<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)
Esprit Telecom Group plc
- --------------------------------------------------------------------------------
(Name of Issuer)
Ordinary Shares, nominal value (pound)0.01 each
- --------------------------------------------------------------------------------
(Title of Class of Securities)
29665W104
- --------------------------------------------------------------------------------
(CUSIP Number of Class of Securities)
Stephen Distler
E.M. Warburg, Pincus & Co., LLC
466 Lexington Avenue
New York, New York 10017
(212) 878-0600
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copies to:
William N. Dye
Willkie Farr & Gallagher
35 Wilson Street
London EC2M 2SJ
England
(011) 44-171-696-9060
October 28, 1998
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Schedule)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following: [ ]
<PAGE>
SCHEDULE 13D
- --------------------- -----------------------------
CUSIP No. 29665W104 Page 2 of 10 Pages
- --------------------- -----------------------------
- ---- ---------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Warburg, Pincus Ventures, L.P. I.D. #13-3784037
- ---- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [ ]
(b) [X]
- ---- ---------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS * OO
- ---- ---------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ---- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- -------------- --------- -------------------------------------------------------
7 SOLE VOTING POWER
0 Ordinary Shares
--------- -------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 15,442,150 Ordinary Shares
OWNED BY
EACH --------- -------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH
0 Ordinary Shares
--------- -------------------------------------------------------
10 SHARED DISPOSITIVE POWER
15,442,150 Ordinary Shares
- ---- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
15,442,150 Ordinary Shares
- ---- ---------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES *
[X]
- ---- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.3%
- ---- ---------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON * PN
- ---- ---------------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP No. 29665W104 Page 3 of 10 Pages
- -------------------- ------------------------------
- ---- ---------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Warburg, Pincus & Co. I.D. #13-6358475
- ---- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [ ]
(b) [X]
- ---- ---------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS * N/A
- ---- ---------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[ ]
- ---- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION New York
- -------------- --------- -------------------------------------------------------
7 SOLE VOTING POWER
0 Ordinary Shares
--------- -------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 15,442,150 Ordinary Shares
OWNED BY
EACH --------- -------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH
0 Ordinary Shares
--------- -------------------------------------------------------
10 SHARED DISPOSITIVE POWER
15,442,150 Ordinary Shares
- ---- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
15,442,150 Ordinary Shares
- ---- ---------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES *
[X]
- ---- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.3%
- ---- ---------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON * PN
- ---- ---------------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP No. 29665W104 Page 4 of 10 Pages
- ------------------- --------------------------------
- ---- ---------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
E.M. Warburg, Pincus & Co., LLC I.D. #13-3536050
- ---- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [ ]
(b) [X]
- ---- ---------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS * N/A
- ---- ---------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[ ]
- ---- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION New York
- -------------- --------- -------------------------------------------------------
7 SOLE VOTING POWER
0 Ordinary Shares
--------- -------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 15,442,150 Ordinary Shares
OWNED BY
EACH --------- -------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH
0 Ordinary Shares
--------- -------------------------------------------------------
10 SHARED DISPOSITIVE POWER
15,442,150 Ordinary Shares
- ---- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
15,442,150 Ordinary Shares
- ---- ---------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES *
[X]
- ---- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.3%
- ---- ---------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON * OO
- ---- ---------------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
This Amendment No. 1 amends the statement on Schedule 13D filed with
the Securities and Exchange Commission on October 22, 1998 (the "Schedule 13D")
on behalf of Warburg, Pincus Ventures, L.P., a Delaware limited partnership
("Ventures"), Warburg, Pincus & Co., a New York general partnership ("WP"), and
E.M. Warburg, Pincus & Co., LLC, a New York limited liability company ("EMW"),
relating to the Ordinary Shares, nominal value (pound)0.01 each (the "Ordinary
Shares"), of Esprit Telecom Group plc, a public limited company organized under
the laws of England and Wales, whose principal executive office is located at
Minerva House, Valpy Street, Reading, RG1 1AR, United Kingdom.
This statement is being filed by the Reporting Entities (as defined in
the Schedule 13D). There has been no change in the number of Ordinary Shares
held by the Reporting Entities since the date of the Schedule 13D and, other
than as set forth herein, there has been no material change in the information
set forth in the Schedule 13D. The Schedule 13D is supplementally amended as set
forth herein.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is hereby amended to add the following:
Extraordinary General Meeting. On October 29, 1998, the Company called
-------------------------------
an extraordinary general meeting of its shareholders to be held on November 23,
1998. On October 29, 1998, Ventures and Apax Funds Nominees Limited sent
shareholders of the Company a letter urging them to vote in favor of the
resolution proposed by Ventures and Apax Funds Nominees Limited to remove Mr.
Walter Anderson as a Director of the Company and against the resolutions
proposed by Mr. Anderson and Gold & Appel Transfer, S.A. The text of this letter
is set forth as Exhibit 99.3 and is incorporated herein by reference. Ventures
expects to vote in favor of the resolution to remove Mr. Anderson as a Director
and to vote against the resolutions proposed by Mr. Anderson and Gold & Appel
Transfer, S.A., and expects Apax Funds Nominees Limited to vote in the same way.
In addition, Dominic Shorthouse and John McMonigall, in their capacities as
Directors, sent shareholders of the Company a letter,
5 of 10 Pages
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dated October 29, 1998, summarizing their views in respect of the resolutions
proposed at the extraordinary general meeting of the Company's shareholders. The
text of this letter is set forth as Exhibit 99.4 and is incorporated herein by
reference.
Complaint of Mr. Walter Anderson and Gold & Appel Transfer, S.A.
----------------------------------------------------------------
On October 27, 1998, Mr. Walter Anderson and Gold & Appel Transfer,
S.A. filed a Verified Complaint for Damages and Injunctive Relief in the United
States District Court for the District of Columbia (the "Complaint") against
Ventures, WP, EMW, Dominic Shorthouse (collectively, the "Warburg Parties"),
Apax (as defined in the Schedule 13D) and John McMonigall. The text of the
Complaint (without exhibits) is set forth as Exhibit 99.5. The Warburg Parties
believe that the Complaint is without merit and intend to defend vigorously the
allegations against them contained in the Complaint.
Indemnity Agreement
-------------------
On October 28, 1998, Apax Ventures IV International Partners, L.P.,
Apax Ventures IV, Apax UK V-A, L.P. and Apax UK V-B (collectively, the "Apax
Funds") and Ventures entered into an agreement (the "Biggam Agreement") with Sir
Robin Biggam, the Chairman of the Company, pursuant to which the Apax Funds and
Ventures have agreed to jointly and severally indemnify Sir Robin Biggam against
certain losses that he may suffer or incur as a result of actions brought (a) by
or on behalf of Mr. Walter Anderson, Gold & Appel Transfer, S.A., the Foundation
for the International Non-Governmental Development of Space or any other entity
(other than the Company or any of its subsidiaries) associated with Mr. Anderson
(the "Anderson Entities") or (b) by the Company or any of its subsidiaries at
the instance of any Anderson Entities, in the event that the Company or insurers
under any directors and officers liability or other insurance policy maintained
from time to time by the Company fail for any reason to meet its or their
liability to Sir Robin Biggam, and under other limited circumstances. The text
of the Biggam Agreement (together with the side letter related thereto) is set
forth as Exhibit 99.6 and is incorporated herein by reference. In addition, on
the same date, the Apax Funds and Ventures entered into an agreement
6 of 10 Pages
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providing for, among other things, the sharing between them of liabilities under
the Biggam Agreement. The text of this agreement is set forth as Exhibit 99.7
and is incorporated herein by reference.
As a result of the foregoing actions by Ventures, Apax Funds Nominees
Limited and the Apax Funds, the Reporting Entities and Apax may be deemed to
have formed a "group" within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Apax has informed the
Reporting Entities that it intends to file a separate Schedule 13D. The filing
of this Amendment No. 1 to the Schedule 13D shall not be construed as an
admission that any Reporting Entity is, for the purposes of Section 13(d) or
13(g) of the Exchange Act, the beneficial owner of any securities covered by
this Amendment No. 1 to the Schedule 13D other than the securities stated herein
to be beneficially owned by such Reporting Entity. The Reporting Entities
expressly disclaim beneficial ownership of any Ordinary Shares beneficially
owned by Apax.
The Reporting Entities may from time to time acquire additional
Ordinary Shares or dispose of Ordinary Shares through open market or privately
negotiated transactions or otherwise, depending on existing market conditions
and other considerations discussed below. The Reporting Entities intend to
review their investment in the Company on a continuing basis and, depending upon
the price and availability of Ordinary Shares, subsequent developments affecting
the Company, the Company's business and prospects, other investment and business
opportunities available to the Reporting Entities, general stock market and
economic conditions, tax considerations and other factors considered relevant,
may decide at any time not to increase, or to decrease, the size of their
investment in the Company.
Except as set forth herein or in Item 6, none of the Reporting Entities
nor, to the best of their knowledge, any person listed in Schedule I to the
Schedule 13D, has any plans or proposals which relate to or would result in: (a)
the acquisition by any person of additional securities of the Company, or the
disposition of
7 of 10 Pages
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securities of the Company; (b) an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the Company or any of its
subsidiaries; (c) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries; (d) any change in the present Board of
Directors or management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board; (e) any material change in the present capitalization or dividend policy
of the Company; (f) any other material change in the Company's business or
corporate structure; (g) changes in the Company's Memorandum and Articles of
Association or instruments corresponding thereto or other actions which may
impede the acquisition or control of the Company by any person; (h) causing a
class of securities of the Company to be delisted from a national securities
exchange or to cease to be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association; (i) a class of equity
securities of the Company becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Exchange Act; or (j) any action similar to
any of those enumerated above.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Item 6 of the Schedule 13D is hereby amended to add the following:
The information set forth in Item 4 above is incorporated herein by
reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 of the Schedule 13D is hereby amended to add the following:
99.3 Letter to Shareholders, dated October 29, 1998, from
Ventures and Apax Funds Nominees Limited.
99.4 Letter to Shareholders, dated October 29, 1998, from John
McMonigall and Dominic Shorthouse.
8 of 10 Pages
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99.5 Verified Complaint for Damages and Injunctive Relief filed
by Mr. Walter Anderson and Gold & Appel Transfer, S.A. on
October 27, 1998, in the United States District Court for
the District of Columbia against Ventures, WP, EMW, Dominic
Shorthouse, Apax and John McMonigall.
99.6 Letter of Indemnity, dated October 28, 1998, from the Apax
Funds and Ventures to Sir Robin Biggam, together with the
side-letter related thereto.
99.7 Agreement between the Apax Funds and Ventures, dated October
28, 1998.
9 of 10 Pages
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SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: November 2, 1998 WARBURG, PINCUS VENTURES, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:/s/Stephen Distler
------------------
Stephen Distler
Partner
Dated: November 2, 1998 WARBURG, PINCUS & CO.
By:/s/Stephen Distler
------------------
Stephen Distler
Partner
Dated: November 2, 1998 E.M. WARBURG, PINCUS & CO., LLC
By:/s/Stephen Distler
------------------
Stephen Distler
Member
10 of 10 Pages
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EXHIBIT INDEX
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EXHIBIT NO. TITLE
- ----------- -----
99.3 Letter to Shareholders, dated October 29, 1998, from
Warburg, Pincus Ventures, L.P. and Apax Funds Nominees
Limited.
99.4 Letter to Shareholders, dated October 29, 1998, from John
McMonigall and Dominic Shorthouse.
99.5 Verified Complaint for Damages and Injunctive Relief filed
by Mr. Walter Anderson and Gold & Appel Transfer, S.A. on
October 27, 1998, in the United States District Court for
the District of Columbia against Warburg, Pincus Ventures,
L.P., Warburg, Pincus & Co., E.M. Warburg, Pincus & Co.,
LLC, Dominic Shorthouse, Apax Partners & Co. Ventures, Ltd.
and John McMonigall.
99.6 Letter of Indemnity, dated October 28, 1998, from Apax
Ventures IV International Partners, L.P., Apax Ventures IV,
Apax UK V-A, L.P., Apax UK V-B and Warburg, Pincus Ventures,
L.P. to Sir Robin Biggam, together with the side-letter
related thereto.
99.7 Agreement between Apax Ventures IV International Partners,
L.P., Apax Ventures IV, Apax UK V-A, L.P., Apax UK V-B and
Warburg, Pincus Ventures, L.P., dated October 28, 1998.
<PAGE>
EXHIBIT 99.3
------------
APAX FUNDS NOMINEES LIMITED WARBURG, PINCUS VENTURES, L.P.
Registered in England no. 2140054 Registered in Delaware no. 133784037
Registered Office 466 Lexington Avenue
62 Green Street New York
London W1Y 4BA New York 10017
USA
29 October 1998
Dear Shareholder
As substantial shareholders of the Company we are concerned to protect our
respective interests. In this respect, we recognise the importance of the role
played by David Oertle as Chief Executive Officer in enhancing shareholder value
since his appointment in May 1997. In our view, Mr Oertle is an integral part of
the Company's success.
In the light of the current situation on the board, Warburg, Pincus Ventures,
L.P. and Apax Funds Nominees Limited are proposing that Walter Anderson be
removed as a director. We do so with regret acknowledging Mr Anderson's role in
the development of this Company and his knowledge in the telecommunications
field. It is now our view, however, that Mr Anderson's continued presence on the
Board of directors presents an obstacle to the Company's future success.
Shareholders are urged to vote in favour of the resolution to remove Mr Anderson
as a Director.
In addition, we urge shareholders to vote against the resolutions to remove
David Oertle, John McMonigall, Dominic Shorthouse and Sir Robin Biggam as
Directors.
Yours faithfully,
/s/ Apax Funds Nominees Limited
Yours faithfully,
/s/ Warburg, Pincus Ventures, L.P.
<PAGE>
EXHIBIT 99.4
------------
John McMonigall Dominic Shorthouse
15 Portland Place Almack House
London 28 King Street
W1N 3AA St James's
England London
SW1Y 6QW
England
29 October 1998
Dear Shareholder
As you will know, we are the Esprit Telecom Directors nominated by Warburg,
Pincus Ventures, L.P. ("Warburg, Pincus") and Apax Funds Nominees Limited
("Apax") respectively.
We are writing this letter to summarise the background to the resolutions which
are to be proposed at the Extraordinary General Meeting on 23 November 1998. As
the Chairman has explained in his letter to you:
(a) Walter Anderson and an entity, Gold & Appel Transfer S.A., for
whom he acts, have requisitioned resolutions to remove both of us, David Oertle,
the Chief Executive Officer ("CEO"), and Sir Robin Biggam, the Chairman, from
the Board of Directors; and
(b) Warburg, Pincus and Apax, whose funds hold in aggregate
approximately 39 per cent of the ordinary shares in Esprit Telecom, have
requisitioned a resolution to remove Mr Anderson from the Board.
Mr Oertle became CEO in May 1997 whereupon Mr Anderson, the previous CEO,
relinquished his executive role within the Company and was subsequently
appointed non-executive Chairman.
Mr Oertle has, in our view, been an outstanding success as CEO and has greatly
enhanced shareholder value. His achievements have been widely admired by the
investment community. He has also generated strong support and loyalty from his
colleagues in the Company.
We accordingly urge shareholders to vote against the resolution to remove David
Oertle as a Director and as Chief Executive Officer.
The role of Mr Anderson, as non-executive Chairman, has been an issue for some
time. In the context of the overall evolution of the Company it had become
increasingly clear to us (and other board members) that your company required a
highly respected European based independent Chairman to continue to move
forward. Mr Anderson is based in Washington and the initial period of his
appointment as Chairman was in any event to expire on 4 March 1999. It was clear
to us that steps were necessary to ensure that a successor was identified to
facilitate a smooth transition at the appropriate time.
In addition to the above factors, the situation was exacerbated by the
difficulties senior management have experienced with Mr Anderson since 1997. It
was brought to our attention on several occasions that senior management had
major concerns about Mr
<PAGE>
Anderson's ability to restrict his role to that of a non-executive Chairman, and
that his behaviour was confusing staff and damaging management morale.
We were also concerned as to the style in which Mr Anderson conducted Board
meetings, which we felt was not appropriate.
It was clear to us that this situation could not be allowed to persist. The
retention, commitment and energy of Mr Oertle and the entire management team was
vital in the interests of shareholders. The Board had already discussed the need
to appoint independent non-executive directors. This requirement was brought
into focus by the need to replace the two directors who had notified the Board
that they would be resigning in March 1998 and we felt that the process of
identifying a candidate for Chairman must proceed. Accordingly, on 26 February
1998 the Remuneration Committee of the Board comprising ourselves and Mr Oertle
met and resolved to appoint recruitment consultants to identify two individuals
whom we could recommend to the full Board as independent non-executive
directors, one of whom could be proposed as Chairman.
At that meeting, Mr Oertle expressed the view that the current fees for
non-executive directors were insufficient to attract the high calibre
independent candidates sought and accordingly, it was resolved to increase the
fees from (pound)12,000 to (pound)15,000 p.a in line with the remuneration
offered to high quality non-executive directors at peer group companies.
Warburg, Pincus has not received any of this additional remuneration. Apax have
inadvertently received an additional sum of (pound)321.92 (inclusive of VAT) in
respect of the increased remuneration, which has been repaid to the company.
Neither of us has ever personally received any directors' fees.
Following notification to Mr Anderson that a suitable candidate as an
independent non-executive director with the appropriate credentials to be
Chairman had been identified and was to be put before the full Board for
consideration, Mr Anderson made a number of complaints and allegations against
us.
Mr Anderson's allegations have been the subject of a careful and detailed review
by the Company's English and American legal advisers. That report (whilst noting
that the remuneration committee had technically exceeded its terms of reference
in appointing a recruitment consultant and approving an increase in the
non-executive directors' fees) found that we have at all times acted in good
faith and in the best interests of the Company. We contend that our actions have
been vindicated by Mr Anderson's conduct.
We accordingly urge shareholders to vote against the resolutions to remove us as
Directors.
In the interests of the Company, at the board meeting on 5 October 1998 we put
forward a compromise proposal that Mr Anderson remain as Chairman until the AGM
in March 1999 and that all requisitions for an EGM be withdrawn. This was
rejected outright by Mr Anderson.
We do not believe that it is in the best interests of the Company for Mr
Anderson to remain on the Board.
2
<PAGE>
We support the proposal of our respective firms as shareholders and urge
shareholders to vote in favour of the resolution to remove Mr Anderson as a
Director.
Finally, we believe that Sir Robin Biggam, who was appointed as a non-executive
director and Chairman of the Company on 5 October 1998 is the best possible
candidate to Chair the Company into the future. Sir Robin has extensive
experience as a director and chairman of major European companies and is
strongly committed to good corporate governance.
We unreservedly urge shareholders to vote against the resolution to remove Sir
Robin Biggam as a non-executive Director and Chairman.
Yours faithfully Yours faithfully
/s/ John McMonigall /s/ Dominic Shorthouse
John McMonigall Dominic Shorthouse
Director Director
Esprit Telecom Group Plc Esprit Telecom Group Plc
3
<PAGE>
EXHIBIT 99.5
------------
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
- -----------------------------------
Walt Anderson )
200 L Street, N.W. )
Washington, D.C. )
)
and )
)
Gold & Appel Transfer, SA., )
Omar Hodge Building )
Wickams Cay )
Road Town, Tortula )
Plaintiffs, )
v. )
Warburg, Pincus Ventures, L.P. )
466 Lexington Avenue ) Case No.
New York, New York 10017 ) -----------------
)
)
Warburg, Pincus & Co., ) JURY TRIAL DEMANDED
466 Lexington Avenue )
New York, New York 10017 )
)
E.M. Warburg, Pincus & Co., LLC )
466 Lexington Avenue )
New York, New York 10017 )
)
Dominic Shorthouse )
c/o E.M. Warburg, Pincus & Co. LLC )
Almack House )
28 King Street, St. James )
London SW1Y6QW England )
)
Apax Partners & Co. Ventures, Ltd. )
15 Portland Place )
London WIN3AA England )
)
John McMonigall, )
15 Portland Place )
London WIN3AA England )
)
)
Defendants. )
- ------------------------------------
<PAGE>
VERIFIED COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF
Introduction
1. This Complaint is brought (1) to remedy an ongoing violation by
defendants of the disclosure requirements of Section 13(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), and (2) to remedy a tortious
interference by defendants with the contract between plaintiff, Walt Anderson,
and Esprit Telecom Group PLC ("Esprit" or "the Company"). Beginning in February,
1998, defendants embarked on a scheme to gain control of Esprit and depose
Anderson as Chairman of the Board of Directors. In order to keep their scheme
secret, defendants (1) failed to amend previously filed statements of their
intentions regarding management and control of the Company as required under
U.S. securities laws, and (2) failed to inform Esprit's Board of Directors of
their actions. Defendants improperly committed the Company to a contract with a
search firm and selected a candidate to replace Anderson as Chairman of the
Board, without authority and in breach of their fiduciary duties to the Company.
Plaintiffs recently discovered defendants' plans, and brought the matter before
the shareholders by a resolution calling for the removal of the individual
defendants as members of Esprit's Board. Defendants responded by sponsoring a
resolution to remove plaintiff Anderson from the Board of Esprit. An emergency
general meeting of the shareholders to consider these competing resolutions has
been called by Mr. Anderson, and the date will shortly be set for sometime in
November, 1998. Proxies are
2
<PAGE>
currently being solicited by the Company on the resolutions. The Apax related
defendants have failed to file any of the required filings under the securities
laws relating to a decision by a five percent shareholder regarding management
of the Company. The Warburg-related defendants filed false and misleading
statements with the Securities and Exchange Commission ("SEC") designed to
influence shareholders in their vote on the pending resolutions. Without an
order from this Court requiring defendants to file accurate, non-misleading
statements with the Securities and Exchange Commission, plaintiffs will be
irreparably harmed. Shareholders will vote on the pending resolutions regarding
composition of the Board of Directors of Esprit without accurate information on
the conduct and intentions of the defendants, in violation of the disclosure
requirements of the securities laws.
Parties
-------
2. Plaintiff Walt Anderson is an individual resident of the District of
Columbia with offices located in the District of Columbia at 2000 L Street, N.W.
Washington, D.C. Mr. Anderson is a director and a shareholder in Esprit, owning
approximately 162,000 ordinary shares of the Company. Mr. Anderson was the
co-founder, original CEO and Chairman of the Board of Esprit. Prior to that time
Mr. Anderson was President of Mid-Atlantic Telecom, a company that he founded in
1984. Mr. Anderson is widely known as a pioneer in the telecommunications
industry and serves on the Board of Directors of several telecommunications
companies.
3
<PAGE>
3. Plaintiff Gold & Appel Transfer, S.A. ("G&A"), is a British Virgin
Islands corporation. G&A is a shareholder in Esprit, owning approximately
32,500,000 ordinary shares, representing approximately twenty-six and one-half
percent (26.5%) of the shares of the Company. Mr. Anderson controls the G&A
shares pursuant to a power of attorney that permits him to buy, sell, and trade
G&A shares.
4. Defendant Warburg, Pincus Ventures, L.P. ("WPV") is a Delaware
limited partnership. Defendant Warburg, Pincus & Co. ("WP") is a New York
general partnership, and the sole general partner in WPV. Defendant E.M.
Warburg, Pincus & Co., L.L.C. ("EMW LLC"), is a New York limited liability
company, and the manager of WPV (collectively these entities are referred to
here as "Warburg"). Warburg is the beneficial owner of approximately 15,442,150
ordinary shares of the Company according to a Schedule 13(g) filed by Warburg
with the SEC on or about February 10, 1998.
5. Defendant Dominic Shorthouse is a member of the Board of Directors
of Esprit. He is also Managing Director and member of EMW LLC and a general
partner of WP. Mr. Shorthouse is a resident of England.
6. Defendant Apax Partners & Co. Ventures, Ltd. is a corporation
organized under the laws of England. It is the general partner of Apax Ventures
IV and Apax UK V-B, both partnerships organized under the laws of England to
make venture
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capital investments. It is also the managing general partner of Apax Ventures IV
International Partners, L.P., and Apax UK V-A, L.P., partnerships organized
under the laws of the state of Delaware to make venture capital investments
(collectively referred to herein as "Apax"). Apax Partners & Co. Ventures, Ltd.
conducts business in the United States, inter alia, as the managing general
partner of its U.S. venture capital funds. Apax is the beneficial owner of
approximately 33,250,000 ordinary shares of the Company according to a Schedule
13(d) filed by Apax with the SEC on or about June 27, 1997.
7. Defendant John McMonigall is a director of Esprit. Mr. McMonigall is
also a director of Apax Partners. Mr. McMonigall is a resident of England.
5
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Jurisdiction and Venue
----------------------
8. This Complaint includes a claim asserted under ss. 13(d) of the
Securities Exchange Act of 1934, 15 U.S.C. ss. 78m(d). Accordingly, this Court
has jurisdiction over this action, and over the defendants, pursuant to ss. 27
of the Act. 15 U.S.C. ss. 78aa and under principles of supplemental jurisdiction
of the District Courts under 28 U.S.C. ss. 1367. On information and belief, this
Court also has diversity jurisdiction pursuant to 28 U.S.C. ss. 1332(3) in that
this action is between citizens of different states in which citizens of a
foreign state are additional parties.
9. Venue is proper in this district pursuant to ss. 27 of the
Securities Exchange Act of 1934, 15 U.S.C. ss. 78aa, because an "act or
transaction constituting the violation" of ss. 13(d) occurred in the District of
Columbia - namely, the false filing and failure to file the required accurate
disclosures with the Securities and Exchange Commission. In addition, venue is
proper in this Court pursuant to 28 U.S.C. ss. 1391(b)(2), in that a substantial
part of the events and omissions giving rise to the claims occurred in this
district; ss.1391 (b)(3) in that certain of the defendants may be found in this
district; and ss.1391(d) in that certain defendants are aliens and may sued in
any district where there is jurisdiction.
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FACTS COMMON TO ALL COUNTS
--------------------------
10. Esprit is a rapidly growing telecommunications company, providing
high quality, competitively priced, international and national long distance
telecommunications services. The Company commenced operations in June 1992, with
the objective of competing primarily in the European telecommunications market.
Esprit operates an integrated digital telecommunications network of leased fiber
optic lines, microwave transmission facilities and digital switching technology
linking numerous European cities, New York and Washington, D.C. On or about
September 25, 1996, the Company was reorganized under the name Esprit Telecom
Group, Plc, and incorporated under the laws of England and Wales.
11. Esprit first offered shares in the United States through a
securities offering of American Depositary Shares ("ADS") in 1997. Each ADS is
equivalent to seven ordinary shares of the Company. Esprit ADS's are traded in
the United States on the NASDAQ exchange in Washington, D.C., under the symbol
ESPRY. Esprit shares are also traded through the European Association of
Securities Dealers on the London over-the-counter market ("EASDAQ"), under the
symbol ESPR. On January 31, 1997 the Company was re-registered a public company
in England.
12. Apax obtained an interest in Esprit pursuant to a subscription
agreement that provided, among other things, that Apax had a right, so long as
it or its nominees retained more than 2.5% of the issued equity share capital of
the Company, to
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appoint two non-executive directors to the Company's Board of Directors. Mr.
McMonigall was one of the non-executive directors appointed by Apax. Apax's
right to representation on the Board pursuant to the subscription agreement
ended when Esprit became a public company.
13. Warburg obtained an interest in Esprit pursuant to a subscription
agreement that provided, among other things, that Warburg had a right, so long
as it or its nominees retained more than 2.5% of the issued equity share capital
of the Company, to appoint a non-executive director to the Company Board of
Directors. Mr. Shorthouse was the non-executive director appointed by Warburg.
Warburg's right to representation on the Board pursuant to the subscription
agreement ended when Esprit became a public company.
14. Following the offering of ADSs to the public, at the suggestion of
Mr. Anderson, the Company hired a new Chief Executive Officer, Mr. David Oertle.
Mr. Oertle became CEO in April, 1997. By resolution of the Board of Directors,
sponsored by Mr. Anderson, on or about August 4, 1997, Mr. Oertle was elected as
a member of the Board. On that same date, the Board of the Company resolved to
set up a Remuneration Committee, consisting of Messrs. McMonigall, Shorthouse,
and a third Board member. The resolutions creating the Remuneration Committee
specifically identify its purposes and powers as "for the purpose of and with
the power to determine approve and administer the
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ESOS [Employee Share Option Schemes] for and on behalf of the Company."
15. Following the successful completion of the public offering of the
Company's shares, Esprit determined to enter into a written contract with Walt
Anderson to serve as Chairman of the Board of Esprit for a period commencing
October 1, 1997 and "expiring no earlier than 4 March 1999" (hereafter "the
Contract"). A true and correct copy of the Contract is attached hereto as
Exhibit A. It was understood and agreed between the Company and Mr. Anderson
that Mr. Anderson would perform his services as Chairman of the Board both from
his office in Washington, D.C. and as necessary by travel to the Company's
headquarters in Reading, England.
16. From February 1998, through October 5, 1998, Esprit had a six
person Board of Directors, consisting of Anderson (Chairman), Michael Potter
(President of Esprit and co-founder of the Company with Anderson), McMonigall,
Shorthouse, Oertle, and Roy Merritt (CFO of Esprit).
17. At a time unknown to plaintiffs, but prior to February 26, 1998,
Messrs. McMonigall and Shorthouse, on behalf of their principals, Apax and
Warburg respectively, determined that it would be in their interest to effect a
change of control in Esprit by (1) deposing Anderson as Chairman of the Board,
(2) adding an additional seat to the Board, and (3) causing Esprit to breach the
Contract.
9
<PAGE>
18. Acting under the guise of the Remuneration Committee, on February
26, 1998, McMonigall (for Apax), Shorthouse (for Warburg) and Oertle determined
to put in effect a plan to expand the number of directors to seven and to spend
Esprit's funds without authorization to employ a search firm to identify and
hire a new Chairman of the Board. Defendants McMonigall and Shorthouse, along
with David Oertle, purported to retain the executive search firm of Russell
Reynolds Associates to assist in the identification of new Board members. They
committed to have the Company pay between 25,000 and 40,000 pounds to the search
firm. For a period of seven months, until their actions were discovered by
Anderson, McMonigall, Shorthouse and Oertle failed to advise the full board of
directors of Esprit of their action to replace Anderson as Chairman and breach
the Contract, their hiring of a search firm to assist in doing so, or their
commitment of Company funds to be used in the process.
19. On or about September 11, 1998. Mr. Anderson received a telephone
call from John McMonigall of Apax. Mr. McMonigall advised Mr. Anderson that at
the Board meeting scheduled for September 15th, Apax and Warburg representatives
on the Board would be adding an agenda item to remove Anderson as Chairman.
20. On or about September 14, Mr. Anderson received for the first time
copies of minutes of the Remuneration Committee, detailing the activities of
McMonigall and Shorthouse in attempting to depose him as Chairman of the Board
and to cause Esprit to breach the Contract.
10
<PAGE>
21. On or about September 23, 1998, Mr. Anderson, after receiving an
opinion from counsel, advised Warburg and Apax that they were in violation of
the U.S. securities laws for failing to file with the SEC any disclosure since
February regarding their intention jointly to effect a change in control of the
Company by removing Mr. Anderson as Chairman and adding another director to the
Board.
22. At Mr. Anderson's request, the Board meeting was continued until
September 24. At that meeting on September 24, Mr. Anderson brought these
matters to the attention of the full Board of Directors and to counsel for the
Company, and introduced a resolution calling for an investigation into whether
McMonigall, Shorthouse and Oertle had taken actions that were outside their
authority as directors of the Company, without the consent of the full Board of
Directors and that constituted a breach of their fiduciary duty. Mr. Anderson's
request for a full, on-the-record investigation was defeated when Messrs.
McMonigall, Shorthouse and Oertle were permitted to vote on the scope of the
investigation, notwithstanding their position as interested parties, and Mr.
Anderson was told that he was ineligible to vote because he had proposed the
resolution. In order to protect their personal position and the position of
Warburg and Apax, McMonigall, Shorthouse and Oertle authorized a more limited
inquiry by counsel.
23. The more limited report of counsel was presented to the Board by
memorandum dated October 2, 1998 from the Company's
11
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solicitors, Rowe & Maw. The Rowe & Maw report states that "the appointment of
the search consultants was outside the authority of the Remuneration Committee
and therefore an improper use of the Company's funds." The report concluded that
the actions of McMonigall, Shorthouse and Oertle on February 26, 1998 "to
authorise (sic) the appointment of search consultants [to replace the Chairman
of the Board] was not within the authority of the Remuneration Committee. In the
circumstances any payment to the search consultants was or will be an improper
use of the Company's funds, for which those directors who approved such payment
would be personally liable for a breach of their fiduciary duty to apply the
Company's funds only in accordance with its constitution, subject to
ratification by the Board...." The Rowe & Maw report also advised that the
breach of fiduciary duty by these individuals could be remedied by ratification
of their actions by the full Board of Directors.
24. Following receipt of the Rowe & Maw report, a Board of Directors
meeting was held on October 5, 1998. The meeting proceeded with a discussion of
the issue of the misconduct of Messrs. McMonigall, Shorthouse and Oertle. During
the meeting, Michael Potter received a message requiring him to leave because of
an illness in his family. After Potter's departure, McMonigall, Shorthouse and
Oertle introduced a resolution removing Anderson from his position as Chairman
and adding a new seat to the Board of Directors in order to create a majority to
ratify their prior misconduct and protect their personal
12
<PAGE>
interests and the interests of Warburg and Apax. The resolution carried with the
votes only of the three directors who had been determined by Rowe & Maw to have
acted outside the scope of their authority. Esprit then issued a notice to the
public that Anderson had been removed as Chairman and the Board had been
expanded to seven members with the election of an additional outside director,
Sir Robin Biggam, who was also elected Chairman. The purported election of Mr.
Biggam as Chairman was in derogation of the prior stipulation of the Board of
Directors that Mr. Anderson remain Chairman for a minimum term and, on
information and belief, ineffectual under English law.
25. On October 12, 1998, Gold & Appel, through Mr. Anderson, notified
the Company pursuant to section 368 of the United Kingdom's Companies Act of
1985 that it was requesting an Extra Ordinary General Meeting ("EGM") for the
purpose of considering a resolution to remove Messrs. Oertle, McMonigall and
Shorthouse as members of the Board, and to reverse the decision of the Board, to
the extent it was valid, to appoint Sir Robin Biggam as Chairman of the Board.
26. Following receipt of the request for an EGM and resolution by Gold
& Appel, Warburg and Apax submitted a separate request for an EGM for the
purpose of considering a resolution to remove Walt Anderson from the Board of
Directors of Esprit.
27. The vote of the shareholders on the resolutions in response to the
EGM is about to commence pursuant to a proxy
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<PAGE>
solicitation by Esprit, and the EGM is scheduled to be held on a date to be
fixed in November, 1998.
COUNT I
-------
Violations of Section 13(d) of the Securities Exchange
------------------------------------------------------
Act of 1934, 15 U.S.C. ss. 78m(d).
----------------------------------
(Warburg and Apax)
28. Plaintiffs repeat and reallege the allegations contained in
paragraphs 1 through 27, as if fully set forth herein.
29. Warburg and Apax each acquired beneficial ownership of in excess of
five percent of outstanding equity securities of Esprit, securities of a class
which is registered pursuant to Section 12 of the Securities Exchange Act of
1934. 15 U.S.C. ss. 78l. As such, each has incurred an obligation under Section
13(d) of the Securities Exchange Act to send to the issuer, send to each
exchange where Esprit's equity securities are traded, and file with the
Securities and Exchange Commission a complete and truthful statement containing
the information required by Section 13(d).
30. Section 13(d) requires that the statement disclose, among other
things, "if the purpose of the purchases or prospective purchases is to acquire
control of the business of the issuer of the securities,....any plans or
proposals...to make any...major change in its business or corporate structure."
15 U.S.C. ss. 78m(d)(1)(C). As the implementing regulations make clear, the
statement must disclose any plans to make "[a]ny
14
<PAGE>
change in the present board of directors or management of the issuer, including
any plans or proposals to change the number or term of directors or to fill any
existing vacancies on the board." 17 C.F.R. ss. 240.13d-101, Item 4. Under
Section 13(d)(2), a person filing a Section 13(d) statement has a continuing
duty to update its statement whenever any material change occurs in the facts
set forth therein.
31. Apax filed a Section 13(d) statement on June 30, 1997 with respect
to its beneficial ownership of equity securities of Esprit. The statement
represented, among other things, that Apax acquired its securities for
investment purposes and had "no present plans or proposals that relate to or
would result in any of the actions or events described in paragraphs (a) through
(j) of Item 4 of Schedule 13D." Paragraph (d) of Item 4 of Schedule 13D requires
disclosure of any intent to effect "[a]ny change in the present board of
directors or management of the issuer, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board." A true and correct copy of Apax's ss.13(d) filing is attached as Exhibit
B. On information and belief after a search of the available public records, as
of the date of this Complaint, Apax has not updated or amended its Section 13(d)
statement in any way.
32. On February 10, 1998, Warburg filed a statement pursuant to Section
13(g) of the Securities Exchange Act of 1934, 15 U.S.C. ss. 78m(g), with respect
to its beneficial ownership of
15
<PAGE>
equity securities of Esprit. Section 13(g) and its implementing regulations
permit a person otherwise subject to the disclosure requirements of Section
13(d) to file instead an abbreviated statement under Section 13(g), but only if
the person represents that it has acquired the securities "in the ordinary
course of [its] business and not with the purpose or with the effect of changing
or influencing the control of the issuer." 17 C.F.R. ss. 240.13d-1. A true and
correct copy of Warburg's ss.13(g) filing is attached as Exhibit C. A person who
has previously filed a Section 13(g) statement is required to file a Section
13(d) statement if it holds the securities "with a purpose or effect of changing
or influencing control of the issuer," and is not permitted to vote its
securities or acquire additional securities until 10 days after the new Section
13(d) statement is filed. Until the filing on October 22, 1998 discussed below,
Warburg did not file any statement under Section 13(d), and did not update or
amend its Section 13(g) filing.
33. As explained above, in or about February 1998, Warburg and Apax
formed an intention to effect a major change in control of Esprit and in its
management structure by removing Anderson from his position as Chairman of the
Board and increasing the size of the Board from six members to seven.
34. Beginning in or about February 1998 and continuing to the present,
Warburg and Apax jointly took, and agreed to take, actions designed to
effectuate their intentions to make a major change in control of Esprit and in
its management structure. As
16
<PAGE>
such, Warburg and Apax acted as a "group" within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934. This "group" was required to make and
file Section 13(d) disclosures, but no disclosures of any kind have been filed
by Apax, and no disclosures were filed by Warburg until October 22, 1998.
35. From on or before February 26, 1998, after forming their intentions
to effect a major change in control of Esprit and in its management structure,
until October 22, 1998, neither Warburg nor Apax, individually or as a group,
filed any statement or amended statement required by Section 13(d) of the
Securities Exchange Act reflecting their intention to effect a major change
control of Esprit and in its management structure. Rather, the Section 13(d)
statement filed by Apax continued to represent that it has no such intention;
Warburg had filed only a Section 13(g) disclosure which, by definition, is
permissible only if Warburg has no intention to change or influence the control
of Esprit; and the "group" had never filed any statement under Section 13(d) or
(g).
36. Finally, on October 22, 1998, after seven months of deception,
Warburg filed a ss. 13(d) statement, amending its prior 13(g). The October 22
ss. 13(d) statement notified shareholders that Warburg and Apax took actions
that may be considered formation of a "group" as defined by the securities law
for the purpose of supporting the resolution offered by them to remove Mr.
Anderson as a director of Esprit. However, the ss. 13(d) statement contains
false and misleading information designed to
17
<PAGE>
materially effect the decision of shareholders in voting on the pending
resolutions.
37. The Warburg ss. 13(d) contains the following statement:
"The Reporting Entities, together, and Apax, each have a
representative on the Board of Directors of the Company.
These Directors participate in Board and committee
meetings and in such capacity discuss the business of the
Company. In such capacity, on February 26, 1998, the
Remuneration Committee of the Board of Directors
(comprised of such Directors and David Oertle, the Chief
Executive Officer of the Company) met and resolved to
appoint recruitment consultants to identify two
individuals to be recommended to the Board of Directors as
independent non-executive Directors."
A true and correct copy of the October 22 schedule 13(d) filing
is attached as Exhibit D (without attachments).
38. Warburg's October 22, 1998 ss. 13(d) filing is materially false and
misleading in three critical respects: (1) it affirmatively misstates that the
actions of Shorthouse and McMonigall in February were in their capacity as
members of a committee of the Board of Directors, thereby attempting to cloak
them with the aura of legitimacy, when in fact, as Company counsel has found,
they were acting outside the scope of their authority, ultra vires, and were
subject to personal liability for breach of fiduciary duty to the extent Company
funds were spent in support of their unauthorized actions; (2) it fails to
disclose that for a period of seven months the "resolution" referred to was kept
secret from the full Board of Directors in violation of the participants' duty
to the Company; and (3) it
18
<PAGE>
affirmatively misstates the substance of the action taken by those individuals
in February. In fact, the purported resolution calls for the identification of
two new directors "one of whom should be considered for the chairman's role" in
place of Mr. Anderson.
39. The ss. 13(d) filing by Apax and the ss. 13(g) filing by Warburg
have been, since on or about February 1998, materially false and misleading. The
amended 13(d) filed by Warburg on October 22 continued this pattern of failing
to file accurate information as required by ss. 13(d).
40. These false and misleading filings and failures to file by Warburg
and Apax, both individually and as a group, have misled plaintiffs, who were
unaware until September 1998 of Warburg's and Apax's actions to effect a major
change in control of Esprit and in its corporate structure. Moreover, Warburg's
and Apax's false and misleading filings and failures to file have misled other
Esprit shareholders, many of whom were unaware of Warburg's and Apax's
intentions and efforts through the date that they voted to remove Mr. Anderson
as Chairman of the Board and add an additional director to the Board. The
October 22 ss. 13(d) by Warburg has and will continue to mislead shareholders
regarding the resolutions to be voted on by proxy or at the EGM on a date to be
set in November, 1998.
41. By their false and misleading filings and failures to file, Warburg
and Apax have engaged in continuing violations of
19
<PAGE>
Section 13(d) of the Securities Exchange Act of 1934, and have demonstrated a
propensity to violate the statute in the future, with respect to their
beneficial ownership of equity securities of Esprit.
42. This Complaint has been filed within the applicable limitations
period for a Section 13(d) claim. The violation of Section 13(d) is ongoing; it
began in or about February 1998; and plaintiffs, exercising reasonable diligence
at all times, discovered the violation upon receipt of the minutes of the
Remuneration Committee in September 1998, and upon reviewing the amended filing
by Warburg on October 23, 1998.
43. Without injunctive relief from this Court, plaintiffs will suffer
irreparable injury in that shareholders of Esprit will vote on the pending
resolution concerning change in control of the Company based on incomplete,
false and misleading information filed by the defendants Apax and Warburg.
COUNT II
--------
Tortious Interference with Contract
-----------------------------------
(Warburg; Shorthouse; Apax; McMonigall)
---------------------------------------
44. Plaintiff Walt Anderson repeats and realleges the allegations
contained in paragraphs 1 through 43, as if fully set forth herein.
45. From October 1, 1997 through its purported termination on October
5, 1998, Anderson had a valid written contract with Esprit to serve as Chairman
of the Board of Esprit.
20
<PAGE>
46. Defendants Warburg and Apax, and their respective agents Shorthouse
and McMonigall, were aware of the existence and terms of the Contract.
47. Warburg, through its President Ronald Cohen and general partner
Shorthouse, and Apax, through its managing director McMonigall, determined to
further their own interests in control of Esprit by the removal of Anderson as
Chairman of the Board. Defendants used their positions on the Esprit Board of
Directors to further the interests of Warburg and Apax by inducing Esprit to
breach the Contract by wrongfully usurping Mr. Anderson's role as Chairman of
the Board and purporting to install Mr. Biggam in his place.
48. The actions of Shorthouse, for himself and on behalf of Warburg,
and McMonigall, for himself and on behalf of Apax, were done with malice and
conscious knowledge of wrongdoing and were designed to injure Anderson.
49. As result of defendants inducement and causing Esprit to breach the
Contract, Anderson has been damaged financially in an amount in excess of
$75,000.00 to be proven at trial.
21
<PAGE>
WHEREFORE, plaintiffs respectfully request judgment as follows:
(a) That the Court enter injunction relief, including a permanent
injunction, enjoining Warburg and Apax (1) to file complete and accurate
statements as required by Section 13(d) of the Securities Exchange Act of 1934
and its implementing regulations, with respect to their beneficial ownership of
equity securities of Esprit; (2) from further violation of Section 13(d) in the
future with respect to their beneficial ownership of equity securities of
Esprit; and (3) from voting any equity securities of Esprit until after the
Court finds that their current and ongoing violations of Section 13(d) have been
fully remedied;
(b) That plaintiff Anderson be awarded compensatory damages against all
defendants for tortious interference with the contract in an amount to be proven
at trial;
(c) That plaintiff Anderson be awarded punitive damages against all
defendants in an amount to be determined at trial;
(d) That the Court award such other relief that it deems just and
proper.
22
<PAGE>
Respectfully submitted,
WILLIAMS & CONNOLLY
By: /s/Richard S. Hoffman
---------------------
Richard S. Hoffman
D.C. Bar #367604
725 12th Street, N.W.
Washington, D.C. 20005
(202) 434-5000
Attorneys for Plaintiffs
Walt Anderson and Gold &
Appel Transfer, S.A.
DEMAND FOR JURY TRIAL
---------------------
Pursuant to Fed. R. Civ. Pro. 38, plaintiffs demand a trial by jury on
issues so triable.
/s/Richard S. Hoffman
---------------------
Richard S. Hoffman
23
<PAGE>
VERIFICATION
------------
I declare under penalty of perjury of the laws of the United States
that the foregoing allegations are true and correct to the best of my knowledge,
information and belief.
/s/Walt Anderson
-------------------
Walt Anderson
24
<PAGE>
EXHIBIT 99.6
------------
From: Apax Ventures IV International Partners, L.P.; Apax Ventures IV; Apax
UK V-A, L.P.; and Apax UK V-B (together "the Apax Entities", each of
which are acting by their respective manager, Apax Partners & Co.
Ventures Ltd.) and Warburg, Pincus Ventures, L.P. (together, "the
Indemnifiers")
To: Sir Robin Biggam
Streatley House
Streatley
Bedfordshire
LU3 3PS
Date: 28 October 1998
Indemnity relating to Esprit Telecom Group plc
Each of the Indemnifiers agrees with you as follows, in consideration of the
payment of (pound)1 each from you (receipt of which is acknowledged by each of
the Indemnifiers) and of other good and valuable consideration.
1. INDEMNITY PROVISIONS
1.1 Indemnity
The Indemnifiers hereby jointly and severally agree to indemnify you on
demand and to keep you fully indemnified against all Losses which you
may make, suffer or incur as a result of or otherwise in connection
with any Claim:
(a) brought by or on behalf of Mr Anderson, Gold & Appel Transfer
S.A. or the Foundation for the International Non-Governmental
Development of Space or any other entity (other than the
Company or any of its subsidiaries) associated with Mr
Anderson (Mr Anderson and those entities together "the
Anderson Entities"); or
(b) brought by the Company or any of its subsidiaries at the
instance of any Anderson Entities,
in either case relating in any way, directly or indirectly, to the
Company or any of its Subsidiaries (including without limitation the
specific matters set out in paragraph 1.6). This indemnity shall only
apply in relation to any Indemnified Losses (defined in paragraph
1.3(1)) to the extent set out in, and on the terms of, paragraph 1.3.
1.2 Claims
For the avoidance of doubt, the obligation of the Indemnifiers under
this indemnity to indemnify you against relevant Losses includes an
obligation upon your demand to put you in funds to meet any relevant
Losses before the date on which payment by you of those Losses first
becomes due (in respect of any Losses, their "Due Date").
1.3 Claims against the Company or under an insurance policy
<PAGE>
(1) You may be entitled to claim indemnity or compensation from the Company
or from the insurers ("the Insurers") under any directors and officers
liability or other insurance policy maintained from time to time by the
Company (a "Policy") in respect of particular relevant Losses
("Indemnified Losses").
(2) You shall only be entitled to be indemnified in respect of Indemnified
Losses if and to the extent that the Company and/or (as the case may
be) the Insurers fail for any reason to meet its or their liability to
you in respect of them; however, this is without prejudice to paragraph
1.3(4).
(3) Accordingly, you agree that, subject to paragraph 1.3(4), you may only
make a demand on either or both of the Indemnifiers under this
indemnity in respect of Indemnified Losses if and to the extent that
you have made demand on the Company or the Insurers, as the case may
be, in respect of them and that demand has not been met within five
business days.
(4) Notwithstanding paragraph 1.3(3), you may make demand on either or both
of the Indemnifiers under this indemnity in respect of Indemnified
Losses at any time if:
(a) you have actually paid them; or
(b) their Due Date will occur within five business
days of the date of the demand,
so long as you have not been compensated or indemnified by the Company
or the insurers, as the case may be, in respect of them.
(5) If either or both of the Indemnifiers make any payment to you under
this indemnity in respect of any Indemnified Losses, then the relevant
Indemnifier(s) will be subrogated to your rights against the Company
and/or, as the case may be, the Insurers in relation to those Losses to
the extent of that payment. But this subrogation will only apply if you
have been fully compensated for all of your Losses in respect of the
relevant matter.
1.4 Interest on late payment
Without prejudice to the obligation of the Indemnifiers to make
payments pursuant to this indemnity on demand (subject in the case of
Indemnified Losses to the terms of paragraph 1.3), the Indemnifiers
jointly and severally undertake to pay to you interest on any moneys
not paid by them pursuant to this indemnity within five business days
after the date of the demand for the period from the date of the demand
up to the date of payment. That interest shall accrue and be calculated
on a daily basis, after as well as before any judgment, at the rate of
2% per annum over the base rate from time to time of National
Westminster Bank plc.
1.5 Definitions
For these purposes:
2
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"Claim" means any claim, demand, action or other proceedings; and
"Losses" means:
(a) all damages, payments and other liabilities paid, made or
incurred in or as a result of any Claim from time to time
threatened, made or brought against you, including without
limitation all costs, expenses and other liabilities incurred
by you as a result of investigating, avoiding, contesting,
appealing or compromising any such Claim; and
(b) all other losses, damages, payments, costs, expenses and
other liabilities made or incurred by you.
1.6 Specific matters
The specific matters referred to in paragraph 1.1 are:
(a) Mr Anderson's removal as Chairman of the Company and/or as a
director of the Company (whether or not that removal was valid
or effective) and the circumstances relating to or arising
from that removal;
(b) your appointment as a director and the Chairman of the Company
(whether or not that appointment was valid or effective),
including without limitation the circumstances leading up to
such appointment or relating to it and your role as a director
and/or Chairman of the Company;
(c) any matter relating to or arising from the allegations made by
Mr Anderson against Mr Oertle and/or Mr McMonigall and/or Mr
Shorthouse and/or any further or ancillary allegations which
Mr Anderson and/or the other Anderson Entities may bring
whether in relation to the period prior to your appointment or
at any time after your appointment;
(d) the letter which you are to sign as Chairman of the Company to
accompany the notice of an Extraordinary General Meeting of
the shareholders to consider resolutions requisitioned by Apax
Funds Nominees Limited and Warburg, Pincus Ventures, L.P. and
Mr Anderson and Gold & Appel Transfer S.A.; and
(e) the forthcoming Extraordinary General Meeting of the Company
and your role as Chairman of that meeting or any other
Extraordinary General Meeting of the Company.
2. LIABILITY UNAFFECTED
The liability of an Indemnifier under this indemnity shall not be
affected by any failure of one or more of the other Indemnifiers or the
Company to enter into this indemnity, by the obligations of one or more
of the other Indemnifiers or the Company being or becoming invalid or
unenforceable, by any concession, time, indulgence, release, or other
dealing granted to or made with one or more of the other Indemnifiers
3
<PAGE>
or the Company or by anything else which would, but for this paragraph
2, operate to discharge or reduce that liability.
3. EXCEPTIONS
The indemnity contained in paragraph 1 shall not apply to any Losses:
(a) made, suffered or incurred by you as a result of any fraud or
criminal offence committed by you or as a result of your
deliberate failure to act, in your capacity as a director and
the Chairman of the Company, in accordance with specific legal
advice;
(b) if and to the extent that they relate to any personal dealings
which you may have had, or in future have, with any of the
Anderson Entities and which do not relate in any way, directly
or indirectly, to the Company or any of its subsidiaries; or
(c) if and to the extent that you are compensated in respect of
them by the Company or under any Policy.
4. CONDUCT
If at any time any Claim (or event which may give rise to a Claim)
which may give rise to a claim by you under this indemnity comes to
your notice, then:
(a) you shall notify each of the Indemnifiers forthwith in writing;
(b) unless required to do so by the Company or the Insurers under
any Policy, you shall not take any action in connection with
the Claim without the consent in writing of each of the
Indemnifiers; and
(c) at the joint written request of the Indemnifiers you shall
(subject to being indemnified to your reasonable satisfaction
by the Indemnifiers in respect of any Losses suffered by you
in connection with the Claim and subject to the rights of the
Company and of the Insurers under any Policy):
(i) take such action as the Indemnifiers may jointly
reasonably require to avoid, contest, dispute,
resist, appeal, compromise or defend the Claim
(including, but without limitation, making
counter-claims and exercising all rights of set-off
against third parties);
(ii) if so requested, permit either or both of the
Indemnifiers in your name and on your behalf to have
the conduct of all proceedings relating to the Claim
including the appointment of solicitors and other
professional advisers and the making of any
settlement or compromise of the Claim; and
(iii) give the Indemnifiers all reasonable assistance as
they may reasonably require for the purpose of
avoiding, contesting, disputing, resisting,
appealing, compromising or defending the Claim.
4
<PAGE>
A failure by you to comply with your obligations under this paragraph 4 shall
only invalidate your rights under this indemnity in respect of any relevant
Losses if and to the extent that the Indemnifiers are prejudiced by that
failure.
5. LAW AND JURISDICTION
5.1 Law
This indemnity is governed by and shall be construed in accordance with English
law.
5.2 Jurisdiction
For your exclusive benefit, each of the Indemnifiers agrees that the courts of
England are to have the exclusive jurisdiction to settle any dispute which may
arise in connection with this indemnity.
5.3 Proceedings
Each of the Indemnifiers irrevocably submits to the jurisdiction of the
English courts and:
(a) agrees that, notwithstanding paragraph 5.2, you shall be
entitled to bring proceedings in connection with this
indemnity in any other court of competent jurisdiction;
(b) agrees that the bringing of such proceedings in a court of one
jurisdiction shall not preclude the bringing of such
proceedings in a court of another jurisdiction, whether at the
same time or not; and
(c) waives irrevocably any objection which it may have from time
to time (whether on grounds of venue, inconvenient forum or
otherwise) to the bringing of such proceedings in any court
referred to in this paragraph 5.3.
5.4 Agent for service of process
Each of the Indemnifiers shall at all times maintain an agent for service of
process in England. Each of them appoints initially the agent specified in
respect of it in the appendix to this indemnity. No Indemnifier may revoke such
appointment. If for any reason an agent appointed under this paragraph 5.4
ceases to act as such, the relevant Indemnifier shall promptly appoint another
such agent and notify the other parties of the appointment and the new agent's
name and address; provided that each of the Apax Entities must at all times have
the same agent for the service of process. If it does not make such an
appointment within seven days of such cessation, then you may do so on its
behalf.
6. NOTICES
All notices and other communications relating to this indemnity:
(a) shall be delivered by hand or sent by post or facsimile;
5
<PAGE>
(b) (subject to paragraph 6(c)) shall be delivered or sent to the
party concerned at the relevant address or number, as
appropriate, and marked as referred to in the appendix to this
indemnity, subject to such amendments as may be notified from
time to time in accordance with this paragraph by the relevant
party to the other parties by no less than ten business days'
notice. However, each of the Apax Entities must at all times
have the same address for service;
(c) may in the alternative in the case of any writ, judgment or
other notice of process on any Indemnifier be delivered or
sent to the agent referred to in paragraph 5.4; and
(d) shall take effect only upon actual receipt at the appropriate
address and for these purposes a facsimile is received when a
complete and legible copy of the communication, whether the
copy sent by facsimile or a hard copy sent by post or hand,
has been received.
EXECUTION:
The parties have shown their acceptance of the terms of this indemnity by
signing it below.
EXECUTION:
WARBURG, PINCUS VENTURES, L.P.
By: E.M. Warburg, Pincus & Co., LLC,
Manager
By: /s/ Dominic H. Shorthouse
Dominic H. Shorthouse
Member
Signed by )
Apax Partners & Co. Ventures Ltd. in )
its capacity as manager of APAX )
VENTURES IV INTERNATIONAL )
PARTNERS, L.P. in the presence of: )
/s/ Apax Partners & Co. Ventures Ltd.
Signed by )
Apax Partners & Co. Ventures Ltd. in )
its capacity as manager of APAX )
VENTURES IV in the presence of: )
/s/ Apax Partners & Co. Ventures Ltd.
Signed by )
Apax Partners & Co. Ventures Ltd. in )
its capacity as manager of APAX UK V-A, )
L.P. in the presence of: )
/s/ Apax Partners & Co. Ventures Ltd.
Signed by )
Apax Partners & Co. Ventures Ltd in )
its capacity as manager of APAX UK V-B )
in the presence of: )
/s/ Apax Partners & Co. Ventures Ltd.
Signed by SIR ROBIN BIGGAM )
/s/ SIR ROBIN BIGGAM
6
<PAGE>
APPENDIX
to an indemnity
Agents for service of process and notice addresses
1. For each Apax Entity
1.1 Agent for service of process:
S J Berwin & Co
222 Gray's Inn Road
London
WC1X 8HB
Facsimile number: 0171 533 2000
For the attention of: Stephen Maffey
1.2 Notice details: Apax Partners & Co. Ventures Ltd.
15 Portland Place
London W1N 3AA
Facsimile number: 0171 872 9449
For the attention of: Ronald Cohen
2. Warburg, Pincus Ventures, L.P.
2.1 Agent for service of process:
E M Warburg, Pincus Ventures
International Limited
Almack House
St James's
London SW1Y 6QW
Facsimile number: 0171 321 0881
For the attention of: Dominic Shorthouse
2.2 Notice details: Almack House
St James's
London SW1Y 6QW
Facsimile number: 0171 321 0881
For the attention of: Dominic Shorthouse
3. Sir Robin Biggam
Notice details: Streatley House
Streatley
Bedfordshire
LU3 3PS
Facsimile Number: 01582 883187
<PAGE>
SIDE LETTER TO INDEMNITY AGREEMENT
To: Apax Ventures IV International Partners, L.P.; Apax Ventures
IV; Apax UK V-A, L.P.; and Apax UK V-B (together "the Apax
Entities", each of which are acting by their respective
manager, Apax Partners & Co. Ventures Ltd.) and Warburg,
Pincus Ventures, L.P.
From: Sir Robin Biggam
Streatley House
Streatley
Bedfordshire
LU3 3PS
Date: 28 October 1998
Indemnity relating to Esprit Telecom Group plc ("the Company")
I would refer to the indemnity dated 28 October 1998 ("the Indemnity") which you
have each granted to me. I would confirm that following my ceasing to be a
director of the Company and/or its subsidiaries the Indemnity will not apply to
claims made or attributable to acts or matters which I have occasioned or
effected after that date unless such acts or matters relate to the conduct of
claims which have arisen or relate to the period prior to such cessation.
Yours faithfully
/s/ Sir Robin Biggam
Sir Robin Biggam
<PAGE>
EXHIBIT 99.7
------------
To: Apax Ventures IV International Partners, L.P., Apax Ventures
IV; Apax UK V-A, L.P.; and Apax UK V-B (together "the Apax
Entities") each of which is acting by their respective manager
Apax Partners & Co. Ventures Ltd
From: Warburg, Pincus Ventures L.P. ("WP")
Dear Sirs
1. We refer to the Indemnity Agreement (the "Indemnity") (relating to
Esprit Telecom Group plc which we are each to enter into in favour of
Sir Robin Biggam ("Sir Robin").
2. This letter is to confirm that we have each agreed with the other that,
in consideration of our each respectively agreeing to enter into the
Indemnity, our respective liabilities under the Indemnity shall be
borne as between each other in the proportions:
The Apax Entities : 68.485%; and
WP : 31.515%;
and each agrees with the other that it will procure the settlement of
its respective proportion of all such liabilities immediately it
becomes obliged to do so under the terms of the Indemnity. Each party
agrees to notify the other forthwith after it receives notice of any
demand or impending demand by or on behalf of Sir Robin under the
Indemnity and agrees to cooperate with the other in making its
respective proportion of the payment required pursuant to such demand,
and to notify the other upon any such payment being made.
3. Accordingly, if for any reason whatsoever an amount of Indemnified
Losses or Losses (each as defined in the Indemnity) is properly paid to
Sir Robin (or his heirs, personal representatives or assignees) by the
Apax Entities and not by WP, or by WP and not by the Apax Entities, or
by the Apax Entities and WP in proportions different to those set out
in paragraph 2, then the party (the Debtor Party") which has paid less
than its due proportion as aforesaid shall, forthwith on demand by the
other party (the "Creditor Party"), pay to the Creditor Party such
amount as will result in each having borne such due proportion, and the
Debtor Party shall also pay interest on such amount at the rate
provided for in clause 1.4 of the Indemnity in respect of the period
from the date of the payment in respect of Losses by the Creditor Party
up to and including the date of payment hereunder by the Debtor Party.
4. If either WP or the Apax Entities receives any payment pursuant to the
Indemnity from Sir Robin or, pursuant to the rights of subrogation
provided for in the Indemnity, from any other person, apart from a
payment made simultaneously to both parties in their respective due
proportions, the party receiving more than its due proportion shall
forthwith on
<PAGE>
such receipt account to the other for the other's due proportion.
5. Each party undertakes to the other not to give any consent or direction
to, or make any requirement of, Sir Robin pursuant to clause 4 of the
Indemnity without the consent of the other party hereto, such consent
not to be unreasonably withheld or delayed. If in relation to any such
matter, the parties cannot, in spite of using their respective best
efforts over a period of not less than 14 days to agree a common
position, agree on how to proceed and each is acting reasonably in not
agreeing to the other's position, WP will act in relation to such
matters as the Apax Entities wish.
6. For the purposes of this letter the Apax Entities shall be deemed to be
a single party, the obligations of the Apax Entities to WP hereunder
shall be joint and several, and notice from WP to any Apax Entity, or
from any Apax Entity to WP shall take effect as notice to or, as the
case may be, notice from all of the Apax Entities.
7. This letter agreement is governed by and shall be construed in
accordance with English law.
8. Each party agrees that the courts of England are to have the exclusive
jurisdiction to settle any dispute which may arise in connection with
this letter.
9. Each party irrevocably submits to the jurisdiction of the English
courts and;
(a) agrees that, notwithstanding paragraph 8, the other party shall be
entitled to bring proceedings in connection with this letter in any
other court of competent jurisdiction;
(b) agrees that the bringing of such proceedings in a court of one
jurisdiction shall not preclude the bringing of such proceedings in a
court of another jurisdiction, whether at the same time or not; and
(c) waives irrevocably any objection which it may have from time to
time (whether on grounds of venue, inconvenient forum or otherwise) to
the bringing of such proceedings in any court referred to in this
paragraph 9.
10. Each party shall at all times maintain an agent for service of process
in England. Each of them appoints initially the agent specified in
respect of it in the appendix to the Indemnity. No party may revoke
such appointment. If for any reason an agent appointed under this
paragraph 10 ceases to act as such, the relevant party shall promptly
appoint another such agent and notify the other party of the
appointment and the new agent's name and address; provided that each of
the Apax Entities must at all times have the same agent for the service
of process. If any party does not make such an appointment within seven
days of such cessation, then the other party may do so on its behalf.
11. All notices and other communications relating to this letter:
(a) shall be delivered by hand or sent by post or facsimile;
<PAGE>
(b) subject to paragraph 11(c) shall be delivered or sent to the party
concerned at the relevant address or number, as appropriate, and marked
as referred to in the appendix to the Indemnity, subject to such
amendments as may be notified from time to time in accordance with this
paragraph by the relevant party to the other party by no less than ten
business days' notice. However, each of the Apax Entities must at all
times have the same address for service;
(c) may in the alternative in the case of any writ, judgment or other
notice of process on any party be delivered or sent to the agent
referred to in paragraph 10; and
(d) shall take effect only upon actual receipt at the appropriate
address and for these purposes a facsimile is received when a complete
and legible copy of the communication, whether the copy sent by
facsimile or a hard copy sent by post or hand, has been received.
Please show your acceptance of the terms of this letter by signing the attached
copy of it where indicated.
Yours faithfully
Warburg, Pincus Ventures, L.P
By: E M Warburg, Pincus & Co., LLC
By: /s/ Dominic Shorthouse
Member
Dominic Shorthouse
Signed by
Apax Partners & Co. Ventures )
Ltd in its capacity as manager )
of Apax Ventures IV )
International Partners, L.P., )
in the presence of )
/s/ Apax Partners & Co. Ventures Ltd.
Signed by )
Apax Partners & Co. Ventures )
Ltd in its capacity as manager )
of Apax Ventures IV )
in the presence of )
/s/ Apax Partners & Co. Ventures Ltd.
Signed by )
Apax Partners & Co. Ventures )
Ltd in its capacity as manager )
of Apax UK V - A, L.P. )
in the presence of )
/s/ Apax Partners & Co. Ventures Ltd.
Signed by )
Apax Partners & Co. Ventures )
Ltd in its capacity as manager )
of Apax UK V- B )
in the presence of )
/s/ Apax Partners & Co. Ventures Ltd.
