outstanding Equity Interests of such Subsidiary, along
with undated share transfer forms (or similar instruments) for such Equity
Interests, executed in blank (or, if any such Equity Interests are
uncertificated, confirmation and evidence satisfactory to the
Administrative Agent that the security interest in such uncertificated
securities has been perfected by the Administrative Agent in accordance
with Article 8 of the UCC or any similar law which may be applicable),
together with all intercompany promissory notes, duly endorsed in blank;
(c) the Administrative Agent shall have received from each such
Subsidiary (other than any newly formed Subsidiary), if applicable,
certified copies of Uniform Commercial Code Requests for Information or
Copies (Form UCC-11), or a similar search report certified by a party
acceptable to the Administrative Agent, dated a date reasonably near (but
prior to) the date of any such Person becoming a direct or indirect
Subsidiary, listing all effective financing statements, tax liens and
judgment liens which name such Person as the debtor and which are filed in
the jurisdictions in which filings are to be made pursuant to this
Agreement and the other Loan Documents, and in such other jurisdictions as
the Administrative Agent may reasonably request, together with copies of
such financing statements (none of which (other than financing statements
(i) filed pursuant to the terms hereof in favor of the Administrative Agent
(for the benefit of the Secured Parties), if such Form UCC-11 or search
report, as the case may be, is current enough to list such financing
statements, (ii) being terminated pursuant to termination statements that
are to be delivered on or prior to the date such Person becomes a
Subsidiary or (iii) in respect of protective filings or Liens permitted
under Section 6.02) shall cover any of the Collateral); and
------------
(d) the Administrative Agent shall have received from each such
Subsidiary executed copies of UCC financing statements (or equivalent
instruments) naming each such Subsidiary as the debtor and the
Administrative Agent as the secured party, suitable for filing under the
UCC (or the foreign equivalent, if any) of all jurisdictions as may be
necessary (or possible) or, in the reasonable opinion of the Administrative
Agent, desirable to perfect the first priority security interest of the
Secured Parties pursuant to the security agreement entered into by such
Subsidiary in such types of collateral as were perfected with respect to
other Subsidiaries as of the Closing Date,
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together, in each case, with such opinions of legal counsel for the Borrower
relating thereto as the Administrative Agent shall reasonably request, which
legal opinions shall be in form and substance reasonably satisfactory to the
Administrative Agent.
SECTION 5.29. Post-Closing Collateral; Mortgages. The Borrower shall,
----------------------------------
within the 90 days after the Closing Date (or such longer period as is necessary
with the consent of the Administrative Agent),
(a) with respect to each Subsidiary organized outside of Bermuda or
the United States of America, (i) cause each such Subsidiary to execute (A)
a Foreign Subsidiary Pledge Supplement, if required under applicable local
law, in form and substance reasonably satisfactory to the Administrative
Agent, and (B) the Subsidiary Guaranty (unless the Borrower, in the
exercise of its reasonable commercial efforts, shall have caused the
Subsidiary Guaranty to have been duly executed and delivered by the Closing
Date), (ii) cause each such Subsidiary to make all filings and obtain all
notarizations reasonably required in connection therewith to give the
Secured Parties a perfected security interest in the same type of property
that was perfected as of the Closing Date under the Subsidiary Pledge and
Security Agreement, (iii) subject all ownership interests in each such
Subsidiary to the Borrower Pledge and Security Agreement and (iv) deliver
to the Administrative Agent customary favorable legal opinions with respect
to the above;
(b) with respect to real property owned by the Borrower and the
Subsidiaries as of the Closing Date, or within 90 days after the
acquisition by the Borrower or any Subsidiary of real property not owned as
of the Closing Date, (i) execute, or cause such Subsidiary to execute, a
Mortgage, or its reasonable equivalent under applicable local law, in favor
of the Secured Parties and in form and substance reasonably satisfactory to
the Administrative Agent providing the Secured Parties with a first Lien
thereon, subject only to customary Liens which in any event do not
materially adversely effect (a) the Borrower's or such Subsidiary's use,
operation or enjoyment of such property for its intended purpose or (b) the
Secured Parties' rights or remedies under the Mortgage and (ii) cause to be
provided to the Administrative Agent, to the extent commercially feasible,
mortgagee's title insurance (or its reasonable equivalent) in amounts and
in form reasonably satisfactory to the Administrative Agent.
SECTION 5.30. TBI. The Borrower shall use all reasonable efforts to
---
promptly obtain all regulatory approvals so that TBI can own 100% of the Equity
Interests in TeleBermuda International LLC and, upon receiving such approval,
will cause TBI to exercise its option to own such Equity Interests and pledge
such Equity Interests to the Secured Parties pursuant to the Subsidiary Pledge
and Security Agreement.
SECTION 5.31. Achievement of Commercial Operation Date. The Borrower
----------------------------------------
shall, and shall cause the Subsidiaries to, use all reasonable commercial
efforts to cause the Commercial Operation Date to occur by the Guaranteed
Completion Date.
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ARTICLE VI
NEGATIVE COVENANTS
------------------
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees and other Obligations payable hereunder and
under the Loan Documents have been paid in full, all Letters of Credit have
expired or terminated (or shall have been cash collateralized on terms
reasonably acceptable to the Administrative Agent and the Issuer) and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Administrative Agent, the Syndication Agent, the Arranger, the Issuer and
the Lenders as set forth in this Article.
SECTION 6.01. Indebtedness. The Borrower shall not, and shall not permit
------------
any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness,
except:
(a) Indebtedness incurred under the Loan Documents;
(b) Permitted Subordinated Debt;
(c) Capital Lease Obligations permitted by Section 6.11;
------------
(d) trade or other similar Indebtedness incurred in the ordinary
course of business and payable within 60 days;
(e) Indebtedness under, or constituting net exposure under, interest
Hedging Agreements entered into in accordance with Section 5.18 or other
------------
Hedging Agreements otherwise permitted by the Administrative Agent;
(f) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or another Subsidiary; provided that, (i) with
--------
respect to any Indebtedness of any Subsidiary to the Borrower, such
Indebtedness shall be evidenced by a promissory note pledged to the Secured
Parties by the Borrower on terms reasonably satisfactory to the
Administrative Agent, and (ii) with respect to any Indebtedness of the
Borrower to a Subsidiary, repayment of such Indebtedness shall be
subordinated to the repayment of the Credit Extensions and all other
Obligations under this Agreement and the other Loan Documents in a manner
reasonably satisfactory to the Administrative Agent;
(g) Guarantees by the Borrower of Indebtedness of any Subsidiary
otherwise permitted hereunder, and by any Subsidiary of Indebtedness of the
Borrower otherwise permitted hereunder (other than under clause (i) below)
----------
or any other Subsidiary otherwise permitted hereunder;
(h) reimbursement obligations of the Borrower incurred under the Term
C Loan
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Guaranty Reimbursement Agreement;
(i) Indebtedness incurred under the System Contracts; and
(j) other unsecured Indebtedness of the Borrower and the Subsidiaries
in an aggregate principal amount not to exceed $2,500,000 at any one time;
provided that no Indebtedness otherwise permitted by clauses (b), (c) or (j)
- -------- ----------- --- ---
shall be assumed or otherwise incurred if a Default has occurred and is then
continuing or would result therefrom.
SECTION 6.02. Liens. The Borrower shall not, and shall not permit any
-----
Subsidiary to, create, incur, assume or permit to exist any Lien on the
Collateral or on the System or any of its other assets, except Permitted
Encumbrances.
SECTION 6.03. Fundamental Changes. The Borrower shall not, and shall not
-------------------
permit any Subsidiary to, merge into or amalgamate or consolidate with any other
Person, or permit any other Person to merge into or amalgamate or consolidate
with it, or liquidate or dissolve, except that (a) any Subsidiary may merge into
or amalgamate or consolidate with the Borrower in a transaction in which the
Borrower is the surviving Person, (b) any Subsidiary may merge into or
amalgamate or consolidate with another Subsidiary (other than any Subsidiary
which for any reason has not executed and delivered the Subsidiary Guaranty) in
a transaction in which the surviving or continuing entity is a wholly-owned
Subsidiary and (c) any Subsidiary may, with the prior written consent of the
Administrative Agent (such consent not to be unreasonably withheld or delayed),
liquidate or dissolve if the Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Borrower and such
liquidation or dissolution is not disadvantageous in any material respect to the
Lenders.
SECTION 6.04. Sale of Assets. The Borrower shall not, and shall not
--------------
permit any Subsidiary to, sell, lease, convey, assign, transfer or otherwise
dispose of (each, a "Transfer") all or any portion of its assets except (a)
--------
Transfers of Capacity or other capacity in accordance with Section 6.23, (b)
------------
Transfers of assets by any Subsidiary to the Borrower, (c) Transfers of assets
in the ordinary course of business not required for the efficient operation of
the System for fair value with a book value not exceeding for all such Transfers
under this clause (c) $10,000,000 in the aggregate over the term of this
----------
Agreement, (d) Transfers of assets to Subsidiaries which have executed and
delivered the Subsidiary Guaranty and where the Equity Interests of such
Subsidiary is subject to a Lien in favor of the Administrative Agent (for the
benefit of the Secured Parties), but only to the extent necessary to facilitate
the obtaining of Landing Licenses or the minimization of material Taxes or
constituting an investment permitted by Section 6.05, (e) Transfers of obsolete
------------
equipment in connection with any Permitted System Upgrades and (f) Transfers of
obsolete, worn out or defective equipment and other assets for fair value in
cash; provided that the proceeds or the Net Cash Proceeds of a Transfer (i)
--------
under clauses (c), (e) and (f) shall be applied to the prepayment of the Loans
----------- --- ---
and cash collateralization of LC Exposure if required in accordance with Section
-------
2.11 and (ii) under clause (a) shall be deposited into the Revenue Account for
- ---- ----------
application in accordance with Article VIII.
------------
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<PAGE>
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions.
---------------------------------------------------------
(a) The Borrower shall not, and shall not permit any of the Subsidiaries to,
purchase, hold or acquire (including pursuant to any amalgamation or merger with
any Person that was not a wholly-owned Subsidiary prior to such merger) any
Equity Interests, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, or become a general
or limited partner in any partnership or a joint venturer in any joint venture
or enter into any profit sharing or royalty agreement or similar arrangement
whereby the Borrower's or any of the Subsidiaries' income or profits are, or
might be, shared with any Person, except:
(i) Permitted Investments;
(ii) investments by the Borrower in a Subsidiary; provided that (A)
--------
such Subsidiary has executed and delivered the Subsidiary Guaranty and the
Equity Interests of such Subsidiary is subject to a first priority Lien in
favor of the Administrative Agent (for the benefit of the Secured Parties)
and (B) such investment is necessary to capitalize such Subsidiary in
accordance with applicable law, to facilitate the obtaining of Landing
Licenses or the minimization of material Taxes or to enable such Subsidiary
to acquire assets to be used to operate the System or otherwise fulfill
obligations incurred in connection with the System and reflected in the
Capital Budget or the Operating Budget;
(iii) loans or advances made by the Borrower to any Subsidiary and
made by any Subsidiary to the Borrower or any other Subsidiary; provided
--------
that (A) each such Subsidiary has executed and delivered the Subsidiary
Guaranty and the Equity Interests of such Subsidiary is subject to a first
priority Lien in favor of the Administrative Agent (for the benefit of the
Secured Parties) and (B) such loans or advances are necessary to facilitate
the obtaining of Landing Licenses or the minimization of material Taxes or
to enable such Subsidiary to acquire assets to be used to operate the
System or otherwise fulfill obligations incurred in connection with the
System and reflected in the Capital Budget or the Operating Budget;
provided that the requirements contained in the proviso to Section 6.01(f)
-------- ---------------
are satisfied;
(iv) Guarantees constituting Indebtedness permitted by Section 6.01;
------------
(v) the purchase or acquisition of Equity Interests of a Subsidiary
in accordance with Sections 5.28 and 6.19(c) or Section 6.18; and
------------- ------- ------------
(vi) the loan existing on the Closing Date made by the Borrower to
TeleBermuda International LLC in the principal amount of $25,000,000
(provided that such loan is evidenced by a promissory note pledged to the
---------
Secured Parties);
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<PAGE>
provided that no investments, loans, advances or Guarantees otherwise permitted
- --------
by clauses (ii), (iii), (iv) or (v) shall be assumed or otherwise made if a
------------ ----- ---- ---
Default has occurred and is then continuing or would result therefrom.
SECTION 6.06. Restricted Payments. The Borrower shall not, and shall not
-------------------
permit any of the Subsidiaries to, declare or make any Restricted Payment or any
payment in connection with any tax sharing arrangement except for (a) Restricted
Payments by the Subsidiaries to the Borrower and other Subsidiaries, (b)
distributions by the Borrower or any Subsidiary in respect of its Equity
Interests which are payable solely in additional Equity Interests of the
Borrower or such Subsidiary, but only to the extent such additional Equity
Interests is subject to a first priority Lien in favor of the Administrative
Agent (for the benefit of the Secured Parties), (c) so long as no Blockage Event
has occurred and is continuing, intercompany advances by the Borrower to Parent
pursuant to intercompany promissory notes pledged to the Secured Parties for
payment of interest on the Parent Senior Notes and any Parent Additional Notes
and Parent Expenses in accordance with Sections 8.08(a) and 8.08(d), (d) so long
---------------- -------
as no Blockage Event has occurred and is continuing, distributions by the
Borrower in respect of its Equity Interests from funds available to the Borrower
in accordance with Section 8.08(a), (e) so long as no Blockage Event has
---------------
occurred and is continuing, distributions by the Borrower in respect of its
Equity Interests from proceeds made available to the Borrower from the Special
Payment Account in accordance with Section 8.09 and (f) payments in connection
------------
with tax sharing arrangements among the Borrower and the Subsidiaries.
SECTION 6.07. Amendment of System Contracts, etc. (a) The Borrower shall
----------------------------------
not, and shall not permit the Subsidiaries to, enter into, amend, supplement or
otherwise modify, or grant any material waivers or material consents under, or
agree to any material contract variation or material discretionary or other
material change that requires the consent or agreement of the Borrower under,
any System Contract without the written consent of the Majority Lenders (such
consent not to be unreasonably withheld) other than (i) Contract Variations in
accordance with Section 6.08, (ii) administerial, clarifying, correcting or
------------
other immaterial amendments to any such System Contract which could not
reasonably be expected to have a Material Impact (it being understood that an
increased cost permitted pursuant to Section 5.14 shall not be deemed to
------------
constitute a "Material Impact" under clause (a) thereof solely by reason of such
----------
increased cost), (iii) other amendments, supplements or modifications not
involving the Supply Contract that do not involve increased costs to the
Borrower or any Subsidiary other than as permitted pursuant to Section 5.14 and
------------
which, in any event, could not reasonably be expected to have a Material Impact,
(iv) amendments, supplements or other modifications required to implement the
provisions of Section 6.09 or 6.10 and (v) amendments, supplements or other
------------ ----
modifications or waivers, consents, contract variations or other changes to
Capacity Sales Agreements and Capacity Swap Agreements so long as any such
amendments are on commercially reasonable terms and comply with the proviso to
Section 6.23; provided that no amendments, supplements or other modifications or
- ------------ --------
waivers, consents, contract variations or other changes to any Intercompany
Agreement shall be made without the prior written consent of the Administrative
Agent.
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<PAGE>
(b) The Borrower shall not, and shall not permit the Subsidiaries to,
terminate or permit the termination of any (i) Material System Contract other
than in accordance with its terms, (ii) Capacity Sales Agreement or Capacity
Swap Agreement unless (A) such actions are commercially reasonable and (B) the
provisions of Section 6.23 and Section 6.24 are complied with at such time,
------------ ------------
(iii) the Term C Loan Guaranty Reimbursement Agreement (other during any Term C
Loan Guaranteed Period) or (iv) any other System Contract unless such other
System Contract is, at the reasonable request of the Designated Agents (upon
such consultation with the Independent Engineer as the Designated Agents shall
require), replaced with a new contract reasonably acceptable to the Designated
Agents.
(c) The Borrower and the Subsidiaries shall be permitted to replace
certain System Contracts in accordance with the terms of Article VII.
-----------
SECTION 6.08. Supply Contract. (a) The Borrower shall not, and shall not
---------------
permit the Subsidiaries to, without the prior written consent of the Required
Lenders (or, with respect to any Contract Variation that will not increase the
costs under the Supply Contract by more than $500,000 for any individual
Contract Variation and up to $2,000,000 in the aggregate for all Contract
Variations taken together, the Designated Agents), such consent in each case not
to be unreasonably withheld, enter into any Contract Variation, or grant any
waiver or consent under, the Supply Contract other than (i) Contract Variations,
waivers or consents made on an emergency basis to the extent there are funds
available for the payment thereof in the Capital Budget or the Construction
Contingency Reserve Account so long as such Contract Variation, waiver or
consent could not reasonably be expected to have a Material Adverse Effect, (ii)
Contract Variations, waivers or consents required to implement the provisions of
Section 6.09 and (iii) Contract Variations, waivers or consents required to
- ------------
implement the provisions of Section 6.10.
------------
(b) The Borrower shall not, and shall not permit the Subsidiaries to, (i)
without the prior written consent of the Required Lenders (such consent not to
be unreasonably withheld), (A) reduce the amount or change the date or basis for
payment of liquidated damages under Article 22 of the Supply Contract, (B)
reduce the duration of any warranty period under the Supply Contract, (ii)
without the prior written consent of the Designated Agents (based upon
consultation with the Independent Engineer and such consent not to be
unreasonably withheld), (A) reduce the scope of any warranty under the Supply
Contract, (B) reduce the scope or availability of intellectual property under
Article 18 of the Supply Contract and (C) materially change the terms of payment
as set forth in Article 5 of the Supply Contract.
(c) The Borrower shall not, and shall not permit the Subsidiaries to, (i)
without the prior written consent of the Designated Agents (based upon
consultation with the Independent Engineer and such consent not to be
unreasonably withheld), agree to (A) new acceptance testing as contemplated
under the definition of "Acceptance Testing" in the Supply Contract, (B) new
performance requirements as contemplated under the definition of "System
Performance Requirements" and any term or appendix or exhibit underlying the
substance of such definition or (C) any equitable adjustment to the Initial
Contract Price under Article 6C of the Supply
-90-
<PAGE>
Contract unless such adjustment is in accordance with this Section, and (ii)
without the prior written consent of the Required Lenders, (A) grant or
otherwise consent to any extension of time under the last sentence of Article 6D
of the Supply Contract or (B) agree to any arrangement to extend the Scheduled
RFS Date under Article 6D of the Supply Contract.
SECTION 6.09. Addition to Configuration. The Borrower shall not, and
-------------------------
shall not permit the Subsidiaries to, without the prior written consent of the
Majority Lenders (such consent to not be unreasonably withheld), add any
additional Landing Country or select, or agree to the selection of, any
alternative Landing Country to the contemplated configuration of the System
unless (a) in the case of adding an additional Landing Country, all costs
related to such addition are funded with equity funds made available to the
Borrower or Permitted Subordinated Debt or funds made available to the Borrower
for its sole benefit, in accordance with Sections 8.08(a) or is otherwise borne
----------------
exclusively by parties other than (and without recourse to) the Borrower and the
Subsidiaries, which in each case has been fully funded or has been committed to
on terms reasonably satisfactory to the Designated Agents, (b) such addition
could not reasonably be expected to have a Material Adverse Effect, (c) no
material liabilities of or costs to the Borrower or any of the Subsidiaries
shall be created which are not provided for from sources described in clause (a)
----------
above and (d) in the case of the selection of an alternative Landing Country,
the Independent Engineer has concurred that the conditions in the Supply
Contract underlying such selection have been met.
SECTION 6.10. Permitted System Upgrades. The Borrower shall not, and
-------------------------
shall not permit the Subsidiaries to, request that the Contractor perform any
Permitted System Upgrade unless the costs thereof are (a) funded with proceeds
from the Upgrade Reserve Account in accordance with Section 8.09(d), the
---------------
Borrower's portion of Excess Cash Flow or other funds made available to the
Borrower, for its sole benefit, in accordance with Sections 8.08(a) or (b)
----------------
funded with equity funds made from common stock of the Borrower or preferred
stock with provisions substantially similar to Permitted Subordinated Debt made
available to the Borrower or Permitted Subordinated Debt of the Borrower or is
otherwise borne by parties other than (and without recourse to) the Borrower and
the Subsidiaries, which in each case has been fully funded or has been committed
to on terms reasonably satisfactory to the Designated Agents.
SECTION 6.11. Leases. The Borrower shall not, and shall not permit the
------
Subsidiaries to, enter into any lease as a lessee thereunder except for (a)
leases of personal property in the ordinary course of business, (b) leases of
real property in the ordinary course of business, (c) Capital Lease Obligations
in an amount not to exceed $250,000 in any fiscal year of the Borrower and (d)
leases of Backhaul Capacity otherwise permitted hereunder.
SECTION 6.12. Change of Office. The Borrower shall not, and shall not
----------------
permit the Subsidiaries to, change the location of its principal place of
business unless the Borrower shall have given the Administrative Agent at least
30 days' prior written notice thereof and all action reasonably necessary or
advisable in the Administrative Agent's opinion to protect and perfect the Liens
and security interests in the Collateral shall have been taken.
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<PAGE>
SECTION 6.13. Change of Name. The Borrower shall not, and shall not
--------------
permit the Subsidiaries to, change its name unless the Borrower shall have given
the Administrative Agent at least 30 days' prior written notice thereof and all
action reasonably necessary or advisable in the Administrative Agent's opinion
to protect and perfect the Liens and security interests in the Collateral shall
have been taken.
SECTION 6.14. Transactions with Affiliates. The Borrower shall not, and
----------------------------
shall not permit the Subsidiaries to, enter into any agreement with any
Affiliate of the Borrower except (a) as required by the Loan Documents or the
System Contracts, (b) transactions in the ordinary course of business which are
on fair and reasonable terms not less favorable than the Borrower or any
Subsidiary could obtain in an arm's-length transaction with a Person which is
not an Affiliate, (c) any agreement between the Borrower and any Subsidiary that
is directly or indirectly wholly-owned by the Borrower or between Subsidiaries
that are directly or indirectly wholly-owned by the Borrower and (d) any
transaction between the Borrower and Parent expressly permitted by a Loan
Document.
SECTION 6.15. Sale and Leaseback. The Borrower shall not, and shall not
------------------
permit the Subsidiaries to, enter into any arrangement with any Person providing
for the leasing of real or personal property which has been or is to be sold by
it to such Person.
SECTION 6.16. Approval of Additional Contracts. The Borrower shall not,
--------------------------------
and shall not permit the Subsidiaries to, without the prior written consent of
the Required Lenders (such consent not to be unreasonably withheld), enter into
any Additional Contract other than (a) Capacity Sales Agreements, Capacity Swap
Agreements or other agreements or arrangements for the disposition of Capacity
entered into in accordance with Section 6.23, (b) pipeline and cable crossing
------------
agreements and other similar agreements entered into in the ordinary course of
business to facilitate the construction and installation of the System by the
Contractor, (c) Interconnect Agreements entered into in the ordinary course of
business, (d) other contracts in the ordinary course of business to the extent
amounts payable thereunder by the Borrower or any Subsidiary, if any, are
provided for in the Capital Budget or the Operating Budget, (e) other contracts
entered into in the ordinary course of business that could not reasonably be
expected to have a Material Adverse Effect and (f) with the prior written
consent of the Administrative Agent, if such Additional Contract relates to the
System and is being entered into as a quid pro quo for the purchase of Capacity
---- --- ---
by the counterparty thereto and the entering into or performance of such
Additional Contract could not reasonably be expected to have a Material Impact.
The Borrower shall be permitted to replace System Contracts as set forth in
Section 6.07 and Article VII. At the time any such Additional Contract is
- ------------ -----------
entered into (other than Capacity Sales Agreements, Capacity Swap Agreements and
agreements entered into pursuant to clause (b)), the Borrower and the Designated
----------
Agents (upon consultation with the Independent Engineer, if necessary) shall
designate such Additional Contract as either an "Additional Material Contract"
or an "Additional Non-Material Contract".
SECTION 6.17. Capital Expenditures. The Borrower shall not, and shall
--------------------
not permit the Subsidiaries to, make any expenditure in respect of the purchase
of capital assets, except for
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<PAGE>
expenditures which could not reasonably be expected to adversely affect the
System and which are (a) covered by the Capital Budget or the then current
Operating Budget, (b) are funded solely from sources described in Section
-------
6.09(a), or (c) approved by the Majority Lenders in writing (after consultation
- -------
with the Independent Engineer).
SECTION 6.18. Limitations on Transfer and Issuance of Interests. The
-------------------------------------------------
Borrower shall not, and shall not permit the Subsidiaries to, (a) permit the
transfer of any ownership interest in Subsidiaries, except in accordance with
Section 6.03, or (b) issue any additional ownership interests, unless (subject
- ------------
in any event to the provisions of Section 7.14) (i) such ownership interests are
------------
issued by the Borrower or are otherwise in accordance with Section 6.06(b) and
---------------
(ii) such ownership interests are being issued by a Subsidiary to the Borrower
or another Subsidiary (whether in addition to or substitution for the then
outstanding Equity Interests of such Subsidiary) and in each case are made
subject to the first priority Lien in favor of the Administrative Agent (for the
benefit of the Secured Parties); provided that, with respect to any such pledge
--------
agreement pledging the Equity Interests of the Borrower, the liability of the
shareholders of the Borrower shall be limited to the "Collateral" pledged
thereunder.
SECTION 6.19. Unrelated Activities; Abandonment; New Subsidiaries. (a)
---------------------------------------------------
The Borrower shall not, and shall not permit the Subsidiaries to, engage in any
activity other than Permitted Activities.
(b) The Borrower shall not abandon the diligent development, construction,
installation or operation of the System.
(c) The Borrower shall not, and shall not permit the Subsidiaries to,
create any new subsidiaries after the Closing Date other than (i) with the prior
written consent of the Administrative Agent or (ii) wholly-owned, special
purpose Subsidiaries created in connection with changes to the System
configuration permitted by this Agreement; provided that, in any event, (x) the
--------
Equity Interests of such Subsidiary shall be subject to the first priority Lien
of the Secured Parties and, (y) such Subsidiary shall have executed and
delivered to the Administrative Agent the Subsidiary Guaranty.
SECTION 6.20. Set-off. Without the prior written consent of the
-------
Administrative Agent (such consent not to be unreasonably withheld), the
Borrower shall not, and shall not permit the Subsidiaries to, exercise any right
of set-off with respect to amounts owing to it by the Contractor under the
Supply Contract.
SECTION 6.21. Changes in Capital Budget. Without the prior written
-------------------------
consent of the Majority Lenders (such consent not to be unreasonably withheld),
the Borrower shall not modify the Capital Budget to increase the aggregate
amounts payable thereunder unless such modification is a necessary conforming
change related to an amendment to a System Contract permitted by Section 6.07 or
------------
Section 6.08 or is concurrent and consistent with any additional sources of
- ------------
funds which are to be made available to the Borrower and not theretofore
contemplated in the Capital Budget (including amounts available in the
Construction
-93-
<PAGE>
Contingency Reserve Account, liquidated damages being applied to Obligations
hereunder and proceeds of insurance applied in accordance with terms of this
Agreement); provided that the foregoing shall not prevent the Borrower from
--------
applying identified cost savings in a budget category (as confirmed by the
Independent Engineer or the Designated Agents, as applicable) to cost overruns
in another budget category (as confirmed by the Independent Engineer or the
Designated Agents, as applicable) without increasing the aggregate amounts
payable under the Capital Budget (provided that the prior written consent of the
Administrative Agent shall be required with respect to the application of any
identified cost savings in excess of $2,000,000).
SECTION 6.22. Payment of Construction Costs. Prior to the Commercial
-----------------------------
Operation Date, the Borrower shall not pay any amount (other than with respect
to amounts received from the sources described in Section 6.09(a) or from
---------------
amounts available in the Construction Contingency Reserve Account or under the
Working Capital Loan Commitment or from Special Payments) in respect of the
construction and installation of the System other than those costs set forth or
provided for in the Capital Budget, as the same may be amended in accordance
with Section 6.21, and costs that the Contractor or the Operator is
------------
contractually obligated to pay under any System Contract if it results in a
dollar for dollar reduction in amounts payable by the Borrower or any of the
Subsidiaries under such System Contract.
SECTION 6.23. Sales of Capacity. The Borrower shall not, and shall not
-----------------
permit the Subsidiaries to, sell or otherwise dispose of Capacity or capacity on
other telecommunication systems acquired in accordance with the terms hereof
except (a) pursuant to Capacity Sale Agreements and Capacity Swap Agreements,
(b) pursuant to other agreements or arrangements which are on commercially
reasonable terms and reasonable satisfactory to the Designated Agents (which
shall include the disposition of System Capacity without cash compensation in
exchange for mutual restoration agreements or for reasonably equivalently valued
capacity on other subsea fiber or terrestrial fiber telecommunication systems,
subject to the proviso contained in this Section) and (c) with respect to
Backhaul Capacity or capacity on other subsea fiber or terrestrial fiber
telecommunication systems acquired in accordance with the terms hereof, pursuant
to agreements or arrangements in exchange for reasonably equivalent value and
which are on commercially reasonable terms and reasonably satisfactory to the
Designated Agents (which may include dispositions for non-cash consideration);
provided that, in any event, (i) all such agreements and arrangements described
- --------
in the foregoing clauses (a), (b) and (c) shall provide that amounts payable to
----------- --- ---
the Borrower or any Subsidiary shall be paid to the Revenue Account (unless the
Designated Agents otherwise agree), (ii) no agreement providing for future
payments shall prohibit the granting of a security interest in such agreement by
the Borrower to the Secured Parties and (iii) without derogation of the
provisions of Section 6.24 and except for the non-cash exchanges expressly
------------
contemplated above, such agreements shall provide that payments thereunder shall
be in cash.
SECTION 6.24. Financial Covenants. (a) Minimum Cumulative Capacity
------------------- ---------------------------
Revenue. The Borrower shall not permit the cumulative Capacity Revenue (which
- -------
has been deposited in the Revenue Account) as of the last day of any fiscal
quarter occurring during any period set forth below to be less than the amount
set forth opposite such period:
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<PAGE>
Minimum Cumulative
Period Capacity Revenue
------ ----------------
06/30/01 $ 33,900,000
09/30/01 $ 74,800,000
12/31/01 $ 151,900,000
01/01/02 - 12/31/02 $ 356,700,000
01/01/03 - 12/31/03 $ 649,800,000
01/01/04 - 12/31/04 $ 960,900,000
01/01/05 - 12/31/05 $1,267,100,000
(b) Minimum Debt Service Coverage Ratio. The Borrower shall not permit
-----------------------------------
the Debt Service Coverage Ratio as of the last day of any fiscal quarter
occurring during any period set forth below to be less than the ratio set forth
opposite such period:
Debt Service
Period Coverage Ratio
------ --------------
09/30/01 1.05:1
12/31/01 1.50:1
01/01/02 - 12/31/02 2.50:1
01/01/03 - 12/31/03 3.00:1
01/01/04 - 12/31/04 3.50:1
01/01/05 - 12/31/05 4.00:1
(c) Minimum Remaining Asset Value to Borrower Debt Ratio. The Borrower
----------------------------------------------------
shall not permit the Remaining Asset Value to Borrower Debt Ratio at any time
after the Commercial Operation Date to be less than 1.25:1.
Notwithstanding anything to the contrary contained in this Agreement, the
failure to comply with clause (b) or (c) of this Section 6.24 at any time shall
---------- --- ------------
not constitute an Event of Default, but shall result in Excess Cash Flow being
applied 100% to the Lenders in accordance with Section 8.08(d) until such time
---------------
as the Borrower shall have delivered a certificate to the Administrative Agent
in accordance with Section 5.02(c) demonstrating the Borrower's compliance with
---------------
this Section 6.24.
------------
SECTION 6.25. Amendments, etc. of Organizational and Other Documents. The
------------------------------------------------------
Borrower shall not, and shall not permit the Subsidiaries to, amend, supplement
or otherwise modify, or permit the amendment, modification or supplementation
of, (a) the memorandum of association or bye-laws (or such other organizational
and governing documents) in a manner which is inconsistent with or violates the
terms of or could reasonably be expected to prevent compliance with any of the
terms of any Loan Document or System Contract or could materially adversely
affect the Lenders or any Collateral or (b) if issued in accordance with and
subject to the terms of this Agreement, any documents evidencing or relating to
Permitted Subordinated
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<PAGE>
Debt which could adversely affect the Lenders or result in provisions that are
more onerous on the Borrower.
SECTION 6.26. Management and Advisory Fees, etc. The Borrower shall not,
---------------------------------
and shall not permit any of the Subsidiaries to, pay any management, advisory,
consulting or other similar fees to any Affiliate of the Borrower other than
those set forth in the Capital Budget.
SECTION 6.27. Immunity. Neither the Borrower nor any of the Subsidiaries
--------
shall, in any proceeding in the United States, Bermuda, Venezuela, Brazil or
elsewhere, in connection with any Loan Document, claim for itself, any of its
assets or the System, immunity from suit, execution, attachment or other legal
process.
ARTICLE VII
EVENTS OF DEFAULT
-----------------
Each of the following events or occurrences described in this Article VII
-----------
shall constitute an "Event of Default".
SECTION 7.01. Non-Payment of Obligations. The Borrower shall fail to pay
--------------------------
any principal of any Loan when and as the same shall become due and payable; or
the Borrower shall fail to pay any interest on any Loan or any fee payable under
this Agreement or any other Loan Document when and as the same shall become due
and payable, and such failure shall continue unremedied for a period of three
days; or the Borrower or any Subsidiary shall fail to pay any other amount
payable under this Agreement or any other Loan Document when and as the same
shall become due and payable, and such failure shall continue unremedied for a
period of three days following the Borrower's receipt of written notice thereof
from the Administrative Agent.
SECTION 7.02. Breach of Warranty. Any representation or warranty made or
------------------
deemed made by the Borrower or any other Obligor in this Agreement, in any other
Loan Document or in any Material System Contract to which it is a party or in
any certificate delivered by the Borrower or any other Obligor pursuant to this
Agreement, any other Loan Document or any Material System Contract shall prove
to have been false or misleading in any material respect as of the time made or
deemed made and, if such misrepresentation is capable of being corrected as of a
subsequent date, such misrepresentation shall not have been corrected as of a
day within thirty calendar days following written notice thereof being given by
the Administrative Agent to the Borrower or such Loan Party; provided that if
--------
such misrepresentation is made by such other Obligor in a Material System
Contract, it shall not constitute an Event of Default hereunder unless such
misrepresentation has had or could reasonably be expected to have a Material
Adverse Effect.
SECTION 7.03. Non-Performance of Certain Covenants and Obligations. (a)
----------------------------------------------------
The Borrower shall fail to observe or perform any covenant or agreement
contained in Article VI of
----------
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<PAGE>
this Agreement (other than clauses (b) and (c) of Section 6.24); (b) the
----------- --- ------------
Borrower or any Loan Party shall fail to perform any of its covenants or
agreements contained in Article IV of any Security Document or in the Subsidiary
Guaranty; or (c) the Borrower or any other Loan Party shall fail to observe or
perform any covenant or agreement contained in this Agreement or any other Loan
Document to which it is a party (other than those specified in Sections 7.01 and
-------------
7.02 above, in clauses (a) and (b) of this Section 7.03 and in clause (a) of
- ---- ----------- --- ------------ ----------
Section 6.24), and such failure shall continue unremedied or unwaived for a
- ------------
period of thirty days; provided that with respect to this clause (c) if (i) such
-------- ----------
failure cannot be cured within such thirty-day period despite the Borrower's or
such Loan Party's best efforts to do so, (ii) such failure is susceptible of
cure, (iii) the Borrower or such other Loan Party is continuously proceeding
with diligence and in good faith to cure such failure and (iv) the existence of
such failure has not had and could not reasonably be expected to have a Material
Adverse Effect, then, with the consent of the Administrative Agent, such thirty-
day cure period shall be extended to such date, not to exceed a total ninety-day
cure period, as shall be necessary for the Borrower or such other Loan Party to
cure such failure.
SECTION 7.04. Involuntary Bankruptcy Proceeding, etc. An involuntary
--------------------------------------
proceeding shall be commenced or an involuntary petition shall be filed seeking
(a) liquidation, reorganization or other relief in respect of the Borrower or
any other Obligor or its debts, or of a substantial part of its assets, under
any Federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect or (b) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower or any
other Obligor or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for 60 days or an order
or decree approving or ordering any of the foregoing shall be entered; provided
--------
that, with respect to the Contractor, such proceeding shall not constitute an
Event of Default hereunder if such proceeding occurs on or after the Commercial
Operation Date, so long as such proceeding could not reasonably be expected to
have a Material Adverse Effect.
SECTION 7.05. Voluntary Bankruptcy Proceeding, etc. The Borrower or any
------------------------------------
other Obligor shall (a) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (b) consent to the institution of any proceeding or petition described
in Section 7.04, (c) apply for or consent to the appointment of a receiver,
------------
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or any other Obligor or for a substantial part of its assets, (d) file
an answer admitting the material allegations of a petition filed against it in
any such proceeding, (e) make a general assignment for the benefit of creditors
or (f) take any action for the purpose of effecting any of the foregoing;
provided that, with respect to the Contractor, any such event shall not
- --------
constitute an Event of Default hereunder if such event occurs on or after the
Commercial Operation Date, so long as such event could not reasonably be
expected to have a Material Adverse Effect.
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SECTION 7.06. Judgments. One or more final judgments (a) for the payment
---------
of money in an aggregate amount (not paid or covered by insurance) in excess of
$5,000,000 shall be rendered against the Borrower or any other Loan Party and
the same shall not have been vacated, discharged, stayed or bonded pending
appeal within 45 days from the entry thereof or (b) shall be entered in the form
of an injunction or similar form of relief requiring suspension or abandonment
of the construction, installation or operation of the System and such injunction
or similar relief shall not have been stayed, discharged or vacated within 60
days.
SECTION 7.07. ERISA. An ERISA Event shall have occurred that, in the
-----
opinion of the Required Lenders, when taken together with all other ERISA Events
that have occurred, could reasonably be expected to have a Material Adverse
Effect.
SECTION 7.08. Impairment of Security, etc. (a) Any Loan Document shall
---------------------------
cease to be in full force and effect or the Borrower or any other Loan Party
shall so assert in writing; (b) the Lien as to any material portion of the
Collateral created by any Security Document shall cease to be enforceable or, in
the case of Perfectible Collateral, of the same effect and priority purported to
be created thereby, or (c) the Supply Contract Guaranty shall cease to be in
full force and effect (except as a result of the express provisions thereof) or
the Supply Contract Guarantor shall so assert in writing.
SECTION 7.09. Commercial Operation. The Commercial Operation Date shall
--------------------
not have occurred by the Guaranteed Completion Date.
SECTION 7.10. Impairment of System Contract. Any Material System Contract
-----------------------------
shall cease to be valid and binding and in full force and effect, other than as
contemplated by the terms of Section 6.07; provided that, with respect to any
------------ --------
such Material System Contract (other than the Supply Contract Guaranty), it
shall not constitute an Event of Default under this Section so long as such
event is cured by the Borrower by replacing such Material System Contract with
the consent of the Required Lenders (such consent not to be unreasonably
withheld or delayed) within 60 days of such event.
SECTION 7.11. Default Under System Contract. (a) Any party to any System
-----------------------------
Contract (other than a Capacity Sales Agreement, a Capacity Swap Agreement and
the Supply Contract) shall be in material default thereunder and, other than
with respect to the Supply Contract Guaranty, such default shall continue
unremedied for 30 consecutive days (60 consecutive days where the defaulting
party is undertaking to use reasonable efforts to cure the default) and such
default could reasonably be expected to have a Material Adverse Effect, unless
any such System Contract has been replaced with the consent of the Required
Lenders (such consent not to be unreasonably withheld or delayed) within 60 days
of such default, or (b) prior to System Final Completion, an "Event of Default"
(as defined in the Supply Contract) shall have occurred and be continuing under
the Supply Contract, unless the Supply Contract has been replaced with the prior
written consent of the Required Lenders (such consent not to be unreasonably
withheld or delayed) within 60 days of such event or the Supply Contract
Guarantor is diligently performing its obligations under the Supply Contract
Guaranty and has cured such "Event of Default" within
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such 60-day period, it being understood that a failure of the Contractor to
achieve the Commercial Operation Date by the Scheduled RFS Date shall not
constitute an Event of Default under this Section so long as it achieves the
Commercial Operation Date by the Guaranteed Completion Date.
SECTION 7.12. Liquidated Damages. The Contractor shall fail to pay when
------------------
due (after any permitted grace periods) any amounts owing as liquidated damages
under Article 22 of the Supply Contract (unless the Supply Contract Guarantor is
duly performing under the Supply Contract Guaranty).
SECTION 7.13. Revocation of Landing License, etc. Any Landing License or
----------------------------------
other Governmental Action which shall at the time be necessary for the
performance of any material System Activity in a manner contemplated under the
Loan Documents and the System Contracts shall be revoked or shall otherwise
terminate (or shall be amended or modified in a materially adverse manner) and
such revocation or termination (or such amendment or modification thereof) could
reasonably be expected to have a Material Adverse Effect, unless such Landing
License or Governmental Action is replaceable and is replaced with the prior
written consent of the Required Lenders (such consent not to be unreasonably
withheld or delayed) with an alternative Landing License or Governmental Action
permitting the performance of such System Activity within 60 days of the
occurrence of such event.
SECTION 7.14. Change in Control. A Change in Control shall occur.
-----------------
SECTION 7.15. Default on Other Indebtedness. The Borrower or any other
-----------------------------
Loan Party shall (a) default in any payment of principal of or interest on any
Indebtedness (other than Indebtedness under the Loan Documents) or in the
payment of any obligations under Hedging Agreements, in any case in an aggregate
amount in excess of $5,000,000 beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness was created, or (b)
default in the performance of any other agreement relating to any Indebtedness
(other than Indebtedness under the Loan Documents) or contained in any
instrument or agreement evidencing, securing or relating thereto, in each case
beyond the period of grace, if any, provided therein, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or permit the holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity.
SECTION 7.16. Delay in Construction or Installation. The construction
-------------------------------------
or installation of the System shall be suspended under Article 15 of the Supply
Contract for more than 60 consecutive days or 90 days in the aggregate or the
System (or any Segment thereof) shall be abandoned by the Borrower.
SECTION 7.17. Term C Loan Guarantor. The Term C Loan Guarantor shall,
---------------------
at any time during any Term C Loan Guaranteed Period, (a) have a long-term
senior unsecured debt rating of less than BBB- from Standard & Poor's Rating
Services or Baa3 from Moody's Investors Services, Inc. or (b) fail to observe or
perform any covenant or agreement contained in
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the Term C Loan Guaranty, and such failure shall continue unremedied for a
period of thirty days.
If any Event of Default described in Sections 7.04 or 7.05 shall occur with
------------- ----
respect to the Borrower or any Subsidiary, the Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest thereon and all fees and other Obligations of the Borrower accrued
hereunder, and an amount equal to 100% of all LC Exposure, shall automatically
become immediately due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
If any Event of Default (other than any Event of Default described in
Section 7.04 or 7.05) shall occur for any reason, whether voluntary or
- ------------ ----
involuntary, and be continuing, the Administrative Agent may, and at the request
or with the consent of the Majority Lenders shall, by notice to the Borrower,
take any or all of the following actions, at the same or different times: (a)
terminate the Commitments, and thereupon the Commitments shall terminate
immediately, (b) declare the Loans then outstanding to be due and payable in
whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other Obligations of the Borrower accrued
hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower, (c) demand that the Borrower immediately pay to the Administrative
Agent an amount equal to 100% of the LC Exposure whereupon the Borrower shall
immediately make such payment to the Administrative Agent which shall hold such
amount in a cash collateral account to secure the LC Exposure, and (iv) exercise
such other rights or remedies as the Lenders may have under the Loan Documents
or applicable law.
ARTICLE VIII
ACCOUNTS
--------
SECTION 8.01. Creation of Accounts. (a) The Administrative Agent hereby
--------------------
establishes the following thirteen special, segregated and irrevocable cash
collateral accounts in the name of the Borrower and for the benefit of the
Lenders, which accounts shall be maintained by the Administrative Agent at all
times until the termination of this Agreement and the payment in full of all
Obligations:
(1) Construction Account;
(2) Revenue Account;
(3) Special Payment Account;
(4) Debt Reserve Account;
(5) Parent Interest Reserve Account;
(6) Operating Reserve Account;
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(7) Insurance Proceeds Account;
(8) Clean-Up Account;
(9) Sales and Issuances Proceeds Account;
(10) Construction Contingency Reserve Account;
(11) Current Account;
(12) Backhaul Reserve Account; and
(13) System Upgrade Reserve Account.
(b) The Administrative Agent hereby establishes special, segregated and
irrevocable cash collateral accounts, each in the name of the applicable
Subsidiary and for the benefit of the Lenders, which accounts shall be
maintained by the Administrative Agent at all times until the termination of
this Agreement and the payment in full of all Obligations.
(c) The Administrative Agent hereby establishes a special segregated
account in the name of the Borrower entitled "Borrower Net Equity Proceeds
Account" for the deposit of the Net Equity Proceeds and the Parent Senior Note
Proceeds (in each case net of the fees and expenses set forth in the Capital
Budget), which account shall be maintained by the Administrative Agent at all
times until the amounts on deposit therein have been spent or applied in
accordance with the terms hereof.
(d) All moneys, investments and securities at any time on deposit in any
of the Accounts shall be under the sole dominion and control of the
Administrative Agent and shall constitute Collateral in accordance with the
terms of the Security Documents to be held in the custody of the Administrative
Agent for the purposes and on the terms set forth in the Security Documents and
this Article VIII. All moneys, investments and securities at any time on
------------
deposit in the Borrower Equity Proceeds Account or in any Checking Account shall
not constitute Collateral.
SECTION 8.02. Required Deposits into the Accounts.
-----------------------------------
(a) Construction Account. (i) Each Lender shall, subject to Sections
-------------------- --------
8.02(b) and 8.02(i), fund each Loan made by it hereunder directly to the
- ------- -------
Administrative Agent for deposit in the Construction Account.
(ii) On each date on which the Borrower receives Equity Contributions
from Parent (excluding Equity Contributions which do not constitute Net Cash
Proceeds) prior to the payment of all Capital Costs, the Borrower shall, subject
to the provisions of Section 8.02(j), deposit such Equity Contributions in the
---------------
Construction Account.
(iii) On any date after the Closing Date and prior to the Commercial
Operation Date on which the Borrower receives payment under any Hedging
Agreement, the Borrower shall deposit such payment into the Construction
Account.
(b) Dispute Account. Subject to the satisfaction or waiver by the
---------------
Majority Lenders of the applicable conditions precedent set forth herein, each
Lender shall fund the disputed portion
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of any Loan made by it hereunder directly to the Payment Escrow Agent for
deposit into the Dispute Account in accordance with the terms of the Supply
Contract and of the Payment Escrow Agreement. The disputed portion of any Loan
shall be that amount indicated by the Borrower or the Independent Engineer as
being in dispute in the certificate attached to the monthly Construction
Progress Certificate delivered in connection with such Loan.
(c) Revenue Account. Subject to Section 8.02(j), the Borrower and the
--------------- ---------------
Subsidiaries shall deposit all Revenue received in cash in the Revenue Account;
provided that with respect to Revenue received by any Subsidiary in a country in
- --------
which applicable laws therein restrict the transfer of such Revenue to the
Revenue Account, such Revenue shall be held and applied on terms reasonably
satisfactory to the Designated Agents.
(d) Special Payment Account. The Borrower and the Subsidiaries shall
-----------------------
deposit all Special Payments in the Special Payment Account.
(e) Debt Reserve Account. The Administrative Agent shall transfer amounts
--------------------
on deposit in the Revenue Account to the Debt Reserve Account in accordance with
Sections 8.08(a) and 8.08(d).
- ---------------- -------
(f) Parent Interest Reserve Account. The Administrative Agent shall
-------------------------------
transfer amounts on deposit in the Revenue Account to the Parent Interest
Reserve Account in accordance with Sections 8.08(a) and 8.08(d).
---------------- -------
(g) Operating Reserve Account. The Administrative Agent shall transfer
-------------------------
amounts on deposit in the Revenue Account to the Operating Reserve Account in
accordance with Sections 8.08(a) and 8.08(d).
---------------- -------
(h) Insurance Proceeds Account. The Borrower, the Subsidiaries and the
--------------------------
Administrative Agent shall deposit all Casualty Proceeds in the Insurance
Proceeds Account.
(i) Clean-Up Account. Subject to the satisfaction or waiver by the
----------------
Majority Lenders of the applicable conditions precedent set forth herein, each
Lender shall fund the Loan made by it hereunder on the last day of the
Availability Period in respect of Capital Costs which are not yet due directly
to the Administrative Agent for deposit in the Clean-Up Account.
(j) Sales and Issuances Proceeds Account. The Borrower and the
------------------------------------
Subsidiaries shall deposit all Net Cash Proceeds in the Sales and Issuances
Proceeds Account.
(k) Construction Contingency Reserve Account. The Administrative Agent
----------------------------------------
shall transfer amounts on deposit in the Revenue Account to the Construction
Contingency Reserve Account in accordance with Section 8.08(a).
---------------
(l) Current Account. The Administrative Agent shall transfer amounts on
---------------
deposit in the Revenue Account to the Current Account in accordance with Section
-------
8.08(b).
- -------
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<PAGE>
(m) Backhaul Reserve Account. The Administrative Agent shall transfer
------------------------
amounts on deposit in the Revenue Account to the Backhaul Reserve Account in
accordance with Sections 8.08(a) and 8.08(d).
---------------- -------
(n) System Upgrade Reserve Account. The Administrative Agent shall
------------------------------
transfer amounts on deposit in the Revenue Account to the System Upgrade Reserve
Account in accordance with Section 8.08(d).
---------------
(o) Subsidiary Accounts. The Administrative Agent shall deposit all
-------------------
capital contributions or loans, as the case may be, from the Borrower to any
Subsidiary directly in the applicable Subsidiary Account from amounts on deposit
in the Construction Account. The Administrative Agent will transfer all
payments by the Borrower to any Subsidiary under any Intercompany Agreement
directly to the applicable Subsidiary Account from amounts on deposit in the
Revenue Account in accordance with Sections 8.07(b), 8.08(a), 8.08(b), 8.12(a)
---------------- ------- ------- -------
and 8.16(a).
-------
(p) Borrower Equity Proceeds Account. On the Closing Date, the Borrower
--------------------------------
shall deposit the Equity Contributions made by Parent to the Borrower on the
Closing Date in the Borrower Equity Proceeds Account; provided that the Borrower
--------
may deposit up to $1,000,000 of such Equity Contributions in one or more
Checking Accounts designated by the Borrower.
SECTION 8.03. Deposits Held as Cash Collateral and Deposits in the
----------------------------------------------------
Borrower Equity Proceeds Account. The Administrative Agent agrees to accept all
- --------------------------------
revenue, cash, payments, insurance and casualty proceeds, other amounts and
Permitted Investments to be delivered to or held by the Administrative Agent
pursuant to the terms of this Agreement. The Administrative Agent shall hold
and safeguard the Accounts and the Borrower Equity Proceeds Account (and, in
each case, the revenues, cash, payments, insurance and casualty proceeds,
instruments, securities and other amounts on deposit therein) during the term of
this Agreement and shall treat the revenues, cash, payments, insurance and
casualty proceeds, instruments, securities and other amounts in the Accounts as
funds, instruments, securities and other properties pledged by the Borrower (or
the applicable Subsidiary, in the case of the Subsidiary Accounts) to the
Administrative Agent as collateral securing the Obligations in accordance with
the provisions of this Agreement and the Security Documents.
SECTION 8.04. Source of Payments; Deposits Irrevocable. (a) If the
----------------------------------------
Administrative Agent shall be unable to determine the source of any payments
received or the Account or Accounts into which such payments are to be
deposited, the Administrative Agent shall hold such amounts in the Revenue
Account (and such amounts shall not be applied in accordance with Section 8.08)
------------
until its proper application is identified.
(b) Any deposit made into any Account hereunder shall, absent manifest
error, be irrevocable and the amount of such deposit and any instrument or
security held in such Account and all interest thereon shall be held in trust by
the Administrative Agent and applied solely as provided in this Article VIII.
------------
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SECTION 8.05. Books of Account; Statements. (a) The Administrative
----------------------------
Agent shall maintain books of account on a cash basis and record therein all
deposits into and transfers to and from the Accounts and all investment
transactions effected by the Administrative Agent pursuant to Section 8.26, and
------------
any such recordation shall constitute prima facie evidence of the information
----- -----
recorded.
(b) Not later than the tenth Business Day of each month, commencing with
the first month to occur after the earlier of (i) the date the Primary Ring
becomes operational and (ii) the receipt of Net Cash Proceeds or Casualty
Proceeds, the Administrative Agent shall deliver to the Borrower a statement
setting forth the transactions in each Account during the preceding month and
specifying the Revenue, Net Cash Proceeds, Special Payments, Casualty Proceeds,
cash equivalents and other amounts held in each Account at the close of business
on the last Business Day of the preceding month; provided that the
--------
Administrative Agent shall promptly respond (during normal business hours) to
requests by the Borrower concerning information regarding deposits, investments
and transfers in and among the Accounts.
SECTION 8.06. Location of the Accounts. The Accounts shall be
------------------------
maintained by the Administrative Agent at its office located at 909 Fannin,
Suite 1700, Houston, Texas 77010, until the Administrative Agent gives written
notice to the other parties to this Agreement setting forth a different location
of the Accounts, in the manner specified in Section 10.01; provided that such
------------- --------
location shall be in Houston, Texas.
SECTION 8.07. Construction Account. (a) On each Borrowing Date, the
--------------------
Administrative Agent shall distribute, from amounts on deposit in the
Construction Account, directly to each Person to which an amount in excess of
$200,000 is due and payable (and otherwise to the Checking Accounts designated
by the Borrower for the benefit of the Persons entitled thereto), the amounts
identified as Capital Costs then due and payable in the Borrowing Request
delivered in connection with such Borrowing Date.
(b) If, prior to the Commercial Operation Date and after all amounts on
deposit in the Borrower Equity Proceeds Account have been spent in accordance
with the terms hereof, the amounts due and owing to any Subsidiary under any
Intercompany Agreement exceed the amounts distributed to such Subsidiary
pursuant to clause first of Section 8.08(a), and no amounts remain on deposit in
------------ ---------------
the Operating Reserve Account and the Construction Contingency Reserve Account,
the Administrative Agent shall distribute to such Subsidiary, from amounts on
deposit in the Construction Account, the remaining amounts due and owing to such
Subsidiary under any Intercompany Agreement.
(c) If, prior to the Commercial Operation Date and after all amounts on
deposit in the Borrower Equity Proceeds Account have been spent in accordance
with the terms hereof, OA&M Expenses, SG&A Expenses and Term C Loan Guaranty
Fees of the Borrower due and payable exceed the amounts distributed in respect
thereof pursuant to clause first of Section 8.08(a), and no amounts remain on
------------ ---------------
deposit in the Operating Reserve Account and the Construction Contingency
Reserve Account, the Administrative Agent shall distribute to the
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Person entitled thereto, from amounts on deposit in the Construction Account, an
amount equal to such OA&M Expenses, SG&A Expenses and Term C Loan Guaranty Fees
of the Borrower remaining unpaid; provided that amounts distributed in respect
--------
of OA&M Expenses and SG&A Expenses pursuant to this paragraph (b), Section
------------- -------
8.12(b), Section 8.16(b), Section 8.22(a) and clause first of Section 8.08(a)
- ------- --------------- ---------------
shall not in the aggregate exceed (x) $7,500,000 in any calendar quarter or (y)
the amounts allocated therefor in the then current Operating Budget.
(d) If, prior to the Commercial Operation Date and after all amounts on
deposit in the Borrower Equity Proceeds Account have been spent in accordance
with the terms hereof, insufficient Revenue has been received for application
thereto pursuant to clause tenth of Section 8.08(a), the Administrative Agent
------------ ---------------
shall, upon receipt by it of a certificate of the Borrower (which shall be
delivered no more frequently than once a month), distribute, from amounts on
deposit in the Construction Account, to one or more Checking Accounts designated
by the Borrower; provided that the aggregate amount distributed to such Checking
--------
Accounts pursuant to this paragraph (d), Section 8.08(a) and Section 8.08(d)
------------- --------------- ---------------
shall not in exceed $1,000,000 in any calendar year.
SECTION 8.08. Revenue Account.
---------------
(a) Transfers Prior to the Commercial Operation Date. The Administrative
------------------------------------------------
Agent shall, upon receipt by it of a certificate of the Borrower prior to the
Commercial Operation Date (which shall be delivered no more frequently than once
a month), and in any event on the Commercial Operation Date, distribute, from
amounts on deposit in the Revenue Account, the following amounts in the
following order of priority:
first, (i) to the Borrower (or such other Person as may be entitled
-----
thereto), all OA&M Expenses and SG&A Expenses of the Borrower then due and
payable, (ii) to each Subsidiary's Subsidiary Account, all OA&M Expenses
and SG&A Expenses of such Subsidiary then due and payable, (iii) to the
Term C Loan Guarantor, all Term C Loan Guaranty Fees then due and payable
and (iv) to Parent, all Parent Expenses then due and payable; provided that
--------
(A) amounts distributed to pay OA&M Expenses and SG&A Expenses of the
Borrower and the Subsidiaries shall not exceed $7,500,000 in the aggregate
in any fiscal quarter, and (B) amounts distributed to Parent to pay Parent
Expenses shall not exceed $300,000 in the aggregate (which amount may be
increased with the consent of the Designated Agents to the extent such
increase is necessary to pay Parent Expenses) in any calendar year;
second, to the Administrative Agent, for the account of the Lenders,
------
the amount of all fees payable pursuant to the terms of the Loan Documents,
which the Administrative Agent certifies to the Borrower to be due and
payable on such date;
third, to the Administrative Agent, for the account of the Lenders,
-----
the amount, if any, equal to the interest on the Loans and under Hedging
Agreements which the Administrative Agent certifies to the Borrower to be
due and payable under the Loan
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Documents on such date;
fourth, so long as no Blockage Event has occurred and is continuing,
------
to Parent, an amount equal to the interest due and payable on the Parent
Senior Notes or on any Parent Additional Notes on the next succeeding
January 15 or July 15 (or other applicable interest payment date), as the
case may be, as certified by the Borrower to the Administrative Agent,
together with any such interest distributable pursuant to this clause
------
fourth which was blocked for any prior period and has not otherwise been
------
paid pursuant to this clause fourth or from amounts on deposit in the
-------------
Parent Interest Reserve Account;
fifth, until such time as $15,000,000 in the aggregate shall have been
-----
deposited therein pursuant to this clause fifth on or prior to the
------------
Commercial Operation Date, to the Construction Contingency Reserve Account,
to be applied in accordance with Section 8.16;
------------
sixth, until such time as $34,000,000 (provided that such amount shall
----- --------
be increased to $48,000,000 from and after the date that is six months
prior to the Initial Principal Payment Date) in the aggregate shall have
been deposited therein pursuant to this clause sixth on or prior to the
------------
Commercial Operation Date, to the Debt Reserve Account, to be applied in
accordance with Section 8.10;
------------
seventh, until such time as $19,500,000 in the aggregate shall have
-------
been deposited therein pursuant to this clause seventh on or prior to the
--------------
Commercial Operation Date, to the Parent Interest Reserve Account, to be
applied in accordance with Section 8.11;
------------
eighth, until such time as $5,000,000 in the aggregate shall have been
------
deposited therein pursuant to this clause eighth on or prior to the
-------------
Commercial Operation Date, to the Operating Reserve Account, to be applied
in accordance with Section 8.12;
------------
ninth, to the Backhaul Reserve Account to be applied in accordance
-----
with Section 8.19, at the Borrower's option, up to an amount equal to 70%
------------
of Backhaul Service Revenue received since the last certificate received by
the Administrative Agent under this Section 8.08(a);
---------------
tenth, at the Borrower's option, to one or more Checking Accounts;
-----
provided that the aggregate amount distributed to such Checking Accounts
--------
pursuant to this clause tenth, Section 8.07(d) and Section 8.08(d) shall
------------ --------------- ---------------
not in exceed $1,000,000 in any calendar year;
eleventh, to the Administrative Agent, for the account of the Lenders,
--------
up to an amount sufficient to pay all Loans in full, together with accrued
interest thereon and all other amounts payable under this Agreement and the
other Loan Documents; and
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twelfth, thereafter, to the Borrower, to be applied to such purposes
-------
(including the making of equity dividends) as the Borrower may direct.
(b) Monthly Payment of OA&M Expenses, SG&A Expenses and Intercompany
----------------------------------------------------------------
Payments After the Commercial Operation Date. (i) On or before the twentieth
- --------------------------------------------
day of each month occurring after the Commercial Operation Date (or if such day
is not a Business Day, the immediately preceding Business Day), the Borrower
shall deliver to the Administrative Agent an Expense Certificate requesting
distributions to be made from the Revenue Account to pay OA&M Expenses and SG&A
Expenses. The approval of the Designated Agents shall be required for the
payment of OA&M Expenses and SG&A Expenses which would cause an Operating Budget
Deviation and the approval of the Majority Lenders shall be required if such
payment would cause a Material Operating Budget Deviation. On the twenty-fifth
day of each month (or if such date is not a Business Day, the immediately
succeeding Business Day) (each such date, a "Monthly Expense Transfer Date"),
-----------------------------
the Administrative Agent shall distribute, from amounts on deposit in the
Revenue Account, (A) directly to each Person (other than the Borrower or a
Subsidiary) to which an amount in excess of $200,000 is due and payable, the
amounts identified as OA&M Expenses and SG&A Expenses of the Borrower then due
and owing in Item 1 of the Expense Certificate referred to above, (B) to the
Checking Accounts designated by the Borrower for the benefit of the Persons
entitled thereto, all other OA&M Expenses and SG&A Expenses of the Borrower then
due and owing in Item 1 of such Expense Certificate and (C) to the Current
Account, the amounts identified as OA&M Expenses and SG&A Expenses of the
Borrower expected to be due and owing prior to the next Monthly Expense Transfer
Date in Item 2 of such Expense Certificate; provided that amounts distributed to
--------
pay OA&M Expenses and SG&A Expenses of the Borrower and the Subsidiaries shall
not exceed $10,500,000 in the aggregate in any fiscal quarter occurring after
the Commercial Operation Date. In addition, the Administrative Agent shall
distribute directly to each Subsidiary Account, from amounts on deposit in the
Revenue Account, the amounts due and owing by the Borrower to the applicable
Subsidiary under any Intercompany Agreement as set forth in Item 3 of the
Expense Certificate and the amounts identified as OA&M Expenses and SG&A
Expenses of the applicable Subsidiary identified in Items 1 and 2 of the Expense
Certificate.
(ii) If any portion of the Contract Price is due and owing and remains
unpaid (and such unpaid portion is not required pursuant to the terms of this
Agreement to be paid from another specified source, unless amounts are not
actually available from such other source), the Borrower shall be permitted to
deliver a certificate to the Administrative Agent setting forth such unpaid
amounts and the Administrative Agent shall promptly distribute, from amounts on
deposit in the Revenue Account, the portion of the Contract Price remaining
unpaid.
(c) Additional Monthly Transfers After the Commercial Operation Date. On
----------------------------------------------------------------
the last Business Day of each calendar month occurring after the Commercial
Operation Date, the Administrative Agent shall distribute, from amounts on
deposit in the Revenue Account (after making any distributions required by
Section 8.08(b)), the following amounts in the following order of priority:
- ---------------
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first, to the Term C Loan Guarantor, the amount of all Term C Loan
-----
Guaranty Fees due and payable on such date;
second, to the Administrative Agent, for the account of the Lenders,
------
the amount of all fees payable pursuant to the terms of the Loan Documents,
which the Administrative Agent certifies to the Borrower to be due and
payable on such date;
third, to the Administrative Agent, for the account of the Lenders,
-----
the amount, if any, equal to the interest on the Loans and under Hedging
Agreements which the Administrative Agent certifies to the Borrower to be
due and payable under the Loan Documents on such date;
fourth, if such date is a Principal Payment Date, to the
------
Administrative Agent, for the account of the Lenders, the amount, if any,
equal to the principal (excluding any mandatory prepayments thereof) which
the Administrative Agent certifies to the Borrower to be due and payable on
such date;
fifth, to TBI and GCL, as applicable, an amount equal to the amount of
-----
payments due and payable for capital expenditures to be made by TBI and GCL
in the next month and included in the Capital Budget, as set forth in a
certificate of the Borrower delivered to the Administrative Agent (provided
--------
that with respect to GCL, capital expenditures in any calendar year shall
not exceed an amount equal to the sum of (i) $5,000,000 plus (ii) 50% of
GCL's Revenue for such calendar year); and
sixth, until such time as $300,000 in the aggregate (which amount may
-----
be increased with the consent of the Designated Agents to the extent such
increase is necessary to pay Parent Expenses) shall have been distributed
pursuant to this clause fifth in any calendar year, to Parent, an amount
------------
equal to all Parent Expenses then due and payable.
(d) Semi-Annual Transfers After the Commercial Operation Date. On each
---------------------------------------------------------
Principal Payment Date, the Administrative Agent shall distribute, from amounts
on deposit in the Revenue Account (after making any distributions required by
Sections 8.08(b) and 8.08(c)), the following amounts in the following order of
- ---------------- -------
priority:
first, to the Debt Reserve Account, an amount sufficient to cause the
-----
amounts on deposit therein to equal the Debt Reserve Amount (as set forth
in the most recent certificate of the Borrower delivered pursuant to
Section 5.02(f));
---------------
second, to the Parent Interest Reserve Account, an amount sufficient
------
to cause the amounts on deposit therein to equal the Parent Interest
Reserve Amount (as set forth in the most recent certificate of the Borrower
delivered pursuant to Section 5.02(f));
---------------
third, to the Operating Reserve Account, an amount sufficient to cause
-----
the
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<PAGE>
amounts on deposit therein to equal the Operating Reserve Amount (as set
forth in the most recent certificate of the Borrower delivered pursuant to
Section 5.02(f));
---------------
fourth, so long as no Blockage Event has occurred and is continuing,
------
to Parent, an amount equal to the interest due and payable on the Parent
Senior Notes or on any Parent Additional Notes on the next succeeding
January 15 or July 15 (or other applicable interest payment date), as the
case may be, as certified by the Borrower to the Administrative Agent,
together with any such interest distributable pursuant to this clause
------
fourth which was blocked for any prior period and has not otherwise been
------
paid pursuant to this clause fourth or from amounts on deposit in the
-------------
Parent Interest Reserve Account;
fifth, to the Backhaul Reserve Account, to be applied in accordance
-----
with Section 8.18, at the Borrower's option, up to an amount equal to 80%
------------
of Backhaul Service Revenue received since the last distribution pursuant
to this clause fifth;
------------
sixth, to the System Upgrade Reserve Account, to be applied in
-----
accordance with Section 8.19, at the Borrower's option, up to an amount
------------
equal to $10,000,000 in the aggregate shall be distributed pursuant to this
clause sixth.
------------
seventh, at the Borrower's option, to one or more Checking Accounts;
-------
provided that the aggregate amount distributed to such Checking Accounts
--------
pursuant to this clause seventh, Section 8.07(d) and Section 8.08(a) shall
-------------- --------------- ---------------
not in exceed $1,000,000 in any calendar year.
eighth, to the Administrative Agent, for the account of the Lenders,
------
an amount equal to 50% (or, if as of such date a Default or a Designated
Event has occurred and is continuing, 100%) of the remainder of the amounts
on deposit in the Revenue Account to be applied to the prepayment of the
Loans in accordance with Section 2.11(b); and
---------------
ninth, to the Borrower (or such other Person entitled thereto), to be
-----
applied (i) first to the payment of outstanding amounts owed to the Term C
Loan Guarantor under the Term C Loan Guaranty Reimbursement Agreement and
(ii) thereafter to Permitted Activities and, subject to the consent of the
Administrative Agent (such consent not to be unreasonably withheld) other
activities, the remainder, if any, of the amounts on deposit in the Revenue
Account;
provided that if an Event of Default shall have occurred and be continuing, all
- --------
amounts remaining on deposit in the Revenue Account after the payment of amounts
specified in clauses first through seventh shall be applied by the
------------- -------
Administrative Agent to the Obligations then due in such order as the Designated
Agents shall direct.
SECTION 8.09. Special Payment Account. All Special Payments deposited
-----------------------
in the Special Payment Account constituting Liquidated Damages or proceeds of
delayed opening of business insurance shall be applied by the Administrative
Agent first, to the payment of interest
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due and payable on the Loans, second, to the payment of interest on the Parent
------
Senior Notes and any Parent Additional Notes and, third, to the payment of other
-----
Capital Cost overruns resulting from the delay in the Commercial Operation Date,
in each case as and when the same shall become due and payable. All other
Special Payments shall be transferred to the Revenue Account to be applied in
accordance with Section 8.08; provided that, in the event the Supply Contract is
------------ --------
being replaced in accordance with this Agreement, such other Special Payments
shall, subject to Section 8.25, be applied by the Borrower to the costs of
------------
entering into a replacement supply agreement and to such other related costs as
shall be approved by the Administrative Agent.
SECTION 8.10. Debt Reserve Account. If, subsequent to the Commercial
--------------------
Operation Date, on any date on which the payment of principal or interest on the
Loans or fees due to the Agents or Lenders becomes due and payable, the amounts
on deposit in the Revenue Account are insufficient to make the payment
obligations set forth in clauses second, third and fourth of Section 8.08(c) on
-------------- ----- ------ ---------------
such date, the Administrative Agent shall distribute to the Lenders the amount
(to the extent amounts on deposit are available in the Debt Reserve Account)
equal to the amount of any deficiency in the payment obligations set forth in
clauses second, third and fourth of Section 8.08(c) on such date.
- -------------- ----- ------ ---------------
SECTION 8.11. Parent Interest Reserve Account. If, on any Principal
-------------------------------
Payment Date (or any other date on which interest may be due and payable on the
Parent Senior Notes or any Parent Additional Notes), the amounts on deposit in
the Revenue Account are insufficient to make the payment obligations set forth
in clause fourth of Section 8.08(a) or clause fourth of Section 8.08(d) on such
------------- --------------- ------------- ---------------
Principal Payment Date or other date, the Administrative Agent shall, subject to
the provisions of Section 8.25, transfer to Parent the amount (to the extent
------------
amounts on deposit are available in the Parent Interest Reserve Account) equal
to the amount of any deficiency in the payment obligations set forth in clause
------
fourth of Section 8.08(a) or clause fourth of Section 8.08(d) on such Principal
- ------ --------------- ------------- ---------------
Payment Date or other date.
SECTION 8.12. Operating Reserve Account. (a) If, prior to the Commercial
-------------------------
Operation Date, the amounts due and owing to any Subsidiary under any
Intercompany Agreement exceed the amounts distributed to such Subsidiary
pursuant to clause first of Section 8.08(a), the Administrative Agent shall
------------ ---------------
distribute to such Subsidiary, from amounts on deposit in the Operating Reserve
Account, the remaining amounts due and owing to such Subsidiary under any
Intercompany Agreement.
(b) If, prior to the Commercial Operation Date, OA&M Expenses, SG&A
Expenses and Term C Loan Guaranty Fees of the Borrower due and payable exceed
the amounts distributed in respect thereof pursuant to clause first of Section
------------ -------
8.08(a), the Administrative Agent shall distribute to the Person entitled
- -------
thereto, from amounts on deposit in the Operating Reserve Account, an amount
equal to such OA&M Expenses, SG&A Expenses and Term C Loan Guaranty Fees of the
Borrower remaining unpaid; provided that amounts distributed in respect of OA&M
--------
Expenses and SG&A Expenses pursuant to this paragraph (b), Section 8.22(a) and
------------- ---------------
clause first of Section 8.08(a) shall not in the aggregate exceed (x) $7,500,000
- ------------ ---------------
in any calendar
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quarter or (y) the amounts allocated therefor in the then current Operating
Budget.
(c) If, subsequent to the Commercial Operation Date, on any Monthly
Expense Transfer Date, the amounts on deposit in the Revenue Account are
insufficient to make the payment obligations set forth in the Expense
Certificate (or other certificate) setting forth such OA&M Expenses and SG&A
Expenses, the Administrative Agent shall distribute to the Person(s) entitled
thereto in accordance with Section 8.08(b) the amount (to the extent amounts on
---------------
deposit are available in the Operating Reserve Account) equal to the amounts of
any deficiency in the payment of the OA&M Expenses and SG&A Expenses set forth
in such certificate.
SECTION 8.13. Insurance Proceeds Account. (a) All cash, cash
--------------------------
equivalents, instruments, investments and securities at any time on deposit in
the Insurance Proceeds Account, including all interest or other income earned
with respect thereto, are herein referred to as the "Casualty Proceeds
-----------------
Deposits".
- --------
(b) The Casualty Proceeds Deposits shall be accumulated in the Insurance
Proceeds Account and held therein until paid to or upon the order of the
Borrower as provided in paragraph (c) of this Section 8.13, paid to the
------------- ------------
Administrative Agent as provided in paragraph (d) or (e) of this Section 8.13,
------------- --- ------------
or returned to the Borrower as provided in Section 8.32.
------------
(c) Subject to the provisions of paragraphs (d) and (e) of this Section
-------------- --- -------
8.13, Casualty Proceeds Deposits shall be paid over to or upon the order of the
- ----
Borrower (or directly to the Persons entitled thereto in the case of amounts in
excess of $200,000) to reimburse it for, or to pay, the cost of repairing,
rebuilding or otherwise replacing the damaged, destroyed, lost or condemned
property in respect of which such moneys were received, upon the receipt by the
Administrative Agent of a certificate of the Borrower (A) setting forth in
reasonable detail the work done or proposed to be done and materials purchased
or to be purchased by way of the renewal, repair, rebuilding or other
replacement of the damaged, destroyed, lost or condemned property and (B)
stating the specific amount requested to be paid over to or upon the order of
the Borrower (or such other Person) or that such amount is requested to
reimburse the Borrower, as the case may be, for, or to pay, costs actually
incurred to repair, rebuild or replace property and that such amount, together
with amounts remaining in the Insurance Proceeds Account for such purpose and
other funds of the Borrower available for such purpose, are sufficient to pay in
full the costs of such renewal, repair, rebuilding or other replacement. In the
event that any amounts remain in the Insurance Proceeds Account after
application thereof in accordance with this paragraph (c), the Administrative
-------------
Agent shall transfer such Casualty Proceeds Deposits to the Revenue Account.
(d) If the Borrower shall at any time notify the Administrative Agent that
an Event of Loss has occurred, then, unless the System is being repaired in
accordance with Section 5.22, the Administrative Agent shall promptly apply the
------------
Casualty Proceeds Deposits in the Insurance Proceeds Account to the payment of
the Obligations in accordance with Section 2.11(d). If the System is being
---------------
repaired in accordance with Section 5.22, the provisions of paragraph (c) above
------------ -------------
shall apply.
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<PAGE>
(e) If an Event of Default has occurred and is continuing and the Loans
have been accelerated in accordance with Article VII, then the Administrative
-----------
Agent shall promptly apply the Casualty Proceeds Deposits in the Insurance
Proceeds Account to the payment of the Obligations in such order as the
Administrative Agent may elect.
SECTION 8.14. Clean-Up Account. The Administrative Agent shall, upon
----------------
receipt by it of a certificate of the Borrower setting forth the same
information required in a Borrowing Request with respect to the Capital Costs to
be paid (together with all applicable invoices), distribute directly to each
Person to which an amount in excess of $200,000 is due and payable (and
otherwise to the Checking Accounts designated by the Borrower for the benefit of
the Persons entitled thereto), from amounts on deposit in the Clean-Up Account,
the amounts identified as Capital Costs in such certificate as then due and
payable. The Borrower shall use reasonable efforts to submit certificates under
this Section 8.14 no more than once a month.
------------
SECTION 8.15. Sales and Issuances Proceeds Account. Amounts on deposit
------------------------------------
in the Sales and Issuances Proceeds Account shall be applied as follows:
(a) if such amounts are Net Cash Proceeds of any new issuance after
the Closing Date of Equity Interests of the Borrower or Parent, (i) an
amount equal to the portion thereof being held in accordance with the
proviso contained in clause (i) of Section 2.11(c) for application to the
---------- ---------------
payment of Permitted Costs (which shall be specified in a certificate of
the Borrower delivered to the Administrative Agent when such Net Cash
Proceeds are deposited) shall be held and applied to the payment thereof
upon receipt of a certificate of the Borrower specifying the Person(s) to
whom such Permitted Costs are due and owing (provided that any portion
thereof which is being held for the payment of Capital Costs shall be
transferred to the Construction Account or, after the Commercial Operation
Date, the Revenue Account or, after the Availability Period, the Clean-Up
Account) and (ii) the remainder shall be applied, 50% to the prepayment of
the Loans in accordance with clause (i) of Section 2.11(c) and 50% to the
---------- ---------------
Checking Accounts designated by the Borrower to be used for Permitted
Activities;
(b) if any such amounts are Net Cash Proceeds of an incurrence of
Indebtedness by the Borrower or Parent after the Closing Date (other than
Indebtedness permitted by Section 6.01, but subject in any event to the
------------
limitations contained in Section 6.01), such Net Cash Proceeds shall be
------------
applied to the prepayment of the Loans in accordance with clause (ii) of
-----------
Section 2.11(c); and
---------------
(c) if such amounts are Net Cash Proceeds in respect of any sale,
transfer, lease or other disposition of any asset of the Borrower or any
Subsidiary, (i) an amount equal to the portion thereof being held to be
reinvested in the Borrower's or any Subsidiary's business (which shall be
specified in a certificate of the Borrower delivered to the Administrative
Agent when such Net Cash proceeds are deposited) shall be held and applied
to the payment of the relevant expenses upon receipt of a certificate of
the Borrower specifying the Person(s) to whom such expenses are due and
owing, (ii) if any
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<PAGE>
such Net Cash Proceeds are not expended in accordance with clause (i) above
----------
within six months of their receipt into the Sales and Issuances Proceeds
Account, such Net Cash Proceeds (net of the portion being transferred to
the Revenue Account pursuant to clause (iii) below), shall be applied to
------------
the prepayment of the Loans in accordance with clause (iii) of Section
------------ -------
2.11(c) and (iii) all such other Net Cash Proceeds which are not being held
-------
pursuant to clause (i) above or are not being applied to the prepayment of
----------
the Loans pursuant to clause (iii) of Section 2.11(c),shall be transferred
------------ ---------------
to the Revenue Account.
SECTION 8.16. Construction Contingency Reserve Account. (a) If, prior to
----------------------------------------
the Commercial Operation Date, the amounts due and owing to any Subsidiary under
any Intercompany Agreement exceed the amounts distributed to such Subsidiary
pursuant to clause first of Section 8.08(a), and no amounts remain on deposit in
------------ ---------------
the Operating Reserve Account, the Administrative Agent shall distribute to such
Subsidiary, from amounts on deposit in the Construction Contingency Reserve
Account, the remaining amounts due and owing to such Subsidiary under any
Intercompany Agreement.
(b) If, prior to the Commercial Operation Date, OA&M Expenses, SG&A
Expenses and Term C Loan Guaranty Fees of the Borrower due and payable exceed
the amounts distributed in respect thereof pursuant to clause first of Section
------------ -------
8.08(a), and no amounts remain on deposit in the Operating Reserve Account, the
- -------
Administrative Agent shall distribute to the Person entitled thereto, from
amounts on deposit in the Construction Contingency Reserve Account, an amount
equal to such OA&M Expenses, SG&A Expenses and Term C Loan Guaranty Fees of the
Borrower remaining unpaid; provided that amounts distributed in respect of OA&M
--------
Expenses and SG&A Expenses pursuant to this paragraph (b), Section 8.12(b),
------------- ---------------
Section 8.22(a) and clause first of Section 8.08(a) shall not in the aggregate
- --------------- ------------ ---------------
exceed (x) $7,500,000 in any calendar quarter or (y) the amounts allocated
therefor in the then current Operating Budget.
(c) The Administrative Agent shall distribute, from and to the extent of
amounts on deposit in the Construction Contingency Reserve Account and as set
forth in a certificate of the Borrower, (i) directly to each Person to which an
amount in excess of $200,000 is due and payable and (ii) otherwise, to the
Checking Accounts designated by the Borrower for the benefit of the Persons
entitled thereto, the amounts identified in such certificate as Capital Costs
overruns then due and payable in the Borrowing Request delivered in connection
with the most recent Borrowing Date.
SECTION 8.17. Current Account. The Administrative Agent shall distribute,
---------------
from and to the extent of amounts on deposit in the Current Account and as set
forth in a certificate of the Borrower, (i) directly to each Person to which an
amount in excess of $200,000 is due and payable, the amounts previously
identified as OA&M Expenses and SG&A Expenses in Item 2 of the most recently
delivered Expense Certificate which are then due and owing, or (ii) to the
Checking Accounts designated by the Borrower for the benefit of the Persons
entitled thereto, all other such OA&M Expenses and SG&A Expenses previously
identified in Item 2 of the most recently delivered Expense Certificate which
are then due and owing.
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<PAGE>
SECTION 8.18. Backhaul Reserve Account. The Administrative Agent shall
------------------------
pay from amounts on deposit in the Backhaul Reserve Account, at the Borrower's
written request, Backhaul Service Costs (whether or not set forth in the then
current Operating Budget). The Borrower's request shall be accompanied by a
certificate setting forth in reasonable detail the appropriate payment
instructions and the Backhaul Capacity in respect of which such payment is to be
made. In addition, at the Borrower's written request, the Administrative Agent
shall release the funds requested by the Borrower from the Backhaul Reserve
Account and apply them as Revenue in accordance with the provisions of Section
-------
8.08.
- ----
SECTION 8.19. System Upgrade Reserve Account. At the Borrower's written
------------------------------
request, the Administrative Agent shall distribute to the Contractor, from
amounts on deposit in the System Upgrade Reserve Account, the amount certified
by the Borrower and confirmed by the Independent Engineer to be due and owing in
respect of the a Permitted System Upgrade.
SECTION 8.20. Subsidiary Accounts. (a) If, prior to the Commercial
-------------------
Operation Date, OA&M Expenses and SG&A Expenses of a Subsidiary are due and
payable, the Administrative Agent shall distribute to the Person entitled
thereto, from amounts on deposit in such Subsidiary's Subsidiary Account, an
amount equal to such OA&M Expenses and SG&A Expenses of such Subsidiary then due
and payable to such Person.
(b) The Administrative Agent shall, on each Monthly Expense Transfer Date,
distribute, from amounts on deposit in each Subsidiary's Subsidiary Account, (i)
directly to each Person to which an amount in excess of $200,000 is due and
payable, the amount of OA&M Expenses and SG&A Expenses of such Subsidiary then
due and owing and identified in Item 1 of the Expense Certificate delivered
pursuant to Section 8.08(b) in respect of such date and (ii) to the Checking
---------------
Account of such Subsidiary designated by the Borrower for the benefit of the
Persons entitled thereto, all other OA&M Expenses and SG&A Expenses of such
Subsidiary then due and owing and identified in Item 1 of such Expense
Certificate.
(c) The Administrative Agent shall distribute to the applicable
Governmental Authority entitled thereto, from amounts on deposit in each
Subsidiary's Subsidiary Account, the amount of taxes then due and payable by
such Subsidiary (or required to be withheld from payments made by such
Subsidiary) to such Governmental Authority as set forth in a certificate of such
Subsidiary delivered to the Administrative Agent.
(d) The Administrative Agent shall, on each Subsidiary Transfer Date,
distribute to the Revenue Account, from amounts on deposit in each Subsidiary's
Subsidiary Account, the amount of such Subsidiary's Subsidiary Transfer Payment
due and payable on such date, as set forth in a certificate of the Borrower
delivered to the Administrative Agent.
SECTION 8.21. Borrower Equity Proceeds Account. On the last Business Day
--------------------------------
of each calendar month, the Administrative Agent shall distribute, from amounts
on deposit in the Borrower Equity Proceeds Account, directly to each Person to
which an amount in excess of $200,000 is due and payable (and otherwise to the
Checking Accounts designated by the
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<PAGE>
Borrower for the benefit of the Persons entitled thereto), the amounts certified
by the Borrower as Capital Costs then due and payable. Notwithstanding anything
herein to the contrary, the Borrower shall be entitled to direct, in its sole
discretion, the application of the proceeds from time to time on deposit in the
Borrower Equity Proceeds Account.
SECTION 8.22. Checking Accounts. The Borrower and the Subsidiaries shall
-----------------
each be permitted to maintain general corporate checking accounts (collectively,
the "Checking Accounts"); provided that amounts on deposit in such Checking
----------------- --------
Accounts shall only be used to pay Capital Costs in accordance with the Capital
Budget, OA&M Expenses and SG&A Expenses in accordance with the then effective
Operating Budget, Term C Loan Guaranty Fees and expenses in connection with
Permitted Activities.
SECTION 8.23. Release of Excess Amounts. If, as of any Principal Payment
-------------------------
Date, (a) an amount is on deposit in the Debt Reserve Account, the Parent
Interest Reserve Account or the Operating Reserve Account in excess of the
Required Balance for such Account as the result of the actual realization of
income or gain on the amounts on deposit in such Account and (b) no Event of
Default or Designated Event has occurred and is continuing, then the
Administrative Agent shall transfer any such excess amounts to the Revenue
Account. After the payment of all Capital Costs, amounts remaining on deposit in
the Construction Account, the Construction Contingency Reserve Account and the
Clean-Up Account shall be applied first, to fund the Debt Reserve Account, the
-----
Parent Interest Reserve Account and the Operating Reserve Account to bring the
amounts on deposit therein up to the Required Balances (in the order of priority
set forth in Section 8.08(d)) and second, to the prepayment of the Loans in
--------------- ------
accordance with Section 2.11(e).
---------------
SECTION 8.24. Acceleration. Any other provision contained in this
------------
Agreement to the contrary notwithstanding, upon the occurrence and during the
continuance of an Event of Default and after the Loans have become or have been
declared to be due and payable in accordance with Article VII, the
-----------
Administrative Agent shall then apply amounts on deposit in the Accounts to the
payment of the Obligations in such order as the Administrative Agent shall
direct.
SECTION 8.25. Investment. Any amounts held by the Administrative Agent in
----------
any Account shall be invested by the Administrative Agent from time to time as
directed in writing by the Borrower (or, if an Event of Default has occurred and
is continuing, by the Administrative Agent in its sole discretion) in Permitted
Investments. Any income or gain realized as a result of any such investment
shall be held as part of the applicable Account and reinvested as provided
herein. If any income tax is payable on account of any such income or gain, it
shall be paid by the Borrower or its Affiliates. Any such investment may be sold
(without regard to maturity date) by the Administrative Agent whenever necessary
to make any distribution required by this Agreement. The Administrative Agent
shall have no liability for any loss resulting from any such investment or sale
thereof other than by reason of its willful misconduct or gross negligence. The
Administrative Agent will promptly notify the Borrower of any loss resulting
from any such investment or sale and the Borrower may instruct the
Administrative Agent to, and the Administrative Agent shall, reimburse the
affected Account from Revenue.
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SECTION 8.26. Value. Cash and Permitted Investments on deposit from time
-----
to time in the Accounts shall be valued by the Administrative Agent as follows:
(a) cash shall be valued at the face amount thereof; and
(b) Permitted Investments shall be valued at the lesser of the face
amount and the purchase price.
SECTION 8.27. Other Determinations; Additional Accounts. The Borrower and
-----------------------------------------
the Administrative Agent may establish procedures not materially inconsistent
with this Agreement pursuant to which the Administrative Agent may conclusively
determine, for purposes of this Agreement, the amounts from time to time to be
distributed or paid by the Administrative Agent from amounts on deposit in the
Accounts or pursuant to which the Administrative Agent and the Borrower may
provide for reasonable operating and administrative flexibility. In addition,
the Borrower and the Administrative Agent may establish additional Accounts
(e.g., with respect to insurance proceeds, etc.) of the Borrower and the
Subsidiaries in order to better reflect the separateness of the Borrower's and
any Subsidiary's property or as the Borrower and the Administrative agree are
necessary, subject in each case to Liens in favor of the Administrative Agent
(for the benefit of the Secured Parties) and on terms and conditions regarding
withdrawal and application as are consistent with the terms hereof.
SECTION 8.28. Sales of Permitted Investments. The Administrative Agent
------------------------------
will use its reasonable commercial efforts to sell Permitted Investments so that
actual cash is available, on each date on which a distribution is to be made
pursuant to this Agreement, for the Administrative Agent to make such
distribution in cash on such date. The amount of any check or other instrument
which may be deposited in any Account shall not be treated as available amounts
on deposit until the final collection thereof.
SECTION 8.29. Available Cash. In determining the amount of available cash
--------------
in any Account at any time, in addition to any cash then on deposit in such
Account, the Administrative Agent shall treat as available cash the amount which
the Administrative Agent would have received on such day if the Administrative
Agent had liquidated all the Permitted Investments (at then prevailing market
prices) then on deposit in such Account.
SECTION 8.30. Purchaser Escrow Arrangements. Anything contained herein to
-----------------------------
the contrary notwithstanding, in the event a purchaser of Capacity requires that
its down payment, if any, on its purchase of Capacity be placed in escrow, the
Borrower shall be permitted to enter into customary escrow arrangements with
such purchaser; provided that once the Borrower becomes entitled to any such
--------
amounts in accordance with the terms of such escrow arrangements, such amounts
shall be deposited into the Revenue Account.
SECTION 8.31. Termination. Upon termination of this Agreement and the
-----------
payment in full of all Obligations, the Administrative Agent shall distribute
any remaining amounts on deposit in the Accounts, together with any interest
thereon, to the Borrower or as the Borrower
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may direct.
SECTION 8.32. Conflicts With Other Loan Documents. To the extent the
-----------------------------------
provisions of this Article VIII and the provisions of any other Loan Document
------------
conflict as to the application of Revenue or other amounts on deposit in the
Accounts, the provisions of this Article VIII shall take precedence.
------------
ARTICLE IX
THE ADMINISTRATIVE AGENT, OTHER AGENTS
AND AGENT RELATED PERSONS
-------------------------
SECTION 9.01. Authorization and Action. Each Lender hereby appoints and
------------------------
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement as are delegated
to the Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement (including enforcement or collection of
the Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Lenders, the Required Lenders or the
Lenders, as the case may be, for actions or refraining from acting pursuant to
the terms of this Agreement, and such instructions shall be binding upon all
Lenders and all holders of Notes; provided that the Administrative Agent shall
--------
not be required to take any action that exposes the Administrative Agent to
personal liability (unless indemnified to its reasonable satisfaction) or that
is contrary to this Agreement or applicable law. The Administrative Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrower or any of the Subsidiaries pursuant to the terms of this Agreement.
SECTION 9.02. Exculpation of, and Reliance by, Agent Related Persons.
------------------------------------------------------
Neither the Administrative Agent nor any other Agent nor any Agent Related
Person shall be liable to any Lender for any action taken or omitted to be taken
by it or them under or in connection with this Agreement or any other Loan
Document, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Administrative Agent
and each Agent Related Person:
(a) may treat the payee of any Note as the holder thereof or any
Lender as a Lender until the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by such payee or Lender, as
assignor, and an eligible assignee, as assignee, as provided in Section
-------
10.04;
-----
(b) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice
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of such counsel, accountants or experts;
(c) makes no warranty or representation to any Lender and shall not
be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with
this Agreement or any other Loan Document;
(d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of
this Agreement or any other Loan Document on the part of the Borrower, or
any of the Subsidiaries or to inspect the property (including the books and
records) of the Borrower or any of the Subsidiaries;
(e) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of,
or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, this Agreement or any
other instrument or document furnished pursuant hereto; and
(f) shall incur no liability to any Lender under or in respect of
this Agreement or any other Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by
telecopier, telegram, or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
SECTION 9.03. Agent Related Persons and Affiliates. With respect to its
------------------------------------
Commitment, the Credit Extensions made by it and any Note issued to it, Toronto
Dominion (Texas) Inc. and Credit Suisse First Boston and their respective
Affiliates shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though it were not an Agent; and the
term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include
Toronto Dominion (Texas) Inc., Credit Suisse First Boston and any Affiliate
thereof in its individual capacity. Toronto Dominion (Texas) Inc., Credit
Suisse First Boston and their Affiliates may accept deposits from, lend money
to, act as trustee under indentures of, accept investment banking engagements
from and generally engage in any kind of business with, the Borrower, any of the
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all as if Toronto Dominion (Texas) Inc., Credit
Suisse First Boston and their Affiliates were not an Agent and without any duty
to account therefor to the Lenders.
SECTION 9.04. Lender Credit Decision. Each Lender acknowledges that it
----------------------
has, independently and without reliance upon any Agent or Agent Related Person
or any other Lender and based on the financial statements referred to in Section
-------
3.01 and such other documents and information as it has deemed appropriate, made
- ----
its own credit analysis and decision to enter into this Agreement. Each Lender
also acknowledges that it will, independently and without reliance upon any
Agent or Agent Related Person or any other Lender based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
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SECTION 9.05. Indemnification. The Lenders agree to indemnify each Agent
---------------
Related Person (to the extent not reimbursed by the Borrower or the
Subsidiaries), ratably according to the respective principal amounts of the
Loans owing to them, participation interests in Working Capital Loans and
Letters of Credit and Commitments issued by them, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against such Agent Related Person in any
way relating to or arising out of this Agreement or any other Loan Document or
any action taken or omitted by such Agent Related Person under this Agreement or
any other Loan Document; provided that no Lender shall be liable to any Agent
--------
Related Person for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent Related Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse each Agent Related Person promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by such Agent
Related Person in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, to the extent that such Agent
Related Person is not reimbursed for such expenses by the Borrower or any of the
Subsidiaries.
SECTION 9.06. Collateral and Guaranty Matters. (a) The Administrative
-------------------------------
Agent is authorized on behalf of all the Lenders, without the necessity of any
notice to or further consent from the Lenders, from time to time to take any
action with respect to any collateral security or the Security Documents which
may be necessary to perfect and maintain perfected the security interest in and
Liens upon the collateral security granted pursuant to the Security Documents.
(b) The Lenders irrevocably authorize the Administrative Agent, at its
option and in its discretion, to (i) release any security interest or Lien
granted to or held by the Administrative Agent upon any collateral security (A)
upon termination of the Commitments and Letters of Credit, and payment in full
in cash of all principal of and interest on the Loans and all fees, costs,
indemnities, gross-ups and expenses that are payable under this Agreement or
under any other Loan Document and have been invoiced as of such termination date
(in which case the Lenders hereby authorize the Administrative Agent to execute,
and the Administrative Agent agrees to execute, reasonable releases in
connection with this Agreement and the Loan Documents (other than, in any event,
as to items stated to survive the termination of this Agreement or a Loan
Document)); (B) constituting property sold or to be sold or disposed of as part
of or in connection with any disposition permitted hereunder; (C) constituting
property in which the Borrower or any Subsidiary of the Borrower owned no
interest at the time the security interest and/or Lien was granted or at any
time thereafter; (D) consisting of an instrument evidencing Indebtedness or
other debt instrument, if the Indebtedness evidenced thereby has been paid in
full; or (E) if approved, authorized or ratified in writing by the Majority
Lenders or, if required by Section 10.02, the Required Lenders or each Lender,
-------------
as applicable, (ii) release any guarantor from its obligations under any
Guaranty constituting a Loan Document in the event such guarantor is not
required to be a guarantor pursuant to the terms of this Agreement (including,
in any event, the Term C Loan Guarantor at any time other than during any Term C
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Loan Guaranteed Period) and (iii) reduce the outstanding principal amount of the
Term C Loans that are guaranteed by the Term C Loan Guaranty as set forth in
Section 9.08(b). Upon request by the Administrative Agent at any time, the
- ---------------
Lenders will confirm in writing the Administrative Agent's authority to release
particular types or items of collateral security or a Guaranty pursuant to this
Section.
SECTION 9.07. Successor Administrative Agent. The Administrative Agent
------------------------------
may resign at any time by giving 30 days' written notice thereof to the Lenders
and the Borrower and may be removed at any time with or without cause by the
Majority Lenders. Upon any such resignation or removal, the Majority Lenders
shall have the right to appoint a successor Administrative Agent, with the prior
written consent of the Borrower (not to be unreasonably withheld or delayed) so
long as no Event of Default has occurred and is continuing. If no successor
Administrative Agent shall have been so appointed by the Majority Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint, with the prior written consent of
the Borrower (not to be unreasonably withheld or delayed) so long as no Event of
Default has occurred and is continuing, a successor Administrative Agent, which
shall be a Lender or a commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $250,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, discretion, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article IX shall inure to its benefit as to any actions
----------
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
SECTION 9.08. Notice of Guaranty Draw. (a) Upon the written request of
-----------------------
the Borrower, the Administrative Agent shall, in accordance with the terms of
the Term C Loan Guaranty, give a Notice of Guaranty Draw to the Term C Loan
Guarantor specifying that a Borrowing of Term C Loans is being requested that is
subject to the Term C Loan Guaranty and specifying the remaining available Term
C Loan Commitment after giving effect to such Borrowing.
(b) Prior to the expiration of the Availability Period for Term C Loans,
upon the written request of the Borrower (such request to be in form and
substance reasonably satisfactory to the Administrative Agent), the
Administrative Agent shall reduce the Contingent Guaranty Amount (as defined in
the Term C Loan Guaranty), but not below the then outstanding principal amount
of Term C Loans that are guaranteed by the Term C Loan Guaranty by giving
written notice to the Term C Loan Guarantor in accordance with the Term C Loan
Guaranty.
(c) Upon the written request of the Borrower (such request to be in form
and substance
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reasonably satisfactory to the Administrative Agent), the Administrative Agent
shall reduce the outstanding principal amount of Term C Loans that are
guaranteed by the Term C Loan Guaranty by an amount equal to the Qualified
Capacity Revenue (whether arising prior to or after the expiration of the
Availability Period for Term C Loans) not used to support Term C Loans by giving
written notice to the Term C Loan Guarantor in accordance with the Term C Loan
Guaranty, together with a written release in respect of the Term C Loan Guaranty
as to the amount of such reduction, and, at the Borrower's election, such notice
shall indicate that the reduced amount shall be added back to the Available
Committed Amount (as defined in and in accordance with the Term C Loan
Guaranty).
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.01. Notices. Except in the case of notices and other
-------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by facsimile, as follows:
(a) if to the Borrower, to it at 2 Carter's Bay Road, Southside, St.
David's DD02, Bermuda, attention of: Chief Financial Officer, copy to
General Counsel (fax: 441-296-9010);
(b) if to the Administrative Agent, to it at 909 Fannin, Suite 1700,
Houston, Texas 77010, attention of Kimberly Burleson (fax: 713-951-9921);
(c) if to the Syndication Agent, to it at Eleven Madison Avenue, New
York, New York 10010, attention of Todd Morgan (fax: 212-325-8314);
(d) if to the Issuer, to it at 909 Fannin, Suite 1700, Houston, Texas
77010, attention of Kimberly Burleson (fax: 713-951-9921); and
(e) if to any other Lender, to it at its address (or facsimile
number) set forth on Schedule 2.01.
-------------
Any party hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given (a) to the Borrower or any of the
Subsidiaries in accordance with Article VII of terms of this Agreement shall be
-----------
deemed to have been given when sent, in the case of facsimile, when delivered,
in the case of hand or overnight courier service, and three days after mailing,
in the case of certified or registered mail, or (b) to any party hereto in
accordance with the terms of this Agreement other than for purposes of the
immediately preceding clause (a), shall be deemed to have been given on the date
----------
of receipt.
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SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the
-------------------
Administrative Agent, the Issuer or any Lender in exercising any right or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Administrative Agent, the Issuer and the Lenders hereunder are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or any other Loan Document or
consent to any departure by the Borrower or any Subsidiary therefrom shall in
any event be effective unless the same shall be permitted by paragraph (b) of
-------------
this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent, any Lender or the Issuer may have had notice or
knowledge of such Default at the time.
(b) Neither this Agreement, any other Loan Document nor any provision
hereof or thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Loan Parties party
thereto and the Majority Lenders or by such Loan Parties and the Administrative
Agent with the consent of the Majority Lenders (unless expressly provided
otherwise in this Agreement); provided that no such agreement shall (i) increase
--------
the Commitment of any Lender without the written consent of such Lender, (ii)
reduce the principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the scheduled date of
payment of the principal amount of any Loan or LC Disbursement, or any interest
thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse
any such payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender affected thereby, (iv)
change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing
--------------- ---
of payments required thereby, without the written consent of each Lender, (v)
release any substantial and material portion of the Collateral (other than
releases in accordance with the terms of this Agreement or any Security
Document), amend Section 2.11(b), change the application of Revenue in
---------------
accordance with Section 8.08 or otherwise amend Article VIII without the consent
------------ ------------
of the Required Lenders, (vi) change any of the provisions of this Section or
the definition of "Required Lenders", "Majority Lenders" or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend
or modify any rights hereunder or make any determination or grant any consent
hereunder (other than to conform to any amendment or other modification made to
effectuate the provisions of Section 2.01(c)) or release all or substantially
---------------
all of the Collateral or release any guarantor (other than the Term C Loan
Guarantor at any time other than during any Term C Loan Guaranteed Period) from
its obligations under a guaranty, without the written consent of each Lender, or
(vii) amend, modify or waive the provisions of Section 2.10(c) or Section
--------------- -------
2.11(h) in such a manner as to adversely affect the rights of the Lenders
- -------
participating in any particular tranche of Term Loans without the consent of the
Lenders holding more than 50% of the aggregate amount of Term Loans outstanding
under the tranche or tranches of Term Loans adversely affected by such
amendment, modification or waiver;
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provided further that no such agreement shall amend, modify or otherwise affect
- --------
the rights or duties of the Administrative Agent or the Issuer hereunder without
the prior written consent of the Administrative Agent or the Issuer, as the case
may be. The Borrower shall deliver to the Contractor a copy of each amendment to
such Loan Document which has an impact on the Contractor promptly after
execution thereof.
SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall
----------------------------------
pay (i) all reasonable out-of-pocket expenses incurred by the Administrative
Agent, the Arranger and their respective Affiliates, including the reasonable
fees, charges and disbursements of one U.S. documentation counsel for the
Administrative Agent, the Syndication Agent, the Arranger and their respective
Affiliates, in connection with the syndication of the credit facilities provided
for herein, the structuring, preparation and negotiation of this Agreement and
the Loan Documents, and any amendments, modifications or waivers of the
provisions hereof and any other Loan Document (whether or not the transactions
contemplated hereby or thereby shall be consummated) and the reasonable fees,
charges and disbursements of one U.S. counsel for the Administrative Agent, the
Syndication Agent, the Arranger and their respective Affiliates in connection
with the ongoing administration and consideration of legal matters relevant to
any of the foregoing, including the ongoing compliance with this Agreement and
the security relating hereto and thereto, (ii) the reasonable fees and expenses
of any local counsel retained by the Administrative Agent, (iii) the reasonable
ongoing fees and expenses of the Consultants in connection with the preparation
of their reports and the ongoing fees and expenses of the Independent Engineer
and the Insurance Consultant, (iv) any expenses the Borrower or any Subsidiary
specifically agrees to pay pursuant to any provision of the Loan Documents and
(v) all reasonable out-of-pocket expenses incurred by the Administrative Agent,
the Syndication Agent, the Arranger, the Issuer or any Lender, but only in
connection with the enforcement or protection of its rights or remedies in
connection with this Agreement and the Loan Documents, including its rights
under this Section, or in connection with the Loans made or Letters of Credit
issued hereunder, including in connection with any workout, restructuring or
negotiations in respect thereof.
(b) The Borrower shall indemnify the Administrative Agent, the Syndication
Agent, the Arranger, the Issuer, each Lender and each Related Party of any of
the foregoing Persons (each such Person being called an "Indemnitee") against,
----------
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses (subject, in the case of ordinary expenses, to
the provisions of Section 10.03(a)), including the fees, charges and
----------------
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement or any agreement or instrument
contemplated hereby, the performance by the parties hereto of their respective
obligations hereunder or the consummation of the transactions contemplated
hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom
(including any refusal by the Issuer to honor a demand for payment under a
Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (iii) any presence
or release of Hazardous Materials on or from any property owned or operated by
the Borrower or any of the Subsidiaries, or any Environmental Liability related
in any way to
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the Borrower or any of the Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
--------
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses resulted from the gross negligence or wilful
misconduct of such Indemnitee or relate to a claim brought by an assignee or
Participant against the Lender making such assignment or participation.
(c) Each Indemnitee claiming any right to indemnity under paragraph (b) of
-------------
this Section by reason of the institution of any action against such Indemnitee
shall notify the Borrower thereof and shall consult with the Borrower from time
to time in connection with the defense of such action. In case any such action
shall be brought against such Indemnitee, the Borrower shall be entitled, at its
expense, to assume the defense thereof or to participate in such action with
counsel of its choice (which counsel shall be reasonably satisfactory to such
Indemnitee); provided that the Borrower may not settle any such action without
--------
the prior written consent of such Indemnitee (such consent not to be
unreasonably withheld or delayed) and the Borrower shall not be entitled to
assume the defense thereof if (i) such Indemnitee reasonably determines, on the
advice of counsel, that representation of both the Borrower and such Indemnitee
by the Borrower's counsel would present such counsel with a conflict of
interest, (ii) the defendants in, or targets of, any such action include both
such Indemnitee and the Borrower, and such Indemnitee shall have reasonably
concluded, on advice of counsel, that there may be legal defenses available to
it which are significantly different from those available to the Borrower, (iii)
the Borrower shall not have employed counsel satisfactory to such Indemnitee to
represent such Indemnitee within a reasonable time after notice of the
institution of any such action, or (iv) such Indemnitee is faced with potential
criminal liability.
SECTION 10.04. Successors and Assigns; Consent and Agreement. (a) The
---------------------------------------------
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted hereby,
except that the Borrower may not assign or otherwise transfer any of its rights
or obligations hereunder without the prior written consent of each Lender (and
any attempted assignment or transfer by the Borrower without such consent shall
be null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Issuer, the Agent Related Persons and Related Parties
of the Lenders, and with respect to clause (vi) of Section 10.02(b), the
----------- ----------------
Contractor) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees (other than to the
Borrower, any of the Subsidiaries or any of their respective Affiliates) all or
a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it) and the other
Loan Documents; provided that (i) except in the case of an assignment to a
--------
Lender, an Affiliate of any Lender or a Related Fund, no such assignment shall
be permitted without the prior written consent of each of the Borrower (unless
an Event of Default has
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occurred and is continuing), the Administrative Agent and the Issuer (which
consent shall not be unreasonably withheld or delayed), (ii) except in the case
of an assignment to a Lender, an Affiliate of any Lender or a Related Fund, or
an assignment of the entire remaining amount of the assigning Lender's
Commitment, the amount of the Commitment of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $5,000,000 unless each of the Borrower and the Administrative Agent
otherwise consent, (iii) each partial assignment shall be made as an assignment
of a proportionate part of each Class of the assigning Lender's Loans and all
the assigning Lender's rights and obligations under this Agreement, (iv) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance for its acceptance and recording in the Register,
together with a processing and recordation fee of $3,500 (which shall be paid by
the assignor and/or assignee but not the Borrower) and (v) the assignee shall
not, as of the effective date of such assignment, be entitled to receive any
greater payment under Section 2.15 or 2.17 than the assigning Lender shall be
------------ ----
entitled to receive with respect to the obligations sold. Upon acceptance and
recording pursuant to paragraph (d) of this Section, from and after the
-------------
effective date specified in each Assignment and Acceptance, the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this paragraph shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with paragraph (e) of this Section.
-------------
(c) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders and the registered
owner(s) of any obligation evidenced by a Note, and the Commitment of, and
principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The Notes and
--------
the Obligations evidenced thereby may be assigned or otherwise transferred in
whole or in part only by registration in the Register and the Note evidencing
the same shall be registered on the Register only upon surrender for
registration of assignment or transfer of the Note evidencing such obligation,
duly endorsed by (or accompanied by a written instrument of assignment or
transfer duly executed by) the registered owner thereof, and thereupon one or
more new Note(s) in the same aggregate principal amount shall be issued to the
designated assignee(s) and the old Notes shall be returned by the Administrative
Agent to the Borrower marked "canceled". No assignment of any Note or
obligation evidenced thereby shall be effective unless it has been recorded in
the Register as provided in this Section 10.04(c). The entries in the Register
----------------
shall be conclusive, and the Borrower, the Administrative Agent, the Issuer and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all
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purposes of this Agreement, notwithstanding notice to the contrary.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the processing and recordation
fee referred to in paragraph (b) of this Section, evidence of such assignee's
-------------
exemption from withholding Taxes and any written consent to such assignment
required by paragraph (b) of this Section, the Administrative Agent shall accept
-------------
such Assignment and Acceptance and record the information contained therein in
the Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent, the Syndication Agent, the Arranger or the Issuer, sell
participations to one or more banks or other entities (a "Participant") in all
-----------
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided that (i) such Lender's obligations under this Agreement shall remain
- --------
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent, the Syndication Agent, the Arranger, the Issuer and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement. Subject to paragraph (f) of this Section, the Borrower
-------------
agrees that each Participant shall be entitled to the benefits of Sections 2.15,
-------------
2.16 and 2.17 to the same extent as if it were a Lender and had acquired its
- ---- ----
interest by assignment pursuant to paragraph (b) of this Section.
-------------
(f) Notwithstanding anything to the contrary contained herein, any Lender
(a "Granting Lender") may grant to a special purpose funding vehicle (an "SPV"),
--------------- ---
identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Borrower, the option to provide to the Borrower all
or any part of any Loan that such Granting Lender would otherwise be obligated
to make to the Borrower pursuant to this Agreement; provided that (i) nothing
--------
herein shall constitute a commitment by any SPV to make any Loan and (ii) if any
SPV elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof. The making of a Loan by an SPV hereunder shall
utilize the Commitment of the Granting Lender to the same extent, and as if,
such Loan were made by such Granting Lender. Each party hereto hereby agrees
that no SPV shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the Granting
Lender). In furtherance of the foregoing, each party hereto hereby agrees
(which agreement shall survive the termination of this Agreement) that, prior to
the date that is one year and one day after the payment in full of all
outstanding commercial paper or other senior Indebtedness of an SPV, it will not
institute against, or join any other Person in instituting against, such SPV any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary in this Section 10.04(f), any
----------------
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<PAGE>
SPV may (i) with notice to, but without the prior written consent of, the
Borrower and the Administrative Agent and without paying any processing fee
therefor, assign all or a portion of its interests in any Loans to the Granting
Lender or to any financial institutions (consented to by the Borrower and the
Administrative Agent) providing liquidity and/or credit support to or for the
account of such SPV to support the funding or maintenance of Loans and (ii)
disclose on a confidential basis any non-public information relating to its
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPV. As this Section
applies to any particular SPV, this section may not be amended without the
written consent of such SPV.
(g) A Participant shall not be entitled to receive any greater payment
under Section 2.15 or 2.17 than the applicable Lender would have been entitled
------------ ----
to receive with respect to the participation sold to such Participant. A
Participant shall not be entitled to the benefits of Section 2.17 unless the
------------
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with the
provisions of Section 2.17(e) as though it were a Lender.
---------------
(h) Any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Lender, including any such pledge or assignment to a Federal Reserve Bank, and
this Section shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
--------
shall release a Lender from any of its obligations hereunder or substitute any
such assignee for such Lender as a party hereto.
SECTION 10.05. Limited Recourse. There shall be full recourse to the
----------------
Borrower and the Subsidiaries and all of their respective assets for the
liabilities of the Borrower and the Subsidiaries under this Agreement and the
other Loan Documents, but in no event shall any holder of any equity interest in
Parent (or any officer or director of such holder or any officer or director of
the Borrower or any Subsidiary, in its capacity as such) be personally liable or
obligated for such liabilities of the Borrower and the Subsidiaries.
SECTION 10.06. Survival. All covenants, agreements, representations and
--------
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 10.03
------------- ---- ---- -----
and Article IX shall survive and remain in full force and effect regardless of
----------
the consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
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<PAGE>
SECTION 10.07. Counterparts; Integration; Effectiveness. This Agreement may
----------------------------------------
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Loan Documents and any separate letter agreements with respect to fees payable
to an Agent and/or Agent Related Person constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof, except for the third, fourth, fifth and sixth paragraphs of the
Commitment Letter which shall expressly survive execution and delivery of this
Agreement and shall continue to be effective in accordance with the terms
thereof. This Agreement shall become effective when it shall have been executed
by the Administrative Agent and when the Administrative Agent shall have
received counterparts hereof which, when taken together, bear the signatures of
each of the other parties hereto, and thereafter shall be binding upon and inure
to the benefit of the parties hereto and, subject to and in accordance with
Section 10.04, their respective successors and assigns, and when the conditions
- -------------
specified in Section 4.01 have been satisfied or waived. Delivery of an
------------
executed counterpart of a signature page of this Agreement by facsimile shall be
effective as delivery of a manually executed counterpart of this Agreement.
SECTION 10.08. Severability. Any provision of this Agreement held to be
------------
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof, and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 10.09. Right of Setoff. If an Event of Default shall have occurred
---------------
and be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any of and all the obligations of
the Borrower now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 10.10. Governing Law; Jurisdiction; Consent to Service of Process.
----------------------------------------------------------
(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
(b) THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT
OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES
DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT
FROM ANY THEREOF, IN
-128-
<PAGE>
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR,
TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES
HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY
RIGHT THAT THE ADMINISTRATIVE AGENT, THE ISSUER OR ANY LENDER MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST THE
BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN
PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
- -------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(d) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.01. NOTHING IN THIS
-------------
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 10.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
--------------------
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
SECTION 10.12. Headings. Article and Section headings and the Table of
--------
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 10.13. Replacement of Independent Engineer or Insurance Consultant.
-----------------------------------------------------------
Any appointment by the Administrative Agent of a replacement engineer to act as
the "Independent Engineer" or of a replacement "Insurance Consultant" under the
Loan Documents and the
-129-
<PAGE>
System Contracts shall be subject to the approval of the Borrower, such approval
not to be unreasonably withheld or delayed.
SECTION 10.14. Confidentiality. Each of the Administrative Agent, the
---------------
Syndication Agent, the Arranger, the Issuer and the Lenders agrees to maintain
the confidentiality of the Information (as defined below) in accordance with its
customary practices for such materials, except that Information may be disclosed
(a) to its and its Affiliates' directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any governmental or regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement, (g) with the consent of the Borrower (not to be
unreasonably withheld or delayed), (h) to the extent such Information (x)
becomes publicly available other than as a result of a breach of this Section or
(y) becomes available to the Administrative Agent, the Syndication Agent, the
Arranger, the Issuer or any Lender on a nonconfidential basis from a source
other than the Borrower or (i) to any direct or indirect contractual
counterparties in swap agreements or such contractual counterparties'
professional advisors; provided that such contractual counterparty or
--------
professional advisor to such contractual counterparty agrees in writing to keep
such information confidential to the same extent required of the Lenders
hereunder. For the purposes of this Section, "Information" means all
-----------
information received from or on behalf of the Borrower relating to Parent, the
Borrower, the Subsidiaries, its business or the System, other than any such
information that is available to the Administrative Agent, the Issuer or any
Lender on a nonconfidential basis prior to disclosure by the Borrower; provided
--------
that, in the case of information received from the Borrower before or after the
date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
-130-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
GLOBENET COMMUNICATIONS
HOLDINGS LTD.
By: /S/ GREG BELBECK
_______________________________
Name: Greg Belbeck
Title: Chief Financial Officer
TORONTO DOMINION (TEXAS) INC.,
as the Administrative Agent
By:/S/ DIANE BAILEY
_______________________________
Name: Diane Bailey
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
as the Syndication Agent
By: /s/ TODD MORGAN
_______________________________
Name: Todd Morgan
Title: Director
By: /s/ NANCY SHERIDAN
_______________________________
Name: Nancy Sheridan
Title: Vice President
Signature Page 1
<PAGE>
Exhibit 4.3(b)
- --------------------------------------------------------------------------------
GLOBENET COMMUNICATIONS HOLDINGS LTD.
GUARANTY
(Qualified Capacity Agreement)
by
ALCATEL
in favor of
THE LENDERS UNDER THAT CERTAIN CREDIT AGREEMENT
DATED AS OF JULY 14, 1999
and
TORONTO DOMINION (TEXAS) INC.,
as Agent for Such Lenders
------------------------------
Dated as of July 14, 1999
------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This GUARANTY is executed on July 14, 1999, by ALCATEL, a societe anonyme
established in France (the "Guarantor"), in favor of each of the Lender Parties
---------
(hereinafter defined).
R E C I T A L S
---------------
(A) Pursuant to a Credit Agreement, dated as of July 14, 1999
(together with all amendments, supplements and other modifications, if any, from
time to time hereafter made thereto, the "Credit Agreement"), among GlobeNet
----------------
Communications Holdings Ltd., a Bermuda company (the "Company"), the various
-------
financial institutions and other entities (individually, a "Lender", and,
------
collectively, the "Lenders") as are, or may from time to time become, parties
-------
thereto and Toronto Dominion (Texas) Inc., as administrative agent (the "Agent")
-----
for the Lenders, the Lenders have made commitments to extend credit to the
Company up to $400,000,000 (which may be increased to $450,000,000 under the
conditions therein specified), which amounts shall be utilized, in part, to
finance the design, building and installation of the System.
(B) Pursuant to the Project Development and Construction Contract (as
the same may from time to time be amended, modified or supplemented, the "Supply
------
Contract") dated as of June 16, 1999, Alcatel Submarine Networks, a societe
- --------
anonyme established in France, and Alcatel Submarine Networks, Inc., a Delaware
corporation (together with any successor or assignee under the Contract,
collectively, the "Contractor"), jointly and severally, have agreed with
----------
Atlantica Network (Bermuda) Ltd., a wholly-owned subsidiary of Company, among
other things, to design, build and install the System in accordance with the
terms and conditions of the Contract.
(C) The Guarantor controls either directly or indirectly of all of
the capital stock of the Contractor.
(D) In furtherance of the business purposes of the Guarantor, the
Guarantor desires to guaranty certain of the obligations of the Company under
the Credit Agreement as provided herein.
NOW, THEREFORE, based upon the foregoing, for good and valuable
consideration the receipt of which is hereby acknowledged, and in order to
induce the Agent and the Lenders to enter into the Credit Agreement, the
Guarantor hereby agrees, for the benefit of the Agent and the Lenders, as
follows:
ARTICLE 1
Definitions
1.1 Definitions. Capitalized terms used but not otherwise defined in this
Guaranty shall have the meanings ascribed to them in the Credit Agreement. As
used in this Guaranty, the following terms have the following meanings unless
the context otherwise requires:
<PAGE>
"Available Committed Amount" means the Contingent Guaranty Amount less
--------------------------
the Guaranteed Draw Amount.
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in New York City, New York (and, solely for the
purposes of the providing and receipt of notices and the making of payments by
the Guarantor hereunder, Paris, France) are authorized or required by law to
remain closed.
"Contingent Guaranty Amount" means initially $100,000,000, which
--------------------------
amount is subject to increase up to * (but the Contingent Guaranty
Amount shall in no event exceed the amount of the Term C Loan Commitment) as
provided in Schedule 1 attached hereto. The Contingent Guaranty Amount is
subject to reduction under certain conditions as provided in this Guaranty.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR
CONFIDENTIAL TREATMENT.
"Guaranteed Draw" means an advance of principal in respect of the Term
---------------
C Loan Commitment under the Credit Agreement that is made subject to this
Guaranty by Notice of Guaranty Draw given to Guarantor by Agent as provided in
Section 9.08 of the Credit Agreement.
"Guaranteed Draw Amount" means, at the time of determination, the
----------------------
aggregate amount of principal then outstanding in respect of the Term C Loans
that is subject to this Guaranty. The Guaranteed Draw Amount (i) shall not
exceed the Contingent Guaranty Amount and (ii) shall not include any interest in
respect of the Term C Loans or any other sums advanced or due under the Credit
Agreement.
"Guaranteed Obligations" has the meaning ascribed to such term in
----------------------
Section 2.1.
"Guaranty" means this Guaranty, as it may be amended, supplemented or
--------
otherwise modified from time to time in a writing signed by the Guarantor,
Parent, Company and the Agent.
"Lender Parties" means, collectively, the Lenders, the Agent and each
--------------
of their respective successors, transferees and assigns, and "Lender Party"
------------
means any of the foregoing.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
financial condition of the Guarantor and its subsidiaries, taken as a whole, or
(b) the validity or enforceability of this Guaranty or the rights and remedies
of the Lender Parties under this Guaranty.
"Notice of Guaranty Draw" means a notice given by Agent to Guarantor
-----------------------
pursuant to Section 9.08 of the Credit Agreement (but subject to the limitations
set forth in Section 2.8 hereof) specifying that an advance of funds in respect
of the Term C Loan Commitment thereunder is made subject to this Guaranty and
specifying the remaining amount that may be borrowed under the Term C Loan
Commitment after giving effect to such advance.
2
<PAGE>
"Parent" means GlobeNet Communications Group Limited, a Bermuda
------
company.
"Party" means either Guarantor or Agent.
-----
"Person" means an individual, corporation, partnership, limited
------
liability company, trust or other entity.
"Reimbursement Agreement" means the Reimbursement Agreement of even
-----------------------
date herewith between Guarantor and Company.
ARTICLE 2
The Guaranty
2.1 The Guaranty. Except as expressly set forth herein, the Guarantor
hereby absolutely, irrevocably and unconditionally (i) guarantees to Agent
Company's prompt payment in full when due, pursuant to the terms of the Credit
Agreement, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of the Guaranteed Draw Amount (including all
such amounts which would become due but for (x) the operation of any provision
of any law that prevents the commencement or continuation of any act or actions
against a debtor such as the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. (S)362(a), and (y) the operation of any
provision of any law that disallows a claim against a debtor because such claim
is unsecured, unmatured or unenforceable such as Sections 502(b) and 506(b) of
the United States Bankruptcy Code, 11 U.S.C. (S)502(b) and (S)506(b)),
(collectively, the "Guaranteed Obligations") and (ii) indemnifies and holds
----------------------
harmless each Lender Party for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Lender Party in
enforcing any rights under this Guaranty. This Guaranty constitutes a guaranty
of payment when due and not of collection. The Guaranteed Obligations shall
conclusively be deemed to have been created in reliance upon this Guaranty.
2.2 Acceleration of Guaranty. The Guarantor agrees that, in the event of
the dissolution or insolvency of the Company or the Guarantor, or the inability
or failure of the Company or the Guarantor to pay debts as they become due, or
an assignment by the Company or the Guarantor for the benefit of creditors, or
the commencement of any case or proceeding in respect of the Company or the
Guarantor under any bankruptcy, insolvency or similar laws, and if such event
shall occur at a time when any of the Guaranteed Obligations may not then be due
and payable, the Guarantor will pay to the Agent, for the benefit of the Lender
Parties, forthwith the full amount which would be payable hereunder by the
Guarantor if all such Guaranteed Obligations were then due and payable.
2.3 Termination of Guaranty. This Guaranty shall remain in full force and
effect until all obligations of the Company in respect of Loans made pursuant to
the Term C Loan Commitment and which are subject to this Guaranty have been paid
in full in cash (including,
3
<PAGE>
without limitation, cash obtained by way of set-off), all obligations of the
Guarantor hereunder, including without limitation under Section 2.1, have been
satisfied and the Term C Loan Commitment of each Lender shall have terminated.
The Guarantor guarantees that the Guaranteed Obligations will be paid strictly
in accordance with the terms of the Credit Agreement and each other Loan
Document under which they arise, regardless of any law, regulation or order now
or hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Lender Party with respect thereto. The Guarantor's payment of a
portion, but not all, of the Guaranteed Obligations shall in no way limit,
affect, modify or abridge the Guarantor's liability, as set forth herein, for
any portion of the Guaranteed Obligations that has not been completely performed
or indefeasibly paid in full.
2.4 Guaranty Unconditional. The Guarantor agrees that the obligations of
the Guarantor hereunder shall be unconditional, absolute and irrevocable, and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by (and the Guarantor hereby waives any right
to or claim of) any of the following, whether with or without notice to or
assent by the Guarantor:
(i) any extension, renewal, settlement, compromise,
modification, waiver or release in respect of any obligation or duty of the
Company under the Credit Agreement or any other Loan Document, by operation
of law or otherwise;
(ii) any waiver, rescission, modification or amendment of,
supplement to or consent to depart from any condition under or any terms of
the Loan Documents;
(iii) any addition, exchange, surrender, release, impairment, non-
perfection, failure to maintain perfection or recordation or invalidity of
any direct or indirect security for any obligation or duty of the Company
or any other Person under the Loan Documents or any amendment to or waiver
or release or addition of, or consent to depart from, any other guaranty
held by any Lender Party securing any of the obligations of the Company
under the Credit Agreement;
(iv) any change in the corporate existence, structure or
ownership of the Company or any other Person, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the
Company or any other Person or its assets or any release or discharge of
any obligation or duty of the Company or any other Person contained in the
Loan Documents resulting from any of the foregoing;
(v) the existence of any claim, set-off or other rights which
the Guarantor may have at any time against the Company or any other Person,
whether in connection herewith or any unrelated transactions, provided that
nothing herein shall prevent the assertion of any such claim by separate
suit or compulsory counterclaim;
(vi) any invalidity, illegality, unenforceability, irregularity
or frustration for any reason of any of the Loan Documents or any actual or
purported obligations thereunder, or any provision of applicable law or
regulation purporting to prohibit the
4
<PAGE>
payment by the Company of any other amount payable by the Company under the
Loan Documents;
(vii) any impairment of the Company's duty of performance, the
Company's duty to reimburse or the Guarantor's right of restitution or
subrogation;
(viii) the failure of any Lender Party (A) to assert any claim or
demand or to enforce any right or remedy against the Company or any other
Person (including any other guarantor) under the provisions of the Credit
Agreement, any other Loan Document or otherwise, or (B) to exercise any
right or remedy against any other guarantor of, or any collateral securing,
any obligations of the Company;
(ix) any other act or omission to act or give notice or delay of
any kind by the Company or any other Person or any other circumstance
whatsoever which might, but for the provisions of this section, constitute
a legal or equitable discharge of or defense to the Guarantor's obligations
or duties hereunder; or
(x) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the Company,
any surety or any guarantor.
Notwithstanding any provision of this Guaranty to the contrary, other than
Sections 2.2 and 2.7, the Guarantor shall be entitled to assert as a defense to
any claim for payment or performance of the Guaranteed Obligations that (i) such
Guaranteed Obligations are not currently due under the terms of the Loan
Documents or (ii) that such Guaranteed Obligations have previously been paid or
performed in full.
2.5 Reinstatement, etc. The Guarantor agrees that this Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment (in whole or in part) of any of the Guaranteed Obligations is
rescinded or must otherwise be restored by the Agent or any Lender Party, upon
the insolvency, bankruptcy or reorganization of the Company or otherwise, as
though such payment had not been made.
2.6 Waivers of Notices and Defenses. The Guarantor hereby waives
promptness, diligence, notice of acceptance, presentment, demand, protest and
any notice not provided for herein with respect to any obligations of the
Company under the Credit Agreement and this Guaranty, as well as any requirement
that the Agent or any Lender protect, secure, perfect or insure any security
interest or lien, or any property subject thereto, or exercise or exhaust any
right, assert any claim or demand or enforce any remedy or take any other action
against the Company or any other Person (including any other guarantor) or any
collateral securing the obligations of the Company under the Credit Agreement
and any requirement that at any time any action be taken by any Person against
the Company or any other Person.
2.7 Stay; Indemnity. (a) The Guarantor, unconditionally and irrevocably,
agrees that, notwithstanding anything to the contrary herein, if a Lender Party
is stayed upon the insolvency, bankruptcy, or reorganization of the Company from
exercising its rights to enforce or exercise
5
<PAGE>
any right or remedy with respect to the Guaranteed Obligations, or is prevented
from giving any notice or demand for payment or performance or taking any action
to realize on any security or collateral or is prevented from collecting any of
the Guaranteed Obligations, in any such case, by such proceeding or action, the
Guarantor shall pay or render to the Agent upon demand therefor the amount or
performance that would otherwise have been due had such rights and remedies been
permitted to be exercised by the applicable Lender Party.
(b) The Guarantor irrevocably and unconditionally agrees as a primary
obligation to indemnify each Lender Party from time to time on demand from and
against any loss incurred by such Lender Party as a result of any of the
obligations of the Company to pay the Guaranteed Draw Amount pursuant to the
Loan Documents being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Agent
or any other Person; provided, however, that the maximum amount of Guarantor's
-------- --------
liability under this Section 2.7(b) shall, together with all obligations under
Sections 2.1 and 2.2, not exceed the Contingent Guaranty Amount .
2.8 No Enforcement of Subrogation. Upon making any payment or performance
with respect to any Guaranteed Obligation hereunder, the Guarantor shall be
subrogated to the rights of the Agent against the Company with respect to such
payment or performance; provided that, in furtherance of, and not in limitation
of, the terms of the Reimbursement Agreement (including the subordination
provisions thereof) the Guarantor shall not exercise or enforce any rights which
it may acquire by way of subrogation until all of the Company's obligations
under or in respect of the Credit Agreement (and under or in respect of any
financing obtained to refinance the indebtedness described in the Credit
Agreement) have been paid in full in cash and performed in full and all
commitments to extend credit thereunder have terminated. Any amount paid to the
Guarantor on account of any such subrogation rights in contravention of the
immediately preceding proviso shall be held in trust for the benefit of the
Agent, for the benefit of the Lender Parties, and shall immediately be paid to
the Agent, for the benefit of the Lender Parties, and credited and applied
against the Guaranteed Obligations, whether matured or unmatured.
2.9 Reduction of Contingent Guaranty Amount and Reduction of Guaranteed
Obligations.
(a) The Contingent Guaranty Amount shall be reduced as follows: (i) on a
dollar-for-dollar basis by the principal amount of all Loans made in respect of
the Term C Loan Commitment that are not, at the time made, Guaranteed Draws; and
(ii) by the Agent pursuant to Section 9.08 of the Credit Agreement, to the
extent required under the Credit Agreement (but not below the then Guaranteed
Draw Amount);
(b) The Agent shall, subject to the last sentence of this Section 2.9(b),
reduce the Guaranteed Draw Amount (and, therefore, the Guaranteed Obligations)
as follows: (i) by giving written notice thereof to Guarantor pursuant to
Section 9.08 of the Credit Agreement, whereupon the Guaranty Draw Amount shall
be reduced on a dollar-for-dollar basis to the extent that Guaranteed Draws
previously made in respect of the Term C Loan Commitment are then supported by
Qualified Capacity Revenue from any Qualified Capacity Agreement or any other
6
<PAGE>
Capacity Sales Agreement or Capacity Swap Agreement approved by Agent as
provided in the Credit Agreement and (ii) by giving written notice thereof to
Guarantor pursuant to Section 9.08 of the Credit Agreement, pursuant to which
Agent shall provide to Guarantor an irrevocable release in respect to this
Guaranty as to the amount of the reduction in question, and, at Company's
election, notice of which shall be given to Guarantor by Agent on behalf of the
Company, such amount to be added back to the Available Committed Amount.
Following receipt by the Agent of all applicable notices from the Company
requesting such reduction and the Agent's satisfaction with the form and
substance of such notices, the Agent shall promptly notify Guarantor of any such
reductions in the Guaranteed Draw Amount. For the avoidance of doubt, any
Qualified Capacity Revenue arising after the termination of the availability of
the Term C Loan Commitment shall be used to reduce the Guaranteed Draw Amount to
the extent permitted under Section 9.08 of the Credit Agreement.
2.10 Restriction on Right of Agent to Give Notices of Guaranty Draw.
Notwithstanding anything herein or in the Credit Agreement to the contrary, the
delivery of a Notice of Guaranty Draw to Guarantor is subject to the following:
(i) No Notice of Guaranty Draw may be given until the Term B Loan
Commitment of all Lenders has been fully drawn in accordance with the terms
of the Credit Agreement;
(ii) No Notice of Guaranty Draw may be given until more than 50
percent of the Term A Loan Commitment of all Lenders has been drawn in
accordance with the Credit Agreement;
(iii) No Notice of Guaranty Draw may be given to the extent that the
draw in question in respect of the Term C Loan Commitment is supported by
Qualified Capacity Agreements in accordance with the Credit Agreement;
(iv) No Notice of Guaranty Draw may be given prior to the time that
the Agent shall have received evidence reasonably satisfactory to it that
the Company has spent (or, simultaneously with the application of the
proceeds of the Loan in respect of the Term C Loan Commitment for which a
Notice of Guaranty Draw is being given, will have spent or shall have
deposited in the Construction Account provided for under the terms of the
Credit Agreement) an amount equal to the excess of $540,000,000 over the
sum of the fees, out-of-pocket expenses and other costs incurred by the
Parent and the Company in connection with the issuance by the Parent of the
Parent Senior Notes and certain of its equity interests and the other
transactions contemplated hereunder and under the Credit Agreement;
(v) No Notice of Guaranty Draw may be given if, at the time in
question, the Company is in default of its obligation to pay any of the
fees set forth in Section 2.1 of the Reimbursement Agreement; provided that
--------
the Guarantor hereby agrees with the Company and the Lender Parties that,
in the event the Agent requests the Guarantor to confirm that the Company
is not in default in the payment of any such fees, that the Guarantor has
no knowledge that a proposed Notice of Guaranty Draw cannot be given
7
<PAGE>
and/or that the Guarantor is not aware that this Guaranty is not in full
force and effect, the Guarantor will provide the Agent (with a copy to the
Company) with a prompt written response to such request.
2.11 Payments Free and Clear of Taxes, etc. The Guarantor hereby agrees
that:
(a) Any and all payments made by the Guarantor hereunder shall be made
free and clear of, and without deduction for, any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding, in the case of any Lender Party, taxes imposed
on its income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Lender Party is organized and by any political subdivision
thereof and taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction of such Lender Party's lending office under the Credit
Agreement and any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Guarantor shall be required by
-----
law to deduct any Taxes from or in respect of any sum payable hereunder to any
Lender Party
(i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) such Lender Party receives an
amount equal to the sum it would have received had no such deductions been
made,
(ii) the Guarantor shall make such deductions, and
(iii) the Guarantor shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law.
(b) The Guarantor shall pay any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Guaranty (hereinafter
referred to as "Other Taxes").
-----------
(c) The Guarantor hereby indemnifies and holds harmless the Agent and
each Lender Party for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section) paid by the Agent or such Lender Party, as
the case may be, and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally assessed.
(d) Within 30 days after the date of any payment of Taxes or Other Taxes,
the Guarantor will furnish to the Agent the original or a certified copy of a
receipt evidencing payment thereof. If no Taxes or Other Taxes are payable in
respect of any payment hereunder to the Agent or any Lender Party, the Guarantor
will furnish to the Agent or such Lender Party a certificate from each
appropriate taxing authority, or an opinion of counsel acceptable to the
8
<PAGE>
Agent, in either case stating that such payment is exempt from or not subject to
Taxes or Other Taxes.
(e) Without prejudice to the survival of any other agreement of the
Guarantor hereunder, the agreements and obligations of the Guarantor contained
in this Section shall survive the payment in full of the Guaranteed Obligations.
2.12 Consent to Jurisdiction; Waiver of Immunities. The Guarantor hereby
acknowledges and agrees that:
(a) It expressly, irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of the Supreme Court of the State
of New York sitting in New York County and of the United States District Court
of the Southern District of New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Guaranty or any
other Loan Document, or for the recognition or enforcement of any judgment, and
the Guarantor hereby irrevocably and unconditionally agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such federal court. The
Guarantor hereby irrevocably waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Guaranty or any other Loan Document in any court referred to herein. The
Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court. The Guarantor hereby irrevocably appoints Thelen Reid &
Priest LLP (the "Process Agent"), with an office on the date hereof
-------------
at 40 West 57th Street, New York, New York 10019, United States, as its agent to
receive, on behalf of the Guarantor and its property, service of copies of the
summons and complaint and any other process which may be served in any such
action or proceeding. Such service may be made by mailing or delivering, return
receipt requested, a copy of such process to the Guarantor in care of the
Process Agent at the Process Agent's above address, and the Guarantor hereby
irrevocably authorizes and directs the Process Agent to accept such service on
its behalf. As an alternative method of service, the Guarantor also irrevocably
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to the Guarantor at its address
specified on the signature page hereof and to the attention of the person
specified thereon. The Guarantor agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section shall affect the right of the Agent or any
other Lender Party to serve legal process in any other manner permitted by law
or affect the right of the Agent or any other Lender Party to bring any action
or proceeding against the Guarantor or its property in the courts of any other
jurisdictions.
(c) To the extent that the Guarantor has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with
9
<PAGE>
respect to itself or its property, the Guarantor hereby irrevocably waives such
immunity in respect of its obligations under this Guaranty.
ARTICLE 3
Representations and Warranties
The Guarantor hereby represents and warrants to each of the Lender Parties
that the following statements are true and correct:
3.1 Binding Obligation. This Guaranty has been duly and validly executed
and delivered by the Guarantor and constitutes the legal, valid and binding
obligation of the Guarantor enforceable against the Guarantor in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and by equitable principles relating to the availability of equitable
remedies.
3.2 Relationship to the Company. As of the date hereof, the Guarantor is
the owner, directly or through one or more wholly-owned subsidiaries, of all of
the issued and outstanding capital stock of the Contractor, the agreement to
enter into the Supply Contract with the Contractor is of substantial and
material benefit to the Guarantor, the financing evidenced by the Credit
Agreement is of substantial and material benefit to the Guarantor, and the
Guarantor has reviewed and approved copies of the Supply Contract, the Credit
Agreement, and all other related documents and is fully informed of the remedies
the Agent may pursue upon the occurrence of a default under the Loan Documents.
This Guaranty will remain in full force and effect if Contractor ceases to be a
direct or indirect subsidiary of Guarantor and will remain in full force and
effect if the Supply Contract is assigned, in accordance with the terms thereof,
in whole or in part, by Company and/or the Agent (or any of Company's and/or
Agent's successors in interest to the Supply Contract).
3.3 Incorporation and Qualification. Guarantor is a societe anonyme duly
organized and validly existing pursuant to the laws of France. Guarantor has
all requisite corporate power and authority to execute and deliver, and perform
its obligations under, this Guaranty.
3.4 Authorization. The Guarantor has full power and authority to conduct
its business and to execute, deliver and perform this Guaranty. The Guarantor
has taken all necessary action to authorize the execution, delivery and
performance of this Guaranty.
3.5 No Conflict, etc. The execution, delivery and performance of this
Guaranty do not and will not:
(a) require any consent or approval of any governmental agency or
authority or other person or entity, or conflict with any court decree or order
applicable to the Guarantor;
10
<PAGE>
(b) conflict with any law or governmental order applicable to the
Guarantor or with any provision of the statuts (bylaws) of the Guarantor or of
any material mortgage, indenture or other agreement binding upon or applicable
to the Guarantor; or
(c) result in the creation or imposition of any lien on any of the
Guarantor's properties pursuant to the provisions of any such mortgage,
indenture or other agreement.
3.6 Claims Pari Passu. The claims of the Agent against Guarantor under
this Guaranty will rank at least pari passu with the claims of all its other
unsecured and unsubordinated creditors save those whose claims are preferred
solely by any bankruptcy, insolvency, liquidation or other similar laws of
general application.
3.7 No Filing or Stamp Taxes. Under the laws of France in force at the
date hereof, it is not necessary that this Guaranty be filed, recorded or
enrolled with any court or other authority in such jurisdiction or that any
stamp, registration or similar tax be paid on or in relation to this Guaranty.
3.8 No Deduction or Withholding. Under the laws of France in force at the
date hereof, it will not be required to make any deduction or withholding from
any payment Guarantor may make hereunder.
ARTICLE 4
COVENANTS
The Guarantor covenants and agrees with each Lender Party that:
4.1 Existence. The Guarantor shall, and shall, to the fullest extent
permitted under applicable law, cause each of its subsidiaries to, do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence and take all reasonable action to maintain all
rights, privileges and franchises material, necessary or desirable in the normal
conduct of its business except those as to which the failure to maintain such
rights, privileges and franchises could not reasonably be expected to have a
Material Adverse Effect; provided that the foregoing shall not prohibit any
--------
amalgamation, consolidation or merger permitted under Section 4.3.
-----------
4.2 Compliance with Laws. The Guarantor shall, and shall, to the fullest
extent permitted under applicable law, cause each of its subsidiaries to, comply
in all material respects with all laws applicable to it or its property, except
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
4.3 Amalgamation, Merger, Consolidation and Sale of Assets. The
Guarantor will not, directly or indirectly, (x) amalgamate or consolidate or
merge with or into another Person (whether or not the Guarantor is the surviving
or continuing entity) or (y) sell, assign, transfer,
11
<PAGE>
convey, lease or otherwise dispose of all or substantially all of its properties
or assets, in one or more related transactions, to another Person; unless:
(a) either (i) the Guarantor is the surviving or continuing entity
or (ii) the Person formed by, surviving or continuing after any such
amalgamation, consolidation or merger (if other than the Guarantor), or to
which such sale, assignment, transfer, conveyance, lease or other
disposition is made (the "Surviving Entity"), is a societe anonyme
----------------
established or existing under the laws of France or a corporation organized
or existing under the laws of Bermuda, the United States, any state thereof
or the District of Columbia or any member country as of the date hereof of
the European Union;
(b) the Surviving Entity (if other than the Guarantor) assumes all
obligations of the Guarantor under this Guaranty, pursuant to agreements
reasonably satisfactory to the Agent or, if such assumption is effected by
operation of law, pursuant to confirmation of the same reasonably
satisfactory to Agent;
(c) the Guarantor is not then in default under any of its payment
obligations hereunder;
(d) the Guarantor or the Surviving Entity will, immediately after
such transaction, have a long-term senior unsecured debt rating of BBB- (or
better) from Standard & Poor's Rating Services and Baa3 (or better) from
Moody's Investors Service, Inc.; and
(e) the Guarantor delivers to the Agent an officers' certificate and
an opinion of counsel reasonably acceptable to the Agent, each stating that
such amalgamation, consolidation, merger, sale, assignment, transfer,
conveyance, lease or other disposition complies with the preceding clauses
(a) through (d).
For purposes of the foregoing, the transfer (by assignment, sale or otherwise)
of all or substantially all of the properties and assets of one or more
subsidiaries of the Guarantor, the Guarantor's interest in which constitutes all
or substantially all of the properties and assets of the Guarantor, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Guarantor.
ARTICLE 5
Miscellaneous
5.1 Notices. All notices, requests and other communications to any party
hereunder shall be in writing in the English language (including bank wire,
facsimile transmission or similar writing) and shall be given to such party at
its address, telecopy number set forth, in the case of the Guarantor, on the
signature pages hereof, or in the case of the Agent, in the Credit Agreement, or
such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other party. Each such notice, request or other
communication shall be
12
<PAGE>
effective (i) if given by facsimile transmission, on the next Business Day after
such telecopy is transmitted to the telecopy number specified in this Section
and confirmation has been received, (ii) if given by mail, ten Business Days
after such communication is deposited in the mails with first class (or, in the
case of international mail, airmail) postage prepaid, addressed as aforesaid, or
(iii) if given by any other means, on the next Business Day following delivery
at the address specified in this Section.
5.2 No Waivers. In addition to, and not in limitation of, Sections 2.3,
2.4 and 2.6, no failure or delay by the Agent in exercising any right, power or
privilege hereunder or under the Credit Agreement or any other Loan Document
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided under the
Credit Agreement or any other Loan Document or otherwise by law.
5.3 Amendments and Waivers. This Guaranty, together with the
Reimbursement Agreement, constitutes the complete agreement of the Agent and the
Guarantor with respect to the subject matter hereof and supersedes all prior or
contemporaneous negotiations, promises, covenants, agreements or
representations. No amendment, modification, termination or waiver of any
provision of this Guaranty, nor consent to the departure of the Guarantor
herefrom, shall in any event be effective unless in writing and signed by the
Agent, Guarantor, Company and Parent .
5.4 Successors and Assigns; Beneficiaries. This Guaranty is a continuing
Guaranty and shall be binding upon the Guarantor and its successors, transferees
and assigns; provided, however, that the Guarantor may not assign this Guaranty
-------- -------
or transfer any of the rights or obligations of the Guarantor hereunder without
the prior written consent of the Agent. This Guaranty shall inure to the
benefit of, and be enforceable by, the Lender Parties. Nothing contained in
this Guaranty shall be deemed to confer upon anyone other than the parties
hereto and the other beneficiaries described in the preceding sentence any right
to insist upon or to enforce the performance or observance of any of the
obligations contained herein. Without limiting the generality of this Section,
each Lender Party may assign or otherwise transfer (in whole or in part) all or
any portion of the Guaranteed Obligations held by it to any other Person, and
such other Person shall thereupon become vested with all rights and benefits in
respect thereof granted to such Lender Party under any Loan Document (including
this Guaranty) or otherwise. If requested by the Agent, the Guarantor will
execute and deliver a consent, in a form reasonably requested by Agent, to any
such assignment in favor of such Lenders.
5.5 APPLICABLE LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
EXCLUDING ITS CONFLICTS OF LAW PROVISIONS. THE GUARANTOR HEREBY EXPRESSLY,
IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE
UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
13
<PAGE>
ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EXPRESSLY CONSENTS TO AND
ACKNOWLEDGES THE TERMS AND AGREEMENTS SET FORTH IN SECTION 2.12.
5.6 Judgment. The obligations of the Guarantor in respect of this
Guaranty due to any Person shall, notwithstanding any judgment in a currency
(the "judgment currency") other than the lawful currency of the United States of
-----------------
America ("Dollars"), be discharged only to the extent that on the Business Day
-------
following receipt by such Person of any sum adjudged to be so due in the
judgment currency, such Person may in accordance with normal banking procedures
purchase Dollars with the judgment currency. If the amount of Dollars so
purchased (net of all transaction costs including currency conversion costs) is
less than the sum originally due to such Person in Dollars, the Guarantor
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify such Person against such loss, and if the amount of Dollars so
purchased exceeds the sum originally due to any such Person, such Person agrees
to remit to the Guarantor, such excess.
5.7 Severability. Whenever possible, each provision of this Guaranty
shall be interpreted in such a manner as to be effective and valid under
applicable law, provided that if any provision in or obligation under this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
5.8 Interpretation. Section headings in this Guaranty are included
herein for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose or be given any substantive effect.
5.9 Further Assurances. At any time or from time to time, upon the
request of the Agent, the Guarantor shall execute and deliver such further
documents and do such other acts and things as the Agent may reasonably request
in order to effect fully the purposes of this Guaranty. The Guarantor agrees to
be liable for any reasonable expenses incurred by Agent and/or its successors
and assigns with respect to any action or proceeding to enforce this Guaranty.
The Guarantor agrees to deliver from time to time, within fifteen (15) days upon
request, an opinion of counsel, in form and substance reasonably satisfactory to
the Agent, addressed to the Agent and the Lenders, which opinion shall, without
limitation, express the opinion that this Guaranty is enforceable and the
Guarantor has all necessary power and authority to execute this Guaranty and
perform its obligations hereunder; provided, however, that Guarantor may only be
-------- -------
required to provide such an opinion once in any 24-month period and such opinion
shall be delivered at the cost and expense of the Company.
5.10. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY. THE
GUARANTOR
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<PAGE>
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
LENDERS ENTERING INTO THE CREDIT AGREEMENT.
5.11 Loan Document. This Guaranty is a Loan Document executed pursuant to
the Credit Agreement.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
date first above written.
EXECUTED BY:
ALCATEL
By /s/ Jean-Pierre Halbron
---------------------------
Name:
Title:
Address: Alcatel
54 rue La Boetie
75008 Paris, France
Fax:
15
<PAGE>
SCHEDULE 1
TO
GUARANTY (QUALIFIED CAPACITY AGREEMENT)
For every * that the total amount owed or that may become owed to
Contractor under the Supply Contract (whether as a result of or with respect to
the Initial Contract Price, Contract Variations, System Upgrades, System
Extensions or otherwise) exceeds * , the Contingent Guaranty Amount shall
(unless the Agent, at the direction of the Company, notifies the Guarantor
in writing to the contrary) be increased by * ; provided, however, the
-------- -------
aggregate amount of such increases shall in no event result in the Contingent
Guaranty Amount exceeding * in the aggregate and that such increases shall
only be made in aggregate amounts of * or in whole number multiples
thereof. All capitalized terms used and not otherwise defined herein shall have
the meaning set forth in the Supply Contract.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
Schedule 1-1
<PAGE>
EXHIBIT 4.3(c)
REIMBURSEMENT AGREEMENT
This Reimbursement Agreement ("Agreement") is entered into effective as of
---------
July 14, 1999 by GlobeNet Communications Holdings Ltd. ("Company"), and
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ALCATEL, a societe anonyme established in France (the "Guarantor").
---------
R E C I T A L S
---------------
(A) Concurrently with the execution hereof, Guarantor has executed a
Guaranty (Qualified Capacity Agreement) (such agreement, as amended,
supplemented, amended and restated or otherwise modified from time to time by
the Guarantor and the Agent, the "Guaranty") for the benefit of the Lenders
--------
(defined below) and Toronto Dominion (Texas), Inc., as administrative agent for
the Lenders (in such capacity, together with its successors and assigns in such
capacity, the ("Agent"). The Guaranty has been executed and delivered by
-----
Guarantor pursuant to a Credit Agreement, dated as of July 14, 1999 (together
with all amendments, supplements and other modifications, if any, from time to
time hereafter made thereto, including and together with any agreement or
agreements refunding, replacing or refinancing such Credit Agreement, the
"Credit Agreement"), among Company, the various financial institutions and other
----------------
entities (individually, a "Lender" and collectively, the "Lenders") as are or
------ -------
may from time to time become, parties thereto and the Agent.
(B) Guarantor has executed and delivered the Guaranty at the special
instance and request of Company, and in conjunction therewith Guarantor has
required the execution and delivery of this Reimbursement Agreement.
NOW, THEREFORE, based upon the foregoing, and in order to induce the
Guarantor to execute and deliver the Guaranty, Company and Guarantor agree as
follows:
ARTICLE 1
Definitions
1.1 Definitions. Capitalized terms used but not otherwise defined in this
Agreement shall have the meanings ascribed to them in the Credit Agreement. As
used in this Agreement, the following terms shall have the following meanings
unless the context otherwise requires:
"Available Committed Amount" means the Contingent Guaranty Amount less
--------------------------
the Guaranteed Draw Amount.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City, New York (and, solely for the
purposes of the providing and receipt of notices, Paris, France) are authorized
or required by law to remain closed.
<PAGE>
"Capital Lease Obligations" of any Person, means the obligations of
-------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Contingent Guaranty Amount" means initially $100,000,000, which
--------------------------
amount is subject to increase up to * (but the Contingent Guaranty Amount shall
in no event exceed the amount of the Term C Loan Commitment) as provided in
Schedule 1 attached hereto. The Contingent Guaranty Amount is subject to
reduction under certain conditions as provided in the Guaranty.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
"Credit Agreement Termination Date" means the date of repayment in
---------------------------------
full in cash (including, without limitation, cash obtained by way of set-off) of
all obligations and termination of all commitments under the Credit Agreement or
any subsequent credit or similar agreement relating to any refunding,
replacement or refinancing of the indebtedness and/or commitments evidenced by
the Credit Agreement.
"Guaranteed Draw Amount" means, at the time of determination, the
----------------------
aggregate amount of principal then outstanding in respect of the Term C Loans
that is subject to the Guaranty. The Guaranteed Draw Amount (i) shall not exceed
the Contingent Guaranty Amount, and (ii) shall not include any interest in
respect of the Term C Loans or any other sums advanced or due under the Credit
Agreement.
"Guaranty Draw Fee" means a fee equal to one percent (1%) of the
-----------------
principal amount of Term C Loan Commitment that is specified in the applicable
Notice of Guaranty Draw as being made subject to the Guaranty.
"Increased Indebtedness Fee" means, with respect to each borrowing
--------------------------
constituting Indebtedness for Borrowed Money (other than any borrowing incurred
pursuant to or in connection with the Credit Agreement), a fee equal to three
percent (3%) of the principal amount of such borrowing determined as of the time
all of the proceeds of such borrowing are actually received by the Borrower or
any Subsidiary, as the case may be.
"Indebtedness for Borrowed Money" means the principal amount of the
-------------------------------
borrowings of the Company and its Subsidiaries, excluding (i) fees or interest
in respect of borrowings, (ii) non-speculative hedging transactions, (iii) any
amounts owed pursuant to this Agreement, (iv) leases properly classified as
operating leases under GAAP, but Indebtedness for Borrowed Money shall include
the capitalized value of any Capital Lease Obligations, and (v) intercompany
indebtedness.
"Lender Hedging Agreement" means any agreement relating to the
------------------------
obligations referred to in clause (i)(B) of Section 4.6.
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"Notice of Guaranty Draw" means a notice given by Agent to Guarantor
-----------------------
pursuant to Section 9.08 of the Credit Agreement (but subject to the limitations
set forth in Section 2.8 of the Guaranty) specifying that an advance of funds in
respect of the Term C Loan Commitment is made subject to the Guaranty and
specifying the remaining amount that may be advanced under Term C Loan
Commitment after giving effect to such Advance.
"Parent" means GlobeNet Communications Group Limited, a Bermuda
------
company.
"Party" means either the Guarantor or the Company.
-----
"Person" means an individual, corporation, partnership, limited
------
liability company, trust or other entity.
"Quarterly Availability Fee" means, as to any applicable period of
--------------------------
determination, (i) for each day during such period when there is not outstanding
any Guaranteed Draw Amount, an amount equal to 0.375 percent per annum of the
average daily Available Committed Amount during such number of days (including,
without limitation, all amounts added back to the Available Committed Amount
pursuant to Section 9.08 of the Credit Agreement during such period), , and (ii)
for each day during such period when there is any outstanding Guaranteed Draw
Amount, an amount equal to 0.75 percent per annum of the average Available
Committed Amount during such number of days.
"Quarterly Guaranteed Draw Fee" means an amount equal to 2.0 percent
-----------------------------
per annum of the average daily Guaranteed Draw Amount outstanding for the
applicable period of determination, provided that for the purposes of
determining the Quarterly Guaranteed Draw Fee, the Guaranteed Draw Amount shall
be reduced by any portion thereof that has become a Reimbursement Amount.
"Reimbursement Amount" has the meaning set forth in Section 3.1.
--------------------
"Reimbursement Obligation" has the meaning set forth in Section 3.1.
------------------------
"Semi-Annual Payment Date" means each June 30 and December 31 (or, if
------------------------
such day is not a Business Day, the immediately preceding Business Day)
commencing with December 31, 2001 (or, if such day is not a Business Day, the
immediately preceding Business Day).
"Senior Obligations" means all obligations of Company now existing or
------------------
hereafter arising under the Credit Agreement, any Lender Hedging Agreement or
any other Loan Document, including, without limitation, principal, reimbursement
obligations in respect of letters of credit, interest (including, without
limitation, interest accruing after the filing of, or which would have accrued
but for the filing of, a petition initiating any proceeding referred to in
Section 5.3, whether or not allowed as a claim in such proceeding), fees,
- -----------
indemnities and expenses.
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"Subordinated Obligations" means the Reimbursement Amount, all
------------------------
interest thereon and all other amounts payable in connection therewith.
"Upfront Fee" means a fee that is paid once, in an amount equal to the
-----------
sum of (i) $250,000, plus (ii) one percent (1%) of the Contingent Guaranty
Amount on the date of this Agreement.
ARTICLE 2
Payment of Fees in Respect of Guaranty
2.1 Payment of Fees in Respect of Guaranty. In consideration for the
provision of the Guaranty, the Company agrees to pay the following fees to
Guarantor at the times indicated:
(a) Upfront Fee. The Upfront Fee shall be payable in full within
-----------
three (3) Business Days after all of the following have occurred: (i) the
Net Equity Proceeds and the Parent Senior Note Proceeds have been received
by Parent, and (ii) the Credit Agreement has been executed by Company and
the Lenders;
(b) Guaranty Draw Fee. The Guaranty Draw Fee shall be payable three
-----------------
(3) Business Days after receipt by Guarantor from the Agent of the
applicable Notice of Guaranty Draw pursuant to the Credit Agreement;
provided, however, that Company shall not be liable for making any such
-------- -------
payment until the proceeds of the applicable draw have actually been
received by the Company;
(c) Quarterly Availability Fee. The Quarterly Availability Fee shall
--------------------------
commence to accrue on the date hereof and shall be payable on a calendar
quarter basis in arrears on the last Business Day of the last month of such
calendar quarter during the term of the Guaranty, based upon the average
daily Available Committed Amount outstanding during the preceding calendar
quarter (or, if applicable, portion thereof);
(d) Quarterly Guaranty Draw Fee. The Quarterly Guaranty Draw Fee
---------------------------
shall be payable on a quarterly basis in arrears on the last Business Day
of the last month of each calendar quarter during the term of the Guaranty
(or, if applicable, portion thereof), based upon the average daily
Guaranteed Draw Amount outstanding during the preceding calendar quarter
(or, if applicable, portion thereof); and
(e) Increased Indebtedness Fee. The Increased Indebtedness Fee shall
--------------------------
be payable on the last Business Day of any month during which the Company
or any of its Subsidiaries incurs any Indebtedness for Borrowed Money other
than that incurred pursuant to or in connection with the Credit Agreement,
including any Indebtedness for Borrowed Money incurred to refund, replace
or refinance Indebtedness for Borrowed Money incurred pursuant to or in
connection with the Credit Agreement. The Company agrees to give notice to
the Guarantor within three (3) Business Days after it incurs any
Indebtedness for Borrowed Money that would obligate it to pay the Increased
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Indebtedness Fee. Notwithstanding anything to the contrary, the aggregate
amount of all Increased Indebtedness Fees shall not exceed $1,250,000.
ARTICLE 3
Reimbursement Obligations
3.1 Reimbursement Obligation. If and to the extent Guarantor pays any
amount to the Agent pursuant to the terms of the Guaranty, Company shall
immediately and automatically be obligated (the "Reimbursement Obligation") to
------------------------
pay such amount (inclusive of all other such amounts, collectively, the
"Reimbursement Amount") to Guarantor with interest thereon as herein provided,
--------------------
subject to the subordination provisions of Article 5 hereof.
3.2 Interest on Reimbursement Amounts. The Reimbursement Amount shall bear
interest at the applicable rate specified in the Credit Agreement as to
principal of the Term C Loans that is not paid when due from the date that
Guarantor advances funds to Agent pursuant to the Guaranty until repaid as
provided herein. The Reimbursement Amount shall continue to bear interest at
such rate notwithstanding the termination of the Credit Agreement.
3.3 Payment of Reimbursement Amount.
(a) Unless otherwise agreed to by the Lenders, Guarantor and Company agree
that no payment shall be made in respect of the Reimbursement Amount or interest
thereon (except as provided below in this Section 3.3(a)) prior to the Credit
Agreement Termination Date; provided that Company shall be required to make
--------
payments in respect of the Reimbursement Amount and interest thereon to the
extent of 50 percent of the Excess Cash Flow available for such purpose (if any)
as provided in clause ninth of Section 8.08(d) of the Credit Agreement; such
payments shall be applied first to interest and then to the Reimbursement Amount
and shall be payable on each Semi-Annual Payment Date based upon the Excess Cash
Flow for the semi-annual period ending on such Semi-Annual Payment Date.
Notwithstanding anything herein to the contrary, Guarantor and Company agree
that no payment shall be required or made in respect of the Reimbursement Amount
or interest thereon during any time when a Default or Designated Event has
occurred and is continuing or would result therefrom (it being understood and
agreed that any payment default under the Credit Agreement cured by the
Guarantor shall not be a Default or Designated Event thereunder upon and
subsequent to such cure).
(b) After the Credit Agreement Termination Date, the Reimbursement Amount
shall be payable in four equal semi-annual installments of principal, the first
of which (together with accrued and unpaid interest thereon) shall be due and
payable on the first Business Day following the first six-month anniversary of
the Credit Agreement Termination Date, and a like installment of principal and
interest shall be due on the first Business Day following each subsequent six-
month anniversary of such date until the fourth such date, when the
Reimbursement Amount and all accrued and unpaid interest thereon, shall be due
and payable in full. In addition, after the Credit Agreement Termination Date,
75 percent of the Company's net cash flow (determined in accordance with
GAAP) shall be applied to prepay the Reimbursement
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Amount and interest thereon (with payments being applied first to interest),
with one-half (1/2) of such payments being applied in the regular order of
maturity and one-half (1/2) thereof being applied in the inverse order of
maturity; such payments shall be made on the first Business Day of each calendar
quarter based upon the net cash flow for the preceding calendar quarter.
3.4 Prepayment of Reimbursement Amount. Company may (to the extent it has
funds available therefor) prepay the Reimbursement Amount and interest thereon,
in whole or in part, at any time without penalty or premium.
ARTICLE 4
Certain Restrictions, Guaranty and Lien Rights
4.1 Restrictions on Declaration of Defaults and on Taking Certain Actions.
Guarantor agrees that until the earlier to occur of (i) the Credit Agreement
Termination Date, and (ii) the occurrence of an Event of Default under or in
respect of the Credit Agreement and the acceleration of payment of all
obligations thereunder, Guarantor may not, except as hereafter provided in this
Section 4.1, declare a default in respect of the Reimbursement Obligation or
otherwise accelerate payment of the Reimbursement Amount and interest thereon
under this Agreement. The foregoing provision shall not be construed to limit
the obligation of Company to pay the fees called for under Article 2 of this
Agreement or to make payments in respect of the Reimbursement Amount and
interest thereon out of Excess Cash Flow as provided in Section 3.3(a) hereof,
and upon any failure to pay such fees or payments Guarantor may (after giving no
less than 15 days prior written notice thereof to Agent) pursue any action
available to recover the amount of the fees or payments that have not been paid.
In addition to the foregoing, Guarantor may also declare a default under this
Agreement (after giving not less than 15 days prior written notice thereof to
Agent), if the Maturity Date set forth in the Credit Agreement is amended to
provide for a later date that is more than three months after the original
scheduled Maturity Date.
4.2 Restrictions on Indebtedness for Borrowed Money. Until such time as
all Reimbursement Amounts and all other amounts payable to Guarantor under this
Agreement have been paid in full and this Agreement has been terminated, the
Company agrees that its and its subsidiaries' total Indebtedness for Borrowed
Money shall not exceed $500,000,000 in the aggregate.
4.3 Restriction on Payment on Parent Senior Notes. Until such time as all
Reimbursement Amounts and all other amounts payable to Guarantor under this
Agreement have been paid in full and this Agreement has been terminated, the
Parent shall not make any payments in respect of principal on the Parent Senior
Notes.
4.4 Restriction on Redemptions and Reduction in Share Capital. During any
time while the Guaranty is in effect or there is outstanding and unpaid any
Reimbursement Obligation or other amount payable to Guarantor hereunder, then
the Company and Parent shall not redeem, reacquire, or buy back any outstanding
capital stock of the Company or Parent, as applicable, nor
6
<PAGE>
otherwise reduce its outstanding share capital, provided that foregoing
provision shall not restrict the Parent from redeeming (i) up to $31,000,000 of
its outstanding capital stock from the proceeds of the Company high yield debt
and equity offerings and (ii) its capital stock as required in connection with
its stock option plans and employment agreements, provided that redemptions
pursuant to this clause (ii) shall not exceed $10,000,000. In addition to the
foregoing, following the closing and funding of the Parent Senior Notes and the
sale of the equity interests in Parent described in the Credit Agreement, and
after any Notice of Guaranty Draw is given, the outstanding share capital of the
Company shall not be less than the excess of $540,000,000 over the sum of the
fees, out-of-pocket expenses and other costs incurred by the Parent and the
Company in connection with the issuance by the Parent of the Parent Senior Notes
and certain of its equity interests and the other transactions contemplated
hereunder and under the Credit Agreement.
4.5 Additional Guaranties and Lien Rights. After the occurrence of the
Credit Agreement Termination Date, Company agrees that it shall, to the extent
granted to the Agent, and shall cause all of its Subsidiaries to the extent
provided under the Credit Agreement (the "Subject Subsidiaries" which directly
--------------------
or indirectly own any interest in the System) to (i) guaranty Company's
obligations hereunder, and (ii) grant a lien on their interests in the System,
to secure performance of Company's obligations under this Agreement. The
documentation evidencing such guaranties and liens shall be in substantially the
same form as that executed in conjunction with the Credit Agreement. Guarantor
agrees that it will not register, make any filing or take any similar action in
respect of such future lien until after the occurrence of the Credit Agreement
Termination Date.
4.6 Negative Pledge. So long as the Guaranty is in effect or any
Reimbursement Amount or any other amount is payable to Guarantor pursuant to
this Agreement, the Company and the Subject Subsidiaries shall not grant any
liens or security interests on or in any of their assets to secure the payment
of any borrowings, nor shall the Company or the Subject Subsidiaries guaranty
the payment of any borrowings of any other person or entity, except that the
foregoing provision shall not restrict the following: (i) any liens or security
interests or guarantees granted or made in connection with or with respect to
(A) the Credit Agreement, including any refunding, replacement or refinancing of
the indebtedness and/or commitments evidenced by the Credit Agreement, and (B)
all obligations under non-speculative hedging transactions payable to a Person
that was a Lender (or an affiliate of a Lender) at the time the hedging
transaction pursuant to which such obligations are payable was entered into to
the extent such obligations are secured by liens or security interests on assets
securing the obligations described in the preceding clause (A) or guaranteed by
any or all of the Persons guarantying such obligations; (ii) purchase money
security interests and liens securing up to $50,000,000 in principal
obligations, together with all interest, fees and other charges incurred in
respect of such borrowings; and (iii) liens arising by operation of law. The
Company shall notify Guarantor, within two (2) Business Days after the
consummation thereof, of the incurrence of any purchase money security interest
or lien as described in clause (ii) of the preceding sentence, and the principal
amount secured thereby.
4.7 Credit Agreement Definitions. Notwithstanding anything to the contrary
contained herein or in the Guaranty, for the purposes of this Agreement and the
Guaranty, the
7
<PAGE>
following terms: (a) "Qualified Capacity Agreement", (b) "Qualified
---------------------------- ---------
Capacity Revenue, (c) "Qualified Purchaser", (d) "Capacity Swap Agreements",
- ---------------- ------------------- ------------------------
(e) "Capacity Sales Agreements", (f) "Net Equity Proceeds", (g) "Parent Senior
------------------------- ------------------- -------------
Note Proceeds", and (h) "Parent Senior Notes", shall have the meanings ascribed
- ------------- -------------------
to such terms in the Credit Agreement as of the date hereof, and shall only be
modified for purposes of this Agreement by any modification to the Credit
Agreement (including any agreement or agreements refunding, replacing or
refinancing the Credit Agreement in effect as of the date hereof) subsequent to
such date to the extent that such a modification is not adverse to the
Guarantor. In addition, the Company acknowledges and agrees that any reduction
of the Term A Loan Commitment, the Term B Loan Commitment and the Term C Loan
Commitment shall be calculated and reduced pro rata among all such loan
commitments. The Company agrees that it shall not amend Section 9.08 of the
Credit Agreement (or any successor provision) in a manner adverse to the
Guarantor without the Guarantor's prior consent.
4.8 Reductions. (a) Company agrees that if it determines that there is an
increase of at least * in the aggregate in Qualified Capacity Revenue from any
one or more Qualified Capacity Agreements or any other Capacity Sales Agreements
or Capacity Swap Agreements that will not be needed to support any drawing under
the Term C Loan Commitment, Company shall promptly notify Agent and, to the
extent permitted under Section 9.08 of the Credit Agreement, shall require the
Agent to notify Guarantor that the Contingent Guaranty Amount or the Guaranteed
Draw Amount, as applicable, shall be reduced to the extent of such increase. In
connection with the foregoing, Company shall promptly furnish to the Agent such
information in Company's possession (including copies of the applicable
Qualified Capacity Agreements) as may be necessary to enable the Agent to make a
determination that such a reduction is permitted under the Credit Agreement.
(b) In the event that there exists any Qualified Capacity Revenue in
excess of * in the aggregate from any one or more Qualified Capacity Agreements
or any other Capacity Sales Agreements or Capacity Swap Agreements that is not
supporting any Term C Loan after the expiration of the availability of the Term
C Loan Commitment, Company will promptly notify Agent and, to the extent
permitted under Section 9.08 of the Credit Agreement, shall require the Agent to
notify Guarantor that the Guaranteed Draw Amount shall be reduced to the extent
of such amount of Qualified Capacity Revenue. In connection with the foregoing,
Company shall promptly furnish to the Agent such information in Company's
possession as referred to in Section 4.8(a) above.
* MATERIAL OMITTED AND FILED SEPARATELY UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
ARTICLE 5
SUBORDINATION
5.1 Agreement to Subordinate. Each of Guarantor and Company agrees that
the Subordinated Obligations are and shall be subject, subordinate and rendered
junior, to the extent and in the manner hereinafter set forth, in right of
payment, to the prior payment in full in cash
8
<PAGE>
of all Senior Obligations. Guarantor acknowledges and agrees that these
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Obligations, whether such Senior
Obligations were created or acquired before or after the execution and delivery
of this Agreement, to acquire and continue to hold such Senior Obligations and
such holder of Senior Obligations shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold such Senior
Obligations.
5.2 Payment Restrictions. Company shall not make, and Guarantor shall not
receive or accept, any payment in respect of the Subordinated Obligations if a
Default or Designated Event has occurred and is continuing or would result
therefrom, unless otherwise agreed to by the Lenders. For purposes of these
provisions, "payment" in respect of the Subordinated Obligations shall include
any direct or indirect payment or distribution from any source, whether in cash,
property or securities, by set-off or otherwise, in respect of principal,
premium, interest or otherwise, including in connection with any redemption or
purchase thereof or any recovery on any claim for rescission or damages.
5.3 Insolvency and Related Proceedings. (a) Upon any payment, distribution
or other transfer of all or any of the assets of Company in the event of
(i) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to Company or to its assets,
(ii) any liquidation, dissolution or other winding up of Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or
(iii) any assignment for the benefit of creditors, any scheme of
arrangement or reconstruction of creditor claims, or any marshaling of
assets and liabilities of Company,
then, and in any such event, unless the Lenders shall otherwise agree in
writing, the holders of the Senior Obligations shall receive payment in full in
cash of all amounts due or to become due (whether or not the Senior Obligations
have been declared due and payable prior to the date on which the Senior
Obligations would otherwise have become due and payable) on or in respect of all
Senior Obligations before the Guarantor or anyone claiming through or on its
behalf (including any receiver, trustee, or otherwise) are entitled to receive
any payment on account of the Subordinated Obligations, and to that end any
payment or distribution of any kind or character, whether in cash, property or
securities, which may be payable or deliverable in respect of the Subordinated
Obligations in any such case, proceeding, dissolution, liquidation or other
winding up or event, shall be paid or delivered directly to the Agent for the
application (in the case of cash) to, or as collateral (in the case of non-cash
property or securities) for, the payment or prepayment of the Senior Obligations
until the Senior Obligations shall have been paid in full in cash.
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<PAGE>
(b) If any proceeding, liquidation, dissolution or winding up referred to
in clause (a) above is commenced by or against Company,
----------
(i) the Agent is hereby irrevocably authorized and empowered (in its
own name or in the name of Company, Guarantor or otherwise), but shall have
no obligation, to demand, sue for, collect and receive every payment or
distribution in respect of the Subordinated Obligations and give
acquittance therefor and to file claims and proofs of claim and take such
other action (including, without limitation, voting the Subordinated
Obligations or enforcing any security interest or other lien securing
payment of the Subordinated Obligations) as the Agent may deem necessary or
advisable for the exercise or enforcement of any of the rights or interests
of the Lender Parties, including the Agent, hereunder; provided that
--------
Guarantor shall be permitted to take such action so long as, in the
reasonable judgment of the Agent, the taking of such action is not
inconsistent with the terms hereof and the parties agree that any party
taking any such action hereunder shall promptly notify the other party upon
the taking of any such action; provided, however, that if the Agent takes
-------- -------
any such action, the Agent shall apply all proceeds first, to the payment
-----
of the costs of enforcement of these subordination provisions, and second,
------
to the pro rata payment, prepayment and/or cash collateralization of the
--- ----
Senior Obligations in a manner consistent with the provisions set forth in
the Credit Agreement; and
(ii) the Guarantor shall duly and promptly take such action as the
Agent may reasonably request (A) to collect the Subordinated Obligations
for account of the holders of Senior Obligations and to file appropriate
claims or proofs of claim in respect of the Subordinated Obligations, (B)
to execute and deliver to the Agent such powers of attorney, assignments,
or other instruments as the Agent may reasonably request to enable them to
enforce any and all claims with respect to, and any security interests and
other liens securing payment of, the Subordinated Obligations and (C) to
collect and receive any and all payments or distributions which may be
payable or deliverable upon or with respect to the Subordinated
Obligations.
5.4 Payment Over. All payments, distributions or other transfers of assets
of Company, whether in cash, property or securities upon or with respect to the
Subordinated Obligations which are received by the Guarantor contrary to the
provisions of this Agreement shall be received in trust for the pro rata benefit
--- ----
of holders of Senior Obligations, shall be segregated from other funds and
property held by the Guarantor and shall be forthwith paid over to the Agent in
the same form as so received (with any necessary endorsement) to be applied, pro
---
rata (in the case of cash) to, or held as collateral (in the case of noncash
- ----
property or securities) for, the payment or prepayment of the Senior
Obligations, whether matured or unmatured, in accordance with the terms of this
Agreement.
5.5 Specific Performance. The Agent is hereby authorized to demand
specific performance of these subordination provisions, whether or not Company
or Guarantor shall have complied with any of the provisions hereof applicable to
it, at any time when Guarantor shall have failed to comply with any of the
provisions of this Agreement applicable to it. Guarantor hereby irrevocably
waives any defense (other than the defense of payment in full in cash of the
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Senior Obligations) based on the adequacy of a remedy at law which might be
asserted as a bar to such remedy of specific performance.
5.6 Subordination Legend; Further Assurances. Guarantor will cause each
note and instrument (if any) evidencing the Subordinated Obligations to be
endorsed with the following legend:
"The indebtedness evidenced by this instrument is subordinated
to the prior payment in full in cash of the Senior Obligations (as
defined in the Reimbursement Agreement, dated as of July ___, 1999)
pursuant to, and to the extent provided in, the Reimbursement
Agreement by the maker hereof and payee named herein in favor of the
holders of such Senior Obligations and any person now or hereafter
designated as their agent."
Each of Guarantor and Company hereby agrees to mark its books of account in such
a manner as shall be effective to give proper notice of the effect of this
Agreement and will, in the case of any Subordinated Obligation not evidenced by
any note or instrument, following the occurrence and continuation of a Default,
or Designated Event, upon the Agent's request, cause such Subordinated
Obligation to be evidenced by an appropriate note or instrument or instruments
endorsed with the above legend. Each of Guarantor and Company will at its
expense and at any time and from time to time promptly execute and deliver all
further instruments and documents and take all further action that may be
necessary or that the Agent may reasonably request to protect any right or
interest granted or purported to be granted hereunder or to enable holders of
Senior Obligations or the Agent to exercise and enforce their rights and
remedies hereunder.
5.7 No Change in or Disposition of Subordinated Obligations. Guarantor
will not, without the prior written consent of the Agents (a) sell, assign,
transfer, endorse, pledge, encumber or otherwise dispose of any of the
Subordinated Obligations ("Transfer") or (b) permit the terms of any of the
--------
Subordinated Obligations to be changed in such a manner as to have an adverse
effect upon the rights or interests of holders of Senior Obligations or the
Agent unless, in the case of any purported Transfer, either (i)
(a) the proposed assignee is a societe anonyme established or existing
under the laws of France or a corporation organized under the laws of
Bermuda, the United States, any state thereof or the District of
Columbia, or any member country as of the date hereof of the European
Union;
(b) the proposed assignee assumes all obligations of the Guarantor
hereunder, pursuant to agreements reasonably satisfactory to the
Agent;
(c) the proposed assignee has a long-term senior unsecured debt rating of
BBB-(or better) from Standard & Poor's Services and Baa3 (or better)
from Moody's Investor Service, Inc.; and
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<PAGE>
(d) the Guarantor delivers to the Agent an officer's certificate and an
opinion of counsel reasonably acceptable to the Agent, each stating
that such sale, assignment or transfer complies with the preceding
clauses (a) through (c);
or (ii) the proposed assignee agrees to be bound by the subordination
provisions of this Agreement pursuant to an agreement reasonably satisfactory to
the Agent and such Transfer does not cause or effect any Transfer of any of
Guarantor's obligations under this Agreement and in any event Guarantor remains
primarily liable in respect of all of its obligations hereunder.
5.8 Obligations Hereunder Not Affected. All rights and interest of
holders of Senior Obligations and the Agent hereunder, and all agreements and
obligations of the Guarantor and Company hereunder, shall remain in full force
and effect irrespective of:
(a) any lack of validity or enforceability of any document evidencing
the Senior Obligations;
(b) except as contemplated in the last sentence of Section 4.1, any
change in the time, manner or place of payment of, or any other term of,
all or any of the Senior Obligations, or any other amendment or waiver of
or any consent to departure from any of the documents evidencing or
relating to the Senior Obligations;
(c) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any guaranty
or other document, for all or any of the Senior Obligations;
(d) any failure of any holder of Senior Obligations or the Agent to
assert any claim or to enforce any right or remedy against any other party
hereto under the provisions of this Agreement, the Credit Agreement or any
other document;
(e) any reduction, limitation, impairment or termination of the
Senior Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and
Company and Guarantor hereby waive any right to or claim of) any defense
(other than the defense of payment in full in cash of the Senior
Obligations) or setoff, counterclaim, recoupment or termination whatsoever
by reason of invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Senior Obligation; and
(f) any other circumstance which might otherwise constitute a defense
(other than the defense of payment in full in cash of the Senior
Obligations) available to, or a discharge of, Company in respect of the
Senior Obligations or Guarantor in respect of these subordination
provisions.
These subordination provisions shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Senior Obligations
is rescinded or must otherwise be
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returned by any holder of Senior Obligations or the Agent upon the insolvency,
bankruptcy or reorganization of Company or otherwise, all as though such payment
had not been made.
5.9 Miscellaneous Subordination Provisions. (a) The subordination
provisions contained herein are solely for the benefit of the holders from time
to time of Senior Obligations and their representatives, assignees and
beneficiaries and may not be rescinded, cancelled, amended or modified in any
way other than any amendment or modification that would not adversely affect the
rights of any holder of Senior Obligations. Guarantor shall not subordinate any
Subordinated Obligations to any indebtedness or obligation of Company other than
the Senior Obligations.
(b) No right of any present or future holder of any Senior
Obligations to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of
Company or by any act or failure to act, in good faith, by any such holder, or
by any non-compliance by Company with the terms, provisions and covenants of
this Agreement, regardless of any knowledge thereof any such holder may have or
be otherwise charged with.
(c) These subordination provisions shall, to the fullest extent
permitted by law, continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Senior Obligations is, pursuant to
applicable law, avoided, recovered, or rescinded or must otherwise be restored
or returned by any holder of Senior Obligations, whether as a "voidable
preference," "fraudulent conveyance," "fraudulent transfer," or otherwise, all
as though such payment or performance had not been made.
ARTICLE 6
Miscellaneous
6.1 Notices. All notices, requests and other communications to any party
hereunder shall be in writing in the English language (including bank wire,
facsimile transmission or similar writing) and shall be given to such party at
its address, telecopy number set forth on the signature pages hereof, or such
other address or telecopy number as such party may hereafter specify for the
purpose by notice to the other party. Each such notice, request or other
communication shall be effective (i) if given by facsimile transmission, on the
next Business Day after such telecopy is transmitted to the telecopy number
specified in this Section and confirmation has been received, (ii) if given by
mail, ten (10) Business Days after such communication is deposited in the mails
with first class (or, in the case of international mail, airmail) postage
prepaid, addressed as aforesaid, or (iii) if given by any other means, the next
Business Day following delivery at the address specified in this Section.
6.2 No Waivers. No failure or delay by either Party or any Lender Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other
13
<PAGE>
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any other rights or remedies.
6.3 Amendments and Waivers. This Agreement constitutes the complete
agreement of Company and the Guarantor with respect to the subject matter hereof
and supersedes all prior or contemporaneous negotiations, promises, covenants,
agreements or representations. No amendment, modification, termination or
waiver of any provision hereof, nor any consent to the departure from the
provisions hereof shall in any event be effective without the written consent of
both Parties and the Agent.
6.4 Successors and Assigns; Beneficiaries. This Agreement shall be binding
upon the Parties and their respective successors, transferees and assigns,
provided, however, that neither Party may assign this Agreement or transfer any
- -------- -------
of the rights or obligations hereunder without the prior written consent of the
other Party.
6.5 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
EXCLUDING ITS CONFLICTS OF LAW PROVISIONS.
6.6 Consent to Jurisdiction; Waiver of Immunities. (a) Each Party hereby
acknowledges and agrees that it expressly, irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any other Loan Document, or for the recognition or
enforcement of any judgment, and hereby irrevocably and unconditionally agrees
that all claims in respect of such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
federal court. Each Party hereby irrevocably waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or any other Loan Document in any court referred to
herein. Each Party hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
(b) The Company hereby irrevocably appoints CT Corporation System (the
"Company Process Agent"), with an office on the date hereof at 1633 Broadway,
---------------------
New York, New York 10019, United States, as the Company Process Agent of Company
as its agent to receive, on behalf of it and its property, service of copies of
the summons and complaint and any other process which may be served in any such
action or proceeding. Such service may be made by mailing or delivering a copy
of such process to the Company in care of the Company Process Agent at the
Company Process Agent's above address, and the Company hereby irrevocably
authorizes and directs the Company Process Agent to accept such service on its
behalf.
(c) The Guarantor hereby irrevocably appoints Thelen Reid & Priest LLP
(the "Guarantor Process Agent"), with an office on the date hereof at 40 West
------------------------
57th Street, New York, New York 10019, United States, as the Guarantor
Process Agent of Guarantor as its agent
14
<PAGE>
to receive, on behalf of it and its property, service of copies of the summons
and complaint and any other process which may be served in any such action or
proceeding. Such service may be made by mailing or delivering a copy of such
process to the Guarantor in care of the Guarantor Process Agent at the Guarantor
Process Agent's above address, and the Guarantor hereby irrevocably authorizes
and directs the Guarantor Process Agent to accept such service on its behalf.
(d) As an alternative method of service, the Guarantor and the Company
each also irrevocably consents to the service of any and all process in any such
action or proceeding by the mailing of copies of such process to the Guarantor
or the Company, as the case may be, at its address specified on the signature
page hereof. Each Party agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
6.7. Waiver of Jury Trial. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT. EACH
PARTY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT AGREEMENT.
6.8 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, provided that if any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
6.9 Interpretation. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
6.10 Further Assurances. At any time or from time to time, upon the
reasonable request of a Party or the Agent therefor, the Parties shall execute
and deliver such further documents and do such other acts and things as may be
reasonably requested in order to effect fully the purposes of this Agreement.
6.11 Termination. This Agreement (except Article 5) shall terminate at such
time as (i) the Guaranty is no longer in effect and Guarantor has no further
obligations thereunder, and (ii) all Reimbursement Amounts and other amounts
payable to Guarantor hereunder have been paid in full.
15
<PAGE>
6.12 Multiple Counterparts. This Agreement may be executed in one or more
counterparts.
6.13 Legal Opinion. The Company hereby agrees to promptly upon receipt of
appropriate invoices from Guarantor, reimburse Guarantor for all costs and
expenses incurred by Guarantor in connection with the delivery of any opinion
requested of Guarantor in accordance with section 5.9 of the Guaranty.
16
<PAGE>
EXECUTED as of the date set forth above.
ALCATEL
/s/
By _____________________________________
Name:
Title:
Address: Alcatel
54 rue La Boetie
75008 Paris, France
Fax:
The Common Seal of GLOBENET COMMUNICATIONS
HOLDINGS LTD. was hereunto affixed in the presence
of:
/s/ Michael Kedar
By _____________________________________
Director
/s/ Lin Gentemann
By _____________________________________
Director / Secretary
GLOBENET COMMUNICATIONS HOLDINGS
LTD.
2 Carter's Bay Road
Address: ______________________________
Southside
______________________________
St. David's
______________________________
Bermuda DD 02
441-296-9010
Fax: ______________________________
17
<PAGE>
ACKNOWLEDGED:
TORONTO DOMINION (TEXAS), INC.,
as Administrative Agent
By: ______________________________
Name:
Title:
18
<PAGE>
SCHEDULE 1
TO
REIMBURSEMENT AGREEMENT
For every * that the total amount owed or that may become owed to
Contractor under the Supply Contract (whether as a result of or with respect to
the Initial Contract Price, Contract Variations, System Upgrades, System
Extensions or otherwise) exceeds * , the Contingent Guaranty Amount shall
(unless the Agent, at the direction of the Company, notifies the Guarantor
in writing to the contrary) be increased by * ; provided, however, the
-------- -------
aggregate amount of such increases shall in no event result in the Contingent
Guaranty Amount exceeding * in the aggregate and that such increases
shall only be made in aggregate amounts of * or in whole number
multiples thereof. All capitalized terms used and not otherwise defined herein
shall have the meaning set forth in the Supply Contract.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
1-1
<PAGE>
Exhibit 5.1
September 2, 1999
GlobeNet Communications Group Ltd.
2 Carter's Bay Road
Southside, St. David's
Bermuda
Ladies and Gentlemen:
We have acted as counsel for GlobeNet Communications Group Limited, a
corporation organized under the laws of Bermuda (the "Company"), in connection
with the Registration Statement on Form S-4 (the "Registration Statement") filed
by the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the issuance by the Company of U.S.$300,000,000 aggregate principal amount of
its 13% Series B Senior Notes due 2007 (the "Exchange Notes"). The Exchange
Notes are to be offered by the Company in exchange (the "Exchange Offer") for
the U.S.$300,000,000 aggregate principal amount of its outstanding 13% Senior
Notes due 2007 (the "Notes"). The Notes have been, and the Exchange Notes will
be, issued under the an Indenture, dated as of July 14, 1999 (the "Indenture"),
among the Company and Bankers Trust Company, as Trustee.
We have examined the Registration Statement and the Indenture which has
been filed with the Commission as an exhibit to the Registration Statement. In
addition, we have examined, and have relied as to matters of fact upon, the
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents and other instruments and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and have made such other and further
investigations, as we have deemed relevant and necessary as a basis for the
opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents.
We have further assumed, with your consent and without independent
investigation or inquiry, that, with respect to each of the parties to the
Indenture and the Exchange Notes, as the case may be, (i) such person was duly
organized and is validly existing under the laws of the jurisdiction in which it
was organized, (ii) such person has the power and authority to execute the
Indenture and the Exchange Notes, as the case may be, to which it is a party and
to take all actions contemplated to be taken by it thereunder and (iii) such
person has duly authorized, executed and delivered the Indenture and the
Exchange Notes, as the case may be, to which it is a party in accordance with
the charter or other organizational documents of such person.
<PAGE>
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that when (1) the Indenture has been duly
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), (2) the Board of Directors of the Company, a duly constituted
and acting committee thereof or duly authorized officers thereof have taken all
necessary corporate action to approve the issuance and terms of the Exchange
Notes and related matters, and (3) the Exchange Notes have been duly executed,
authenticated, issued and delivered in accordance with the provisions of the
Indenture upon the consummation of the Exchange Offer, the Exchange Notes will
constitute valid and legally binding obligations of the Company enforceable
against the Company in accordance with their terms and entitled to the benefits
of the Indenture.
Our opinion set forth in the preceding paragraph is subject to (i) the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, (ii) general equitable principles (whether considered in a proceeding
in equity or at law), (iii) an implied covenant of good faith and fair dealing
and (iv) the effects of the possible judicial application of foreign laws or
foreign governmental or judicial action affecting creditors' rights.
We are members of the Bar of the State of New York, and we do not express
any opinion herein concerning any law other than the laws of the State of New
York and the federal laws of the United States. Insofar as the opinions set
forth herein relate to issues governed by the laws of Bermuda, we have assumed
the correctness of the opinion of Conyers, Dill & Pearman, which is also filed
as an exhibit to the Registration Statement.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
VINSON & ELKINS L.L.P.
<PAGE>
EXHIBIT 5.2
August 31, 1999
GlobeNet Communications Group Limited
2 Carter's Bay Road
Southside
St. David's
Bermuda
Dear Sirs
GlobeNet Communications Group Limited (the "Company")
Registration Statement on Form S-4 (No. 333- )
We have acted as special legal counsel in Bermuda to the Company in connection
with its filing with the U.S. Securities and Exchange Commission of a
Registration Statement on Form S-4 (File No. 333- (the
"Registration Statement") with respect to the proposed offer by the Company to
exchange US$300,000,000 aggregate principal amount of the Company's 13% Series B
Senior Notes Due 2007 (the "Exchange Notes") for an equal principal amount of
its outstanding 13% Senior Notes Due 2007 (the "Restricted Notes"). The
Exchange Notes are to be issued pursuant to an Indenture dated as of 14 July,
1999 between the Company and Bankers Trust Company, as Trustee (the
"Indenture").
For the purposes of giving this opinion, we have examined the following
documents:
(i) a copy of the Registration Statement;
(ii) a copy of the Indenture;
(iii) a form of the Notes.
The documents listed in items (i) through (iii) above are herein sometimes
collectively referred
<PAGE>
GlobeNet Communications Group Limited
August 31, 1999
Page 2
________________________________________________________________________________
to as the "Documents" (which term does not include any other instrument or
agreement whether or not specifically referred to therein or attached as an
exhibit or schedule thereto).
We have also reviewed the memorandum of association and the bye-laws of the
Company, minutes of various meetings of its directors (the "Minutes"), and such
other documents and made such enquiries as to questions of law as we have deemed
necessary in order to render the opinion set forth below.
We have assumed (a) the genuineness and authenticity of all signatures and the
conformity to the originals of all copies (whether or not certified) examined by
us and the authenticity and completeness of the originals from which such copies
were taken, (b) that where a document has been examined by us in draft form, it
will be or has been executed in the form of that draft, and where a number of
drafts of a document have been examined by us all changes thereto have been
marked or otherwise drawn to our attention, (c) the capacity, power and
authority of each of the parties to the Documents, other than the Company, to
enter into and perform its respective obligations under the Documents, (d) the
due execution of the Documents by each of the parties thereto, other than the
Company, and that each of the parties to the Documents physically gave such
Documents to the other parties thereto, (e) the accuracy and completeness of all
factual representations made in the Documents and other documents reviewed by
us, (f) that the resolutions contained in the Minutes remain in full force and
effect and have not been rescinded or amended, (g) that the Company is entering
into the Documents pursuant to its business of providing international
telecommunications services, (h) that there is no provision of the law of any
jurisdiction, other than Bermuda, which would have any implication in relation
to the opinions expressed herein, (i) the validity and binding effect under the
laws of the State of New York (the "Foreign Laws") of the Documents which are
expressed to be governed by such Foreign Laws in accordance with their
respective terms.
The obligations of the Company under the Documents (a) will be subject to the
laws from time to time in effect relating to bankruptcy, insolvency,
liquidation, possessory liens, rights of set off, reorganisation, amalgamation,
moratorium or any other laws or legal procedures, whether of a similar nature or
otherwise, generally affecting the rights of creditors, (b) will be subject to
statutory limitation of the time within which proceedings may be brought, (c)
will be subject to general principles of equity and, as such, specific
performance and injunctive relief, being equitable remedies, may not be
available, (d) may not be given effect to by a Bermuda court, whether or not it
was applying the Foreign Laws, if and to the extent they constitute the payment
of an amount which is in the nature of a penalty and not in the nature of
liquidated damages. Notwithstanding any contractual submission to the
jurisdiction of specific courts, a Bermuda court has inherent discretion to stay
or allow proceedings in the Bermuda courts.
We express no opinion as to the enforceability of any provision of the Documents
which provides for the payment of a specified rate of interest on the amount of
a judgment after the date of judgment or which purports to fetter the statutory
powers of the Company.
<PAGE>
GlobeNet Communications Group Limited
August 31, 1999
Page 3
________________________________________________________________________________
We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is to be governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda. This opinion is issued
solely for your benefit and is not to be relied upon by any other person, firm
or entity or in respect of any other matter.
On the basis of and subject to the foregoing, we are of the opinion that:
1. The Restricted Notes and the Exchange Notes have been duly authorised in
accordance with the Company's memorandum of association and bye-laws.
2. When issued in accordance with the terms of the Indenture, duly executed by
the Company, duly authenticated by the Trustee, and issued and delivered
against exchange of the Restricted Notes as contemplated in the
Registration Statement, the Exchange Notes will constitute the legal and
binding obligations of the Company under the laws of Bermuda.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the references to our firm in the sections headed
"Service of Process and Enforcement of Liabilities" and "Legal Matters".
Yours faithfully
CONYERS DILL & PEARMAN
/s/ CONYERS DILL & PEARMAN
<PAGE>
EXHIBIT 10.2
INDEMNITY AGREEMENT
-------------------
THIS Agreement is made as of and effective the 21st day of May, 1999
between Linda Dougherty, of Toronto, Ontario, Canada ("GlobeNet Director"), and
GlobeNet Communications Group Limited, a company incorporated under the laws of
Bermuda ("GlobeNet").
WHEREAS the GlobeNet Director has agreed to act as a director of GlobeNet,
at the request of GlobeNet;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
$1 now paid by the GlobeNet Director to GlobeNet (the receipt of which is hereby
acknowledged) and for other good and valuable consideration, it is hereby agreed
as follows:
1. GlobeNet acknowledges that the GlobeNet Director has been requested by
GlobeNet to act as a GlobeNet Director.
2. GlobeNet agrees to indemnify and save harmless the GlobeNet Director,
his/her heirs and legal representatives, to the fullest extent permitted by
Section 98 of the Companies Act 1981 against all costs, charges, liability,
damages, and expenses, including an amount paid to settle an action or to
satisfy a judgment, reasonably incurred by him/her in respect of any civil,
criminal or administrative action or proceeding to which he is made a party by
reason of, or in any connection with him/her, being or having been a director of
GlobeNet if: (a) the GlobeNet Director acted in his/her capacity as a Director
and (b) in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the GlobeNet Director had reasonable grounds for
believing that his/her conduct was lawful.
3. Without prejudice to the generality of section 2, but for the purposes
of Section 97 of the Companies Act 1981, or otherwise for the purpose of
determining whether the GlobeNet Director was acting within his/her capacity as
a director, the termination of any civil, criminal or administrative action or
proceeding by judgment, order, settlement, conviction or similar or other result
shall not, of itself, create a presumption either that the GlobeNet Director did
not act honestly and in good faith with a view to the best interests of GlobeNet
or that, in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the GlobeNet Director did not have reasonable
grounds for believing that his/her conduct was lawful.
4. If approval of any court is required in respect of any indemnification
of the GlobeNet Director by GlobeNet, then GlobeNet shall promptly make
application for approval of such court to indemnify the GlobeNet Director,
his/her heirs and legal representatives, against all costs, charges, liability,
damages, and expenses reasonably incurred by him/her in connection with such
action if: (a) the GlobeNet Director acted honestly and in good faith with a
view to the best interests of GlobeNet; and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, the
GlobeNet Director had reasonable grounds for believing that his/her conduct was
lawful.
Page 1 of 3
<PAGE>
5. Subject as hereinafter provided, GlobeNet shall pay all amounts covered
by this Agreement and incurred or reasonably likely to be incurred, by the
GlobeNet Director, his heirs and legal representatives, in defending any civil,
criminal or administrative action or proceeding to which the GlobeNet Director
or his/her heirs and legal representatives are made a party by reason of, or in
any connection with, the GlobeNet Director being or having been a director of
GlobeNet in advance of such action or proceeding. In respect of any such action
or proceeding, including an action by or on behalf of GlobeNet to procure
judgment in its favour and in respect of which GlobeNet is obligated to make
application for approval of the court to indemnify the GlobeNet Director, or
his/her heirs and legal representatives, GlobeNet shall pay all such amounts in
advance of such action or proceeding only upon receipt of an undertaking
satisfactory to GlobeNet by or on behalf of the GlobeNet Director, or his/her
heirs and legal representatives, to repay such amount if the court determines
that the GlobeNet Director, or his/her heirs and legal representatives, is not
entitled to be indemnified.
6. The GlobeNet Director shall not have any right to indemnification
hereunder in respect of any settlement of any civil, criminal or administrative
action or proceeding without GlobeNet's consent to such settlement, such consent
not to be unreasonably withheld.
7. This Agreement shall not operate to abridge, limit, restrict, or
exclude any other defences or rights, in law or in equity, to which the GlobeNet
Director may be entitled by operation of law or under any statute, bye-law of
GlobeNet, agreement, vote of shareholders of GlobeNet, vote of disinterested
directors of GlobeNet, or otherwise.
8. This Agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of Bermuda applicable therein, and the
parties hereby agree that any claims, disputes or questions arising out of or in
relation to this Agreement may be submitted to the jurisdiction of the courts of
Bermuda. Each of the parties hereto irrevocably attorns to the non-exclusive
jurisdiction of the courts of Bermuda.
9. This Agreement and the benefit and obligation of all covenants herein
contained shall enure to the benefit of and be binding upon the heirs,
executors, administrators, legal personal representatives and successors and
assigns of each of the parties hereto.
10. This Agreement shall continue until and terminate upon the later of:
(a) fifteen (15) years after the date that the GlobeNet Director shall have
ceased to serve as a director of GlobeNet; or (b) the final termination of all
pending proceedings in respect of which the GlobeNet Director is granted rights
of indemnification or advancement of expenses. This Agreement shall be binding
upon GlobeNet and its successors and assigns and shall inure to the benefit of
the GlobeNet Director and his heirs, executors and administrators.
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED & DELIVERED )
in the presence of )
)
) /s/ LINDA DOUGHERTY
_______________________
(Witness) ) Linda Dougherty
)
(Name) )
GLOBENET COMMUNICATIONS
GROUP LIMITED
By: /s/ LIN GENTEMANN
______________________(seal)
Name: Lin Gentemann
Title Corporate Secretary
Page 3 of 3
<PAGE>
EXHIBIT 10.4
INDEMNITY AGREEMENT
-------------------
THIS Agreement is made as of and effective the 14th day of July, 1999
between George E. Matelich, of New York, New York, USA ("GlobeNet Director"),
and GlobeNet Communications Group Limited, a company incorporated under the laws
of Bermuda ("GlobeNet").
WHEREAS the GlobeNet Director has agreed to act as a director of GlobeNet,
at the request of GlobeNet;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
$1 now paid by the GlobeNet Director to GlobeNet (the receipt of which is hereby
acknowledged) and for other good and valuable consideration, it is hereby agreed
as follows:
1. GlobeNet acknowledges that the GlobeNet Director has been requested by
GlobeNet to act as a GlobeNet Director.
2. GlobeNet agrees to indemnify and save harmless the GlobeNet Director,
his heirs and legal representatives, to the fullest extent permitted by Section
98 of the Companies Act 1981 against all costs, charges, liability, damages, and
expenses, including an amount paid to settle an action or to satisfy a judgment,
reasonably incurred by him in respect of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of, or in any
connection with him, being or having been a director of GlobeNet if: (a) the
GlobeNet Director acted in his capacity as a Director and (b) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, the GlobeNet Director had reasonable grounds for believing that his
conduct was lawful.
3. Without prejudice to the generality of section 2, but for the purposes
of Section 97 of the Companies Act 1981, or otherwise for the purpose of
determining whether the GlobeNet Director was acting within his capacity as a
director, the termination of any civil, criminal or administrative action or
proceeding by judgment, order, settlement, conviction or similar or other result
shall not, of itself, create a presumption either that the GlobeNet Director did
not act honestly and in good faith with a view to the best interests of GlobeNet
or that, in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the GlobeNet Director did not have reasonable
grounds for believing that his conduct was lawful.
4. If approval of any court is required in respect of any indemnification
of the GlobeNet Director by GlobeNet, then GlobeNet shall promptly make
application for approval of such court to indemnify the GlobeNet Director, his
heirs and legal representatives, against all costs, charges, liability, damages,
and expenses reasonably incurred by him/her in connection with such action if:
(a) the GlobeNet Director acted honestly and in good faith with a view to the
best interests of GlobeNet; and (b) in the case of a criminal or administrative
action or proceeding that is enforced by a monetary penalty, the GlobeNet
Director had reasonable grounds for believing that his/her conduct was lawful.
Page 1 of 3
<PAGE>
5. Subject as hereinafter provided, GlobeNet shall pay all amounts
covered by this Agreement and incurred or reasonably likely to be incurred, by
the GlobeNet Director, his heirs and legal representatives, in defending any
civil, criminal or administrative action or proceeding to which the GlobeNet
Director or his heirs and legal representatives are made a party by reason of,
or in any connection with, the GlobeNet Director being or having been a director
of GlobeNet in advance of such action or proceeding. In respect of any such
action or proceeding, including an action by or on behalf of GlobeNet to procure
judgment in its favour and in respect of which GlobeNet is obligated to make
application for approval of the court to indemnify the GlobeNet Director, or his
heirs and legal representatives, GlobeNet shall pay all such amounts in advance
of such action or proceeding only upon receipt of an undertaking satisfactory to
GlobeNet by or on behalf of the GlobeNet Director, or his heirs and legal
representatives, to repay such amount if the court determines that the GlobeNet
Director, or his heirs and legal representatives, is not entitled to be
indemnified.
6. The GlobeNet Director shall not have any right to indemnification
hereunder in respect of any settlement of any civil, criminal or administrative
action or proceeding without GlobeNet's consent to such settlement, such consent
not to be unreasonably withheld.
7. This Agreement shall not operate to abridge, limit, restrict, or
exclude any other defences or rights, in law or in equity, to which the GlobeNet
Director may be entitled by operation of law or under any statute, bye-law of
GlobeNet, agreement, vote of shareholders of GlobeNet, vote of disinterested
directors of GlobeNet, or otherwise.
8. This Agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of Bermuda applicable therein, and the
parties hereby agree that any claims, disputes or questions arising out of or in
relation to this Agreement may be submitted to the jurisdiction of the courts of
Bermuda. Each of the parties hereto irrevocably attorns to the non-exclusive
jurisdiction of the courts of Bermuda.
9. This Agreement and the benefit and obligation of all covenants herein
contained shall enure to the benefit of and be binding upon the heirs,
executors, administrators, legal personal representatives and successors and
assigns of each of the parties hereto.
10. This Agreement shall continue until and terminate upon the later of:
(a) fifteen (15) years after the date that the GlobeNet Director shall have
ceased to serve as a director of GlobeNet; or (b) the final termination of all
pending proceedings in respect of which the GlobeNet Director is granted rights
of indemnification or advancement of expenses. This Agreement shall be binding
upon GlobeNet and its successors and assigns and shall inure to the benefit of
the GlobeNet Director and his heirs, executors and administrators.
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED & DELIVERED )
in the presence of )
) /s/ GEORGE E. MATELICH
) _____________________________________________
(Witness) ) George E. Matelich
)
(Name) )
GLOBENET COMMUNICATIONS
GROUP LIMITED
By: /s LIN GENTEMANN (seal)
-----------------
Name: Lin Gentemann
Title Corporate Secretary
Page 3 of 3
<PAGE>
EXHIBIT 10.5
INDEMNITY AGREEMENT
-------------------
THIS Agreement is made as of and effective the 21st day of May, 1999
between Michael Kedar, of Toronto, Ontario, Canada ("GlobeNet Director"), and
GlobeNet Communications Group Limited, a company incorporated under the laws of
Bermuda ("GlobeNet").
WHEREAS the GlobeNet Director has agreed to act as a director of GlobeNet,
at the request of GlobeNet;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
$1 now paid by the GlobeNet Director to GlobeNet (the receipt of which is hereby
acknowledged) and for other good and valuable consideration, it is hereby agreed
as follows:
1. GlobeNet acknowledges that the GlobeNet Director has been requested by
GlobeNet to act as a GlobeNet Director.
2. GlobeNet agrees to indemnify and save harmless the GlobeNet Director,
his/her heirs and legal representatives, to the fullest extent permitted by
Section 98 of the Companies Act 1981 against all costs, charges, liability,
damages, and expenses, including an amount paid to settle an action or to
satisfy a judgment, reasonably incurred by him/her in respect of any civil,
criminal or administrative action or proceeding to which he is made a party by
reason of, or in any connection with him/her, being or having been a director of
GlobeNet if: (a) the GlobeNet Director acted in his/her capacity as a Director
and (b) in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the GlobeNet Director had reasonable grounds for
believing that his/her conduct was lawful.
3. Without prejudice to the generality of section 2, but for the purposes
of Section 97 of the Companies Act 1981, or otherwise for the purpose of
determining whether the GlobeNet Director was acting within his/her capacity as
a director, the termination of any civil, criminal or administrative action or
proceeding by judgment, order, settlement, conviction or similar or other result
shall not, of itself, create a presumption either that the GlobeNet Director did
not act honestly and in good faith with a view to the best interests of GlobeNet
or that, in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the GlobeNet Director did not have reasonable
grounds for believing that his/her conduct was lawful.
4. If approval of any court is required in respect of any indemnification
of the GlobeNet Director by GlobeNet, then GlobeNet shall promptly make
application for approval of such court to indemnify the GlobeNet Director,
his/her heirs and legal representatives, against all costs, charges, liability,
damages, and expenses reasonably incurred by him/her in connection with such
action if: (a) the GlobeNet Director acted honestly and in good faith with a
view to the best interests of GlobeNet; and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, the
GlobeNet Director had reasonable grounds for believing that his/her conduct was
lawful.
Page 1 of 3
<PAGE>
5. Subject as hereinafter provided, GlobeNet shall pay all amounts
covered by this Agreement and incurred or reasonably likely to be incurred, by
the GlobeNet Director, his heirs and legal representatives, in defending any
civil, criminal or administrative action or proceeding to which the GlobeNet
Director or his/her heirs and legal representatives are made a party by reason
of, or in any connection with, the GlobeNet Director being or having been a
director of GlobeNet in advance of such action or proceeding. In respect of any
such action or proceeding, including an action by or on behalf of GlobeNet to
procure judgment in its favour and in respect of which GlobeNet is obligated to
make application for approval of the court to indemnify the GlobeNet Director,
or his/her heirs and legal representatives, GlobeNet shall pay all such amounts
in advance of such action or proceeding only upon receipt of an undertaking
satisfactory to GlobeNet by or on behalf of the GlobeNet Director, or his/her
heirs and legal representatives, to repay such amount if the court determines
that the GlobeNet Director, or his/her heirs and legal representatives, is not
entitled to be indemnified.
6. The GlobeNet Director shall not have any right to indemnification
hereunder in respect of any settlement of any civil, criminal or administrative
action or proceeding without GlobeNet's consent to such settlement, such consent
not to be unreasonably withheld.
7. This Agreement shall not operate to abridge, limit, restrict, or
exclude any other defences or rights, in law or in equity, to which the GlobeNet
Director may be entitled by operation of law or under any statute, bye-law of
GlobeNet, agreement, vote of shareholders of GlobeNet, vote of disinterested
directors of GlobeNet, or otherwise.
8. This Agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of Bermuda applicable therein, and the
parties hereby agree that any claims, disputes or questions arising out of or in
relation to this Agreement may be submitted to the jurisdiction of the courts of
Bermuda. Each of the parties hereto irrevocably attorns to the non-exclusive
jurisdiction of the courts of Bermuda.
9. This Agreement and the benefit and obligation of all covenants herein
contained shall enure to the benefit of and be binding upon the heirs,
executors, administrators, legal personal representatives and successors and
assigns of each of the parties hereto.
10. This Agreement shall continue until and terminate upon the later of:
(a) fifteen (15) years after the date that the GlobeNet Director shall have
ceased to serve as a director of GlobeNet; or (b) the final termination of all
pending proceedings in respect of which the GlobeNet Director is granted rights
of indemnification or advancement of expenses. This Agreement shall be binding
upon GlobeNet and its successors and assigns and shall inure to the benefit of
the GlobeNet Director and his heirs, executors and administrators.
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED & DELIVERED )
in the presence of )
) /s/ MICHAEL KEDAR
) __________________
(Witness) ) Michael Kedar
)
(Name) )
GLOBENET COMMUNICATIONS
GROUP LIMITED
By: /s/ LIN GENTEMANN (seal)
_________________
Name: Lin Gentemann
Title Corporate Secretary
Page 3 of 3
<PAGE>
EXHIBIT 10.6
INDEMNITY AGREEMENT
-------------------
THIS Agreement is made as of and effective the 21st day of May, 1999
between Harley J. Murphy, of Hamilton, Ontario, Canada ("GlobeNet Director"),
and GlobeNet Communications Group Limited, a company incorporated under the laws
of Bermuda ("GlobeNet").
WHEREAS the GlobeNet Director has agreed to act as a director of GlobeNet,
at the request of GlobeNet;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
$1 now paid by the GlobeNet Director to GlobeNet (the receipt of which is hereby
acknowledged) and for other good and valuable consideration, it is hereby agreed
as follows:
1. GlobeNet acknowledges that the GlobeNet Director has been requested by
GlobeNet to act as a GlobeNet Director.
2. GlobeNet agrees to indemnify and save harmless the GlobeNet Director,
his/her heirs and legal representatives, to the fullest extent permitted by
Section 98 of the Companies Act 1981 against all costs, charges, liability,
damages, and expenses, including an amount paid to settle an action or to
satisfy a judgment, reasonably incurred by him/her in respect of any civil,
criminal or administrative action or proceeding to which he is made a party by
reason of, or in any connection with him/her, being or having been a director of
GlobeNet if: (a) the GlobeNet Director acted in his/her capacity as a Director
and (b) in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the GlobeNet Director had reasonable grounds for
believing that his/her conduct was lawful.
3. Without prejudice to the generality of section 2, but for the purposes
of Section 97 of the Companies Act 1981, or otherwise for the purpose of
determining whether the GlobeNet Director was acting within his/her capacity as
a director, the termination of any civil, criminal or administrative action or
proceeding by judgment, order, settlement, conviction or similar or other result
shall not, of itself, create a presumption either that the GlobeNet Director did
not act honestly and in good faith with a view to the best interests of GlobeNet
or that, in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the GlobeNet Director did not have reasonable
grounds for believing that his/her conduct was lawful.
4. If approval of any court is required in respect of any indemnification
of the GlobeNet Director by GlobeNet, then GlobeNet shall promptly make
application for approval of such court to indemnify the GlobeNet Director,
his/her heirs and legal representatives, against all costs, charges, liability,
damages, and expenses reasonably incurred by him/her in connection with such
action if: (a) the GlobeNet Director acted honestly and in good faith with a
view to the best interests of GlobeNet; and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, the
GlobeNet Director had reasonable grounds for believing that his/her conduct was
lawful.
Page 1 of 3
<PAGE>
5. Subject as hereinafter provided, GlobeNet shall pay all amounts covered
by this Agreement and incurred or reasonably likely to be incurred, by the
GlobeNet Director, his heirs and legal representatives, in defending any civil,
criminal or administrative action or proceeding to which the GlobeNet Director
or his/her heirs and legal representatives are made a party by reason of, or in
any connection with, the GlobeNet Director being or having been a director of
GlobeNet in advance of such action or proceeding. In respect of any such action
or proceeding, including an action by or on behalf of GlobeNet to procure
judgment in its favour and in respect of which GlobeNet is obligated to make
application for approval of the court to indemnify the GlobeNet Director, or
his/her heirs and legal representatives, GlobeNet shall pay all such amounts in
advance of such action or proceeding only upon receipt of an undertaking
satisfactory to GlobeNet by or on behalf of the GlobeNet Director, or his/her
heirs and legal representatives, to repay such amount if the court determines
that the GlobeNet Director, or his/her heirs and legal representatives, is not
entitled to be indemnified.
6. The GlobeNet Director shall not have any right to indemnification
hereunder in respect of any settlement of any civil, criminal or administrative
action or proceeding without GlobeNet's consent to such settlement, such consent
not to be unreasonably withheld.
7. This Agreement shall not operate to abridge, limit, restrict, or
exclude any other defences or rights, in law or in equity, to which the GlobeNet
Director may be entitled by operation of law or under any statute, bye-law of
GlobeNet, agreement, vote of shareholders of GlobeNet, vote of disinterested
directors of GlobeNet, or otherwise.
8. This Agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of Bermuda applicable therein, and the
parties hereby agree that any claims, disputes or questions arising out of or in
relation to this Agreement may be submitted to the jurisdiction of the courts of
Bermuda. Each of the parties hereto irrevocably attorns to the non-exclusive
jurisdiction of the courts of Bermuda.
9. This Agreement and the benefit and obligation of all covenants herein
contained shall enure to the benefit of and be binding upon the heirs,
executors, administrators, legal personal representatives and successors and
assigns of each of the parties hereto.
10. This Agreement shall continue until and terminate upon the later of:
(a) fifteen (15) years after the date that the GlobeNet Director shall have
ceased to serve as a director of GlobeNet; or (b) the final termination of all
pending proceedings in respect of which the GlobeNet Director is granted rights
of indemnification or advancement of expenses. This Agreement shall be binding
upon GlobeNet and its successors and assigns and shall inure to the benefit of
the GlobeNet Director and his heirs, executors and administrators.
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED & DELIVERED )
in the presence of )
) /s/ Harley J. Murphy
) _______________________
(Witness) ) Harley J. Murphy
)
(Name) )
GLOBENET COMMUNICATIONS
GROUP LIMITED
By: /s/ Lin Gentemann
_______________________ (seal)
Name: Lin Gentemann
Title Corporate Secretary
Page 3 of 3
<PAGE>
EXHIBIT 10.7
INDEMNITY AGREEMENT
-------------------
THIS Agreement is made as of and effective the 14th day of July, 1999
between Mark A. Pelson, of Providence, Rhode Island, USA ("GlobeNet Director"),
and GlobeNet Communications Group Limited, a company incorporated under the laws
of Bermuda ("GlobeNet").
WHEREAS the GlobeNet Director has agreed to act as a director of GlobeNet,
at the request of GlobeNet;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
$1 now paid by the GlobeNet Director to GlobeNet (the receipt of which is hereby
acknowledged) and for other good and valuable consideration, it is hereby agreed
as follows:
1. GlobeNet acknowledges that the GlobeNet Director has been requested by
GlobeNet to act as a GlobeNet Director.
2. GlobeNet agrees to indemnify and save harmless the GlobeNet Director,
his heirs and legal representatives, to the fullest extent permitted by Section
98 of the Companies Act 1981 against all costs, charges, liability, damages, and
expenses, including an amount paid to settle an action or to satisfy a judgment,
reasonably incurred by him in respect of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of, or in any
connection with him, being or having been a director of GlobeNet if: (a) the
GlobeNet Director acted in his capacity as a Director and (b) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, the GlobeNet Director had reasonable grounds for believing that his
conduct was lawful.
3. Without prejudice to the generality of section 2, but for the purposes
of Section 97 of the Companies Act 1981, or otherwise for the purpose of
determining whether the GlobeNet Director was acting within his capacity as a
director, the termination of any civil, criminal or administrative action or
proceeding by judgment, order, settlement, conviction or similar or other result
shall not, of itself, create a presumption either that the GlobeNet Director did
not act honestly and in good faith with a view to the best interests of GlobeNet
or that, in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the GlobeNet Director did not have reasonable
grounds for believing that his conduct was lawful.
4. If approval of any court is required in respect of any indemnification
of the GlobeNet Director by GlobeNet, then GlobeNet shall promptly make
application for approval of such court to indemnify the GlobeNet Director, his
heirs and legal representatives, against all costs, charges, liability, damages,
and expenses reasonably incurred by him/her in connection with such action if:
(a) the GlobeNet Director acted honestly and in good faith with a view to the
best interests of GlobeNet; and (b) in the case of a criminal or administrative
action or proceeding that is enforced by a monetary penalty, the GlobeNet
Director had reasonable grounds for believing that his/her conduct was lawful.
Page 1 of 3
<PAGE>
5. Subject as hereinafter provided, GlobeNet shall pay all amounts
covered by this Agreement and incurred or reasonably likely to be incurred, by
the GlobeNet Director, his heirs and legal representatives, in defending any
civil, criminal or administrative action or proceeding to which the GlobeNet
Director or his heirs and legal representatives are made a party by reason of,
or in any connection with, the GlobeNet Director being or having been a director
of GlobeNet in advance of such action or proceeding. In respect of any such
action or proceeding, including an action by or on behalf of GlobeNet to procure
judgment in its favour and in respect of which GlobeNet is obligated to make
application for approval of the court to indemnify the GlobeNet Director, or his
heirs and legal representatives, GlobeNet shall pay all such amounts in advance
of such action or proceeding only upon receipt of an undertaking satisfactory to
GlobeNet by or on behalf of the GlobeNet Director, or his heirs and legal
representatives, to repay such amount if the court determines that the GlobeNet
Director, or his heirs and legal representatives, is not entitled to be
indemnified.
6. The GlobeNet Director shall not have any right to indemnification
hereunder in respect of any settlement of any civil, criminal or administrative
action or proceeding without GlobeNet's consent to such settlement, such consent
not to be unreasonably withheld.
7. This Agreement shall not operate to abridge, limit, restrict, or
exclude any other defences or rights, in law or in equity, to which the GlobeNet
Director may be entitled by operation of law or under any statute, bye-law of
GlobeNet, agreement, vote of shareholders of GlobeNet, vote of disinterested
directors of GlobeNet, or otherwise.
8. This Agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of Bermuda applicable therein, and the
parties hereby agree that any claims, disputes or questions arising out of or in
relation to this Agreement may be submitted to the jurisdiction of the courts of
Bermuda. Each of the parties hereto irrevocably attorns to the non-exclusive
jurisdiction of the courts of Bermuda.
9. This Agreement and the benefit and obligation of all covenants herein
contained shall enure to the benefit of and be binding upon the heirs,
executors, administrators, legal personal representatives and successors and
assigns of each of the parties hereto.
10. This Agreement shall continue until and terminate upon the later of:
(a) fifteen (15) years after the date that the GlobeNet Director shall have
ceased to serve as a director of GlobeNet; or (b) the final termination of all
pending proceedings in respect of which the GlobeNet Director is granted rights
of indemnification or advancement of expenses. This Agreement shall be binding
upon GlobeNet and its successors and assigns and shall inure to the benefit of
the GlobeNet Director and his heirs, executors and administrators.
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED & DELIVERED )
in the presence of )
)
) /s/ MARK A. PELSON
________________________________________
(Witness) ) Mark A. Pelson
)
(Name) )
GLOBENET COMMUNICATIONS
GROUP LIMITED
By: /s/ LIN GENTEMANN (seal)
_____________________
Name: Lin Gentemann
Title Corporate Secretary
Page 3 of 3
<PAGE>
EXHIBIT 10.8
INDEMNITY AGREEMENT
-------------------
THIS Agreement is made as of and effective the 21st day of May, 1999
between Jeffrey G. Conyers, of Pembroke, Bermuda ("GlobeNet Director"), and
GlobeNet Communications Group Limited, a company incorporated under the laws of
Bermuda ("GlobeNet").
WHEREAS the GlobeNet Director has agreed to act as a director of GlobeNet,
at the request of GlobeNet;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
$1 now paid by the GlobeNet Director to GlobeNet (the receipt of which is hereby
acknowledged) and for other good and valuable consideration, it is hereby agreed
as follows:
1. GlobeNet acknowledges that the GlobeNet Director has been requested by
GlobeNet to act as a GlobeNet Director.
2. GlobeNet agrees to indemnify and save harmless the GlobeNet Director,
his/her heirs and legal representatives, to the fullest extent permitted by
Section 98 of the Companies Act 1981 against all costs, charges, liability,
damages, and expenses, including an amount paid to settle an action or to
satisfy a judgment, reasonably incurred by him/her in respect of any civil,
criminal or administrative action or proceeding to which he is made a party by
reason of, or in any connection with him/her, being or having been a director of
GlobeNet if: (a) the GlobeNet Director acted in his/her capacity as a Director
and (b) in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the GlobeNet Director had reasonable grounds for
believing that his/her conduct was lawful.
3. Without prejudice to the generality of section 2, but for the purposes
of Section 97 of the Companies Act 1981, or otherwise for the purpose of
determining whether the GlobeNet Director was acting within his/her capacity as
a director, the termination of any civil, criminal or administrative action or
proceeding by judgment, order, settlement, conviction or similar or other result
shall not, of itself, create a presumption either that the GlobeNet Director did
not act honestly and in good faith with a view to the best interests of GlobeNet
or that, in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the GlobeNet Director did not have reasonable
grounds for believing that his/her conduct was lawful.
4. If approval of any court is required in respect of any indemnification
of the GlobeNet Director by GlobeNet, then GlobeNet shall promptly make
application for approval of such court to indemnify the GlobeNet Director,
his/her heirs and legal representatives, against all costs, charges, liability,
damages, and expenses reasonably incurred by him/her in connection with such
action if: (a) the GlobeNet Director acted honestly and in good faith with a
view to the best interests of GlobeNet; and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, the
GlobeNet Director had reasonable grounds for believing that his/her conduct was
lawful.
Page 1 of 3
<PAGE>
5. Subject as hereinafter provided, GlobeNet shall pay all amounts
covered by this Agreement and incurred or reasonably likely to be incurred, by
the GlobeNet Director, his heirs and legal representatives, in defending any
civil, criminal or administrative action or proceeding to which the GlobeNet
Director or his/her heirs and legal representatives are made a party by reason
of, or in any connection with, the GlobeNet Director being or having been a
director of GlobeNet in advance of such action or proceeding. In respect of any
such action or proceeding, including an action by or on behalf of GlobeNet to
procure judgment in its favour and in respect of which GlobeNet is obligated to
make application for approval of the court to indemnify the GlobeNet Director,
or his/her heirs and legal representatives, GlobeNet shall pay all such amounts
in advance of such action or proceeding only upon receipt of an undertaking
satisfactory to GlobeNet by or on behalf of the GlobeNet Director, or his/her
heirs and legal representatives, to repay such amount if the court determines
that the GlobeNet Director, or his/her heirs and legal representatives, is not
entitled to be indemnified.
6. The GlobeNet Director shall not have any right to indemnification
hereunder in respect of any settlement of any civil, criminal or administrative
action or proceeding without GlobeNet's consent to such settlement, such consent
not to be unreasonably withheld.
7. This Agreement shall not operate to abridge, limit, restrict, or
exclude any other defences or rights, in law or in equity, to which the GlobeNet
Director may be entitled by operation of law or under any statute, bye-law of
GlobeNet, agreement, vote of shareholders of GlobeNet, vote of disinterested
directors of GlobeNet, or otherwise.
8. This Agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of Bermuda applicable therein, and the
parties hereby agree that any claims, disputes or questions arising out of or in
relation to this Agreement may be submitted to the jurisdiction of the courts of
Bermuda. Each of the parties hereto irrevocably attorns to the non-exclusive
jurisdiction of the courts of Bermuda.
9. This Agreement and the benefit and obligation of all covenants herein
contained shall enure to the benefit of and be binding upon the heirs,
executors, administrators, legal personal representatives and successors and
assigns of each of the parties hereto.
10. This Agreement shall continue until and terminate upon the later of:
(a) fifteen (15) years after the date that the GlobeNet Director shall have
ceased to serve as a director of GlobeNet; or (b) the final termination of all
pending proceedings in respect of which the GlobeNet Director is granted rights
of indemnification or advancement of expenses. This Agreement shall be binding
upon GlobeNet and its successors and assigns and shall inure to the benefit of
the GlobeNet Director and his heirs, executors and administrators.
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED & DELIVERED )
in the presence of )
)
) /s/ JEFFREY G. CONYERS
____________________________________
(Witness) ) Jeffrey G. Conyers
)
(Name) )
GLOBENET COMMUNICATIONS
GROUP LIMITED
By: /s/ LIN GENTEMANN (seal)
_______________________
Name: Lin Gentemann
Title Corporate Secretary
Page 3 of 3
<PAGE>
Exhibit 10.9
INDEMNITY AGREEMENT
-------------------
THIS Agreement is made as of and effective the 14th day of July, 1999
between Kevin Maroni, of Boston, Massachusette, USA ("GlobeNet Director"), and
GlobeNet Communications Group Limited, a company incorporated under the laws of
Bermuda ("GlobeNet").
WHEREAS the GlobeNet Director has agreed to act as a director of GlobeNet,
at the request of GlobeNet;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
$1 now paid by the GlobeNet Director to GlobeNet (the receipt of which is hereby
acknowledged) and for other good and valuable consideration, it is hereby agreed
as follows:
1. GlobeNet acknowledges that the GlobeNet Director has been requested by
GlobeNet to act as a GlobeNet Director.
2. GlobeNet agrees to indemnify and save harmless the GlobeNet Director,
his heirs and legal representatives, to the fullest extent permitted by Section
98 of the Companies Act 1981 against all costs, charges, liability, damages, and
expenses, including an amount paid to settle an action or to satisfy a judgment,
reasonably incurred by him in respect of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of, or in any
connection with him, being or having been a director of GlobeNet if: (a) the
GlobeNet Director acted in his capacity as a Director and (b) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, the GlobeNet Director had reasonable grounds for believing that his
conduct was lawful.
3. Without prejudice to the generality of section 2, but for the purposes
of Section 97 of the Companies Act 1981, or otherwise for the purpose of
determining whether the GlobeNet Director was acting within his capacity as a
director, the termination of any civil, criminal or administrative action or
proceeding by judgment, order, settlement, conviction or similar or other result
shall not, of itself, create a presumption either that the GlobeNet Director did
not act honestly and in good faith with a view to the best interests of GlobeNet
or that, in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the GlobeNet Director did not have reasonable
grounds for believing that his conduct was lawful.
4. If approval of any court is required in respect of any indemnification
of the GlobeNet Director by GlobeNet, then GlobeNet shall promptly make
application for approval of such court to indemnify the GlobeNet Director, his
heirs and legal representatives, against all costs, charges, liability, damages,
and expenses reasonably incurred by him/her in connection with such action if:
(a) the GlobeNet Director acted honestly and in good faith with a view to the
best interests of GlobeNet; and (b) in the case of a criminal or administrative
action or proceeding that is enforced by a monetary penalty, the GlobeNet
Director had reasonable grounds for believing that his/her conduct was lawful.
Page 1 of 3
<PAGE>
5. Subject as hereinafter provided, GlobeNet shall pay all amounts
covered by this Agreement and incurred or reasonably likely to be incurred, by
the GlobeNet Director, his heirs and legal representatives, in defending any
civil, criminal or administrative action or proceeding to which the GlobeNet
Director or his heirs and legal representatives are made a party by reason of,
or in any connection with, the GlobeNet Director being or having been a director
of GlobeNet in advance of such action or proceeding. In respect of any such
action or proceeding, including an action by or on behalf of GlobeNet to procure
judgment in its favour and in respect of which GlobeNet is obligated to make
application for approval of the court to indemnify the GlobeNet Director, or his
heirs and legal representatives, GlobeNet shall pay all such amounts in advance
of such action or proceeding only upon receipt of an undertaking satisfactory to
GlobeNet by or on behalf of the GlobeNet Director, or his heirs and legal
representatives, to repay such amount if the court determines that the GlobeNet
Director, or his heirs and legal representatives, is not entitled to be
indemnified.
6. The GlobeNet Director shall not have any right to indemnification
hereunder in respect of any settlement of any civil, criminal or administrative
action or proceeding without GlobeNet's consent to such settlement, such consent
not to be unreasonably withheld.
7. This Agreement shall not operate to abridge, limit, restrict, or
exclude any other defences or rights, in law or in equity, to which the GlobeNet
Director may be entitled by operation of law or under any statute, bye-law of
GlobeNet, agreement, vote of shareholders of GlobeNet, vote of disinterested
directors of GlobeNet, or otherwise.
8. This Agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of Bermuda applicable therein, and the
parties hereby agree that any claims, disputes or questions arising out of or in
relation to this Agreement may be submitted to the jurisdiction of the courts of
Bermuda. Each of the parties hereto irrevocably attorns to the non-exclusive
jurisdiction of the courts of Bermuda.
9. This Agreement and the benefit and obligation of all covenants herein
contained shall enure to the benefit of and be binding upon the heirs,
executors, administrators, legal personal representatives and successors and
assigns of each of the parties hereto.
10. This Agreement shall continue until and terminate upon the later of:
(a) fifteen (15) years after the date that the GlobeNet Director shall have
ceased to serve as a director of GlobeNet; or (b) the final termination of all
pending proceedings in respect of which the GlobeNet Director is granted rights
of indemnification or advancement of expenses. This Agreement shall be binding
upon GlobeNet and its successors and assigns and shall inure to the benefit of
the GlobeNet Director and his heirs, executors and administrators.
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED & DELIVERED )
in the presence of ) /s/ KEVIN MARONI
) ______________________
) Kevin Maroni
(Witness) )
)
(Name) )
GLOBENET COMMUNICATIONS
GROUP LIMITED
By: /s/ LIN GENTEMANN
____________________(seal)
Name: Lin Gentemann
Title Corporate Secretary
<PAGE>
EXHIBIT 10.10
INDEMNITY AGREEMENT
-------------------
This Agreement is made as of and effective the 21st day of May, 1999
("Agreement"), by and between GlobeNet Communications Group Limited, a Bermuda
corporation ("Company"), and Michael Kedar of Toronto, Ontario, Canada
("Indemnitee"):
RECITALS:
--------
A. Highly competent persons are becoming more reluctant to serve publicly-
held corporations as officers, counsel or other key employees or in other
capacities unless they are provided with adequate protection through insurance
or adequate indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of the
corporation.
B. The increasing difficulties of obtaining adequate insurance and the
uncertainties relating to indemnification may impair the ability of the Company
to continue to attract and retain such persons.
C. The Board of Directors of the Company (the "Board") has determined that
the potential inability to attract and retain such persons is detrimental to the
best interest of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future.
D. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
the Company's Bye-Laws and the Companies Act 1981 of Bermuda, so that they will
serve or continue to serve the Company free from undue concern that they will
not be so indemnified.
E. Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve as an officer,
----------------------
employee, agent or fiduciary of the Company and/or an affiliate thereof, and may
at the request of the Company, agree to serve as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law), in which event the Company shall have no obligation under
this Agreement to continue Indemnitee in any such position.
<PAGE>
2. Indemnification - General. The Company shall indemnify and advance
-------------------------
Expenses (as hereinafter defined) to Indemnitee as provided in this Agreement
and to the fullest extent permitted by the Company's Bye-Laws and the Companies
Act 1981 of Bermuda in effect on the date hereof and to such greater extent as
applicable law may thereafter from time to time permit. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited
to, the rights set forth in the other Sections of the Agreement. This Agreement
shall also apply to any claims brought against the Indemnitee which antedate the
date hereof, so long as Indemnitee was serving in a Corporate Status (as
hereinafter defined) with respect to any such claims.
3. Proceedings Other Than Proceedings by or in the Right of the Company.
--------------------------------------------------------------------
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 3 if, by reason of his Corporate Status, he is, or is threatened to be
made, a party to any threatened, pending, or completed Proceeding (as
hereinafter defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
4. Proceeding by or in the Right of the Company. Indemnitee shall be
--------------------------------------------
entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company. Notwithstanding the foregoing, no indemnification against such
Expenses and against judgments, penalties, fines and amounts paid in settlement
shall be made in respect of any claim, issue or matter in any such Proceeding as
to which Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall nevertheless
be made by the Company in such event if and only to the extent that the court in
which such Proceeding shall have been brought or is pending, shall determine.
5. Indemnification for Expenses of a Party Who is Wholly or Partly
----------------------------------------------------------------
Successful. Notwithstanding any other provision of this Agreement, to the
- ----------
extent that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. If Indemnitee is not successful with respect to a claim, issue
or matter, Indemnitee's right to indemnification for Expenses with regard to
such claim, issue or matter shall be governed by Sections 3 and 4 of this
Agreement. For purposes of this Section and without limitation, the
2
<PAGE>
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
6. Indemnification for Expenses of a Witness. Notwithstanding any other
-----------------------------------------
provision of this Agreement, to the extent that Indemnitee is or is threatened
to be made, by reason of his Corporate Status, a witness in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
7. Advancement of Expenses. The Company shall advance all reasonable
-----------------------
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statements shall reasonably evidence the Expenses incurred by Indemnitee and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such Expenses.
8. Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(a) To obtain indemnification against this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
the first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) (unless
Indemnitee shall request that such determination be made by the Board of
Directors or the stockholders, in which case by the person or persons or in the
manner provided for in clauses (ii) or (iii) of this Section 8(b)) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
if such quorum of Disinterested Directors so directs, by Independent Counsel in
a written opinion to the Board of Directors, a copy of which shall be delivered
to Indemnitee or (C) by the stockholders of the Company; or (iii) as provided in
Section 9(b) of this Agreement; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten (10)
days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making
3
<PAGE>
such determination shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising her of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event, Indemnitee
or the Company, as the case may be, may, within seven (7) days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of a written request
for indemnification pursuant to Section 8(a) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee
may petition the court of competent jurisdiction for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
9. Presumptions and Effect of Certain Proceedings.
----------------------------------------------
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
4
<PAGE>
(b) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, then requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such sixty (60) day period may be
extended for a reasonable time, not to exceed an additional thirty (30) days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 8(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of the request for
such determination the Board of Directors has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within seventy-five (75) days after such receipt and such
determination is made at such meeting, or (B) a special meeting of stockholders
is called within fifteen (15) days after such receipt for the purpose of making
such determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made at such meeting, or
(ii) if the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
10. Remedies of Indemnitee.
----------------------
(a) In the event that (i) a determination is made pursuant to Section
8 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 7 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within ninety (90) days after receipt by the Company of the
request for indemnification, or (iv) payment of indemnification is not made
pursuant to Section 6 of this Agreement within ten (10) days after receipt by
the Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Section 8 or 9 of this Agreement, Indemnitee shall be
entitled to an adjudication in an appropriate court in Bermuda, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator in Hamilton, Bermuda
pursuant to the Commercial Arbitration
5
<PAGE>
Rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant
to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits that Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 10, the
Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 8 or 9 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 10, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks
a judicial adjudication of or an award in arbitration to enforce her rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
her in such judicial adjudication or arbitration, but only if she prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
------------------------------------------------------------
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Memorandum of Association, Bye-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
6
<PAGE>
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. Duration of Agreement. This Agreement shall continue until and
---------------------
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as an officer, employee, agent or fiduciary of the
Company or a director, officer, employee, agent or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which Indemnitee served at the request of the Company; or (b) the
final termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of expenses hereunder and of
any Proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement
relating thereto. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his
heirs, executors and administrators.
13. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, each portion of any Section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. Exception to Right of Indemnification or Advancement of Expenses.
-----------------------------------------------------------------
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim therein, brought or made by him against
the Company.
15. Identical Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
7
<PAGE>
16. Headings. The headings of the paragraphs of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to effect the construction hereof.
17. Definitions. For purposes of this Agreement:
-----------
(a) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter; or (iii) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute a majority of
the Board of Directors.
(b) "Corporate Status" describes the status of a person who is or was
an officer, employee, agent or fiduciary of the Company or a director, officer,
employee, agent or fiduciary of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Effective Date" means the date of this Agreement.
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of expert, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five (5) years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who,
8
<PAGE>
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
(g) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce
his rights under this Agreement.
18. Modification and Waiver. No supplement, modification or amendment
-----------------------
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
19. Notice of Indemnitee. Indemnitee agrees promptly to notify the
--------------------
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
20. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
Mike Kedar
(a) If to Indemnitee, to: _____________________________
401 Glencairn Ave.
_____________________________
Toronto, Ontario
_____________________________
M5N 1V2
_____________________________
(b) If to the Company, to: GlobeNet Communications Group Limited
2 Carter's Bay Road
Southside,
St. David's DD02
Bermuda
Attn: Chief Executive Officer
cc: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
21. Governing Law. The parties agree that this Agreement shall be
-------------
governed by, and construed and enforced in accordance with, the laws of Bermuda.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
SIGNED, SEALED & DELIVERED:
/s/ MICHAEL KEDAR
By:____________________________
Michael Kedar
GLOBENET COMMUNICATIONS
GROUP LIMITED
/s/ LIN GENTEMANN
_______________________________
Name: Lin Gentemann
Title: Corporate Secretary
10
<PAGE>
Exhibit 10.11
INDEMNITY AGREEMENT
-------------------
This Agreement is made as of and effective the 21st day of May, 1999
("Agreement"), by and between GlobeNet Communications Group Limited, a Bermuda
corporation ("Company"), and Greg Belbeck of Etobicoke, Ontario, Canada
("Indemnitee"):
RECITALS:
--------
A. Highly competent persons are becoming more reluctant to serve publicly-
held corporations as officers, counsel or other key employees or in other
capacities unless they are provided with adequate protection through insurance
or adequate indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of the
corporation.
B. The increasing difficulties of obtaining adequate insurance and the
uncertainties relating to indemnification may impair the ability of the Company
to continue to attract and retain such persons.
C. The Board of Directors of the Company (the "Board") has determined that
the potential inability to attract and retain such persons is detrimental to the
best interest of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future.
D. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
the Company's Bye-Laws and the Companies Act 1981 of Bermuda, so that they will
serve or continue to serve the Company free from undue concern that they will
not be so indemnified.
E. Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve as an officer,
----------------------
employee, agent or fiduciary of the Company and/or an affiliate thereof, and may
at the request of the Company, agree to serve as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law), in which event the Company shall have no obligation under
this Agreement to continue Indemnitee in any such position.
<PAGE>
2. Indemnification - General. The Company shall indemnify and advance
-------------------------
Expenses (as hereinafter defined) to Indemnitee as provided in this Agreement
and to the fullest extent permitted by the Company's Bye-Laws and the Companies
Act 1981 of Bermuda in effect on the date hereof and to such greater extent as
applicable law may thereafter from time to time permit. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited
to, the rights set forth in the other Sections of the Agreement. This Agreement
shall also apply to any claims brought against the Indemnitee which antedate the
date hereof, so long as Indemnitee was serving in a Corporate Status (as
hereinafter defined) with respect to any such claims.
3. Proceedings Other Than Proceedings by or in the Right of the Company.
--------------------------------------------------------------------
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 3 if, by reason of his Corporate Status, he is, or is threatened to be
made, a party to any threatened, pending, or completed Proceeding (as
hereinafter defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
4. Proceeding by or in the Right of the Company. Indemnitee shall be
--------------------------------------------
entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company. Notwithstanding the foregoing, no indemnification against such
Expenses and against judgments, penalties, fines and amounts paid in settlement
shall be made in respect of any claim, issue or matter in any such Proceeding as
to which Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall nevertheless
be made by the Company in such event if and only to the extent that the court in
which such Proceeding shall have been brought or is pending, shall determine.
5. Indemnification for Expenses of a Party Who is Wholly or Partly
---------------------------------------------------------------
Successful. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. If Indemnitee is not successful with respect to a claim, issue
or matter, Indemnitee's right to indemnification for Expenses with regard to
such claim, issue or matter shall be governed by Sections 3 and 4 of this
Agreement. For purposes of this Section and without limitation, the
2
<PAGE>
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
6. Indemnification for Expenses of a Witness. Notwithstanding any other
------------------------------------------
provision of this Agreement, to the extent that Indemnitee is or is threatened
to be made, by reason of his Corporate Status, a witness in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
7. Advancement of Expenses. The Company shall advance all reasonable
-----------------------
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statements shall reasonably evidence the Expenses incurred by Indemnitee and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such Expenses.
8. Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(a) To obtain indemnification against this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant
to the first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) (unless
Indemnitee shall request that such determination be made by the Board of
Directors or the stockholders, in which case by the person or persons or in the
manner provided for in clauses (ii) or (iii) of this Section 8(b)) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
if such quorum of Disinterested Directors so directs, by Independent Counsel in
a written opinion to the Board of Directors, a copy of which shall be delivered
to Indemnitee or (C) by the stockholders of the Company; or (iii) as provided in
Section 9(b) of this Agreement; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten (10)
days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making
3
<PAGE>
such determination shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising her of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event, Indemnitee
or the Company, as the case may be, may, within seven (7) days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of a written request
for indemnification pursuant to Section 8(a) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee
may petition the court of competent jurisdiction for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
9. Presumptions and Effect of Certain Proceedings.
----------------------------------------------
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
4
<PAGE>
(b) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, then requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such sixty (60) day period may be
extended for a reasonable time, not to exceed an additional thirty (30) days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 8(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of the request for
such determination the Board of Directors has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within seventy-five (75) days after such receipt and such
determination is made at such meeting, or (B) a special meeting of stockholders
is called within fifteen (15) days after such receipt for the purpose of making
such determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made at such meeting, or
(ii) if the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
10. Remedies of Indemnitee.
----------------------
(a) In the event that (i) a determination is made pursuant to Section
8 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 7 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within ninety (90) days after receipt by the Company of the
request for indemnification, or (iv) payment of indemnification is not made
pursuant to Section 6 of this Agreement within ten (10) days after receipt by
the Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Section 8 or 9 of this Agreement, Indemnitee shall be
entitled to an adjudication in an appropriate court in Bermuda, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator in Hamilton, Bermuda
pursuant to the Commercial Arbitration
5
<PAGE>
Rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant
to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits that Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 10, the
Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 8 or 9 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 10, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks
a judicial adjudication of or an award in arbitration to enforce her rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
her in such judicial adjudication or arbitration, but only if she prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
-----------------------------------------------------------
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Memorandum of Association, Bye-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
6
<PAGE>
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. Duration of Agreement. This Agreement shall continue until and
---------------------
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as an officer, employee, agent or fiduciary of the
Company or a director, officer, employee, agent or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which Indemnitee served at the request of the Company; or (b) the
final termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of expenses hereunder and of
any Proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement
relating thereto. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his
heirs, executors and administrators.
13. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, each portion of any Section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. Exception to Right of Indemnification or Advancement of Expenses.
----------------------------------------------------------------
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim therein, brought or made by him against
the Company.
15. Identical Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
7
<PAGE>
16. Headings. The headings of the paragraphs of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to effect the construction hereof.
17. Definitions. For purposes of this Agreement:
-----------
(a) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter; or (iii) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute a majority of
the Board of Directors.
(b) "Corporate Status" describes the status of a person who is or was
an officer, employee, agent or fiduciary of the Company or a director, officer,
employee, agent or fiduciary of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Effective Date" means the date of this Agreement.
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of expert, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five (5) years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who,
8
<PAGE>
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
(g) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce
his rights under this Agreement.
18. Modification and Waiver. No supplement, modification or amendment
-----------------------
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
19. Notice of Indemnitee. Indemnitee agrees promptly to notify the
--------------------
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
20. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to: Greg Belbeck
38 Herne Hill
Etobicoke, Ontario M9A 2X1
(b) If to the Company, to: GlobeNet Communications Group Limited
2 Carter's Bay Road
Southside, St. David's DD02
Bermuda
Attn: Chief Executive Officer
cc: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
21. Governing Law. The parties agree that this Agreement shall be
-------------
governed by, and construed and enforced in accordance with, the laws of Bermuda.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
SIGNED, SEALED & DELIVERED:
/s/ Greg Belbeck
By: ______________________________
Greg Belbeck
GLOBENET COMMUNICATIONS
GROUP LIMITED
/s/ Lin Gentemann
__________________________________
Name: Lin Gentemann
Title: Corporate Secretary
10
<PAGE>
EXHIBIT 10.12
INDEMNITY AGREEMENT
-------------------
This Agreement is made as of and effective the 21st day of May, 1999
("Agreement"), by and between GlobeNet Communications Group Limited, a Bermuda
corporation ("Company"), and Lin Gentemann of Southampton, Bermuda
("Indemnitee"):
RECITALS:
--------
A. Highly competent persons are becoming more reluctant to serve publicly-
held corporations as officers, counsel or other key employees or in other
capacities unless they are provided with adequate protection through insurance
or adequate indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of the
corporation.
B. The increasing difficulties of obtaining adequate insurance and the
uncertainties relating to indemnification may impair the ability of the Company
to continue to attract and retain such persons.
C. The Board of Directors of the Company (the "Board") has determined that
the potential inability to attract and retain such persons is detrimental to the
best interest of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future.
D. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
the Company's Bye-Laws and the Companies Act 1981 of Bermuda, so that they will
serve or continue to serve the Company free from undue concern that they will
not be so indemnified.
E. Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve as an officer,
----------------------
employee, agent or fiduciary of the Company and/or an affiliate thereof, and may
at the request of the Company, agree to serve as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law), in which event the Company shall have no obligation under
this Agreement to continue Indemnitee in any such position.
<PAGE>
2. Indemnification - General. The Company shall indemnify and advance
-------------------------
Expenses (as hereinafter defined) to Indemnitee as provided in this Agreement
and to the fullest extent permitted by the Company's Bye-Laws and the Companies
Act 1981 of Bermuda in effect on the date hereof and to such greater extent as
applicable law may thereafter from time to time permit. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited
to, the rights set forth in the other Sections of the Agreement. This Agreement
shall also apply to any claims brought against the Indemnitee which antedate the
date hereof, so long as Indemnitee was serving in a Corporate Status (as
hereinafter defined) with respect to any such claims.
3. Proceedings Other Than Proceedings by or in the Right of the Company.
--------------------------------------------------------------------
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 3 if, by reason of his Corporate Status, he is, or is threatened to be
made, a party to any threatened, pending, or completed Proceeding (as
hereinafter defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
4. Proceeding by or in the Right of the Company. Indemnitee shall be
--------------------------------------------
entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company. Notwithstanding the foregoing, no indemnification against such
Expenses and against judgments, penalties, fines and amounts paid in settlement
shall be made in respect of any claim, issue or matter in any such Proceeding as
to which Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall nevertheless
be made by the Company in such event if and only to the extent that the court in
which such Proceeding shall have been brought or is pending, shall determine.
5. Indemnification for Expenses of a Party Who is Wholly or Partly
---------------------------------------------------------------
Successful. Notwithstanding any other provision of this Agreement, to the extent
- ----------
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. If Indemnitee is not successful with respect to a claim, issue
or matter, Indemnitee's right to indemnification for Expenses with regard to
such claim, issue or matter shall be governed by Sections 3 and 4 of this
Agreement. For purposes of this Section and without limitation, the
2
<PAGE>
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
6. Indemnification for Expenses of a Witness. Notwithstanding any other
-----------------------------------------
provision of this Agreement, to the extent that Indemnitee is or is threatened
to be made, by reason of his Corporate Status, a witness in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
7. Advancement of Expenses. The Company shall advance all reasonable
-----------------------
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statements shall reasonably evidence the Expenses incurred by Indemnitee and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such Expenses.
8. Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(a) To obtain indemnification against this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
the first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) (unless
Indemnitee shall request that such determination be made by the Board of
Directors or the stockholders, in which case by the person or persons or in the
manner provided for in clauses (ii) or (iii) of this Section 8(b)) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
if such quorum of Disinterested Directors so directs, by Independent Counsel in
a written opinion to the Board of Directors, a copy of which shall be delivered
to Indemnitee or (C) by the stockholders of the Company; or (iii) as provided in
Section 9(b) of this Agreement; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten (10)
days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making
3
<PAGE>
such determination shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising her of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event, Indemnitee
or the Company, as the case may be, may, within seven (7) days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of a written request
for indemnification pursuant to Section 8(a) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee
may petition the court of competent jurisdiction for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
9. Presumptions and Effect of Certain Proceedings.
----------------------------------------------
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
4
<PAGE>
(b) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, then requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such sixty (60) day period may be
extended for a reasonable time, not to exceed an additional thirty (30) days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 8(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of the request for
such determination the Board of Directors has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within seventy-five (75) days after such receipt and such
determination is made at such meeting, or (B) a special meeting of stockholders
is called within fifteen (15) days after such receipt for the purpose of making
such determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made at such meeting, or
(ii) if the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
10. Remedies of Indemnitee.
----------------------
(a) In the event that (i) a determination is made pursuant to Section 8
of this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7
of this Agreement, (iii) the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) of this Agreement and
such determination shall not have been made and delivered in a written opinion
within ninety (90) days after receipt by the Company of the request for
indemnification, or (iv) payment of indemnification is not made pursuant to
Section 6 of this Agreement within ten (10) days after receipt by the Company of
a written request therefor, or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 8 or 9 of this Agreement, Indemnitee shall be entitled to an
adjudication in an appropriate court in Bermuda, or in any other court of
competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator in Hamilton, Bermuda
pursuant to the Commercial Arbitration
5
<PAGE>
Rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 10
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits that Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 10, the Company
shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made
pursuant to Section 8 or 9 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 10, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce her rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
her in such judicial adjudication or arbitration, but only if she prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
-----------------------------------------------------------
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Memorandum of Association, Bye-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
6
<PAGE>
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. Duration of Agreement. This Agreement shall continue until and
---------------------
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as an officer, employee, agent or fiduciary of the
Company or a director, officer, employee, agent or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which Indemnitee served at the request of the Company; or (b) the
final termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of expenses hereunder and of
any Proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement
relating thereto. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his
heirs, executors and administrators.
13. Severability. If any provision or provisions of this Agreement shall be
------------
held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. Exception to Right of Indemnification or Advancement of Expenses.
----------------------------------------------------------------
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim therein, brought or made by him against
the Company.
15. Identical Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
7
<PAGE>
16. Headings. The headings of the paragraphs of this Agreement are inserted
--------
for convenience only and shall not be deemed to constitute part of this
Agreement or to effect the construction hereof.
17. Definitions. For purposes of this Agreement:
-----------
(a) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter; or (iii) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute a majority of
the Board of Directors.
(b) "Corporate Status" describes the status of a person who is or was
an officer, employee, agent or fiduciary of the Company or a director, officer,
employee, agent or fiduciary of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Effective Date" means the date of this Agreement.
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of expert, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five (5) years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who,
8
<PAGE>
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
(g) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce
his rights under this Agreement.
18. Modification and Waiver. No supplement, modification or amendment of
-----------------------
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
19. Notice of Indemnitee. Indemnitee agrees promptly to notify the Company
--------------------
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered
hereunder.
20. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to: Lin Gentemann
P.O. Box SN 110
Southampton SN Bx
Bermuda
(b) If to the Company, to: GlobeNet Communications Group Limited
2 Carter's Bay Road
Southside, St. David's DD02
Bermuda
Attn: Chief Executive Officer
cc: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
21. Governing Law. The parties agree that this Agreement shall be governed
-------------
by, and construed and enforced in accordance with, the laws of Bermuda.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
SIGNED, SEALED & DELIVERED:
/s/ LIN GENTEMANN
By:___________________________________________
Lin Gentemann
GLOBENET COMMUNICATIONS
GROUP LIMITED
/s/ MICHAEL KEDAR
______________________________________________
Name: Michael Kedar
Title: Chairman and Chief Executive Officer
10
<PAGE>
EXHIBIT 10.13
INDEMNITY AGREEMENT
-------------------
This Agreement is made as of and effective the 21st day of May, 1999
("Agreement"), by and between GlobeNet Communications Group Limited, a Bermuda
corporation ("Company"), and Scott K. Socol of King City, Ontario, Canada
("Indemnitee"):
RECITALS:
--------
A. Highly competent persons are becoming more reluctant to serve publicly-
held corporations as officers, counsel or other key employees or in other
capacities unless they are provided with adequate protection through insurance
or adequate indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of the
corporation.
B. The increasing difficulties of obtaining adequate insurance and the
uncertainties relating to indemnification may impair the ability of the Company
to continue to attract and retain such persons.
C. The Board of Directors of the Company (the "Board") has determined that
the potential inability to attract and retain such persons is detrimental to the
best interest of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future.
D. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
the Company's Bye-Laws and the Companies Act 1981 of Bermuda, so that they will
serve or continue to serve the Company free from undue concern that they will
not be so indemnified.
E. Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve as an officer,
----------------------
employee, agent or fiduciary of the Company and/or an affiliate thereof, and may
at the request of the Company, agree to serve as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law), in which event the Company shall have no obligation under
this Agreement to continue Indemnitee in any such position.
<PAGE>
2. Indemnification - General. The Company shall indemnify and advance
-------------------------
Expenses (as hereinafter defined) to Indemnitee as provided in this Agreement
and to the fullest extent permitted by the Company's Bye-Laws and the Companies
Act 1981 of Bermuda in effect on the date hereof and to such greater extent as
applicable law may thereafter from time to time permit. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited
to, the rights set forth in the other Sections of the Agreement. This Agreement
shall also apply to any claims brought against the Indemnitee which antedate the
date hereof, so long as Indemnitee was serving in a Corporate Status (as
hereinafter defined) with respect to any such claims.
3. Proceedings Other Than Proceedings by or in the Right of the Company.
--------------------------------------------------------------------
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 3 if, by reason of his Corporate Status, he is, or is threatened to be
made, a party to any threatened, pending, or completed Proceeding (as
hereinafter defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
4. Proceeding by or in the Right of the Company. Indemnitee shall be
--------------------------------------------
entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company. Notwithstanding the foregoing, no indemnification against such
Expenses and against judgments, penalties, fines and amounts paid in settlement
shall be made in respect of any claim, issue or matter in any such Proceeding as
to which Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall nevertheless
be made by the Company in such event if and only to the extent that the court in
which such Proceeding shall have been brought or is pending, shall determine.
5. Indemnification for Expenses of a Party Who is Wholly or Partly
---------------------------------------------------------------
Successful. Notwithstanding any other provision of this Agreement, to the extent
- ----------
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. If Indemnitee is not successful with respect to a claim, issue
or matter, Indemnitee's right to indemnification for Expenses with regard to
such claim, issue or matter shall be governed by Sections 3 and 4 of this
Agreement. For purposes of this Section and without limitation, the
2
<PAGE>
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
6. Indemnification for Expenses of a Witness. Notwithstanding any other
-----------------------------------------
provision of this Agreement, to the extent that Indemnitee is or is threatened
to be made, by reason of his Corporate Status, a witness in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
7. Advancement of Expenses. The Company shall advance all reasonable
-----------------------
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statements shall reasonably evidence the Expenses incurred by Indemnitee and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such Expenses.
8. Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(a) To obtain indemnification against this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
the first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) (unless
Indemnitee shall request that such determination be made by the Board of
Directors or the stockholders, in which case by the person or persons or in the
manner provided for in clauses (ii) or (iii) of this Section 8(b)) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
if such quorum of Disinterested Directors so directs, by Independent Counsel in
a written opinion to the Board of Directors, a copy of which shall be delivered
to Indemnitee or (C) by the stockholders of the Company; or (iii) as provided in
Section 9(b) of this Agreement; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten (10)
days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making
3
<PAGE>
such determination shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising her of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event, Indemnitee
or the Company, as the case may be, may, within seven (7) days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of a written request
for indemnification pursuant to Section 8(a) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee
may petition the court of competent jurisdiction for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
9. Presumptions and Effect of Certain Proceedings.
----------------------------------------------
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons o making such determination shall presume that Indemnitee is
entitled to indemnification under this Agreement if Indemnitee has submitted a
request for indemnification in accordance with Section 8(a) of this Agreement,
and the Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any determination
contrary to that presumption.
4
<PAGE>
(b) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, then requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such sixty (60) day period may be
extended for a reasonable time, not to exceed an additional thirty (30) days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 8(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of the request for
such determination the Board of Directors has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within seventy-five (75) days after such receipt and such
determination is made at such meeting, or (B) a special meeting of stockholders
is called within fifteen (15) days after such receipt for the purpose of making
such determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made at such meeting, or
(ii) if the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
10. Remedies of Indemnitee.
----------------------
(a) In the event that (i) a determination is made pursuant to Section
8 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 7 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within ninety (90) days after receipt by the Company of the
request for indemnification, or (iv) payment of indemnification is not made
pursuant to Section 6 of this Agreement within ten (10) days after receipt by
the Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Section 8 or 9 of this Agreement, Indemnitee shall be
entitled to an adjudication in an appropriate court in Bermuda, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator in Hamilton, Bermuda
pursuant to the Commercial Arbitration
5
<PAGE>
Rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 10
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits that Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 10, the Company
shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 8 or 9 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 10, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce her rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
her in such judicial adjudication or arbitration, but only if she prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
-----------------------------------------------------------
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Memorandum of Association, Bye-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
6
<PAGE>
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. Duration of Agreement. This Agreement shall continue until and
---------------------
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as an officer, employee, agent or fiduciary of the
Company or a director, officer, employee, agent or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which Indemnitee served at the request of the Company; or (b) the
final termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of expenses hereunder and of
any Proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement
relating thereto. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his
heirs, executors and administrators.
13. Severability. If any provision or provisions of this Agreement shall
------------
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. Exception to Right of Indemnification or Advancement of Expenses.
----------------------------------------------------------------
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim therein, brought or made by him against
the Company.
15. Identical Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
7
<PAGE>
16. Headings. The headings of the paragraphs of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to effect the construction hereof.
17. Definitions. For purposes of this Agreement:
-----------
(a) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter; or (iii) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute a majority of
the Board of Directors.
(b) "Corporate Status" describes the status of a person who is or was
an officer, employee, agent or fiduciary of the Company or a director, officer,
employee, agent or fiduciary of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Effective Date" means the date of this Agreement.
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of expert, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five (5) years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who,
8
<PAGE>
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
(g) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce
his rights under this Agreement.
18. Modification and Waiver. No supplement, modification or amendment of
-----------------------
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
19. Notice of Indemnitee. Indemnitee agrees promptly to notify the Company
--------------------
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered
hereunder.
20. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to: Scott K. Socol
66 Curtis Crescent
King City, Ontario L7B1C2
(b) If to the Company, to: GlobeNet Communications Group Limited
2 Carter's Bay Road
Southside, St. David's DD02
Bermuda
Attn: Chief Executive Officer
cc: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
21. Governing Law. The parties agree that this Agreement shall be governed
-------------
by, and construed and enforced in accordance with, the laws of Bermuda.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
SIGNED, SEALED & DELIVERED:
By: /s/ SCOTT K. SOCOL
___________________________
Scott K. Socol
GLOBENET COMMUNICATIONS
GROUP LIMITED
/s/ LIN GENTEMANN
______________________________
Name: Lin Gentemann
Title: Corporate Secretary
10
<PAGE>
EXHIBIT 10.14
INDEMNITY AGREEMENT
-------------------
This Agreement is made as of and effective the 21st day of May, 1999
("Agreement"), by and between GlobeNet Communications Group Limited, a Bermuda
corporation ("Company"), and Laurent Duplantie of La Prairie, Quebec, Canada
("Indemnitee"):
RECITALS:
--------
A. Highly competent persons are becoming more reluctant to serve publicly-
held corporations as officers, counsel or other key employees or in other
capacities unless they are provided with adequate protection through insurance
or adequate indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of the
corporation.
B. The increasing difficulties of obtaining adequate insurance and the
uncertainties relating to indemnification may impair the ability of the Company
to continue to attract and retain such persons.
C. The Board of Directors of the Company (the "Board") has determined that
the potential inability to attract and retain such persons is detrimental to the
best interest of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future.
D. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
the Company's Bye-Laws and the Companies Act 1981 of Bermuda, so that they will
serve or continue to serve the Company free from undue concern that they will
not be so indemnified.
E. Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve as an officer,
----------------------
employee, agent or fiduciary of the Company and/or an affiliate thereof, and may
at the request of the Company, agree to serve as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law), in which event the Company shall have no obligation under
this Agreement to continue Indemnitee in any such position.
<PAGE>
2. Indemnification - General. The Company shall indemnify and advance
-------------------------
Expenses (as hereinafter defined) to Indemnitee as provided in this Agreement
and to the fullest extent permitted by the Company's Bye-Laws and the Companies
Act 1981 of Bermuda in effect on the date hereof and to such greater extent as
applicable law may thereafter from time to time permit. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited
to, the rights set forth in the other Sections of the Agreement. This Agreement
shall also apply to any claims brought against the Indemnitee which antedate the
date hereof, so long as Indemnitee was serving in a Corporate Status (as
hereinafter defined) with respect to any such claims.
3. Proceedings Other Than Proceedings by or in the Right of the Company.
--------------------------------------------------------------------
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 3 if, by reason of his Corporate Status, he is, or is threatened to be
made, a party to any threatened, pending, or completed Proceeding (as
hereinafter defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
4. Proceeding by or in the Right of the Company. Indemnitee shall be
--------------------------------------------
entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company. Notwithstanding the foregoing, no indemnification against such
Expenses and against judgments, penalties, fines and amounts paid in settlement
shall be made in respect of any claim, issue or matter in any such Proceeding as
to which Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall nevertheless
be made by the Company in such event if and only to the extent that the court in
which such Proceeding shall have been brought or is pending, shall determine.
5. Indemnification for Expenses of a Party Who is Wholly or Partly
---------------------------------------------------------------
Successful. Notwithstanding any other provision of this Agreement, to the extent
- ----------
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. If Indemnitee is not successful with respect to a claim, issue
or matter, Indemnitee's right to indemnification for Expenses with regard to
such claim, issue or matter shall be governed by Sections 3 and 4 of this
Agreement. For purposes of this Section and without limitation, the
2
<PAGE>
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
6. Indemnification for Expenses of a Witness. Notwithstanding any other
-----------------------------------------
provision of this Agreement, to the extent that Indemnitee is or is threatened
to be made, by reason of his Corporate Status, a witness in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
7. Advancement of Expenses. The Company shall advance all reasonable
-----------------------
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statements shall reasonably evidence the Expenses incurred by Indemnitee and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such Expenses.
8. Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(a) To obtain indemnification against this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
the first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) (unless
Indemnitee shall request that such determination be made by the Board of
Directors or the stockholders, in which case by the person or persons or in the
manner provided for in clauses (ii) or (iii) of this Section 8(b)) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
if such quorum of Disinterested Directors so directs, by Independent Counsel in
a written opinion to the Board of Directors, a copy of which shall be delivered
to Indemnitee or (C) by the stockholders of the Company; or (iii) as provided in
Section 9(b) of this Agreement; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten (10)
days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making
3
<PAGE>
such determination shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising her of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event, Indemnitee
or the Company, as the case may be, may, within seven (7) days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of a written request
for indemnification pursuant to Section 8(a) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee
may petition the court of competent jurisdiction for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
9. Presumptions and Effect of Certain Proceedings.
----------------------------------------------
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
4
<PAGE>
(b) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, then requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such sixty (60) day period may be
extended for a reasonable time, not to exceed an additional thirty (30) days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 8(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of the request for
such determination the Board of Directors has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within seventy-five (75) days after such receipt and such
determination is made at such meeting, or (B) a special meeting of stockholders
is called within fifteen (15) days after such receipt for the purpose of making
such determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made at such meeting, or
(ii) if the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
10. Remedies of Indemnitee.
----------------------
(a) In the event that (i) a determination is made pursuant to Section
8 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 7 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within ninety (90) days after receipt by the Company of the
request for indemnification, or (iv) payment of indemnification is not made
pursuant to Section 6 of this Agreement within ten (10) days after receipt by
the Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Section 8 or 9 of this Agreement, Indemnitee shall be
entitled to an adjudication in an appropriate court in Bermuda, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator in Hamilton, Bermuda
pursuant to the Commercial Arbitration
5
<PAGE>
Rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 10
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits that Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 10, the Company
shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 8 or 9 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 10, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce her rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
her in such judicial adjudication or arbitration, but only if she prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
-----------------------------------------------------------
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Memorandum of Association, Bye-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
6
<PAGE>
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. Duration of Agreement. This Agreement shall continue until and
---------------------
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as an officer, employee, agent or fiduciary of the
Company or a director, officer, employee, agent or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which Indemnitee served at the request of the Company; or (b) the
final termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of expenses hereunder and of
any Proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement
relating thereto. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his
heirs, executors and administrators.
13. Severability. If any provision or provisions of this Agreement shall
------------
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. Exception to Right of Indemnification or Advancement of Expenses.
----------------------------------------------------------------
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim therein, brought or made by him against
the Company.
15. Identical Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
7
<PAGE>
16. Headings. The headings of the paragraphs of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to effect the construction hereof.
17. Definitions. For purposes of this Agreement:
-----------
(a) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter; or (iii) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute a majority of
the Board of Directors.
(b) "Corporate Status" describes the status of a person who is or was
an officer, employee, agent or fiduciary of the Company or a director, officer,
employee, agent or fiduciary of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Effective Date" means the date of this Agreement.
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of expert, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five (5) years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who,
8
<PAGE>
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
(g) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce
his rights under this Agreement.
18. Modification and Waiver. No supplement, modification or amendment of
-----------------------
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
19. Notice of Indemnitee. Indemnitee agrees promptly to notify the Company
--------------------
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered
hereunder .
20. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to: Laurent Duplantie
170 Elisee Choquette
La Prairie, Quebec J5R 5L5
(b) If to the Company, to: GlobeNet Communications Group Limited
2 Carter's Bay Road
Southside, St. David's DD02
Bermuda
Attn: Chief Executive Officer
cc: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
21. Governing Law. The parties agree that this Agreement shall be governed
-------------
by, and construed and enforced in accordance with, the laws of Bermuda.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
SIGNED, SEALED & DELIVERED:
By: /s/ LAURENT DUPLANTIE
____________________________
Laurent Duplantie
GLOBENET COMMUNICATIONS
GROUP LIMITED
/s/ LIN GENTEMANN
_______________________________
Name: Lin Gentemann
Title: Corporate Secretary
10
<PAGE>
Exhibit 10.15
INDEMNITY AGREEMENT
-------------------
This Agreement is made as of and effective the 15th day of July, 1999
("Agreement"), by and between GlobeNet Communications Group Limited, a Bermuda
corporation ("Company"), and James Fitzgerald of Hamilton, Bermuda
("Indemnitee"):
RECITALS:
--------
A. Highly competent persons are becoming more reluctant to serve publicly-
held corporations as officers, counsel or other key employees or in other
capacities unless they are provided with adequate protection through insurance
or adequate indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of the
corporation.
B. The increasing difficulties of obtaining adequate insurance and the
uncertainties relating to indemnification may impair the ability of the Company
to continue to attract and retain such persons.
C. The Board of Directors of the Company (the "Board") has determined that
the potential inability to attract and retain such persons is detrimental to the
best interest of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future.
D. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
the Company's Bye-Laws and the Companies Act 1981 of Bermuda, so that they will
serve or continue to serve the Company free from undue concern that they will
not be so indemnified.
E. Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve as an officer,
----------------------
employee, agent or fiduciary of the Company and/or an affiliate thereof, and may
at the request of the Company, agree to serve as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law), in which event the Company shall have no obligation under
this Agreement to continue Indemnitee in any such position.
<PAGE>
2. Indemnification - General. The Company shall indemnify and advance
-------------------------
Expenses (as hereinafter defined) to Indemnitee as provided in this Agreement
and to the fullest extent permitted by the Company's Bye-Laws and the Companies
Act 1981 of Bermuda in effect on the date hereof and to such greater extent as
applicable law may thereafter from time to time permit. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited
to, the rights set forth in the other Sections of the Agreement. This Agreement
shall also apply to any claims brought against the Indemnitee which antedate the
date hereof, so long as Indemnitee was serving in a Corporate Status (as
hereinafter defined) with respect to any such claims.
3. Proceedings Other Than Proceedings by or in the Right of the Company.
--------------------------------------------------------------------
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 3 if, by reason of his Corporate Status, he is, or is threatened to be
made, a party to any threatened, pending, or completed Proceeding (as
hereinafter defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
4. Proceeding by or in the Right of the Company. Indemnitee shall be
--------------------------------------------
entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company. Notwithstanding the foregoing, no indemnification against such
Expenses and against judgments, penalties, fines and amounts paid in settlement
shall be made in respect of any claim, issue or matter in any such Proceeding as
to which Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall nevertheless
be made by the Company in such event if and only to the extent that the court in
which such Proceeding shall have been brought or is pending, shall determine.
5. Indemnification for Expenses of a Party Who is Wholly or Partly
---------------------------------------------------------------
Successful. Notwithstanding any other provision of this Agreement, to the extent
- ----------
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. If Indemnitee is not successful with respect to a claim, issue
or matter, Indemnitee's right to indemnification for Expenses with regard to
such claim, issue or matter shall be governed by Sections 3 and 4 of this
Agreement. For purposes of this Section and without limitation, the
2
<PAGE>
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
6. Indemnification for Expenses of a Witness. Notwithstanding any other
-----------------------------------------
provision of this Agreement, to the extent that Indemnitee is or is threatened
to be made, by reason of his Corporate Status, a witness in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
7. Advancement of Expenses. The Company shall advance all reasonable
-----------------------
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statements shall reasonably evidence the Expenses incurred by Indemnitee and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such Expenses.
8. Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(a) To obtain indemnification against this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
the first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) (unless
Indemnitee shall request that such determination be made by the Board of
Directors or the stockholders, in which case by the person or persons or in the
manner provided for in clauses (ii) or (iii) of this Section 8(b)) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
if such quorum of Disinterested Directors so directs, by Independent Counsel in
a written opinion to the Board of Directors, a copy of which shall be delivered
to Indemnitee or (C) by the stockholders of the Company; or (iii) as provided in
Section 9(b) of this Agreement; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten (10)
days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making
3
<PAGE>
such determination shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising her of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event, Indemnitee
or the Company, as the case may be, may, within seven (7) days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of a written request
for indemnification pursuant to Section 8(a) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee
may petition the court of competent jurisdiction for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
9. Presumptions and Effect of Certain Proceedings.
----------------------------------------------
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
4
<PAGE>
(b) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, then requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such sixty (60) day period may be
extended for a reasonable time, not to exceed an additional thirty (30) days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 8(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of the request for
such determination the Board of Directors has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within seventy-five (75) days after such receipt and such
determination is made at such meeting, or (B) a special meeting of stockholders
is called within fifteen (15) days after such receipt for the purpose of making
such determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made at such meeting, or
(ii) if the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
10. Remedies of Indemnitee.
----------------------
(a) In the event that (i) a determination is made pursuant to Section
8 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 7 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within ninety (90) days after receipt by the Company of the
request for indemnification, or (iv) payment of indemnification is not made
pursuant to Section 6 of this Agreement within ten (10) days after receipt by
the Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Section 8 or 9 of this Agreement, Indemnitee shall be
entitled to an adjudication in an appropriate court in Bermuda, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator in Hamilton, Bermuda
pursuant to the Commercial Arbitration
5
<PAGE>
Rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 10
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits that Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 10, the Company
shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 8 or 9 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 10, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce her rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
her in such judicial adjudication or arbitration, but only if she prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
-----------------------------------------------------------
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Memorandum of Association, Bye-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
6
<PAGE>
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. Duration of Agreement. This Agreement shall continue until and
---------------------
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as an officer, employee, agent or fiduciary of the
Company or a director, officer, employee, agent or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which Indemnitee served at the request of the Company; or (b) the
final termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of expenses hereunder and of
any Proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement
relating thereto. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his
heirs, executors and administrators.
13. Severability. If any provision or provisions of this Agreement shall
------------
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. Exception to Right of Indemnification or Advancement of Expenses.
----------------------------------------------------------------
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim therein, brought or made by him against
the Company.
15. Identical Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
7
<PAGE>
16. Headings. The headings of the paragraphs of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to effect the construction hereof.
17. Definitions. For purposes of this Agreement:
-----------
(a) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter; or (iii) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute a majority of
the Board of Directors.
(b) "Corporate Status" describes the status of a person who is or was
an officer, employee, agent or fiduciary of the Company or a director, officer,
employee, agent or fiduciary of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Effective Date" means the date of this Agreement.
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of expert, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five (5) years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who,
8
<PAGE>
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
(g) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce
his rights under this Agreement.
18. Modification and Waiver. No supplement, modification or amendment of
-----------------------
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
19. Notice of Indemnitee. Indemnitee agrees promptly to notify the Company
--------------------
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered
hereunder.
20. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to: James Fitzgerald
Twigdon, 58 Harrington Sound Road
Smith's Bermuda
(b) If to the Company, to: GlobeNet Communications Group Limited
2 Carter's Bay Road
Southside, St. David's DD02
Bermuda
Attn: Chief Executive Officer
cc: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
21. Governing Law. The parties agree that this Agreement shall be governed
-------------
by, and construed and enforced in accordance with, the laws of Bermuda.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
SIGNED, SEALED & DELIVERED:
By: /s/ JAMES FITZGERALD
___________________________
James Fitzgerald
GLOBENET COMMUNICATIONS
GROUP LIMITED
/s/ LIN GENTEMANN
_______________________________
Name: Lin Gentemann
Title: Corporate Secretary
10
<PAGE>
EXHIBIT 10.16
AMENDED AND RESTATED SECURITYHOLDERS' AGREEMENT
DATED JULY 14, 1999
BY AND AMONG
GLOBENET COMMUNICATIONS GROUP LIMITED,
TELEBERMUDA INTERNATIONAL LIMITED,
GLOBENET COMMUNICATIONS LTD.,
ATLANTICA NETWORK (BERMUDA) LTD.,
MICHAEL KEDAR,
TELEBERMUDA (BVI) LIMITED,
IHI HYDRO, INC.,
JEFFREY G. CONYERS,
BOSTON VENTURES LIMITED PARTNERSHIP V, L.P.,
KELSO INVESTMENT ASSOCIATES VI, L.P.,
KEP VI, L.L.C.,
PROVIDENCE EQUITY PARTNERS III L.P.,
PROVIDENCE EQUITY OPERATING PARTNERS III L.P.,
SPECTRUM EQUITY INVESTOR III, L.P.,
SEI III ENTREPRENEURS' FUND, L.P.,
SPECTRUM III INVESTMENT MANAGERS' FUND, L.P.,
CAPITAL COMMUNICATIONS CDPQ, INC.,
SANDLER CAPITAL PARTNERS IV, L.P.,
SANDLER CAPITAL PARTNERS IV FTE, L.P.,
ONTARIO MUNICIPAL EMPLOYEES RETIREMENT BOARD,
NAUTILUS EQUITY INVESTORS, L.L.C.,
AND
TD CAPITAL GROUP LIMITED
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 -- DEFINITIONS........................................................... 2
1.1 Definitions................................................................. 2
1.2 Rules of Construction....................................................... 8
ARTICLE 2 -- MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES...................... 8
2.1 Special Voting Provisions................................................... 8
2.2 Special Board Votes......................................................... 10
2.3 Other Activities of the Holders; Fiduciary Duties........................... 11
2.4 Board Representation........................................................ 11
2.5 Board Materials............................................................. 13
2.6 Subsidiary Boards........................................................... 13
2.7 Committees.................................................................. 13
2.8 Organizational Documents.................................................... 13
ARTICLE 3 -- TRANSFERS OF SECURITIES............................................... 14
3.1 Preemptive Rights........................................................... 14
3.2 Drag-Along Rights........................................................... 16
3.3 Tag-Along Rights............................................................ 18
3.4 Right of First Refusal...................................................... 19
3.5 Exempt Transfers............................................................ 21
3.6 [intentionally omitted]..................................................... 21
3.7 Lock-Up of Senior Management and Additional Investors....................... 21
3.8 Transfer and Exchange....................................................... 21
ARTICLE 4 -- LIMITATION ON TRANSFERS............................................... 22
4.1 Restrictions on Transfer.................................................... 22
4.2 Restrictive Legends......................................................... 22
4.3 Notice of Proposed Transfers................................................ 23
4.4 Termination of Certain Restrictions......................................... 24
4.5 Additional Restrictions on Transactions..................................... 24
4.6 Transfers of Class B Shares................................................. 26
ARTICLE 5 -- ACCESS TO INFORMATION................................................. 26
5.3 Disclosure.................................................................. 28
5.4 Accounting Standards........................................................ 28
5.5 Inquiries and Inspections................................................... 28
5.6 Conduct of Holders.......................................................... 29
5.7 Termination................................................................. 30
ARTICLE 6 -- COVENANTS OF THE CORPORATIONS; COVENANTS OF TDG AND NAUTILUS.......... 30
6.1 Covenants of the Corporations............................................... 30
6.2 Covenant of TDG............................................................. 31
6.3 Covenant of Nautilus........................................................ 31
ARTICLE 7 -- NON-COMPETITION COVENANT.............................................. 32
7.1 Non-Competition by Kedar.................................................... 32
7.2 Other Activities............................................................ 34
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8 -- REPRESENTATIONS AND WARRANTIES................................. 34
8.1 Holder Representations............................................... 34
8.2 Kedar and BVI Representations........................................ 35
8.3 Company Representations and Covenants................................ 35
8.4 Representations of the Corporations.................................. 36
8.5 Representation of TDG................................................ 37
8.6 Representation of Non-U.S. Status for CFC Purposes................... 37
8.7 Kedar Representations................................................ 37
8.8 Representation of Nautilus........................................... 37
ARTICLE 9 -- TERMINATION.................................................... 37
ARTICLE 10 -- MISCELLANEOUS................................................. 38
10.1 Notices.............................................................. 38
10.2 Legal Holidays....................................................... 38
10.3 Governing Law; Consent to Jurisdiction............................... 39
10.4 Successors and Assigns............................................... 39
10.5 Counterparts......................................................... 39
10.6 Severability......................................................... 39
10.7 No Waivers: Amendments............................................... 39
10.8 Entire Agreement..................................................... 40
10.9 Remedy for Breach of Section 8.3(c), (d) or (e), 8.5(b) or 8.6....... 40
10.10 Appraisal.......................................................... 40
10.11 Consents........................................................... 41
10.12 Additional Investors............................................... 41
</TABLE>
EXHIBIT A -- CURRENT SECURITY OWNERSHIP OF THE HOLDERS
SCHEDULE 2.1(A) --EXISTING OPTIONS AND WARRANTS
SCHEDULE 3.1(A) --PREEMPTIVE RIGHTS
SCHEDULE 3.7 -- SHARES OF SENIOR MANAGEMENT NOT SUBJECT TO SECTION 3.7
ii
<PAGE>
AMENDED AND RESTATED
SECURITYHOLDERS' AGREEMENT
THIS AMENDED AND RESTATED SECURITYHOLDERS' AGREEMENT (this
"Securityholders' Agreement"), dated July 14, 1999, is entered into by and among
GlobeNet Communications Group Limited, an exempted company incorporated and
registered pursuant to The Companies Act 1981 of Bermuda (including its
successors, the "Company"), TeleBermuda International Limited, a local company
incorporated and registered pursuant to The Companies Act 1981 of Bermuda
("TBI"), GlobeNet Communications Ltd., an exempted company incorporated and
registered pursuant to The Companies Act 1981 of Bermuda ("GCL"), Atlantica
Network (Bermuda) Ltd., an exempted company incorporated and registered pursuant
to The Companies Act 1981 of Bermuda ("Atlantica"), Michael Kedar, an individual
residing in Toronto, Ontario ("Kedar"), TeleBermuda (BVI) Limited, a corporation
incorporated under the laws of the British Virgin Islands ("BVI"), IHI Hydro,
Inc., a corporation incorporated under the Canada Business Corporations Act
("IHI"), Boston Ventures Limited Partnership V, L.P., a Delaware limited
partnership ("BV"), Kelso Investment Associates VI, L.P., a Delaware limited
partnership ("Kelso"), KEP VI, L.L.C., a Delaware limited liability company
("KEP"), Providence Equity Partners III L.P., a Delaware limited partnership
("Providence"), Providence Equity Operating Partners III L.P., a Delaware
limited partnership ("PEOP"), Spectrum Equity Investor III, L.P., a Delaware
limited partnership ("Spectrum"), SEI III Entrepreneurs' Fund, L.P., a Delaware
limited partnership ("SEI"), Spectrum III Investment Managers' Fund, L.P., a
Delaware limited partnership ("Managers"), Capital Communications CDPQ, Inc., a
corporation formed under the Companies Act (Quebec) ("CDPQ"), Sandler Capital
Partners IV, L.P. ("Sandler"), Sandler Capital Partners IV FTE, L.P ("SCP"),
Ontario Municipal Employees Retirement Board, a corporation organized under the
laws of Ontario ("OMERS"), Nautilus Equity Investors, L.L.C. ("Nautilus"), and
TD Capital Group Limited, a corporation incorporated under the Canada Business
Corporations Act ("TDG"), and solely for the purposes of Sections 3.2, 3.3 and
3.7 and Articles 4, 9 and 10 hereof, the members of Senior Management listed on
the signature pages hereto and the Additional Investors (as defined herein)
listed on the signature pages hereto, and solely for the purpose of agreeing to
this amendment and restatement, Jeffrey G. Conyers, an individual residing in
Hamilton, Bermuda ("Conyers").
WHEREAS, the authorized capital of the Company consists of 24,000,000
common shares having a par value of $1.50 per share, 100 class A restricted
voting shares having a par value of $1.50 per share, and 2,000 class B
restricted voting shares having a par value of $1.50 per share;
WHEREAS, as of this date, the New Investors hold in the aggregate 1,000
Class B Shares and 15,735,257 Common Shares (including 110 Class B Shares and
1,635,286 Common Shares held by IHI), each in such individual amounts as set
forth in Exhibit A attached hereto;
WHEREAS, the Original Investors currently hold in the aggregate 110 Class B
Shares, 2,471,611 Common Shares, and warrants and/or options to purchase 320,000
additional Common Shares, each in such individual amounts as set forth in
Exhibit A attached hereto;
<PAGE>
WHEREAS, in connection with their holdings in the Company, the Original
Investors, the Company, TBI, Conyers, and Tyco Submarine Systems, Ltd. ("Tyco")
executed that certain Securityholders' Agreement in April of 1999 (the "Original
Agreement");
WHEREAS, on or before the date hereof, Tyco assigned all of its rights and
obligations under the Original Agreement to IHI;
WHEREAS, in connection with and in order to facilitate the investment by
the New Investors in the Company, the Original Investors, Conyers, the Company
and TBI wish to amend and restate the Original Agreement in its entirety and to
admit the New Investors, GCL and Atlantica as signatories hereto, such amended
and restated securityholders' agreement to govern the matters set forth herein
with respect to the Corporations;
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements hereinafter contained and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following words and
-----------
phrases shall have the following meanings, respectively:
"Accredited Investor" means either (i) an "Accredited Investor," as defined
in Regulation D, or any successor rule then in effect, or (ii) to the extent
permitted by the laws of any jurisdiction applicable to the Company, an investor
that is not a resident or citizen of the United States of America who is
permitted by the laws of the jurisdiction applicable to that investor to make
the purchase contemplated by this Agreement without the preparation by the
seller or the Company of a prospectus or other qualifying document.
"Accredited Offeree" shall have the meaning provided in Section 3.1 hereof.
"Additional Investor" shall have the meaning provided in Section 10.12.
"Affiliate" means, with respect to any Person, any Person who, directly or
indirectly, controls, is controlled by or is under common control with that
Person. For purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise. Specifically for the purposes of Section 2.2, a Person
shall be deemed to control another Person if it owns 25% or more of such
Person's voting securities or if it has a representative on such Person's board
of directors or other governing body.
"Affiliated Successor" shall have the meaning set forth in Section 3.1
hereof.
2
<PAGE>
"Agreement" shall mean this Amended and Restated Securityholders'
Agreement, as such may be amended from time to time.
"Atlantica" shall mean Atlantica Network (Bermuda) Ltd., an exempted
company incorporated and registered pursuant to The Companies Act 1981 of
Bermuda.
"Board of Directors" shall mean the Company's board of directors, as such
is duly constituted pursuant to the Company's bye-laws.
"Business Day" means a day that is not a Legal Holiday.
"BV" shall mean Boston Ventures Limited Partnership V, L.P., a Delaware
limited partnership.
"BVI" shall mean TeleBermuda (BVI) Limited, a corporation incorporated
under the laws of the British Virgin Islands.
"Canadian Majority" shall have the meaning set forth in Section 4.5(b).
"CDPQ" shall mean Capital Communications CDPQ, Inc., a corporation formed
under the Companies Act (Quebec).
"CFC" shall have the meaning set forth in Section 2.4(c).
"Class B Shares" means the class B restricted voting shares, having a par
value of $1.50 per share, of the Company, and any shares into which such class B
restricted voting shares thereafter may be converted.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Common Shares" means the common shares, having a par value of $1.50 per
share, of the Company, and any shares into which such common shares thereafter
may be converted.
"Common Share Equivalents" means, without duplication with any Common
Shares, any rights, warrants, options, convertible securities or indebtedness,
exchangeable securities or indebtedness, or other rights, exercisable for or
convertible or exchangeable into, directly or indirectly, Common Shares, whether
at the time of issuance or upon the passage of time or the occurrence of some
future event.
"Company" shall have the meaning set forth in the introductory paragraph
hereof.
"Competitive Business" shall have the meaning set forth in Section 7.1(b)
hereof.
"Controlled Foreign Affiliate" shall have the meaning set forth in Section
4.5 hereof.
"Conyers" shall mean Jeffrey G. Conyers, an individual residing in
Hamilton, Bermuda.
3
<PAGE>
"Corporations" shall mean the Company, TBI, GCL and Atlantica.
"Co-Seller" shall have the meaning set forth in Section 3.2 hereof.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Fully-Diluted Common Shares" means, at any time, the then outstanding
Common Shares plus (without duplication) all Common Shares issuable, whether at
such time or upon the passage of time or the occurrence of future events, upon
the exercise, conversion, or exchange of all then outstanding Common Share
Equivalents if, at the close of business on the Business Day immediately
preceding the date of determination, the exercise price or consideration payable
per share as provided in such Common Share Equivalent is less than or equal to
the fair market value of a Common Share, but excluding Common Share Equivalents
that are not exercisable immediately following the transaction triggering the
event in Section 3.2 or 3.3 giving rise to the determination.
"GCL" shall mean GlobeNet Communications Ltd., an exempted company
incorporated and registered pursuant to The Companies Act 1981 of Bermuda.
"Holder" means (i) an Original Investor, (ii) a New Investor and (iii) any
direct or indirect transferee thereof who shall become a party to this Agreement
pursuant to Section 4.1.
"IHI" shall mean IHI Hydro, Inc., a corporation incorporated under the
Canada Business Corporations Act.
"Immediate Family Members" shall mean with respect to any individual, his
or her parents, grandparents, spouse or ex-spouse(s), siblings, children,
grandchildren and great-grand children.
"Kedar" shall mean Michael Kedar, an individual residing in Toronto,
Ontario.
"Kelso" shall mean Kelso Investment Associates VI, L.P., a Delaware limited
partnership.
"KEP" shall mean KEP VI, L.L.C., a Delaware limited liability company.
"Legal Holiday" shall have the meaning provided in Section 10.2 hereof.
"Managers" shall mean Spectrum III Investment Managers' Fund, L.P., a
Delaware limited partnership.
"Nautilus" shall mean Nautilus Equity Investors, L.L.C.
4
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"New Investors" shall mean BV, Kelso, KEP, Providence, PEOP, Spectrum, SEI,
Managers, CDPQ, Sandler, SCP, OMERS, Nautilus, IHI and TDG, and any transferee
of the Common Shares or Class B Shares currently held by such New Investors who
shall become a party to this Agreement pursuant to Section 4.1.
"Offer Notice" shall have the meaning provided in Section 3.1 hereof.
"Offered Securities" shall have the meaning provided in Section 3.1 hereof.
"OMERS" shall mean Ontario Municipal Employees Retirement Board, a
corporation organized under the laws of Ontario.
"Original Agreement" shall mean that certain Securityholders' Agreement,
executed in April 1999, by and among the Original Investors, Conyers and Tyco.
"Original Investors" shall mean BVI, IHI and Kedar and any transferee of
the Common Shares or Class B Shares currently held by such Original Investors
and admitted as a party to this Agreement pursuant to Section 4.1.
"Original New Investors" shall mean BV, Kelso, KEP, Providence, PEOP,
Spectrum, SEI, Managers, CDPQ, Sandler, SCP, OMERS, Nautilus, IHI and TDG, and
any Affiliated transferee of the Common Shares or Class B Shares currently held
by such Original New Investors who is admitted as a party to this Agreement
pursuant to Section 4.1.
"Other New Investors" shall have the meaning set forth in Section 3.4
hereof.
"Participation Offer" shall have the meaning provided in Section 3.3
hereof.
"PEOP" shall mean Providence Equity Operating Partners III L.P., a Delaware
limited partnership.
"Person" or "person" means any individual, company, corporation,
partnership, limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or other agency or
political subdivision thereof.
"Preemptive Rights Offer" shall have the meaning set forth in Section 3.1
hereof.
"Preemptive Rights Transaction" shall have the meaning set forth in Section
3.1 hereof.
"Providence" shall mean Providence Equity Partners III L.P. a Delaware
limited partnership.
"Qualified Public Offering" means an underwritten public offering of Common
Shares pursuant to a prospectus, registration statement, statement of material
facts, or similar document filed with the relevant regulatory body in the United
States or Canada pursuant to which the aggregate gross proceeds to the Company
(prior to deducting any underwriters' discounts and
5
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commissions), when added to the aggregate gross proceeds to the Company (prior
to deducting any underwriters' discounts and commissions) from all previous
underwritten public offerings of Common Shares in the United States and/or
Canada, equal or exceed $150 million (or such lesser amount, but not less than
$100 million, as may be approved by the holders of a majority of the Class B
Shares) and following which the Common Shares are listed for trading on the New
York Stock Exchange or on the Nasdaq stock market.
"Registration Rights Agreement" shall have the meaning set forth in
Section 2.1(j).
"Regulation D" means Regulation D promulgated under the Securities Act
by the SEC.
"Required Holders" means New Investors who then hold more than 50% of
the aggregate number of outstanding Class B Shares entitled to vote under this
definition; provided, however, that,
-----------------
(i) in the case of each New Investor that is a "United States person"
(within the meaning of section 957(c) of the Code) and that is not a
"United States shareholder" (within the meaning of section 951(b) of the
Code, as determined without regard to any of the rights or obligations
set forth in this Agreement) of the Company, the number of Class B
Shares considered held by such New Investor for purposes of this
definition shall be deemed reduced so that such New Investor is
considered to have (after taking into account the attribution principles
set forth in section 958 of the Code) less than 10% of the aggregate
number of outstanding Class B Shares entitled to vote under this
definition; and
(ii) in the case of the New Investors that are "United States persons"
(within the meaning of section 957(c) of the Code) and that are not
described in clause (i) hereof, the number of Class B Shares considered
held by such New Investors for purposes of this definition shall be
deemed reduced so that such New Investors are not considered to have,
individually or in the aggregate (after taking into account the
attribution principles set forth in section 958 of the Code), more than
50% of the aggregate number of outstanding Class B Shares entitled to
vote under this definition.
Clause (i) hereof shall be applied prior to clause (ii) hereof and then clause
(i) and (ii) shall be applied repeatedly until no reduction is required pursuant
to either clause. Any reduction pursuant to clause (ii) in the number of Class B
Shares deemed to be held by the New Investors described therein shall be made in
proportion to the number of Class B Shares actually held by such New Investors.
Factual determinations for purposes of this definition shall be reasonably made
in good faith by holders of a majority of the Class B Shares who are "United
States persons" (within the meaning of section 957(c) of the Code).
"ROFR Offeror" shall have the meaning set forth in Section 3.4 hereof.
"ROFR Shares" shall have the meaning set forth in Section 3.4 hereof.
"Sandler" shall mean Sandler Capital Partners IV, L.P.
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"SCP" shall mean Sandler Capital Partners IV FTE, L.P.
"SEC" means the United States Securities and Exchange Commission.
"Securities" means the Common Shares, the Class A Shares and the Class B
Shares.
"Securities Act" means the United States Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Securities Act (Ontario)" means the Securities Act of the Province of
Ontario, Canada, R.S.O. 1990, c. S.5, the regulations promulgated thereunder and
all rules, policies, and orders of the Ontario Securities Commission thereunder,
all as amended from time to time.
"SEI" shall mean Spectrum III Entrepreneurs' Fund, L.P., a Delaware limited
partnership.
"Selling Investors" shall have the meaning provided in Section 3.2 hereof.
"Selling ROFR Holder" shall have the meaning set forth in Section 3.4
hereof.
"Senior Facility" means collectively the $10 million senior secured working
capital facility, the $60 million senior secured multiple draw facility, the $80
million senior secured multiple draw facility, the $150 million senior secured
multiple draw facility, and the $100 million senior secured working capital
facility, entered into pursuant to the commitment letter, dated on or about July
9, 1999, by and among the GlobeNet Communications Holdings Ltd., an exempted
Bermuda company and a wholly-owned subsidiary of the Company, as the borrower,
and TD Securities (USA), Inc. and Credit Suisse First Boston Corporation, as the
lead banks, together with certain other financial institutions.
"Senior Management shall have the meaning provided in Section 2.1(j)
hereof.
"Significant Sale" shall have the meaning provided in Section 3.2 hereof.
"Spectrum" shall mean Spectrum Equity Investors III, L.P., a Delaware
limited partnership.
"Subsidiary" of any Person means (i) a corporation a majority of whose
outstanding shares of capital stock or other equity interests with voting power,
under ordinary circumstances, to elect directors, is at the time, directly or
indirectly, owned by such Person, by one or more subsidiaries of such Person or
by such Person and one or more subsidiaries of such Person, and (ii) any other
Person (other than a corporation) in which such Person, a subsidiary of such
Person or such Person and one or more subsidiaries of such Person, directly or
indirectly, at the date of determination thereof, has (x) at least a majority
ownership interest or (y) the power to elect or direct the election of a
majority of the directors or other governing body of such Person.
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"TBI" shall mean TeleBermuda International Limited, a local company
incorporated and registered pursuant to The Companies Act 1981 of Bermuda.
"TDG" shall mean TD Capital Group Limited, a corporation incorporated under
the Canada Business Corporations Act.
"Transfer" means any disposition of any Security or any interest therein
that would constitute a "sale" thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning provided in Section 4.3 hereof.
"Tyco" shall mean Tyco Submarine Systems, Ltd., a Delaware corporation.
"U.S. Majority" shall have the meaning provided in Section 2.4(c) hereof.
1.2 Rules of Construction. Unless the context otherwise requires
---------------------
(a) a term has the meaning assigned to it;
(b) words in the singular include the plural, and words in the plural
include the singular;
(c) "herein," "thereof" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision; and
(d) all dollars or "$" referred to herein are United States dollars.
ARTICLE 2.
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
2.1 Special Voting Provisions. The Company hereby covenants and agrees
-------------------------
that it shall not take (and shall cause each of its Subsidiaries not to take)
any of the following actions without the prior approval of the Required Holders:
(a) issue any Common Shares, Common Share Equivalents or any other equity
securities or securities convertible into or exercisable for equity securities
of the Company or any of its Subsidiaries; provided, however, that nothing
contained herein shall limit the Company's ability to (i) issue such securities
with respect to the exercise of options or warrants to purchase Company
securities granted (x) pursuant to any employee, officer or director share
option or share purchase plan, benefit plan or arrangement previously approved
by the Board of Directors and set forth on Schedule 2.1(a) hereto or approved by
the Board of Directors (or the compensation committee thereof) after the date
hereof, or (y) pursuant to options or warrants the grant of which was previously
approved by the Board of Directors and set forth on Schedule 2.1(a) hereto or
approved by the Board of Directors and the Required Holders after the date
hereof, or (ii) issue in any consecutive 12-month period equity securities or
securities convertible
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<PAGE>
into or exercisable for equity securities of the Company constituting no more
than 20% of the outstanding class of such securities on a fully-diluted basis so
long as no Person (together with its Affiliates) would obtain more than 25% of
the securities issued pursuant to this Section 2.1(a)(ii) during such 12 month
period; and provided further that any securities issued pursuant to this Section
2.1(a)(ii) shall be issued by the Company solely with respect to or in
connection with (A) any acquisitions of equity interests or operating assets by
the Company or its Affiliates, (B) the entering into of joint ventures,
partnerships, or other similar arrangements by the Company or its Affiliates, or
(C) the entering into of capacity swaps, joint construction agreements or other
similar arrangements by the Company or its Affiliates;
(b) issue any Class B Shares or class A restricted voting shares of the
Company or any of its Subsidiaries or securities convertible into or
exchangeable for Class B Shares or class A restricted voting shares of the
Company or any of its Subsidiaries;
(c) declare or pay any dividends (or other distributions with respect to
equity securities) or repurchase or redeem any equity securities other than in
connection with the self-tender for $30.6 million of Common Shares contemplated
by the offer made by the Company to its shareholders in July 1999; provided,
however, that nothing contained herein shall limit the Company's ability to
declare and pay a dividend if, in the opinion of legal counsel reasonably
acceptable to the Required Holders, the payment of such dividend is necessary to
avoid or ameliorate an adverse tax consequence arising under the United States
federal income tax laws or Canadian income tax laws applicable to the Company or
any of the New Investors and in connection with the holding of Common Shares;
(d) sell, lease or exchange (other than in the ordinary course of
business) any material assets or rights of the Company and its Subsidiaries
(taken as a whole), such as, but not limited to, the sale or lease of (i) more
than 400 STM-1 circuits of capacity on the Company's undersea fiber optic cable
system in one transaction or a series of related transactions, (ii) more than
25% of the other assets or holdings of the Company or its Subsidiaries (taken as
a whole), in one transaction or a series of related transactions; or (iii) a
material interest in any material Subsidiary (whether by sale or issuance of
shares);
(e) incur indebtedness or guarantee the payment of indebtedness except to
the extent (i) such indebtedness (whether incurred or guaranteed), together with
all indebtedness then outstanding (other than indebtedness described in clauses
(ii), (iii) or (iv)), does not exceed in the aggregate $25 million in
outstanding principal amount at any time, not including for this purpose any
indebtedness permitted by clause (ii), (iii) and (iv) hereof, (ii) such
indebtedness constitutes trade payables occurring in the ordinary course of
business, (iii) such indebtedness is incurred pursuant to the Senior Facility,
or (iv) such indebtedness is incurred pursuant to the pending offering of $300
million of senior notes, pursuant to the Company's offering memorandum, dated as
of July 8, 1999, as such may be amended or supplemented prior to the
consummation of such offering.
(f) adopt any annual budget or business plan, or make any amendments to
such annual budgets or business plans; provided, however, that this provision
shall not apply to budgeted amounts (whether incurred in 1999 or otherwise)
approved by the Company's Board of
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Directors prior to the date hereof with respect to the construction of the
Atlantica-1 network (other than the construction or completion of an undersea
ring from Fortaleza to and from Rio de Janeiro, Brazil, or Buenos Aires,
Argentina, which specifically is subject to this Section 2.1), to the extent
such budgeted amounts are reflected in the supplemental letter, dated July 9,
1999, from the Company to the New Investors.
(g) invest or commit or agree to invest in equity investments in an amount
in excess of 5% above the amount contemplated for equity investments by the most
recent annual budget or business plan, or make or commit or agree to make
capital expenditures in an amount in excess of 5% above the amount contemplated
for capital expenditures by the most recent annual budget or business plan;
(h) merge, amalgamate, or consolidate with any other Person;
(i) effect any reorganization or recapitalization, or any combination or
reclassification of the Company's shares;
(j) hire or fire Michael Kedar, Scott Socol, Greg Belbeck, Lin Gentemann,
or Laurent Duplantie or any other member of the Company's senior management team
designated by the Board of Directors (hereinafter "Senior Management"), provided
further that the Company shall use its commercially reasonable efforts to
require such Persons to become a party to this Agreement and the Registration
Rights Agreement, dated of even date herewith, by and among the Company and
certain of its shareholders, as such agreement may be amended from time to time
(the "Registration Rights Agreement");
(k) terminate or suspend construction under the Project Development and
Construction Contract entered into by and among Atlantica, Alcatel Submarine
Networks, and Alcatel Submarine Networks, Ltd.; or
(l) adopt any material amendment to any license or contract disclosed to
the New Investors on Schedules 4.1(d) and 4.1(f), respectively, to the
Subscription Agreements, dated June 16, 1999, by and between the Company and the
New Investors.
2.2 Special Board Votes. The approval of a majority (by headcount) of
-------------------
the disinterested members of the Board of Directors of the Company shall be
required for the Company or any of its Subsidiaries to enter into any contract
or agreement with, to provide any services to, or to accept any services from
any Affiliate of the Company or of any member of Senior Management, or from any
New Investor or Additional Investor or any Affiliate thereof, unless the
consideration payable under such contract, agreement or arrangement, when
considered together with all other contracts, agreements or arrangements entered
into by and between the Company and such Person (collectively with each of its
Affiliates) calls for aggregate consideration payable by the Company of less
than $1 million.
2.3 Other Activities of the Holders; Fiduciary Duties. It is
-------------------------------------------------
understood and accepted that the Holders and their Affiliates have interests in
other business ventures which may be in conflict with the activities of the
Company and its Subsidiaries and that, subject to applicable
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<PAGE>
law and Article 7 hereof, nothing in this Agreement shall limit the current or
future business activities of the Holders whether or not such activities are
competitive with those of the Company and its Subsidiaries. Nothing in this
Agreement, express or implied, shall relieve any officer or director of the
Company or any of its Subsidiaries, or any Holder, of any fiduciary or other
duties or obligations they may have to the Company or its shareholders.
2.4 Board Representation.
--------------------
(a) If any of the Persons named in Bye-Law 2A(7)(d) of the Company's Bye-
Laws, together with such Person's Affiliates, shall at any time reduce its
Common Share holdings in the Company to less than 880,000 Common Shares
(adjusted, as appropriate, for stock splits or bonus issuances, reverse stock
splits or consolidations, reclassifications, stock dividends or similar
transactions) by reason of a transfer (or series of transfers) to an Original
New Investor (or an Affiliate thereof) of 880,000 or more Common Shares, then in
such circumstances the holders of the Class B Shares shall take such action as
they can (exercising commercially reasonable efforts) to (i) amend Bye-Law
2A(7)(d) to provide that the director (and alternate director) formerly
appointed by such Person shall instead be appointed by the Original New Investor
(or its Affiliate) that acquires such Common Shares, in which event such party's
appointment rights shall also be subject to this Section 2.4, and (ii) cause the
current director (and alternate director) appointed by such Person to be
replaced by the appointee of such Original New Investor (or an Affiliate
thereof).
(b) If any of the Persons named in Bye-Law 2A(7)(d) of the Company,
together with such Person's Affiliates, shall at any time reduce its Common
Share holdings to less than 880,000 Common Shares (adjusted as appropriate, for
stock splits or bonus issuances, reverse stock splits or consolidations,
reclassifications, stock dividends or similar transactions) by reason of a
transfer to which Section 2.4(a) does not apply, then the holders of the Class B
Shares shall take such action as they can (exercising commercially reasonable
efforts) to (i) amend Bye-Law 2A(7)(d) to provide that the director (and
alternate director) formerly appointed by such Person shall instead be appointed
by one or more of the holders of Class B Shares selected by the Required
Holders, and (ii) cause the current director (and alternate director) appointed
by such Person to be replaced by the appointee of one or more of the holders of
Class B Shares selected by the Required Holders, provided that the selection of
such holder(s) of Class B Shares must be made in a manner that does not cause
the Company to breach the representations made in Section 8.3(c) or (e).
(c) A resolution described in Bye-Law 2A(7)(e) of the Company, providing
for the amendment of the number of votes to which directors of the Company are
entitled, may be approved by holders of a majority of the Class B Shares held by
New Investors who are "U.S. persons" within the meaning of section 957(c) of the
Code (a "U.S. Majority") only if (i) the U.S. Majority has made its
determination with respect to the Company's status as a "controlled foreign
corporation" for U.S. federal income tax purposes (a "CFC") based on advice of a
nationally recognized U.S. law firm and after consultation with Providence and
Spectrum, and (ii) the amendment of the number of votes to which directors are
entitled is determined in accordance with the following principles:
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(A) If the U.S. Majority determines that the amendment is reasonably
necessary to prevent either Providence or Spectrum from being considered a
"United States shareholder" (within the meaning of section 951(b) of the Code),
then the voting rights of any director appointed by such Person (but not the
other Person except to the extent necessary to prevent such other Person from
being considered a "U.S. shareholder" (within the meaning of section 951(b) of
the Code)) shall be reduced by increasing the number of votes the other
directors are entitled to cast until Providence and Spectrum would reasonably be
expected not to be considered a "United States shareholder" (within the meaning
of section 951(b) of the Code); provided that without such Person's consent the
voting rights of any director appointed by such Person shall not be reduced
pursuant to this Section 2.4(c)(A) to the extent such reduction would cause such
Person to own (directly and by attribution) less than 9.8% of the total combined
voting power of all classes of stock entitled to vote within the meaning of
Section 951(b) of the Code).
(B) If the U.S. Majority determines that the amendment is reasonably
necessary to prevent Kelso and BV from being treated as owning (directly and by
attribution) individually or in the aggregate more than 50% of the total
combined voting power of all classes of shares of the Company entitled to vote
(within the meaning of section 957(a)(1) of the Code), then the voting rights of
the directors appointed by Kelso and BV shall be reduced by increasing the
number of votes other directors (excluding those appointed by New Investors who
are "U.S. persons" within the meaning of section 957(c) of the Code) are
entitled to cast by the least number necessary such that, following such
reduction, Kelso and BV would no longer reasonably be expected to be treated as
owning (directly and by attribution) individually or in the aggregate more than
50% of the total combined voting power of all classes of shares of the Company
entitled to vote (within the meaning of section 957(a)(1) of the Code).
(C) If due to a change in law or circumstance the U.S. Majority
determines that it would be possible to (i) reverse (in whole or in part) any
reduction in the number of votes cast by directors appointed by Providence or
Spectrum pursuant to clause (A) hereof or (ii) reapportion votes from directors
appointed by Kelso and BV to the directors appointed by Providence and Spectrum,
in each case without causing the Company to become a CFC, then the New Investors
who are "U.S. persons" within the meaning of section 957(c) of the Code shall
adopt a resolution pursuant to Bye-Law 2A(7)(e) of the Company providing for the
voting rights of the directors appointed by Providence and Spectrum to be so
increased (but not to the extent that the voting rights of the directors
appointed by Providence and Spectrum would exceed the voting rights of the
directors appointed by Kelso and BV).
(D) If due to a change in law or circumstance the U.S. Majority
determines that it would be possible to reverse (in whole or part) a prior
adjustment to the votes of the directors pursuant to clause (B) hereof without
causing Kelso and BV to be treated as owning (directly and by attribution) in
the aggregate more than 50% of the total combined voting power of all classes of
shares of the Company entitled to vote (within the meaning of section 957(a)(1)
of the Code), then the New Investors who are "U.S. persons" within the meaning
of section 957(c) of the Code shall adopt a resolution pursuant to Bye-Law
2A(7)(e) of the Company providing for an adjustment to the votes of the
directors that effects such reversal.
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(E) In no event shall any such amendment reduce the proportionate
number of votes to which any director appointed by a New Investor who is not a
"U.S. person" within the meaning of section 957(c) of the Code is entitled in
relation to the total number of votes to which all of the directors are entitled
on the date hereof (without taking into account any changes made pursuant to
this Section 2.4(c)), unless such reduction is consented to by such New
Investor.
If requested by Providence or Spectrum, the New Investors who are "U.S. persons"
(within the meaning of section 957(c) of the Code) will make a good-faith
determination whether it is possible to adopt a resolution of the type described
in clause (C) above, and, if a U.S. Majority determines that it would be
possible to adopt such a resolution, such U.S. Majority shall approve such a
resolution. To the extent appropriate, the limitations set forth in this Section
2.4(c) on the ability of the New Investors to adopt a resolution described in
Bye-Law 2A(7) of the Company shall be interpreted to apply to transferees of
Kelso, BV, Providence or Spectrum, as the case may be. All determinations under
this Section 2.4(c) (other than Section 2.4(c)(E)) shall be made by the U.S.
Majority.
2.5 Board Materials. The Company shall deliver to each Original New
---------------
Investor or its Affiliated designee, so long as such Original New Investor (and
its Affiliates) owns 250,000 or more Common Shares (adjusted, as appropriate,
for stock splits or bonus issuances, reverse stock splits or consolidations,
reclassifications, stock dividends, and similar transactions), (a) copies of all
materials distributed to the Board of Directors of the Company, and (b) notice
of all actions taken by the Board of Directors of the Company.
2.6 Subsidiary Boards. The Company shall, to the extent requested by the
-----------------
Required Holders, take such action as may be necessary to cause the board of
directors of each of the Company's Subsidiaries to consist of the same directors
as the Board of Directors of the Company.
2.7 Committees. The Company shall, to the extent requested by the
----------
Required Holders and to the extent permissible under applicable law and stock
exchange rules, take such action as may be necessary to cause each committee of
the Board of Directors of the Company and each committee of the board of
directors of each of the Company's Subsidiaries to be constituted such that the
persons appointed to the Board of Directors by the New Investors shall sit on
such committees in the same proportion as the proportion of directors appointed
to the Board of Directors by the New Investors.
2.8 Organizational Documents.
------------------------
(a) No New Investor (the "first investor") shall vote in favor of any
amendment to the Company's Bye-Laws or other constitutional documents if such
amendment adversely and discriminatorily changes (i) the rights and obligations
of any other New Investor or New Investors (or their Affiliates) in a manner
that is materially different from the change in the rights and obligations of
the first investor, or (ii) the number of directors or the rights to appoint the
directors, unless such amendment is required by the provisions of this Agreement
or the New Investor or New Investors affected thereby shall have consented
thereto in writing.
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<PAGE>
(b) In the event that (i) there is a change in law or facts, (ii) as a
result of such change in law or facts, the grant to Spectrum and Providence of a
right to vote in the election of the independent directors (on the same terms as
the shareholders of the Company that are otherwise entitled to vote in the
election of such directors) will not cause the Company to be a CFC, and (iii)
Spectrum and Providence provide the Company with an opinion of a nationally
recognized United States law firm, in a form and substance reasonably acceptable
to the Company and the holders of a majority of the Common Shares held by the
New Investors who are United States persons within the meaning of section 957(c)
of the Code (which majority shall be deemed to have approved such opinion if no
objection is raised by one or more of such New Investors with the Company,
Spectrum and Providence within 20 days of the receipt of such proposed opinion
by such New Investors), to the effect that the grant of such a right to Spectrum
and Providence will not cause the Company to be a CFC, then the Company and each
New Investor shall take such steps as they can (using commercially reasonable
efforts) to amend this Agreement and the Bye-Laws and other constitutional
documents of the Company to permit Spectrum and Providence to be granted such a
right. The Company and each party to this Agreement will provide counsel such
information as is reasonably necessary in order to render such opinion, and
counsel shall be entitled to rely upon such information in rendering such
opinion.
2.9 Termination. The terms and provisions of this Article 2 shall
-----------
terminate upon the earlier of (a) the completion by the Company of a Qualified
Public Offering, or (b) the New Investors (together with their Affiliates)
holding in the aggregate less than 4,000,000 Common Shares (adjusted, as
appropriate, for stock splits or bonus issuances, reverse stock splits or
consolidations, reclassifications, stock dividends and similar transactions),
and upon either such event the holders of the Class B Shares shall take such
actions as they can (exercising commercially reasonable efforts) to (i) amend
Bye-Law 2A(7)(d) to provide that the directors previously appointed or elected
pursuant to the provisions of this Article 2 shall thereafter be elected by
holders of the Common Shares, and (ii) cause the current directors (and
alternate directors) appointed or elected pursuant to this Article 2 to be
replaced by Persons so elected.
ARTICLE 3.
TRANSFERS OF SECURITIES
3.1 Preemptive Rights.
-----------------
(a) Rights to Participate in Future Sales. In case the Company or any
-------------------------------------
Affiliated Successor (as hereinafter defined) proposes to issue or sell any
Common Shares or Common Share Equivalents (the "Offered Securities"), the
Company shall, no later than 30 days prior to the consummation of such
transaction (a "Preemptive Rights Transaction"), give notice in writing (the
"Offer Notice") to each Holder of such Preemptive Rights Transaction.
(i) The Offer Notice shall describe the proposed Preemptive Rights
Transaction, identify the proposed purchaser (and its controlling
Affiliates, if any), and contain an offer (the "Preemptive Rights Offer")
to sell to each Holder (or its assignee; provided that no consideration is
paid or payable to the Holder in respect of the assignment of such right)
who certifies (to the reasonable satisfaction of the Company)
14
<PAGE>
that such Holder (or such assignee) is an Accredited Investor (an
"Accredited Offeree") and that no consideration is paid or payable for the
assignment of such rights, if applicable, at the same price and for the
same consideration to be paid by the proposed purchaser (or the equivalent
amount in cash), all or part of such Accredited Offeree's pro rata portion
of the Offered Securities (which shall be the percentage ownership of the
Fully-Diluted Common Shares held by such Holder (considered, for this
purpose, together with its Affiliates), excluding, for the purposes of such
calculation, any Common Shares issuable upon exercise of any Common Share
Equivalents granted pursuant to any employee, officer or director share
option or share purchase plan, benefit plan or arrangement); provided that
the Company shall be free to reallocate the Offered Securities for the
purposes hereof to the extent necessary to prevent the making or acceptance
of an offer in respect of fractional Offered Securities.
(ii) Each Holder (or assignee) electing to purchase all or part of
its pro rata portion of the Offered Securities shall notify the Company in
writing within 15 days after its receipt of the Offer Notice of the number
of Offered Securities it elects to purchase, and shall tender on or before
the close of such 15-day period the purchase price for such Offered
Securities. If requested during such 15-day period, the Company shall
advise each Holder of the names of each Holder who has responded (or
assignee who has responded) to such Offer Notice and the number of Offered
Securities in respect of which each has elected to purchase. The Company
shall issue the purchased Offered Securities to the electing and tendering
Holders (or assignees) upon the close of such 15-day period, and shall
cause its registrar and transfer agent to deliver to such Holders (or
assignees) as soon as practicable thereafter, certificates representing the
Offered Securities registered in their respective names in an aggregate
number equal to the number of Offered Securities purchased by them.
(iii) If any such Holder fails to accept such offer by written notice
within 15 days after its receipt of the Offer Notice, fails to elect to
purchase all of its prescribed share or fails to timely tender the purchase
price for such Offered Securities, the Company or such Affiliated Successor
may proceed with the proposed issue or sale of the remaining Offered
Securities, free of any right on the part of such Holder under this Section
3.1(a) in respect thereof, provided that such issuance or sale occurs in
compliance with the terms and conditions set forth in the Offer Notice.
The sale of such securities shall not constitute a waiver of any claims for
damages or otherwise the Company may have against an electing Holder (or
designee) who fails to timely tender the purchase price for such Offered
Securities.
(iv) As used herein, the term "Affiliated Successor" means a
successor entity to the Company (whether by merger, amalgamation
consolidation, reorganization, or otherwise) in which the Holders own (as a
group) at least the same percentage of the fully-diluted common stock of
such entity (after giving effect to the merger, amalgamation,
consolidation, reorganization, or other transaction) as the Holders own (as
a group) of the Fully-Diluted Common Shares of the Company, excluding, for
the purposes of such calculation, any Common Shares issuable upon exercise
of any
15
<PAGE>
Common Share Equivalents granted pursuant to any employee, officer or
director share option or share purchase plan, benefit plan or arrangement.
(b) Exceptions to Preemptive Rights. This Section 3.1 shall not apply to
-------------------------------
(i) issuances or sales of Common Shares or Common Share Equivalents to
employees, officers, and/or directors of the Company and/or any of its
Subsidiaries pursuant to employee, officer or director share option or share
purchase plans, benefit plans or arrangements of the Company and/or its
Subsidiaries which have been approved by the Board of Directors of the Company,
(ii) issuances or sales of Common Shares or Common Share Equivalents upon the
exercise of any currently outstanding options or warrants evidenced on Exhibit A
attached hereto or any Common Share Equivalent which, when issued, was subject
to or exempt from the preemptive rights under this Section 3.1 and, to the
extent in existence on the date hereof, which are set forth on Schedule 3.1(b)
hereto, (iii) securities distributed or set aside ratably to all holders of
Common Shares and Common Share Equivalents (or any class or series thereof) on a
per share equivalent basis, or (iv) issuances or sales of Common Shares or
Common Share Equivalents pursuant to a registered and broadly distributed
underwritten public offering, a merger or amalgamation of the Company or a
Subsidiary of the Company into or with another entity or an acquisition by the
Company or a Subsidiary of the Company of another business or corporation if
such transaction was approved in accordance with the Bye-laws of the Company and
the terms of this Agreement. In the event of any issuances or sales of Common
Shares or Common Share Equivalents as a unit with any other security of the
Company or its Subsidiaries, the preemptive rights under this Section 3.1 shall
be applicable to the entire unit rather than only the Common Shares or Common
Share Equivalent included in the unit.
(c) Designees. Any party exercising a Holder's preemptive rights
---------
hereunder shall take any Common Shares or Common Share Equivalents acquired
pursuant to such exercise subject to Article III and Article IV of this
Agreement, and such Holder shall ensure that such party shall execute a
counterpart to this Agreement or such other instrument as may be required by the
Company to acknowledge such party's obligations and benefits hereunder.
(d) Termination. This Section 3.1 shall terminate immediately prior to,
-----------
and shall not be exercisable in connection with, the completion by the Company
of a Qualified Public Offering.
3.2 Drag-Along Rights.
-----------------
(a) Applicability. In connection with any proposed Transfer after the
-------------
third anniversary of the date hereof by New Investors (the "Selling Investors")
of more than 50% of the Company, whether structured as a sale of shares,
amalgamation, merger, recapitalization, sale of assets or otherwise (a
"Significant Sale") other than a Transfer to a New Investor pursuant to Section
3.4 hereof, the Selling Investors shall have the right to require each non-
selling Holder, member of Senior Management and Additional Investor (each, a
"Co-Seller") to Transfer a portion of its Common Shares which represents the
same percentage of the Fully-Diluted Common Shares held by such Co-Seller as the
shares being disposed of by the Selling Investors represent of the Fully-Diluted
Common Shares held by the Selling Investors (adjusted for the effects of any
rights exercised under this Section 3.2). Each Co-Seller shall, to the extent
16
<PAGE>
necessary to enable such Co-Seller to meet its obligations hereunder, convert
its Common Share Equivalents into Common Shares, if convertible at such time.
All Common Shares Transferred by Co-Sellers pursuant to this Section 3.2 shall
be sold at the same price and otherwise treated identically with the Common
Shares being sold by the Selling Investors in all respects including, without
limitation, with respect to representations and warranties, escrow arrangements
and indemnification; provided, however, that any representations and warranties
relating specifically to any Selling Investor or Co-Seller shall be made only by
that Selling Investor or Co-Seller and any indemnification provided by any such
Selling Investor or Co-Seller with respect to such representations and
warranties shall be on a several, not joint, basis. Any indemnification for
breaches of representations and warranties and covenants relating to the Company
generally shall be limited to an escrowed amount and each Co-Seller's liability
with respect thereto shall be pro rata, based on the number of Common Shares
being sold by each Co-Seller and the Selling Investors. All fees and expenses
incurred in connection with a Significant Sale pursuant to this Section 3.2,
including, without limitation, investment banking fees and expenses, shall be
borne ratably by the Selling Investors and the Co-Sellers. No Selling Investor
or Co-Seller shall exercise any dissenter's rights with respect to the
consummation of any Significant Sale pursuant to this Section 3.2.
(b) Notice of Significant Sale. The Selling Investors shall give each Co-
--------------------------
Seller at least 30 days' prior written notice of any Significant Sale as to
which the Selling Investors intend to exercise their rights under Section 3.2.
If the Selling Investors elect to exercise their rights under Section 3.2, the
Co-Sellers shall take such actions as may be reasonably required and otherwise
cooperate in good faith with the Selling Investors in connection with
consummating the Significant Sale (including, without limitation, the voting of
any Common Shares or other voting shares of the Company to approve such
Significant Sale or to amend the Bye-Laws of the Company or to cause directors
of the Company to be replaced in connection therewith). At the closing of such
Significant Sale, each Co-Seller shall deliver certificates for all Common
Shares to be sold by such Co-Seller, duly endorsed for transfer, with the
signature guaranteed, to the purchaser against payment of the appropriate
purchase price.
(c) Cooperation. Subject to applicable laws and any fiduciary duties
-----------
arising thereunder, the Company and the members of Senior Management party to
this Agreement shall use all reasonable efforts to cooperate with the Selling
Investors in connection with a proposed Significant Sale pursuant to this
Section 3.2, including, without limitation, by providing or not preventing the
Selling Investors from providing information (which may be confidential
information) to the proposed purchaser and its advisors in order to enable such
proposed purchaser to evaluate the proposed Significant Sale, provided that such
proposed purchaser enters into a customary confidentiality agreement with the
Company.
3.3 Tag-Along Rights.
----------------
(a) Applicability. In the event some or all of the New Investors desire
-------------
to effect a Significant Sale after the third anniversary of the date hereof
(including a sale to a New Investor pursuant to Section 3.4 hereof) and they do
not elect to exercise their rights (if any) under Section 3.2 hereof, then at
least 30 days prior to the closing of such Significant Sale, the Selling
Investors shall make an offer (the "Participation Offer") to each Co-Seller to
include in the
17
<PAGE>
proposed Significant Sale up to a portion of his or its Common Shares which
represents the same percentage of such Co-Seller's Fully-Diluted Common Shares
as the shares being sold by the Selling Investors represent of their Fully-
Diluted Common Shares (taking into account any reduction pursuant to Section
3.3(b) in the number of shares to be sold by the Selling Investors); provided
that, if the consideration to be received by the Selling Investors includes any
securities, only Co-Sellers who have certified to the reasonable satisfaction of
the Selling Investors that they are Accredited Investors shall be entitled to
participate in such Transfer, unless the transferee consents otherwise.
(b) Terms of Participation Offer. The Participation Offer shall describe
----------------------------
the terms and conditions of the proposed Significant Sale and shall be
conditioned upon (i) the consummation of the transactions contemplated in the
Participation Offer with the transferee named therein, and (ii) each Co-Seller's
execution and delivery of all agreements and other documents as the Selling
Investors are required to execute and deliver in connection with such
Significant Sale; provided, however, that any representations and warranties
relating specifically to any Selling Investor or Co-Seller shall be made only by
that Selling Investor or Co-Seller and any indemnification provided by any such
Selling Investor or Co-Seller with respect to such representations and
warranties shall be on a several, not joint, basis. Any indemnification for
breaches of representations and warranties and covenants relating to the Company
generally shall be limited to an escrowed amount and each Co-Seller's liability
with respect thereto shall be pro rata, based on the number of Common Shares
being sold by each Co-Seller and the Selling Investors. All fees and expenses
incurred in connection with a Significant Sale pursuant to this Section 3.3,
including, without limitation, investment banking fees and expenses, shall be
borne ratably by the Selling Investors and the Co-Sellers. No Selling Investor
or Co-Seller shall exercise any dissenter's rights with respect to the
consummation of any Significant Sale pursuant to this Section 3.3. If any Co-
Seller shall accept the Participation Offer, the Selling Investors shall reduce,
to the extent necessary, the number of Common Shares they otherwise would have
sold in the proposed Transfer so as to permit those Co-Sellers who have accepted
the Participation Offer to sell the number of Common Shares that they are
entitled to sell under this Section 3.3, and the Selling Investors and such Co-
Sellers shall Transfer the number of Common Shares specified in the
Participation Offer to the proposed transferee in accordance with the terms of
such transfer as set forth in the Participation Offer.
(c) Applicability of Section 3.4. Notwithstanding anything to the
----------------------------
contrary contained herein, a Transfer by a Co-Seller pursuant to this Section
3.3 shall not be subject to Section 3.4 of this Agreement.
3.4 Right of First Refusal.
----------------------
(a) Notice Regarding Offer to Purchase Common Shares. Except in the
------------------------------------------------
context of a Significant Sale in which the Selling Investors exercise their
rights pursuant to Section 3.2 of this Agreement, no New Investor (hereinafter
referred to as a "Selling ROFR Holder") shall Transfer any of its Common Shares
to any Person, except as otherwise permitted by this Agreement, unless such
Selling ROFR Holder shall first deliver to the other New Investors and to the
Company a written notice (a "Notice") stating:
18
<PAGE>
(i) that such Selling ROFR Holder has received a bona fide offer
(which may be conditional) from an offeror (the "ROFR Offeror") to purchase
all or a portion of the Common Shares owned by such Selling ROFR Holder and
to assume the obligations of such Selling ROFR Holder under this Agreement
with regard to the Common Shares and Class B Shares to be sold;
(ii) the name and address of the ROFR Offeror and its controlling
Affiliates, if any;
(iii) the number and type of Common Shares (including for this
purpose, Class B Shares) which the Selling ROFR Holder desires to sell (the
"ROFR Shares");
(iv) the price currently being offered to the Selling ROFR Holder
by the ROFR Offeror, including the terms of payment and the other terms of
such offer;
(v) the proposed closing date of the transaction; and
(vi) a copy of the written offer, if any, from the ROFR Offeror;
provided, that any such Notice stating a proposed closing date less than 90 days
after the date of delivery of the Notice to the Company and to the New Investors
shall be null and void and of no legal force or effect. Such Notice shall
constitute an offer to sell all, but not less than all, of the ROFR Securities
to the New Investors and their Affiliates (other than the Selling ROFR Holder
and its Affiliates) (collectively, the "Other New Investors") on the terms and
conditions stated in the Notice, subject to Section 3.4(e) below.
(b) Rights of Other New Investors to Purchase. Upon the receipt of the
-----------------------------------------
Notice described in Section 3.4(a) above, each Other New Investor shall then
have the right within ten days after receipt of such Notice to notify the
Selling ROFR Holder in writing of his or its election to purchase some or all of
the ROFR Shares offered for sale. Each electing Other New Investor shall have
the right to purchase the number of ROFR Shares equal to the product of (i) the
number of ROFR Shares offered for sale multiplied by (ii) the quotient of (A)
the number of Fully-Diluted Common Shares held by such Other New Investor
divided by (B) the number of Fully-Diluted Common Shares held by all of the
Other New Investors. To the extent one or more Other New Investors do not
exercise their rights in full pursuant to this Section 3.4, each electing Other
New Investor shall be entitled (but not obligated) to purchase the remaining
ROFR Shares in an amount equal to the maximum number of ROFR Shares such Other
New Investor elected to purchase less the number of ROFR Shares it is entitled
to purchase pursuant to the preceding sentence; provided that if (x) the
remaining ROFR Shares are oversubscribed, such remaining ROFR Shares shall be
allocated to the electing Other New Investors who desire to purchase such
remaining ROFR Shares pro rata on the basis of the maximum number of ROFR Shares
stated in their election notices, and (y) the remaining ROFR Shares are
undersubscribed, the Selling ROFR Holder shall give the Other New Investors
notice to that effect and any Other New Investor may elect to purchase all or a
portion of such remaining ROFR Shares (which shall be allocated on the basis of
maximum subscriptions therefor in the event of an oversubscription) within five
days of such additional notice. If the ROFR Shares are
19
<PAGE>
fully subscribed for by the Other New Investors, the Selling ROFR Holder shall
sell such ROFR Shares to the Other New Investors at the price and terms
disclosed in the Notice (except that such closing shall be held as soon as
practicable after all of the ROFR Shares are subscribed for). If any Other New
Investor fails to notify the Selling ROFR Holder and the Company within the ten
days of its election or shall elect not to purchase all of its pro rata portion
of the ROFR Shares subject to the offer, such Other New Investor's right to
purchase the ROFR Shares not subscribed for subject to the offer on the terms of
such offer shall terminate.
(c) Sale to ROFR Offeror. If the Other New Investors do not elect to (or
--------------------
otherwise fail to) purchase all of the ROFR Shares, the Selling ROFR Holder may
accept or reject all or a portion (on a pro rata basis) of the acceptances from
the Other New Investors and may, within a period of 90 days from the date the
Notice was first delivered to the Company, sell to the ROFR Offeror all ROFR
Shares to which the Notice related, or such portion of the ROFR Shares as to
which acceptances by the Other New Investors were not accepted or were not
consummated, at a price not less than the price stated in the Notice and upon
terms, including terms of payment, stated therein. Before such sale shall be
consummated, the ROFR Offeror shall have executed and delivered to the Company
and the Other New Investors his or its agreement that the ROFR Offeror and the
Common Shares held by the ROFR Offeror shall be bound by the terms of this
Agreement to the same extent as if the ROFR Offeror had been the transferring
Holder. If such ROFR Shares are not sold to the ROFR Offeror within such 90 day
period, such ROFR Shares shall again become subject to all of the restrictions
of this Agreement.
(d) Closing. The closing of the sale of the Securities to the Other New
-------
Investors and/or the ROFR Offeror pursuant to this Section 3.4 shall be held at
the principal office of the Company and (i) with respect to the ROFR Offeror, on
the date specified in the Notice, and (ii) with respect to the Other New
Investors, as soon as practicable after all of the ROFR Shares are subscribed
for.
(e) Restrictions on Sales. Notwithstanding anything to the contrary
---------------------
contained herein, no sale shall be made of ROFR Shares by a Selling ROFR Holder
hereunder except for (i) cash, (ii) publicly-traded securities traded on the New
York Stock Exchange, the American Stock Exchange, the Nasdaq stock market or The
Toronto Stock Exchange, or (iii) any other non-cash consideration, the value of
which may be determined by appraisal in accordance with Section 10.10. If the
proposed consideration is not cash, each Other New Investor purchasing any
portion of the ROFR Shares (and any other Securities as a result of an exercise
of the tag-along rights pursuant to Section 3.3) shall be required to pay cash
equal to the fair market value of the applicable portion of such consideration.
For the purposes hereof, the fair market value of (x) any publicly-traded
security shall be determined as of the close of business on the day immediately
preceding the closing date for the sale hereunder and shall be the closing price
at which such securities were traded; provided that if such securities were not
traded on such day, the fair market value shall be deemed to be the bid price
for such securities on the relevant exchange on such day, and (y) any other non-
cash consideration shall be its agreed value, if all of the Selling ROFR Holders
and the Other New Investors so agree, or in the absence of such an agreement its
appraised value, as determined pursuant to Section 10.10.
20
<PAGE>
(f) Superseded by Section 3.2. Notwithstanding anything contained in
-------------------------
this Section 3.4 to the contrary, the rights and obligations granted under this
Section 3.4 shall not apply to proposed Significant Sales for which the rights
of Section 3.2 are exercised by the Selling Investors.
3.5 Exempt Transfers. The provisions of Sections 3.2, 3.3 and 3.4 shall
----------------
not apply to (a) Transfers to Affiliates of the transferring New Investor, (b)
Transfers pursuant to registration statements filed by the Company with the SEC
or under the applicable securities laws of Canada pursuant to the terms and
provisions of the Registration Rights Agreement, dated of even date herewith, by
and among the Company and certain of its shareholders, as such agreement may be
amended from time to time, or (c) non-negotiated sales to the public on a United
States national stock exchange, The Toronto Stock Exchange, the Bermuda Stock
Exchange or the Nasdaq stock market.
3.6 [intentionally omitted.]
3.7 Lock-Up of Senior Management and Additional Investors. Prior to the
-----------------------------------------------------
completion by the Company of a Qualified Public Offering, except as contemplated
by Sections 3.2 and 3.3 and except to the extent of the number of Common Shares
set forth opposite such Person's name on Schedule 3.7 hereto (adjusted, as
appropriate, for stock splits or bonus issuances, reverse stock splits or
consolidations, stock dividends or similar transactions), no individual member
of the Company's Senior Management and no Additional Investor may Transfer any
of his, her or its Common Shares or Common Share Equivalents without the prior
consent of the Company's Board of Directors; provided, however, that (i) nothing
contained herein shall limit any such individual's or Person's ability to make
transfers to Immediate Family Members or trusts, partnerships or other entities
established for the sole benefit of such individual and/or his or her Immediate
Family Members, in each case who become parties to this Agreement and thereby
assume the same rights and obligations hereunder as are applicable to such
individual, and (ii) this Section 3.7 shall no longer apply to any member of
Senior Management whose employment with the Company (and its Affiliates) is
terminated by the Company without cause or is terminated by the employee for
good reason (as "cause" and "good reason" are defined in such employee's
employment contract); provided further that this Section 3.7 shall continue to
apply to any member of Senior Management whose employment with the Company (and
its Affiliates) is terminated (including by reason of voluntary termination) for
any other reason.
3.8 Transfer and Exchange. When Securities are presented to the Company
---------------------
by a Holder with a request to register the transfer of such Securities or to
exchange such Securities for Securities of other authorized denominations, the
Company shall register the Transfer or make the exchange as requested if the
requirements of this Agreement for such transaction are met; provided, however,
that the Securities surrendered for Transfer or exchange shall be duly endorsed
or accompanied by a written instrument of Transfer in form satisfactory to the
Company, duly executed by the Holder thereof or its attorney and duly authorized
in writing. No service charge shall be made for any registration of Transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
Transfer tax or similar governmental charge payable in connection therewith.
21
<PAGE>
ARTICLE 4.
LIMITATION ON TRANSFERS
4.1 Restrictions on Transfer.
------------------------
(a) The Securities shall not be Transferred or otherwise conveyed,
assigned or hypothecated, and the Company shall not register any such Transfer,
before satisfaction of (i) the conditions specified in this Section 4.1, Section
4.2, and Section 4.3, which conditions are intended to ensure compliance with
the provisions of the Securities Act and the applicable prospectus requirements
of the securities laws of Canada with respect to the Transfer of any Security
and (ii) if applicable, Article 3 and Section 4.5 hereof. Other than Transfers
to the public pursuant to an effective registration statement or prospectus,
sales to the public pursuant to Rule 144 under the Securities Act otherwise
permitted hereunder, or sales pursuant to Section 3.5(c), each Holder will cause
any proposed transferee of any Security or any interest therein held by it to
agree to take and hold such Securities subject to the provisions and upon the
conditions specified in this Agreement by executing and delivering a counterpart
signature page to this Agreement. The preceding sentence shall survive any
Qualified Public Offering.
(b) Notwithstanding anything in this Agreement to the contrary, the
Securities held by any Holder or any member of Senior Management shall not be
Transferred, and the Company shall not register any such Transfer, to any Person
who is not an Accredited Investor, other than pursuant to a Transfer pursuant to
Section 3.7 or a sale on a United States national stock exchange, the Nasdaq
stock market, the Bermuda Stock Exchange or The Toronto Stock Exchange.
4.2 Restrictive Legends.
-------------------
(a) Securities Act Legend. Except as otherwise provided in Section 4.4
---------------------
hereof, the certificates relating to each Security held by a Holder, and to each
Security issued to any subsequent transferee of such Security, shall be stamped
or otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, NOR PURSUANT TO THE SECURITIES
OR "BLUE SKY" LAWS OF ANY STATE, NOR HAVE SUCH SECURITIES BEEN QUALIFIED FOR
DISTRIBUTION IN CANADA PURSUANT TO CANADIAN SECURITIES LAWS OR IN ANY OTHER
JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT,
(ii) RULE 144 UNDER SUCH ACT, (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT, (iv) A PROSPECTUS FILED UNDER CANADIAN SECURITIES LAWS OR AN EXEMPTION
FROM THE PROSPECTUS REQUIREMENTS OF SUCH SECURITIES LAWS OR UPON EXPIRY OF
22
<PAGE>
THE APPLICABLE HOLD PERIOD IMPOSED BY SUCH LAWS, OR (v) COMPLIANCE WITH THE
SECURITIES LAWS OF ANY OTHER APPLICABLE JURISDICTION.
(b) Other Legends. The certificates relating to each Security issued to
-------------
each Holder and to each Additional Investor and each member of Senior Management
or to a subsequent transferee (unless the transferee acquired such security in a
transaction permitted by Section 3.5(c)) shall include a legend in substantially
the following form:
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER, VOTING AND OTHER
TERMS AND CONDITIONS SET FORTH IN THE AMENDED AND RESTATED SECURITYHOLDERS'
AGREEMENT DATED JULY 14, 1999, A COPY OF WHICH MAY BE OBTAINED FROM GLOBENET
COMMUNICATIONS GROUP LIMITED AT ITS PRINCIPAL EXECUTIVE OFFICES.
4.3 Notice of Proposed Transfers. Prior to any Transfer or attempted
----------------------------
Transfer of any Security (other than a Transfer pursuant to Section 3.2 or a
non-negotiated public sale on a United States national stock exchange, the
Nasdaq stock market, the Bermuda Stock Exchange or The Toronto Stock Exchange),
the Holder of such Security shall (i) give ten days' prior written notice (a
"Transfer Notice") to the Company of such Holder's intention to effect such
Transfer, describing the manner and circumstances of the proposed Transfer, and
(ii) either (A) provide to the Company an opinion reasonably satisfactory to the
Company from counsel who shall be reasonably satisfactory to the Company (or
supply such other evidence reasonably satisfactory to the Company) that the
proposed Transfer of such Security may be effected without registration under
the Securities Act or applicable prospectus requirements of the securities laws
of Canada, or (B) certify to the Company that the Holder reasonably believes the
proposed transferee is a "qualified institutional buyer" and that such Holder
has taken reasonable steps to make the proposed transferee aware that such
Holder may rely on Rule 144A under the Securities Act in effecting such
Transfer. After receipt of the Transfer Notice and opinion (if required), the
Company shall, within five days thereof, so notify the Holder of such Security
and such Holder shall thereupon be entitled to Transfer such Security in
accordance with the terms of the Transfer Notice. The certificate relating to
such Security issued upon such Transfer shall bear the restrictive legend set
forth in Section 4.2(a), unless in the opinion of such counsel such legend is
not required in order to ensure compliance with the Securities Act. The Holder
of the Security giving the Transfer Notice shall not be entitled to Transfer
such Security until receipt of the notice from the Company under this Section
4.3.
4.4 Termination of Certain Restrictions. Notwithstanding the foregoing
-----------------------------------
provisions of this Article 4 and Section 4.6, the restrictions imposed by
Section 4.1 upon the transferability of the Securities, the legend requirements
of Section 4.2(a), and the restrictions imposed by Section 4.6 shall terminate
as to any Security (i) when and so long as such Security shall have been
effectively registered under the Securities Act or qualified for distribution
under the applicable securities laws of Canada or any similar laws of any other
applicable jurisdiction and disposed of pursuant thereto or (ii) when the
Company shall have received an opinion of counsel reasonably satisfactory to it
that such Security may be transferred without registration thereof under the
Securities Act or qualified for distribution under the applicable securities
laws of Canada or any similar laws of any other applicable jurisdiction and that
such legend may be removed.
23
<PAGE>
Whenever the restrictions imposed by Section 4.1 shall terminate as to any
Security, the Holder thereof shall be entitled to receive from the Company, at
the Company's expense, a new Security not bearing the restrictive legend set
forth in Section 4.2(a).
4.5 Additional Restrictions on Transactions.
---------------------------------------
(a) Basic Provision. Notwithstanding any other provision of this
---------------
Agreement, neither the Company, any Holder, any Additional Investor nor any
member of Senior Management shall take any action or engage in any transaction
(or, in the case of the Company, shall refrain from taking any action)
(including, without limitation, any sale, issuance or other disposition of any
Common Shares or Common Share Equivalents), taking into account any rights under
the Bye-Laws to appoint, nominate and vote on directors (and any attribution
rules), that could reasonably be expected to cause (x) prior to the second
anniversary of the date hereof, the Company to become a "controlled foreign
affiliate" of a New Investor within the meaning of Section 95(1) of the Income
Tax Act (Canada) (a "Controlled Foreign Affiliate"), or (y) any of the
representations made by the Company in Sections 8.3(c) or (e) to become untrue
(as if made immediately after giving effect to such event or transaction);
provided, however, that this Section 4.5(a) shall not
(i) apply to transfers pursuant to Section 3.2 or 3.3 of this
Agreement,
(ii) be construed to prohibit the exercise of the right to appoint
directors under the Bye-Laws (but may, however, be construed to prohibit an
amendment of the Bye-Laws related to the appointment of directors), or
(iii) apply to the Company's registration of a Transfer of Common
Shares by a shareholder who is not a party to this Agreement or
registration of a Transfer of Common Shares on a stock exchange.
(b) Required Sales. If, notwithstanding the foregoing, (i) an event is
--------------
reasonably likely to occur with respect to any Holder (e.g., the acquisition of
such Holder by a U.S. person) that could reasonably be expected to cause (A) one
-
or more of the representations of the Company contained in Section 8.3(c) or
(e) to become untrue (as if made immediately after giving effect to such event)
or (B) the Company to become a Controlled Foreign Affiliate (prior to the second
-
anniversary of the date hereof), such Holder shall (if requested by a U.S.
Majority in the case of clause (A) or if requested by holders of a majority of
the Class B Shares held by New Investors who are Canadian residents (as that
term is interpreted for Canadian income tax purposes) (a "Canadian Majority") in
the case of clause (B)) use its best efforts to dispose of its interest in the
Company prior to such event in a manner that will allow the representations of
the Company in Section 8.3(c) and (e) to be true (as if made immediately after
giving effect to such event) or allow the Company not to be a Controlled Foreign
Affiliate (prior to the second anniversary of the date hereof), as applicable,
whether or not such event occurs, and (ii) an event occurs with respect to any
Holder that causes (A) one or more of the representations of the Company
contained in Section 8.3(c) or (e) to become untrue (as if made immediately
after giving effect to such event) or (B) the Company to become a Controlled
Foreign Affiliate (prior to the second anniversary of the date hereof), such
Holder shall (if requested by a U.S. Majority
24
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in the case of clause (A) or if requested by a Canadian Majority in the case of
clause (B)) use its best efforts promptly (and, in any event, within 30 days or
such shorter period as is required to prevent an amount from being includable in
income by any person under section 951(a) of the Code) to dispose of its
interest in the Company in a manner that will allow the representations of the
Company made in Section 8.3(c) and (e) to become true (as if then made) or allow
the Company not to be a Controlled Foreign Affiliate (prior to the second
anniversary of the date hereof), as applicable.
(c) Survival. This Section 4.5 shall survive a Qualified Public Offering.
--------
(d) Miscellaneous.
-------------
(i) If (1) a Holder proposes to Transfer Securities to any Person
(a "proposed transferee"), (2) the proposed transferee represents to (A)
the Company and each Holder that constitutes (or would constitute as a
result of such Transfer) a "United States shareholder" (within the meaning
of section 951(b) of the Code) that the proposed Transfer will not cause
one or more of the Company's representations made in Section 8.3(c) or (e)
to become untrue (as if made immediately after giving effect to such event
or transaction), and (B) if the transfer is prior to the second anniversary
of the date hereof, to the Company and each Holder that is a Canadian
resident taxpayer that the proposed Transfer will not cause the Company to
be a Controlled Foreign Affiliate, (3) the proposed transferee agrees to
indemnify each affected Holder in the event that the Transfer does cause
one or more of such representations to become untrue or causes the Company
to be a Controlled Foreign Affiliate, and (4) such representation and
indemnity are in form and substance reasonably acceptable to the Company
and each such Holder (taking into account the creditworthiness of the
indemnitor), then the transferring Holder shall not be liable for monetary
damages for violating this Section 4.5 in the event that the Transfer
causes one or more the Company's representations made in Section 8.3(c) or
(e) to become untrue (as if made immediately after giving effect to such
event or transaction) or causes the Company to be a Controlled Foreign
Affiliate.
(ii) For the avoidance of doubt, the parties agree that a
Transfer pursuant to Section 3.5(b) or (c) ordinarily would not reasonably
be expected to cause (x) any of the representations made by the Company in
Section 8.3(c) or (e) to become untrue (as if made immediately after giving
effect to such event or transaction), or (y) the Company to be a Controlled
Foreign Affiliate.
(iii) The Company and each party to this Agreement will
provide such information to the proposed transferee as is reasonably
necessary in order to make the representations required in Section
4.5(d)(i)(2) above, and the proposed transferee shall be entitled to rely
upon such information in making such representations. The parties will use
commercially reasonable efforts to simplify the procedures set forth in
this Section 4.5 on a case-by-case basis.
25
<PAGE>
4.6 Transfers of Class B Shares.
---------------------------
(a) Except with respect to a non-negotiated public sale or a registered
sale of Common Shares on a United States national securities exchange, the
Nasdaq stock market, the Bermuda Stock Exchange or The Toronto Stock Exchange,
no Holder shall be entitled to Transfer all or a portion of his Common Shares
without Transferring, or causing to be Transferred, the same percentage of Class
B Shares held by such Holder or its Affiliates. The rights provided in Sections
3.2, 3.3 and 3.4 hereof shall apply to such Class B Shares as if such shares
were "Common Shares" within the meaning thereof (except with respect to the
consideration payable therefor).
(b) If a Holder Transfers Common Shares pursuant to a registered sale or a
non-negotiated public sale of Common Shares on a United States national
securities exchange, the Nasdaq stock market, the Bermuda Stock Exchange or The
Toronto Stock Exchange, such Holder shall surrender the same percentage of his
Class B Shares to the Company for cancellation, subject to applicable law, in
exchange for the paid up capital with respect to such Class B Shares.
(c) Except as permitted in Section 4.6(b), no Holder shall be entitled to
Transfer all or a portion of his Class B Shares without Transferring, or causing
to be Transferred, the same percentage of Common Shares held by such Holder or
its Affiliates.
ARTICLE 5.
ACCESS TO INFORMATION
5.1 Annual Budget and Business Plan. An annual budget and business plan
-------------------------------
for the succeeding fiscal year shall be delivered to each of the members of the
board of directors of each Corporation and to each Original New Investor who
continues to hold, together with its Affiliates, 250,000 or more Common Shares
(adjusted, as appropriate, for stock splits or bonus issuances, reverse stock
splits or consolidations, stock dividends or similar transactions) within 30
days prior to the end of such Corporation's fiscal year, which budget and
business plan shall include financial statements, cash flow schedules, a
schedule of planned capital expenditures for the upcoming fiscal year and
comparison of the projected consolidated statement of income to the audited
consolidated statement of income. If no objection is raised to such annual
budget and business plan within twenty days of delivery thereof, such annual
budget and business plan shall be deemed to be approved by the Required Holders
pursuant to Section 2.1 hereof. To the extent a specific objection is raised to
one or more line items of such annual budget or business plan and such line
items are not approved by the Required Holders prior to the commencement of the
succeeding fiscal year, the Company's management may, pending approval of the
annual budget and business plan, (i) in good faith act in accordance with all
provisions of such annual budget and business plan to which no objections have
been raised and (ii) in good faith act in accordance with all provisions of such
annual budget and business plan to which objections have been raised to the
extent authorized by the Required Holders.
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<PAGE>
5.2 Information. Each Corporation shall provide each of the members of
-----------
its board of directors and each Original New Investor who continues to hold,
together with its Affiliates, 250,000 or more Common Shares (adjusted, as
appropriate, for stock splits or bonus issuances, reverse stock splits or
consolidations, stock dividends or similar transactions) with:
(a) its balance sheet at the close of its fiscal year and its related
statements of operations, retained earnings or deficit, and changes in financial
position, as may be relevant, in each case (with comparable information at the
close of and for the prior fiscal year) promptly when available, and in any
event within 120 days after the close of its fiscal year, which balance sheet
and related statements shall be consolidated and reported on by an independent
certified public or chartered accountant of recognized international standing;
(b) its balance sheet at the close of each fiscal quarter and its
related statements of operations, retained earnings or deficit, and changes in
financial position, as may be relevant; in each case, for such fiscal quarter
and for the period commencing at the close of the previous fiscal year and
ending with the close of such fiscal quarter (with comparable information at the
close of and for the corresponding fiscal quarter of the prior fiscal year and
for the corresponding portion of such prior fiscal year) promptly when
available, and in any event within 60 days after the close of each fiscal
quarter, which balance sheet and related statements shall be consolidated and
certified by its president, chief financial officer and treasurer;
(c) in connection with each annual or interim audit made by an independent
chartered accountant or certified public accountant, as the case may be, of the
books of such Corporation, copies of all detailed financial and management
reports submitted to such Corporation by such independent chartered accountant
or certified public accountant, as the case may be;
(d) a detailed report of any material change or modification to (i) the
Project Development and Construction Contract dated June 16, 1999 by and among
Atlantica, Alcatel Submarine Networks and Alcatel Submarine Networks, Inc., (ii)
the cable station resources and cable maintenance agreement between TeleBermuda
and AT&T Corp., or (iii) the Atlantic Cable Maintenance and Repair Agreement by
and between TBI and Atlantic Cable Maintenance Organization, in each case
promptly upon the occurrence thereof;
(e) a comparison (and variance analysis) of the year-end and quarterly
financial results, as applicable, to the annual budget approved by its Board of
Directors, and a comparison to the same period in such Corporation's prior
fiscal year, such comparison to be delivered with the annual and quarterly
financial statements and reports described above;
(f) a comparison (and variance analysis) of the year-end or quarterly
financial results, as the case may be, to the projections set out in the then
current business plan of such Corporation, such comparison to be delivered with
the annual and quarterly financial statements and reports described above;
(g) notice of the occurrence of any default or event of default by any
party under, or any other material change in or circumstance affecting, any of
the material contracts to which any of the Corporations or any of their
Affiliates is a party which, either singularly or
27
<PAGE>
cumulatively with any other such default or event of default, would have a
materially adverse effect on any of the Corporations or their businesses;
(h) any additional financial information or reports (financial or
otherwise) as are delivered to any one or more of the lenders under the Senior
Facility, or its agents or their agent(s), at the time of such delivery to such
holder or agent; and
(i) such other information with respect to such Corporation's financial
condition, business, property, assets, revenues and operations as any such
director or Original New Investor may from time to time reasonably request.
5.3 Disclosure. Subject to applicable law and to their fiduciary duties
----------
to the Corporations, the appointees of any of the Holders as directors shall be
entitled to discuss the affairs of the Corporations with the officers,
directors, general partners and members of such Holder, as the case may be, and
their respective Affiliates, provided that (i) such disclosure is reasonably
necessary in the course of business of such Holder, and (ii) such persons to
whom disclosure is made agree to treat the information received by them as
confidential and in accordance with applicable laws relating to the use of
material undisclosed information relating to the Corporations.
5.4 Accounting Standards. Each of the Corporations will maintain at all
--------------------
times a system of accounting established and administered in accordance with
generally accepted accounting principles consistently applied and in accordance
with sound business practices and will therein make complete, true and correct
entries of all dealings and transactions relating to its business. All financial
statements furnished to each director and Original New Investor (who continues
to hold, together with its Affiliates, 250,000 or more Common Shares (adjusted,
as appropriate, for stock splits or bonus issuances, reverse stock splits or
consolidations, stock dividends or similar transactions)) will fairly represent
the financial condition and the results of the operations of the relevant
Corporation and all other information, certificates, schedules, reports and
other papers and data furnished to each director and each such Original New
Investor will be accurate, complete and correct in all material respects.
5.5 Inquiries and Inspections.
-------------------------
(a) Subject to applicable laws and to the duties of their respective
directors, each of the Corporations will discuss and review with each of its
directors and each Original New Investor (who continues to hold, together with
its Affiliates, 250,000 or more Common Shares (adjusted, as appropriate, for
stock splits or bonus issuances, reverse stock splits or consolidations, stock
dividends or similar transactions)) any matters relating to the business of such
Corporation or pertaining to all or any part of its properties as each such
director or Original New Investor may reasonably request, and it will permit
each such director and Original New Investor to visit, inspect and have access
to its property and assets at any and all reasonable times on reasonable notice
and during business hours on a Business Day.
(b) Subject to applicable laws and to the fiduciary duties of their
respective directors, each of the Corporations will permit, and will cause each
of its Subsidiaries to permit, at any and
28
<PAGE>
all reasonable times and in reasonable frequency and upon reasonable notice,
each of its directors and any Original New Investor (who continues to hold,
together with its Affiliates, 250,000 or more Common Shares (adjusted, as
appropriate, for stock splits or bonus issuances, reverse stock splits or
consolidations, stock dividends or similar transactions)) and their respective
authorized representatives to examine all of the books of account, records,
reports, documents, papers, and data of such Corporation and its Subsidiaries
whether in ordinary or machine language and to make copies and take extracts,
and to discuss its business, affairs, finances and accounts with its executive
officers, senior financial officers, accountants and other financial advisors;
each of the Corporations authorizes its accountants and other financial advisors
to discuss its finances and affairs in the presence of a representative of such
Corporation, and agrees to furnish each such director and Original New Investor
and their authorized representatives with any information reasonably requested
regarding its business, affairs, finances and accounts at the cost of such
Corporation. It is hereby acknowledged and agreed by each Holder that if any of
its directors or an Original New Investor requires the assistance of any third
party consultant, advisor or other representative in connection with its review
of such books, records and documents of a Corporation, any and all amounts
payable to such third party consultants, advisors or representatives shall be at
the sole cost of such director or Original New Investor or the Holder of which
such director is the appointee. The Investors' exercise of rights under this
Section 5.5 hereof shall not unreasonably interfere with the operations of the
Corporations.
5.6 Conduct of Holders.
------------------
(a) Except as contemplated in Section 3.2(c) and except to the extent
approved by the Board of Directors of the Company, the Holders will not, and
will cause their officers and employees and their appointees as directors not
to, disclose or allow disclosure to others of any portion of the non-public
information provided to them pursuant to Article 5 of this Agreement (unless
such information shall be publicly disclosed other than as a result of a breach
by such Holder of its confidentiality obligations under this Agreement) except
(i) to those of its directors, officers, general partners, members, employees
and advisors who have agreed to be bound by the terms of this Section 5.6 and
any other confidentiality provisions of this Agreement, (ii) by New Investors in
connection with a Transfer of Common Shares and Class B Shares to a Person who
has executed a confidentiality agreement requiring the recipient to maintain the
confidentiality of such information and not use same for any purpose other than
consideration of the acquisition of such Common Shares and Class B Shares and
(iii) to the shareholders, members and limited partners of a New Investor in
connection with the reporting obligations of such New Investor to its equity
holders pursuant to the organizational documents of such New Investor.
Notwithstanding the foregoing, a Holder and members of Senior Management
may provide summary financial information in respect of the Company to any
Person to whom that Holder or member is permitted under this Agreement to
transfer Common Shares, provided that such Person agrees to be bound by this
Section 5.6 and any other confidentiality provisions of this Agreement and to
use such information only for the purpose of evaluating a purchase of Common
Shares.
29
<PAGE>
(b) Unless supported by an opinion of a nationally recognized United
States law firm, in form and substance reasonably acceptable to the Company and
the holders of a majority of the Common Shares held by New Investors who are
United States persons within the meaning of section 957(c) of the Code, no
Holder will (except to the extent required by law) take a reporting position for
United States federal income tax purposes that the Company is a CFC, a "passive
foreign investment corporation," a "personal holding company," or a "foreign
personal holding company", within the meaning of the United States federal
income tax laws for the purposes of such United States federal income tax laws.
5.7 Termination. Sections 5.1, 5.2, 5.4 and 5.5 shall terminate upon the
-----------
completion by the Company of a Qualified Public Offering.
ARTICLE 6.
COVENANTS OF THE CORPORATIONS;
COVENANTS OF TDG AND NAUTILUS
6.1 Covenants of the Corporations.
-----------------------------
(a) Until the completion by the Company of a Qualified Public Offering,
TBI, GGL and Atlantica each hereby covenants and agrees that it will not issue,
redeem or permit the transfer of any of its shares or securities convertible
into its shares, or any subscription rights, warrants or options in respect of
its shares or other securities convertible into its shares except to the Company
or with the prior written consent of the Required Holders.
(b) Each of the Company and Atlantica covenants and agrees that it will
not issue any of its shares or securities convertible into its shares, or any
subscription rights, warrants or options in respect of its shares or other
securities convertible into its shares, or any subscription rights, warrants or
options in respect of its shares or other securities convertible into its
shares, including the issuance of shares pursuant to any outstanding options or
warrants, which would cause a violation of any of the terms of any license
granted to Atlantica for landing stations or otherwise.
(c) Without the consent of the holders of a majority of the Common Shares
held by New Investors who are United States persons within the meaning of
section 957(c) of the Code, the Company shall not (and shall not permit its
Subsidiaries to) take any act or omit to take any action if (i) such action or
omission is inconsistent with the then-applicable business plan approved by the
Board of Directors prior to the date hereof or subsequently, and (ii) such
action or omission reasonably could be expected to increase the likelihood that
the Company and/or its Subsidiaries would be treated as a CFC, a "passive
foreign investment corporation," a "personal holding company," or a "foreign
personal holding company" within the meaning of the United States federal income
tax laws.
(d) The Company shall take such commercially reasonable steps as may be
necessary to avoid being deemed to (or having any Subsidiary deemed to be) a
CFC, a "passive foreign investment corporation," a "personal holding company,"
or a "foreign personal holding
30
<PAGE>
company", within the meaning of the United States federal income tax laws for
the purposes of such United States federal income tax laws; provided, however,
that the registration of a Transfer of Common Shares by a shareholder who is not
a party to this Agreement or the registration of a Transfer of Common Shares on
a stock exchange shall not be deemed to be a breach of this Agreement. Unless
supported by an opinion of a nationally recognized United States law firm, in
form and substance reasonably acceptable to the holders of a majority of the
Common Shares held by New Investors who are United States persons within the
meaning of section 957(c) of the Code, the Company will not take a reporting
position for United States federal income tax purposes that it is a CFC, a
"passive foreign investment corporation," a "personal holding company," or a
"foreign personal holding company", within the meaning of the United States
federal income tax laws for the purposes of such United States federal income
tax laws.
(e) In the event the Company (or any of its Subsidiaries) is determined to
be a CFC, a "passive foreign investment corporation," a "personal holding
company," or a "foreign personal holding company" within the meaning of the
United States federal income tax laws for the purposes of United States federal
income tax purposes, the Company will (and will cause any such Subsidiary to)
use its best efforts to manage the Company's and any such Subsidiary's cash
investments and other passive investment activities in a manner to minimize, to
the extent possible, the adverse United States federal income tax consequences
incurred by the Company or any of the Holders by reason of such determination
and such Holder's holding of Common Shares.
6.2 Covenant of TDG. So long as IHI holds any Common Shares and/or Class
---------------
B Shares of the Company, TDG shall not, without the prior consent of the holders
of a majority of the Class B Shares, directly or indirectly transfer equity
interests in IHI (or cause or allow IHI to issue new equity interests in IHI)
if, as a result of such transfer (or issuance) TDG would no longer be the holder
of 100% of the equity interests in IHI.
6.3 Covenant of Nautilus. So long as Nautilus holds any Common Shares
--------------------
and/or Class B Shares of the Company, no interests in Nautilus shall, without
the prior consent of the holders of a majority of the Class B Shares, directly
or indirectly, be transferred or issued if, as a result of such transfer (or
issuance) Nautilus would no longer be owned 100% by Credit Suisse First Boston
Corporation, its 100% wholly-owned Affiliates or its employees.
ARTICLE 7.
NON-COMPETITION COVENANT
7.1 Non-Competition by Kedar.
------------------------
(a) Kedar covenants and agrees with TBI, the Company, Atlantica, GCL, and
the Holders that, while he is an employee of the Company, TBI, Atlantica, GCL or
TeleBermuda International (Canada) Ltd. and for a period of two years
thereafter, he will not, without the prior written consent of each of the
Holders, either directly or indirectly:
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(i) solicit any contractors, customers or distributors of TBI,
Atlantica, GCL, the Company or its Affiliates or endeavor to entice away
from TBI, Atlantica, GCL, the Company or any Affiliate thereof any such
Person or otherwise interfere with the relationship between such Person and
TBI, Atlantica, GCL, the Company or any Affiliate thereof for the purposes
of competing with TBI, Atlantica, GCL or the Company;
(ii) endeavor to entice away from TBI, Atlantica, GCL, the Company
or any Affiliate thereof any Person who was employed by TBI, Atlantica,
GCL, the Company or such Affiliate at the date upon which Kedar ceases to
be an employee of TBI, Atlantica, GCL, the Company or TeleBermuda
International (Canada) Ltd., either directly or indirectly, or interfere in
any way with the employer/employee relations between any such employee and
TBI, Atlantica, GCL, the Company or any Affiliate thereof; or
(iii) offer employment to any Person who was employed by TBI,
Atlantica, GCL, the Company or such Affiliate at the date upon which Kedar
ceases to be an employee of TBI, Atlantica, GCL, the Company or TeleBermuda
International (Canada) Ltd.
(b) Kedar covenants and agrees with TBI, the Company, Atlantica, GCL and
each of the Holders that, while he is an employee of TBI, the Company,
Atlantica, GCL or TeleBermuda International (Canada) Ltd. and for a period of
two years following the date he ceases such employment for whatever reason, he
will not, directly or indirectly, in any manner whatsoever, including, without
limitation, either individually or in partnership or jointly or in conjunction
with any other person or Persons, firm, association, syndicate, company or
corporation, as principal, agent, shareholder, employee or in any other manner
whatsoever, carry on or be engaged in or concerned with or interested in or lend
money to, guarantee the debts or obligations of or permit his name to be used by
a Competitive Business (as defined below) within Bermuda, the United Kingdom,
the United States, Europe, Canada and any other country in which the Company,
TBI, Atlantica or GCL or any Affiliate thereof directly offered its services to
potential customers at any time hereafter while he is an employee of the
Company, TBI, Atlantica, GCL or TeleBermuda International (Canada) Ltd. Kedar
expressly acknowledges that while he is an employee of TBI, Atlantica, GCL, the
Company or TeleBermuda International (Canada) Ltd., any of such companies or
their Affiliates may offer services to potential customers in geographic areas
not specifically named herein, and agrees that if such services are offered to
potential customers in such geographic areas by any such company, his covenants
shall extend to such geographic areas, as if named herein. In that regard, Kedar
specifically acknowledges that the Company, TBI, Atlantica, GCL and TeleBermuda
International (Canada) Ltd. intend to pursue appropriate licenses in Brazil,
Venezuela and Argentina. Kedar agrees that the restrictions contained herein are
reasonable.
(c) For the purposes of this Article 7, a "Competitive Business" shall
mean (i) while Kedar is an employee of the Company, TBI, Atlantica, GCL or
TeleBermuda International (Canada) Ltd., any business which is the same as or
similar to the international telecommunications business carried on by the
Company, TBI, Atlantica, GCL or TeleBermuda International (Canada) Ltd. or any
of their subsidiaries, and (ii) from and after the time Kedar
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<PAGE>
ceases to be an employee of the Company, TBI, Atlantica, GCL or TeleBermuda
International (Canada) Ltd., any business which is the same or similar to the
international telecommunications business carried on by the Company, TBI,
Atlantica, GCL or TeleBermuda International (Canada) Ltd. or any of their
subsidiaries while Kedar was an employee of the Company, TBI, Atlantica, GCL or
TeleBermuda International (Canada) Ltd.
(d) Kedar covenants and agrees that until the expiration of his covenants
set out in Section 7.1(a) and (b) hereof, he shall use his reasonable best
efforts to ensure that any and all current and future opportunities relating to
the international telecommunications businesses of the Company, TBI, Atlantica,
GCL and their Subsidiaries and any businesses ancillary thereto shall be carried
out through the Company, TBI, Atlantica, GCL or their Subsidiaries.
(e) The foregoing covenants are given by Kedar acknowledging that he has
specific knowledge of the affairs of TBI, Atlantica, GCL and the Company.
(f) Kedar acknowledges and agrees that the nature of the confidential
information to which he will have access during his employment by the Company,
TBI, Atlantica, GCL or TeleBermuda International (Canada) Ltd. would make it
difficult, if not impossible, for him to perform in a similar capacity for a
Competitive Business without disclosing or utilizing the confidential
information and that if he were to perform in a similar capacity for a
Competitive Business it would be inevitable that he would disclose and/or use
confidential information.
(g) Kedar acknowledges that violations of the provisions of this Section
7.1 will cause immediate and irreparable harm to the Company, entitling the
Company and the Holders to an injunction in a court of competent jurisdiction in
addition to any other remedies the Company or the Holders may have at law or in
equity, including recovery of reasonable attorneys' fees and costs incurred by
the Company or the Holders in enforcing the provisions of this Section 7.1. In
the event that any covenant contained in this Article 7 or portion of any such
covenant should be unenforceable or be declared invalid for any reason
whatsoever, such unenforceability or invalidity shall not affect the
enforceability or validity of the remaining portions of the covenants and such
unenforceable or invalid portions shall be severable from the remainder of this
agreement. Kedar hereby acknowledges and agrees that all restrictions contained
in this Article 7 are reasonable and valid and all defenses to the strict
enforcement thereof by TBI, Atlantica, GCL and/or the Company and/or the Holders
are hereby waived by him.
(h) Notwithstanding the provisions of Section 10.3 hereof, Article 7 of
this Agreement and any disputes in connection with or arising out of the
provisions of Article 7 of this Agreement, shall be governed by and construed in
accordance with the laws of the Province of Ontario, without regard to
principles of conflicts of law.
7.2 Other Activities. Nothing in this Article 7 shall be deemed to
----------------
prevent or prohibit Kedar from making investments in his personal capacity
unless such investments are of a type that may conflict with the efficient
performance of his duties or with any of his obligations to TBI, Atlantica, GCL
or the Company; provided further that nothing contained herein shall preclude
Kedar from purchasing or owning stock in any corporation or firm engaged in a
33
<PAGE>
Competitive Business whose shares are traded on a recognized stock exchange or
over-the-counter market, so long as Kedar's holdings therein do not exceed five
percent (5%) of the issued and outstanding capital of the corporation or firm in
question. Notwithstanding the foregoing, it is acknowledged and agreed by the
parties hereto that Kedar shall be entitled (a) prior to the nine-month
anniversary of the date hereof, to own a controlling interest in MK Telecom
Network Inc. and MK Telecom Network Holdings Inc., and (b) to be a member of the
board of directors of (i) any corporation that does not carry on, directly or
indirectly, an undersea fiber optic cable business, and (ii) any corporation not
described in clause (i) with the prior approval of the Company's board of
directors.
7.3 Consideration. Kedar acknowledges and agrees that he has received
-------------
good and valuable consideration in exchange for his covenants and obligations
under this Agreement.
ARTICLE 8.
REPRESENTATIONS AND WARRANTIES
8.1 Holder Representations. Each Holder respectively warrants with
----------------------
respect to itself in favor of each other Holder as follows, and hereby
acknowledges and agrees that each of the other Holders has relied and is relying
on such representations and warranties in entering into this Agreement:
(a) it is the beneficial owner of that number and class of the issued and
outstanding securities of the Company set out opposite its name on Exhibit A
attached hereto, and holds such securities free and clear of all claims, liens,
security interests and encumbrances whatsoever and, except as provided in the
warrants or the options disclosed on such Exhibit A, no person will have any
agreement or option or right capable of becoming an agreement for the purchase
of any such securities;
(b) it has all necessary power and authority to own its Common Shares and
to enter into and carry out the provisions of this Agreement, and has taken all
acts (corporate or otherwise) necessary to authorize the execution and delivery
of this Agreement;
(c) this Agreement constitutes the binding obligations of such Holder,
enforceable in accordance with its terms;
(d) neither the execution and delivery of this Agreement nor the
fulfillment or compliance with the terms and conditions hereof:
(i) conflicts with or will conflict with or result in a breach of any
of the terms, conditions, or provisions of or constitute a material default
under such Holder's organizational documents; or
(ii) conflicts with or will conflict with or result in a material
breach of any of the terms, conditions, or provisions of or constitute a
material default under any agreement or instrument to which such Holder is
a party or by which it is bound; and
34
<PAGE>
(e) there are no actions, suits or proceedings pending, or to the
knowledge of such Holder threatened, against such Holder or its Affiliates
which, if adversely determined, could materially adversely affect the ability of
such Holder or its Affiliates to perform its obligations under this Agreement.
8.2 Kedar and BVI Representations. Each of Kedar and BVI jointly and
-----------------------------
severally represents and warrants to the other Holders that:
(a) as of the date hereof, Kedar is the beneficial owner of 51,132 Class A
Series 1; 74,369 Class A Series 2; 17,187 Class A Series 3; 22,508 Class A
Series 4; and 162,559 Class A Series 5 shares of BVI, and such shares of BVI
entitle Kedar to 52.942% of the voting rights attached to all outstanding shares
of BVI;
(b) no Person has any agreement or option or right capable of becoming an
agreement for the purchase, subscription or issuance of any of the unissued
class A shares of BVI; and
(c) the shares described in Subsection 8.2(a) hereof are free and clear of
all claims, liens, security interests and encumbrances whatsoever and no person
has any agreement or option or right capable of becoming an agreement for the
purchase of any such shares.
8.3 Company Representations and Covenants. The Company hereby represents,
-------------------------------------
warrants and convenants to the Holders that:
(a) the Company owns 100% of the issued and outstanding capital shares of
TBI, GCL and Atlantica;
(b) other than the warrants and the options set forth on Exhibit A
attached hereto, no Person has any agreement or option or right capable of
becoming an agreement for the purchase, subscription or issuance of any of the
unissued shares of the Company, and no Person has any agreement or option or
right capable of becoming an agreement for the purchase, subscription or
issuance of any of the unissued shares of TBI, GCL or Atlantica;
(c) no person (other than BV, Kelso, and KEP or their transferees) is a
"United States shareholder" (within the meaning of section 951(b) of the
Internal Revenue Code of 1986, as amended (the "Code")) of the Company;
(d) BV, Kelso and KEP do not own (within the meaning of section 958(a) of
the Code), and are not considered as owning by applying the rules of ownership
of section 958(a) of the Code, more than 50 percent of (i) the total combined
voting power of all classes of stock of the Company entitled to vote, or (ii)
the total value of the stock of the Company, in each case as defined in section
957(a) of the Code; and
(e) the Company is not a "controlled foreign corporation" (within the
meaning of section 957(a) of the Code).
35
<PAGE>
8.4 Representations of the Corporations. Each of the Corporations hereby
-----------------------------------
represents and warrants to the Holders as follows:
(a) it is a corporation duly organized and in good standing under the laws
of its jurisdiction of organization;
(b) it has all necessary power and authority to enter into and carry out
the provisions of this Agreement, and has taken all acts (corporate or
otherwise) necessary to authorize the execution and delivery of this Agreement.
(c) this Agreement constitutes the binding obligations of such
Corporation, enforceable in accordance with its terms;
(d) neither the execution and delivery of this Agreement nor the
fulfillment or compliance with the terms and conditions hereof:
(i) conflicts with or will conflict with or result in a breach of
any of the terms, conditions, or provisions of or constitute a material
default under such Corporation's organizational documents; or
(ii) conflicts with or will conflict with or result in a material
breach of any of the terms, conditions, or provisions of or constitute a
material default under any agreement or instrument to which such
Corporation is a party or by which it is bound;
(e) there are no actions, suits or proceedings pending, or to the
knowledge of such Corporation threatened, against such Corporation or its
Affiliates which, if adversely determined, could materially adversely affect the
ability of such Corporation or its Affiliates to perform its obligations under
this Agreement.
8.5 Representation of TDG. TDG hereby represents and warrants to the
---------------------
Company and each other Holder that:
(a) TDG currently holds 100% of the issued and outstanding equity
interests in IHI, and there is no outstanding contract, agreement, warrant,
option, convertible debt instrument or other right or arrangement pursuant to
which any other Person can require (i) IHI to issue equity securities to it or
(ii) TDG to sell, transfer or otherwise convey any of TDG's equity interests in
IHI to it.
(b) TDG is not a "United States shareholder" (within the meaning of
section 951(b) of the Code) of the Company, and no United States person (within
the meaning of section 957(c) of the Code), by virtue of a direct or indirect
ownership interest in TDG, is a "United States shareholder" (within the meaning
of section 951(b) of the Code) of the Company by virtue of TDG's ownership of
Securities or any other interests in the Company.
8.6 Representation of Non-U.S. Status for CFC Purposes. Each Holder (other
--------------------------------------------------
than Kelso, KEP, BV, Providence, PEOP, Nautilus, Spectrum, SEI and Managers)
hereby represents
36
<PAGE>
and warrants to the Company and each other Holder that (i) it is not a "United
States shareholder" (within the meaning of section 951(b) of the Code) of the
Company, and (ii) if such Holder is an entity, no United States person (within
the meaning of section 957(c) of the Code), by virtue of a direct or indirect
ownership interest in it, is a "United States shareholder" (within the meaning
of section 951(b) of the Code) of the Company by virtue of its ownership
interest of Common Shares or any other interests in the Company.
8.7 Kedar Representations. Kedar represents to the Company and each other
---------------------
Holder that he is not a citizen or resident of the United States within the
meaning of section 552(b) of the Code.
8.8 Representation of Nautilus. Nautilus hereby represents and warrants to
--------------------------
the Company and each other Holder that all of the interests of Nautilus are
owned, directly or indirectly, by Credit Suisse First Boston Corporation, its
100% wholly-owned Affiliates, and/or its employees.
ARTICLE 9.
TERMINATION
Unless specifically stated to the contrary herein, the provisions of this
Agreement shall terminate upon the completion of a Qualified Public Offering;
provided that any such termination shall be without prejudice to the rights of
any party hereto arising out of a breach by any other party of any covenant,
agreement, representation or warranty contained in this Agreement. The parties
specifically understand and agree that Article 4, Section 5.6 and Article 7 may,
on their terms, survive the completion of a Qualified Public Offering.
ARTICLE 10.
MISCELLANEOUS
10.1 Notices. All notices, requests, demands or other communications by
-------
the terms hereof required or permitted to be given by one party to any other
party, or to any other person shall be given in writing by personal delivery or
by registered mail, postage prepaid, or by facsimile transmission to such other
party as follows:
(a) to TBI, GCL, Atlantica 2 Carter's Bay Road
and the Company at: Southside, St. David's
Bermuda
Attention: General Counsel
Facsimile: (441) 296-9010
(b) to the Holders, members of Senior Management or Additional Investors
at the respective addresses set forth on the signature pages attached hereto;
37
<PAGE>
or at such other address as may be given by such person to the other parties
hereto in writing from time to time. If any party bound hereby shall not have
given the parties hereto notice setting forth an address for the giving of
notices, the notice for such person shall be deemed to have been properly given
if given in accordance with the terms hereof as if given to the transferor(s) of
such shares.
Any such notice, request, demand, or other communication shall be deemed to
be given (a) when received, if personally delivered; (b) if mailed, on the fifth
day after it is deposited in the United States, Canadian or Bermuda mail,
properly addressed, with proper postage affixed; (c) if sent by facsimile or
similar device, when electronically confirmed; and (d) if sent by courier, 24
hours after delivery to such courier service.
10.2 Legal Holidays. A "Legal Holiday" used with respect to a particular
--------------
place of payment or delivery of notice is a Saturday, a Sunday or a day on which
banking institutions at such place are not required to be open. If a payment
date or notice date is a Legal Holiday at such place, payment or delivery of
notice may be made at such place on the next succeeding day that is not a Legal
Holiday, and (i) no interest on the amount of such payment shall accrue for the
intervening period, and (ii) such notice shall be deemed timely received.
10.3 Governing Law; Consent to Jurisdiction.
--------------------------------------
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(b) To the fullest extent permitted by applicable law, each party hereto
irrevocably submits to the non-exclusive jurisdiction of any Federal or State
court located in the Borough of Manhattan in the City of New York, New York in
any action, suit, or proceeding based on or arising out of or relating to this
Agreement, and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in any such court. Each party hereto irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it may have to the laying of the venue of any such suit, action or proceeding
brought in such a court as an inconvenient forum. Each party agrees that final
judgment in any such suit, action or proceeding brought in such a court (upon
the passage of time for appeal or the determination of such appeal) shall be
conclusive and binding upon the parties hereto and may be enforced in the courts
of Bermuda (or any other courts to the jurisdiction of which the parties hereto
are subject) by suit upon such judgment, provided that service of process is
effected upon such party in the manner specified herein or as otherwise
permitted by law.
10.4 Successors and Assigns. The provisions of this Agreement that are for
----------------------
the Holders' benefit as the holders of any Securities are also for the benefit
of, and enforceable by, all subsequent holders of Securities who become a party
to this Agreement by executing and delivering a counterpart signature page
hereto, except as otherwise expressly provided herein. This Agreement shall be
binding upon the Company, each Holder, and their respective successors and
permitted assigns.
38
<PAGE>
10.5 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which so executed shall be deemed to be an original and such
counterparts together shall be but one and the same instrument.
10.6 Severability. In case any provision in this Agreement shall be held
------------
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and the
remaining provisions shall not in any way be affected or impaired thereby.
10.7 No Waivers: Amendments.
----------------------
(a) No failure or delay on the part of the Company or any Holder in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
any Holder at law or in equity or otherwise.
(b) Any provision of this Agreement may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the Company and the
holders of 2/3 of the Class B Shares; provided, however, that no such amendment
shall be effective against (i) a holder of Class B Shares without the consent of
such holder if such amendment or waiver adversely and discriminatorily changes
the rights or obligations of such holder (or its Affiliates) in a manner that is
materially different from the changes to the rights or obligations of the other
holders of Class B Shares, (ii) a member of Senior Management (now or hereafter
made a party hereto) without the consent of such member if such amendment or
waiver adversely and discriminatorily affects in a material way the rights of or
obligations of such member or such member's permitted assignees, or (iii)
Jeffrey G. Conyers, without his consent if such amendment changes the rights or
obligations of Mr. Conyers in any way.
10.8 Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the matters herein and its execution has not
been induced by, nor do any of the parties rely upon or regard as material, any
representations or writings whatever not incorporated herein and made a part
hereof.
10.9 Remedy for Breach of Section 8.3(c), (d) or (e), 8.5(b) or 8.6.
--------------------------------------------------------------
(a) The parties hereto understand and agree that no party may bring any
action, claim or proceeding for monetary damages against the Company or any of
its directors or officers for a breach of the representations set forth in
Section 8.3(c), (d) or (e) of this Agreement.
(b) The parties hereto understand and agree that no party may bring any
action, claim or proceeding for monetary damages against a Holder for a breach
of the representations or covenants set forth in Section 8.5(b) or 8.6 of this
Agreement.
39
<PAGE>
10.10 Appraisal. In the event a Selling ROFR Holder and the Other New
---------
Investors cannot agree upon the fair market value of any non-cash consideration
that is offered in a transaction subject to Section 3.4(a) and is not publicly
traded, either the Selling ROFR Holder or the Other New Investors can request an
appraisal pursuant to this Section 10.10 as soon as such disagreement becomes
evident to such party. The appraised value of any such non-cash consideration
means the fair market value on the date of the Notice of such non-cash
consideration, without premiums for control or discounts for minority interest
or restrictions on transfer, determined by an appraiser designated by the
Selling ROFR Holder and an appraiser designated by the Other New Investors, and
if such two appraisers cannot agree on the fair market value, then the two
appraisers shall select a third appraiser mutually agreeable to the two
appraisers, which third appraiser shall, upon the basis of an independent
analysis, determine the fair market value. The Selling ROFR Holder and the Other
New Investors shall use reasonable efforts to designate their respective
appraisers, and to cause such appraisers to complete their work, as quickly as
is reasonably practicable. The Selling ROFR Holder and the Other New Investors,
as a group, shall each pay 50% of the cost and expenses of such appraisal
proceeding (including appraisers' fees), provided that the Selling ROFR Holder
and the Other New Investors, as a group, shall each bear their own professional
fees and expenses (legal, accounting, financial advisory or otherwise) incurred
in connection therewith.
10.11 Consents. Whenever any matter is to be approved by a vote of the
--------
holders of the Class B Shares, all holders of the Class B Shares shall, if
requested by holders of a number of Class B Shares sufficient to approve such
matter, execute written consents voting all of their Class B Shares in favor of
such matter.
10.12 Additional Investors. If consented to by holders of a majority of
--------------------
the Class B Shares, any Affiliate of the Company or of any New Investor (or any
employee of any such Affiliate) who has acquired Common Shares on the Bermuda
Stock Exchange (an "Additional Investor") may, by executing and delivering a
counterpart signature page to this Agreement, become a party hereto solely for
purposes of Sections 3.2, 3.3 and 3.7 and Articles 4, 9 and 10 hereof. Each
Additional Investor shall promptly deliver to the Company all certificates
relating to such Common Shares, and the Company shall affix thereon the legend
set forth in Section 4.2(b).
40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, all as of the date first written above.
THE CORPORATIONS:
GLOBENET COMMUNICATIONS GROUP LIMITED
By: /s/ Greg Belbeck
----------------------------------
Name: Greg Belbeck
--------------------------------
Title: Chief Financial Officer
-------------------------------
TELEBERMUDA INTERNATIONAL LIMITED
By: /s/ Greg Belbeck
----------------------------------
Name: Greg Belbeck
--------------------------------
Title: Vice President, Finance
-------------------------------
GLOBENET COMMUNICATIONS LTD.
By: /s/ Lin Gentemann
----------------------------------
Name: Lin Gentemann
--------------------------------
Title: Vice President
-------------------------------
ATLANTICA NETWORK (BERMUDA) LTD.
By: /s/ Lin Gentemann
----------------------------------
Name: Lin Gentemann
--------------------------------
Title: Vice President
-------------------------------
41
<PAGE>
THE HOLDERS:
/s/ Michael Kedar
----------------------------------------
Michael Kedar
Address: TeleBermuda International Ltd.
3100 Steeles Avenue East
Suite 805
Markham, Ontario
L3R 8T3
Facsimile: (905) 470-6376
TELEBERMUDA (BVI) LIMITED
By: /s/ Michael Kedar
---------------------------------------
Name: Michael Kedar
-------------------------------------
Title: President
------------------------------------
Address: TeleBermuda International
3100 Steeles Avenue East
Suite 805
Markham, Ontario
L3R 8T3
Facsimile: (905) 470-6376
IHI HYDRO, INC.
By: /s/ Linda Dougherty
---------------------------------------
Name: Linda Dougherty
-------------------------------------
Title: Vice President
------------------------------------
Address: 55 King Street West
8th Floor
TD Bank Tower
TD Centre
Toronto, Ontario
M5K 1A2
Facsimile: (416) 982-5045
42
<PAGE>
BOSTON VENTURES LIMITED PARTNERSHIP
V, L.P.
By: BOSTON VENTURES COMPANY V, LLC,
its general partner
By: /s/ Anthony J. Bolland
----------------------------------
Name: Anthony J. Bolland
--------------------------------
Title: Managing Director
-------------------------------
Address: One Federal Street
23rd Floor
Boston, Massachusetts 02110-2003
Facsimile: (617) 350-1574
KELSO INVESTMENT ASSOCIATES VI, L.P.
By: Kelso GP VI, LLC, its general partner
By: /s/ George E. Matelich
----------------------------------
Name: George E. Matelich
--------------------------------
Title: Managing Member
-------------------------------
Address: 320 Park Avenue
24th Floor
New York, New York 10022
Facsimile: (212) 223-2379
KEP VI, L.L.C.
By: /s/ George E. Matelich
----------------------------------
Name: George E. Matelich
--------------------------------
Title: Managing Member
-------------------------------
Address: 320 Park Avenue
24th Floor
New York, New York 10022
Facsimile: (212) 223-2379
43
<PAGE>
PROVIDENCE EQUITY PARTNERS III L.P.
By: Providence Equity Partners III L.L.C, its
general partner
By: /s/ Jonathan M. Nelson
______________________________________
Jonathan M. Nelson
Its President
Address: Fleet Center, 9th Floor
50 Kennedy Plaza
Providence, Rhode Island 02903
Facsimile: (401) 751-1790
PROVIDENCE EQUITY OPERATING PARTNERS III L.P.
By: Providence Equity Partners III L.L.C, its
general partner
By: /s/ Jonathan M. Nelson
______________________________________
Jonathan M. Nelson
Its President
Address: Fleet Center, 9th Floor
50 Kennedy Plaza
Providence, Rhode Island 02903
Facsimile: (401) 751-1790
44
<PAGE>
SPECTRUM EQUITY INVESTORS III, L.P.
By: Spectrum Equity Associates III, L.P., its
General Partner
By: /s/ Kevin J. Maroni
___________________________________________
Kevin J. Maroni
Its General Partner
Address: One International Place
29th Floor
Boston, Massachusetts 02110
Facsimile: (617) 464-4601
SPECTRUM III ENTREPRENEURS' FUND, L.P.
By: SEI III Entrepreneurs' LLC, its General
Partner
By: /s/ Kevin J. Maroni
___________________________________________
Kevin J. Maroni
Its Managing Member
Address: One International Place
29th Floor
Boston, Massachusetts 02110
Facsimile: (617) 464-4601
SPECTRUM III INVESTMENT MANAGERS' FUND, L.P.
By: /s/ Kevin J. Maroni
___________________________________________
Kevin J. Maroni
Its General Partner
Address: One International Place
29th Floor
Boston, Massachusetts 02110
Facsimile: (617) 464-4601
CAPITAL COMMUNICATIONS CDPQ, INC.
45
<PAGE>
By: /s/ Sebastien Rheaume
---------------------------------------------
Name: Sebastien Rheaume
-------------------------------------------
Title: Manager
------------------------------------------
By: /s/ Andre De Montigny
---------------------------------------------
Name: Andre De Montigny
-------------------------------------------
Title: Vice President
------------------------------------------
Address: 1981 McGill College Avenue
Suite 725
Montreal, Quebec
H3A 3C7
Facsimile: (514) 847-5980
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P., its
general partner
By: Sandler Capital Management, its general
partner
By: MJDM Corp., a general partner
By: /s/ Edward Grinacoff
---------------------------------------
Name: Edward Grinacoff
-------------------------------------
Title: President
------------------------------------
Address: 767 Fifth Avenue
45th Floor
New York, New York 10153
Facsimile: (212) 826-0269
46
<PAGE>
SANDLER CAPITAL PARTNERS IV FTE, L.P.
By: Sandler Investment Partners, L.P., its
general partner
By: Sandler Capital Management, its general
partner
By: MJDM Corp., a general partner
By: /s/ Edward Grinacoff
--------------------------------------
Name: Edward Grinacoff
------------------------------------
Title: President
-----------------------------------
Address: 767 Fifth Avenue
45th Floor
New York, New York 10153
Facsimile: (212) 826-0269
ONTARIO MUNICIPAL EMPLOYEES
RETIREMENT BOARD
By: /s/ Ian D. Collier
------------------------------------------
Name: Ian D. Collier
----------------------------------------
Title: Vice President
---------------------------------------
By: /s/ Donna Parr
------------------------------------------
Name: Donna Parr
----------------------------------------
Title: Senior Portfolio Manager
---------------------------------------
Address: One University Avenue, Suite 1100
Toronto, Ontario
M5J 2P1
Facsimile: (416) 369-0675
47
<PAGE>
NAUTILUS EQUITY INVESTORS, L.L.C.
By: /s/ Mark Patterson
------------------------------------------
Mark Patterson, Its Managing Member
Address:
TD CAPITAL GROUP LIMITED
By: /s/ Linda Dougherty
-------------------------------------------
Name: Linda Dougherty
-----------------------------------------
Title: Vice President
----------------------------------------
Address: 55 King Street West, 8th Floor
TD Bank Tower
TD Centre
Toronto, Ontario
M5K 1A2
Facsimile: (416) 982-5045
48
<PAGE>
Solely for the purposes of Sections 3.2, 3.3 and 3.7 and Articles 9 and 10 of
this Agreement:
SENIOR MANAGEMENT
/s/ Scott Socol
________________________________________________
Scott Socol
Address: GlobeNet Communications Group
3100 Steeles Avenue East, Suite 805
Markham, Ontario
L3R 8T3
Facsimile: (905) 470-6376
/s/ Greg Belbeck
________________________________________________
Greg Belbeck
Address: GlobeNet Communications Group
Limited
3100 Steeles Avenue East, Suite 805
Markham, Ontario
L3R 8T3
Facsimile: (905) 470-6376
/s/ Laurent Duplantie
________________________________________________
Laurent Duplantie
Address: GlobeNet Communications Group
Limited
170 Taschereau Boulevard
Suite 310
La Prairie, Quebec
J5R 5H6
Facsimile: (514) 444-9301
49
<PAGE>
/s/ Lin Gentemann
_______________________________________________
Lin Gentemann
Address: GlobeNet Communications Group
2 Carter's Bay Road
Southside, St. David's DD02
Bermuda
Facsimile: (441) 296-9010
50
<PAGE>
Solely for the purposes of acknowledging his consent to this amendment and
restatement of the Original Agreement and the termination of his rights
thereunder:
/s/ Jeffrey G. Conyers
______________________________________________
Jeffrey G. Conyers
Address: First Bermuda Securities
Chevron House
Ground Floor
11 Church Street
Hamilton, Bermuda
HM 11
Facsimile: (441) 292-9471
51
<PAGE>
EXHIBIT A
CURRENT SECURITY OWNERSHIP OF THE HOLDERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Securityholder Common Shares Class B Common Share
-------------- ------------ Shares(C) Options
--------- -------
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kedar(A) 200,000
- ----------------------------------------------------------------------------------------
BVI 836,325 120,000
- ----------------------------------------------------------------------------------------
IHI(B) 1,635,286(C) 110
- ----------------------------------------------------------------------------------------
BV 2,941,176 199
- ----------------------------------------------------------------------------------------
Kelso 2,500,000 169
- ----------------------------------------------------------------------------------------
KEP 441,176 30
- ----------------------------------------------------------------------------------------
Providence 1,508,378 98
- ----------------------------------------------------------------------------------------
PEOP 11,230 1
- ----------------------------------------------------------------------------------------
Spectrum 1,458,824 97
- ----------------------------------------------------------------------------------------
SEI 45,588 1
- ----------------------------------------------------------------------------------------
MANAGERS 15,196 1
- ----------------------------------------------------------------------------------------
CDPQ 1,470,588 100
- ----------------------------------------------------------------------------------------
Sandler 521,176 35
- ----------------------------------------------------------------------------------------
SCP 214,118 14
- ----------------------------------------------------------------------------------------
OMERS 558,824 38
- ----------------------------------------------------------------------------------------
Nautilus 294,118 20
- ----------------------------------------------------------------------------------------
TDG 1,283,254 87
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
(A) The amount set forth above does not reflect 92,353 Common Shares held by a
trust for the benefit of a charitable organization and a family member of Mr.
Kedar. Mr. Kedar is not the trustee of the trust, and has no beneficial
ownership interest in such shares. The amount set forth above also does not
include shares attributable to Mr. Kedar pursuant to his interests in BVI. Mr.
Kedar has preference shares in BVI which carry more than 50% of the voting
rights of BVI.
(B) IHI is a wholly-owned subsidiary of TDG.
(C) Reflects interest owed by the Company to IHI through July 13, 1999.
52
<PAGE>
SCHEDULE 2.1(A)
EXISTING OPTIONS AND WARRANTS
53
<PAGE>
SCHEDULE 3.1(B)
PREEMPTIVE RIGHTS
The only persons with preemptive rights to issuances of the Company's shares are
set forth below:
Tyco Submarine Systems, Ltd.
IHI Hydro, Inc.
TeleBermuda (BVI) Limited
Jeffrey G. Conyers
Michael Kedar
These rights exist by reason of the Original Agreement. Each of these persons
has waived its right to purchase a portion of the Common Shares and Class B
Shares sold to the New Investors. The rights of Tyco will be transferred to IHI
or its Affiliates on or before the Closing Date. The rights of Mr. Conyers will
terminate upon the execution of this Agreement.
54
<PAGE>
SCHEDULE 3.7
SHARES OF SENIOR MANAGEMENT NOT SUBJECT TO SECTION 3.7
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Member of Senior Management Cumulative Sales not Subject to Section 3.7
----------------- -------------------------------------------
- ------------------------------------------------------------------------------------------------
<S> <C>
Mike Kedar 145,020 Common Shares
- ------------------------------------------------------------------------------------------------
Scott Socol 39,500 Common Shares
- ------------------------------------------------------------------------------------------------
Greg Belbeck 27,000 Common Shares
- ------------------------------------------------------------------------------------------------
Lin Gentemann 27,313 Common Shares
- ------------------------------------------------------------------------------------------------
Laurent Duplantie 27,000 Common Shares
- ------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
EXHIBIT 10.17
_____________________________________
ATLANTICA - 1
_____________________________________
PROJECT DEVELOPMENT
AND
CONSTRUCTION CONTRACT
AMONG
ALCATEL SUBMARINE NETWORKS
AND
ALCATEL SUBMARINE NETWORKS, INC.
AND
ATLANTICA NETWORK (BERMUDA) LTD.
_____________________________________
Dated as of June 16, 1999
_____________________________________
<PAGE>
TABLE OF CONTENTS
GENERAL TERMS AND CONDITIONS
<TABLE>
<CAPTION>
Article PAGE
- ------- ----
<S> <C> <C>
1 Provision of System.......................................................... 2
- - -------------------
2 Documents Forming the Entire Contract........................................ 2
- - ------------------------------------
3 Definitions.................................................................. 2
- - ----------
4 Contract Price............................................................... 12
- - -------------
5 Terms of Payment............................................................. 15
- - ---------------
6 Contract Variations.......................................................... 18
- - ------------------
7 Responsibilities for Permits/Landing Licenses; Compliance with Laws.......... 19
- - ------------------------------------------------------------------
8 Route Survey................................................................. 20
- - -----------
9 Acceptance................................................................... 20
- - ---------
10 Warranty..................................................................... 25
- -- --------
11 Contractor Support........................................................... 29
- -- ------------------
12 Purchaser's Obligations...................................................... 30
- -- -----------------------
13 Termination for Default...................................................... 31
- -- -----------------------
14 Termination for Convenience.................................................. 33
- -- ---------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Article PAGE
- ------- ----
<S> <C> <C>
15 Suspension................................................................... 35
- -- ----------
16 Title and Risk of Loss....................................................... 36
- -- ----------------------
17 Force Majeure................................................................ 36
- -- -------------
18 Intellectual Property........................................................ 37
- -- ---------------------
19 Infringement................................................................. 41
- -- ------------
20 Safeguarding of Information and Technology................................... 43
- -- ------------------------------------------
21 Export Control............................................................... 44
- -- --------------
22 Liquidated Damages........................................................... 44
- -- ------------------
23 Limitation of Liability/Indemnification...................................... 45
- -- ---------------------------------------
24 Counterparts................................................................. 46
- -- ------------
25 Design and Performance Responsibility........................................ 46
- -- -------------------------------------
26 Product Changes.............................................................. 46
- -- ---------------
27 Risk and Insurance........................................................... 47
- -- ------------------
28 Plant and Work Rules......................................................... 50
- -- --------------------
29 Right of Access and Audit.................................................... 50
- -- -------------------------
30 Quality Assurance............................................................ 51
- -- -----------------
31 Documentation................................................................ 52
- -- -------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Article PAGE
- ------- ----
<S> <C> <C>
32 Training..................................................................... 52
- -- --------
33 Settlement of Disputes/Arbitration........................................... 52
- -- ----------------------------------
34 Applicable Law............................................................... 53
- -- --------------
35 Notices...................................................................... 53
- -- -------
36 Publicity and Confidentiality................................................ 54
- -- -----------------------------
37 Assignment; Subcontractors................................................... 55
- -- --------------------------
38 Relationship of the Parties.................................................. 57
- -- ---------------------------
39 Successors Bound............................................................. 57
- -- ----------------
40 Article Captions............................................................. 57
- -- ----------------
41 Severability................................................................. 57
- -- ------------
42 Prime Contractor; Joint and Several Liability of the Contractor; Guarantors.. 57
- -- ---------------------------------------------------------------------------
43 Survival of Obligations...................................................... 58
- -- -----------------------
44 Non-Waiver................................................................... 58
- -- ----------
45 Language; Interpretation..................................................... 58
- -- ------------------------
46 Representations and Warranties............................................... 58
- -- ------------------------------
47 Entire Agreement............................................................. 60
- -- ----------------
48 Optional System Upgrades..................................................... 61
- -- ------------------------
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Article PAGE
- ------- ----
<S> <C> <C>
49 Integration of BUS-1 in System............................................... 62
- -- ------------------------------
50 Optional System Extension.................................................... 63
- -- -------------------------
51 Time of the Essence.......................................................... 64
- -- -------------------
</TABLE>
Exhibits and Appendices
EXHIBIT A GUARANTY
EXHIBIT B PERMIT LISTING
EXHIBIT C PAYMENT ESCROW AGREEMENT
EXHIBIT D FORMAT OF CONTRACTOR'S INVOICE CERTIFICATE
EXHIBIT E FORMAT OF CERTIFICATE OF PROVISIONAL/COMMERCIAL
ACCEPTANCE
EXHIBIT F STATEMENT OF ORIGIN AND LIST OF SUBCONTRACTORS
APPENDIX 1 PROVISIONING SCHEDULE
APPENDIX 1A UPGRADE PROVISIONING SCHEDULE
APPENDIX 1B EXTENSION OPTION PROVISIONING SCHEDULE
APPENDIX 2 BILLING SCHEDULE AND MILESTONES
APPENDIX 2A UPGRADE BILLING MILESTONES
APPENDIX 2B EXTENSION OPTION BILLING MILESTONES
APPENDIX 3 PLAN OF WORK
APPENDIX 4 TECHNICAL VOLUME, SYSTEM DESCRIPTION
APPENDIX 5 TECHNICAL VOLUME, TECHNICAL INFORMATION
iv
<PAGE>
PROJECT DEVELOPMENT AND
CONSTRUCTION CONTRACT
This Project Development and Construction Contract ("Contract") is
--------
made as of this 16th day of June, 1999 among (i) ALCATEL SUBMARINE NETWORKS
(together with its permitted successors and assigns, "ASN"), a societe anonyme
---
organized and existing under the laws of France, and having its principal office
in Paris, France, and ALCATEL SUBMARINE NETWORKS, INC. (together with its
permitted successors and assigns, "ASNI"), a corporation organized and existing
----
under the laws of the State of Delaware, United States, and having its principal
office in Portland, Oregon, United States (ASN and ASNI are hereinafter
collectively referred to as "Contractor" and are jointly and severally liable
----------
for all obligations and liabilities of Contractor hereunder as more fully set
forth in Article 42 hereof) and (ii) Atlantica Network (Bermuda) Ltd., a
corporation organized and existing under the laws of Bermuda, and having its
principal office in St. David's, Bermuda (hereinafter "Purchaser").
---------
WHEREAS, Purchaser desires to establish a fiber optic submarine cable
system, to be known as the ATLANTICA-1 Submarine Cable System (hereinafter, and
as more fully defined herein, the "System"), which will be used to provide
------
service between and among the United States mainland, Bermuda, Venezuela and
Brazil; and
WHEREAS, subject to the provisions of Sub-Article 6(B) hereof, the
System will consist of the following Segments:
Segment 1: From Tuckerton, New Jersey to Boca Raton, Florida;
Segment 2: From Boca Raton, Florida to Punta Gorda, Venezuela;
Segment 3: From Punta Gorda, Venezuela to Fortaleza, Brazil;
Segment 4: From Fortaleza, Brazil to St. David's, Bermuda;
Segment 5: From St. David's, Bermuda to Tuckerton, New Jersey,
including the system called BUS-1 (which Segment 5
consists of BUS-1 which already has been built and is
owned by Purchaser); and
Segment 6: From Fortaleza, Brazil to Rio de Janeiro, Brazil;
WHEREAS, Contractor is in the business of designing, constructing,
installing, supplying, delivering and manufacturing fiber optic submarine cable
systems and is familiar with the general business of the fiber optic submarine
cable system industry;
WHEREAS, Purchaser seeks to purchase from Contractor and own Segments
1 through 4 and 6 of the System and wishes to engage Contractor to perform the
Work in respect of the System (as hereinafter defined); and
Page 1
<PAGE>
WHEREAS, Contractor is willing to perform the Work, as detailed in
Appendix 4, on a turn-key, fixed-price basis in accordance with and subject to
the terms hereof.
NOW THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
1 Provision of System
-------------------
In consideration of the Contract Price, the Contractor agrees to undertake
and complete the Work and to provide the Purchaser with (a) the System
(exclusive of Segment 6) meeting the System Performance Requirements on or
before the Scheduled RFS Date, (b) Segment 6 meeting the System Performance
Requirements on or before the Segment 6 Scheduled RFS Date, and (c) Segments 4
and 5 meeting the System Performance Requirements on or before the Segment 4/5
Scheduled RFS Date, in each case meeting the requirements of this Contract, all
in accordance with the terms hereof.
2 Documents Forming the Entire Contract
-------------------------------------
This Contract consists of the terms and conditions set forth herein (the
"Terms and Conditions") and the following documents (in the form of attachments,
- ---------------------
including appendices, attached hereto), which shall be read and construed as
part of this Contract:
. Provisioning Schedule, Appendix 1
. Upgrade Provisioning Schedule, Appendix 1A
. Extension Option Provisioning Schedule, Appendix 1B
. Billing Schedule and Milestones, Appendix 2
. Upgrade Billing Milestones, Appendix 2A
. Extension Option Billing Milestones, Appendix 2B
. Plan of Work, Appendix 3
. Technical Volume, System Description, Appendix 4
. Technical Volume, Technical Information, Appendix 5
In the event of any inconsistency between the Terms and Conditions and the
above listed documents, the Terms and Conditions shall prevail. The Appendices
listed above have no order of precedence.
3 Definitions
-----------
Except as otherwise defined, the following definitions shall apply
throughout this Contract:
AAA has the meaning set forth in Sub-Article 33(B).
Acceptance Testing means with respect to a Segment or the System, the
tests described in the System Commissioning and Acceptance section of
Appendix 4, as such tests shall be developed pursuant to such section by
mutual written agreement of the Parties with
Page 2
<PAGE>
the concurrence of the Independent Engineer (or pursuant to Article 33 in
the absence of such mutual agreement) and designed to verify that such
Segment or the System meets the applicable System Performance Requirements.
Access Rights means all ownership, easements, leases, wayleaves and/or
other property rights, from both private and governmental entities, both on
land and below the surface of the water (including, without limitation,
agreements to use conduits and ducts, install manholes and to lease space
in cable stations) necessary to access, use and occupy cable stations and
the sites for cable stations (including, without limitation, to land and
install the submarine cable and related equipment and to bring such cable
from the ocean to the cable stations) in order for the Purchaser to own,
operate and maintain the System.
Actual Knowledge means the actual knowledge of any executives with
management responsibility for this Contract.
ASN has the meaning set forth in the first paragraph of this Contract.
ASNI has the meaning set forth in the first paragraph of this
Contract.
Assignment has the meaning set forth in Sub-Article 37(A).
Bankruptcy Event means an event specified in Sub-Article 13(A)(3) or
13(A)(4).
Billing Milestones means the billing milestones set forth in Appendix
2.
Billing Schedule means the billing schedule attached hereto as
Appendix 2.
BUS-1 means the fiber optic cable system known as "BUS-1" connecting
St. David's Bermuda and Tuckerton, New Jersey.
Certificate of Commercial Acceptance means a certificate in the form
of Exhibit E hereto issued by Purchaser in accordance with Sub-Article 9(D)
to Contractor certifying that a Segment or the System, as applicable, is
Ready for Commercial Acceptance.
Certificate of Final Acceptance means a certificate issued by
Purchaser in accordance with Sub-Article 9(E) to Contractor certifying that
the System is Ready for Final Acceptance.
Certificate of Provisional Acceptance means a certificate in the form
of Exhibit E hereto issued by Purchaser in accordance with Sub-Article 9(C)
to Contractor certifying that a Segment or the System, as applicable, is
Ready for Provisional Acceptance.
CIF means cost, insurance and freight, as defined in Incoterms.
Commissioning Report has the meaning set forth in the System
Commissioning and Acceptance section of Appendix 4.
Page 3
<PAGE>
Confidential Information has the meaning set forth in Sub-Article
36(B).
Contract means this Project Development and Construction Contract,
specifically consisting of the documents described in Article 2, and shall
be deemed to include any amendments thereto or Contract Variations pursuant
to Article 6 (Contract Variations).
Contract Price means the Initial Contract Price, plus any variations
pursuant to Article 6 (Contract Variations) to the extent provided under
Sub-Article 4(A), Contract Taxes as set forth in Sub-Article 4(B) and other
adjustments to the Contract Price provided for in this Contract.
Contract Tax has the meaning set forth in Sub-Article 4(B)(1).
Contract Variation has the meaning set forth in Sub-Article 6(A).
Contractor means the entities that have collectively executed this
Contract as the Contractor, jointly and severally, and that will be
responsible for the performance of the Work under this Contract and shall
include their permitted successors and/or assigns.
Contractor Intellectual Property has the meaning set forth in Sub-
Article 18(A).
Date of Commercial Acceptance means the date that is determined in
accordance with Sub-Article 9(D).
Date of Final Acceptance means the date that is determined in
accordance with Sub-Article 9(E).
Date of Provisional Acceptance means the date that is determined in
accordance with Sub-Article 9(C).
Default means an Event of Default, as described in Sub-Article 13(A),
or any event, condition or occurrence which, with the giving of notice or
passage of time or both, would be an Event of Default.
Default Date means, with respect to the Scheduled RFS Date, the
Segment 4/5 Scheduled RFS Date or the Segment 6 Scheduled RFS Date, as the
case may be, one-hundred (100) days after such Scheduled RFS Date.
Defect and Defective each has the meaning set forth in Sub-Article
10(F).
Deliverable Software has the meaning set forth in Sub-Article 18(C).
Deliverable Technical Material has the meaning set forth in Sub-
Article 18(B).
Design Life Period has the meaning set forth in Sub-Article 10(B).
Page 4
<PAGE>
Dispute Account means the Dispute Account to be created under the
Payment Escrow Agreement.
Dollars has the meaning set forth in Sub-Article 4(A)(1).
Event of Default has the meaning set forth in Sub-Article 13(A).
Extension Option Period has the meaning as set forth in Sub-Article
50(B).
Final Commissioning Report has the meaning set forth in the System
Commissioning and Acceptance section of Appendix 4.
Final Survey Report means the final route survey report described in
the Marine Operations section (Route Survey Reports subsection) of Appendix
4.
Force Majeure has the meaning set forth in Sub-Article 17(A).
Guarantor means Alcatel, a societe anonyme established in France and
the ultimate parent company of the Contractor.
Guaranty means the guaranty entered into by the Guarantor
contemporaneously with the initial payment made by Purchaser to Contractor
under this Contract in favor of the Purchaser in the form of Exhibit A
hereto.
Import Fiscal Costs has the meaning set forth in Sub-Article 4(B)(1).
Incoterms means the International Chamber of Commerce, Guide to
Incoterms (1990).
Independent Engineer means Ricardo Espinoza or a similarly qualified
successor in the capacity as the engineer to, and selected by, the
financing sources secured in accordance with Sub-Article 37(C) who has
agreed to be bound by the confidentiality provisions of this Contract and
who is not affiliated with a competitor of Contractor or Purchaser. As
between the Purchaser and the Contractor, the Independent Engineer, acting
in accordance with this Contract, shall, solely for purposes of this
Contract, be deemed to be acting on behalf of the Purchaser.
Information has the meaning set forth in Sub-Article 20(A).
Initial Contract Price has the meaning set forth in Sub-Article
4(A)(1).
Intellectual Property has the meaning set forth in Sub-Article 18(A).
Landing Jurisdiction has the meaning set forth in Sub-Article 4(B)(1).
Page 5
<PAGE>
Landing Licenses means, in the United States of America, a License to Land
and Operate a Submarine Cable System pursuant to the Submarine Cable Landing
License Act, 47 U.S.C. (S)(S) 34-39 and, in Bermuda, Venezuela and Brazil the
comparable licenses which are required under the laws of Bermuda, Venezuela and
Brazil.
Laws means any laws, ordinances, regulations, rules, orders, proclamations,
requirements of governmental authorities or treaties.
Manufacturing Materials has the meaning set forth in Sub-Article 13(B).
Notice of Termination has the meaning set forth in Sub-Article 14(A).
Party(ies) means any of the Purchaser, ASN and/or ASNI, as appropriate.
Pattern of Failure means any two or more failures of the same or similar
mechanisms included in any portion of the System have occurred which show that a
deterioration of the System performance will reasonably likely render or has
rendered the System outside any of its prescribed specifications or System
Performance Requirements, as detailed in Appendix 4, at any time during the
Design Life Period.
Payment Escrow Agent means Toronto Dominion Bank, in its capacity as escrow
agent under the Payment Escrow Agreement, and its successors in such
capacity.
Payment Escrow Agreement means that Escrow Agreement to be entered into
among the Prime Contractor, Purchaser, and the Payment Escrow Agent,
substantially in the form of Exhibit C hereto, with such changes therein as are
reasonably requested by the Payment Escrow Agent, as amended, modified or
supplemented from time to time.
Permits means all Access Rights, permits, pipeline and cable crossing
agreements, approvals, "no objections", permissions-in-principle,
authorizations, consents, customs clearances, registrations, certificates,
rights-of-way, easements, certificates of occupancy, licenses, including without
limitation, orders, vessel and crew authorizations/visas, permission for the
operation of navigational aids and radio systems and similar authorizations
necessary to complete the Work and operate and maintain the System (other than
any of the foregoing (i) relating to the ownership, operation and maintenance of
the System and not necessary until after the System is Ready for Final
Acceptance, (ii) which is or would be needed by Purchaser to engage in any
business outside the business relating to constructing, developing, owning,
repairing, maintaining and improving, and operating a submarine cable system or
(iii) which is or would be needed at any time by any purchaser or lessee of
capacity on the System or any portion thereof). Permits do not include Landing
Licenses.
Prime Contractor has the meaning set forth in Sub-Article 42A hereof.
Prime Rate shall mean the prime rate (or base rate) announced by CitiBank,
N.A. (whether or not such rate has actually been charged by such bank). If such
bank discontinues
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<PAGE>
the practice of announcing the Prime Rate, the "Prime Rate" shall mean the prime
rate (or base rate) charged by any other bank (whose headquarters is in New
York, New York) selected by mutual agreement of the Parties or pursuant to
Article 33.
Provisioning Schedule means the price schedule attached hereto in Appendix
1.
Purchase Taxes has the meaning set forth in Sub-Article 4(B)(1).
Purchaser means Atlantica Network (Bermuda) Ltd. and shall include its
permitted successors and assigns.
Ready for Commercial Acceptance means
(i) for any Segment, that
(a) if the System is not at the same time also Ready for
Commercial Acceptance, the Purchaser has consented in
writing (as confirmed by the Independent Engineer), in its
sole discretion, to accept such Segment as Ready for
Commercial Acceptance,
(b) such Segment, as established by Acceptance Testing, has the
ability to carry commercial traffic between the two landing
points operating at an initial 20 Gb/s per fiber pair (with one
fiber pair equipped for working and one fiber pair for
protection) such that such Segment will meet performance criteria
of ITU-T G.826 as defined in the System Performance section of
Appendix 4 at the end of the Design Life Period and has line
monitoring operating pursuant to the principals enunciated in
ITU-T M.3010 and protection switching capability according to
ITU-T G.841, Annex A and as set forth in the Technical Volume,
(c) Contractor has tested and provided for interconnectivity
capability to the Segment terminal equipment as described in
Appendix 4 as established by Acceptance Testing,
(d) Contractor has performed its obligations under Article 18
(Intellectual Property) then required to be performed by it,
(e) all Permits have been obtained for such Segment in
accordance with this Contract, and
(f) the results of Acceptance Testing of such Segment
demonstrate that such Segment has satisfied the System
Performance Requirements for such Segment, and
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<PAGE>
(ii) for the System, that
(a) the System has the ability, as established by Acceptance Testing,
to carry commercial traffic throughout the System operating at an
initial 20 Gb/s per fiber pair (with one fiber pair equipped for
working and one fiber pair for protection) such that the System
will meet performance criteria of ITU-T G.826 as defined in the
System Performance section of Appendix 4 at the end of the Design
Life Period, has line monitoring and a network management system
operating pursuant to ITU-T M.3010 and protection switching
capability according to ITU-T G.841, Annex A,
(b) Contractor has tested and provided for interconnectivity
capability to the System terminal equipment as described in
Appendix 4, as established by Acceptance Testing,
(c) Contractor has performed its obligations under Article 18
(Intellectual Property) then required to be performed by it,
(d) all Permits have been obtained for the System in accordance with
this Contract and
(e) the results of Acceptance Testing demonstrate that the
System has satisfied the System Performance Requirements.
Ready for Final Acceptance means
(i) for the System, that
(a)(I) the System has, in accordance with the Acceptance Testing,
successfully and continuously (other than by reason of Force
Majeure in which case the test period shall be extended for a
time period agreed between the Parties) functioned in
compliance with the System Performance Requirements during the
period of ninety (90) consecutive days after the Date of
Provisional Acceptance or
(II) if the System shall have failed to meet the System Performance
Requirements at any time during such period (other than by
reason of Force Majeure), the Contractor has corrected such
failure and the System has, in accordance with the Acceptance
Testing, successfully and continuously (other than by reason of
Force Majeure in which case the test period shall be extended
for a time period agreed between the Parties) functioned in
compliance with the System Performance Requirements for such
additional period of time not to exceed ninety (90) days (and
not to end prior to the date ninety (90) days after the Date of
Provisional Acceptance) as reasonably
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<PAGE>
determined by the Purchaser (as confirmed by the Independent
Engineer) as being sufficient to confirm that such failure has
been corrected and that no other failures are likely to appear,
and
(b) all deficiencies noted in the Certificate of Provisional
Acceptance have been corrected in accordance with this Contract
(other than, at the election of Purchaser (as confirmed by the
Independent Engineer), minor deficiencies which will not affect
the operation of the System, in respect of which an equitable
adjustment to the Contract Price shall be made), and
(c) Contractor has complied in all respects with Article 18
(Intellectual Property), and
(d) the results of Acceptance Testing of the System demonstrate
that the System has satisfied the System Performance
Requirements.
Ready for Provisional Acceptance means
(i) with respect to any Segment,
(a) if the System is not, at the same time, also Ready for
Provisional Acceptance, the Purchaser has consented in writing
(as confirmed by the Independent Engineer), in its sole
discretion, to accept such Segment as Ready for Provisional
Acceptance,
(b) such Segment is complete in all material respects (and in any
event is Ready for Commercial Acceptance),
(c) the results of Acceptance Testing of such Segment demonstrate
that such Segment has satisfied the System Performance
Requirements,
(d) Contractor has substantially performed its obligations under
Article 18 (Intellectual Property) then required to be performed
by it, and
(e) all Permits have been obtained for such Segment in accordance
with this Contract, and
(ii) with respect to the System, the System is (as established by
Acceptance Testing) complete in all material respects (and in any
event is Ready for Commercial Acceptance), and all Segments are Ready
for Provisional Acceptance such that the System will meet performance
criteria of ITU-T G.826 as defined in the System Performance section
of Appendix 4 at the end of the Design Life Period, has line
monitoring and a network management system operating pursuant to ITU-T
M.3010 and protection switching capability according to ITU-T G.841,
Annex A.
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Representatives has the meaning set forth in Sub-Article 36(B).
Retainage means an amount equal to *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
Retesting has the meaning set forth in Sub-Article 9(B)(3).
Route Survey means the route survey described in the Marine Operations
section (Route Survey Reports subsection) of Appendix 4.
Scheduled RFS Date has the meaning set forth in Sub-Article 9(A)(7).
Scheduled Upgrade Date has the meaning set forth in Sub-Article 48(G).
Sea State 5 has the meaning for such state of weather as described in the
Douglas Sea Scale.
Segment means Segment 1, Segment 2, Segment 3, Segment 4, Segment 5 or
Segment 6, as the case may be.
Segment 1 means the segment of the System from Tuckerton, New Jersey to
Boca Raton, Florida, and landing in locations capable of interconnecting with
major telecommunications carriers.
Segment 2 means the segment of the System from Boca Raton, Florida to Punta
Gorda, Venezuela, and landing in locations capable of interconnecting with
major telecommunications carriers.
Segment 3 means the segment of the System from Punta Gorda, Venezuela to
Fortaleza, Brazil and landing in locations capable of interconnecting with
major telecommunications carriers.
Segment 4 means the segment of the System from Fortaleza, Brazil to St.
David's, Bermuda and landing in locations capable of interconnecting with major
telecommunications carriers.
Segment 5 means the segment of the System from St. David's, Bermuda to
Tuckerton, New Jersey, including the System called BUS-1, and landing in
locations capable of interconnecting with major telecommunications
carriers.
Segment 6 means the segment of the System from Fortaleza, Brazil to Rio de
Janeiro, Brazil and landing in locations capable of interconnecting with
major telecommunications carriers.
Segment 4/5 Scheduled RFS Date has the meaning set forth in Sub-Article
9(A)(7).
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Segment 6 Scheduled RFS Date has the meaning set forth in Sub-Article
9(A)(7).
Software Escrow Agreement has the meaning set forth in Sub-Article 18(H).
Special Upgrade has the meaning set forth in Sub-Article 48(G).
Supplies means any and all goods, materials, plant, machinery, equipment,
hardware, spare parts and items to be supplied or supplied by the Contractor
under this Contract, including those items set forth on Appendix 1.
Suspension means a suspension pursuant to Sub-Article 15(A) or 15(B).
System means the four fiber pair submarine cable system consisting of
Segments 1, 2, 3, 4 and 6 (at an initial capacity of 20 Gb/s on each of two
fiber pairs, one working fiber pair and one protection fiber pair, with each
fiber pair upgradeable to 320 Gb/s at the Date of Commercial Acceptance or the
Date of Provisional Acceptance, as the case may be) and the two fiber pair
submarine cable system consisting of Segment 5 named as BUS-1, at an initial
capacity of 20 Gb/s on two fiber pairs with one working fiber pair and one
protection fiber pair as more fully described in the System Description section
of Appendix 4.
System Extension has the meaning set forth in Sub-Article 50(A).
System Performance Requirements means with respect to a Segment or the
System, the applicable performance requirements set forth or to be developed by
mutual written agreement of the Parties (and, with respect to those performance
requirements to be mutually developed by the Parties, as accepted and approved
by the Independent Engineer, which acceptance and approval shall not be
unreasonably withheld) pursuant to the System Performance section of the System
Description section of Appendix 4 (or pursuant to Article 33 in the absence of
such mutual agreement).
System Upgrade has the meaning set forth in Sub-Article 48(A).
Tax means any tax, duty, levy, charge or custom imposed or collected by any
taxing authority or agency (domestic or foreign).
Technical Volumes means the Technical Volumes attached hereto as Appendices
4 and 5.
Transfer Taxes has the meaning set forth in Sub-Article 4(B)(1).
Upgrade Option Period has the meaning as set forth in Sub-Article 48(B).
VAT has the meaning set forth in Sub-Article 4(B)(1).
Warranty Period has the meaning set forth in Sub-Article 10(A).
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Work means all activities, labor, management, engineering, procurement and
other work and services (other than the activities and services specified in
this Contract to be provided by Purchaser) necessary to be performed or provided
in developing, planning, designing, manufacturing, constructing, delivering,
installing and testing the System, until the System is Ready for Final
Acceptance, including without limitation, designating, coordinating and
obtaining all Permits. Whether or not used in conjunction with the term
"Supplies," the term "Work" shall always be deemed to include the provision of
all of the Supplies.
Year 2000 Compliant means, when used with respect to any software, firmware
or materials, that such software, firmware or materials will operate accurately
and, without interruption, accept, possess and in all manner retain full
functionality, as detailed in the Technical Volume, when referring to, or
involving, and process correctly any year, including any leap year, or date in
the twentieth and twenty-first centuries; provided, however, that
notwithstanding the description of full functionality in the Technical Volume,
nothing therein will diminish Contractor's obligation to furnish software,
firmware or materials that are Year 2000 compliant.
4 Contract Price
--------------
A. Contract Price
1. The initial Contract Price for the Work, in United States Dollars
(US$ or "Dollars") is a fixed fee of US$* (the "Initial Contract
------- ----------------
Price"). The Initial Contract Price does not include the cost of
-----
any (i) Contract Taxes as provided for in Sub-Article 4(B) and
(ii) any Contract Variations. The Initial Contract Price includes,
without limitation, all charges for CIF delivery of the Supplies,
all costs and expenses incurred in obtaining all Permits and all
costs and expenses incurred with respect to Supplies and
preparation of cable stations for terminal equipment.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
2. The Provisioning Schedule sets forth the Contractor's breakdown of
the Initial Contract Price among various aspects of the Work. If
the actual cost of any aspect of the Work is greater or less than
that set forth in the Provisioning Schedule, such fact shall not
cause any change in the Initial Contract Price.
3. The Contractor and the Purchaser will share equally the costs and
expenses of the Payment Escrow Agent.
4. The Contractor will not arrange for any Permit which requires
payments to be made by the Purchaser or made after the System is
Ready for Provisional Acceptance, without the prior written
consent of the Purchaser.
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B. Taxes, Levies and Duties
1. The Initial Contract Price, as stated in Sub-Article 4(A) above,
excludes all Contract Taxes. For purposes of this Article the term
"Contract Tax" means: (i) customs duties, value added taxes
------------
("VAT"), taxes, levies, fees and any similar fiscal cost imposed
by the "Landing Jurisdiction" (the jurisdiction in which such
--------------------
Supplies will be permanently located once incorporated into the
System) on import of Supplies into the Landing Jurisdiction
(hereinafter referred to collectively as "Import Fiscal Costs");
-------------------
(ii) VAT, sales tax, business tax, general sales tax, consumption
tax, goods and services tax and any similar taxes imposed by the
Landing Jurisdiction on the transfer of ownership of the Supplies
from the Contractor to the Purchaser or provision of services in
the Landing Jurisdiction by the Contractor on behalf of the
Purchaser (hereinafter referred to collectively as "Transfer
--------
Taxes"); and (iii) duties, levies, fees or fiscal stamps imposed
-----
in respect of Contract legalizations, and use or property taxes
imposed on the value of the Contract, or a portion thereof, by a
Landing Jurisdiction (excluding any property taxes imposed on
property owned by the Contractor that is not intended to be
incorporated into the System) (hereinafter referred to
collectively as "Purchase Taxes"). Any Taxes not addressed in this
--------------
Contract are to be borne by the party upon whom they are imposed
by the tax authorities.
2. The Purchaser (i) shall be ultimately responsible for the payment
of all Contract Taxes and (ii) shall pay them directly to the tax
authorities in a Landing Jurisdiction at the time they are payable
to such tax authorities, provided that it has adequate notice that
they will be imposed. The Contractor will use reasonable efforts
to ensure that the Purchaser has adequate notice of Contract Taxes
due under this Sub-Article 4(B).
3. In the event that the Contractor pays Import Fiscal Costs and/or
Purchase Taxes, the Contractor shall issue a request for
reimbursement to the Purchaser within one month of the payment of
the Import Fiscal Costs or Purchase Taxes, which request shall
include evidence of the Contractor's payment of the relevant Tax.
Within sixty (60) days of receipt of such request, the Purchaser
will reimburse the Contractor, in US$, at the rate of exchange in
force on the date the Contractor paid the relevant Tax. If the
Contractor is required by a Landing Jurisdiction to charge
Transfer Taxes to the Purchaser, the Purchaser will pay such
Transfer Taxes to the Contractor, in US$, within sixty (60) days
of receipt of invoices for the Transfer Taxes issued pursuant to
and in compliance with the applicable regulations of the Landing
Jurisdiction regarding Transfer Taxes .
4. Amounts owed pursuant to requests for reimbursement under Sub-
Article 4(B)(3) that are not paid when due shall accrue late
payment charges in accordance with the terms for payment of the
Contract Price.
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<PAGE>
5. If the Contractor shall become aware that it is entitled to
receive a refund or credit from a relevant taxing or governmental
authority in respect of a Contract Tax that the Purchaser has
paid, the Contractor shall promptly notify the Purchaser of the
availability of such refund or credit and shall, within thirty
(30) days after receipt of a request by the Purchaser (whether as
a result of notification that it has made to the Purchaser or
otherwise), make a claim to such taxing or governmental authority
for such refund or credit at the Purchaser's expense. If the
Contractor receives the refund or credit, the Contractor shall
within sixty (60) days from the date of receipt of the refund or
credit pay it over to the Purchaser (including any interest paid
or credited by the relevant taxing or governmental authority with
respect to such refund or credit), net of all out-of-pocket
expenses of the Contractor for obtaining the refund or credit;
provided, however, that the Purchaser, upon the request of the
-------- -------
Contractor, agrees to repay the amount paid over to the Purchaser
to the Contractor in the event the Contractor is required to repay
such refund or credit to such relevant authority.
6. The Contractor agrees to use reasonable efforts, including,
without limitation, registering for VAT and any applicable
Transfer Taxes in any country, state or other jurisdiction where
legally required, to cooperate with and assist Purchaser in its
efforts (i) to have Supplies made exempt from Contract Taxes,
whether in the manufacture of the Supplies or related to the
importation or location or installation of the Supplies; (ii) to
request revisions, drawbacks, remissions, reclassifications or the
like to the jurisdictions identified by the Purchaser; or (iii) to
reduce or eliminate Contract Taxes (including the provision of
applicable certifications and forms) and to obtain any available
refunds of Contract Taxes, provided that the Contractor shall not
be required to act other than in accordance with the relevant Laws
then in force. The Purchaser shall reimburse the Contractor, in
accordance with Article 5, for any reasonable out-of-pocket costs
(including the reasonable fees and expenses of legal counsel,
accountants and other advisors) incurred by the Contractor under
this Sub-Article 4(B)(6) provided that Purchaser was notified in
advance of and has consented to the incurrence of such costs, fees
and expenses. Contractor shall not be required to cooperate with
and assist Purchaser in its efforts under this Sub-Article 4(B)(6)
or to take any action hereunder which in the Contractor's good
faith judgment would incur any costs or if in Contractor's good
faith judgment it would be advisable to obtain the advice of
counsel, accountants or other advisors prior to cooperating with
or assisting Purchaser or taking any action, unless in each case,
Purchaser has agreed to reimburse Contractor under the foregoing
proviso.
7. As part of the Work, the Contractor shall obtain at its cost and
expense, on Purchaser's behalf, any import license or other
official authorization and carry out all customs formalities
necessary for the importation or exportation of Supplies in
connection with such Work. The Purchaser agrees to be the
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<PAGE>
Importer or Exporter of Record or designate an Importer or
Exporter of Record/Consignee on its behalf. Purchaser must provide
a Letter of Authorization from any third party designate stating
it agrees to be the Importer or Exporter of Record on Purchaser's
behalf and identify the name and address of the designated
Importer or Exporter of Record.
8. The Supplies to be installed or held on land shall, at the cost
and expense of Contractor, be delivered to, unloaded and stored at
the agreed point at the named place of destination and shall be
consigned at such point to the Purchaser; provided, that risk of
loss and title to the Supplies shall pass in accordance with Sub-
Article 9(F).
C. Withholding Tax
1. If any withholding for any Tax other than a Contract Tax is
required by any Law as modified by applicable treaties in respect
of any payment to the Contractor, the Purchaser shall (i) withhold
the appropriate amount from such payment, and (ii) pay such amount
to the relevant authorities in accordance with applicable Laws.
2. To the extent reasonably possible, before withholding any such Tax
in respect of any payment to the Contractor, the Purchaser shall
inform the Contractor of the withholding requirement.
3. The Purchaser shall provide to the Contractor, as soon as
reasonably practicable, a certified copy of an official tax
receipt for any Tax which is withheld from any payment due to the
Contractor. All such receipts shall be in the name of the
Contractor. The Contractor agrees to complete accurately and
timely provide to the Purchaser or, if required, to the applicable
taxing authority, such forms, certifications or other documents as
may be requested in a timely manner by the Purchaser, in order to
allow it to make payments to the Contractor without any deduction
or withholding on account of such Taxes (or at a reduced rate
thereof) or to receive a refund of any amounts deducted or
withheld on account of such Taxes.
5 Terms of Payment
----------------
A. General Conditions of Payment
1. All payments shall be made and all invoices shall be rendered in
Dollars. The payor hereunder shall be responsible for and shall
pay all costs and fees for payment, as well as the banking and
wiring costs. All banking documents and correspondence must be in
English.
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<PAGE>
B. Invoice Procedures
1. All invoices for Work shall be submitted according to the Billing
Schedule, provided that the appropriate Billing Milestones have been
achieved; provided, further that Contractor may invoice Purchaser in
advance of the specified Billing Schedule date when Contractor has
achieved the corresponding Billing Milestone. All invoices for Work
shall have a certificate in the form of Exhibit D attached.
2. Any Contract Variation shall be invoiced and paid in accordance with
the terms of the Contract Variation as specified in Article 6
(Contract Variations).
3. Invoices for amounts not described in Sub-Sections 1 and 2 above,
which may become payable hereunder by the Purchaser, shall be
submitted after applicable costs have been incurred or such other
time as may be specified in this Contract. Such invoices shall be
payable at a reasonable bank rate of exchange (to be agreed to by
the Parties) applicable at the time such costs were paid by the
Contractor, and shall be accompanied by a certificate of the
Contractor explaining such amount and certifying that it is payable.
4. The Contractor shall render all invoices to the following address or
facsimile number (or such other address as may be specified from
time to time by the Purchaser):
Atlantica Network (Bermuda) Ltd.
2 Carter's Bay Road
Southside, St. David's DDO2
Bermuda
Attention: Chief Financial Officer
With a copy to:
it-International Telecom Ltd.
The Howard Centre
2 Harbour Exchange Square
London E14 9GE
England
Attention: Ricardo Espinoza
C. Payment Procedures
1. The Purchaser shall pay the Contractor, and the Contractor shall
accept payment, in accordance with this Article 5 (Terms of
Payment). All payments due and owing to the Contractor shall be paid
to the Prime Contractor (and each invoice shall so provide) and
payment to the Prime Contractor shall be deemed payment to the
Contractor. Any amounts
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<PAGE>
received by the Prime Contractor shall be deemed to have been received
by the Prime Contractor in its capacity as agent of the Contractor. The
Prime Contractor shall pay such amounts to the Contractor net of any
applicable taxes or levies that may be imposed on the Contractor.
2. Purchaser agrees to pay an initial payment to Contractor in the amount
of US$* on July 15, 1999. Failure to receive this payment shall entitle
Contractor to immediately suspend Work hereunder.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
3. Invoices shall be given to the Purchaser and the Independent Engineer
on the fifteenth (15th) day of any month, subject to Sub-Article
5(C)(5) below, and shall be due and payable on the later to occur of
the last day of the next month or forty-five (45) days from the
Purchaser's receipt of the invoice (the "Payment Date").
------------
4. Invoices or amounts owed which are not paid when due shall accrue late
payment charges from the day, following the day, on which payment was
due until the day on which it is paid. Invoices for such extended
payment charges shall not be issued for an amount less than U.S.
$1,000. Late payment charges shall be computed at the rate of the Prime
Rate plus 2%.
5. In the event that the Purchaser has an objection to any invoice, the
Purchaser shall notify the Contractor by the Payment Date and the
Purchaser and Contractor shall make every reasonable effort to settle
promptly the dispute concerning the payment(s) in question. Failure to
notify or pay the Contractor by the Payment Date shall entitle the
Contractor, under Sub-Article 15(B), to suspend Work hereunder. In the
event such dispute is not settled by the Payment Date, the Prime
Contractor and the Purchaser will execute and deliver a Payment Escrow
Agreement substantially in the form of Exhibit C hereto, with such
changes therein as the Payment Escrow Agent may reasonably request, and
the Purchaser will have the right to withhold payment of the disputed
amount(s) (or withhold from the invoice amount a sum equal to the
amount purportedly owing by Contractor to Purchaser hereunder) so long
as it deposits, in full, such disputed amount(s) into the Dispute
Account. In the event payment is made under the Payment Escrow
Agreement, Contractor shall continue to perform the Work hereunder.
(a) Provided such disputed amount is placed into the Dispute Account
in a timely manner, the Purchaser shall not be deemed to be in
breach of or in default for failing to pay Contractor.
(b) The Payment Escrow Agent will distribute the disputed amount in
accordance with the terms of the Payment Escrow Agreement.
(c) In addition, the prevailing Party shall be entitled to receive
from the Dispute Account an amount equal to the interest earned by
the
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<PAGE>
Payment Escrow Agent on the distributed, disputed amount,
which shall be distributed by the Payment Escrow Agent under
clause (b) above.
6. The Purchaser shall make timely payments for that portion of the
invoice not in dispute in accordance with Sub-Article 5(C) or such
payments will be assessed extended payment charges as set forth in
Sub-Article 5(C)(4). Pending resolution of the dispute, the
Purchaser may not withhold payment (unless also subject to
dispute) on any other invoice concerning different goods and/or
services submitted by Contractor.
6 Contract Variations
-------------------
A. Either Party may request, during construction of the System, by written
order, a contract variation requiring additions or alterations to, deviations or
deductions from the System ("Contract Variation"). If the other Party consents,
------------------
in its sole discretion, this change will be formalized as an amendment to this
Contract by a Contract Variation; provided, that the Contractor will not
--------
unreasonably withhold its consent to a Contract Variation requested by the
Purchaser.
B. A Contract Variation shall not become effective unless and until the
price adjustment, the terms and schedule of payment and the extension or
reduction of time and all other terms have been mutually agreed upon by the
Parties (and the Parties shall act reasonably and in good faith in connection
with all such terms) and such Contract Variation is signed by an authorized
representative of each of the Purchaser and the Prime Contractor. Each Contract
Variation shall be incorporated as an amendment to this Contract.
C. Contractor may seek a Contract Variation for any change, after the date
hereof, of any Law (except those, and to the extent, affecting only Taxes or
wages) which requires a change in the Work or affects the costs (other than
Taxes or wages) incurred or to be incurred by the Contractor or any combination
of the foregoing and Purchaser shall agree to any such change in Work as may be
required and, subject to Sub-Article 4(A), to an equitable adjustment to the
Contract Price. In such event, Contractor shall use its best endeavors to
minimize any increase in cost arising out of a change in Law. As of the date
hereof, neither Party has Actual Knowledge of any proposed change in any Law
that would require a change in the Work.
D. The Parties shall negotiate appropriate Contract Variations in good
faith to finalize the scope of the Work required for the land acquisition and/or
lease and civil works (i.e., construction) associated with the provision of
----
cable stations, and access thereto, such negotiations to be completed by July
15, 1999. Subject to completion of negotiations by the date specified in the
preceding sentence, no Contract Variation referred to in this Sub-Article 6(D)
shall result in an extension of the Scheduled RFS Date, the Segment 6 Scheduled
RFS Date or the Segment 4/5 Scheduled RFS Date.
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<PAGE>
7 Responsibilities for Permits/Landing Licenses; Compliance with Laws
-------------------------------------------------------------------
A. The Purchaser shall reasonably cooperate with and assist the Contractor
to obtain all Permits, to the extent that Purchaser's cooperation and assistance
are necessary for Contractor to expeditiously and cost-efficiently obtain such
Permits. The Purchaser agrees to respond promptly to any such request from
Contractor. Further, the Purchaser agrees that it will not impede or interfere
with Contractor's activities or Contractor's abilities to perform its
obligations. Upon notice from Contractor with respect to a Permit or receipt by
Purchaser of a copy of a Permit, Purchaser shall use reasonable efforts to
fulfill all conditions of such Permit and perform all responsibilities
thereunder, except to the extent that such conditions or responsibilities are
those of the Contractor under or relating to the Work or as provided in Sub-
Articles 4(A)(4) and 7(B). Contractor will inform Purchaser as to any such
conditions or responsibilities that are not ordinary and routine and obtain
Purchaser's written consent thereto prior to arranging for any such Permit.
B. The Contractor shall have the responsibility for obtaining and shall
use its best efforts to obtain as soon as reasonably practicable and at
Contractor's cost and expense, all Permits. With respect to any interest in real
property, Contractor shall (unless Purchaser otherwise requires), to the extent
practicable, obtain title directly in the name of the Purchaser or its designee.
The Contractor will cause, at its cost and expense, all Permits not issued in
the name of Purchaser to be freely assignable to Purchaser, and to be assigned
to Purchaser at the time title to the System is transferred to Purchaser
pursuant to this Contract. Contractor will cause all Permits to provide that any
payments thereunder are the obligation of Contractor and not of Purchaser.
C. The Purchaser shall be responsible for obtaining, at its expense (but
shall not be liable for its failure to obtain), Landing Licenses. The Contractor
will cooperate with the Purchaser in connection therewith.
D. Any delay in obtaining or failure to obtain any Permit shall constitute
Force Majeure and be treated as described in Article 17 (Force Majeure), except
to the extent such delay is a result of Contractor's negligence, willful
misconduct or breach of this Contract.
E. Except with respect to variations necessitated by complying with any
changes, enacted after the date hereof, in any Laws (the costs with respect to
which shall be borne by the Contractor and/or the Purchaser to the extent
provided in this Contract), the Contractor shall be responsible for the payment
of any and all costs incurred as a result of the need to vary design, drawings,
plans or procedures to comply with any of the circumstances set forth in this
Article. The Contractor shall, before making any variations from the designs,
drawings, plans or procedures that may be necessitated by so complying with any
Laws and that would represent a change to the design of the System, give to the
Purchaser written notice, specifying the variations proposed to be made, and the
reasons for making them. As of the date hereof, neither Party has Actual
Knowledge of any proposed changes in the Laws which would necessitate any such
variation.
F. The Contractor shall (i) give all notices required by any Laws to be
given to any authority and (ii) perform or permit the performance by authorized
persons of any inspection required by the said Laws in connection with Work
performed under this Contract.
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<PAGE>
G. As part of the Initial Contract Price, the Contractor shall obtain, at
its own risk and expense, any export and import license and other official
authorization and carry out all customs formalities for the exportation and
importation of Supplies and, where necessary, for their transit through another
country.
H. Further to the Permit Listing in Exhibit B, within 30 days after the
date of execution of this Contract, the Contractor will prepare and deliver to
the Purchaser an updated list of Permits that to its knowledge are required to
be obtained under current Law in order to complete the Work and shall update
such list from time to time as it becomes aware of changes in Permit
requirements. Such list, as updated from time to time, shall set forth the
projected dates of filing for such Permits and an estimate of when such Permits
are expected to be obtained. Without limiting Contractor's liabilities in
respect of Sub-Articles 7(B) and (G), Contractor shall have no liability in
respect of the accuracy of the information furnished under this Sub-Article,
except in the case of gross negligence or willful misconduct.
I. Contractor, in performing the Work, shall comply with all applicable
Laws, including, without limitation, all employment, safety and environmental
laws.
J. Contractor is responsible for notifying any third party cable or
pipeline owner or operator whose system could be impacted by a System cable
crossing or by the proximate location of any portion of the System.
8 Route Survey
------------
A. The Contractor shall conduct the Route Survey and select the cable
route for the System (other than with respect to BUS-1) in accordance with the
information in the Final Survey Report. Contractor shall be permitted to make
changes, at its discretion, to the route selection (other than with respect to
BUS-1), if necessary for operational reasons without additional cost to
Purchaser.
B. Any changes to the route selection requested by Purchaser shall be
treated as a Contract Variation in accordance with Article 6 (Contract
Variations).
9 Acceptance
----------
A. General
1. The Acceptance Testing shall be performed by the Contractor at its
cost and expense. The Purchaser and its designated representatives
(including the Independent Engineer) may observe, at their own
expense, the Contractor's tests and review the test results.
Purchaser may request and conduct any additional tests, at its own
expense (except where the additional test establishes that the
Work in question has not been performed in strict compliance with
this Contract, in which case Contractor shall bear the cost of
such test), but any delay caused by such process shall be a Force
Majeure
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<PAGE>
event except where any such test establishes that the Work or portion
thereof that is subject to such test has not been performed in strict
compliance with this Contract. To the extent Acceptance Testing criteria
have not been established with respect to a given portion of the System as
of the date of this Contract, the Parties agree to cooperate in promptly
establishing appropriate criteria as is reasonable under the circumstances.
2. Until the Date of Final Acceptance of the System, the Purchaser agrees to
allow Contractor reasonable access to all Segments of the System, subject to
the terms of the Permits and Landing Licenses and provided that such access
does not unduly interfere with service of the System.
3. The Purchaser (together with the Independent Engineer) shall issue a
Certificate of Commercial Acceptance if the provisions of Sub-Article
9(D)(1) are satisfied.
4. Once a Segment or the System is Ready for Provisional Acceptance, the
Purchaser shall issue a Certificate of Provisional Acceptance (subject to
the approval of the Independent Engineer), provided, that it is within the
Purchaser's sole discretion as to whether to accept a Segment instead of the
System.
5. Once the System is Ready for Final Acceptance, the Purchaser (subject to the
approval of the Independent Engineer) shall issue a Certificate of Final
Acceptance.
6. The Purchaser (or the Independent Engineer) shall not unreasonably withhold
or delay issuance of a Certificate of Commercial Acceptance, a Certificate
of Provisional Acceptance or a Certificate of Final Acceptance, as
applicable.
7. The Contractor agrees that, except with respect to Segment 6, the Date of
Provisional Acceptance of the System or Date of Commercial Acceptance of the
System will occur by December 30, 2000 (as such date may be extended under
Article 6 (Contract Variations), Article 17 (Force Majeure) or otherwise
under this Contract or by written agreement of the Parties (the "Scheduled
---------
RFS Date")). The Contractor agrees that, with respect to Segment 6, the Date
--------
of Provisional Acceptance or Date of Commercial Acceptance will occur by
February 16, 2001 (as such date may be extended under Article 6 (Contract
Variations)) (the "Segment 6 Scheduled RFS Date"). The Contractor further
----------------------------
agrees that, with respect to Segments 4 and 5, the Date of Provisional
Acceptance or Date of Commercial Acceptance will occur by September 30, 2000
(as such date may be extended under Article 6 (Contract Variations)) (the
"Segment 4/5 Scheduled RFS Date").
------------------------------
8. The Date of Commercial Acceptance, Date of Provisional Acceptance and Date
of Final Acceptance, as the case may be, shall be deemed to have
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<PAGE>
occurred with respect to a Segment or the System, as applicable, if a
Certificate of Commercial Acceptance, a Certificate of Provisional
Acceptance or a Certificate of Final Acceptance, as applicable, is
issued with respect thereto.
B. Notice of Acceptance or Rejection
1. Within thirty (30) days of receipt by Purchaser and the Independent
Engineer of the Commissioning Report, the Purchaser (subject to
confirmation by the Independent Engineer) must issue notification to
the Contractor of the following:
(a) issuance of a Certificate of Provisional Acceptance in accordance
with Sub-Article 9(C); or
(b) rejection of a Certificate of Provisional Acceptance, but instead
issuance of a Certificate of Commercial Acceptance in accordance
with Sub-Article 9(D) below; or
(c) rejection of the Segment or the System in its existing condition
and issuance of neither a Certificate of Provisional Acceptance
nor a Certificate of Commercial Acceptance, with, in the case of
the System, a written explanation of reasons for rejection (it
being understood that acceptance of a Segment instead of the
System is at the sole discretion of the Purchaser).
If the Purchaser or the Independent Engineer fails to
respond with such notification within thirty (30) days, then the Date
of Provisional Acceptance of the Segment (subject to Purchaser's
written consent) or the System shall be deemed to be the date such
Commissioning Report was received by the Purchaser.
2. On receipt of a notice from the Purchaser pursuant to Sub-Articles
9(B)(1)(b) or (c) above, the Contractor shall be entitled to address
any disputes and explain any discrepancies to the Purchaser regarding
the results of the Acceptance Testing. Unless Purchaser, for good
cause, rejects such explanation, it shall issue a new notice pursuant
to Sub-Article 9(B)(1) above, which shall be deemed to have been
issued on the date of the original notice.
3. In case of rejection, and if the explanation by the Contractor as
referred to in Sub-Article 9(B)(2) above is not accepted, for good
cause, by the Purchaser, the Contractor shall, at Contractor's
expense, carry out the necessary corrective actions and will effect a
new series of Acceptance Testing ("Retesting"). After receipt by
---------
Purchaser and the Independent Engineer of the new Commissioning
Report describing the results of Retesting, the
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<PAGE>
Purchaser will be granted a new period of thirty (30) days to analyze
the new Commissioning Report according to the provisions of Sub-
Article 9(B)(1) and any new notice of the Purchaser shall apply from
the date the Purchaser receives such new Commissioning Report.
C. Provisional Acceptance
1. The Certificate of Provisional Acceptance may have annexed to it a
list of all outstanding Work to be completed and deficiencies to be
corrected by the Contractor in accordance with this Contract. The
Contractor shall, at its expense and as soon as reasonably
practicable, correct such deficiencies and complete the Work indicated
on all such listed items so as to comply with the requirements of this
Contract, provided that the Purchaser allows Contractor the necessary
access to the Segment(s) as the Contractor reasonably needs and as
allowed under the Permits and Landing Licenses to correct such
deficiencies and complete the Work. The Contractor shall give the
Purchaser reasonable notice of its requirement for such access.
Notwithstanding the above, provided that Contractor has been allowed
access to the Segment(s) as required in Sub-Article 9(A)(2), the
Contractor shall continue to carry the risk of loss for any deficient
Supply and Work until such deficiency is no longer outstanding.
D. Commercial Acceptance
1. A Certificate of Commercial Acceptance shall be issued by Purchaser
and provided the Contractor accepts, with respect to a Segment or the
System if the results of the Acceptance Testing demonstrate that such
Segment or the System does not justify the issuance of a Certificate
of Provisional Acceptance, but nevertheless, such Segment or the
System is Ready for Commercial Acceptance; provided, that acceptance
of a Segment instead of the System shall be in the sole discretion of
the Purchaser (as confirmed by the Independent Engineer).
2. Each Certificate of Commercial Acceptance shall have annexed to it a
mutually agreed list of all outstanding Work to be completed and
deficiencies to be corrected by the Contractor in accordance with this
Contract.
3. The Contractor shall, at its expense and as soon as reasonably
practicable, correct such deficiencies and complete the Work indicated
on such list, so as to comply with the requirements of this Contract,
provided that the Purchaser allows Contractor (to the extent Purchaser
has the right to do so) the necessary access to the Segment(s) as the
Contractor reasonably needs to remedy such outstanding items. The
Contractor shall give the Purchaser reasonable notice of its
requirement for such access. Notwithstanding the above, provided that
Contractor has been allowed access to the Segment(s) as required in
Sub-Article 9(A)(2), the Contractor shall continue to carry the
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<PAGE>
risk of loss for any deficient Supply and Work until such deficiency
is no longer outstanding.
4. When the outstanding deficiencies referenced in Sub-Article 9(D)(3)
above have been remedied and completed, and the Segment(s) is
otherwise Ready for Provisional Acceptance in accordance with this
Contract, the Purchaser (as confirmed by the Independent Engineer)
will promptly issue a Certificate of Provisional Acceptance; provided,
--------
that acceptance of a Segment instead of the System shall be in the
sole discretion of the Purchaser.
5. The issuance of a Certificate of Commercial Acceptance with respect to
a Segment shall in no way relieve the Contractor from its obligation
to provide a Segment conforming with the System Performance
Requirements at the time of the issuance of a Certificate of
Commercial Acceptance. Moreover, the issuance of a Certificate of
Commercial Acceptance for a Segment or the System shall not be in lieu
of the issuance of a Certificate of Provisional Acceptance for each
Segment and the System and the Contractor shall still be required to
achieve the Ready for Provisional Acceptance standard with respect to
each Segment and the System.
E. Final Acceptance
1. Within thirty (30) days of the date of receipt by Purchaser and the
Independent Engineer of the Final Commissioning Report, the Purchaser
shall issue a Certificate of Final Acceptance or reject such Report.
If the Purchaser neither issues a Certificate of Final Acceptance nor
rejects such Report within such thirty (30) day period, then the Date
of Final Acceptance of the System shall be deemed to be the date such
Final Commissioning Report was received by the Purchaser.
F. Title and Risk of Loss
1. If the Purchaser, in its sole discretion, chooses to accept a Segment
prior to accepting the System, then upon payment of all amounts listed
in the Billing Schedule with respect to such Segment (other than the
Retainage applicable to such Segment) and the issuance of a
Certificate of Commercial Acceptance or a Certificate of Provisional
Acceptance with respect to such Segment by the Purchaser in accordance
with this Contract, title (free and clear of all liens other than
those deriving through or from the Purchaser) to such Segment and all
Supplies incorporated into and/or attached to such Segment shall pass
to and vest in the Purchaser.
2. Upon (i) payment of all amounts listed in the Billing Schedule with
respect to the System (other than the Retainage) and (ii) the issuance
of a Certificate of Commercial Acceptance or a Certificate of
Provisional Acceptance with respect to the System by the Purchaser in
accordance with this Contract, title
Page 24
<PAGE>
(free and clear of all liens other than those deriving through or
from the Purchaser) to the System and all Supplies attached to
and/or incorporated into the System shall pass to and vest in the
Purchaser.
3. As from the date of vesting of title in a Segment or the System,
as applicable, the Purchaser shall, except as set forth in the
following sentence, assume the risk of loss in respect of all
parts of such Segment or the System, as applicable, and
responsibility for its maintenance. As stated in Sub-Article
9(A)(2), the Contractor will be allowed access to such Segment,
and, so long as the Contractor has been allowed access to such
Segment as may be required in accordance with Sub-Article
9(A)(2), the Contractor shall continue to carry the risk of loss
with respect to each deficient Supply and Work under Sub-Article
9(C)(1) and/or 9(D)(2) until such deficiencies are no longer
outstanding.
4. Upon passage of title to a Segment or the System, as the case may
be, Contractor shall deliver written evidence thereof in
substantially the form of Exhibit E hereto.
10 Warranty
--------
A. Except as provided in Sub-Article 49(C), Contractor represents and
warrants that the System and the Supplies shall be free from Defects and shall
otherwise comply fully with all of the terms and provisions of this Contract,
including the requirement that the System fully meet all of the System
Performance Requirements (collectively, the "Warranty") for a period commencing
--------
on the first Date of Provisional Acceptance for any Segment and ending *
after the last Date of Provisional Acceptance of any Segment (hereinafter
"Warranty Period").
---------------
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
1. The Contractor shall promptly and fully cure, at its sole cost
and expense, by repair or replacement, at its sole option, any
breach of the Warranty if notice of such breach is provided to
Contractor prior to the expiration of the Warranty Period,
including any breach which may become apparent or be discovered
due to imperfect workmanship, faulty design or faulty Supplies,
or any act, neglect or omission on the Contractor's part, whether
in connection with the System or to property not constituting a
portion of the System that is damaged or harmed by such breach.
(a) In making such repairs, Contractor may make changes to the
System or substitute Supplies of later or comparable design,
provided the changes, modifications, or substitutions are
made in accordance with this Contract and, under normal and
proper use do not cause the System to fail to meet any of
the System Performance Requirements.
(b) The Contractor shall use reasonable efforts to minimize the
period of time that any Segment or the System is out of
service for testing and
Page 25
<PAGE>
repair. The Purchaser agrees to cooperate with the
Contractor to facilitate the Contractor's repair activity.
(c) It is understood that if there is any breach of the
Warranty, the Purchaser may at any time (but it shall have
no obligation to) dispatch the maintenance authority to
effect repairs and/or replacements and the Contractor shall
promptly reimburse the Purchaser for the cost thereof. The
Contractor shall be given advance notice and be entitled, at
its cost and expense, to have a representative on board ship
to observe at sea repairs and shall be given the earliest
possible notice of any such repair.
(d) In the event that the Contractor fails to commence making
provision for any repair and/or replacement required
pursuant to this Article 10 within thirty (30) days after
receipt of notice from Purchaser and/or fails to use all
reasonable efforts to minimize the period of time that any
Segment or the System or any portion thereof is out of
service for repair and/or replacement, the Purchaser may
effect the repair and/or replacement and the Contractor
shall promptly reimburse the Purchaser for the cost thereof.
The Contractor shall be given advance notice and be
entitled, at Contractor's cost and expense, to have a
representative on board ship to observe at sea repairs and
shall be given the earliest possible notice of any such
repair.
Subject to Sub-Article 10(D), any repair and/or replacement by any
maintenance authority or on behalf of the Purchaser shall not in any way
diminish the Contractor's obligation with respect to the Warranty. Moreover,
such remedy by the Purchaser shall not limit or nullify any other obligations of
the Contractor under this Contract or the Purchaser's other rights under this
Contract. Any Supplies discovered to be Defective or faulty and recovered
during a repair pursuant to this Article 10 shall be returned to the Contractor
at its request, and at Contractor's cost and expense.
2. The Contractor shall, at its cost and expense, cure fully any
breach of the Warranty and shall supply all necessary repair
materials, including Supplies. However, the Contractor may use,
with the written consent of the Purchaser, which shall not be
unreasonably withheld, the materials needed to effect a repair
from the Purchaser's available spare materials. The Contractor
shall promptly replace (at a time mutually agreed to by the
Parties), at its cost and expense, in kind such materials
supplied from the Purchaser's spare materials or, at the option
of Purchaser, reimburse Purchaser for such materials at the
original purchase price.
3. The Contractor represents and warrants that, until the expiration
of the Warranty Period, the Work will be performed in a
workmanlike manner using materials free from Defects except when
such materials are provided by the Purchaser (it being understood
that all materials arranged for directly by Contractor, whether
or not purchased in the name of Purchaser, are not
Page 26
<PAGE>
materials provided by the Purchaser). If any Work proves to be
not so performed and Purchaser notifies the Contractor prior to
the expiration of the Warranty Period, the Contractor will
promptly correct the Defect at Contractor's cost and expense.
4. Any Supply or Work which replaces any Defective Supply or Work
during the Warranty Period shall be subject to a further Warranty
Period of two (2) years. However, the Warranty Period shall never
exceed five (5) years from the Date of Provisional Acceptance of
the System.
5. The Contractor shall be responsible for enforcing the warranties
of all subcontractors (including vendors of Supplies) during the
Warranty Period.
B. The System is designed to operate in accordance with the System
Performance Requirements for a period of twenty-five (25) years from the Date of
Provisional Acceptance (whether or not any System Upgrades are done) (the
"Design Life Period"). The Contractor represents and warrants that (i) the
------------------
System shall be designed so that until the * of the Date of Provisional
Acceptance of the System, no Pattern of Failure shall occur, (ii) the System
shall be designed with sufficient transmission margin to be upgradeable to a
capacity of 320 Gb/s per fiber pair, and (iii) until the * of the Date of
Provisional Acceptance of the System, no design defect shall occur with respect
to the System or any portion thereof which causes or is reasonably likely to
cause the System or any portion thereof to fail to operate in accordance with
the System Performance Requirements at any time during the Design Life Period.
In the event the Contractor breaches any of the representations and warranties
referred to in this Sub-Article 10(B), Contractor shall, at its cost and
expense, promptly effect such reengineering and redesign and make such repairs
and/or replace such Supplies as may be necessary to correct such breach. The
Contractor shall bear the costs of all repairs and Supplies and of the
reengineering and redesign necessary to effect such repairs and replacements.
The Contractor represents and warrants that all Deliverable Software and
Deliverable Technical Materials are Year 2000 Compliant.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
C. The representations and warranties provided above in Sub-Articles 10(A)
and (B) by the Contractor shall not apply to Defects or failures of performance,
to the extent resulting from damage caused by improper acts or omissions of the
Purchaser or its agents, employees or representatives or third parties (other
than the Contractor, its agents and subcontractors), or which result from
improper modifications, misuse, neglect, accident or abuse, or improper repair,
storage or maintenance by other than the Contractor or its agents or
subcontractors, or use in a manner not in accordance with the System Description
in Appendix 4.
D. THE WARRANTY IN THIS ARTICLE 10 IS EXCLUSIVE AND IS IN LIEU OF ALL OTHER
EXPRESS AND IMPLIED WARRANTIES INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WHICH ARE SPECIFICALLY
DISCLAIMED; PROVIDED, HOWEVER, THAT NOTHING IN THIS ARTICLE 10 IS A LIMITATION
ON ANY WARRANTY OF TITLE OR ANY OTHER REPRESENTATION AND WARRANTY EXPRESSLY SET
FORTH IN THIS CONTRACT.
Page 27
<PAGE>
E. The Contractor shall, in accordance with its normal operating practices,
investigate at its cost and expense any Supply repaired or replaced pursuant to
this Article 10 to determine the type of Defect and the cause of failure of the
Supply. The Contractor shall provide a written report to the Purchaser on the
results of the investigation, if any.
F.
1. Standard of Work and Supplies.
-----------------------------
(a) The Contractor shall ensure that all Work performed
hereunder, all Supplies and the System (during construction
and when constructed), shall strictly comply with the System
Performance Requirements and Appendix 4 and all other
requirements and provisions of this Contract, including,
without limitation, insurance requirements and applicable
Laws.
(b) Any Work or Supply that fails to satisfy the following
requirements and standards is referred to herein as
"Defective," and the condition causing such Work or Supply
---------
to be Defective is referred to herein as a "Defect": new and
------
undamaged, good and workmanlike, free from defects at the
time installed and at all times through the end of the
Warranty Period (including any defects in condition,
quality, workmanship and design, and defects arising from
normal weather conditions and normal use provided that
maintenance is provided by the Purchaser consistent with the
practices of a reasonably prudent fibre optic cable
operator), in good quality and operating condition, and
adequate, appropriate and standard for the purposes
contemplated by this Contract.
(c) Without prior written approval by the
Purchaser, the Contractor shall not use any Supply other
than that specified where such Supply would (i) affect
System functionality or (ii) adversely affect the System
performance. If the Contractor wishes to use such substitute
Supply, it will make written application to the Purchaser
for approval of such a substitute certifying in writing that
the quality of the proposed substitute is equal to or better
than that specified and that the substitute is suited to the
same use and capable of performing the same function as that
specified. All Supplies shall be fabricated, constructed,
applied, installed, connected, used, cleaned and conditioned
in accordance with the instructions of the applicable
vendor, manufacturer, fabricator or processor.
2. Preparation of Detailed Engineering. The Contractor shall be
-----------------------------------
solely responsible for the detailed professional design and
engineering (the "Detailed Engineering") of the System so that,
--------------------
as constructed, the System shall comply with the System
Performance Requirements. The Contractor
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<PAGE>
shall secure professional engineering certifications for all
drawings prepared as part of the Detailed Engineering, to the
extent required by any applicable Laws. Any review by the
Purchaser shall not relieve or diminish the Contractor's
responsibility for errors or omissions, adequate design,
performance requirements, and proper operation of any item
required under this Contract.
3. Conduct of Work on Property. In clearing the land which is
---------------------------
subject to any Permit or Landing License and in the performance
of the Work, the Contractor shall comply with the terms of this
Contract. The Contractor shall pay to the Purchaser the value of
any harm or damages to any land which is subject to or covered by
any Permit or Landing License caused by the Contractor or any
subcontractor to the extent that such harm or damages are the
result of the Contractor's (or any subcontractor's) failure to
act as a reasonably prudent construction contractor. The
Contractor shall pay for all harm or damages to land or property
outside of the land subject to or covered by any Permit or
Landing License which is caused by the Contractor or any
subcontractor.
4. Safety. The Parties recognize and agree that safety is of
------
paramount importance in the performance of the Work and that the
Contractor is fully responsible for ensuring that the Work is
performed in a safe manner and shall take all reasonable actions
and precautions that are necessary or advisable to ensure safety
and to avoid accidents, injuries and property damage, including
the use of adequate protective devices, warning signs and
barriers as may be required under the circumstances. The
Contractor shall comply with and cause its employees, agents and
subcontractors (and their respective employees and agents) to
comply with reasonable safety procedures in performing the Work.
Nothing in this Sub-Article 10(F)(4) shall affect the
Contractor's status as an independent contractor.
5. Protection of Work. Until the commencement of the Warranty
------------------
Period, the Contractor shall, at its expense, continuously
maintain reasonable protection of the Supplies and the System
from damage, and shall protect its employees, subcontractors,
agents and their respective employees, the employees and property
of the Purchaser, and property owners and others in the vicinity
of the Work from injury or loss arising in connection with this
Contract or the Work.
11 Contractor Support
------------------
A. For a period of * from the applicable Date of Provisional Acceptance
or Date of Commercial Acceptance of the System whichever is earlier, the
Contractor will make available to the Purchaser replacement parts and repair
service for the System as may be reasonably necessary for its operation,
maintenance or repair. Where identical parts cannot be supplied, the Contractor
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
Page 29
<PAGE>
shall provide fully compatible parts with characteristics equal or superior to
those originally provided by the Contractor. Such parts and services shall be
provided under commercially reasonable conditions of price and delivery.
B. Notwithstanding Sub-Article 11(A), if for any reason the Contractor or
Contractor's suppliers intend to cease or ceases manufacturing or having
manufactured identical or fully compatible replacement parts, the Contractor
shall give at least one year's prior written notice to the Purchaser to allow
the Purchaser to order from the Contractor any required replacement parts and
shall provide full details of the arrangements to provide equivalents.
12 Purchaser's Obligations
-----------------------
A. Purchaser agrees to pay all amounts payable by it when due under this
Contract and to perform all of its other obligations under this Contract.
B. If any loss, damage, delay or failure of performance of the System
results from the Purchaser's failure to perform its obligations under this
Contract and results in an increase in the costs of performance or the time
required for performance of any of the Contractor's duties or obligations under
this Contract, the Contractor shall be entitled, as appropriate, to (i) an
equitable adjustment in the Contract Price, (ii) an equitable extension of time
for completion of the Work, (iii) reimbursement for all such reasonable
additional costs incurred, and (iv) to the extent necessary in light of
Purchaser's failure and the adjustments made in accordance with clauses (i),
(ii) and (iii) above, an equitable adjustment of the Work.
1. The Contractor shall inform the Purchaser promptly of any
occurrence covered under this Sub-Article 12(B), and shall
use reasonable efforts to minimize any such additional costs
or delay.
2. The Contractor shall promptly provide to the Purchaser a
written estimate of the anticipated additional costs and
time required to complete the Work and request relief from
contractual obligations or duties, as appropriate. Purchaser
shall, upon notification, make advance payment to Contractor
for the reasonable estimated amount of anticipated
additional costs; provided that Purchaser may deposit such
--------
amount into the Dispute Account and Sub-Article 5(C)(5)
shall apply. Contractor shall, without limiting Purchaser's
obligations in the foregoing sentence, discuss such costs
with Purchaser upon Purchaser's request.
3. As soon as reasonably practicable after the actual costs
become known to the Contractor, the Contractor shall provide
a statement of such actual costs to the Purchaser.
4. If the estimated amount is greater than the amount of actual
costs, then the Contractor shall promptly reimburse the
Purchaser. If the amount of actual costs incurred is greater
than the estimated amount, then the Purchaser shall
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<PAGE>
reimburse the Contractor for any shortfall in accordance
with Article 5 (Terms of Payment).
13 Termination for Default
-----------------------
A. Either Party may, by written notice of termination for Default,
immediately upon receipt or such later date as specified in the notice,
terminate the whole or any part of this Contract in any one of the following
circumstances (each an "Event of Default"):
----------------
1. In the case of the Purchaser, (a) if Contractor fails to
comply with the terms and conditions of this Contract and,
if such failure occurs prior to the Date of Commercial
Acceptance of the System or the Date of Provisional
Acceptance of the System, it would be reasonable to believe
that the Contractor will not be able to provide (i) the
System (exclusive of Segment 6) which is Ready for
Provisional Acceptance or (ii) Segments 4 and 5 which are
Ready for Provisional Acceptance, in either case within one
hundred (100) days after the Scheduled RFS Date or the
Segment 4/5 Scheduled RFS Date, as the case may be; (b) if
Contractor fails to comply with the terms and conditions of
this Contract and, if such failure occurs prior to the Date
of Commercial Acceptance of Segment 6 or the Date of
Provisional Acceptance of Segment 6, it would be reasonable
to believe that the Contractor will not be able to provide
Segment 6 which is Ready for Provisional Acceptance within
one hundred (100) days after the Segment 6 Scheduled RFS
Date (provided, however, that under clauses (a) and (b) of
this Sub-Article 13(A)(1), the Purchaser shall provide
Contractor notice of such failure and a cure period which
shall expire on the earlier to occur of forty-five (45) days
after Contractor's receipt of notice of the failure and the
applicable Default Date and such cure period shall in no
event (x) affect the Purchaser's right to terminate this
Contract under clause (c) of this Sub-Article 13(A)(1) or
any other right of termination under this Contract or (y)
affect the Purchaser's rights to liquidated damages under
Article 22); or (c) the Contractor fails to cause the System
to be Ready for Provisional Acceptance within one hundred
(100) days after the Scheduled RFS Date;
2. If any Party defaults on any of its payment obligations and
does not cure such default (whether by paying money to the
payee or the Payment Escrow Agent) within a period of thirty
(30) days (or such longer period as the non-breaching Party
may authorize in writing) after receipt of written notice
demanding cure (subject to dispute provisions);
3. If the other Party shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property,
Page 31
<PAGE>
or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or
4. If an involuntary case or other proceeding shall be commenced
against the other Party seeking liquidation, reorganization or
other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a
period of sixty (60) days; or an order for relief shall be
entered against the other Party.
B. If this Contract is terminated by the Purchaser as provided in Sub-
Article 13(A), the Purchaser, in addition to any other rights provided in this
Article and upon payment to Contractor of all monies due and owing as set forth
in Sub-Article 13(C) below, may require the Contractor to transfer title and
deliver to the Purchaser in the manner and to the extent directed by the
Purchaser (i) any or all completed Work and/or Supplies, and/or such partially
completed Work and/or cable and materials, parts, tools, dies, jigs, fixtures,
plans, drawings, information, and contract rights (hereinafter collectively
"Manufacturing Materials"), (ii) Deliverable Software and (iii) Deliverable
-----------------------
Technical Materials as the Contractor has had specifically produced or
specifically acquired for the performance of such part of this Contract as has
been terminated and which, if this Contract had been completed, would have been
required to be furnished to the Purchaser; and the Contractor shall, upon the
direction of the Purchaser, protect and preserve property in the Contractor's
possession in which the Purchaser has an interest.
C. If this Contract is terminated by Contractor as provided in Sub-
Article 13(A), the Purchaser shall pay the total of:
1. the cost of settling and paying claims arising out of the
termination of Work under the contracts and orders, as provided
in Sub-Article 14(B)(3) below which are properly chargeable to
the terminated portion of this Contract;
2. the reasonable out-of-pocket costs of settlement including
accounting, legal, clerical and other expenses necessary for the
preparation of settlement claims and supporting data with respect
to the terminated portion of this Contract and for termination
and settlement of contracts thereunder, together with reasonable
storage, transportation and other costs incurred in connection
with the protection, preservation and disposition of property
proper to this Contract; and
3. any general damages that are required by law.
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<PAGE>
D. Force Majeure events pursuant to Article 17 (Force Majeure) shall not
constitute a default or provide a basis for termination under this Article.
E. Except as provided in Article 23 and regardless of any termination of
this Contract as provided in Sub-Article 13(A), neither Party shall be relieved
from any liability for damages or otherwise which may have been incurred by
reason of any breach of this Contract.
F. Without limitation to the foregoing, in the event that Purchaser
terminates this Contract pursuant to Sub-Article 13(A), the Contractor shall be
liable to Purchaser (without duplication) for the total of all costs and
expenses incurred by Purchaser in completing the Work and/or in correcting
deficiencies in the Work to the extent that the payments made to Contractor
pursuant to this Contract, together with such costs and expenses, exceed the
Contract Price.
14 Termination for Convenience
---------------------------
A. The performance of Work under this Contract may be terminated by the
Purchaser in whole, or in part, at its discretion. The Purchaser shall deliver
to the Contractor a written notice specifying the extent to which performance of
Work under this Contract is terminated, and the date upon which such termination
becomes effective (a "Notice of Termination"). Upon termination, the Purchaser
---------------------
will make payment to Contractor of all monies due and owing as set forth in Sub-
Article 14(D) below.
B. After receipt of such Notice of Termination, and except as otherwise
directed by the Purchaser, the Contractor shall:
1. Stop Work under this Contract on the date and to the extent
specified in the Notice of Termination;
2. Place no further orders or contracts for Supplies, services or
facilities except as may be necessary for completion of such
portion of Work under this Contract as is not terminated;
3. Use reasonable efforts to terminate all orders and contracts to
the extent that they relate to the performance of Work terminated
by the Notice of Termination;
4. Assign to the Purchaser, in the manner, at the time, and to the
extent directed by the Purchaser, all of the Contractor's rights,
title and interest under the orders and contracts so terminated;
5. Use reasonable efforts to settle all outstanding liabilities and
all claims arising out of such termination of orders and
contracts, with the Purchaser's approval or ratification to the
extent required;
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<PAGE>
6. Transfer title and deliver to the Purchaser in the manner, at the
time and to the extent (if any) directed for the fabricated or
unfabricated parts, Work in process and completed Work. Supplies
and other material produced as a part of, or acquired in
connection with, the performance of the Work terminated by the
Notice of Termination;
7. Use reasonable efforts to sell, in the manner, at the time, to the
extent and at the price or prices directed or authorized by the
Purchaser, any property of the types referred to in Sub-Article
14(B)(6) above; provided, however, that the Contractor:
-------- -------
(a) shall not be required to extend credit to any buyer;
and
(b) may acquire any such property under the conditions
prescribed by and at a price approved by the Purchaser;
and provided further that the net proceeds of any such
-------- -------
transfer or disposition shall be applied in reduction of any
payments to be made by the Purchaser to the Contractor under this
Contract or, if no such payments are due, paid in such other
manner as the Purchaser may direct;
8. Complete performance of such part of the Work which was not
terminated by the Notice of Termination; and
9. Take such action as may be necessary, or as the Purchaser may
reasonably direct, for the protection and preservation of the
property related to this Contract which is in the Contractor's
possession and in which the Purchaser has acquired or may acquire
an interest.
C. After such Notice of Termination, the Contractor shall submit to the
Purchaser a written termination claim. Such claim shall be submitted promptly,
but, unless otherwise extended by the Parties, in no event later than three (3)
months from the effective date of termination.
D. In the settlement of any such partial or total termination claim, the
Purchaser shall pay to the Contractor the total of:
1. all amounts invoiced in accordance with this Contract plus, for
Work or Supplies which have been done or provided but which have
not been invoiced, an amount calculated by reference to the prices
set forth in the Provisioning Schedule and to the amount of such
Work or Supplies done or provided;
2. the reasonable cost of settling and paying claims arising out of
the termination of Work under the contracts and orders which are
properly chargeable to the terminated portion of this Contract;
and
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<PAGE>
3. the reasonable out-of-pocket costs of settlement including
accounting, legal, clerical and other expenses necessary for the
preparation of settlement claims and supporting data with respect
to the terminated portion of this Contract and for termination and
settlement of contracts thereunder, together with reasonable
storage, transportation and other costs incurred in connection
with the protection and disposition of property proper to this
Contract.
E. In arriving at the amount due to the Contractor under this Article 14,
all unliquidated payments made to the Contractor, any liability which the
Contractor may have to the Purchaser, and the agreed price for, or the proceeds
of sale of any materials, supplies or other things acquired by the Contractor or
sold, pursuant to the provisions of this Article 14, and not otherwise recovered
by or credited to the Purchaser shall be deducted.
F. The Purchaser may, from time to time, under such terms and conditions
as it prescribes, approve partial payments and payments on account against costs
incurred by the Contractor in connection with the terminated portion of this
Contract. If such payments total in excess of the amount finally agreed or
determined to be due under this Article 14, such excess shall be refunded, upon
demand, by the Contractor to the Purchaser.
G. For a period of two years after final settlement under this Contract,
the Contractor shall preserve and make available to the Purchaser at reasonable
times at the Contractor's office, but without direct charge to the Purchaser,
all supporting books, records and documents required to be kept relating to the
terminated Work.
15 Suspension
----------
A. The Purchaser may, at its convenience, order the Contractor to suspend
all or part of the Work for such period of time as the Purchaser determines to
be appropriate. If, as a result of such suspension, the Contractor incurs
additional costs or losses in the discharge of its responsibilities under this
Contract, and where such suspension, losses or costs are not caused by the
Contractor's act or omission and could not have been reasonably prevented by the
Contractor, the Contractor shall be allowed an equitable adjustment to the
Contract Price or the Provisioning Schedule in Appendix 1 and an equitable
extension in the time required for performance.
B. Upon the occurrence of:
(i) an Event of Default by the Purchaser; or
(ii) any transfer of this Contract prior to the Date of Final
Acceptance of any portion of the System except in accordance with
Article 37.
Contractor, in addition to any other rights provided in Article 13, may suspend
performance of the Work.
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<PAGE>
C. Every forty-five (45) days, during the period of Suspension, the
Parties shall meet formally and review the circumstances surrounding the
Suspension including, without limitation, the anticipated date of re-commencing
Work.
D. Thereafter, if the Suspension continues for a total of one hundred and
eighty (180) consecutive days, the Contractor may terminate this Contract by
notice to the Purchaser and this Contract shall be deemed to have been
terminated by Purchaser, effective on the date of Contractor's notice, in
accordance with Sub-Article 13(A) and the remaining provisions of Article 13
shall apply.
16 Title and Risk of Loss
----------------------
A. Except as provided in Article 18 (Intellectual Property), Article 20
(Safeguarding of Information and Technology) and, Article 21 (Export Control),
title to all Supplies provided by the Contractor hereunder for incorporation in
or attachment to a Segment shall pass to and vest in the Purchaser in accordance
with Article 9 (Acceptance). Risk of loss or damage to all Supplies (including
Supplies consigned to Purchaser) provided by the Contractor for incorporation in
or attachment to such Segment shall pass to and vest in the Purchaser in
accordance with Article 9. Prior to risk of loss so passing, Contractor shall
bear the risk of loss. Upon termination of this Contract pursuant to Article 13
(Termination for Default) or 14 (Termination for Convenience), the Purchaser may
require, upon full payment of all amounts due thereunder (provided that, without
--------
limiting Purchaser's obligation to make any such payment, if this Contract is
terminated by Purchaser because of a Bankruptcy Event full payment shall not be
required prior to the transfer of title), that title to Supplies, which has not
previously passed to the Purchaser, pass to the Purchaser, free and clear of all
liens, claims, charges and other encumbrances other than those deriving through
Purchaser.
B. Upon the passage of title in accordance with this Contract, the
Contractor warrants that all Supplies and the System (or portion thereof) to
which title has passed will be free and clear of all liens, claims, charges and
other encumbrances other than those deriving through the Purchaser. Moreover,
Contractor warrants that all Permits which are transferred to Purchaser will, at
the time of such transfer, be free and clear of all liens, claims, charges and
other encumbrances arising by, through or under the Contractor, its affiliates
and its subcontractors.
17 Force Majeure
-------------
A. The Contractor shall not be responsible for any loss, damage, delay or
failure of performance resulting directly or indirectly from any cause which is
beyond its reasonable control ("Force Majeure"), including but not limited to:
-------------
delay in obtaining or failure to obtain any Permits (subject to the provisions
of Sub-Article 7(D)); the Purchaser's delay in obtaining or failure to obtain
any Landing Licenses; acts of God or of the public enemy; acts or failure to act
of any governmental authority; war or warlike operations, civil war or
commotion, mobilizations or military call-up, and acts of similar nature;
revolution, rebellions, sabotage, and insurrections or riots; fires, floods,
epidemics, quarantine restrictions; strikes, and other labor actions; freight
embargoes; Sea State 5; trawler or anchor damage; damage caused by other marine
activity such as fishing, marine research
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and marine development; acts or omissions of transporters; provided that (i) a
--------
loss by Contractor of employees (other than by reasons of Force Majeure), (ii)
strikes and other labor actions involving the Contractor's own work force, (iii)
the first 5 days of Sea State 5 (unless any such day occurs during the 30 days
immediately preceding the then Scheduled RFS Date), (iv) the failure (other than
by reason of Force Majeure) of any subcontractor, supplier or transporter to
perform its obligations to Contractor (including on account of insolvency)
unless such supplies or transportation or other services are generally
unavailable in the marketplace, (v) the unavailability of any raw materials or
components, unless such raw materials or components are generally unavailable in
the marketplace or are unavailable by reason of force majeure or, (vi) any
increase in Contractor's costs shall not in and of itself constitute Force
Majeure. Moreover, in no event shall any breach of this Contract by Contractor
constitute Force Majeure.
B. If any such Force Majeure causes an increase in the time or costs
required for performance of any of its duties or obligations, with the exception
of marine installation activities, the Contractor shall be entitled to an
equitable extension of time for completion of the Work and an equitable
adjustment in the Contract Price; provided, however, in regard to the marine
-------- -------
installation (i.e., the undersea portion of the System and Supplies), the
----
Contractor shall only be entitled to an equitable extension of time for the
completion of the Work.
C. The Contractor shall inform the Purchaser promptly with written
notification, and in all cases no later than fourteen (14) days of discovery and
knowledge, of any occurrence covered under this Article and shall use its
reasonable efforts to minimize such additional delays. The Contractor shall
promptly provide an estimate of the anticipated time and costs required to
complete the Work. Contractor shall be entitled to an equitable extension of
time and equitable adjustment in the Contract Price resulting from the Force
Majeure condition.
D. Within thirty (30) days of receipt of such a notice from Contractor,
the Purchaser (together with the Independent Engineer) may provide a written
response. The absence of a response shall be deemed as acceptance of
Contractor's notice and request for additional time.
E. Every forty-five (45) days during the period of Force Majeure, the
Parties shall meet and review the circumstances surrounding the Force Majeure,
including, without limitation, the anticipated date of recommencing work.
18 Intellectual Property
---------------------
A. Ownership in Contractor; No Licenses Except Those Expressly Granted
All right, title and interest in and to all Intellectual Property created
or developed by Contractor, under this Contract, before commencing its
performance under this Contract, is and shall remain the sole property of
Contractor. Unless otherwise expressed in this Contract, no license is implied
or granted herein to Purchaser to any Intellectual Property by virtue of this
Contract owned or controlled by Contractor (the "Contractor Intellectual
-----------------------
Property"), nor by the transmittal or disclosure of any Contractor Intellectual
- --------
Property to Purchaser. Any Contractor Intellectual Property disclosed,
furnished, or conveyed to Purchaser that is marked as "Proprietary" or
"Confidential" (or
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if transmitted orally is identified as being proprietary or confidential in a
subsequent writing) shall be treated in accordance with the provisions of
Article 20 (Safeguarding of Information and Technology). As used herein,
"Intellectual Property" means any information, computer or other apparatus
---------------------
programs, software, specifications, drawings, designs, sketches, tools, market
research or operating data, prototypes, records, documentation, works of
authorship or other creative works, ideas, concepts, methods, inventions,
discoveries, improvements, or other business, financial and/or technical
information (whether or not protectable or registrable under any applicable
intellectual property law).
B. Licenses
Contractor shall furnish to Purchaser, upon the transfer of title to any
portion of the System pursuant to this Contract, copies of all technical
information, specifications, drawings, designs, sketches, tools, operating data,
records, documentation and/or other types of engineering or technical data or
information relating to the operation, maintenance or repair of each item of
such portion of the System as delivered by Contractor (the "Deliverable
-----------
Technical Material"). Contractor grants to Purchaser a perpetual, royalty-free,
- ------------------
non-transferable (except under the circumstances specified in Sub-Article 18(G)
below) license to use and reproduce all Contractor Intellectual Property
included in or necessary to use the Deliverable Technical Materials. This
license grant shall, in any event, be on such terms and to such an extent to
fulfill Purchaser's obligations under this Contract and shall be sufficient to
permit the Purchaser to undertake using, operating and maintaining the System
supplied by Contractor. Further, Purchaser shall have the right to employ third
parties (under appropriate written obligations respecting confidentiality) to
assist Purchaser in fulfilling its obligations under this Contract and in using,
operating or maintaining the System. Contractor grants to Purchaser a
perpetual, royalty-free, non-transferable (except under the circumstances
specified in Sub-Article 18(G) below) license to use and reproduce those
portions of Deliverable Technical Materials owned or controlled by third parties
(but only to the extent of any rights which may have been granted to Contractor
by such third parties). This license grant shall be sufficient to permit the
Purchaser to undertake using, operating and maintaining the System supplied by
Contractor. Further, Purchaser shall have the right to employ third parties
(under appropriate written obligations respecting confidentiality) to assist
Purchaser in fulfilling its obligations under this Contract and in using,
operating or maintaining the System but with no right to sublicense. It is
expressly understood that it shall not be a violation of this license for
Purchaser, on its own behalf or through third parties (under appropriate written
obligations respecting confidentiality) specifically employed for the purpose,
to use and reproduce the Deliverable Technical Material to modify the System or
any portion thereof or connect the System or any portion thereof to other
systems, subject to the rights of third parties therein and thereto, and subject
to the limitations on Contractor's obligations as set forth in Articles 10(C)
and 19(A) concerning any such modification or interconnection.
C. Deliverable Software
Contractor shall furnish to the Purchaser, upon transfer of title to any
portion of the System pursuant to this Contract, copies of all computer or other
apparatus programs and software and related documentation relating to the
operation, maintenance or repair of the computer systems of such portion of the
System, as delivered by Contractor (the "Deliverable Software"). All Deliverable
--------------------
Software that is Contractor Intellectual Property shall be delivered in
executable form. Contractor
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shall also furnish to Purchaser, from time to time during the Warranty Period,
copies of all computer or other apparatus programs and software and related
documentation that Contractor may develop to correct errors or to maintain
Deliverable Software previously furnished to Purchaser, which shall also be
treated as Deliverable Software in accordance with the terms of this provision
and subject to this Contract upon delivery thereof to Purchaser. Contractor
grants to Purchaser a perpetual, royalty-free, non-transferable (except under
the circumstances specified in Sub-Article 18(G) below) license to use and
reproduce the Deliverable Software that is Contractor Intellectual Property to
the same extent and on the same terms as the licenses granted to Purchaser under
Sub-Article 18(B) above. The license granted to Purchaser by Contractor in
Deliverable Software that is Contractor Intellectual Property or that is owned
or controlled by third parties shall be limited to use with the particular type
of computer equipment or substantially similar replacement equipment for which
such Deliverable Software was provided in the System as supplied by Contractor.
1. Confidentiality
Purchaser shall keep Deliverable Software that is
Contractor Intellectual Property or that is owned or controlled
by third parties confidential in accordance with Article 20
(Safeguarding of Information and Technology) and Article 21
(Export Control), to the extent that such Deliverable Software is
designated as Confidential Information by its owner, and agrees
to use commercially reasonable efforts to see that its employees,
consultants, and agents, and other users of such software, comply
with the provisions of this Contract. Purchaser also agrees to
refrain from taking any steps, such as reverse assembly or
decompilation, to derive a source code equivalent of any
Deliverable Software, provided that Contractor does not go
insolvent or bankrupt to thereby trigger a software escrow event
in accordance with Article 18(H). In the case of insolvency or
bankruptcy of Contractor, Purchaser shall limit any derivation of
a source code equivalent to that portion of the Deliverable
Software that is Contractor Intellectual Property. Purchaser
shall not under any circumstances take any steps to derive a
source code equivalent from that portion of the Deliverable
Software comprising commercial, off-the-shelf software developed
or provided by third parties.
2. Backup Copies
Purchaser may make and retain archive copies in
executable form of Deliverable Software. Any copy thereof will
contain the same copyright notice and proprietary markings as are
on the original software and shall be subject to the same
restrictions as the originals.
3. Termination of Software Licenses
In the event of (i) use by Purchaser of Deliverable
Software in a manner other than as permitted in Sub-Article 18(C)
or (ii) any other material breach of this Article 18 by Purchaser
that, in either event, is not
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cured within sixty (60) days from receipt by Purchaser of written
notice of such impermissible use or breach, Contractor, at its
option, may terminate the rights granted to Purchaser pursuant to
this Article, which termination shall take effect no sooner than
sixty (60) days following receipt by Purchaser of a subsequent
written notice of termination. Upon termination, Purchaser shall
either return or destroy, at Contractor's option, all copies of
Deliverable Software furnished to Purchaser under this Contract.
4. Indemnification
In the event of (i) use by Purchaser of Deliverable
Software furnished hereunder other than as permitted in Sub-
Article 18(C) or (ii) any other material breach of this Article
18 by Purchaser, Purchaser shall indemnify and hold Contractor
harmless from any and all third party claims resulting therefrom,
whether arising from a defect in the software or otherwise.
D. Trademarks, Tradenames, etc.
No rights are granted herein to either Party to use any identification
(such as, but not limited to tradenames, trademarks, service marks or symbols,
and abbreviations, contractions, or simulations thereof) owned or used by the
other Party or its affiliates to identify itself, its affiliates or any of its
products or services. Each Party agrees that it will not, without the prior
written permission of the other Party, use such identification in advertising,
publicity, packaging, labeling, or in any other manner to identify itself or any
of its products, services, or organizations, or represent directly or indirectly
that any product, service, or organization is a product, service, or
organization of the other Party or its affiliates, or that any product or
service of a Party is made in accordance with or utilizes any Intellectual
Property belonging to the other Party or its affiliates.
E. DISCLAIMER, LIMITATION OF LIABILITY
CONTRACTOR REPRESENTS THAT ANY INFORMATION OR INTELLECTUAL PROPERTY
FURNISHED IN CONNECTION WITH THIS CONTRACT SHALL BE TRUE AND ACCURATE TO THE
BEST OF ITS KNOWLEDGE AND BELIEF, BUT CONTRACTOR SHALL NOT BE HELD TO ANY
LIABILITY FOR UNINTENTIONAL ERRORS OR OMISSIONS THEREIN.
F. Representations and Warranties
Contractor represents and warrants, to the best of its knowledge at the
time of delivery, (i) that the Deliverable Technical Materials and Deliverable
Software to be furnished by Contractor under this Contract will not infringe any
rights in Intellectual Property belonging to any third party, (ii) that
Contractor has all necessary rights to furnish such Deliverable Technical
Materials and Deliverable Software to Purchaser for use by Purchaser in
accordance with the terms of this Contract, and (iii) that Purchaser's use of
such Deliverable Technical Materials and Deliverable Software for the purposes
contemplated in this Contract will not, by itself, cause Purchaser to incur
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any liability to any third party with respect to Purchaser's use thereof in
accordance with the provisions of this Contract.
G. Transferability
Except as otherwise provided in Sub-Article 37(A), (B) and (D), the
licenses granted to Purchaser by Contractor in the Deliverable Technical
Materials and Deliverable Software are personal and non-transferable, except
that Purchaser may assign or transfer such licenses to (1) an affiliated entity
under common control with the Purchaser or (2) to any entity succeeding to
Purchaser's entire interest in the System as a result of reorganization or
restructuring of the Purchaser or in the event of a change of control of the
Purchaser.
H. Deliverable Software Escrow
Within sixty (60) days of the Date of Provisional Acceptance or Commercial
Acceptance of any portion of the System, the Parties shall enter into a Software
Escrow Agreement, the principals of which are outlined hereunder, with a
software escrow service, following which Contractor shall deliver copies of
source code and related documentation for that portion of Deliverable Software
that is Contractor Intellectual Property (but not that portion of Deliverable
Software comprising commercial, off-the-shelf software, or software developed or
provided by third parties) to a third party commercial software escrow service,
and from time to time as it becomes available, copies of source code for
updates, maintenance releases, or other new versions of the Deliverable Software
that is Contractor Intellectual Property relating to the operation, maintenance,
or repair of the computer systems of any portion of the System as delivered by
Contractor during the System's twenty-five (25) year Design Life Period.
A detailed listing of commercial, off-the-shelf software, or software
developed or provided by third parties, to be included in the Deliverable
Software shall be delivered by Contractor to Purchaser within sixty (60) days of
the Date of Provisional Acceptance of any portion of the System.
The escrow service shall be authorized by Contractor to release the
escrowed software to Purchaser within five (5) business days after the receipt
of notice by Purchaser (which notice Purchaser shall not deliver unless a
Bankruptcy Event shall have occurred in respect to either ASN or ASNI, or either
ASN or ASNI is no longer engaged in the business of operating or maintaining
systems comparable to the System) that a Bankruptcy Event has occurred or that
the Contractor is no longer in the business of operating or maintaining systems
comparable to the System.
19 Infringement
------------
A. The Contractor agrees to defend or settle at its own expense all suits
for infringement of any patent, copyright, trademark or other form of
intellectual property right in any country of the world, for the use and
operation of the System as supplied by Contractor and for any component part
thereof or Supply used therein (or the manufacture of any Supply or the normal
use thereof) provided by the Contractor or on its behalf pursuant to this
Contract and will hold the Purchaser
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harmless from all expense of defending any such suit and all payments for final
judgment assessed on account of such infringement, except such infringement or
claim arising from:
1. The Contractor's adherence to the Purchaser's directions in
the design and configuration of the System or to Supplies of
the Purchaser's selection; or
2. Such Supplies furnished to the Contractor by the Purchaser,
other than in each case, items of the Contractor's design or
selection or the same as any of the Contractor's commercial
merchandise or in processes or machines of the Contractor's
design or selection used in the manufacture of such standard
products or parts; or
3. Use of the System or the Supplies furnished by Contractor
other than for the purposes indicated in, or reasonably to
be inferred from, this Contract or in conjunction with other
products; or
4. Modification of the System or the Supplies furnished by the
Contractor, or connection of the System to another system by
any person or entity other than Contractor, without prior
expressed written approval by Contractor, which approval
shall not be unreasonably withheld.
B. The Purchaser will, at its own expense, defend all suits against the
Contractor for an excepted infringement as referred to in Sub-Article 19(A) and
hold the Contractor harmless from all expense of defending any such suit and
from all payments by final judgment assessed against the Contractor on account
of such excepted infringement.
C. The Contractor and the Purchaser agree to give each other prompt
written notice of claims and suits for infringement, full opportunity and
authority to assume the sole defense, including appeals and, upon request and at
its own expense, the other agrees to furnish all information and assistance
available to it for such defense.
D. If all or any portion of the System or any Supply provided by the
Contractor or on its behalf is held to constitute an infringement (excluding
excepted infringements specified in Sub-Article 19(A)) and is subject to an
injunction restraining its use or any order providing for its delivery up to or
destruction, or if in respect of any such claim of infringement the Contractor
deems it advisable to do so, the Contractor shall at its own expense either:
1. Procure, at the Contractor's cost and expense, for the
Purchaser the right to retain and continue to use the
System, the affected portion thereof, or any such Supply
without interruption for the Purchaser;
2. Replace or modify, at the Contractor's cost and expense, the
System, the affected portion thereof, or any Supply so that
it becomes non-infringing while continuing to meet the
System Performance Requirements; or
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3. If the remedies specified in Sub-Articles 19(D)(1) and
19(D)(2) are not feasible, refund to the Purchaser the full
purchase price paid for the System, the affected portion
thereof, or any Supply found to be infringing.
E. In no event shall the Purchaser make any admission or settle any claim
in relation with any claim for infringement without Contractor's consent.
20 Safeguarding of Information and Technology
------------------------------------------
A. In performance of this Contract, it may be mutually advantageous to
the Parties hereto to share certain specifications, designs, plans, drawings,
software, market research or operating data, prototypes, or other business,
financial, and or/technical information related to products, services, or
systems which are proprietary to the disclosing Party or its affiliates (and in
the case of Contractor, Contractor's parent company) (together with this
Contract and related documents, "Information"). The Parties recognize and agree
-----------
that Information includes information that was supplied in contemplation hereof
prior to execution of this Contract, and further agree that Information includes
information in both tangible and intangible form.
B. Unless such Information was previously known to the Party receiving
such Information free of any obligation to keep it confidential, or such
Information has been or is subsequently made public through other than
unauthorized disclosure by the receiving Party or is independently developed by
the receiving Party (as documented by the records of the receiving Party), it
shall be kept confidential by the Party receiving such Information, shall be
used only in the performance of this Contract, and may not be used for any other
purposes except upon such terms as may be agreed upon in writing by the Party
owning such Information. The receiving Party may disclose such Information to
other persons, upon the furnishing Party's prior written authorization, but
solely to perform acts which this Article expressly authorizes the receiving
Party to perform itself and further provided such other person agrees in writing
(a copy of which writing will be provided to the furnishing Party at its
request) to the same conditions respecting disclosure and use of Information
contained in this Article and to any other reasonable conditions requested by
the furnishing Party. Nothing herein shall prevent a Party from disclosing
Information (a) upon the order of any court or administrative agency, (b) upon
the request or demand of, or pursuant to any regulation of, any regulatory
agency or authority, (c) to the extent reasonably required in connection with
the exercise of any remedy hereunder and (d) to a Party's legal counsel or
independent auditors.
C. The Purchaser may disclose Information to its lenders, investors and
their representatives in connection with obtaining financing for the System,
provided that each such lender, investor or their respective representative
enters into a confidentiality agreement containing terms and conditions similar
to those in this Contract. Any such disclosure of Information shall be subject
to the restrictions in Sub-Article 20(B).
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21 Export Control
--------------
The Parties acknowledge that any products, software, and technical
information (including, but not limited to, services and training) provided by
either Party under this Contract are or may be subject to export laws and
regulations of France, the United Kingdom, Australia and the United States of
America and the destination country(ies) and any use or transfer of such
products, software and technical information must be authorized under those
Laws. The Parties agree that they will not use, distribute, transfer or transmit
the products, software or technical information (even if incorporated into other
products) except in compliance with export Laws. If requested by either Party,
the other Party agrees to sign all necessary export-related documents as may be
required to comply with applicable export Laws.
22 Liquidated Damages
------------------
If (a) the System (exclusive of Segment 6) is not Ready for Commercial
Acceptance or Ready for Provisional Acceptance by the Scheduled RFS Date, (b)
Segment 6 is not Ready for Commercial Acceptance or Ready for Provisional
Acceptance by the Segment 6 Scheduled RFS Date, or (c) either or both of
Segments 4 and 5 are not Ready for Commercial Acceptance or Ready for
Provisional Acceptance by the Segment 4/5 Scheduled RFS Date, as any such date
may have been extended under:
1. Article 6 (Contract Variations);
2. Article 17 (Force Majeure); or
3. Article 15 (Suspension); or
4. Other arrangements as agreed in writing between the Purchaser and
the Contractor;
then Contractor shall pay to Purchaser for each day of delay, for up to 100
days, by way of pre-estimated and liquidated damages for the delay and not as a
penalty as follows: (i) in the case of clause (a) of this Article 22, an amount
equal to 0.1% of the Initial Contract Price for the System (less the value of
Segment 6 and less the amount of any liquidated damages already paid in respect
of either or both of Segments 4 and 5, as the case may be); (ii) in the case of
clause (b) of this Article 22, an amount equal to 0.1% of the value of Segment 6
as set forth in Appendix 1; and (iii) in the case of clause (c) of this Article
22, an amount equal to 0.1% of the value of either or both of Segments 4 and 5,
as the case may be. * Contractor shall pay by *, all of the aforesaid damages
for delay in respect of the days of delay that occurred in *.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
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23 Limitation of Liability/Indemnification
---------------------------------------
A. NOTWITHSTANDING ANY OTHER PROVISION IN THIS CONTRACT, AND IRRESPECTIVE
OF ANY FAULT, NEGLIGENCE OR GROSS NEGLIGENCE OF ANY KIND, IN NO EVENT SHALL
EITHER PARTY OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS (INCLUDING
FINANCING SOURCES AND THEIR REPRESENTATIVES) BE LIABLE FOR ANY CONSEQUENTIAL,
INCIDENTAL, INDIRECT, RELIANCE OR SPECIAL (INCLUDING PUNITIVE) DAMAGES,
INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUE, LOSS OF BUSINESS OPPORTUNITY OR
THE COSTS ASSOCIATED WITH THE USE OF RESTORATION FACILITIES RESULTING FROM ITS
FAILURE TO PERFORM PURSUANT TO THE TERMS AND CONDITIONS OF THIS CONTRACT.
B. THE CONTRACTOR'S MAXIMUM AGGREGATE LIABILITY, WHETHER IN TORT,
CONTRACT OR OTHERWISE, SHALL NOT EXCEED * OF THE CONTRACT PRICE; PROVIDED,
HOWEVER, THAT THE FOREGOING LIMITATION OF LIABILITY SHALL NOT APPLY TO THE
CONTRACTOR'S OBLIGATIONS UNDER ARTICLE 19 AND SUB-ARTICLE 23(C).
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
C. Contractor, at its expense, shall defend, indemnify and hold harmless
Purchaser, its agents (including financing sources and their representatives),
subcontractors and employees against any and all claims, demands, and judgments
for losses due to any act or omission, arising out of, or in connection with
this Contract or, prior to risk of loss passing to Purchaser, the operation and
maintenance of the System, to the extent such losses were caused by the
negligence or willful misconduct of the Contractor, its subcontractors,
employees or agents. The defense, indemnification and save harmless obligation
is specifically conditioned on the following: (i) Purchaser providing prompt
notification in writing of any such claim or demand when it obtains Actual
Knowledge thereof (and if Purchaser does not so provide such notice, then the
indemnification shall not apply to the extent such failure to provide such
notice prevents Contractor from defending against such claim), and (ii)
Contractor having the right to control the defense of any such action, claim or
demand and of all negotiations for its settlement or compromise; provided,
however, the Purchaser shall cooperate, at the Contractor's expense, in a
reasonable way to facilitate the Contractor's defense of such claim or demand or
the negotiations for its settlement. Nothing in this Sub-Article 23(C) shall
limit Purchaser's other rights and remedies otherwise provided in this Contract.
D. Purchaser, at its expense, shall defend, indemnify and hold harmless
Contractor, its agents, subcontractors and employees against any and all claims,
demands, and judgments for losses due to any act or omission, arising out of, or
in connection with this Contract or, after risk of loss passes to Purchaser, the
operation or maintenance of the System, to the extent such losses were caused by
the negligence or willful misconduct of the Purchaser, its subcontractors,
employees or agents (other than Contractor or its agents or subcontractors). The
defense, indemnification and save harmless obligation is specifically
conditioned on the following (i) Contractor providing prompt notification in
writing of any such claim or demand when it obtains Actual Knowledge thereof
(and if Contractor does not so provide such notice, then the indemnification
shall not apply to the extent such failure to provide such notice prevents
Purchaser from defending against such claim), and (ii) Purchaser having the
right to control the defense of any such action, claim or demand and of all
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negotiations for its settlement or compromise; provided, however, Contractor
shall cooperate, at Purchaser's expense, in a reasonable way to facilitate the
Purchaser's defense of such claim or demand or the negotiations for its
settlement. Nothing in this Sub-Article 23(D) shall limit the Contractor's
other rights and remedies otherwise provided in this Contract.
24 Counterparts
------------
This Contract may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
25 Design and Performance Responsibility
-------------------------------------
A. The Contractor shall be solely responsible for the design of and for
all details of the System and for the adequacy thereof.
B. The Contractor's responsibility for design of the System shall not in
any way be diminished nor shall the Contractor's design approach be restricted
or limited by the Purchaser's acceptance of the Contractor's guidance or
recommendations as to engineering standards and design specifications, or by the
Purchaser's or the Independent Engineer's suggestions or recommendations on any
aspect of the design.
C. Purchaser shall use reasonable efforts in assisting the Contractor to
obtain in a timely manner accurate information required for the Contractor to
perform the Work, which the Contractor cannot expeditiously and cost-effectively
obtain from any source other than the Purchaser.
D. If Purchaser reasonably believes that Contractor is failing to
maintain the progress of the Work such that the target date of Provisional
Acceptance of any Segment is expected to be thirty (30) days or more later than
the date therefor set forth in the Plan of Work, Appendix 3, then Contractor
shall (to the extent that appropriate measures are not already being
undertaken), and, in addition to any other obligations specified in this
Contract, work in good faith to regain and thereafter maintain such progress.
26 Product Changes
---------------
The Contractor may at any time make changes to the System furnished
pursuant to this Contract, or modify the drawings and published specifications
relating thereto, or substitute Supplies of later design, provided the changes,
modifications, or substitutions under normal and proper use do not impact upon
the form, fit, expected life or function of the System as provided in the System
Performance Requirements as confirmed in writing to the Purchaser and the
Independent Engineer to their reasonable satisfaction.
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27 Risk and Insurance
------------------
A. The Contractor shall at all times maintain, and upon request, the
Contractor shall furnish the Purchaser with certificates, or other reasonable
evidence, that Contractor maintains, the following insurance or has adequate
self-insurance (other than as required to comply with any statutory insurance
requirements):
1. Workmen's Compensation and Employers Liability Insurance
(with a limit of not less than * for any one incident or
series of incidents arising from one event or such higher
limit as may be required by the laws of any jurisdiction)
covering the officers and employees of the Contractor for
all compensation or other benefits required of the
Contractor by the laws of any nation or political sub-
division thereof to which the Contractor and its operations
under this Contract are subject in respect of injury of
death of any such employee.
2. Comprehensive General Public Liability Insurance, covering
personal injury and/or property damage, with combined single
limits of not less than * for claims of injury or death of
any persons or loss of or damage to property resulting from
any one accident. This insurance to be extended to provide
Marine Comprehensive General Liability including liabilities
arising out of the operation of subsea equipment.
3. All Risk Insurance in respect of all property of Contractor,
its respective officers, agents and employees connected with
the performance of the Work against all loss or damage from
whatever cause.
4. Conventional Marine Hull and Machinery Insurance including
War Risks on any vessel(s) owned, operated or chartered by
the Contractor, in an amount equal to the full value
thereof. In the event of damage to or loss of such
vessel(s), the Contractor agrees to look to its insurance
carrier for payment of such loss or damage and hereby
releases the Purchaser and waives any claims, including any
claim of a general average nature, against the Purchaser for
the loss of such vessel(s) unless due to the negligence of
Purchaser, its agent or representatives (other than
Contractor) or its subcontractors or agents.
5. All vessels in excess of * are to be entered in a Mutual
Protection and Indemnity Association with a full and
unlimited entry or to have Marine Protection and Indemnity
Insurance with a limit of not less than * including coverage
for illness, injury or death of crew members (unless covered
under Workmen's Compensation Insurance), Contractual
Liability Coverage, Collision and Tower's Liability, Removal
of Wreck and Debris and Third Party Liability. However,
vessels of less than * shall only be required to carry
Contractual Liability Coverage, Collision and Tower's
*MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION
FOR CONFIDENTIAL TREATMENT.
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<PAGE>
Liability, Removal of Wreck and Debris and Third Party
Liability insurance with a limit of not less than * .
6. Specialist Operations Insurance with a limit of not less
than *.
7. Transit Insurance including inland, air, and Marine Cargo
coverage including War (other than on land) in an amount
sufficient to cover the expected highest value of any one
shipment. Coverage to include Institute Cargo Clauses, all
risks 1.1.63, Institute War Clauses, London Malicious Damage
Clause, and Institute Strikes Riots and Civil Commotion
Clauses or their equivalent.
8. Marine Cargo or equivalent is required to protect, for full
cost, against all risks of physical loss or damage to the
Supplies to be included in the System (other than War Risks)
beginning with when each such item is ready for shipping and
ending when the submersible Supplies are placed overside the
cable laying vessel and when the Supplies are delivered to
the cable stations, central offices, or network operation
center. The coverage is broadened to include damages
resulting from cable cut due to adverse weather and
continues to cover cable lying on the seabed.
9. Sea Bed or equivalent coverage (including an Old Mines and
Torpedoes Clause, including other derelict weapons of War)
is required to protect, for full cost, against all risks of
physical loss or damage to the submersible Supplies
described in Sub-Article 27(A)(10) below. See last
paragraph.
10. War Risks or equivalent coverage is required to protect
against damage to, seizure by and/or destruction of the
System by means of war, piracy, takings at sea and other
warlike operations until discharge of the Supplies. For the
purposes of this Article "discharge of the Supplies" shall
be deemed to take place when the Supplies reach the sea
bottom, as far as the submersible Supplies are concerned,
and when the Supplies are off-loaded in the respective
terminal country, as far as non-submersible Supplies are
concerned.
11. Pollution Liability (EIL) insurance for installation
operations and as arising from the use of vessels in an
amount not less than * or such higher sum as may be required
to meet any legal requirement in the area of operations.
The Comprehensive General Public Liability Insurance required pursuant to
Sub-Article 27(A)(2) above, shall include Contractual Liability Coverage which
shall specifically apply to the obligations assumed by the Contractor under the
Terms and Conditions of this Contract.
B. 1. All the foregoing insurance shall note the interest of the
Purchaser and its lenders on the policies and be effected
with a creditworthy insurer and shall
*MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
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<PAGE>
be endorsed to provide Purchaser with at least thirty (30)
days prior written notice of cancellation or material
change.
2. All the foregoing insurances shall name the Purchaser (and
its lenders) as an additional insured and shall note the
interest of the Purchaser and its lenders on the policies,
in which event the Contractor's insurance shall be primary
to any insurance carried by Purchaser.
3. The limits specified herein are minimum requirements and
shall not be construed in any way as limits of liability or
as constituting acceptance by Purchaser (or its lenders) of
such responsibility for financial liabilities in excess of
such limits. The Contractor shall bear all deductibles
applicable to any insurance.
4. If it is judicially determined that the monetary limits of
insurance required hereunder or of any indemnity voluntarily
assumed under the Terms and Conditions of this Contact which
the Contractor agrees will be supported either by available
liability insurance or voluntarily self-insured, in part or
whole, exceeds the maximum limits permitted under applicable
law, it is agreed that said insurance requirements or
indemnity shall automatically be amended to conform to the
maximum monetary limits permitted under such law.
5. Contractor shall take reasonable steps to provide that any
sub-contractor engaged by it has in effect or will effect
Employer's Liability, Workmen's Compensation, Hull and
Machinery and Protection and Indemnity insurances and any
other insurances required by law, together with such other
insurances as the Contractor may consider necessary.
6. If the Contractor fails to effect or keep in force any of
the insurances required under this Contract, Purchaser (or
its lenders on Purchaser's behalf) may effect and keep in
force any such insurances and pay such premiums as may be
necessary for that purpose and from time to time deduct the
amount so paid by Purchaser from any money due or which may
become due to the Contractor hereunder or recover the same
as a debt due from the Contractor, provided that Purchaser
is not in Default.
7. Each Party shall give the other prompt notification of any
claim with respect to any of the insurances to be provided
hereunder, accompanied by full details giving rise to such
claim. Each Party shall afford the other all such assistance
as may be required for the preparation and negotiation of
insurance claims.
8. Contractor shall report to Purchaser as soon as practicable
all accidents or occurrences resulting in injuries to
Contractor's employees or third parties,
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<PAGE>
or damage to property of third parties, arising out of our
during the course of services for Purchaser by Contractor.
C. The Contractor may organize such levels of deductibles, excesses and
self-insurance as it considers appropriate and which are within prudent industry
standards.
D. The insurance requirements of this Article 27 will remain in place
with respect to each Segment, and will not in any way be diminished or reduced
until the transfer of title and risk of loss shall have passed to Purchaser of
such Segment, even in the event of the sale of substantially all the assets of
the Contractor by way of a merger, consolidation or sale of assets.
28 Plant and Work Rules
--------------------
Employees and agents of each Party shall, while on the premises of the
other or its subcontractors, comply with all plant rules and governmental
regulations.
29 Right of Access and Audit
-------------------------
A. The Contractor shall, upon reasonable notice of not less than ten (10)
working days, during normal business hours and in a manner to avoid any
disruption of the work on the premises including performance of other contracts,
permit access by the Purchaser or its Quality Assurance (QA) Representative or
the Independent Engineer (other than a competitor of the Contractor or any
affiliate of a competitor) to the Contractor's premises where the Work will be
performed, and will use its best endeavors to secure rights of access to
premises of its subcontractors where the Work will be performed, having
subcontracts or orders in the amount of, or equivalent to U.S. $125,000 or more,
in accordance with the Contractor's contractual arrangements with its
subcontractors, and allow the Purchaser or its QA Representative or the
Independent Engineer to:
1. audit the Contractor's quality assurance system and its
application to the Work, including manufacture, development
and raw materials and components provision;
2. inspect all parts of the manufacturing facilities to the
extent reasonably practicable to ensure that their quality
meets the System specifications as detailed in Appendices 4
and 5.
This right of access shall allow for the Purchaser and/or its QA representative
and/or the Independent Engineer (up to a total of three (3) persons). The
Purchaser shall provide the name(s), nationality and title of each such visitor
prior to the visit. The Contractor shall not be responsible for any costs,
including travel and accommodation costs, of the Purchaser or its
representatives.
B. The right of access shall also allow for the Purchaser and/or
representatives (up to a total of three (3) persons) to be aboard the vessel(s)
during installation and the route survey. The Contractor shall not be
responsible for any costs of the Purchaser or its representatives, except for
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living expenses on board the vessel which includes one (1) daily telex or fax.
All other travel and accommodation costs for the Purchaser or its QA
Representatives shall be for the account of the Purchaser.
C. Any right of access shall not be construed as creating any obligation
requiring the Contractor or its subcontractors to disclose trade secrets or
proprietary information. Further, such right of access may be conditioned on the
execution of a confidentiality and non-disclosure agreement and/or subject to
routine building or security rules, regulations or procedures.
D. Any exercise of any right of the Purchaser hereunder to inspect,
audit, visit or to observe any part of the Work shall not be construed as
limiting any obligation of Contractor hereunder, including without limitation,
under Articles 1 and 10 hereof. Moreover, and notwithstanding anything to the
contrary in this Contract, the Purchaser's right to inspect and reject Work or
Supplies shall not obligate the Purchaser to conduct such inspections. Neither
exercise by the Purchaser of such right, nor any failure on the part of the
Purchaser to discover or reject any Defective Work or Supply (or payment for or
use by the Purchaser of any Defective Work or Supply) shall be construed to
imply an acceptance of such Defective Work or Supply, or a waiver of either such
Defect or of Contractor's obligations or the Purchaser's rights under this
Contract or applicable Law.
E. Contractor will have access to the System as necessary to accomplish
its responsibilities under this Contract and in order to make repairs.
Contractor will provide reasonable notice of its need for access and will take
reasonable steps to minimize disruptions to the operation of the System.
F. Contractor shall give the Purchaser and the Independent Engineer
reasonable prior written notice of each project management review meeting with
respect to the status of the construction and/or installation of the System, and
Purchaser's representatives and the Independent Engineer shall at their cost be
permitted to attend and participate in such meetings.
G. Notwithstanding anything to the contrary in this Article 29, with
respect to Work performed on a cost-plus basis only, Purchaser shall have the
right to inspect, during normal business hours, all of the Contractor's
property, books, and records to perform a financial audit as to such Work, such
audit to be performed by an independent auditor chosen by the Purchaser. The
Contractor shall retain all pertinent records until three years after the
expiration of the Warranty Period. The Purchaser's auditors may copy any
documents that can be properly audited hereunder, and the Purchaser agrees that
any such copies will be used only for the Purchaser's purposes hereunder.
Contractor shall use its best endeavors to provide the Purchaser with identical
audit rights in any subcontract made by the Contractor for Work performed on a
cost-plus basis hereunder.
30 Quality Assurance
-----------------
All Supplies provided under this Contract shall be inspected and tested, at
the cost and expense of Contractor, by representatives designated by the
Contractor to the extent reasonably practical to assure that the quality of the
Supplies is sufficient to realize the System Performance Requirements. The
inspection and test program established for such Supplies shall be consistent
with
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<PAGE>
commercial practices normally employed by the Contractor in the construction of
submarine cable systems. The foregoing shall not be construed as limiting any of
the Contractor's obligations under this Contract.
31 Documentation
-------------
The Contractor shall, at its cost and expense, furnish to the Purchaser
seven copies of the standard documentation, one of which shall be in the
Portuguese language, one of which shall be in the Spanish language, and the
remainder of which shall be in the English language for the System provided
hereunder. All English documentation shall be provided prior to the Acceptance
Testing. All draft documentation and marine charts will be supplied in English
only. Additional copies of the documentation are available at additional cost.
32 Training
--------
The Contractor will provide, as part of the Initial Contract Price, until
the Date of Final Acceptance, any and all training necessary for the operation
and maintenance of the System. Such training shall occur in the English, Spanish
or Portuguese language, as applicable and at the request of Purchaser.
33 Settlement of Disputes/Arbitration
----------------------------------
A. The Parties shall endeavor to settle amicably by mutual discussions
any disputes, differences, or claims whatsoever related to this Contract.
B. Failing such amicable settlement, any controversy, claim or dispute
arising under or relating to this Contract, including the existence, validity,
interpretation, performance, termination or breach thereof, shall, be finally
settled by arbitration in accordance with the International Arbitration Rules of
the American Arbitration Association ("AAA"). Unless the Parties agree to a
---
sole arbitrator, there shall be three (3) arbitrators, with each Party
appointing one arbitrator, who collectively will select a third. The language of
the arbitration shall be English. The Arbitrator will not have authority to
award punitive damages to either Party. Each Party shall bear its own expenses,
but the Parties shall share equally the fees and expenses of the Arbitration
Tribunal and the AAA. This Contract shall be enforceable, and any arbitration
award shall be final, and judgment thereon may be entered in any court of
competent jurisdiction. In any such arbitration, the decision in any prior
arbitration under this Contract shall not be deemed conclusive of the rights as
among themselves of the Parties hereunder. The arbitration shall be held in New
York, New York, U.S.A.
C. THE OBLIGATIONS OF EACH PARTY IN RESPECT OF THIS CONTRACT DUE TO ANY
OTHER PARTY SHALL, NOTWITHSTANDING ANY JUDGMENT IN A CURRENCY (THE "JUDGMENT
--------
CURRENCY") OTHER THAN DOLLARS, BE DISCHARGED ONLY TO THE EXTENT THAT ON THE
- --------
BUSINESS DAY FOLLOWING RECEIPT BY SUCH PARTY OF ANY SUM ADJUDGED TO BE SO DUE IN
THE JUDGMENT CURRENCY, SUCH
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<PAGE>
PARTY MAY, IN ACCORDANCE WITH NORMAL BANKING PROCEDURES, PURCHASE DOLLARS WITH
THE JUDGMENT CURRENCY; IF THE AMOUNT OF DOLLARS SO PURCHASED IS LESS THAN THE
SUM ORIGINALLY DUE TO SUCH PARTY IN DOLLARS, EACH OTHER PARTY AGREES, AS A
SEPARATE OBLIGATION AND NOTWITHSTANDING ANY SUCH JUDGMENT, TO INDEMNIFY SUCH
PARTY AGAINST SUCH LOSS, AND IF THE AMOUNT OF DOLLARS SO PURCHASED EXCEEDS THE
SUM ORIGINALLY DUE TO ANY OTHER PARTY TO THIS CONTRACT, EACH OTHER PARTY AGREES
TO REMIT TO SUCH PARTY, SUCH EXCESS.
34 Applicable Law
--------------
THIS CONTRACT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, UNITED STATES, EXCLUDING ITS CONFLICTS OF LAW
PROVISIONS AND EXCLUDING THE CONVENTION FOR THE INTERNATIONAL SALE OF GOODS.
35 Notices
-------
A. Any notice, consent, approval, or other communication pursuant to this
Contract shall be in writing, in the English language, and shall be deemed to be
duly given or served on a Party if sent to the Party at the address stipulated
in Sub-Article 35(B) and if sent by any one of the following means only:
1. Sent by hand: Such communication shall be deemed to have
been received on the day of delivery provided receipt of
delivery is obtained.
2. Sent by facsimile: Such communication shall be deemed to
have been received, under normal service conditions, twenty-
four (24) hours following the time of dispatch or on
confirmation by the receiving Party, whichever is earlier.
3. Sent by registered or certified mail: Such communication
shall be deemed to have been received, under normal service
conditions, on the day it was received or on the tenth day
after it was dispatched, whichever is earlier.
B. For purposes of this Article, the names, addresses and fax numbers of
the Parties are as detailed below. Any change to the name, address, and
facsimile numbers may be made at any time by giving thirty (30) days prior
written notice.
Alcatel Submarine Networks
30 Rue Pierre Beregovoy
92111 Clichy Cedex
France
Facsimile: 011-33-01-4756-6920
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<PAGE>
Alcatel Submarine Networks, Inc.
15540 North Lombard Street
Portland, Oregon 97203-6428
Atlantica Network (Bermuda) Ltd.
2 Carter's Bay Road
Southside, St. David's DD02
Bermuda
Attn: General Counsel
Facsimile: 441-296-9010
with a copy to:
GlobeNet Communications Group Ltd.
170 Taschereau Blvd., Suite 310
La Prairie, Quebec
Canada J5R 5H6
Attn: Vice-President, Network Operations
Facsimile: 450-444-9301
36 Publicity and Confidentiality
-----------------------------
A. No information relating to this Contract shall be released by either
Party to any newspaper, magazine, journal or other written, oral or visual
medium without the prior written approval of an authorized representative of the
other Party; provided that, subject to Article 20 (Safeguarding of Information
--------
and Technology) and the following Sub-Article, this Article shall not restrict
either Party from (i) responding to customary press inquiries or otherwise
making public or private statements in the normal course of business, so long as
consistent with a mutually agreed press-release and (ii) assisting in the
obtaining of financing in accordance with Sub-Article 37(C), including the
publication of a financial tombstone.
B. This Contract and any non-public information (including Information),
written or oral, with respect to this Contract (collectively, "Confidential
------------
Information"), will be kept confidential and shall not be disclosed, in whole or
- -----------
in part, to any person other than affiliates, officers, directors, employees,
agents or representatives of a Party (collectively, "Representatives") who need
---------------
to know such Confidential Information for the purpose of negotiating, executing
and performing this Contract. Each Party agrees to inform each of its
Representatives of the non-public nature of the Confidential Information and to
direct such persons to treat such Confidential Information in accordance with
the terms of this Article. Nothing herein shall prevent a Party from disclosing
Confidential Information (a) upon the order of any court or administrative
agency, (b) upon the request or demand of, or pursuant to any regulation of, any
regulatory agency or authority, (c) to the extent reasonably required in
connection with the exercise of any remedy hereunder, (d) to a Party's legal
counsel, advisors or independent auditors, (e) to any actual or prospective
lenders to and investors in the Purchaser or Purchaser's parent or affiliate
companies, and (f) to any actual or
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proposed assignee of all or part of its rights hereunder provided that such
actual or proposed assignee agrees in writing to be bound by the provisions of
this Article.
37 Assignment; Subcontractors
--------------------------
A. Except as provided in this Article 37, neither Party shall assign this
Contract or any right or interest under this Contract, nor delegate any work or
obligation to be performed under this Contract ("Assignment"), without the other
----------
Party's prior written consent which shall not be unreasonably withheld (it being
understood that it shall be deemed to be reasonable to withhold consent to the
assignment of this Contract or any rights, interest or obligations hereunder to
a competitor of Contractor or an affiliate of a competitor or uncreditworthy
party). For purposes of this Article 37, "competitor" means a provider of
undersea cable equipment. Nothing herein shall preclude a Party from employing
a subcontractor in carrying out its obligations under this Contract. A Party's
use of such subcontractor shall not release the Party from its obligations or
liability (including warranties) under this Contract. If a proposed
subcontractor of major Supplies (i.e. Supplies listed on Exhibit F) is not
----
listed on Exhibit F hereto, Contractor shall obtain written approval thereof
from Purchaser, which approval shall not be unreasonably withheld.
B. Each Party has the right to assign all of its rights under this
Contract or to delegate all of its duties hereunder at any time without the
other Party's consent to any successor to substantially all the assets of the
assigning Party by way of a merger, consolidation or sale or transfer of assets
provided that in the case of any assignment or delegation pursuant to this Sub-
Article 37(B) such assignee shall assume in writing all warranties,
representations and obligations of the assigning Party under this Contract. The
assigning Party shall give the other party written notice thirty (30) days prior
to the assignment; provided, however, the assigning Party shall remain liable
for all of its obligations under this Contract as if the assignment had not
occurred. Any assignment or transfer by the assigning Party not expressly
permitted by Sub-Article 37(B) shall be of no force and effect.
C. The Parties acknowledge that Purchaser may finance construction of the
System and that in connection therewith the financing parties will require that
such financing be secured by certain assets of Purchaser (including but not
limited to this Contract).
1. Contractor agrees to deliver within fifteen (15) days upon
request, an opinion or opinions of counsel, in form and
substance reasonably satisfactory to the Purchaser,
addressed to the Purchaser and its lenders, which opinion or
opinions shall, without limitation, express the opinion that
this Contract is enforceable and the Contractor has all
necessary power and authority to execute this Contract and
perform its obligations hereunder.
2. Contractor shall execute and deliver to the Purchaser's
lenders all documents and certificates reasonably requested
by the Purchaser and shall cooperate with the Purchaser in
obtaining financing for the System to the extent reasonably
necessary. Without limiting the foregoing, Contractor
agrees, at its expense and to the extent reasonably
requested by the Purchaser and its lenders, (i) to execute
documents (A) consenting to the assignment of this
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<PAGE>
Contract by way of security to the Purchaser's lenders, (B)
agreeing to pay all sums of money payable to the Purchaser
under this Contract to accounts held by or on behalf of the
Purchaser's lenders, (C) agreeing not to terminate this
Contract without providing (x) notice to the Purchaser's
lenders and (y) except in the case of Default by the
Purchaser which allows Contractor to terminate pursuant to
Article 13, consent of the Purchaser's lenders, (D) agreeing
not to amend or modify this Contract (including Contract
Variations under Article 6) in a manner that would
materially adversely affect the Purchaser, but in any event
result in a cost increase to the Purchaser in excess of
US$500,000, without the consent of the Purchaser's lenders,
(E) certifying that this Contract is in full force and
effect and that there is no default by Contractor (or, to
its knowledge, the Purchaser) under this Contract (or
describing any such default), (F) making representations to
the Purchaser's lenders concerning the corporate existence
of Contractor and its authority to enter into and perform
this Contract and other customary corporate representations
and (G) clarifying this Contract if reasonably requested by
the Purchaser's lenders; (ii) to provide the most recently
available information to the Purchaser's lenders concerning
the Contractor's finances; and (iii) to accompany, at the
Purchaser's expense, the Purchaser and the Purchaser's
lenders (or their representatives) on financing roadshows.
D. Notwithstanding anything in this Contract to the contrary, the
Purchaser shall have the following rights: the Purchaser shall, without the
consent of the Contractor, have the right from time to time, to (a) assign its
rights and delegate its duties under this Contract to any person or entity and
(b) to sell, transfer or otherwise dispose of its interest in the System or any
portion thereof without in any way affecting its rights or Contractor's
obligations under this Contract; PROVIDED, HOWEVER, that (i) in the case of an
assignment of the Purchaser's rights or a delegation of the Purchaser's duties
to an affiliate of the Purchaser prior to the earlier to occur of the Date of
Provisional Acceptance or the Date of Commercial Acceptance with respect to a
Segment (such earlier date is hereinafter referred to as the "Acceptance Date"),
---------------
the Purchaser shall remain liable for all of its obligations under this Contract
with respect to such Segment until the Acceptance Date and (ii) no assignment of
the Purchaser's rights under this Contract with respect to a Segment shall be
permitted (other than to an affiliate of the Purchaser or as contemplated by
Sub-Article 37(C)) prior to the Acceptance Date with respect to such Segment
unless Contractor consents to such assignment, which consent shall not be
withheld unreasonably.
38 Relationship of the Parties
---------------------------
All work performed by a Party under this Contract shall be performed as an
independent contractor and not as an agent of the other and no persons furnished
by a Party shall be considered the employees or agents of the other. Each Party
shall be responsible for its employees' compliance with all Laws while
performing under this Contract. This Contract shall not form a joint venture or
partnership between the Parties.
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39 Successors Bound
----------------
This Contract shall be binding on the Contractor and the Purchaser and
their respective successors and permitted assigns.
40 Article Captions
----------------
The captions of the Articles do not form part of this Contract and shall
not have any effect on the interpretation thereof.
41 Severability
------------
If any of the provisions of this Contract shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable the entire Contract, but rather the entire Contract shall
be construed as if not containing the particular invalid or unenforceable
provision or provisions and the rights and obligations of the Contractor and the
Purchaser shall be construed and enforced accordingly. In the event such invalid
or unenforceable provision is an essential and material element of this
Contract, the Parties shall promptly negotiate a replacement provision.
42 Prime Contractor; Joint and Several Liability of the Contractor; Guarantors
---------------------------------------------------------------------------
A. The Contractor hereby designates ASN as the Prime Contractor to be
responsible for the coordination and monitoring of the Work and administration
of this Contract. The Prime Contractor shall act as principal point of contact
between Purchaser and Contractor, although Purchaser may, at its option,
communicate with ASNI. Any notice given to or by, any amendment or Contract
Variation executed and delivered, any consent, waiver or approval given to or
by, or any other action taken by, the Prime Contractor shall be deemed to be the
joint action of each of the parties constituting the Contractor, and Purchaser
shall be entitled to rely thereon.
B. ASN and ASNI shall each be jointly and severally liable to Purchaser
for payment and performance of all of the obligations and liabilities of the
Contractor whatsoever under this Contract. Each of ASN and ASNI shall, by
itself, be deemed fully liable to Purchaser for the payment and performance of
all the obligations and liabilities of the Contractor hereunder, including all
obligations and liabilities arising as a result of (i) a failure by the other
party constituting the Contractor to pay and perform its obligations and
liabilities hereunder, (ii) any breach of warranty by such other party or (iii)
any act or omission by such other party which causes a Default hereunder.
Purchaser may seek to enforce all of the obligations and liabilities of
Contractor hereunder, or seek remedies with respect thereto, against both of, or
either one of, the parties constituting the Contractor without seeking
enforcement or remedies against the other such party. Neither party constituting
the Contractor shall have the right to raise as a defense against any claim
brought by Purchaser, the allegation that such claim was caused by the fault of
the other party constituting the Contractor.
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C. The Contractor agrees to cause its ultimate parent company to execute
and deliver, contemporaneously with the initial payment under this Contract, a
guaranty to Purchaser substantially in the form of Exhibit A hereto.
43 Survival of Obligations
-----------------------
The Parties' rights and obligations, which, by their nature would continue
beyond the termination, cancellation or expiration of this Contract, including,
but not limited to, those contained in Sub-Article 4(B) (Taxes, Levies and
Duties) and Sub-Article 4(C) (Withholding Tax), Article 10 (Warranty), Article
11 (the Contractor Support), Article 18 (Intellectual Property), Article 20
(Safeguarding of Information and Technology), Article 21 (Export Control) and
Article 23 (Limitation of Liability/ Indemnification) shall survive termination,
cancellation or expiration hereof.
44 Non-Waiver
----------
A waiver of any of the terms or conditions of this Contract, or the failure
of either Party strictly to enforce any such term or condition, on one or more
occasions shall not be construed as a waiver of the same or of any other term or
condition of this Contract on any other occasion.
45 Language; Interpretation
------------------------
This Contract has been executed in the English language and English will be
the controlling language for interpretation of this Contract. As used in this
Contract, "including" means "including without limitation."
46 Representations and Warranties
------------------------------
A. Contractor's Representations and Warranties. Contractor represents
-------------------------------------------
and warrants to Purchaser and acknowledges and agrees, as follows:
(a) ASN is a societe anonyme duly formed, validly existing and
in good standing under the laws of France and ASNI is a
Delaware corporation, duly formed, validly existing and in
good standing under the laws of Delaware and each has
obtained all qualifications under all applicable laws
necessary to engage in the business required of it under
this Contract and has full power and authority to own its
property and to carry on its business as now conducted.
(b) Contractor has full power and authority to execute this
Contract and to carry out its obligations under this
Contract. Its execution and performance of this Contract and
the consummation of the
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transactions contemplated by this Contract have been duly
authorized by all requisite corporate action on its part.
This Contract constitutes a valid and legally binding
obligation of Contractor, enforceable against it in
accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to creditors' rights generally. Its representative
executing this Contract has sufficient authority to sign
this Contract in its name and on its behalf, and that
authority has not been limited or revoked.
(c) Contractor's execution and performance of this Contract and
the transactions contemplated hereby do not constitute a
breach of any term or provision of, or a default under, (A)
any contract or agreement to which it or any of its
affiliates is a party or by which it or any of its
affiliates or its or their property is bound, (B) its
organizational documents or (C) any laws, regulations or
judicial orders having applicability to it, which breach
would have a material adverse affect on its ability to
perform its obligations hereunder.
(d) There is no legal proceeding pending or, to Contractor's
knowledge, threatened against it that could materially
adversely affect the validity of this Contract or its
ability to perform its obligations hereunder.
(e) It has the requisite expertise, professional qualifications,
skills, personnel, technology, experience and technical
resources to perform the Work.
(f) It has had a full and complete opportunity to examine this
Contract.
(g) It has made all investigations and inspections that it deems
necessary to perform the Work in accordance with this
Contract. Contractor has ascertained and relied upon its own
investigation of the availability and quality of laborers
and suppliers in each location in which all or any portion
of the Work is to be performed, and has investigated to its
satisfaction all applicable legal and regulatory
requirements relating thereto.
B. Purchaser Representations and Warranties. Purchaser represents and
----------------------------------------
warrants to Contractor as follows:
(a) It is a duly formed and validly existing corporation under
the laws of its jurisdiction of incorporation. It has full
power and authority to own its property and to carry on its
business as now conducted.
Page 59
<PAGE>
(b) It has full power and authority to execute this Contract and
to carry out its obligations under this Contract. Its
execution and performance of this Contract and the
consummation of the transactions contemplated by this
Contract have been duly authorized by all requisite
corporate action on its part. This Contract constitutes a
valid and legally binding obligation of Purchaser,
enforceable against it in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to creditors' rights generally.
Its representative executing this Contract has sufficient
authority to sign this Contract in its name and on its
behalf, and that authority has not been limited or revoked.
(c) Purchaser's execution and performance of this Contract and
the transactions contemplated hereby do not constitute a
breach of any term or provision of, or a default under, (A)
any contract or agreement to which it or any of its
affiliates is a party or by which it or any of its
affiliates or its or their property is bound, (B) its
organizational documents or (C) any laws, regulations or
judicial orders having applicability to it, which breach
would have a material adverse affect on its ability to
perform its obligations hereunder.
(d) There is no legal proceeding pending or, to Purchaser's
knowledge, threatened against it that could materially
adversely affect the validity of this Contract or its
ability to perform its obligations hereunder.
47 Entire Agreement
----------------
This Contract supersedes all prior oral or written understanding among the
Parties and constitutes the entire agreement with respect to the subject matter
herein, including that certain Letter of Intent to Proceed issued by the
Purchaser on June 4, 1999 and signed by ASN on June 7, 1999 (the "LOI");
---
provided, however, that no payment is owed by the Purchaser to ASN under the LOI
as a result of the LOI being superseded by this Contract unless the Purchaser
fails to make the initial payment under Sub-Article 5(C)(2) before the
termination of this Contract by any Party. If any Party terminates this
Contract before the initial payment is made hereunder, the Purchaser shall, in
lieu of such initial payment, be required to pay promptly the amount as
determined under paragraph 3 of the LOI. The terms and conditions of this
Contract shall not be modified or amended except by a writing signed by
authorized representatives of the Purchaser and the Prime Contractor.
48 Optional System Upgrades
------------------------
A. Contractor hereby grants Purchaser an irrevocable option for one or
more (as determined by Purchaser) future upgrades to the System (each
a "System Upgrade") that may be exercised by Purchaser during the
Upgrade Option Period. Except as otherwise provided in this Contract,
all of the terms and conditions of this Contract (including Article
10) shall apply to each System Upgrade.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR
CONFIDENTIAL TREATMENT.
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49 Integration of BUS-1 in System
------------------------------
A. The Parties acknowledge that for the provision of the System, it will
be necessary to utilize the existing BUS-1 system. This Article governs the
utilization of the BUS-1 system. This Article shall be governed in accordance
with the terms and conditions of this Contract.
B. The Contractor will perform all necessary tests on BUS-1 to confirm
its capability for use in the System and to determine the number of wavelengths
by which it can be upgraded while still meeting the System Performance
Requirements.
C. Contractor undertakes to integrate and upgrade BUS-1 into the links
supplied by Contractor, subject to the following provisions:
1. Contractor has determined that BUS-1 is capable for use in
the System.
2. In its present configuration, the BUS-1 system complies with
performance criteria of ITU-T G.826 and interconnectivity
capability according to ITU-T G.957 and G.958.
3. Contractor is given reasonable access to BUS-1 for all
purposes necessary for the integration and upgrade, provided
that such access does not unduly interfere with service of
the BUS-1 system.
4. Purchaser will promptly repair any defects in BUS-1 (other
than defects caused by Contractor or its agents or
Subcontractors) and to the extent such defects delay the
Contractor in the performance of its tasks under this
Article 49, Contractor shall be entitled to claim extensions
of time under Article 17 and any additional cost arising
therefrom.
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<PAGE>
5. With respect to BUS-1, the terms and conditions of Article
10 shall apply except in regard to Defects in BUS-1 not
caused by the Contractor (or its agents or subcontractors)
or any supplies not furnished by Contractor (or its agents
or subcontractors).
50 Optional System Extension
-------------------------
A. Contractor hereby grants Purchaser an irrevocable option to change the
System configuration*
B. *
C. Purchaser may exercise this option to extend the System during the
Extension Option Period by providing notice pursuant to Article 35.
D. The performance of each System Extension shall be consistent with the
end-of-life bit error rate requirements as specified in the Technical Volumes.
The terms and conditions as set forth in Article 9 govern acceptance of each
System Extension.
E. *
F. *The Purchaser will use reasonable efforts to try to forecast its
requirements so as to give earlier notice of an estimated time for the extension
works.
G. *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
51 Time of the Essence
-------------------
Time is of the essence of this Contract.
Page 63
<PAGE>
52. Guaranty
--------
Contractor shall cause the Guarantor to execute and deliver the Guaranty to
Purchaser no later than the date on which the initial payment referred to in
Sub-Article 5(C)(2) is paid.
Page 64
<PAGE>
This Contract is executed as of the date first set forth above in Paris,
France by a duly authorized representative of ASN, in Portland, Oregon by a duly
authorized representative of ASNI, and in St. David's, Bermuda by a duly
authorized representative of Purchaser, as set forth below.
ALCATEL SUBMARINE NETWORKS
By: /s/ CHARLES H. MATTHEWS
--------------------------------------
Name: Charles H. Matthews
Title: General Counsel
ALCATEL SUBMARINE NETWORKS, INC.
By: /s/ ROBERT J. KELLY
--------------------------------------
Name: Robert J. Kelly
Title: President
ATLANTICA NETWORK (BERMUDA) LTD.
By: /s/ JAMES M. FITZGERALD
---------------------------------------
Name: James M. Fitzgerald
Title: Vice President - Bermuda Operations
Page 65
<PAGE>
EXHIBIT 10.18
BUS-1 CABLE SYSTEM
COMMERCIAL
TERMS AND CONDITIONS
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<PAGE>
BUS-1 CABLE SYSTEM
(BERMUDA - U.S. NO. 1)
COMMERCIAL TERMS AND CONDITIONS
COPYRIGHT IN THE WHOLE OR ANY PART OF THIS DOCUMENT IS
THE PROPERTY OF THE PURCHASERS AND ITS USE,
REPRODUCTION, OR STORAGE IN A RETRIEVAL SYSTEM OR
DISTRIBUTION WITHOUT THE EXPRESS LICENSE OF THE
COPYRIGHT OWNERS IS STRICTLY PROHIBITED
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 1. Definitions............................................. 6
Article 2. Object.................................................. 10
Article 3. Documents Forming Entire Contract....................... 10
Article 4. Design Responsibility................................... 11
Article 5. Route Selection......................................... 11
Article 6. Supplier to Inform Itself Fully......................... 12
Article 7. Supplier to Conform to Regulations and Give
Notice and Pay Fees..................................... 12
Article 8. Contract Price.......................................... 14
Article 9. Duties and Sales Taxes.................................. 15
Article 10. Payment................................................. 15
Article 11. Contract Variations..................................... 19
-------------------
Article 12. Date of Ready for Provisional Acceptance................ 20
Article 13. Acceptance Procedures................................... 20
Article 14. Warranty................................................ 24
Article 15. Letter of Credit........................................ 28
Article 16. Future Orders and Suppliers' Support.................... 29
Article 17. Failure to Meet Contracted Time for Completion.......... 31
Article 18. Force Majeure........................................... 32
Article 19. Limitation of Liability................................. 33
</TABLE>
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<TABLE>
<S> <C>
Article 20. Deductions from Suppliers' Monies....................... 33
Article 21. Inferior Supplies or Defective Work..................... 34
Article 22. Termination for Default................................. 34
Article 23. Termination by Notice................................... 36
Article 24. Suspension of Work...................................... 40
Article 25. Patent Rights and Royalties............................. 41
Article 26. Software................................................ 43
Article 27. Safeguarding of Information and Technology.............. 44
Article 28. Vesting and Transfer of Title........................... 45
Article 29. Rights of Access........................................ 46
Article 30. Quality Assurance....................................... 46
Article 31. Waiver and Indemnification.............................. 46
Article 32. Risk and Insurance...................................... 47
Article 33. Assignment and Sub-contracting.......................... 47
Article 34. Purchaser's Staff Participation......................... 49
Article 35. Keeping of Books........................................ 50
Article 36. Applicable Law.......................................... 50
Article 37. Applicable Law.......................................... 50
Article 38. Relationship of the Purchasers.......................... 52
Article 39. Publicity............................................... 52
Article 40. Corrupt Gifts and the Payment of Commission............. 52
Article 41. Execution of Contract and Amendments.................... 52
</TABLE>
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<TABLE>
<S> <C>
Article 42. Headings................................................ 53
Article 43. Successors Bound........................................ 53
Article 44. Severability............................................ 53
Article 45. No Waiver of Remedies................................... 54
Article 46. Liability of Purchasers................................. 54
Article 47. Notices................................................. 54
Article 48. Survival of Obligations................................. 56
Article 49. Expert Control.......................................... 56
Article 50. Letter of Credit Provided by the Purchaser.............. 56
Article 51. Supplemental Agreements................................. 57
Article 52. Coming into Force....................................... 57
</TABLE>
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SUPPLY CONTRACT
This Contract, made and entered into this 16th day of May, 1996 between
TeleBermuda International Ltd. ("TBI"), a Bermuda corporation having its
principal office at 10 Queen Street, Suite 101, Hamilton HM 11, Bermuda
(hereinafter referred to as the "Purchaser") and AT&T Submarine Systems, Inc.
("AT&T-SSI"), a corporation having its principle office at 340 Mt. Kemble Ave.,
Morristown, NJ, 07960 (hereinafter called the "Supplier"). TBI and AT&T-SSI
hereinafter will be referred to collectively as the "Parties."
W I T N E S S E T H
WHEREAS, TBI, wishes to supplement certain existing submarine cable facilities
by providing an optical fiber submarine cable system, linking the United States
of America and Bermuda (hereinafter called the "Cable System"), which will be
used to provide telecommunication services between the U.S. and Bermuda, and
WHEREAS, TBI, as the Purchaser, wishes to enter into a Supply Contract with
AT&T-SSI, to engineer, provide, install and test the BUS-1 Cable System, and
NOW THEREFORE, the Parties agree that the following terms and conditions govern
the supply and purchase of the BUS-1 Cable System.
ARTICLE 1. DEFINITIONS
- ----------------------
Terms and Conditions in this Contract, shall have the following meanings unless
otherwise specifically stated:
1.1 "Cable System"
------------
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means the BUS-1 Cable System as defined in the Technical Documentation.
1.2 "Contract"
--------
means the Terms and Conditions contained herein, together with the
documents described in Article 3, Documents Forming Entire Contract, and
any changes pursuant to Article 11, Contract Variations.
1.3 "Contract Price"
--------------
means the total price stated in the Provisioning Schedule which is found
under the Provisioning Schedule tab of this Contract.
1.4 "DDP"
---
means "Delivered Duty Paid" and refers to the FOB costs and all necessary
charges, duties and taxes required to deliver such Supplies to the
Purchaser's nominated place of delivery, including but not limited to:
. International Freight
. International Insurance
. Custom Duties (if any)
. Sales Tax (if any)
. Clearance Charge (Maritime Services Board and Sorting and Stocking
Charge)
. Carriage to and unloading
1.5 "Intellectual Property Rights"
----------------------------
means all or any rights in intellectual property enjoyed by the owners of
such rights and shall include, but not be limited to, patents, copyright,
design rights (whether registered or unregistered), trademarks, service
marks and trade secrets.
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1.6 "Liability Base"
--------------
means the sum of the cost listed in the tab for the Provisioning Schedule.
The Liability Base will be used to calculate any Liquidated Damages for
Lateness as set forth in Article 17.
1.7 "Quality Assurance (QA) Representative"
-------------------------------------
means a person authorized by the Purchaser to inspect the Work, Supplies,
materials, plans, equipment or any portion or part thereof to be provided
under this Contract. The Purchaser shall obtain written permission, not to
be unreasonably withheld, from the Supplier to employ a competitor of AT&T-
SSI as a Quality Assurance representative and the QA Representative shall
be required to sign a Non-Disclosure Agreement with AT&T-SSI prior to
access to any of the Supplier's facilities.
1.8 "Factory Release Certificates"
----------------------------
means a document issued by the Supplier's Quality Assurance Departments in
the form set out in the Technical Documentation.
1.9 "Software"
--------
means all programs, data, object code, documentation and operating systems,
whether in writing, in firmware, or in any other form, necessary to the
Cable System (excluding source code); including relevant and necessary
documentation, any support tools which are not commercially available, and
any data connected with the System's development and support such as any
upgrades or enhancements thereto required under the Warranty provisions.
1.10 "Supplies"
--------
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means and includes any or all materials, plants, machinery, equipment,
hardware, firmware, Software, spares or any items whatsoever supplied or
licensed by the Supplier for the purposes of the Work.
1.11 "Technical Documentation"
-----------------------
means the contents of the following documents which are attached and
incorporated by reference to:
i) Technical Documentation
ii) Route Information
iii) Plan of Work
1.12 "Warranty Period"
---------------
means the time period set out in Article 14, Warranty.
1.13 "Work"
----
means the object of the Contract, coordinating, planning, designing,
manufacturing, transporting, assembling, cable laying, installing, testing,
commissioning, training, and any other associated service or activities
whatsoever concerning the construction, installing and testing of the Cable
System and performance of the Contract by the Supplier and its
subcontractors.
1.14 "Unusually Severe Weather"
------------------------
means conditions at or exceeding Sea State 5 for a period in excess of 10%
of the operational schedule.
ARTICLE 2. OBJECT
- ---------------------
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In consideration of the Contract Price, as defined in Article 8, Contract Price,
the Supplier agrees, it shall have the responsibility to undertake all Work, in
accordance with the Technical Documentation and this Contract.
ARTICLE 3. DOCUMENTS FORMING ENTIRE CONTRACT
- ------------------------------------------------
This Contract consists of the terms and conditions in Articles 1 through 52
("Terms and Conditions") and the documents attached and listed in the following
order of precedence
. Technical Documentation
. Route Information
. Plan of Work
. Provisioning Schedule
. Billing Schedule
. Attachment A Purchaser's Letter of Credit
. Attachment B Supplier's Letter of Credit
. Attachment C Purchaser's Activities
. Appendix 1 Cable System Maintenance Agreement
In the event of any conflict between the Terms and Conditions and any matters
contained in the Tabs, the Terms and Conditions shall prevail. This Contract
supersedes all prior oral or written understandings between the Purchaser and
the Supplier, and constitutes the entire agreement between the Purchaser and the
Supplier.
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ARTICLE 4. DESIGN RESPONSIBILITY
- ------------------------------------
4.1 The Supplier shall be solely responsible for the design of the Cable
System, in consultation with the Purchaser, and for ensuring that the Cable
System is fully compliant with the Technical Documentation and the Supplier
shall not claim any additional payment nor be relieved from any obligation
imposed by this Contract because of any information on any matter
whatsoever supplied by the Purchaser, unless it is due to incorrect
information received from or supplied by the Purchaser.
4.2 Supplier shall not be relieved in any way from total responsibility for the
design and suitability of the Cable System even if it is based on:
(a) Purchaser's acceptance of the Supplier's guidance or recommendations
as to engineering standards and design specifications or
(b) The Purchaser's suggestions or recommendations on any aspect of the
said design.
4.3 The Supplier shall be solely responsible for the wet plant design of the
Cable System such that it will support upgrade of capacity to 20 Gbit/s per
fiber pair by the Supplier.
ARTICLE 5. ROUTE SELECTION
- ------------------------------
5.1 The Purchaser and Supplier shall mutually agree on the route and consequent
Straight Line Diagram (SLD) within 60 days of presentation of the Final
Route Survey Report. If the Supplier performs the Route Survey, then the
Supplier shall be responsible for any changes resulting from survey
inaccuracies. If the Purchaser performs the Route Survey, the Supplier
shall not be liable for any changes resulting from survey inaccuracies, and
any such changes shall be treated as a Contract Variation.
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5.2 The Supplier shall be solely and totally responsible for the marine
installation along the agreed route.
ARTICLE 6. SUPPLIER TO INFORM ITSELF FULLY
- ----------------------------------------------
6.1 The Supplier shall be deemed to have fully examined the drawings,
specifications, schedules, and Terms and Conditions of this Contract and to
have fully examined and satisfied itself as to all information which is
relevant to reasonably determine the risks, contingencies and other
circumstances which could affect this Contract.
6.2 The Purchaser shall not be responsible for any acts or omissions of the
Supplier that violate the laws, statutes, orders, rules, decrees, or
regulations of any jurisdiction in which the Work is carried out, except
that the Purchaser shall be only responsible for liabilities which arise
from its own negligence or willful misconduct.
ARTICLE 7. SUPPLIER TO CONFORM TO REGULATIONS AND GIVE NOTICE AND PAY FEES
- ------------------------------------------------------------------------------
7.1 Except as set forth in Sub-Article 7.3, the Supplier shall comply with the
requirements of all laws, statutes, ordinances, regulations, by-laws,
orders and proclamations of the countries, states, provinces, and
territories in which any part of the Work is to be performed and which in
any way affect this Contract are applicable to any Work. The Supplier
shall, before making any variations from the designs, drawings, plans or
procedures that may be necessitated by complying, with any regulations,
give to the Purchaser written notice, specifying the variation proposed to
be made, and the reasons
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<PAGE>
for making it, and apply for instructions thereon. Upon receipt of written
approval by the Purchaser, not to be unreasonably withheld, the Supplier
may make its recommended variation and hold Purchaser responsible for the
reasonable costs of any such variation. As required by any regulations, the
Supplier shall give all notices required to be given to any authority,
perform or permit the performance by authorized persons of any inspection
and shall pay all fees, charges, except for the duties and taxes excluded
in Article 9, Duties And Sales Taxes.
7.2 The Supplier shall be responsible for obtaining all required port
clearances in the territorial water of the countries where the cable is to
be laid and all other required permits and clearance documents from the
appropriate authorities to ensure the smooth implementation and successful
completion of the Cable System. However, the Purchaser agrees to provide
assistance in a timely manner and any and all information which is
available only from the Purchaser.
7.3 Notwithstanding the above, the Purchaser shall be responsible for obtaining
any necessary landing licenses and obtain, if necessary, Environmental
Impact Statement(s), and obtain from all relevant governmental
agencies/authorities, environmental approvals necessary to install the
Cable System. The Supplier shall cooperate fully with the Purchaser in
this respect. The Supplier shall not be responsible for any delays
associated with the Purchaser's failure to obtain landing licenses. Any
such permit delay will be treated as a Force Majeure event under Article
18.
7.4 In accordance with the Purchaser's written request, the Supplier will
provide the Purchaser with reasonable assistance in order for the Purchaser
to obtain all
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Environmental permits for the U.S. landing, including relevant materials
which are available from previous systems installed at the cable station
landing location. However, the Supplier shall not be responsible for nay
delays associated with the Purchaser's failure to obtain the Environmental
permits. Any such permit delay will be treated as a Force Majeure event
under Article 18. The Purchaser will be responsible for any costs
associated with obtaining the environmental permits.
ARTICLE 8. CONTRACT PRICE
- -----------------------------
8.1 The Contract Price $* is as agreed for the manufacture, supply,
installation and commissioning of the Cable System, and is based on the
prices described in the tab for Provisioning Schedule. The Contract Price
is fixed and except as otherwise provided, any increase or decrease in the
price must be made as provided for in Article 11, Contract Variations.
8.2 The Contract Price includes all taxes, duties, levies and fees that may be
imposed or levied in connection with the Work, whether in the country of
the Supplier, or the Purchaser including taxes incurred by the Purchaser in
respect of his personnel and subcontractors such as income tax, payroll
tax, and other taxes, contributions and levies that may be levied on the
Supplier of the personnel local agent or site office of the Purchaser.
8.3 The Supplier hereby grants the Purchaser an option under this Contract, to
be exercised by * , to order from AT&T-SSI a cable system
extension to Europe, at the discounted prices provided for in the
Provisioning Schedule in this Contract.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
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ARTICLE 9. DUTIES AND SALES TAXES
- -------------------------------------
9.1 The Supplier shall use all reasonable efforts to exempt all Work from sales
taxes, customs duties, or other applicable levies and duties, whether in
the Supplier's manufacture or related to the Supplier's importation or
installation, and shall cooperate with the Purchaser fully in this respect.
The Supplier hereby undertakes to make applications for such revisions
and/or for drawbacks, remissions, reclassification, or the like, to the
appropriate jurisdiction, and in accordance with the relevant laws and
regulations then in force. Notwithstanding the above, should the Purchaser
be made aware of any areas of exemption from taxes or duties, then the
Purchaser must identify such areas to the Supplier who shall investigate
the same.
ARTICLE 10. PAYMENT
- ----------------------
10.1 The Purchaser shall pay the Supplier and the Supplier shall accept payment
for the Cable System in accordance with this Article 10. The Supplier
shall render invoices to the Purchaser not more than once each calendar
month as follows.
10.2 Invoices shall be submitted in the format of the sample invoices included
in the Billing Schedule; all invoices shall be rendered no later than the
15th calendar day of a given month.
10.3 All invoices rendered under this Contract except as covered under
Subarticle 10.7.1, shall be payable within 60 days. Invoices not paid when
due shall accrue extended payment charges from the day following the day
payment of the invoice was due until the invoice
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is paid. For the purpose of this Contract, extended payment charges shall
be computed at a rate equal to 125% of the lowest publicly announced prime
rate or commercial lending rate, however described, for 90-day loans in the
currency of the United States, of the banks listed below on the day
following the date payment of the invoice was due. In the event that
applicable law will only allow the imposition of extended payment charges
at a rate below the rate established in accordance with this Subarticle,
extended payment charges shall be at the highest rate permitted by the
applicable law.
Citibank, N.A., Chase Manhattan Bank, N.A.,
Manufacturers Hanover Trust Company,
10.4 An invoice shall be deemed to have been accepted if the Purchaser does not
present a written objection before the payment is due. If such objection
is made, the Supplier and the Purchaser shall make every reasonable effort
to settle promptly the dispute concerning the invoice in question. If the
objection is sustained and the Purchaser has paid the disputed invoice, any
agreed upon overpayment shall be refunded to the Purchaser by the Supplier
promptly, together with any financial charges calculated thereon at a rate
determined in accordance with Subarticle 10.3 above from the date of
payment of the invoice to the date on which the refund is paid to the
Purchaser. If the objection is not sustained and the Purchaser has not
paid the disputed invoice, the Supplier shall be entitled to full payment
of the invoice promptly, together with any extended payment charges
calculated thereon at a rate determined in accordance with Subarticle 10.3
above from the day following the date on which payment of the invoice was
due until paid.
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Nothing in this Subarticle shall relive the Purchaser from paying those
parts of an invoice not in dispute.
10.5 All payments shall be made to the Supplier in U.S. dollars free from all
bank charges and such charges shall be the responsibility of the Purchaser.
The amounts due to the Supplier shall be remitted by means of a method
acceptable to the Parties.
10.6 On receipt of the last payment of the Contract Price after Provisional
Acceptance, the Purchaser shall thereby be released from all claims for
payment arising out of or relating to this Contract.
10.7 No payment (final or otherwise) made under or in connection with this
Contract shall be conclusive evidence of the performance of the Work, or of
this Contract, in whole or in part, and no such payment shall be construed
to constitute the acceptance of defective, faulty or improper Work or
Supplies, nor shall it release the Supplier from any of its obligations
under this Contract, nor shall use by the Purchaser of the Cable System
constitute acceptance of the Work or any part thereof.
10.8 Terms for Invoicing
The Purchaser shall make payments to the Supplier according to the
following terms:
10.8.1 * of the Contract Price, as a down payment, payable by September
30, 1996.
10.8.2 * of the prices of the Route Survey as identified in the
Provisioning Schedule, plus * of the Contract Price, to be paid
within 60 days of the date of receipt of invoice of the Final Route
Survey report.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
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10.8.3 * of the prices of Supplies as identified in the Provisioning
Schedule and will be billed in accordance with the Billing
Schedule.
10.8.4 * of the price of the Cable and Repeaters as identified in the
Provisioning Schedule and will be billed in accordance with the
Billing Schedule.
10.8.5 * of the price of Marine Installation services as identified in the
Provisioning Schedule at the time of Final Splice and bill in
accordance with the billing schedule.
10.8.6 The difference between the Contract Price, including Contract
Variations, and all previous entitlements under 10.8.1 and 10.8.2
within 60 days of the date of receipt of invoices by the Purchaser
after the issuance of the Certificate of Provisional Acceptance.
10.8.7 All invoices, except the down payment, shall include all
documentation necessary to demonstrate compliance with the terms of
the Contract, including, but not limited to, appropriate Factory
Release Certificates and shipping papers.
10.8.8 If Commercial Acceptance is granted for any portion of the Cable
System as described in Subarticle 13.5 the difference between *
of the Contract Price for that portion or portions of the Cable
System and all payments previously made under 10.8.1 and 10.8.5
shall be paid in accordance with Subarticle 10.4 after the issuance
of the Certificate of Commercial Acceptance. The remaining unpaid
balance will be due 60 days after Provisional Acceptance.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
ARTICLE 11. CONTRACT VARIATIONS
- ---------- -------------------
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11.1 Subject to Subarticle 11.4 herein, variations in quantities in the
Provisioning Schedule as a result of the Final route Survey, shall be
priced using the unit prices provided in the Provisioning Schedule. Any
additional variations not covered by the provisions of this Subarticle 11.1
shall be subject to the provision of Subarticle 11.2.
11.2 In addition to those changes authorized under Subarticle 11.1, the
Purchaser may, prior to Provisional Acceptance by written order, make
Contract Variations requiring amendments to these Terms and Conditions,
including additions or, alterations to, deviations or deductions from the
Cable System, provided such changes are within the general scope of Work.
The Supplier shall not unreasonably refuse to agree to changes that are not
of a fundamental nature.
11.3 A Contract Variation shall be valued at the applicable rates included in
the Provisioning Schedule. In the case of a variation to which no schedule
rates or prices in the Provisioning Schedule apply, the rate or price
payable for the Contract Variation shall be determined by agreement between
the Supplier and the Purchaser based upon the price detail information
provided to the Purchaser by the Supplier.
11.4 A Contract Variation must have been agreed to by the Purchaser and the
Supplier prior to its implementation for claim for adjustment in time or
cost to be recognized or acceded to.
11.5 If any one Contract Variation exceeds the Contract Price by fifteen percent
(15%) or more, both parties shall in good faith negotiate the unit prices.
11.6 Any increase in costs for the marine operations, stated in the Provisioning
Schedule will only be paid by the Purchaser in accordance with Article 11,
Contract Variations.
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ARTICLE 12. DATE OF READY FOR PROVISIONAL ACCEPTANCE
- -------------------------------------------------------
The Cable System shall be ready for Provisional Acceptance in accordance with
Article 13, Acceptance Procedures, by October 15, 1997.
ARTICLE 13. ACCEPTANCE PROCEDURES
- ------------------------------------
13.1 Compliance with the Technical Documentation shall be determined through the
test programs routinely used in the industry and mutually agreed to between
the Parties.
13.2 The tests shall be performed by the Supplier. The Supplier shall provide
the Purchaser with reasonable advance notice of the date when the tests are
scheduled to commence and the Supplier shall permit the Purchaser or their
designated representatives to observe such tests and to review the test
results.
13.3 Within thirty (30) days of receipt of a formally documented initial
commissioning report and acceptance test results for the Cable System, the
Purchaser shall notify Supplier either that:
13.3.1 it will issue a Certificate of Provisional Acceptance for the Cable
System in accordance with Subarticle 13.4.1 or 13.4.2 below, or
13.3.2 it will not issue a Certificate of Provisional Acceptance for the
Cable System, but will issue a Certificate of Commercial Acceptance
in accordance with Subarticle 13.5 below, or
13.3.3 it will not issue any certificates at this time.
13.4 Certificate of Provisional Acceptance
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13.4.1 When the results of all tests indicate that the Cable System has
been completed in accordance with the Technical Documentation and
any other relevant requirements of this Contract, and during the
thirty (30) day period from the receipt of the initial system
commissioning report, the Cable System has performed in full
accordance with the Technical Documentation and has had no
component failure of a material nature and the Supplier has
fulfilled its requirements under this Contract, the Purchaser shall
issue a Certificate of Provisional Acceptance of the Cable System
and the Cable System shall be deemed to have been provisionally
accepted from the date indicated in the Certificate of Provisional
Acceptance of the Cable System. The title to that part of the Cable
System which has not previously passed and the risk thereto and
responsibility for routine maintenance shall vest in the Purchaser
from the date of the issuance of the Certificate of Provisional
Acceptance of the Cable System.
13.4.2 The Certificate of Provisional Acceptance of the Cable System may
be qualified, in which case it shall have annexed to it a list,
compiled by the Purchaser, of any outstanding deficiencies which
the Purchaser consider as not affecting the normal operation or
maintenance of the Cable System. The Supplier shall as soon as
practical remedy the deficiencies and complete the Work indicated
so as to ensure full conformance with the Technical Documentation
and any other requirements of this Contract notwithstanding that
title shall have passed to the Purchaser. So long as any such item
has not been remedied the Supplier shall continue to bear the risk
in respect of that item.
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13.5 Certificate of Commercial Acceptance
13.5.1 In the event that the Purchaser does not issue a Certificate of
Provisional Acceptance because the Cable System does not fully
conform to the requirements of the Technical Documentation, but
nevertheless the Purchaser and the Supplier mutually agree that the
Cable System, or any part thereof, is suitable to be put into
commercial service, then the Purchaser shall issue to the Supplier
a Certificate of Commercial System Acceptance. In the event that
such a Certificate is issued, the title to the part of the Cable
System put into commercial service shall pass to the Purchaser on
the date of issuance of the Certificate and the responsibility
thereto for routine maintenance shall be vested in the Purchaser.
The Purchaser shall be entitled to commence commercial service over
that part of the Cable System covered in the Certificate of
Commercial System Acceptance. The Supplier is liable for any damage
to the Cable System due to its acts or omissions and is responsible
for all outstanding items necessary to comply with the Technical
Documentation.
13.5.2 The issuance of a Certificate of Commercial System Acceptance shall
in no way relieve the Supplier from its obligation to provide a
Cable System complying with the Technical Documentation and other
requirements of this Contract. In particular any deterioration or
defects in the Cable System occurring or becoming known between the
date of issuance of that certificate and the date of issuance of a
Certificate of Provisional System Acceptance shall be made good at
the sole expense of the Supplier.
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13.5.3 The Supplier shall issue further results of the commissioning and
acceptance tests after such remedial action has been taken by the
Supplier and such results shall be considered by the Purchaser
pursuant to Subarticle 13.3 above. If the results are satisfactory,
and the Cable System is performing in accordance with the Technical
Documentation and any other relevant requirements of this Contract
then the Purchaser shall issue a Certificate of Provisional
Acceptance, the date of which shall be when the last defect was
repaired.
13.6 Final Acceptance
13.6.1 The Purchaser shall in its reasonable discretion issue a
Certificate of Final Acceptance * after Provisional Acceptance.
Final Acceptance will be based upon the results of the Final
Acceptance tests or, if the Purchaser decides not to perform Final
Acceptance Tests, a Certificate of Final Acceptance shall be
granted promptly following the two years after Provisional
Acceptance. The issuance of the Certificate of Final Acceptance
will not be unreasonably withheld or delayed, but in the event that
a pattern of failure or degradation develops that is likely to
cause the Cable System to fail to meet the Technical Documentation
or such other performance requirements which may have been agreed
upon between the Purchaser and the Supplier over the 25 year System
design life. Final Acceptance may be withheld until it can be
reasonably demonstrated that such pattern of failure or degradation
will not continue.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
13.6.2 In the event of any component failure during the Warranty Period,
the Supplier, shall repair or replace at its sole cost and expense
the failed component and the
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Certificate of Final Acceptance shall not be issued until the Cable
System has been in operation for a full 90 continuous day period
from the repair or replacement of the last failed component.
ARTICLE 14. WARRANTY
- -----------------------
14.1 The Supplier warrants for a period starting on the date of Provisional
Acceptance issued pursuant to Article 13, Acceptance Procedures, and
continuing until * after the date of Provisional Acceptance of the
Cable System, including the spares set forth in the Technical
Documentation, shall be free from defects in design, material and
workmanship and shall conform fully to the Technical Documentation of this
Contract. Under this Warranty the ship costs associated with the warranty
repair shall be paid for by the Supplier.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
14.2 The Supplier shall perform any repair required for the Cable System to
comply with the Technical Specification of the Contract or if the Cable
System fails to meet such requirements at any time during the Warranty
Period. The Purchaser is responsible for contracting for the cableship
and, if required, an ROV (Remote Operated Vehicle). The Supplier shall
bear the costs of each repair required during the Warranty Period including
the cost of additional equipment necessary to effect the repair, the cost
of making the repair, the costs of cable repair ship(s) operations that may
be required to make the repair, the cost of reburying any previously buried
portion, the cost of labor and engineering assistance required to make the
repair, and all associated costs, such as, but not limited to, shipping and
customs.
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14.3 Notwithstanding anything to the contrary, the Supplier shall not be
responsible for any repairs or damages resulting from improper handling of
the Cable System by the Purchaser or third parties, (except those acting on
behalf of the Supplier), marine activity or other acts of third parties, or
as applicable under Article 18, Force Majeure.
14.4 The Supplier shall make every reasonable effort to minimize the time to
commence the repair and the period of time that the Cable System is out of
service for testing and repair. In the event that the Supplier fails to
make the repair or to make every reasonable effort to minimize the period
of time that the Cable System is out of service for repair, the Purchaser
may, after giving due notice, repair the Cable System and collect the full
cost of such repair from the Supplier. The Purchaser and the Supplier
agree to cooperate to facilitate the repair activity.
14.5 Materials Used for Warranty Repairs.
14.5.1 The Supplier shall supply the necessary materials and/or parts for
warranty repairs of the Cable System. However, the Supplier may
use, with the agreement of the Purchaser, the materials or parts
from the Purchaser's available spare materials provided that such
materials or parts are replaced, in kind, or, at the option of the
Purchaser, the Purchaser is reimbursed for such materials at the
price paid by Purchaser for such materials or parts. The
replacement of, or reimbursement for, such materials or parts shall
be made at a time as mutually agreed.
14.5.2 All materials or parts supplied to replenish the Purchaser's spare
materials, in accordance with Subarticle 14.5.1, and all materials
or parts used to repair the
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Cable System, which are not supplied from the Purchaser's spare
materials, shall be warranted:
(a) for a period of * from the date of replacement or
(b) in accordance with any extended warranty option exercised on
the entire Cable System or
(c) from the date of replacement until a date * from the date
of issuance of the Certificate of Provisional Acceptance for
the relevant Segment, whichever period is completed first or
(d) for replacement or repair of submersible plant, the additional
warranty shall include any additional ship costs incurred by
the customer as a result of cableship repair operations, only
during the first * from the date of Provisional
Acceptance or in accordance with any extended warranty options
exercised on the entire cable system. At no time shall the
warranty period extend beyond * from the date of
Provisional Acceptance.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
14.6 If, prior to the end of the Warranty Period, a pattern of failure or
degradation on any component has developed which contradicts the
reliability model provided by the Supplier in the Technical Documentation;
then, unless such problem can be adequately alleviated, to Purchaser's
reasonable satisfaction, the Purchaser shall be entitled to require
component replacement and/or an extended warranty in accordance with
Subarticle 14.5.2 covering the type of equipment affected. This right shall
be without prejudice to any other rights of the Purchaser under this
Contract or otherwise.
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14.7 The Supplier shall be responsible for the repair of all failures under
warranty to conform to the Technical Documentation, unless caused by the
negligent act or omissions of the Purchaser, or their agents or
representatives or as applicable under Article 19, Force Majeure.
14.8 Deferral of Repairs
14.8.1 The Purchaser may elect to defer the replacement of defective
items, provided that the Purchaser informs the Supplier of such a
defect as soon as it occurs. The Purchaser and the Supplier shall
agree as to the timing of the replacement of the defective items.
14.8.2 In the event that the replacement, under the basic warranty, of a
defective item(s) is deferred, the Supplier shall bear the cost of
such replacement items as follows:
Period Following Date of Certificate of Percentage of Cost of
--------------------------------------- ---------------------
Provisional Acceptance Repair of Defects
---------------------- -----------------
* *
* *
* *
* *
* *
* *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
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* *
* *
* *
* *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR
CONFIDENTIAL TREATMENT.
14.8.3 The deferred replacement of defective items as provided for in
this Article shall not prevent the Purchaser from issuing a
Certificate of Final Acceptance in accordance with Subarticle
13.6.
14.9 The Supplier shall guarantee the continued performance of the Cable System
when any approved upgrade is planned, designed and implemented using the
Supplier's equipment. The Supplier shall provide all necessary assistance
to the Purchaser in planning designing and implementing the upgrade.
14.10 Any new or additional submersible or terminal station equipment used to
upgrade the Cable System, shall be covered by the same warranty terms and
conditions as set forth for the current network, and shall be applicable
to the new or additional equipment only, effective from the upgrade date.
ARTICLE 15. LETTER OF CREDIT
- -------------------------------
15.1 In order to guarantee the good and timely execution of all the contractual
obligations, the Supplier shall provide a Letter of Credit of a value
equal to ten percent (10%) of the Contract Price within 10 days of
contract signature in favor of the Purchaser.
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15.2 The Letter of Credit shall be reduced to five percent (5%) of the Contract
Price at the date of Provisional Acceptance, and shall remain in force
until Final Acceptance. However, should some item be subject to the
provisions of Subarticle 13.3.2, Certificate of Provisional Acceptance, the
Letter of Credit shall be maintained for such an amount to be agreed upon
so as to reflect the value of these items.
15.3 In the event of a material failure by the Supplier in carrying out its
responsibilities under the Contract, the Purchaser as its option will have
the right, to call in all or part of the amount represented by the Letter
of Credit as it, in its sole discretion, deems necessary subject only to
the terms referred to in the Letter of Credit.
15.4 The Purchaser shall have the right to take such actions to enforce the
remedies provided in the Contract, including the right to recover such
damages or losses as provided in the Contract in addition to the amount
recovered under the Letter of Credit.
15.5 The form of the Letter of Credit is included in Appendix 2 of the
Commercial Terms and Conditions.
ARTICLE 16. FUTURE ORDERS AND SUPPLIERS' SUPPORT
- ---------------------------------------------------
16.1 For a period starting on the date of Provisional Acceptance as shown in the
Certificate of Provisional Acceptance issued pursuant to Article 13,
Acceptance Procedures, and continuing until * after the date of
Provisional Acceptance and at a reasonable price as indicated in Subarticle
16.5 herein, the Supplier shall supply to the Purchaser:
(a) Technical support and advice in respect of the design, maintenance and
operation of the Cable System; and
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
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(b) Supplies, replacement equipment and repair service to the Cable System.
16.2 Where identical parts, or components cannot be supplied for fulfillment of
these Subarticle 16.1 obligations, the Supplier shall provide equivalent
and compatible parts, and shall be responsible for any adaptive engineering
Work and all necessary implementation documentation that may be necessary.
16.3 Notwithstanding Subarticle 16.2, if for any reason the Supplier intends to
cease manufacturing identical or fully compatible spare parts and
replacement equipment, the Supplier shall give a minimum of one year's
prior written notice to the Purchaser to allow the Purchaser to order from
the Supplier any spare parts and replacement equipment and shall forthwith
provide full details of the arrangements to provide equivalents. However,
the Supplier shall not cease to manufacture such parts and equipment within
a period of * from the date of issuance of the Certificate of Provisional
Acceptance.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
16.4 In the event that the Supplier fails to comply with Subarticles 16.2 and
16.3, or if this Contract is terminated for default, the Purchaser may
require the Supplier to provide to the Purchaser in accordance with Article
27, Safeguarding of Information and Technology, the source codes for
Software provided hereunder, and to provide to the Purchaser any and all
manufacturing drawings and related specifications as well as bills of
materials giving the description, in-house numbers and/or code numbers for
all such parts or equipment including Software, object codes, or in cases
where the parts or equipment were not manufactured by the Supplier, the
manufacturers' names, description of the parts or equipment and code
numbers, and giving tolerances for matching or equivalent parts or
equipment and finally, for matched parts or equipment, giving lists of
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matched parameters and tolerances. Legible copies and microfilms thereof
shall be considered as acceptable.
16.5 The Supplier undertakes to provide such Supplies, replacements and support
services as follows:
(a) If such Supplies or replacement parts are manufactured by the
Supplier, the Supplies or replacement parts shall be provided at the
price levels herein accepted but varied in respect of changes to
recognized labor and material indices applicable at the time of
ordering in accordance with the price variation formula(e) in
Subarticle 16.6, or the Purchaser may, at its option, elect to
purchase at the market price.
(b) If no such market price exists, or, if such Supplies or replacement
parts are not manufactured by the Supplier, then they shall be
provided at equitable prices to be agreed between the Supplier and the
Purchaser based upon price detail information provided to the
Purchaser by the Supplier.
16.6 Price Variation Formula(e) for Supplies, including submersible plant,
terminal equipment and installation materials referred to in Subarticle
16.5(a) shall be as follows:
*
ARTICLE 17. FAILURE TO MEET CONTRACTED TIME FOR COMPLETION
- -----------------------------------------------------------
17.1 In the event that the Supplier fails to meet the date of Provisional
Acceptance specified in Article 12, Date of Ready For Provisional
Acceptance, then liquidated damages for delay shall be assessed at * of the
Liability Base per day for *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
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17.2 Liquidated Damages for lateness pursuant to this Article 17 shall not,
under any circumstances, exceed * of the Liability Base.
17.3*
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
ARTICLE 18. FORCE MAJEURE
- --------------------------
18.1 The Supplier shall not be in default if any failure to perform the Contract
arises from any cause which is beyond its reasonable control and without
its fault or negligence, including, but not limited to, fire, flood,
earthquake, riot, civil commotion, civil ware, rebellion, revolution,
insurrection, military or usurped power, fishing, trawler and anchor damage
(other than resulting from defective or faulty installation) and other
marine activities, strikes, Unusually Severe Weather or default by any of
the Supplier's suppliers or subcontractors due to any such Force Majeure
causes.
18.2 If any such Force Majeure event causes an increase in the time required for
performance of any of its duties or obligations under this Contract, the
Supplier shall be entitled to an equitable adjustment in the time for
performance of the Contract.
18.3 The Supplier shall inform the Purchaser promptly (and in all circumstances,
within fourteen (14) days unless the Supplier can satisfactorily
demonstrate that he could not have reasonably been aware of such Force
Majeure event covered under this Article.
18.4 Unless the Supplier shall apply for an extension of time in respect of a
cause of delay within the period stated in Subarticle 18.3, and unless the
Purchaser shall extend the time
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in accordance with Subarticle 18.2 in respect thereof, the Supplier shall
not be entitled to and shall not claim an extension of time in respect of
that cause, and shall not by reason of any delay arising from any such
cause, except as may be agreed pursuant to Article 11, Contract Variations,
be relieved in any way or to any extent from obligations to proceed with,
execute and complete the Work within the time fixed by this Contract.
ARTICLE 19. LIMITATION OF LIABILITY
- ------------------------------------
19.1 The Parties to this Contract shall not be liable to each other for any
consequential, incidental, indirect or special damages, including, but not
limited to, loss of revenue or any loss of business opportunity or the
costs associated with the use of restoration facilities, resulting from
their failure to perform, pursuant to the Terms and Conditions of this
Contract.
19.2 The aggregate amount payable by the Supplier, including their parents,
affiliates, subsidiaries, successors and/or assigns, as damages for
whatever reason under this Contract shall in no circumstances, exceed * of
the Contract Price.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
ARTICLE 20. DEDUCTIONS FROM SUPPLIERS' MONIES
- ----------------------------------------------
20.1 The Purchaser may withhold any amounts that are or may become due to the
Supplier for the Supplier's failure to perform as required by this
Contract, or offset any amounts for liquidated damages payable to the
Purchaser in accordance with Article 17, Failure to Meet Contracted Time
For Completion. If the monies due to the Supplier are less than
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the liquidated damages payable to the Purchaser, the amount of deficiency
shall be a debt by the Supplier to the Purchaser and may be deducted from
the payment.
20.2 If the Purchaser withholds amounts due to the Supplier pursuant to
Subarticle 20.1, the Purchaser shall specify to the Supplier the act or
omission constituting the Supplier's failure to perform, upon which the
Purchaser's withholding is based. Once the Supplier remedies his non-
performance to the satisfaction of the Purchaser, the Purchaser agrees to
pay the Supplier the withheld amount within 30 days.
ARTICLE 21. INFERIOR SUPPLIES OR DEFECTIVE WORK
- ------------------------------------------------
If at any time before the date of Final Acceptance pursuant to Article 13,
Acceptance Procedures, the Purchaser believes that any of the Supplies or Work
are not in accordance with this Contract, (hereinafter referred to as "Inferior
Supplies or Defective Work") the Purchaser may reject such Supplies or Work
notwithstanding that satisfaction may previously have been expressed and such
Supplies or Work may previously have been accepted and notwithstanding that
payment may have been made in respect of such Supplies or Work. The Supplier
shall promptly replace at its own cost and expense the Inferior Supplies or
Defective Work which are not fit for the purpose for which is intended or
otherwise not in accordance with the Contract.
ARTICLE 22. TERMINATION FOR DEFAULT
- ------------------------------------
22.1 The Purchaser may, by written notice of termination for default to the
Supplier, terminate the whole or any part of this Contract in any one of
the following circumstances, such
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termination to be effective immediately upon receipt of said notice or such
later date as it may specify in such notice:
(a) If the Supplier materially fails to comply with the Plan of the Work
or any written extension or amendment thereof, and does not proceed to
cure such failure within a period of thirty (30) days (or such longer
period as the Purchaser may authorize in writing) after receipt of
notice from the Purchaser specifying such failure,
(b) If the Supplier so fails to make progress as to significantly endanger
performance of this Contract in accordance with its terms, and does
not proceed to cure such failure within a period of thirty (30) days
(or such longer period as the Purchaser may authorize in writing)
after receipt of notice from the Purchaser specifying such failure,
(c) If the Supplier becomes insolvent, bankrupt, files for bankruptcy, or
if a petition in bankruptcy, for receivership or for winding-up is
taken against it and is not contested in good faith, rejected or
withdrawn within thirty (30) days from its inception,
(d) If the Supplier commits any material breach of or fails in any
material respect to comply with this Contract; and does not proceed to
cure such breach or failure within a period of thirty (30) days (or
such longer period as the Purchaser may authorize in writing) after
receipt of notice from the Purchaser specifying such failure.
22.2 If this Contract is terminated as provided in Subarticle 22.1, the
Purchaser, in addition to any other rights provided for in this Article,
may require the Supplier to transfer title and
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deliver to the Purchaser in the manner and to the extent directed by the
Purchaser any materials, equipment or manufactured items to which title has
not already passed to Purchaser.
22.3 In addition to Subarticle 22.2 above, the Supplier shall forthwith on
demand by the Purchaser deliver to the Purchaser at a site to be nominated
by the Purchaser not only those items to which title has passed to the
Purchaser but also all material plant, tools and implements and all other
things purchased, used or to be used in connection with the Work and
acquired for the purpose of supply to the Purchaser which are necessary for
the execution and completion of the Work. The Supplier shall be paid for
the outstanding balance of the value of all such items subject always to
any liability the Supplier may have to compensate the Purchaser for, or to
make good at the Supplier's expense, any breach, omission, neglect, or
other non-observance of this Contract, and title to any such Supplies or
completed Work thereupon shall pass to the Purchaser.
22.4 Force Majeure events pursuant to Article 18, Force Majeure, shall not
constitute a default under this Article.
22.5 The Supplier's liability hereunder shall be limited in accordance with
Article 19, Limitation of Liability.
ARTICLE 23. TERMINATION BY NOTICE
- ----------------------------------
23.1 The performance of Work may be terminated by the Purchaser in whole, or
from time to time in part, whenever they shall so determine, or as
specified in the Contract. The Purchaser shall deliver to the Supplier a
written Notice of Termination specifying the
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extent to which performance of Work under this Contract is terminated, and
the date upon which such termination becomes effective.
23.2 After receipt of such Notice of Termination, and except as otherwise
directed by the Purchaser, the Supplier shall:
(a) stop Work on the date and to the extent as specified in the notice of
termination,
(b) place no further orders or contracts for materials, services or
facilities except as may be necessary for completion of such portion
of the Work which is not terminated,
(c) use its reasonable best efforts to terminate all orders and
subcontracts to the extent that they relate to the performance of Work
terminated by the notice of termination unless otherwise directed by
the Purchaser,
(d) assign to the Purchaser, in the manner, at the time, and to the extent
directed by the Purchaser, all of the Supplier's right, title and
interest under the orders and subcontracts so terminated,
(e) used its reasonable best efforts to settle all outstanding liabilities
and all claims arising out of such termination of orders and
subcontracts, with the Purchaser's approval or ratification to the
extent the Purchaser may require, which approval or ratification shall
be final for all the purposes of this Article 23,
(f) transfer title and deliver to the Purchaser in the manner, at the
time, and to the extent (if any) directed by the Purchaser,
(l) the fabricated or unfabricated parts, Work in process, completed
Work, Supplies, and other material produced as a part of, or
acquired in
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connection with the performance of, the Work terminated by the
notice of termination, and
(2) the completed or partially completed plans, drawings, information,
and other property which, if this Contract had been completed,
would have been required to be furnished to the Purchaser,
(g) use its reasonable best efforts to sell, in the manner, at the times,
to the extent, and at the price or prices directed or authorized by
the Purchaser, any property of the types referred to in Subarticle
23.2(f), provided however, that the Supplier,
(1) shall not be required to extend credit to any buyer, and
(2) may acquire any such property under the conditions prescribed by
and at a price approved by the Purchaser; and provided further
that the proceeds of any such transfer or disposition shall be
applied in reduction of any payments to be made by the Purchaser
to the Supplier under this Contract or paid in such other manner
as the Purchaser may direct;
(h) complete performance of such part of the Work as shall not have been
terminated by the notice of termination; and
(i) take such action as may be necessary, or as the Purchaser may direct,
for the protection and preservation of the property related to this
Contract which is in the Supplier's possession and in which the
Purchaser has or may acquire an interest.
23.3 After receipt of a notice of termination, the Supplier shall submit to the
Purchaser a written termination claim. Such claim shall be submitted
promptly, but in no event later than nine months from the effective date
termination, unless one or more extensions in
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writing are granted by the Purchaser upon request made in writing within
such nine month period or any authorized extensions thereof.
23.4 In the settlement of any such partial or total termination claim, the
Purchaser shall pay to the Supplier the total of:
(a) the appropriate price as contained in the Provisioning Schedule for
completed Work;
(b) a fair and reasonable proportion of the Contract Price for partially
completed Work;
(c) cost of materials and Supplies purchased in respect of the Contract but
not yet incorporated into the Work; unless sold to third parties
pursuant to Subarticle (g)
(d) the cost of settling and paying claims arising out of the termination
of Work, as provided in Subarticle 23.2(e) which are properly
chargeable to the terminated portion of this Contract;
(e) the reasonable costs of settlement including accounting, legal,
clerical and other expenses reasonably necessary for the preparation of
settlement claims and supporting data with respect to the terminated
portion of this Contract and for the termination and settlement of
contracts thereunder, together with reasonable storage, transportation
and other costs incurred in connection with the protection and
disposition of property allocable to this Contract.
23.5 In arriving at the amount due to the Supplier under this Article 23 there
shall be deducted all unliquidated payments on account therefore made to
the Supplier, any liabilities which the Supplier may have to the Purchaser,
and the agreed price for, or the proceeds of sale
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of any materials. Supplies, or other things acquired by the Supplier or
sold, pursuant to the provisions of this Article 23, and not otherwise
recovered by or credited to the Purchaser.
23.6 If the termination is a partial termination, prior to any settlement, the
Purchaser shall, at Supplier's request, grant an equitable adjustment in
the price or prices specified in this Contract relating to the portion of
this Contract not terminated by the Notice of Termination and such
equitable adjustments as may be agreed upon shall be made in such price or
prices.
23.7 The Purchaser may, from time to time, under such terms and conditions as
they may prescribe, approve partial payments and payments on account
against costs incurred by the Supplier in connection with the terminated
portion of this Contract whenever in the opinion of the Purchaser the
aggregate of such payments may be within the amount to which the Supplier
will be entitled hereunder. If the total of such payments is in excess of
the amount finally agreed or determined to be due under this Article 23,
such excess shall be payable by the Supplier to the Purchaser upon demand.
23.8 For a period of one year after final settlement under this Contract, the
Supplier shall preserve and make available to the Purchaser at all
reasonable times at the Supplier's office, but without direct charge to the
Purchaser, all books, records, and documents required by Article 35,
Keeping of Books, the Work terminated hereunder, or to the extent approved
by the Purchaser, photographs, micro-photographs, or other authentic
reproductions thereof.
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ARTICLE 24. SUSPENSION OF WORK
- -------------------------------
The Purchaser may, at its convenience, give written notice to the Supplier to
suspend all or part of the Work on the Cable System for such period of time as
the Purchaser determines to be appropriate. Where, as a result of the period of
suspension, the Supplier incurs additional costs or where such a suspension
causes loss to the Supplier in the discharge of its responsibilities under this
Contract, and where Supplier has acted reasonably to minimize such losses or
additional costs, and where such losses and additional costs could not have been
reasonably prevented by the Supplier, the Supplier shall be allowed an equitable
adjustment in the applicable prices to reflect the additional costs reasonably
incurred, and the Supplier shall be granted an equitable extension in the time
required for performance of any suspended Work, not caused by the Supplier's
fault or negligence. Except as provided, the Purchaser shall not be liable to
the Supplier in the event of such suspension or further suspension for any loss
of profit or consequential damages whatsoever.
ARTICLE 25. PATENT RIGHTS AND ROYALTIES
- ----------------------------------------
25.1 The Supplier shall obtain any and all Intellectual Property Rights licenses
necessary for the performance of this Contract. The Contract Price shall
include all amounts payable for the use or license of Intellectual Property
Rights and royalties on or in respect of the Supplies or Work or any part
thereof.
25.2 If, as a consequence of such actions or claims, pursuant to Subarticle 25.1
above, the use of the Cable System is enjoined, the Supplier agrees to use
reasonable efforts to negotiate
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a license or other agreement at the Supplier's sole cost with the owner of
the Intellectual Property Right so as to remove its injunction.
25.3 If any part of equipment provided by the Supplier or on its behalf is held
to constitute an infringement (excluding such excepted infringements
specified in subparagraph 26.4) and is subject to an injunction restraining
its use or any order providing for its delivery or destruction, the
Supplier shall forthwith at their own expense either:
(a) procure for the Purchaser the right to retain and continue to use such
part or equipment, or
(b) modify the Cable System or such part or equipment so that it becomes
non-infringing.
25.4 The Supplier agrees to defend or settle at its own expense all suits for
infringement of any patent or other form of Intellectual Property Right,
for any material (or the manufacture of any material or the normal use
thereof) provided by the Supplier or on its behalf pursuant to this
Contract and will save the Purchaser harmless from all expense of defending
any such suit and all payments for final judgment therein assessed or
compromises made on account of such infringement, except such infringement
or claim arising from:
(a) the Supplier's adherence to the Purchaser's directions to use materials
or parts of the Purchaser selection;
(b) such material or parts furnished to the Supplier by the Purchaser,
other than in each case, items of the Supplier's design or selection or
the same as any of the Supplier's commercial merchandise or in
processes or machines of the Supplier's
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design or selection used in the manufacture of such standard products
or parts thereof; or
(c) use of the equipment other than for the purposes indicated in, or
reasonably to be inferred from, this Contract.
25.5 The Purchaser will, at their own expense, defend all suits against the
Supplier for such excepted infringement and save the Supplier harmless from
all expense of defending any such suit and from all payments by final
judgment therein assessed against the Supplier on account of such excepted
infringement.
25.6 The Supplier and the Purchaser agree to give each other prompt written
notice of claims and suits for infringement for which the other assumes
responsibility hereunder and full opportunity and authority to assume the
sole defense thereof, including appeals, and, upon such other's request and
at its expense, to furnish all information and assistance available to it
for such defense.
ARTICLE 26. SOFTWARE
- --------------------
26.1 The Supplier grants to the Purchaser a personal, non-transferable (except
that the Purchaser may transfer this right to affiliates, subsidiaries, or
successors) and non-exclusive right to use, in object code form, all
Software and related documentation furnished to the Purchaser under this
Contract. This grant shall be limited to use with equipment for operation
and maintenance of the Cable System, for which the Software was provided.
If the license is transferred in accordance with this Article, then the
transferee shall comply with the conditions stated herein.
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26.2 The Purchaser agrees to use all reasonable efforts to see that all users of
the Software licensed hereunder, including the employees of Purchaser,
comply with the terms and conditions set out in this Article.
26.3 The Purchaser also agrees to refrain from taking any steps, such as reverse
assembly or reverse compilation to derive a source code equivalent of the
Software.
26.4 The Purchaser is permitted to make and retain two archive copies of the
Software. Any copy must contain the same copyright notice and proprietary
marking as are on the original Software.
26.5 Use of Software on any equipment other than that for which it was licensed
or any material breach of this license shall enable the Supplier, at its
option, to terminate this license.
26.6 At the Purchaser's request, the Supplier agrees to make modifications to
the Software developed for the Cable System at a reasonable price to be
paid by Purchaser. The Supplier shall thereafter extend this license to
the Purchaser to cover the use of the modified Software. Any such
modifications shall be for the exclusive use of the BUS-1 Purchaser, if
modifications are made solely for the BUS-1 Purchaser.
ARTICLE 27. SAFEGUARDING OF INFORMATION AND TECHNOLOGY
- ------------------------------------------------------
27.1 Any specifications, drawings, sketches, models, samples, tools, technical
information, Software, or data, in written, graphic, or other tangible form
(all hereinafter designated "Information") furnished by the Supplier to the
Purchaser and any Information furnished by the Purchaser to the Supplier
hereunder, including any Information supplied in
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contemplation hereof prior to execution shall remain the property of the
Party so furnishing and shall be kept confidential by the receiving Party.
All copies of such Information in written, graphic, or other tangible form
shall be returned to the Party which provided the Information at the
Party's request. Unless such Information was previously known to the Party
receiving such Information free of any obligation to keep it confidential,
or such Information has been or is subsequently made public through other
than unauthorized disclosure by the receiving Party or is independently
developed by the receiving Party (as documented by the records of the
receiving Party), it shall be kept confidential by the Party receiving such
Information, shall be used only in the construction, maintenance, operation
or repair of the Cable System or for the performance of this Contract, and
may not be used for any other purposes except upon such terms as may be
agreed upon in writing by the Party owning such Information.
27.2 All intellectual property generated by the Supplier in the performance of
this Contract shall belong to the Supplier and if furnished by the Supplier
to the Purchaser, such intellectual property shall be treated as
Information subject to this Article.
27.3 The Purchaser represents and warrants that it will comply fully with all
applicable export control and other laws to which the Supplier is subject.
27.4 The Purchaser has the right to reproduce the documents for its use in the
Cable System.
27.5 All drawings and documents necessary for the Supplier to meet its technical
support should be retained for the design life of the Cable System.
ARTICLE 28. VESTING AND TRANSFER OF TITLE
- -----------------------------------------
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28.1 Title to the Cable System, Supplies provided by the Supplier, and the
absolute and exclusive right to and interest therein shall pass to and vest
in the Purchaser upon issuance of a Certificate of Provisional Acceptance
or Commercial Acceptance, as the case may be. Upon issuance of a
Certificate of Provisional Acceptance or Commercial Acceptance for the
Cable System, the Supplier warrants that the Purchaser shall acquire good
and clear title thereto, free and clear of all liens, claims, charges and
other encumbrances.
28.2 Upon termination of this Contract, the Purchaser may require, pursuant to
Articles 22, Termination For Default, or 23, Termination By Notice,
absolute and exclusive title to the Cable System and the Supplies therein,
which has not previously passed to the Purchaser shall thereupon pass to
the Purchaser, free and clear of all liens, claims, charges and other
encumbrances.
ARTICLE 29. RIGHTS OF ACCESS
- ----------------------------
The Supplier shall upon reasonable notice, but not less than two weeks, permit
access by the Purchaser, or its Quality Assurance (QA) Representative, to the
Supplier's premises where the Work will be performed, and will secure rights of
access to the premise, of its subcontractors where the Work will be performed
having major subcontractions or orders of US $125,000 or more, in accordance
with the Supplier's usual procedures associated with its subcontractors, and
allow Purchaser or their QA Representative to witness the inspection and testing
procedures, and to examine and review testing and inspection records relating to
the manufacture, inspection and testing of equipment, materials and Supplies
provided hereunder. The right of access shall also allow for the Purchaser
and/or its representative to be aboard the cable laying vessel(s) during
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installation, at the Supplier's expense. Any such right of access shall not be
construed as creating an obligation for the Supplier or its subcontractors to
disclose trade secrets or proprietary information, and Purchaser understands and
agrees that its representatives may be required to sign a Non-Disclosure
Agreement prior to being given any such access.
ARTICLE 30. QUALITY ASSURANCE
- -----------------------------
The Supplier will conduct the inspection and testing of all Supplies in
accordance with the quality assurance requirements in the Technical
Documentation. The Purchaser or its QA representative will be permitted to
witness the inspection and testing of all Supplies.
ARTICLE 31. WAIVER AND INDEMNIFICATION
- --------------------------------------
The Supplier shall be liable for and shall indemnify and hold harmless the
Purchaser and its officers, directors, employees, subsidiaries, affiliates,
agents, successors, and/or assigns against all claims, demands, judgments made
or recovered against them for damage to any property and/or injury or death to
any person to the extent it arises out of acts or omissions of the indemnifying
party, its subcontractors, agents or employees. Each Party's obligation to
indemnify hereunder is contingent on its receipt of prompt written notice of all
such claims and full opportunity and authority to assume the sole defense of and
settlement of such claims. The Indemnified Party agrees to cooperate with such
defense and to provide all information necessary for such defense.
ARTICLE 32. RISK AND INSURANCE
- ------------------------------
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Upon request, the Supplier shall furnish the Purchaser certificates, or other
satisfactory evidence, that all of the responsibilities and risks of the
Supplier herein are covered by insurance policies or by self-insurance and that
such insurance is being maintained, including, but not limited to, general
liability insurance sufficient to cover Supplier's liabilities under this
Contract which shall include the provision for insurance for workers, until the
end of the Supplier's Warranty Period, and the relevant insurance to cover the
plant, equipment and Supplies to be installed by the Supplier in the Cable
System until the date of Provisional Acceptance. The Supplier may organize such
levels of deductibles, excesses and self-insurance as it considers appropriate.
ARTICLE 33. ASSIGNMENT AND SUB-CONTRACTING
- ------------------------------------------
33.1 Supplier shall not, without the prior written consent of the Purchaser,
assign this Contract or sub-contract any significant part of the Work,
except that the Supplier may assign, without prior written consent of the
Purchaser, its right to receive payment to any third party. In any event,
the Supplier shall not relieved of responsibility under this Contract for
such parts of the Work as are subcontracted.
33.2 Notwithstanding Subarticle 33.1 above, the Supplier shall not be precluded
from assigning the Contract or subcontracting to a subsidiary or an entity
controlled by or under the same control as the Supplier. In the event of
such assignment or subcontracting, the Supplier shall guarantee the
performance of such subsidiary or entity.
33.3 In the event of Termination, the Supplier shall assign to the Purchaser at
the Purchaser's option, any agreements with the Supplier's subcontractors.
Upon exercise of such option, the Purchaser shall acquire any benefits of
such subcontractors, including prices and
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delivery dates, any applicable discounts, rebates and refunds not already
accrued at the time of such exercise.
33.4 Except as provided for in Subarticle 33.5, the Purchaser shall not assign
to others this Contract, without prior written consent of the Supplier.
Such consent shall not be unreasonably withheld.
33.5 Notwithstanding Subarticle 33.4 above, the Purchaser shall not be precluded
from assigning the Contract or subcontracting to a subsidiary or an entity
controlled by or under the same control as the Purchaser or to a related
company, provided that the assignee is (1) able to obtain permission from
the Purchaser's lending institution to assume the Purchaser's existing
financial package or (2) is able to secure financing acceptable to the
Supplier. In the event of such assignment or subcontracting, the Purchaser
shall guarantee the performance of such subsidiary or entity.
In the event that the Purchaser does assign this Contract to a related
company, written consent from the Supplier is needed for the guarantee of
financing.
ARTICLE 34. PURCHASER'S STAFF PARTICIPATION
- -------------------------------------------
34.1 Where the Technical Documentation provides for stipulated Work to be
carried out by the Purchaser, such Work shall be carried out in the manner
and with the responsibilities as defined therein. Such participation by
any Purchaser's staff in the Work shall not be construed as relieving the
Supplier of its responsibility for the design, quality and performance of
the Cable System.
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34.2 Even if Purchaser's staff participates in the Work, they shall remain the
officers, directors, employees or agents and under the administrative
control of the Purchaser. The Supplier shall not be liable for any act or
omission of such staff.
34.3 Information or services under the Purchaser's control that are to be
provided by the Purchaser and that are necessary for execution of the Work
by the Supplier shall be supplied with reasonable promptness upon request
by the Supplier. In the event the Purchaser does not supply any of the
information or services by the date specified in the Plan of Work
(including, but not limited to, Contract signing, Coming Into Force, U.S.
landing location decision, permits/licenses, and cable stations available
for equipment installation by February 21, 1997) the remaining dates shall
be extended to the extent that the Plan of Work has been affected. With
respect to all other activities of the Purchaser necessary for the Supplier
to perform its obligations hereunder, the Supplier may be granted an
extension of time to comply with any of the dates related thereto in an
amount to meet the Purchaser's obligations hereunder unless the Parties
agree to accelerate work activities to maintain Work on schedule and the
Purchaser agrees to reimburse the Supplier for any reasonable additional
cost incurred thereby.
ARTICLE 35. KEEPING OF BOOKS
- ----------------------------
35.1 For those amounts due and payable by the Purchaser to the Supplier under
this Contract, the Supplier shall keep and maintain records of their
billing of those items to the Purchaser, for a period starting on the date
of Provisional Acceptance as shown in the Certificate of Provisional
Acceptance issued pursuant to Article 14, Acceptance
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Procedures, and continuing until five (5) years after the date of
Provisional Acceptance of the Cable System.
35.2 The Supplier shall afford the Purchaser or its designated representative
the right to review the books, records, vouchers and accounts required to
be kept, maintained and obtained pursuant to his Article. The Supplier
shall not be required to afford access to books or records related to the
costs of items or to the Supplier cost mark-ups on individual items, except
for those items billed on a cost-incurred basis. Cost-incurred items
include Supplier engineering support for those related items billed at the
Supplier's Loaded Labor Rate.
ARTICLE 36. APPLICABLE LAW
- --------------------------
This Contract and all disputes, differences, or questions arising with respect
to any rights, duties, or obligations under this Contract shall be controlled by
the laws of New York.
ARTICLE 37. APPLICABLE LAW
- --------------------------
37.1 The parties agree that they will resolve any dispute, controversy or claim
arising out of or relating to this Contract by mutual discussions and will
endeavor at their utmost to reach an amicable settlement.
37.2 In the event that any dispute or difference whatsoever shall arise from the
performance or as to the meaning of this Contract, or as to any matter of
thing or whatsoever nature however arising out of or in connection with
this Contract, such dispute or difference shall be finally resolved by
arbitration in accordance with and subject to the United
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Nations Commission on International Trade Law ("UNCITRAL") Arbitration
Rules in effect on the date of this Agreement. The case shall be
administered by the American Arbitration Association in accordance with its
"Procedures for Cases Under the UNCITRAL Arbitration Rules."
Notwithstanding any provision of the UNCITRAL Rules to the contrary, the
Parties hereby agree that the arbitrator shall be a national of such
neutral state as the Parties agree. The place of arbitration shall be such
location as the parties may mutually designate in writing. All proceedings
shall be conducted in the English language.
37.3 Pending the determination as aforesaid of such dispute or difference, the
Supplier shall, unless directed otherwise by the Purchaser in writing,
fulfill all of its obligations under this Contract, including the
obligation to take steps necessary during the arbitration proceedings to
ensure that the Work will be completed within the time stipulated or within
such extended time as may be allowed under this Contract.
37.4 Any decision or award of the arbitrage tribunal shall be final and binding
upon the Parties to the arbitration proceedings.
ARTICLE 38. RELATIONSHIP OF THE PURCHASERS
- ------------------------------------------
The relationship between or among the Parties shall not be that of partners and
nothing herein contained shall be deemed to constitute a partnership among them
and neither Party shall have authority or power to act unilaterally as agent for
the other.
ARTICLE 39. PUBLICITY
- ---------------------
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No publicity relating to this Contract shall be published in any newspaper,
magazine, journal, or any other written, oral or visual medium without prior
written approval by both parties, however, the Parties agree that the Contract
may be publicized in general terms and mutual consent shall not be unreasonably
withheld.
ARTICLE 40. CORRUPT GIFTS AND THE PAYMENT OF COMMISSION
- -------------------------------------------------------
40.1 The Supplier shall not offer or give or agree to give to any person
employed by the Purchaser any gift, commission, rebate or consideration of
any kind as an inducement or reward for doing, influencing, or carrying out
any act in relation to the obtaining or execution of this Contract or for
showing any favor or disfavor to any person or persons in relation to such
Contract.
40.2 Breach of this Article may render the Supplier, its subcontractors and
agents liable to punishment by law and any such breach shall be deemed
material.
ARTICLE 41. EXECUTION OF CONTRACT AND AMENDMENTS
- ------------------------------------------------
This Contract shall be executed in two (2) counterparts in English, and each
such counterpart when so executed and delivered shall be an original; and such
counterparts shall together (as well as separately) constitute one and the
same instrument. This Contract and any of its provision may only be altered or
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added to by another agreement in writing signed by a duly authorized
representative of each Party to this Contract.
ARTICLE 42. HEADINGS
- --------------------
42. The headings of the Articles do not form part of this Contract and shall
not have any effect on the interpretation thereof.
42.2 Words implying the singular only shall also include the plural
and vice versa where the context requires.
ARTICLE 43. SUCCESSORS BOUND
- ----------------------------
This Contract shall be binding on the Supplier and the Purchaser and their
respective successors and permitted assigns.
ARTICLE 44. SEVERABILITY
- ------------------------
If any of the provisions of this Contract shall be invalid or unenforceable,
such invalidity or unenforceability shall not invalidate or render unenforceable
the entire Contract, but rather the entire Contract shall be construed as if not
containing the particular invalid or unenforceable provision or provisions, and
the rights and obligations of the Supplier and the Purchaser shall be construed
and enforced accordingly.
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ARTICLE 45. NO WAIVER OF REMEDIES
- ---------------------------------
45.1 The failure of the Purchaser in any one or more instances to insist on
strict performance of any of the terms or provisions of this Contract or to
exercise any right or option herein conferred shall not be construed as a
waiver or relinquishment, to any extent, of the Purchaser's right to rely
upon any such terms or provision or option on any future occasion.
45.2 No delay or failure of the Purchaser to exercise any right or remedy under
this Contract will operate as a waiver thereof. No right or remedy
conferred upon or reserved to the Purchaser under this Contract is
exclusive of any other right or remedy under this Contract or any right or
remedy provided or permitted by law.
ARTICLE 46. LIABILITY OF PURCHASERS
- -----------------------------------
Does not apply to this Contract.
ARTICLE 47. NOTICES
- -------------------
47.1 Any notices, consent, approval or other communication pursuant to this
Contract shall be in writing and shall be deemed to have been duly given or
served by or on behalf of the Purchaser or by or on behalf of the Supplier
if sent by hand, facsimile with confirmation by the receiving party or by
registered or certified mail addressed to the Party at its business
address, as stipulated below in Subarticle 47.2:
(a) if sent by hand, such communication shall be deemed to have been
received on the day of delivery, provided receipt for delivery is
obtained;
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(b) if sent by facsimile under normal service conditions, such
communication shall be deemed to have been received twenty-four (24)
hours following the time of dispatch or on confirmation by the
receiving Party;
(c) if sent by registered or certified mail, under normal service
conditions, such communication shall be deemed to have been received on
the day it was received or on the tenth day after it was dispatched,
whichever is earlier.
47.2 Unless otherwise notified in writing, by giving the other Party thirty (30)
days prior written notice, for the purpose of this Article, the addresses
of the Parties are:
Purchaser:
---------
Michael Kedar, Chairman and CEO
TeleBermuda International Ltd.
10 Queen Street, Suite 101
Hamilton, HM 11
Bermuda
Tel: 441-296-1838
Fax: 441-292-0829
Supplier:
--------
Neil Habig, Project Manager
AT&T-Submarine Systems Inc.
340 Mt. Kemble Ave.
Room S120
Morristown, New Jersey 07960
USA
Tel: 201-326-1777
Fax: 201-326-1221
47.3 Except as otherwise provided, all documents relating to this Contract and
all communications between the Parties shall be in the English language.
ARTICLE 48. SURVIVAL OF OBLIGATIONS
- -----------------------------------
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The Parties' rights and obligations which, by their nature, would continue
beyond the termination, cancellation or expiration of this Contract, including,
but not limited to those contained in Article 25, Patent Rights and Royalties,
Article 26, Software, and Article 27, Safeguarding of Information and
Technology, shall survive termination, cancellation or expiration thereof.
ARTICLE 49. EXPERT CONTROL
- --------------------------
The parties acknowledge that any products, software and technical information
(including, but not limited to, services and training) provided under this
agreement are subject to U.S. export laws and regulations and any use or
transfer of such products, software, or technical information must be authorized
under those regulations. The Purchaser agrees that they will not use,
distribute, transfer or transmit products, software or technical information
(even if incorporated into other products) except in compliance with U.S. export
regulations. If requested by AT&T-SSI, the Purchaser also agrees to sign written
assurances and other export-related documents as may be required for AT&T-SSI to
comply with U.S. export regulations.
ARTICLE 50. LETTER OF CREDIT PROVIDED BY THE PURCHASER
- ------------------------------------------------------
50.1 In order to accommodate the Purchaser's financing arrangement, the Supplier
understands that the Purchaser may not be able to make payment to the
Supplier until September 10, 1996. In consideration thereof, Purchaser
agrees to guarantee payment for Work performed by the Supplier between the
date of signing of the Supply Contract and September 10, 1996. The
Purchaser agrees to provide, upon Contract signature, an irrevocable Letter
of Credit in favor of the Supplier, to the value of * .
50.2 The terms of such Letter of Credit shall be satisfactory to the Supplier to
ensure payment if the Purchaser cannot secure satisfactory financing or
landing licenses, and does not have the option to purchase capacity at
market prices by September 30, 1996. If the Purchaser does not secure
satisfactory financing or does not have the option to purchase capacity at
market prices by September 30, 1996, then the Contract shall be terminated
in
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
Commercial Terms and Conditions May 1996 57
AT&T Submarine Systems, Inc.-Proprietary
Use Pursuant to Non-Disclosure Agreement
<PAGE>
accordance with Article 23, Termination by Notice, unless the Parties
agree by mutual consent on a different course of action.
50.3 Upon payment of the September 30, 1996, payment by the Purchaser in
accordance with the Billing Schedule, the Supplier shall agree to allow the
Purchaser to terminate the Letter of Credit.
ARTICLE 51. SUPPLEMENTAL AGREEMENTS
- -----------------------------------
The Parties agree to use reasonable efforts to discuss and execute agreements
concerning the following issues on or before May 30, 1996:
(1) Access to the Tuckerton, NJ Cable Station or an alternative landing
point or solution.
(2) A cable system maintenance agreement that covers those issues set forth
in Appendix 1.
Notwithstanding any language in Appendix 1, Appendix 1 does not constitute an
agreement regarding the issues addressed in it.
In the event the Parties cannot agree on the issue of cable station access at
Tuckerton, NJ, AT&T-SSI agrees to offer the Purchaser the option to land the
cable system at another site in the same New York/New Jersey region without
change to the Terms and Conditions, Price, or schedule contained herein. The
landing site may not necessarily be another cable station.
AT&T-SSI recognizes that any other landing site must provide the same level of
connectivity to the local and international networks as is available at the
Tuckerton location.
ARTICLE 52. COMING INTO FORCE
- -----------------------------
52.1 This Contract will Come into Force on or before May 30, 1996, provided
that:
(1) AT&T-SSI has posted a Letter of Credit as required under Article 15.
(2) TBI has posted a Letter of Credit satisfactory to AT&T-SSI in
accordance with
(3) TBI has received its International Facilities and Services License
under the Bermuda Telecommunications Act, 1986.
Commercial Terms and Conditions May 1996 58
AT&T Submarine Systems, Inc.-Proprietary
Use Pursuant to Non-Disclosure Agreement
<PAGE>
(4) TBI has access to the Tuckerton, NJ Cable Station or an alternative
landing point or solution.
52.2 If the Contract does not Come into Force on or before May 30, 1996, then
the Parties shall mutually agree to an extension or the Parties may
terminate the Contract in accordance with Article 23, Termination by
Notice.
52.3 If submarine cable capacity is not available between Bermuda and United
Kingdom to TBI to purchase at market prices by September 30, 1996, then TBI
shall have the option to terminate this Contract in accordance with Article
50. AT&T-SSI will provided TBI with reasonable support to assist TBI in
its endeavors to obtain submarine cable capacity between Bermuda and the
United Kingdom prior to Provisional System Acceptance. This provision is
not a guarantee on behalf of AT&T-SSI to provide capacity to TBI.
Commercial Terms and Conditions May 1996 59
AT&T Submarine Systems, Inc.-Proprietary
Use Pursuant to Non-Disclosure Agreement
<PAGE>
IN WITNESS WHEREOF the Parties hereto affix the signatures of their authorized
representative:
/s/ MICHAEL KEDAR
TeleBermuda International Ltd. Date May 16, 1996
AT&T Submarine Systems, Inc. Date 5/16/96
END OF DOCUMENT
Commercial Terms and Conditions May 1996 60
AT&T Submarine Systems, Inc.-Proprietary
Use Pursuant to Non-Disclosure Agreement
<PAGE>
BERMUDA - US NO. 1 SUBMARINE CABLE SYSTEM
Amendment No. 1
between
AT&T-SSI (AT&T Submarine Systems, Inc.)
and
TBI (TeleBermuda International Ltd.)
================================================================================
Amendment No. 1 dated July 9, 1996 represents an agreement between:
AT&T Submarine Systems, Inc., AT&T-SSI, (hereinafter referred to as the
"Supplier") a corporation organized and existing under the laws of the State of
New York, of the United States America, and having its principle office at 340
Mt. Kemble Ave. Morristown, NJ 07960 of the United States Of America; and
TeleBermuda International Ltd., TBI, (hereinafter referred to as the
"Purchaser") a Bermuda corporation having its principal office at 10 Queen
Street, Suite 101, Hamilton HM11, Bermuda. TBI and AT&T-SSI hereinafter will be
collectively referred to as the "Parties".
Reference is made to the BUS-1 Cable System Commercial Terms and Conditions,
Article 52, Coming Into Force.
The Parties hereby amend Article 52.1, Coming Into Force, as follows:
Delete Article 52.1 in its entirety and replace it with the following:
52.1 This Contract has Come Into Force on June 25, 1996.
Except as expressly amended by this Amendment, the Contract shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused Amendment No. 1 to be
executed by their duly authorized officers as of the date first written
above.
AT&T SUBMARINE SYSTEMS, INC.
By:
__________________
TELEBERMUDA INTERNATIONAL LTD.
By: /s/ MICHAEL KEDAR
__________________
<PAGE>
Exhibit 10.19
GLOBENET COMMUNICATIONS GROUP LIMITED
1998 SHARE OPTION AND INCENTIVE PLAN
GlobeNet Communications Group Limited, a Bermuda exempted corporation (the
"Company"), sets forth herein the terms of its 1998 Share Option and Incentive
Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and retain
highly qualified officers, key employees, and other persons to advance the
interests of the Company by providing such persons with stronger incentives to
continue to serve the Company and its Subsidiaries (as defined herein) and to
expend maximum effort to improve the business results and earnings of the
Company. The Plan is intended to accomplish this objective by providing to
eligible persons as defined in the Plan an opportunity to acquire or increase a
direct proprietary interest in the operations and future success of the Company.
To this end, the Plan provides for the grant of share options in accordance with
the terms hereof.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Awards Agreements), the following definitions shall apply:
0.1 "Award Agreement" means the share option agreement or other written
agreement between the Company and a Grantee that evidences and sets out the
terms and conditions of a Grant.
0.2 "Board" means the Board of Directors of the Company.
0.3 "Committee" means a Committee of, and designated from time to time by
resolution of, the Board. Commencing on the Effective Date, and until such time
as the Board shall determine otherwise, the Committee shall be the Compensation
Committee of the Board.
0.4 "Company" means GlobeNet Communications Group Limited.
0.5 "Effective Date" means December 18, 1998, the date on which the Plan
was adopted by the Board.
0.6 "Fair Market Value" means the value of a Share as determined by the
Board in its discretion, as either: (a) the closing price of the Share on the
Bermuda Stock Exchange or other established national or regional stock exchange
on which the Shares are listed or established
<PAGE>
securities market in which the Shares are publicly traded (the highest such
closing price if there is more than one such exchange or market) on the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading day)
or, if no sale of Shares is reported for such trading day, on the next preceding
day on which any sale shall have been reported; or (b) the value of a Share as
determined by the Board in good faith applying appropriate valuation principles.
0.7 "Grant" means an award of an Option under the Plan.
0.8 "Grant Date" means the date as of which the Board approves a Grant.
0.9 "Grantee" means a person who receives or holds an Option under the
Plan.
0.10 "Option" means an Option to purchase one or more Shares pursuant to
the Plan.
0.11 "Option Period" means the period during which Options may be exercised
as set forth in Section 9 hereof.
0.12 "Option Price" means the purchase price for each Share subject to an
Option.
0.13 "Permanent and Total Disability" means a disability which prevents the
individual from engaging in any substantial gainful activity 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 twelve months. An individual shall not be considered to
be permanently and totally disabled unless he furnishes proof of the existence
thereof in such form and manner, and at such times, as the Board may require.
0.14 "Plan" means the GlobeNet Communications Group Limited 1998 Share
Option and Incentive Plan.
0.15 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or Subsidiary of the Company, and employees of any of the foregoing, as
such persons may be designated from time to time by the Board pursuant to
Section 6 hereof.
0.16 "Share" means the common shares of par value U.S. $1.50 each in the
capital of the Company.
0.17 "Subsidiary" means any subsidiary of the Company which is greater
than fifty percent owned by the Company.
0.18 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in Section 9.2 hereof.
2
<PAGE>
3. ADMINISTRATION OF THE PLAN
3.1 Board. The Board shall have such powers and authorities related to the
-----
administration of the Plan as are consistent with the Company's memorandum of
association and bye-laws and applicable law. The Board shall have full power and
authority to take all actions and to make all determinations required or
provided for under the Plan, any Grant or any Award Agreement, and shall have
full power and authority to take all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan that the Board
deems to be necessary or appropriate to the administration of the Plan, any
Grant or any Award Agreement. All such actions and determinations shall be by
the affirmative vote of a majority of the members of the Board present at a
meeting or by unanimous consent of the Board executed in writing in accordance
with the Company's memorandum of association and bye-laws and applicable law.
The interpretation and construction by the Board of any provision of the Plan,
any Grant or any Award Agreement shall be final and conclusive.
3.2 Committee. The Board from time to time may appoint a Committee. The
---------
Board, in its sole discretion, may provide that the role of the Committee shall
be limited to making recommendations to the Board concerning any determinations
to be made and actions to be taken by the Board pursuant to or with respect to
the Plan, or the Board may delegate to the Committee such powers and authorities
related to the administration and implementation of the Plan, as set forth in
Section 3.1 above and in other applicable provisions, as the Board shall
determine, consistent with the Company's memorandum of association and bye-laws
and applicable law. In the event that the Plan, any Grant or any Award Agreement
entered into hereunder provides for any action to be taken by or determination
to be made by the Board, such action may be taken by or such determination may
be made by the Committee if the power and authority to do so has been delegated
to the Committee by the Board as provided for in this Section. Unless otherwise
expressly determined by the Board, any such action or determination by the
Committee shall be final, binding and conclusive.
3.3 Grants. Subject to the other terms and conditions of the Plan, the
------
Board shall have full and final authority (i) to designate Grantees, (ii) to
determine the type or types of Grant to be made to a Grantee, (iii) to determine
the number of Shares to be subject to a Grant, (iv) to establish the terms and
conditions of each Grant (including, but not limited to, the exercise price of
any Option, the nature and duration of any restriction or condition (or
provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of a Grant or the Shares subject thereto), (v) to prescribe the form
of each Award Agreement evidencing a Grant, and (vi) to amend, modify, or
supplement the terms of any outstanding Grant. Such authority specifically
includes the authority, in order to effectuate the purposes of the Plan but
without amending the Plan, to modify Grants to eligible individuals who are
foreign nationals or are individuals who are employed outside Bermuda to
recognize differences in local law, tax policy, or custom. The Board may retain
the right in an Award Agreement to cause a forfeiture of the gain realized by a
Grantee on account of the Grantee taking actions in "competition with the
Company," as defined in the applicable Award Agreement. Furthermore, the Board
may annul a Grant if the Grantee is an employee of the Company or any Subsidiary
and is terminated "for cause" as defined in the applicable Award Agreement. As a
condition to any subsequent Grant, the Board shall have the right, at its
discretion, to require Grantees to return to the Company Grants previously
awarded
3
<PAGE>
under the Plan. Subject to the terms and conditions of the Plan, any such new
Grant shall be upon such terms and conditions as are specified by the Board at
the time the new Grant is made.
3.4 No Liability. No member of the Board or of the Committee shall be
------------
liable for any action or determination made in good faith with respect to the
Plan or any Grant or Award Agreement.
4. SHARES SUBJECT TO THE PLAN
Shares issued or to be issued under the Plan shall be authorized but
unissued Shares. If any Shares covered by a Grant are not purchased or are
forfeited, or if a Grant otherwise terminates without delivery of any Shares
subject thereto, then the number of Shares counted against the aggregate number
of Shares available under the Plan with respect to such Grant shall, to the
extent of any such forfeiture or termination, again be available for making
Grants under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date. The Plan shall be effective as of the Effective
--------------
Date, subject to approval of the Plan within one year of the Effective Date,
by a majority of the votes cast on the proposal at a meeting of shareholders,
provided that the total votes cast represent a majority of all shares entitled
to vote. Upon approval of the Plan by the shareholders of the Company as set
forth above, all Grants made under the Plan on or after the Effective Date shall
be fully effective as if the shareholders of the Company had approved the Plan
on the Effective Date. If the shareholders fail to approve the Plan within one
year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect.
5.2 Term. The Plan has no termination date.
----
6. OPTIONS GRANTS
6.1 Company or Subsidiary Employees. Grants may be made under the Plan to
-------------------------------
(a) any employee of the Company or of any Subsidiary, including any such
employee who is an officer or director of the Company or of any Subsidiary, or
(b) any employee of a Service Provider providing services to the Company or of
any Subsidiary, as the Board shall determine and designate from time to time.
6.2 Successive Grants. An eligible person may receive more than one
-----------------
Grant, subject to such restrictions as are provided herein.
7. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement,
to be executed by the Company and by the Grantee, in such form or forms as the
Board shall from time to time determine. Award Agreements granted from time to
time or at the same time need not contain similar provisions but shall be
consistent with the terms of the Plan.
4
<PAGE>
8. OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated in
the Award Agreement evidencing such Option. The Option Price shall be the Fair
Market Value on the Grant Date of a Share subject to the Option. In no case
shall the Option Price of any Option be less than the par value of a Share.
9. VESTING, TERM AND EXERCISE OF OPTIONS
9.1 Vesting and Option Period. Subject to Section 9.2 hereof, each
-------------------------
Option granted under the Plan shall become exercisable at such times and under
such conditions as shall be determined by the Board and stated in the Award
Agreement. For purposes of this Section 9.1, fractional numbers of Shares
subject to an Option shall be rounded down to the next nearest whole number. The
period during which any Option shall be exercisable shall constitute the "Option
Period" with respect to such Option.
9.2 Term. Each Option granted under the Plan shall terminate, and all
----
rights to purchase Shares thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option (the
"Termination Date").
9.3 Acceleration. Subject to Section 12 hereof, any limitation on the
------------
exercise of an Option contained in any Award Agreement may be rescinded,
modified or waived by the Board, in its sole discretion, at any time and from
time to time after the Grant Date of such Option, so as to accelerate the time
at which the Option, may be exercised.
9.4 Termination of Employment or Other Relationship. Upon the termination
-----------------------------------------------
of a Grantee's employment or other relationship with the Company other than by
reason of death or Permanent and Total Disability, any Option or portion thereof
held by such Grantee that has not vested in accordance with the provisions of
Section 9.1 hereof shall terminate immediately, and any Option or portion
thereof that has vested in accordance with the provisions of Section 9.1 hereof
but has not been exercised shall terminate at the close of business on the 90th
day following the Grantee's termination of employment or other relationship,
unless the Board, in its discretion, extends the period during which the Option
may be exercised (which period may not be extended beyond the original term of
the Option). Upon termination of an Option or portion thereof, the Grantee shall
have no further right to purchase Shares pursuant to such Option or portion
thereof. Whether a leave of absence or leave on military or government service
shall constitute a termination of employment or other relationship for purposes
of the Plan shall be determined by the Board, which determination shall be final
and conclusive. For purposes of the Plan, a termination of employment, service
or other relationship shall not be deemed to occur if the Grantee is immediately
thereafter a director of the Company.
9.5 Rights in the Event of Death. If a Grantee dies while employed by or
----------------------------
providing services to the Company, all Options granted to such Grantee shall
fully vest on the date of death, and the executors or administrators or legatees
or distributees of such Grantee's estate shall have
5
<PAGE>
the right, at any time within one year after the date of such Grantee's death
(or such longer period as the Board, in its discretion, may determine prior to
the expiration of such one-year period) and prior to termination of the Option
pursuant to Section 9.2 above, to exercise any Option held by such Grantee at
the date of such Grantee's death.
9.6 Rights in the Event of Disability. If a Grantee terminates employment
---------------------------------
or other relationship with the Company by reason of the Permanent and Total
Disability of such Grantee, such Grantee's Options shall continue to vest, and
shall be exercisable to the extent that they are vested, for a period of one
year after such termination of employment or other relationship (or such longer
period as the Board, in its discretion, may determine prior to the expiration of
such one-year period), subject to earlier termination of the Option as provided
in Section 9.2 above. Whether a termination of employment or other relationship
is to be considered by reason of "permanent and total disability" for purposes
of the Plan shall be determined by the Board, which determination shall be final
and conclusive.
9.7 Limitations on Exercise of Option. Notwithstanding any other
---------------------------------
provision of the Plan, in no event may any Option be exercised, in whole or in
part, after ten years following the date upon which the Option is granted or
after the occurrence of an event referred to in Section 13 hereof which results
in termination of the Option.
9.8 Method of Exercise. An Option that is exercisable may be exercised by
------------------
the Grantee's delivery to the Company of written notice of exercise on any
business day, at the Company's principal office, addressed to the attention of
the Company Secretary. Such notice shall specify the number of Shares with
respect to which the Option is being exercised and shall be accompanied by
payment in full of the Option Price of the Shares for which the Option is being
exercised. The minimum number of Shares with respect to which an Option may be
exercised, in whole or in part, at any time shall be the lesser of (i) 100
Shares or such lesser number set forth in the applicable Award Agreement and
(ii) the maximum number of Shares available for purchase under the Option at the
time of exercise. Payment of the Option Price for the Shares purchased pursuant
to the exercise of an Option shall be made (i) in cash or in cash equivalents;
(ii) to the extent permitted by law and at the Board's discretion, through the
actual or constructive tender to the Company of Shares, which Shares, if
acquired from the Company, shall have been held for at least six months and
which shall be valued, for purposes of determining the extent to which the
Option Price has been paid thereby, at their Fair Market Value on the date of
exercise; or (iii) to the extent permitted by law and at the Board's discretion,
by a combination of the methods described in (i) and (ii). The Board may
provide, by inclusion of appropriate language in an Award Agreement, that
payment in full of the Option Price need not accompany the written notice of
exercise provided that the notice of exercise directs that the certificate or
certificates for the Shares for which the Option is exercised be delivered to a
licensed broker acceptable to the Company as the agent for the individual
exercising the Option and, at the time such certificate or certificates are
delivered, the broker tenders to the Company cash (or cash equivalents
acceptable to the Company) equal to the Option Price for the Shares purchased
pursuant to the exercise of the Option plus the amount (if any) of taxes which
the Company may in its judgment, be required to withhold with respect to the
exercise of the Option. An attempt to exercise any Option granted hereunder
other than as set forth above shall be invalid and of no force and effect.
Unless otherwise stated in the applicable Award Agreement, an individual holding
or exercising an Option
6
<PAGE>
shall have none of the rights of a shareholder (for example, the right to
receive cash or dividend payments or distributions attributable to the subject
Shares or to direct the voting of the subject Shares) until the Shares covered
thereby are fully paid and issued to him. Except as provided in Section 13
hereof, no adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date of such issuance.
9.9 Delivery of Share Certificates. Promptly after the exercise of an
------------------------------
Option by a Grantee and the payment in full of the Option Price, such Grantee
shall be entitled to the issuance of a share certificate or certificates
evidencing his or her ownership of the Shares subject to the Option.
10. TRANSFERABILITY OF OPTIONS
Each Option granted pursuant to this Plan shall, during a Grantee's
lifetime, be exercisable only by the Grantee or his or her permitted
transferees, and neither the Option nor any right thereunder shall be
transferable by the Grantee, by operation of law or otherwise, other than as
may be provided in the Award Agreement evidencing such Option or as may be
provided by will or the laws of descent and distribution. Except as may be
provided in the Award Agreement evidencing an Option, no Option shall be pledged
or hypothecated (by operation of law or otherwise) or subject to execution,
attachment or similar processes.
11. REQUIREMENTS OF LAW
11.1 General. The Company shall not be required to sell or issue any
-------
Shares under any Grant if the sale or issuance of such Shares would constitute a
violation by the Grantee, any other individual exercising an Option, or the
Company of any provision of any law or regulation of any governmental authority.
11.2 Registration. If at any time the Company shall determine, in its
------------
discretion, that the listing, registration or qualification of any shares
subject to a Grant upon any securities exchange or under any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of Shares hereunder, no Shares may be issued or
sold to the Grantee or any other individual exercising an Option pursuant to
such Grant unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Company, and any delay caused thereby shall in no way affect the date of
termination of the Grant. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable until the Shares covered by
such Option are registered or are exempt from registration, the exercise of such
Option (under circumstances in which the laws of such jurisdiction apply) shall
be deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption.
12. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any Shares as to which Grants have not been made.
Except as permitted under this Section 12 or Section 13 hereof, no amendment,
suspension, or termination of the Plan shall, without the consent
7
<PAGE>
of the Grantee, alter or impair rights or obligations under any Grant
theretofore awarded under the Plan.
13. EFFECT OF CHANGES IN CAPITALIZATION
13.1 Changes in Shares. If the number of outstanding Shares is increased
-----------------
of decreased or the Shares are changed into or exchanged for a different number
or kind of shares or other securities of the Company on account of any
recapitalization, reclassification, share split, reverse split, combination of
shares, exchange of shares, share dividend or other distribution payable in
capital share, or other increase or decrease in such shares effected without
receipt of consideration by the Company occurring after the Effective Date, the
number and kinds of shares for which Grants of Options may be made under the
Plan shall be adjusted proportionately and accordingly by the Company. In
addition, the number and kind of shares for which Grants are outstanding shall
be adjusted proportionately and accordingly so that the proportionate interest
of the Grantee immediately following such event shall, to the extent
practicable, be the same as immediately before such event. Any such adjustment
in outstanding Options shall not change the aggregate Option Price payable with
respect to shares that are subject to the unexercised portion of an Option
outstanding but shall include a corresponding proportionate adjustment in the
Option Price per share.
13.2 Reorganization in Which the Company Is the Surviving Entity and in
------------------------------------------------------------------
Which No Change of Control Occurs. Subject to Section 13.3 hereof, if the
- ---------------------------------
Company shall be the surviving entity in any reorganization, merger, or
consolidation of the Company with one or more other entities, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of Shares subject to such Option
would have been entitled immediately following such reorganization, merger, or
consolidation, with a corresponding proportionate adjustment of the Option Price
per Share so that the aggregate Option Price thereafter shall be the same as the
aggregate Option Price of the Shares remaining subject to the Option immediately
prior to such reorganization, merger, or consolidation.
13.3 Reorganization, Sale of Assets or Sale of Shares Which Involves a
-----------------------------------------------------------------
Change of Control. Upon the dissolution or liquidation of the Company or upon a
- -----------------
merger, consolidation, or reorganization of the Company with one or more other
entities in which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another entity, or upon any
transaction (including, without limitation, a merger or reorganization in which
the Company is the surviving entity) approved by the Board that results in any
person or entity (or person or entities acting as a group or otherwise in
concert), owning fifty percent or more of the combined voting power of all
classes of securities of the Company, all Options outstanding hereunder shall
become immediately exercisable for a period of fifteen days immediately prior to
the scheduled consummation of the event. Any exercise of an Option during such
fifteen-day period shall be conditioned upon the consummation of the event and
shall be effective only immediately before the consummation of the event. Upon
consummation of any such event, the Plan and all outstanding but unexercised
Options shall terminate, except to the extent provision is made in writing in
connection with such transaction for the continuation of the Plan or the
assumption of such Options theretofore granted, or for the substitution for such
Options of new options covering the shares of a successor company, or a parent
or subsidiary thereof, with
8
<PAGE>
appropriate adjustments as to the number and kinds of shares or units and
exercise prices, in which event the Plan and Options theretofore granted shall
continue in the manner and under the terms so provided. The Board shall send
written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which the Company gives
notice thereof to its shareholders.
13.4 Adjustments. Adjustments under this Section 13 related to Shares or
-----------
securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. No fractional Shares or
other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole Share.
13.5 No Limitations on Company. The making of Grants pursuant to the Plan
-------------------------
shall not affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell
or transfer all or any part of its business or assets.
14. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
other relationship of the Company or any Subsidiary, or to interfere in any way
with any contractual or other right or authority of the Company either to
increase or decrease the compensation or other payments to any individual at any
time, or to terminate any employment or other relationship between any
individual and the Company. In addition, notwithstanding anything contained in
the Plan to the contrary, unless otherwise stated in the applicable Award
Agreement, no Grant awarded under the Plan shall be affected by any change of
duties or position of the Grantee, so long as such Grantee continues to be a
director, officer, consultant or employee of the Company. The obligation of the
Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
participant or beneficiary under the terms of the Plan. No Grantee shall have
any of the rights of a shareholder with respect to the Shares subject to an
Option except to the extent such Shares shall have been fully paid for and
issued upon the shareholder's exercise of the Option.
15. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any limitations
upon the right and authority of the Board to adopt such other incentive
compensation arrangements (which arrangements may be applicable either generally
to a class or classes of individuals or specifically to a particular individual
or particular individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of share options otherwise than
under the Plan.
16. WITHHOLDING TAXES
9
<PAGE>
The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any taxes of any
kind required by law to be withheld with respect to the issuance of any Shares
upon the exercise of an Option. At the time of exercise, the Grantee shall pay
to the Company or the Subsidiary, as the case may be, any amount that the
Company or the Subsidiary may reasonably determine to be necessary to satisfy
such withholding obligation. Subject to the prior approval of the Company or the
Subsidiary, which may be withheld by the Company or the Subsidiary, as the case
may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company or the Subsidiary
to withhold Shares otherwise issuable to the Grantee or (ii) by delivering to
the Company or the Subsidiary Shares already owned by the Grantee. The Shares so
delivered or withheld shall have an aggregate Fair Market Value equal to such
withholding obligations. The Fair Market Value of the Shares used to satisfy
such withholding obligation shall be determined by the Company or the Subsidiary
as of the date that the amount of tax to withheld is to be determined. A Grantee
who has made an election pursuant to this Section 16 may satisfy his or her
withholding obligation only with Shares that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.
17. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
18. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
19. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
20. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
21. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Grants awarded hereunder shall be governed by the laws of Bermuda, excluding
the choice of law rules thereof.
* * *
10
<PAGE>
The Plan was duly adopted and approved by the Board of the Company as of
the 18th day of December, 1998.
/s/ MICHAEL KEDAR
__________________________
Name: Michael Kedar
Title: Chairman & CEO
11
<PAGE>
EXHIBIT 10.20
[LOGO OF TELEBERMUDA APPEARS HERE]
TELEBERMUDA INTERNATIONAL LIMITED
(TELEBERMUDA)
DIRECTORS, EXECUTIVES, SENIOR MANAGEMENT & SENIOR STAFF
STOCK OPTION PLAN
<PAGE>
DIRECTORS, EXECUTIVES, SENIOR MANAGEMENT AND SENIOR STAFF
OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this stock option plan is:
a) to promote a proprietary interest in the Company among its Directors,
Executives, Senior Management and Senior Staff.
b) to encourage the Directors, Executives, Senior Management and Senior
Staff to further the development of the Company; and
c) to attract and retain the key employees and Directors necessary for the
Company's long-term success.
2. ELIGIBILITY AND PARTICIPATION
Generally, participation to the Plan will be limited to those positions
that can have a significant impact on the Company's long-term results
including:
Directors
Executive Management
Senior Management
Senior Staff
3. DESCRIPTION OF SECURITIES OFFERED
The Shares offered shall be "Common Shares" of the Company.
<PAGE>
4. GRANTS
a) The Compensation Committee of the Board of Directors ("Committee")
shall determine, at is discretion, the size of such grant and the date
it becomes effective. The number of shares to which such option grant
relates shall be determined in relation to the market value of the
shares and the participant's base salary. (In the case of Directors,
their level of contribution.)
b) Grants may be made annually at the time of the executive compensation
review, unless otherwise determined by the Committee.
c) Participants will be notified of the grant applicable to them by a
notice of grant (see sample in Appendix A), outlining the terms and
conditions of the grant.
d) No grant will be made to a participant who has decided to leave the
Company.
5. OPTION PRICE
The price of the shares to be purchased through the exercise of an option
shall be determined by the Committee but shall not be less than the fair
market value of the shares at time of grant. For purposes of the Plan,
fair market value shall mean the average of the closing price of the shares
on a recognized North American Stock Exchange, including the Bermuda Stock
Exchange for the five trading days immediately preceding the day of grant,
subject to the rules and policies of that stock exchange, or as otherwise
determined by the Committee, acting reasonably.
<PAGE>
6. OPTION PERIOD
A participant may exercise an option granted under the Plan as follows:
i) up to 33% of the optioned shares can be purchased one year following
date of grant;
ii) up to 66% of the optioned shares, less any shares previously
acquired under that option, can be purchased two years following the
date of grant;
iii) up to 100% of the optioned shares, less any shares previously
acquired under that option, can be purchased three years following
the date of the grant; and
iv) all the optioned shares not already acquired can be purchased three
years following the date of grant.
All options must be exercised no later than ten years from the date of
grant unless other option periods were established by the Committee
following the date of grant. Any such options not exercised within that
period will be cancelled and any rights attached to such options will be
forfeited.
7. OPTION EXERCISE
To exercise an option, a participant should contact the Secretary of the
Company to obtain an Option Exercise Form.
8. PAYMENT OF THE SHARES
Each participant must pay in full for the shares purchased by way of
exercising an option under the Plan.
<PAGE>
9. ISSUE OF SHARES
A participant will be entitled to receive the certificate representing the
shares purchased through the exercise of any option as soon as practical
after the exercise of the option.
10. TERMINATION OF EMPLOYMENT AND DISABILITY
a) In the case of termination of employment for any reason other than
retirement or death, a participant may, within thirty (30) days
following the termination of employment, exercise any option for which
rights to exercise have accrued to the participant at the time of
termination. Any option not exercised at the end of the thirty day
period becomes void unless the Committee decides otherwise.
b) If the participant's employment terminates because of retirement as
approved by the Committee, the participant may exercise the options
granted before retirement as the rights to exercise accrue, but not
later than five (5) years from the date of retirement. Following the
expiry of said five (5) years, all unexercised options will be
forfeited.
c) In the case of a participant's death and unless decided otherwise by
the Committee, the estate of the participant is entitled to exercise
within twelve (12) months following the death of the participant, any
option for which rights to exercise have accrued to the participant at
the time of death. Following the expiry of said twelve (12) months, all
unexercised options will be forfeited.
d) If a participant becomes disabled and unless decided otherwise by the
Committee, the participant may exercise the options granted before the
commencement of the disability as the rights to exercise accrue, but
not later than five (5) years from the commencement of the disability.
Following the expiry of said five (5) years, all unexercised options
will be forfeited.
e) No option will be granted after retirement or disability of a
participant.
<PAGE>
11. DURATION, AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend or terminate the Plan at
any time but in such event, the rights of participants related to any
options granted under the Plan shall be preserved and maintained and no
amendment can confer additional benefits to the eligible participants
without prior approval by the shareholders.
12. OFFER FOR SHARES OF THE CORPORATION
In the event that, at any time, an offer to purchase is made to all holders
of shares, notice of such offer shall be given by the Company to each
participant and all unexercised options will become exercisable
immediately, but only to the extent necessary to enable a participant to
tender his shares should the participant so desire.
13. SUBDIVISION, CONSOLIDATION, CONVERSION OR RECLASSIFICATION
In the event that the shares of the Company are subdivided, consolidated,
converted or reclassified by the Company, or that any other action of a
similar nature affecting such shares is taken by the Company, any
unexercised option shall be appropriately adjusted, and the number of
shares reserved for issuance under the Plan shall be adjusted in the same
manner.
14. NECESSARY APPROVALS
The Company's obligation to issue and deliver shares in accordance with the
Plan, as well as any amendment thereto, is subject to the approval of
regulatory authorities having jurisdiction over the Company's shares.
<PAGE>
15. RIGHTS NON-ASSIGNABLE
The rights of a participant pursuant to the provisions of this Plan are
non-assignable.
16. GOVERNING LAW
The provisions of the Plan shall be interpreted in accordance with the laws
of Bermuda.
17. PARTICIPATION VOLUNTARY
a) The participation of an employee in the Plan is entirely voluntary and
non obligatory and shall not be interpreted as conferring upon any such
employee any rights or privileges other than those rights and
privileges expressly provided in the Plan.
b) The Plan does not provide any guarantee against any loss or profit
which may result from fluctuations in the market value of the shares.
18. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the Board
of Directors of the Company. The Committee shall have full and complete
authority to interpret the Plan and to prescribe such rules and regulations
and make such other determinations as it deems necessary or desirable for
the administration of the Plan.
<PAGE>
Appendix A-1
[Standard TBI Letterhead]
Notice of Grant for Non-Directors
(Sample)
September __, 1997
Dear __________:
From time to time the Compensation Committee of the Board of Directors, upon the
recommendation of management, grants stock options to certain TBI employees
whose contributions have played a key part in our Company's success in the past
year.
I am pleased to notify you that you have been granted an option to purchase
_______ shares at a price of $______ per share under the TeleBermuda Directors,
Executives, Senior Management & Senior Staff Stock Option Plan by the Committee
in recognition of your contribution. Within the next few weeks, you will
receive additional information concerning your stock option grant and a copy of
the Company's Summary Plan Description.
Subject to certain conditions set forth in the Stock Option Plan, your stock
option will vest over a three year period: 33% of the shares covered by the
grant after the first anniversary of the grant date; 66% of the shares covered
by the grant after the second anniversary of the grant date (less any shares you
have already exercised); and the entire unexercised portion of the grant after
the third anniversary of the grant date. You must exercise your stock option
within 10 years of the grant date or within 30 days of your termination of
employment with the Company, whichever occurs first. The value of the stock
option will, of course, depend on how we all perform in the future.
Sincerely,
Michael Kedar
Chief Executive Officer
Appendix A-2
<PAGE>
[Standard TBI Letterhead]
Notice of Grant for Directors
(Sample)
September __, 1997
Dear __________:
From time to time the Compensation Committee of the Board of Directors grants
stock options to members of the Board of Directors of TBI whose contributions
have played a key part in our Company's success in the past year.
I am pleased to notify you that you have been granted an option to purchase
_______ shares at a price of $______ per share under the TeleBermuda Directors,
Executives, Senior Management & Senior Staff Stock Option Plan by the Committee
in recognition of your contribution. Within the next few weeks, you will
receive additional information concerning your stock option grant and a copy of
the Company's Summary Plan Description.
Subject to certain conditions set forth in the Stock Option Plan, your stock
option will vest over a three year period: 33% of the shares covered by the
grant after the first anniversary of the grant date; 66% of the shares covered
by the grant after the second anniversary of the grant date (less any shares you
have already exercised); and the entire unexercised portion of the grant after
the third anniversary of the grant date. You must exercise your stock option
within 10 years of the grant date, subject to certain conditions set forth in
the Stock Option Plan. The value of the stock option will, of course, depend on
how we all perform in the future.
Sincerely,
Michael Kedar
Chief Executive Officer
<PAGE>
Exhibit 12.1
<TABLE>
<CAPTION>
GlobeNet Communications Group Limited
Deficiency of Earnings Available to Cover Fixed Charges
(in thousands of Dollars)
- -------------------------------------------------------------------------------------------------------------------
Ten months For the year For the year Six months Six months
ended ended ended ended ended
December 31, 1996 December 31, 1997 December 31, 1998 June 31, 1998 June 31, 1999
$ $ $ $ $
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings
Earnings (loss) before inter-
est, amortization, income
taxes, minority interest,
and equity accounted
for investment (3,377) (3,682) 1,706 (391) 2,358
Interest income 132 169 140 9 101
Amortization of capital assets (1) (542) (2,401) (1,158) (1,264)
Interest component of rent
expense 43 82 114 54 49
Minority interest - 249 204 204 -
Earnings (loss) from equity
accounted for investment - - 266 (209) -
-----------------------------------------------------------------------------------
(3,203) (3,724) 29 (1,491) 1,244
-----------------------------------------------------------------------------------
Fixed charges
Interest component of rent
expense 43 82 114 54 49
Interest on long-term debt - 750 3,542 1,585 1,577
Amortization of deferred
financing costs - 305 321 160 160
Accrued contingent interest - 382 960 472 495
-----------------------------------------------------------------------------------
43 1,519 4,937 2,271 2,281
-----------------------------------------------------------------------------------
Deficiency of earnings
available to cover fixed
charges (3,246) (5,243) (4,908) (3,762) (1,037)
===================================================================================
<CAPTION>
Pro-forma
---------------------------
For the year Six months
ended ended June 31,
December 31, 1998 1999
$ $
-------------------------------
<S> <C> <C>
Earnings
Earnings before interest,
amortization, income taxes,
minority interest, and equity
accounted for investment 1,706 2,358
Interest income 140 101
Amortization of capital assets (2,401) (1,264)
Interest component of rent
expense 114 49
Minority interest 204 -
Earnings from equity accounted
for investment 266 -
---------------------------
29 1,244
---------------------------
Fixed charges
Interest component of rent
expense 114 49
Interest on long-term debt 39,155 19,516
Amortization of deferred
financing costs 3,347 1,673
Accrued contingent interest - -
---------------------------
42,616 21,238
---------------------------
Deficiency of earnings
available to cover fixed
charges (42,587) (19,994)
===========================
</TABLE>
<PAGE>
````<TABLE>
<CAPTION>
Subsidiary Jurisdiction of Incorporation / Organization
---------- --------------------------------------------
<S> <C>
GlobeNet Communications Group Limited Bermuda
GlobeNet Communications Holdings Ltd. Bermuda
Atlantica Network (Bermuda) Ltd. Bermuda
TeleBermuda International Limited Bermuda
GlobeNet Communications Ltd. Bermuda
Atlantica Network (Venezuela) Ltd. Bermuda
Atlantica USA LLC Delaware
TeleBermuda International (Canada) Ltd. Canada
TeleBermuda International LLC Delaware
GeoReach Telecommunications Inc. Canada
GCG Holdings Ltda. Brazil
GCG Services Ltda. Brazil
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
GlobeNet Communications Group Limited of our report dated February 22, 1999
relating to the consolidated financial statements of GlobeNet Communications
Group Limited for the years ended December 31, 1998, 1997 and the ten month
period ended December 31, 1996, which appears in such Registration Statement. We
also consent to the references to us under the headings "Chartered Accountants"
and "Selected Consolidated Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers
Chartered Accountants
Hamilton, Bermuda
August 27, 1999
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
I, Michael Kedar, being a director of GlobeNet Communications Group Limited, a
Bermuda company (the "Company"), hereby constitute and appoint Lin Gentemann, or
any of the directors for the time being of the Company, and each of them, my
true and lawful attorney and agent, to sign, in the capacity indicated below,
and file with the Securities and Exchange Commission under the Securities Act of
1933 (the "Securities Act") and with the Registrar of Companies of Bermuda one
or more registration statement(s) on Form S-4 relating to the registration of
the offering for exchange of the 13% Senior Notes due 2007 of the Company
(the "Registration Statement"), with any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements or any additional registration statement filed pursuant to Rule 462
promulgated under the Securities Act, with full power and authority to do and
perform any and all acts and things whatsoever that such attorney and agent may
deem necessary or desirable, in his or her sole discretion, with any such act or
thing being hereby ratified and approved in all respects.
Any person acting on the strength of this Power of Attorney shall be entitled to
assume that approval as aforesaid has been validly obtained.
I declare that this Power of Attorney shall be governed by and construed in all
respects in accordance with the laws of Bermuda.
IN WITNESS WHEREOF I have this 30 day of August 1999 set my hand and seal.
SIGNED, SEALED and DELIVERED )
by the said /s/ Michael Kedar )
in the presence of: /s/ Angela Stringer )
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
I, Greg Belbeck, being an officer of GlobeNet Communications Group Limited, a
Bermuda company (the "Company"), hereby constitute and appoint Lin Gentemann, or
any of the directors for the time being of the Company, and each of them, my
true and lawful attorney and agent, to sign, in the capacity indicated below,
and file with the Securities and Exchange Commission under the Securities Act of
1933 (the "Securities Act") and with the Registrar of Companies of Bermuda one
or more registration statement(s) on Form S-4 relating to the registration of
the offering for exchange of the 13% Senior Notes due 2007 of the Company (the
"Registration Statement"), with any and all amendments, supplements and exhibits
thereto, including pre-effective and post-effective amendments or supplements or
any additional registration statement filed pursuant to Rule 462 promulgated
under the Securities Act, with full power and authority to do and perform any
and all acts and things whatsoever that such attorney and agent may deem
necessary or desirable, in his or her sole discretion, with any such act or
thing being hereby ratified and approved in all respects.
Any person acting on the strength of this Power of Attorney shall be entitled to
assume that approval as aforesaid has been validly obtained.
I declare that this Power of Attorney shall be governed by and construed in all
respects in accordance with the laws of Bermuda.
IN WITNESS WHEREOF I have this 27/th/ day of August 1999 set my hand and seal.
SIGNED, SEALED and DELIVERED )
by the said /s/ G Belbeck )
in the presence of: /s/ ANGELA STRINGER )
<PAGE>
EXHIBIT 24.3
POWER OF ATTORNEY
I, Anthony Bolland, being a director of GlobeNet Communications Group Limited, a
Bermuda company (the "Company"), hereby constitute and appoint Lin Gentemann, or
any of the directors for the time being of the Company, and each of them, my
true and lawful attorney and agent, to sign, in the capacity indicated below,
and file with the Securities and Exchange Commission under the Securities Act of
1933 (the "Securities Act") and with the Registrar of Companies of Bermuda one
or more registration statement(s) on Form S-4 relating to the registration of
the offering for exchange of the 13% Senior Notes due 2007 of the Company
(the "Registration Statement"), with any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements or any additional registration statement filed pursuant to Rule 462
promulgated under the Securities Act, with full power and authority to do and
perform any and all acts and things whatsoever that such attorney and agent may
deem necessary or desirable, in his or her sole discretion, with any such act or
thing being hereby ratified and approved in all respects.
Any person acting on the strength of this Power of Attorney shall be entitled to
assume that approval as aforesaid has been validly obtained.
I declare that this Power of Attorney shall be governed by and construed in all
respects in accordance with the laws of Bermuda.
IN WITNESS WHEREOF I have this 28 day of August 1999 set my hand and seal.
SIGNED, SEALED and DELIVERED )
by the said /s/ Anthony Bolland )
in the presence of: )
<PAGE>
EXHIBIT 24.5
POWER OF ATTORNEY
I, Sebastien Rheaume, being a director of GlobeNet Communications Group Limited,
a Bermuda company (the "Company"), hereby constitute and appoint Lin Gentemann,
or any of the directors for the time being of the Company, and each of them, my
true and lawful attorney and agent, to sign, in the capacity indicated below,
and file with the Securities and Exchange Commission under the Securities Act of
1933 (the "Securities Act") and with the Registrar of Companies of Bermuda one
or more registration statement(s) on Form S-4 relating to the registration of
the offering for exchange of the 13% Senior Notes due 2007 of the Company (the
"Registration Statement"), with any and all amendments, supplements and exhibits
thereto, including pre-effective and post-effective amendments or supplements or
any additional registration statement filed pursuant to Rule 462 promulgated
under the Securities Act, with full power and authority to do and perform any
and all acts and things whatsoever that such attorney and agent may deem
necessary or desirable, in his or her sole discretion, with any such act or
thing being hereby ratified and approved in all respects.
Any person acting on the strength of this Power of Attorney shall be entitled to
assume that approval as aforesaid has been validly obtained.
I declare that this Power of Attorney shall be governed by and construed in all
respects in accordance with the laws of Bermuda.
IN WITNESS WHEREOF I have this 30 day of August 1999 set my hand and seal.
SIGNED, SEALED and DELIVERED )
by the said /s/ Sebastien Rheaume )
in the presence of: /s/ Marius Moldovan )
<PAGE>
EXHIBIT 24.6
POWER OF ATTORNEY
I, Linda Dougherty, being a director of GlobeNet Communications Group Limited, a
Bermuda company (the "Company"), hereby constitute and appoint Lin Gentemann, or
any of the directors for the time being of the Company, and each of them, my
true and lawful attorney and agent, to sign, in the capacity indicated below,
and file with the Securities and Exchange Commission under the Securities Act of
1933 (the "Securities Act") and with the Registrar of Companies of Bermuda one
or more registration statement(s) on Form S-4 relating to the registration of
the offering for exchange of the 13% Senior Notes due 2007 of the Company
(the "Registration Statement"), with any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements or any additional registration statement filed pursuant to Rule 462
promulgated under the Securities Act, with full power and authority to do and
perform any and all acts and things whatsoever that such attorney and agent may
deem necessary or desirable, in his or her sole discretion, with any such act or
thing being hereby ratified and approved in all respects.
Any person acting on the strength of this Power of Attorney shall be entitled to
assume that approval as aforesaid has been validly obtained.
I declare that this Power of Attorney shall be governed by and construed in all
respects in accordance with the laws of Bermuda.
IN WITNESS WHEREOF I have this 27 day of August 1999 set my hand and seal.
SIGNED, SEALED and DELIVERED )
by the said Linda Dougherty )
in the presence of: /s/Jennie Bastian )
<PAGE>
EXHIBIT 24.7
POWER OF ATTORNEY
I, George E. Matelich, being a director of GlobeNet Communications Group
Limited, a Bermuda company (the "Company"), hereby constitute and appoint Lin
Gentemann, or any of the directors for the time being of the Company, and each
of them, my true and lawful attorney and agent, to sign, in the capacity
indicated below, and file with the Securities and Exchange Commission under the
Securities Act of 1933 (the "Securities Act") and with the Registrar of
Companies of Bermuda one or more registration statements(s) on Form S-4 relating
to the registration of the offering for exchange of the 13% Senior Notes due
2007 of the Company (the "Registration Statement"), with any and all amendments,
supplements and exhibits thereto, including pre-effective and post-effective
amendments or supplements or any additional registration statement filed
pursuant to Rule 462 promulgated under the Securities Act, with full power and
authority to do and perform any and all acts and things whatsoever that such
attorney and agent may deem necessary or desirable, in his or her sole
discretion, with any such act or thing being hereby ratified and approved in all
respects.
Any person acting on the strength of this Power of Attorney shall be entitled to
assume that approval as aforesaid has been validly obtained.
I declare that this Power of Attorney shall be governed by and construed in all
respects in accordance with the laws of Bermuda.
IN WITNESS WHEREOF I have this 30/th/ day of August 1999 set my hand and seal.
SIGNED, SEALED and DELIVERED )
by the said George E. Matelich )
------------------
in the presence of: )
Bernadette Somerville /s/ George E Matelich
---------------------
BERNADETTE SOMERVILLE George E Matelich
Notary Public, State of New York
No. 03-4953361
Qualified in Bronx County
Certificate Filed in New York County
Commission Expires 7/10/00
<PAGE>
EXHIBIT 24.8
POWER OF ATTORNEY
I, Kevin J. Maroni, being a director of GlobeNet Communications Group Limited, a
Bermuda company (the "Company"), hereby constitute and appoint Lin Gentemann, or
any of the directors for the time being of the Company, and each of them, my
true and lawful attorney and agent, to sign, in the capacity indicated below,
and file with the Securities and Exchange Commission under the Securities Act of
1933 (the "Securities Act") and with the Registrar of Companies of Bermuda one
or more registration statement(s) on Form S-4 relating to the registration of
the offering for exchange of the 13% Senior Notes due 2007 of the Company
(the "Registration Statement"), with any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements or any additional registration statement filed pursuant to Rule 462
promulgated under the Securities Act, with full power and authority to do and
perform any and all acts and things whatsoever that such attorney and agent may
deem necessary or desirable, in his or her sole discretion, with any such act or
thing being hereby ratified and approved in all respects.
Any person acting on the strength of this Power of Attorney shall be entitled to
assume that approval as aforesaid has been validly obtained.
I declare that this Power of Attorney shall be governed by and construed in all
respects in accordance with the laws of Bermuda.
IN WITNESS WHEREOF I have this 30 day of August 1999 set my hand and seal.
SIGNED, SEALED and DELIVERED )
by the said /s/ Kevin J. Maroni )
in the presence of: /s/ Emily Anne Allen )
<PAGE>
EXHIBIT 24.9
POWER OF ATTORNEY
I, Harley J. Murphy, being a director of GlobeNet Communications Group Limited,
a Bermuda company (the "Company"), hereby constitute and appoint Lin Gentemann,
or any of the directors for the time being of the Company, and each of them, my
true and lawful attorney and agent, to sign, in the capacity indicated below,
and file with the Securities and Exchange Commission under the Securities Act of
1933 (the "Securities Act") and with the Registrar of Companies of Bermuda one
or more registration statement(s) on Form S-4 relating to the registration of
the offering for exchange of the 13% Senior Notes due 2007 of the Company (the
"Registration Statement"), with any and all amendments, supplements and exhibits
thereto, including pre-effective and post-effective amendments or supplements or
any additional registration statement filed pursuant to Rule 462 promulgated
under the Securities Act, with full power and authority to do and perform any
and all acts and things whatsoever that such attorney and agent may deem
necessary or desirable, in his or her sole discretion, with any such act or
thing being hereby ratified and approved in all respects.
Any person acting on the strength of this Power of Attorney shall be entitled to
assume that approval as aforesaid has been validly obtained.
I declare that this Power of Attorney shall be governed by and construed in all
respects in accordance with the laws of Bermuda.
IN WITNESS WHEREOF I have this 27 day of August 1999 set my hand and seal.
SIGNED, SEALED and DELIVERED )
by the said /s/ HARLEY J. MURPHY ) /s/ HARLEY J. MURPHY
-------------------------
in the presence of: /s/ NANCY MOUSSEAU )
NANCY MOUSSEAU, a Commissioner, etc.,
Regional Municipality of Hamilton-Wentworth
for Brown, Scarfone, Hawidns, Barristers and Solicitors.
Expires April 30, 2002
<PAGE>
EXHIBIT 25.1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2) ___________
______________________________
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, NY 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
_________________________________
GlobeNet Communications Group Limited
(Exact name of Registrant as specified in its charter)
Bermuda None
(State or other jurisdiction of (I.R.S. employer identification no.)
Incorporation or organization)
2 Carter's Bay Road
Southside, St. David's DDBX,
Bermuda
(441) 296-9000
(Address, including zip code, and telephone
number of principal executive offices)
13% Series B Senior Notes due 2007
(Title of the indenture securities)
<PAGE>
Item 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.
Name Address
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust
powers. Yes.
Item 2.Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
Item 3.-15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of Amendment
of the Organization Certificate of Bankers Trust
Company dated June 21, 1995 - Incorporated herein by
reference to Exhibit 1 filed with Form T-1 Statement,
Registration No. 33-65171, Certificate of Amendment of
the Organization Certificate of Bankers Trust Company
dated March 20, 1996, incorporate by referenced to
Exhibit 1 filed with Form T-1 Statement, Registration
No. 333-25843 and Certificate of Amendment of the
Organization Certificate of Bankers Trust Company dated
June 19, 1997, copy attached.
Exhibit 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
Exhibit 3 - Authorization of the Trustee to exercise corporate
trust powers - Incorporated herein by reference to
Exhibit 2 filed with Form T-1 Statement, Registration
No. 33-21047.
Exhibit 4 - Existing By-Laws of Bankers Trust Company, as amended
on June 22, 1999. Copy attached.
-2-
<PAGE>
Exhibit 5 - Not applicable.
Exhibit 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference
to Exhibit 4 filed with Form T-1 Statement,
Registration No. 22-18864.
Exhibit 7 - The latest report of condition of Bankers Trust Company
dated as of March 31, 1999. Copy attached.
Exhibit 8 - Not Applicable.
Exhibit 9 - Not Applicable.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 19th day
of August, 1999.
BANKERS TRUST COMPANY
By: _______________________________
Ednora G. Linares
Assistant Vice President
-4-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 19th day
of August, 1999.
BANKERS TRUST COMPANY
/s/ Ednora G. Linares /s/
-------------------------
By: Ednora G. Linares
Assistant Vice President
-5-
<PAGE>
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York,
DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF
THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the
Banking Law," dated June 19, 1997, providing for an increase in authorized
capital stock from $1,601,666,670 consisting of 100,166,667 shares with a par
value of $10 each designated as Common Stock and 600 shares with a par value of
$1,000,000 each designated as Series Preferred Stock to $2,001,666,670
consisting of 100,166,667 shares with a par value of $10 each designated as
Common Stock and 1,000 shares with a par value of $1,000,000 each designated as
Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at the City of New
York,
this 27th day of June in the Year of our Lord
--------- -----------
one thousand nine hundred and ninety-seven.
Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
_____________________________
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Six Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,601,666,670), divided into One
Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 600 shares with a par value of One Million Dollars ($1,000,000)
each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred Million,
One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (100,166,667)
shares with a par value of $10 each designated as Common Stock and 1000
shares with a par value of One Million Dollars ($1,000,000) each designated
as Series Preferred Stock."
<PAGE>
5. The foregoing amendment of the organization certificate was authorized
by unanimous written consent signed by the holder of all outstanding shares
entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 19th
day of June, 1997.
James T. Byrne, Jr.
------------------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
------------------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant
Secretary of Bankers Trust Company, the corporation described in the foregoing
certificate; that she has read the foregoing certificate and knows the contents
thereof, and that the statements herein contained are true.
Lea Lahtinen
------------------------
Lea Lahtinen
Sworn to before me this 19th day
of June, 1997.
Sandra L. West
- -----------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
<PAGE>
BY-LAWS
JUNE 22, 1999
Bankers Trust Company
New York
<PAGE>
BY-LAWS
of
Bankers Trust Company
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be held
at the office of the Company in the Borough of Manhattan, City of New York, on
the third Tuesday in January of each year, for the election of directors and
such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either in
person or by proxy, stockholders owning a majority of the capital stock of the
Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive
Officer or, in his absence, the President or, in their absence, the senior
officer present, shall preside at meetings of the stockholders and shall direct
the proceedings and the order of business. The Secretary shall act as secretary
of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate powers
exercised by a Board of Directors consisting of such number of directors, but
not less than seven nor more than fifteen, as may from time to time be fixed by
resolution adopted by a majority of the directors then in office, or by the
stockholders. In the event of any increase in the number of directors,
additional directors may be elected within the limitations so fixed, either by
the stockholders or within the limitations imposed by law, by a majority of
directors then in office. One-third of the number of directors, as fixed from
time to time, shall constitute a quorum. Any one or more members of the Board
of Directors or any Committee thereof may participate in a meeting of the Board
of Directors or Committee thereof by means of a conference telephone or similar
communications equipment which allows all persons participating in the meeting
to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting.
All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.
<PAGE>
No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the Board
of Directors may be filled by the affirmative vote of a majority of the
directors then in office, and the directors so elected shall hold office for the
balance of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board of
Directors. In his absence, the Chief Executive Officer or, in his absence, such
other director as the Board of Directors from time to time may designate shall
preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for the
conduct of its meetings and the management of the affairs of the Company as it
may deem proper, not inconsistent with the laws of the State of New York, or
these By-Laws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from time
to time provided, however, that there shall be at least ten regular monthly
meetings during a calendar year. Special meetings of the Board of Directors may
be called upon at least two day's notice whenever it may be deemed proper by the
Chairman of the Board or, the Chief Executive Officer or, in their absence, by
such other director as the Board of Directors may have designated pursuant to
Section 3 of this Article, and shall be called upon like notice whenever any
three of the directors so request in writing.
SECTION 6. The compensation of directors as such or as members of committees
shall be fixed from time to time by resolution of the Board of Directors.
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of not
less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the Executive
Committee. In his absence, the Chief Executive Officer or, in his absence, such
other member of the Committee as the Committee from time to time may designate
shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and powers
and authority conferred by the Executive Committee from time to time shall be
and be deemed to be, and may be certified as being, the act and under the
authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee may act
only by the concurrent vote of not less than one-third of its members, at least
one of whom must be a director other than an officer. Any one or more directors,
even though not members of the Executive Committee, may attend any meeting of
the Committee, and the member or
<PAGE>
members of the Committee present, even though less than a quorum, may designate
any one or more of such directors as a substitute or substitutes for any absent
member or members of the Committee, and each such substitute or substitutes
shall be counted for quorum, voting, and all other purposes as a member or
members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by resolution
adopted by a majority of the entire Board of Directors which shall consist of
such number of directors, who are not also officers of the Company, as may from
time to time be fixed by resolution adopted by the Board of Directors. The
Chairman shall be designated by the Board of Directors, who shall also from time
to time fix a quorum for meetings of the Committee. Such Committee shall
conduct the annual directors' examinations of the Company as required by the New
York State Banking Law; shall review the reports of all examinations made of the
Company by public authorities and report thereon to the Board of Directors; and
shall report to the Board of Directors such other matters as it deems advisable
with respect to the Company, its various departments and the conduct of its
operations.
In the performance of its duties, the Audit Committee may employ or retain, from
time to time, expert assistants, independent of the officers or personnel of the
Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General Auditor to make
such investigation as it deems necessary or advisable with respect to the
Company, its various departments and the conduct of its operations. The
Committee shall hold regular quarterly meetings and during the intervals thereof
shall meet at other times on call of the Chairman.
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of such Committees. Each Committee appointed pursuant to
this Article shall serve at the pleasure of the Board of Directors.
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a
Chairman of the Board and a Chief Executive Officer; and shall also elect a
President, and may also elect a Senior Vice Chairman, one or more Vice Chairmen,
one or more Executive Vice Presidents, one or more Senior Managing Directors,
one or more Managing Directors, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, one or more General Managers, a
Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate
General Counsels, a General Auditor, a General Credit Auditor, and one or more
Deputy Auditors, who need not be directors. The officers of the corporation may
also include such other officers or assistant officers as shall from time to
time be elected or appointed by the Board. The Chairman of the Board or the
Chief Executive Officer or, in their absence, the President, the Senior Vice
Chairman or any Vice Chairman, may from time to time appoint assistant officers.
All officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence, the
President, the Senior Vice Chairman or any Vice Chairman. The Board of Directors
may require any and all officers and employees to give security for the faithful
performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive Officer
of the Company who may also hold the additional title of Chairman of the Board,
President, Senior Vice Chairman or Vice Chairman and such person shall have,
subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer by
law or by these By-Laws, or which usually attach or pertain to such office. The
other officers shall have, subject to the supervision and direction of the Board
of Directors or the Executive Committee or the Chairman of the Board or, the
Chief Executive Officer, the powers vested by law or by these By-Laws in them as
holders of their respective offices and, in addition, shall perform such other
duties as shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.
The General Auditor shall be responsible, through the Audit Committee, to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise all the powers and shall perform all the duties usual to such office
and shall have such other powers as may be prescribed or assigned to him from
time to time by the Board of Directors or vested in him by law or by these By-
Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records and
premises of the Company and shall delegate such authority to his subordinates.
He shall have the duty to report to the Audit Committee on all matters
concerning the internal audit program and the adequacy of the system of internal
controls of the Company which he deems advisable or which the Audit Committee
may request. Additionally, the General Auditor shall have the duty of reporting
independently of all officers of the Company to the Audit Committee at least
quarterly on any matters concerning the internal audit program and the adequacy
of the system of internal controls of the Company that should be brought to the
attention of the directors except those matters responsibility for which has
been vested in the General Credit Auditor. Should the General Auditor deem any
matter to be of
<PAGE>
special immediate importance, he shall report thereon forthwith to the Audit
Committee. The General Auditor shall report to the Chief Financial Officer only
for administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan or
plans of position evaluation and salary administration as shall be approved from
time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of the
Board, the Chief Executive Officer or any person authorized for this purpose by
the Chief Executive Officer, shall appoint or engage all other employees and
agents and fix their compensation. The employment of all such employees and
agents shall continue during the pleasure of the Board of Directors or the
Executive Committee or the Chairman of the Board or the Chief Executive Officer
or any such authorized person; and the Board of Directors, the Executive
Committee, the Chairman of the Board, the Chief Executive Officer or any such
authorized person may discharge any such employees and agents at will.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section 7018
of the New York Banking Law, indemnify any person who is or was made, or
threatened to be made, a party to an action or proceeding, whether civil or
criminal, whether involving any actual or alleged breach of duty, neglect or
error, any accountability, or any actual or alleged misstatement, misleading
statement or other act or omission and whether brought or threatened in any
court or administrative or legislative body or agency, including an action by or
in the right of the Company to procure a judgment in its favor and an action by
or in the right of any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Company is servicing or
served in any capacity at the request of the Company by reason of the fact that
he, his testator or intestate, is or was a director or officer of the Company,
or is serving or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement, and costs, charges and expenses,
including attorneys' fees, or any appeal therein; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company is
permitted to provide indemnification or the advancement of expenses by
applicable law,
<PAGE>
whether pursuant to rights granted pursuant to, or provided by, the New York
Banking Law or other rights created by (i) a resolution of stockholders, (ii) a
resolution of directors, or (iii) an agreement providing for such
indemnification, it being expressly intended that these By-Laws authorize the
creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to any
person referred to in Section 1 the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action or proceeding
referred to in Section 1, upon receipt of a written undertaking by or on behalf
of such person to repay such amount(s) if a judgment or other final adjudication
adverse to the director or officer establishes that (i) his acts were committed
in bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases, the
provisions of this Article V will apply (i) only if the person serving another
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise so served at the specific request of the Company, evidenced by
a written communication signed by the Chairman of the Board, the Chief Executive
Officer or the President, and (ii) only if and to the extent that, after making
such efforts as the Chairman of the Board, the Chief Executive Officer or the
President shall deem adequate in the circumstances, such person shall be unable
to obtain indemnification from such other enterprise or its insurer.
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or advancement
of expense pursuant to this Article V (i) is a contract right pursuant to which
the person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the Company and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant is
not entitled to indemnification or to the
<PAGE>
reimbursement or advancement of expenses, shall be a defense to the action or
create a presumption that the claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 shall be entitled to indemnification only as provided in Sections 1
and 3, notwithstanding any provision of the New York Banking Law to the
contrary.
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the Company
and such officers as the Chairman of the Board, the Chief Executive Officer or
the Secretary may from time to time direct in writing, to be affixed to
certificates of stock and other documents in accordance with the directions of
the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a specified
occasion and for a specified transaction or transactions, for the use of a
printed or engraved facsimile seal of the Company.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the books
of the Company by the registered holder in person, or by power of attorney, duly
executed, witnessed and filed with the Secretary or other proper officer of the
Company, on the surrender of the certificate or certificates of such shares
properly assigned for transfer.
<PAGE>
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board of
Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
I, Ednora G. Linares, Assistant Vice President of Bankers Trust Company, New
York, New York, hereby certify that the foregoing is a complete, true and
correct copy of the By-Laws of Bankers Trust Company, and that the same are in
full force and effect at this date.
/s/ EDNORA G. LINARES
________________________________________________
ASSISTANT VICE PRESIDENT
DATED: AUGUST 19, 1999
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 03/31/99 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1999
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
---------------
C400
-------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS / / / / / / / / / / / /
1. Cash and balances due from depository
institutions (from Schedule RC-A): / / / / / / / / / / / /
a. Noninterest-bearing balances and
currency and coin (1)....................... 0081 1,695,000 1.a.
b. Interest-bearing balances (2)................. 0071 1,308,000 1.b.
2. Securities: / / / / / / / / / / / /
a. Held-to-maturity securities (from
Schedule RC-B, column A).................... 1754 0 2.a.
b. Available-for-sale securities
(from Schedule RC-B, column D).............. 1773 6,150,000 2.b.
3. Federal funds sold and securities
purchased under agreements to resell............ 1350 29,512,000 3.
4. Loans and lease financing receivables: / / / / / / / / / / / /
a. Loans and leases, net of unearned
income (from Schedule RC-C)................. RCFD 2122 18,869,000 / / / / / / / / / / / / 4.a.
b. LESS: Allowance for loan and lease losses.... RCFD 3123 571,000 / / / / / / / / / / / / 4.b.
c. LESS: Allocated transfer risk reserve........ RCFD 3128 0 / / / / / / / / / / / / 4.c.
d. Loans and leases, net of unearned income, / / / / / / / / / / / /
allowance, and reserve (item 4.a minus
4.b and 4.c)................................ 2125 18,298,000 4.d.
5. Trading Assets (from schedule RC-D)............... 3545 34,815,000 5.
6. Premises and fixed assets (including capitalized
leases)......................................... 2145 916,000 6.
7. Other real estate owned (from Schedule RC-M)...... 2150 88,000 7.
8. Investments in unconsolidated subsidiaries and
associated companies (from Schedule RC-M)....... 2130 883,000 8.
9. Customers' liability to this bank on
acceptances outstanding......................... 2155 307,000 9.
10. Intangible assets (from Schedule RC-M)........... 2143 302,000 10.
11. Other assets (from Schedule RC-F)................ 2160 4,645,000 11.
12. Total assets (sum of items 1 through 11)......... 2170 98,919,000 12.
------------------------------
</TABLE>
__________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 03/31/99 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
Schedule RC--Continued
<TABLE>
<CAPTION>
___________________________________
Dollar Amounts in Thousands / / / Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES / / / / / / / / / / /
13. Deposits: / / / / / / / / / / / /
a. In domestic offices (sum of totals
of columns A and C from Schedule
RC-E, part I) RCON 2200 17,829,000 13.a.
(1) Noninterest-bearing(1).................. RCON 6631 2,939,000 / / / / / / / / / / / 13.a.(1)
(2) Interest-bearing........................ RCON 6636 14,890,000 / / / / / / / / / / / / / / / / 13.a.(2)
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs (from Schedule
RC-E part II) RCFN 2200 20,634,000 13.b.
(1) Noninterest-bearing..................... RCFN 6631 1,878,000 / / / / / / / / / / / 13.b.(1)
(2) Interest-bearing ....................... RCFN 6636 18,756,000 / / / / / / / / / / / 13.b.(2)
14. Federal funds purchased and securities
sold under agreements to repurchase RCFD 2800 13,513,000 14.
15. a. Demand notes issued to the U.S. Treasury....... RCON 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D)....... RCFD 3548 22,010,000 15.b.
16. Other borrowed money (includes mortgage
indebtedness and obligations under capitalized
leases):
a. With a remaining maturity of one year or less.. RCFD 2332 6,400,000 16.a.
b. With a remaining maturity of more than one year
through three years.......................... A547 2,347,000 16.b.
c. With a remaining maturity of more than three
years........................................ A548 2,321,000 16.c
17. Not Applicable. / / / / / / / / / / / /
18. Bank's liability on acceptances executed and
outstanding..................................... RCFD 2920 307,000 18.
19. Subordinated notes and debentures (2)............. RCFD 3200 438,000 19.
20. Other liabilities (from Schedule RC-G)............ RCFD 2930 6,129,000 20.
21. Total liabilities (sum of items 13 through 20).... RCFD 2948 91,928,000 21.
22. Not Applicable / / / / / / / / / / / /
/ / / / / / / / / / / /
EQUITY CAPITAL / / / / / / / / / / / /
23. Perpetual preferred stock and related surplus..... RCFD 383 1,500,000 23.
24. Common stock...................................... RCFD 3230 2,127,000 24.
25. Surplus (exclude all surplus related to
preferred stock)................................ RCFD 3839 541,000 25.
26. a. Undivided profits and capital reserves......... RCFD 3632 3,291,000 26.a.
b. Net unrealized holding gains (losses) on
available-for-sale securities................ RCFD 8434 ( 59,000) 26.b.
c. Accumulated net gains (losses) on cash flow
hedges....................................... RCFD 4336 0
27. Cumulative foreign currency translation
adjustments..................................... RCFD 3284 (409,000) 27.
28. Total equity capital (sum of items 23 through 27). RCFD 3210 6,991,000 28.
29. Total liabilities and equity capital
(sum of items 21 and 28)........................ RCFD 3300 98,919,000 29
------------------------------------
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the
number of the statement below that
best describes the most comprehensive
level of auditing work performed for
the bank by independent external Number
-----------
auditors as of any date during 1998....... | RCFD 6724 1 M.1
---------------------------
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external standards
by a certified auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
______________________
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998
AND THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 DEC-31-1998
<CASH> 1,051 3,032
<SECURITIES> 0 0
<RECEIVABLES> 2,882 1,847
<ALLOWANCES> 141 80
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,600 7,235
<PP&E> 53,199 47,612
<DEPRECIATION> 4,167 2,904
<TOTAL-ASSETS> 60,065 56,260
<CURRENT-LIABILITIES> 20,420 11,842
<BONDS> 34,027 36,677
0 0
0 0
<COMMON> 5,274 5,274
<OTHER-SE> 16,377 16,377
<TOTAL-LIABILITY-AND-EQUITY> 60,065 56,260
<SALES> 0 0
<TOTAL-REVENUES> 13,122 26,724
<CGS> 0 0
<TOTAL-COSTS> 7,324 18,077
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 114 91
<INTEREST-EXPENSE> 2,072 4,502
<INCOME-PRETAX> (1,037) (5,378)
<INCOME-TAX> 19 36
<INCOME-CONTINUING> (1,056) (4,944)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,056) (4,944)
<EPS-BASIC> (0.30) (1.41)
<EPS-DILUTED> (0.30) (1.41)
</TABLE>
<PAGE>
Exhibit 99.1
GLOBENET COMMUNICATIONS GROUP LIMITED
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
13% SENIOR NOTES DUE 2007
IN EXCHANGE FOR
13% SERIES B SENIOR NOTES DUE 2007 THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1999, UNLESS EXTENDED (THE "EXPIRATION DATE")
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE EXPIRATION DATE
DELIVER TO THE EXCHANGE AGENT:
BANKERS TRUST COMPANY
By Hand: By Mail:
Bankers Trust Company BT Services Tennessee, Inc.
Corporate Trust and Agency Group Reorganization Unit
Attention: Reorganization Department P.O. Box 292737
Receipt & Delivery Window Nashville, Tennessee 37229-2737
123 Washington Street, 1st Floor Facsimile: (615) 835-3701
New York, NY 10006
By Overnight Mail or Courier:
BT Services Tennessee, Inc.
Corporate Trust and Agency Group
Reorganization Unit
648 Grassmere Park Road
Nashville, Tennessee 37211
Confirm by Telephone: (615) 835-3572
Information:
(800) 735-7777
____________________
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated , 1999 (the "Prospectus") of GlobeNet Communications Group Limited,
a Bermuda company (the "Company") and this Letter of Transmittal (the "Letter of
Transmittal"), which together describe the Company's offer (the "Exchange
Offer") to exchange its 13% Series B Senior Notes due 2007 that have been
registered under the Securities Act of 1933 (the "Exchange Notes") pursuant to a
Registration Statement of which the Prospectus is a part, for a like principal
amount of its issued and outstanding 13% Senior Notes due 2007 (the "Old
Notes"). Capitalized terms used but not defined herein have the respective
meanings given to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended. The Company
shall notify the holders of the Old Notes of any extension by oral or written
notice and will mail to the record holders of Old Notes an announcement thereof,
each prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
<PAGE>
This Letter of Transmittal is to be used by a holder of Old Notes if
original Old Notes, if available, are to be forwarded herewith or an Agent's
Message is to be used if delivery of Old Notes 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 Prospectus under the caption "Exchange Offer -- Procedures for
Tendering" and "-- Book-Entry Transfer." Holders of Old Notes whose Old Notes
are not immediately available, or who are unable to deliver their Old Notes and
all other documents required by this Letter of Transmittal to the Exchange Agent
on or prior to the Expiration Date, or who are unable to complete the procedure
for book-entry transfer on a timely basis, must tender their Old Notes according
to the guaranteed delivery procedures set forth in the Prospectus under the
caption "Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal amounts
on a separate signed schedule and affix the list to this Letter of Transmittal.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered
Holder(s) Exactly as Name(s)
Appear(s) on Old Notes
(Please Fill In, If Blank) Old Note(s) Tendered
- ------------------------------------------------------------------------------------------------------------------------------------
Registered Aggregate Principal Principal
Number(s)* Amount Represented by Amount
Note(s) Tendered**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be deemed to have tendered the entire aggregate principal
amount represented by such Old Notes. All tenders must be in integral multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[_] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[_] 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 (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
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 ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR
USE BY ELIGIBLE INSTITUTIONS ONLY):
<PAGE>
Name(s) of Registered holder(s) of Old Notes:___________________________________
Date of Execution of Notice of Guaranteed Delivery:_____________________________
Window Ticket Number (if available):____________________________________________
Name of Eligible Institution that Guaranteed Delivery:__________________________
Account Number (if delivered by book-entry transfer):___________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:___________________________________________________________________________
Address:________________________________________________________________________
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and transfers to the
Company all right, title and interest in and to the Old Notes tendered for
exchange hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent the agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver such Old Notes, or transfer ownership
of such Old Notes on the account books maintained by the Book-Entry Transfer
Facility, to the Company and deliver all accompanying evidences of transfer and
authenticity, and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of 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, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June
5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-
Action Letter (available June 5, 1991), 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 a
broker-dealer who purchased Old Notes exchanged for such Exchange Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption 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 are not participating in, and have no arrangement with any person
to participate in, the distribution of such Exchange Notes. The undersigned
specifically represent(s) to the Company that (i) any Exchange Notes acquired in
exchange for Old Notes tendered hereby are being acquired in the ordinary course
of business of the person receiving such Exchange Notes, whether or not the
undersigned, (ii) the undersigned is not participating in, and has no
arrangement with any person to participate in, the distribution of Exchange
Notes, and (iii) neither the undersigned nor any such other person is an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Company or
a broker-dealer tendering Old Notes acquired directly from the Company for its
own account.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned or the person receiving the Exchange Notes
is a broker-dealer, the undersigned represents that it or such other person will
receive Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
and the undersigned acknowledges that it or such other person will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned or such other person will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. The
undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned
<PAGE>
cannot rely on the position of the staff of the SEC in the Morgan Stanley Letter
and similar SEC no-action letters, and, in the absence of an exemption
therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes, in which case the registration statement must
contain the selling security holder information required by Item 507 or Item
508, as applicable, of Regulation S-K of the SEC, and (ii) a broker-dealer that
delivers such a prospectus to purchasers in connection with such resales will be
subject to certain of the civil liability provisions under the Securities Act
and will be bound by the provisions of the Registration Rights Agreement
(including certain indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption
"Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged, in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and any Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both "Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the Exchange Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged to, the person(s) so indicated. The undersigned recognizes
that the Company has no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Old Notes from
the name of the registered holder(s) thereof if the Company does not accept for
exchange any of the Old Notes so tendered for exchange.
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old Notes in a principal amount not tendered,
or Exchange Notes issued in exchange for Old Notes accepted for exchange, are
to be issued in the name of someone other than the undersigned, or (ii) if Old
Notes tendered by book-entry transfer which are not exchanged are to be
returned by credit to an account maintained at the Book-Entry Transfer
Facility. Issue Exchange Notes and/or Old Notes to:
Name:_________________________________________________________________________
(Please Type or Print)
______________________________________________________________________________
Address:______________________________________________________________________
______________________________________________________________________________
(include Zip Code)
______________________________________________________________________________
(Tax Identification or Social Security Number)
(Complete Substitute Form W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in a principal amount not tendered, or
Exchange Notes issued in exchange for Old Notes accepted for exchange, are to
be mailed or delivered to someone other than the undersigned, or to the
undersigned at an address other than that shown below the undersigned's
signature.
Mail or deliver Exchange Notes and/or Old Notes to:
Name:_________________________________________________________________________
(Please Type or Print)
______________________________________________________________________________
Address:______________________________________________________________________
______________________________________________________________________________
(include Zip Code)
______________________________________________________________________________
(Tax Identification or Social Security Number)
- --------------------------------------------------------------------------------
<PAGE>
[_] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:
Book-Entry Transfer Facility Account Number:
---------------------------------------------------------------------
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
X_______________________________________________________________
X_______________________________________________________________
(Signature(s) of Registered Holders or Old Notes)
Date_______________________________, 1999
(The above lines must be signed by the registered holder(s) of
Old Notes as name(s) appear(s) on the Old Notes or on a
security position listing, or by person(s) authorized to
become registered holder(s) by a properly completed bond power
from the registered holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Old Notes to
which this Letter of Transmittal relate are held of record by
two or more joint holders, then all such holders must sign
this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth
his or her full title below and (ii) unless waived by the
Company, submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding the
completion of this Letter of Transmittal, printed below.)
Name(s):________________________________________________________
(Please Type or Print)
Capacity:_______________________________________________________
Address:________________________________________________________
________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:_________________________________
---------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible
Institution.
Signature(s) Guaranteed by an Eligible Institution:
________________________________________________________________
(Authorized Signature)
________________________________________________________________
(Title)
________________________________________________________________
(Name of Firm)
________________________________________________________________
(Address, Include Zip Code)
________________________________________________________________
(Area Code and Telephone Number)
Dated:____________________________________________________, 1999
----------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or Agent's Message or facsimile hereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. The method of delivery of the tendered Old Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the holder and, except as otherwise
provided below, the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative
to delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or who cannot complete
the procedure for book-entry transfer on a timely basis and deliver an Agent's
Message, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedures: (1) such
tender must be made by or through a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or a trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received from
the Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the holder of the Old Notes, the registration
number(s) of such Old Notes and the total principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that,
within three business days after the Expiration Date, this Letter of Transmittal
(or facsimile hereof) together with the Old Notes in proper form for transfer
(or a Book-Entry Confirmation) and any other documents required hereby, must be
deposited by the Eligible Institution with the Exchange Agent; and (iii) the
certificates for all physically tendered shares of Old Notes, in proper form for
transfer (or Book-Entry Confirmation, as the case may be) and all other
documents required hereby are received by the Exchange Agent within three
business days after the Expiration Date.
Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above.
See "Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on such beneficial
owner's behalf or must, prior to completing and executing this Letter of
Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial holder's name or obtain a properly completed bond power from the
registered holder.
4. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering holder should fill in the principal amount
tendered in the third column of the box entitled "Description of Old Notes
Tendered" above. The entire principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, then Old Notes
for the principal amount of Old Notes not tendered and Exchange Notes issued in
exchange for any Old Notes accepted will be sent to the holder at such holder's
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Old Notes are accepted for
exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Medallion Guarantee of Signatures. If this Letter of Transmittal (or facsimile
hereof) is signed by the record holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever. If this Letter
of Transmittal (or facsimile hereof) is signed by a participant in the Book-
Entry Transfer Facility, the signature must correspond with the name as it
appears on the security position listing as the holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered holder, the
said holder need not and should not endorse any tendered Old Notes,
<PAGE>
nor provide a separate bond power. In any other case, such holder must either
properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal, with the signatures on the
endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered holder or holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the tendered Old
Notes) and the Exchange Notes are to be issued directly to such registered
holder(s) (or, if signed by a participant in the Book-Entry Transfer Facility,
deposited to such participant's account at such Book-Entry Transfer Facility)
and neither the box entitled "Special Delivery Instructions" nor the box
entitled "Special Registration Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all other
cases, all signatures on this Letter of Transmittal (or facsimile hereof) must
be guaranteed by an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which Exchange Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered hereby, or if tendered Old Notes are registered in the name of any
person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a
holder of any Old Notes which are accepted for exchange must provide the Company
(as payor) with its correct taxpayer identification number ("TIN"), which, in
the case of a holder who is an individual is such holder's social security
number. If the Company is not provided with the correct TIN, the holder may be
subject to a $50 penalty imposed by Internal Revenue Service. (If withholding
results in an over-payment of taxes, a refund may be obtained). Certain holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9" for information on which TIN to
report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
<PAGE>
the Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the absolute right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (includes this Letter of Transmittal and the instructions
hereto) shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any person shall be under any duty to give notification of defects or
irregularities with regard to tenders of Old Notes nor shall any of them incur
any liability for failure to give such notification.
10. Waiver of Conditions. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set forth
in the Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
12. 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.
13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "Exchange Offer
- -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN Social Security Number
IN THE BOX AT RIGHT AND CERTIFY OR Employer Identification Number
Form W-9 BY SIGNING AND DATING BELOW
_____________________________
-----------------------------------------------------------------------------------------
<S> <C> <C>
Department of the Treasury
Internal Revenue Service Part 2 -- Certification -- Under penalties of perjury, I Part 3 --
certify that:
(1) The number shown on this form is my correct Taxpayer Awaiting TIN [_]
Identification Number (or I am waiting for a number
to be issued to me) and
(2) I am not subject to backup withholding either Please complete the
because I have not been notified by the Internal Certificate of Awaiting
Payer's Request for Taxpayer Revenue Service ("IRS") that I am subject to backup Taxpayer Identification
Identification Number (TIN) withholding as a result of failure to report all Number below.
interest or dividends, or the IRS has notified me
that I am no longer subject to backup withholding.
-----------------------------------------------------------------------------------------
Certificate Instructions -- You must cross out item (2) in Part 2 above if you have been
notified by the IRS that you are subject to backup withholding because of under-
reporting interest or dividends on your tax return. However, if after being notified by
the IRS that you were subject to backup withholding you received another notification
from the IRS stating that you are no longer subject to backup withholding, do not cross
out item (2).
SIGNATURE ______________________________________________ DATE ___________________, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE
<PAGE>
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future.
I understand that if I do not provide a taxpayer identification number to the
payor within 60 days, 31% of all reportable payments made to me thereafter
will be withheld until I provide a number.
___________________________ _______________, 1999
Signature Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States
citizen or resident (or I am signing for a foreign corporation, partnership,
estate or trust).
___________________________ _______________, 1999
Signature Date
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 99.2
GLOBENET COMMUNICATIONS GROUP LIMITED
LETTER TO CLIENTS
FOR
TENDER OF ALL OUTSTANDING
13% SENIOR NOTES DUE 2007
IN EXCHANGE FOR
13% SERIES B SENIOR NOTES DUE 2007 THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1999, UNLESS EXTENDED (THE "EXPIRATION DATE")
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated , 1999, of
GlobeNet Communications Group Limited, a Bermuda company (the "Company") and a
related Letter of Transmittal, which together constitute (the "Exchange Offer")
relating to the offer by the Company to exchange its 13% Series B Senior Notes
due 2007 that have been registered under the Securities Act of 1933 (the
"Exchange Notes") for a like principal amount of its issued and outstanding 13%
Senior Notes due 2007 (the "Old Notes"), upon the terms and subject to the
conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the holder of record of Old Notes held by us for your own account.
A tender of such Old Notes can be made only by us as the record holder and
pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used by you to tender Old Notes held by
us for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account pursuant to the terms and conditions of
the Exchange Offer. We also request that you confirm that we may on your behalf
make the representations and warranties contained in the Letter of Transmittal.
Very truly yours,
GLOBENET COMMUNICATIONS GROUP LIMITED
<PAGE>
Please return your instructions to us in the enclosed envelope within ample
time to permit us to submit a tender on your behalf prior to the Expiration
Date.
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK
ENTRY TRANSFER PARTICIPANT
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1999 (the "Prospectus") of GlobeNet Communications Group Limited, a
Bermuda company (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange its 13% Series B Senior Notes due 2007 that have
been registered under the Securities Act of 1933 (the "Exchange Notes"), for all
of its outstanding 13% Senior Notes due 2007 (the "Old Notes"). Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$____________________ of the 13% Senior Notes due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_] To TENDER the following Old Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED) (IF
ANY): $_______________________.
[_] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
Exchange Notes acquired in exchange for Old Notes pursuant to the Exchange Offer
are being acquired in the ordinary course of business of the person receiving
such Exchange Notes, whether or not undersigned, (ii) the undersigned is not
participating in, and has no arrangement with any person to participate in, the
distribution within the meaning of the Securities Act of 1933, as amended (the
"Securities Act") and (iii) neither the undersigned nor any such other person is
an "affiliate" (within the meaning of Rule 405 under the Securities Act) of the
Company or a broker-dealer tendering Old Notes acquired directly from the
Company. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Old Notes, it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act of 1933 in
connection with any resale of such Exchange Notes.
SIGN HERE
Name of beneficial owner(s):____________________________________________________
Signature(s):___________________________________________________________________
Name(s) (please print):_________________________________________________________
Address:________________________________________________________________________
Telephone Number:_______________________________________________________________
Taxpayer Identification or Social Security Number:______________________________
Date:___________________________________________________________________________
<PAGE>
EXHIBIT 99.3
GLOBENET COMMUNICATIONS GROUP LIMITED
LETTER TO REGISTERED HOLDERS AND
DEPOSITORY TRUST COMPANY PARTICIPANTS
FOR
TENDER OF ALL OUTSTANDING 13% SENIOR NOTES DUE 2007
IN EXCHANGE FOR
13% SERIES B SENIOR NOTES DUE 2007 THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1999. UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer
by GlobeNet Communications Group Limited, a Bermuda company (the "Company"), to
exchange its 13% Series B Senior Notes due 2007 that have been registered under
the Securities Act of 1933 (the "Exchange Notes") for a like principal amount of
its issued and outstanding 13% Senior Notes due 2007 (the "Old Notes") upon the
terms and subject to the conditions set forth in the Company's Prospectus, dated
, 1999, and the related Letter of Transmittal (which together
constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated , 1999;
2. Letter of Transmittal (together with accompanying Substitute Form
W-9 Guidelines);
3. Notice of Guaranteed Delivery; and
4. Letter which may be sent to your clients for whose account you
hold Old Notes in your name or in the name of your nominee.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the Exchange Notes acquired in exchange for
Old Notes pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
the holder, (ii) the holder is not participating in, and has no arrangement with
any person to participate in, the distribution of Exchange Notes within the
meaning of the Securities Act, and (iii) neither the holder nor any such other
person is an "affiliate" (within the meaning of Rule 405 under the Securities
Act) of the Company or a broker-dealer tendering Old Notes acquired directly
from the Company. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act of 1933
in connection with any resale of such Exchange Notes.
The enclosed Letter to Clients contains an authorization by the beneficial
owners of the Old Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Old Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
GLOBENET COMMUNICATIONS GROUP LIMITED
<PAGE>
Exhibit 99.4
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
13% SENIOR NOTES DUE 2007
IN EXCHANGE FOR
13% SERIES B SENIOR NOTES DUE 2007 THAT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
This form, or one substantially equivalent hereto, must be used by a holder
to accept the Exchange Offer of GlobeNet Communications Group Limited, a Bermuda
company (the "Company"), and to tender 13% Senior Notes due 2007 (the "Old
Notes") to the Exchange Agent pursuant to the guaranteed delivery procedures
described in "Exchange Offer -- Guaranteed Delivery Procedures" of the Company's
Prospectus, dated , 1999 (the "Prospectus") and in Instruction
2 to the related Letter of Transmittal. Any holder who wishes to tender Old
Notes pursuant to such guaranteed delivery procedures must ensure that the
Exchange Agent receives this Notice of Guaranteed Delivery prior to the
Expiration Date (as defined below) of the Exchange Offer. Capitalized terms used
but not defined herein have the meanings ascribed to them in the Prospectus or
the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY
TIME, ON THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
BANKERS TRUST COMPANY
By Hand: By Mail:
Bankers Trust Company BT Services Tennessee, Inc.
Corporate Trust and Agency Group Reorganization Unit
Attention: Reorganization Department P.O. Box 292737
Receipt & Delivery Window Nashville, Tennessee 37229-2737
123 Washington Street, 1st Floor Facsimile: (615) 835-3701
New York, NY 10006
By Overnight Mail or Courier:
BT Services Tennessee, Inc.
Corporate Trust and Agency Group
Reorganization Unit
648 Grassmere Park Road
Nashville, Tennessee 37211
Confirm by Telephone: (615) 835-3572
Information:
(800) 735-7777
____________________
<PAGE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY 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.
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" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE IN THE BOX PROVIDED ON
THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
Certificate Number(s) (if known) of Old Notes or Account Aggregate Principal Amount Aggregate Principal Amount
Number at the Book-Entry Transfer Facility Represented Tendered
- -------------------------------------------------------- -------------------------- --------------------------
<S> <C> <C>
</TABLE>
PLEASE SIGN AND COMPLETE
Names of Record Holder(s):____________________ Signature(s):___________________
Address:______________________________________ ________________________________
______________________________________________ Dated:____________________, 1999
Area Code and Telephone Numbers:______________
______________________________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Capacity:
________________________________________________________________________________
Address(es):
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility described in
the Prospectus under the caption "Exchange Offer--Book-Entry Transfer" and in
the Letter of Transmittal) and any other required documents, all by 5:00 p.m.,
New York City time, within three business days following the Expiration Date.
Name of Firm:____________________________ __________________________________
(AUTHORIZED SIGNATURE)
Address:_________________________________
(INCLUDE ZIP CODE) Name:_____________________________
Area Code and Tel. Number: Title:____________________________
(PLEASE TYPE OR PRINT)
_________________________________________
Date:______________________, 1999
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date.
The method of delivery of this Notice of Guaranteed Delivery and any other
required documents to the Exchange Agent is at the election and sole risk of the
holder, and the delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. As an alternative to delivery by
mail, the holders may wish to consider using an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Old Notes or signed as the name of the participant shown on the Book-
Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
