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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
April 14, 1999
Date of Report (Date of earliest event reported)
Global TeleSystems Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-23717 94-3068423
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1751 Pinnacle Drive
North Tower, 12th Floor
McLean, VA 22102 22102
(Address of principal executive offices) (Zip Code)
(703) 918-4500
(Registrant's telephone number, including area code)
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Item 5. Other Events
On April 14, 1999, we announced our agreement to buy 52 percent of
the shares of Omnicom, a French corporation, for euro 194.6 million
(approximately $210 million). The total consideration is to be paid 50% in
cash (approximately $103,000,000) and 50% in GTS shares. The 1,850,497 GTS
shares will be unregistered and are therefore subject to transfer restrictions,
unless transferred in compliance with, or pursuant to an exemption from the
Securities Act of 1933 (the "Securities Act"). Certain of the Omnicom majority
shareholders have agreed to the following:
o to place a total of approximately 20% of the GTS shares acquired in
escrow until the later of June 30, 2000 and thirty days after the
filing of our Form 10-K for year end December 31, 1999; and
o not to transfer a total of approximately 30% of the GTS Shares
acquired until six months after the date of acquisition.
We have completed our acquisition of these shares.
As required by French law and regulation, we have filed with the Conseil
des Marches Financiers and are proceeding with an offer to purchase the
remaining minority shares and the convertible bonds of Omnicom. Our board and
the board of Omnicom have approved the agreement and endorse the pending offer
to the remaining minority shareholders and convertible bond holders. We have not
made this offer to Omnicom securityholders in the United States, mailed or
distributed the offer to purchase in the United States or accepted any Omnicom
securityholders' acceptances mailed to us from the United States.
Omnicom is one of the country's first telecommunications providers to
successfully challenge France Telecom's network. Omnicom is the second operator
to connect with France Telecom and also holds a national network operator's
license for France. Excluding France Telecom, Omnicom is the leading provider of
telecommunications services for small and medium-sized businesses in France.
Omnicom markets its services through both a direct sales force and sales agents
throughout France. Omnicom's other service offerings include the sale and
distribution of pre-paid cards to outlets in France and the offering of
telecommunications services to residential customers.
We believe that Omnicom's business is complementary with ours and
benefits will result from combining the two companies.
On April 19, 1999, we filed a prospectus supplement to our previously
filed shelf registration statement for an underwritten public offering of
6,227,921 shares of our common stock (including 812,337 shares exercised
pursuant to the underwriters over-allotment option) owned by two holders, Apax
Funds Nominees Limited and Warburg, Pincus Ventures, L.P. (the "Selling
Stockholders"). The shelf registration statement was declared effective by the
Securities and Exchange Commission Act ("SEC") on April 19, 1999. The Selling
Stockholders received all of the net proceeds from this offering.
On April 19, 1999, we offered, pursuant to exemptions from registration
under the Securities Act, US$500,000,000 of depositary shares (including
US$65,000,000 of depositary shares exercised pursuant to the underwriters
over-allotment option) (the "Shares"), each representing 1/100 of a share of 7
1/4% cumulative convertible preferred stock (the "Preferred Stock"). Each Share
has a liquidation preference of $50 per share. Holders of the Shares are
entitled to quarterly cash payments of $.90625 per Share commencing on June 15,
1999. We have agreed to register with the SEC the Shares and the common stock
issuable upon conversion of the Preferred Stock. We realized net proceeds, after
underwriting discounts and commissions, of $485,000,000 and intend to use such
proceeds for general corporate purposes, including business development.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c.) Exhibits
<TABLE>
<CAPTION>
Designation Description of Exhibit
- ----------- ----------------------
<S> <C>
4.1 Registration Rights Agreement dated as of April 23, 1999 by and
among Global TeleSystems Group, Inc., and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Donaldson Lufkin &
Jenrette Securities Corporation, Bear, Stearns & Co. Inc., BT
Alex. Brown Incorporated and Lehman Brothers Inc.
10.1 Purchase Agreement dated as of April 19, 1999 by and among
Global TeleSystems Group, Inc., and Apax Funds Nominees Limited
and Warburg, Pincus Ventures, L.P. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co.
Inc., Dresdner Kleinwort Benson North American LLC, BT Alex.
Brown Incorporated, Lehman Brothers Inc., Prudential Securities
Incorporated, ING Baring Furman Selz LLC, BancBoston Robertson
Stephens Inc., CIBC Oppenheimer Corp., ABN Amro Incorporated,
Arnhold and S. Bleichroeder, Inc. and Credit Suisse First
Boston Corporation.
10.2 Purchase Agreement dated as of April 19, 1999 by and among
Global TeleSystems Group, Inc. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co.,
Inc., BT Alex. Brown Incorporated and Lehman Brothers Inc.
10.3 Agreement for the transfer of Omnicom Shares dated as of April
14, 1999 by and among Alain Nicolazzi, Florent
Martenne-Duplan, Philippe Ait Yahia and various other Omnicom
shareholders and Esprit Telecom Holdings, Limited and Global
TeleSystems Group, Inc.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Global TeleSystems Group, Inc.
(Registrant)
Date: April 28, 1999 /s/ Alan Krenek
Vice President -
Corporate Accounting
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EXHIBIT INDEX
Designation Description of Exhibit
- ----------- ----------------------
4.1 Registration Rights Agreement dated as of April 23, 1999 by and
among Global TeleSystems Group, Inc., and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Donaldson Lufkin &
Jenrette Securities Corporation, Bear, Stearns & Co. Inc., BT
Alex. Brown Incorporated and Lehman Brothers Inc.
10.1 Purchase Agreement dated as of April 19, 1999 by and among
Global TeleSystems Group, Inc., and Apax Funds Nominees Limited
and Warburg, Pincus Ventures, L.P. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co.
Inc., Dresdner Kleinwort Benson North American LLC, BT Alex.
Brown Incorporated, Lehman Brothers Inc., Prudential Securities
Incorporated, ING Baring Furman Selz LLC, BancBoston Robertson
Stephens Inc., CIBC Oppenheimer Corp., ABN Amro Incorporated,
Arnhold and S. Bleichroeder, Inc. and Credit Suisse First
Boston Corporation.
10.2 Purchase Agreement dated as of April 19, 1999 by and among
Global TeleSystems Group, Inc. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co.,
Inc., BT Alex. Brown Incorporated, Lehman Brothers Inc.
10.3 Agreement for the transfer of Omnicom Shares dated as of April
14, 1999 by and among Alain Nicolazzi, Florent
Martenne-Duplan, Philippe Ait Yahia and various other Omnicom
shareholders and Esprit Telecom Holdings, Limited and Global
TeleSystems Group, Inc.
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EXHIBIT 4.1
===============================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of April 23, 1999
by and among
GLOBAL TELESYSTEMS GROUP, INC.
and
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION,
BEAR, STEARNS & CO. INC.,
BT ALEX. BROWN INCORPORATED
and
LEHMAN BROTHERS INC.
as Initial Purchasers
===============================================================================
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of April 23, 1999 by and among GLOBAL TELESYSTEMS GROUP, INC.,
a Delaware corporation (the "Company"), and MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED (the "Representative"), DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION, BEAR, STEARNS & CO. INC., BT ALEX. BROWN INCORPORATED
and LEHMAN BROTHERS INC. (collectively with the Representative, the "Initial
Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated as of
April 19, 1999 by and among the Company and the Initial Purchasers (the
"Purchase Agreement"), that provides for, among other things, the sale by the
Company to the Initial Purchasers of 10,000,000 Depositary Shares (each a
"Depositary Share" and collectively, the "Depositary Shares"). Each Depositary
Share represents ownership of 1/100 of a share of 7-1/4% Cumulative Convertible
Preferred Stock, $.0001 par value per share (liquidation preference $5,000 per
share) (the "Convertible Preferred Stock"), deposited under the Deposit
Agreement dated as of April 23, 1999, among the Company, The Bank of New York,
as Depositary (the "Depositary"), and all holders from time to time of
depositary receipts issued thereunder (the "Depositary Receipts"). The
Depositary Shares will be convertible into shares of Common Stock, par value
$.10 per share, of the Company (the "Common Stock") as set forth in the
Offering Memorandum dated April 19, 1999, subject to adjustment in accordance
with the Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions (the "Certificate"). The Depositary Shares, the
Convertible Preferred Stock and the Common Stock issuable upon conversion of
the Convertible Preferred Stock, or paid as dividends thereon, are collectively
herein referred to as the "Securities" and each of them as held singularly is
herein referred to as a "Security". In order to induce the Initial Purchasers
to enter into the Purchase Agreement, the Company has agreed to provide to the
Initial Purchasers and their direct and indirect transferees and the holders of
the Securities from time to time (each of the foregoing a "Holder" and together
the "Holders"), the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the closing under
the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
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1. Shelf Registration. So long as any Transfer Restricted Security (as
defined in Section 5 hereof) exists, the Company shall take the following
actions:
(a) The Company shall, at its cost, prepare and, on or before 60 days
after the date of this Agreement (the "Closing Date"), file with the
Securities and Exchange Commission (the "Commission") and thereafter shall
use its commercially reasonable best efforts to cause to be declared
effective on or prior to 135 days after the Closing Date, a registration
statement on the appropriate form (the "Shelf Registration Statement")
covering the offer and sale of the Transfer Restricted Securities (as
defined in Section 5(e) herein) by the Holders thereof from time to time
in accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act") (hereinafter, the "Shelf Registration").
(b) The Company shall use its commercially reasonable best efforts to
keep the Shelf Registration Statement continuously effective, in order to
permit the prospectus included therein to be lawfully delivered by the
Holders of the relevant Securities, until such time as all the Securities
covered by the Shelf Registration Statement (i) have been sold pursuant
thereto or (ii) may be sold pursuant to Rule 144(k) under the Securities
Act (or any successor rule thereof), assuming for this purpose that the
Holders thereof are not affiliates of the Company (in any such case, such
period being called the "Shelf Registration Period"). The Company shall be
deemed not to have used its commercially reasonable best efforts to keep
the Shelf Registration Statement effective during the requisite period if
it voluntarily takes any action that would result in Holders of Securities
covered thereby not being able to offer and sell such Securities during
that period, unless (i) such action is required by applicable law or (ii)
upon the occurrence of any event contemplated by paragraph 2(b)(v) below,
such action is taken by the Company in good faith and for valid business
reasons and the Company thereafter promptly complies with the requirements
of paragraph 2(h) below if the Company has determined in good faith that
there are no material legal or commercial impediments in so doing.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause (other than information required to be
supplied by the selling
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Holders pursuant to this Agreement) (i) the Shelf Registration Statement
and the related prospectus and any amendment or supplement thereto to
comply in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission thereunder,
(ii) the Shelf Registration Statement and any amendment thereto not to
contain, when it becomes effective, 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 (iii) any
prospectus forming a part of the Shelf Registration Statement, and any
amendment or supplement to such prospectus, not to contain, as of the date
of such prospectus or amendment or supplement, any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(d) The Company shall, from time to time, cause a shelf registration
statement to be filed to cover additional shares of Common Stock issued in
payment of dividends, if any, as permitted in accordance with the terms of
the Convertible Preferred Stock.
2. Registration Procedures. In connection with the Shelf Registration
contemplated by Section 1 hereof the following provisions shall apply so long
as any Transfer Restricted Security exists:
(a) The Company shall (i) furnish, without charge, to the Initial
Purchasers, prior to the filing thereof with the Commission, a copy of the
Shelf Registration Statement and each amendment thereof and each amendment
or supplement, if any, to the prospectus included therein and, in the
event that the Initial Purchasers (with respect to any portion of an
unsold allotment from the original offering) are participating in the
Shelf Registration Statement, shall use its commercially reasonable best
efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchasers reasonably may
propose, (ii) include in each such document the names of the Holders who
propose to sell Transfer Restricted Securities pursuant to the Shelf
Registration Statement as selling security holders and (iii) file pursuant
to Rule 424(b) under the Securities Act an amendment to the Shelf
Registration Statement or amend the
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prospectus to cover new Holders of Securities upon written notice by such
new Holders to the effect.
(b) The Company shall give written notice to the Initial Purchasers
and the Holders (which notice pursuant to clauses (ii)-(v) hereof shall be
accompanied by an instruction, if applicable, to suspend the use of the
prospectus until the requisite changes have been made):
(i) when the Shelf Registration Statement or any amendment
thereto has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the prospectus
included therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or
the initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Shelf Registration Statement or the prospectus in
order that the Shelf Registration Statement and the prospectus do not
contain an untrue statement of a material fact and do not omit to
state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the prospectus, in light
of the circumstances under which they were made) not misleading,
which written notice need not provide any detail as to the nature of
such event.
(c) The Company shall use its commercially reasonable best efforts to
obtain the withdrawal as soon as practicable, of any order suspending the
effectiveness of the Shelf Registration Statement.
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(d) The Company shall furnish to each Holder of Transfer Restricted
Securities included within the coverage of the Shelf Registration, if the
Holder so requests in writing, without charge, one copy of the Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in
writing, all exhibits thereto (other than those, if any, incorporated by
reference).
(e) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Transfer Restricted Securities included within the
coverage of the Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in the Shelf Registration Statement and any amendment or supplement
thereto as such person may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the then
current prospectus or any amendment thereto, together with any supplement
thereto, by each of the selling Holders in connection with the offering
and sale of the Transfer Restricted Securities covered by the prospectus,
or any amendment or supplement thereto, included in the Shelf Registration
Statement.
(f) Prior to any public offering of the Securities pursuant to the
Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Transfer Restricted Securities included
therein and their respective counsel in connection with the registration or
qualification of such Securities for offer and sale under the securities or
"blue sky" laws of such states of the United States as any such Holder
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities covered by the Shelf Registration Statement; provided,
however, that the Company shall not be required to (i) qualify generally to
do business in any jurisdiction where it is not then otherwise required to
be so qualified or (ii) take any action which would subject it to general
service of process or to taxation in any jurisdiction where it is not then
so subject.
(g) The Company shall cooperate with the Holders of the Transfer
Restricted Securities to facilitate the timely preparation and delivery of
certificates represent-
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ing the Securities to be sold pursuant to the Shelf Registration Statement
free of any restrictive legends and in such denominations and registered in
such names as the Holders may reasonably request in writing at least two
Business Days prior to the closing of any sale of Registrable Securities.
For purposes of this Section 2(g), "Business Day" means any day, other than
a Saturday or Sunday, on which banks in New York are open for business.
(h) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 2(b) above during the period for which the Company
is required to maintain an effective Shelf Registration Statement, the
Company shall use its commercially reasonable best efforts to prepare and
file as promptly as practicable a post-effective amendment to the Shelf
Registration Statement or an amendment or supplement to the related
prospectus and any other required document so that, as thereafter
delivered to Holders or purchasers of Securities, the prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. If the Company notifies the Initial Purchasers or
the Holders, in accordance with paragraphs (ii) through (v) of Section
2(b) above, to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Initial Purchasers and
the Holders shall suspend use of such prospectus.
(i) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Shelf
Registration and will make generally available to its security holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act)
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of a 12-month period
(or 90 days, if such period is a fiscal year) beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the Shelf Registration Statement, which statement shall cover such
12-month period.
(j) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company
such information regarding the Holder and the distribution of the
Securities by such
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Holder as the Company may from time to time reasonably require for
inclusion in the Shelf Registration Statement and to provide comments on
the Shelf Registration Statement, and the Company may exclude from such
registration the Securities of any Holder that fails to furnish such
information.
(k) The Company shall (i) make reasonably available for inspection by
the Holders of the Transfer Restricted Securities and any attorney,
accountant or other agent retained by the Holders of the Securities all
relevant financial and other records, pertinent corporate documents and
properties of the Company and (ii) cause the Company's officers,
directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the Holders of the Securities or any
such attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to
enable such persons to conduct a reasonable investigation within the
meaning of Section 11 of the Securities Act; provided, however, that the
foregoing inspection and information gathering (i) shall be coordinated by
you and, on behalf of the other parties, by one counsel (the "Designated
Counsel") designated by the Holders of a majority in principal amount of
the Transfer Restricted Securities covered by the Shelf Registration
Statement (provided that Holders of Depositary Shares representing shares
of Convertible Preferred Stock shall be deemed to be Holders of the
aggregate number of Convertible Preferred Stock which may be obtained upon
surrender of all of Holders' Depositary Shares, provided further that
Holders of Common Stock issued upon the conversion of the Convertible
Preferred Stock shall be deemed to be Holders of the aggregate number of
Convertible Preferred Stock from which such Common Stock was converted)
and (ii) shall not be available for any such Holder that is a competitor
of the Company, and provided further that such Holders shall keep the
information so received confidential.
(l) The Company will use its commercially reasonable best efforts to
cause the Common Stock relating to such Shelf Registration Statement to be
listed on the Nasdaq National Market.
(m) The Company shall use its commercially reasonable best efforts to
take all other steps necessary to effect the registration of the Transfer
Restricted Securit-
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ies covered by the Shelf Registration Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 through 2 hereof, whether or not the Shelf Registration Statement is
filed or becomes effective.
4. Indemnification and Contribution. (a) The Company shall indemnify
and hold harmless each Initial Purchaser, each Holder, each broker-dealer (a
"Participating Broker-Dealer") that holds Transfer Restricted Securities
acquired for its own account as a result of market-making activities or other
trading activities and that will be the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of Securities, each underwriter who participates in an offering of
Transfer Restricted Securities, their respective affiliates, and each person,
if any, who controls any of such parties within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement (or any amendment or supplement thereto),
covering the Securities, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission;
provided that (subject to Sections
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4(c) and 4(d) below) any such settlement is effected with the prior
written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred (including
reasonable fees and disbursements of one counsel (in addition to any local
counsel) chosen by the Representative, such Holder, such Participating
Broker-Dealer or any underwriter (except to the extent otherwise expressly
provided in Section 4(c) hereof)), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii) of
this Section 4(a);
provided, however, that this indemnity agreement shall 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 Company by or
on behalf of such Initial Purchaser, such Holder, such Participating
Broker-Dealer or any underwriter with respect to such Initial Purchaser,
Holder, Participating Broker-Dealer or underwriter, as the case may be,
expressly for use in the Shelf Registration Statement (or any amendment or
supplement thereto) or any prospectus (or any amendment or supplement thereto);
provided, further that the Company will not be liable to such Initial
Purchaser, such Holder, such Participating Broker-Dealer or such underwriter,
as the case may be, with respect to any preliminary prospectus to the extent
that the Company shall sustain the burden of proving that any such loss,
liability, claim, damage or expense resulted from the fact that such Initial
Purchaser, such Holder, such Participating Broker-Dealer or such underwriter,
as the case may be, failed to send or deliver a copy of the prospectus (in the
form it was first provided to such parties for confirmation of sales) if: (i)
the Company has previously furnished copies to such Initial Purchaser, such
Holder, such Participating Broker-Dealer or such underwriter, as the case may
be, in accordance with this Agreement, at or prior to the written confirmation
of the sale of such Securities to such person and the loss, liability, claim,
damage or expense of such Initial Purchaser, such Holder, such Participating
Broker-Dealer or such underwriter, as the case may be, resulted from an untrue
statement or omission of a material fact contained in or omitted from the
preliminary prospectus that was corrected in the final pro-
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spectus and (ii) such failure to give or send such final prospectus prior to
the written confirmation of such sale to the party or parties asserting such
loss, liability, claim, damage or expense would have constituted the sole
defense to the claim asserted by such person.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, each Initial Purchaser, each underwriter who
participates in an offering of Transfer Restricted Securities and the other
selling Holders and each of their respective directors and each person, if any,
who controls any of the Company, any Initial Purchaser, any underwriter or any
other selling Holder within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, against any and all loss, liability, claim, damage and
expense whatsoever described in the indemnity contained in Section 4(a) hereof,
as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Shelf Registration
Statement (or any amendment or supplement thereto) or any prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such selling
Holder with respect to such Holder expressly for use in the Shelf Registration
Statement (or any supplement thereto), or any such prospectus (or any amendment
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 Transfer Restricted Securities pursuant to the Shelf Registration
Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability that it
may have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except
with the consent of the indemnified party) also be counsel to the indemnified
party. Notwithstanding the foregoing, if it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and ap-
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proved by the indemnified parties defendant in such action (which approval
shall not be unreasonably withheld), unless such indemnified parties reasonably
object to such assumption on the ground that there may be legal defenses
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions 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 4 (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes a full and unconditional release
of each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and the offer and sale of any Securities 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 reasonable fees and
expenses of counsel pursuant to Section 4(a)(iii) above, then such indemnifying
party agrees that it shall be liable for any settlement of the nature
contemplated by Section 4(a)(ii) effected without its written consent if (i)
such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applica-
<PAGE> 13
- 12 -
ble in accordance with its terms, the Company, the Initial Purchasers and the
Holders, as applicable, shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement incurred by the Company, the Initial Purchasers and the Holders;
provided, however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person that was not guilty of such fraudulent
misrepresentation. As between the Company and the Initial Purchasers and the
Holders, such parties shall contribute to such aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement in such proportion as shall be appropriate to reflect the relative
fault of the Company on the one hand and of the Holder of Transfer Restricted
Securities, the Participating Broker-Dealer or Initial Purchaser, as the case
may be, on the other 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 Company on the one hand and the Holder of
Transfer Restricted Securities, the Participating Broker-Dealer or the Initial
Purchasers, as the case may be, on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, or by the Holder
of Transfer Restricted Securities, the Participating Broker-Dealer or the
Initial Purchasers, as the case may be, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Holders of the Transfer Restricted Securities and
the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 4.
For purposes of this Section 4, each affiliate of any person, if any,
who controls a Holder of Transfer Restricted Securities, an Initial Purchaser
or a Participating Broker-Dealer within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such other person, and each director of the Company, each
affiliate of the Company, each executive officer
<PAGE> 14
- 13 -
of the Company who signed the Shelf Registration Statement, and each person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company.
(f) The agreements contained in this Section 4 shall survive the sale
of the Securities pursuant to the Shelf Registration Statement and shall remain
in full force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
5. Additional Dividends Under Certain Circumstances. (a) Additional
dividends (the "Additional Dividends") shall accrue with respect to the
Convertible Preferred Stock (and the corresponding Depositary Shares) which are
Transfer Restricted Securities upon the occurrence of any of the following
events (each such event in clauses (i), (ii) and (iii) below being herein
called a "Registration Default"):
(i) if by 60 days after the Closing Date, the Shelf Registration
Statement has not been filed with the Commission;
(ii) if by 135 days after the Closing Date, the Shelf Registration
Statement has not been declared effective by the Commission; or
(iii) if after the Shelf Registration Statement is declared effective
(A) the Shelf Registration Statement thereafter ceases to be effective; or
(B) the Shelf Registration Statement or the related prospectus ceases to
be usable (in each case except as permitted in paragraph (c) below) in
connection with resales of Transfer Restricted Securities in accordance
with and during the periods specified herein because either (1) any event
occurs as a result of which the related prospectus forming part of such
Shelf Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were
made not misleading, or (2) it shall be necessary to amend such Shelf
Registration Statement or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
<PAGE> 15
- 14 -
(b) Additional Dividends shall accrue with respect to the Convertible
Preferred Stock (and the corresponding Depositary Shares) which are Transferred
Restricted Securities from and including the date on which any such
Registration Default shall occur until all such Registration Defaults have been
cured according to the following:
(i) with respect to the first 90-day period following the occurrence
of such Registration Default, at a rate of $0.25 per year per Depositary
Share ($25.00 per year per $5,000 in liquidation preference of the
Convertible Preferred Stock); and
(ii) with respect to any period beyond 90 days following the
occurrence of such Registration Default, at a rate of an additional $0.25
per year per Depositary Share (an additional $25.00 per year per $5,000 in
liquidation preference of the Convertible Preferred Stock).
The amount of Additional Dividends for each share of Convertible
Preferred Stock (and each corresponding Depositary Share) shall be determined
by multiplying the applicable Additional Dividends, specified above, by a
fraction, the numerator of which is the number of days such Additional
Dividends rate was applicable during such period (determined on the basis of a
360-day year comprised of twelve 30-day months), and the denominator of which
is 360.
(c) A Registration Default referred to in Section 5(a)(iii) shall be
deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of one of the following, each of which
is referred to herein as a "Permitted Interruption": (x) the filing of a
post-effective amendment to the Shelf Registration Statement to incorporate
annual audited financial information with respect to the Company where such
post-effective amendment is not yet effective and needs to be declared
effective to permit Holders to use the related prospectus or (y) material
business developments with respect to the Company that would need to be
described in the Shelf Registration Statement or the related prospectus to make
such Shelf Registration Statement or related prospectus accurate and complete
and (ii) in the case of clause (y), the Company proceeds promptly and in good
faith to amend or supplement the Shelf Registration Statement and related
prospectus to describe such events if the Company has determined in good faith
that there are no material legal or commercial impediments in so doing;
provided, however, that a Per-
<PAGE> 16
- 15 -
mitted Interruption shall expire and will not prevent a Registration Default
from occurring or continuing to the extent it exceeds 60 days for a single
period. Multiple Permitted Interruptions shall not exceed 90 days in the
aggregate in any calendar year or 180 days in the aggregate during any two-year
period. Additional Dividends shall accrue in accordance with the foregoing
sentence from the date that such Permitted Interruption expires until such
Registration Default is cured.
(d) Any amounts of Additional Dividends due pursuant to this Section
5 will be payable in cash, Common Stock or a combination of cash and Common
Stock and on such terms and conditions as provided in the Certificate with
respect to the Convertible Preferred Stock; provided, however, that the Company
shall pay Additional Dividends in cash if the Common Stock paid as Additional
Dividends would not, at the time such payment for Additional Dividends is made,
be freely transferable under the Securities Act. Notwithstanding anything to
the contrary contained in this Section 5, the Company will not be required to
pay Additional Dividends with respect to more than one Registration Default
during any single period.
(e) "Transfer Restricted Securities" means each Security until (i)
the date on which such Security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (ii) the date on which such Security is saleable pursuant to Rule
144(k) under the Securities Act (or any successor rule thereof) or would be
saleable pursuant to Rule 144(k) under the Securities Act had it not been held
by, or had never been held by, an affiliate of the Company.
6. Miscellaneous.
(a) Rule 144 and Rule 144A. So long as any Transfer Restricted
Security exists, the Company shall use its commercially reasonable best efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Transfer
Restricted Securities, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rules 144 and 144A. The
Company covenants that, if in the event the Company is no longer subject to
Sections 13 or 15(d) of the Exchange Act, it will take such further action as
any Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Securi-
<PAGE> 17
- 16 -
ties without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)). The Company will provide a copy of this Agreement to prospective
purchasers of Securities identified to the Company by the Initial Purchasers
upon request.
Notwithstanding the foregoing, nothing in this Section 6 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.
(b) No Inconsistent Agreements. The rights granted to the Holders
hereunder do not, and will not for the term of this Agreement in any way
conflict with and are not, and will not during the term of this Agreement be
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any other agreements entered into by
the Company.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, otherwise than with the prior
written consent of the Company and the Holders of a majority of the Transfer
Restricted Securities (provided that Holders of Depositary Shares representing
shares of Convertible Preferred Stock shall be deemed to be Holders of the
aggregate number of Convertible Preferred Stock which may be obtained upon
surrender of all of Holders' Depositary Shares, provided further that Holders
of Common Stock issued upon conversion of Convertible Preferred Stock shall be
deemed to be Holders of the aggregate number of Convertible Preferred Stock
from which such Common Stock was converted) affected by such amendment,
modification, supplement, waiver or consents.
(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 courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder
to the Company 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 address set forth in the Purchase Agreement; and (ii) if to the
Company, initially at the Company'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).
<PAGE> 18
- 17 -
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of the Initial
Purchasers, including, without limitation and without the need for an express
assignment, subsequent Holders; provided, however, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms of the Purchase Agreement. If
any transferee of any Holder shall acquire Transfer Restricted Securities, in
any manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities, such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. Each of the Initial Purchasers and each
Holder shall be a third party beneficiary of the agreements made hereunder
between the Company, on the one hand, and the Initial Purchasers, on the other
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 WITHOUT GIVING EFFECT TO
ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified times of day refer to
New York City time.
<PAGE> 19
- 18 -
(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) Securities Held by the Company or Any of Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Transfer
Restricted Securities is required hereunder, Securities held by the Company or
any of its affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
[Signature Page Follows]
<PAGE> 20
- 19 -
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
GLOBAL TELESYSTEMS GROUP, INC.
By: /s/ Grier C. Raclin
---------------------------
Name: Grier C. Raclin
Title: Vice President - External Affairs,
General Counsel and Corporate
Secretary
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS INC.
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Richard Warley
--------------------------------------
Name: Richard Warley
Title: Vice President
<PAGE> 1
EXHIBIT 10.1
===============================================================================
GLOBAL TELESYSTEMS GROUP, INC.
(a Delaware corporation)
5,415,584 Shares of Common Stock
PURCHASE AGREEMENT
Dated: April 19, 1999
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PURCHASE AGREEMENT............................................................................................1
SECTION 1. Representations and Warranties..........................................................3
(a) Representations and Warranties by the Company...........................................3
(i) Compliance with Registration Requirements.................................4
(ii) Incorporated Documents....................................................5
(iii) Independent Accountants...................................................5
(iv) Financial Statements......................................................5
(v) No Material Adverse Change in Business....................................6
(vi) Good Standing of the Company..............................................6
(vii) Good Standing of Subsidiaries.............................................6
(viii) Capitalization............................................................7
(ix) Authorization of Agreement................................................8
(x) Authorization and Description of Securities...............................8
(xi) Absence of Defaults and Conflicts.........................................8
(xii) Absence of Labor Dispute..................................................9
(xiii) Absence of Proceedings....................................................9
(xiv) Accuracy of Exhibits.....................................................10
(xv) Possession of Intellectual Property......................................10
(xvi) Absence of Further Requirements..........................................10
(xvii) Possession of Licenses and Permits.......................................10
(xviii) Title to Property........................................................11
(xix) Compliance with Cuba Act.................................................11
(xx) Investment Company Act...................................................11
(xxi) Environmental Laws.......................................................12
(xxii) Registration Rights......................................................12
(b) Representations and Warranties by the Selling Shareholders.............................12
(i) Accurate Disclosure......................................................13
(ii) Authorization of Agreements..............................................13
(iii) Valid and Marketable Title...............................................14
(iv) Due Execution of Custody Agreement.......................................14
(v) Absence of Manipulation..................................................14
(vi) Absence of Further Requirements..........................................14
(viii) Certificates Suitable for Transfer.......................................15
(c) Officer's Certificates.................................................................15
SECTION 2. Sale and Delivery to Underwriters; Closing.............................................15
(a) Initial Securities.....................................................................15
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(b) Option Securities......................................................................16
(c) Payment................................................................................16
(d) Denominations; Registration............................................................17
SECTION 3. Covenants of the Company...............................................................17
(a) Compliance with Securities Regulations and Commission Requests.........................17
(b) Filing of Amendments...................................................................18
(c) Delivery of Registration Statements....................................................18
(d) Delivery of Prospectus.................................................................19
(e) Continued Compliance with Securities Laws..............................................19
(f) Rule 158...............................................................................20
(g) Listing................................................................................20
(h) Restriction on Sale of Securities......................................................20
(i) Reporting Requirements.................................................................21
SECTION 4. Payment of Expenses....................................................................21
(a) Expenses...............................................................................21
(b) Expenses of the Selling Shareholders...................................................21
(c) Termination of Agreement...............................................................22
(d) Allocation of Expenses.................................................................22
SECTION 5. Conditions of Underwriters' Obligations................................................22
(a) Effectiveness of Registration Statement................................................22
(b) Opinion of Counsel for Company.........................................................23
(c) Opinion of Counsel for the Selling Shareholders........................................23
(d) Opinion of Counsel for Underwriters....................................................23
(e) Officers' Certificate..................................................................23
(f) Certificates of Selling Shareholders...................................................24
(g) Accountant's Comfort Letter............................................................24
(h) Bring-down Comfort Letter..............................................................24
(i) Approval of Listing....................................................................25
(j) No Objection...........................................................................25
(k) Conditions to Purchase of Option Securities............................................25
(l) Additional Documents...................................................................26
(m) Termination of Agreement...............................................................27
SECTION 6. Indemnification........................................................................27
(a) Indemnification of Underwriters........................................................27
(b) Indemnification of Company, Directors and Officers and Selling Shareholders............29
(c) Actions Against Parties; Notification..................................................29
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(d) Settlement Without Consent if Failure to Reimburse.....................................30
(e) Other Agreements with Respect to Indemnification.......................................31
SECTION 7. Contribution...........................................................................31
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.........................32
SECTION 9. Termination of Agreement...............................................................33
(a) Termination; General...................................................................33
(b) Liabilities............................................................................33
SECTION 10. Default by One or More of the Underwriters.............................................33
SECTION 11. Default by One or More of the Selling Shareholders or the Company......................34
SECTION 12. Notices................................................................................35
SECTION 13. Parties................................................................................35
SECTION 14. GOVERNING LAW AND TIME.................................................................36
SECTION 15. Effect of Headings.....................................................................36
SCHEDULES
Schedule A - List of Underwriters.....................................................Sch A-1
Schedule B - List of Company and Selling Shareholders.................................Sch B-1
Schedule C - Pricing Information......................................................Sch C-1
EXHIBITS
Exhibit A-1 - Form of Opinion of Shearman & Sterling.....................................A-1-1
Exhibit A-2 - Form of Opinion of Grier Raclin............................................A-2-1
Exhibit A-3 - Form of Opinion of Coudert Brothers........................................A-3-1
Exhibit A-4 - Form of Opinion of Loeff Claeys Verbeke....................................A-4-1
Exhibit A-5 - Form of Opinion of Counsel for the Selling Shareholders....................A-5-1
</TABLE>
-iii-
<PAGE> 5
GLOBAL TELESYSTEMS GROUP, INC.
(a Delaware corporation)
5,415,584 Shares of Common Stock
(Par Value $.10 Per Share)
PURCHASE AGREEMENT
April 19, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Bear, Stearns & Co. Inc.
Dresdner Kleinwort Benson
North America LLC
BT Alex. Brown Incorporated
Lehman Brothers Inc.
Prudential Securities Incorporated
ING Baring Furman Selz LLC
BancBoston Robertson Stephens Inc.
CIBC Oppenheimer Corp.
ABN AMRO Incorporated
Arnhold and S. Bleichroeder, Inc.
Credit Suisse First Boston Corporation
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
GLOBAL TELESYSTEMS GROUP, INC., a Delaware corporation (the
"Company"), and the other persons listed in Schedule B hereto (the "Selling
Shareholders") confirm their agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other
Underwriters named in Schedule A hereto (collectively, the "Underwriters",
which term shall also include any underwriter substituted as hereinafter
provided in Section 10 hereof), for whom Merrill Lynch, Donaldson, Lufkin &
Jenrette Securities Corporation, Dresdner Kleinwort Benson North America LLC,
Lehman Brothers Inc., BancBoston Robertson Stephens Inc.,
<PAGE> 6
-2-
CIBC Oppenheimer Corp., ING Baring Furman Selz LLC, Prudential Securities
Incorporated, ABN AMRO Incorporated, Arnhold & S. Bleichroeder, Inc., and
Credit Suisse First Boston Corporation are acting as representatives (in such
capacity, the "Representatives"), with respect to the sale by the Selling
Shareholders, acting severally and not jointly, and the purchase by the
Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $.10 per share, of the Company ("Common
Stock") set forth in said Schedule A, and with respect to the grant by the
Selling Shareholders, acting severally and not jointly, to the Underwriters,
acting severally and not jointly, of the option described in Section 2(b)
hereof to purchase all or any part of 812,337 additional shares of Common Stock
to cover over-allotments, if any. The aforesaid 5,415,584 shares of Common
Stock (the "Initial Securities") to be purchased by the Underwriters and all or
any part of the 812,337 shares of Common Stock subject to the option described
in Section 2(b) hereof (the "Option Securities") are hereinafter called,
collectively, the "Securities."
It is understood that the Company, concurrently with the
offer and sale of the Securities, intends to sell pursuant to an exemption from
the 1933 Act (as defined) 8,700,000 depositary shares, each representing 1/100
of a share of the Company's convertible preferred stock (the "Convertible
Preferred Stock"). The offering and sale of the Securities and the offering and
sale of such depositary shares are not conditional upon one another.
The Company and the Selling Shareholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") two registration statements on Form S-3
(Nos. 333-70871 and 333-70885) covering the registration of the Securities, and
the offering thereof from time to time in accordance with Rule 415 under the
Securities Act of 1933, as amended (the "1933 Act"), including the related
preliminary prospectus or Prospectus and such registration statements, as
amended, have become effective. The Company has prepared a form of prospectus
supplement reflecting the terms of the Securities, the terms of the offering
thereof and other matters set forth therein, and promptly after execution and
delivery of this Agreement, the Company will file such prospectus supplement in
accordance with the provisions of Rule 430A ("Rule 430A") of the rules and
regulations of the
<PAGE> 7
-3-
Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of
Rule 424 ("Rule 424(b)") of the 1933 Act Regulations. One form of prospectus
supplement is to be used in connection with the offering and sale of the
Securities (the "Form of Prospectus Supplement"). The information included in
any such prospectus supplement that was omitted from such registration
statements at the time they became effective but that is deemed to be part of
such registration statements at the time they became effective (a) pursuant to
paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b)
pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information."
The Form of Prospectus Supplement used before such registration statements
became effective, and any prospectus supplement that omitted, as applicable,
the Rule 430A Information or the Rule 434 Information, that was used after such
effectiveness and prior to the execution and delivery of this Agreement, is
herein called a "Preliminary Prospectus." Such registration statements,
including the exhibits thereto and schedules thereto, at the time they became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, are herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The base prospectus included in the Registration Statement relating
to all offerings of securities under the Registration Statement, as
supplemented by the final Form of Prospectus Supplement is herein called the
"Prospectus," except that, if such base prospectus is amended or supplemented
on or prior to the date on which the Prospectus Supplement is first filed
pursuant to Rule 424, the term "Prospectus" shall refer to the base prospectus
as so amended or supplemented and as supplemented by the Prospectus Supplement,
including the documents filed by the Company with the Commission pursuant to
the Securities Exchange Act of 1934, as amended (the "1934 Act"). For purposes
of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the Prospectus or any amendment or supplement to any of
the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter and the Selling Shareholders as of
the date hereof, as of the Closing
<PAGE> 8
-4-
Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b) hereof, and agrees with each Underwriter, as
follows:
(i) Compliance with Registration Requirements. The
Registration Statement has become effective under the 1933 Act and no
stop order suspending the effectiveness of the Registration Statement
has been issued under the 1933 Act and no proceedings for that purpose
have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the
part of the Commission for additional information has been complied
with.
At the respective times the Registration Statement and any
post-effective amendments thereto became effective and at the Closing
Time (and, if any Option Securities are purchased, at the Date of
Delivery), the Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto, at the time the
Prospectus or any amendments or supplements thereto were issued and at
the Closing Time (and, if any Option Securities are purchased, at the
Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements of Rule 434 and
the Prospectus shall not be "materially different," as such term is
used in Rule 434, from the Prospectus included in the Registration
Statement at the time it became effective. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter through the
Representatives expressly for use in the Registration Statement or the
Prospectus.
Each preliminary prospectus and the Prospectus filed as part
of the Registration Statement as originally filed
<PAGE> 9
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or as part of any amendment thereto, or filed pursuant to Rule 424
under the 1933 Act, complied when so filed in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
each preliminary prospectus and the Prospectus delivered to the
Underwriters for use in connection with this offering was identical to
the electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectus, at the time they were or hereafter are filed with
the Commission, complied and will comply in all material respects with
the requirements of the 1934 Act and the rules and regulations of the
commission thereunder and, when read together with the other
information in the Prospectus, at the time the Registration Statement
became effective, at the time the Prospectus was issued and at the
Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery), did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading.
(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included
in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of
the entities to which they relate as of the dates indicated and their
respective results of operations, stockholders' equity and cash flows
for the periods specified; said financial statements have been prepared
in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information included in the Prospectus present fairly the information
shown therein and, in the case of the consolidated financial data
therein, have been
<PAGE> 10
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compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement, and in the case of
the combined financial data therein, have been compiled from financial
statements prepared on a basis consistent with that of the audited
financial statements included in the Registration Statement.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement (at the time it became effective), except as otherwise stated
therein (at the time it became effective), (A) there has been no
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and
its Subsidiaries (as defined below) considered as one enterprise,
whether or not arising in the ordinary course of business (a "Material
Adverse Effect"), (B) there have been no transactions entered into by
the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise, and (C)
there has been no dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the state of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not, singly or in the aggregate, result in a
Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) and all entities in which the Company has a direct or
indirect majority equity interest or voting power (each a "Subsidiary"
and, collectively, the "Subsidiaries") has been duly organized (to the
extent applicable) and is validly existing as a corporation, general
partnership, limited partnership, limited
<PAGE> 11
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liability company, closed joint stock company, or similar entity in
good standing (to the extent applicable) under the laws of the
jurisdiction of its organization, has organizational power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not, singly or in the aggregate, result in a Material
Adverse Effect; except as otherwise disclosed in the Registration
Statement, all of the issued and outstanding capital stock or other
ownership interests of each such Subsidiary has been duly authorized
and validly issued, is fully paid and non-assessable (to the extent
applicable) and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity, except that the Company's
Capital Stock in Vostok Mobile B.V. and in GTS Hungary has been pledged
to Ericsson Finans A.B. and Creditanstalt Bank as collateral for
certain borrowings; none of the outstanding shares of capital stock or
other ownership interests of any Subsidiary was issued in violation of
the preemptive or similar rights of any securityholder of such
Subsidiary. The only subsidiaries of the Company are (a) the
subsidiaries listed on Exhibit 21 to the Registration Statement and (b)
certain other subsidiaries which, considered in the aggregate as a
single Subsidiary, do not constitute a "significant subsidiary" as
defined in Rule 1-02 of Regulation S-X.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company.
<PAGE> 12
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(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) Authorization and Description of Securities. The
Securities to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale to the Underwriters pursuant
to this Agreement, and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued, fully paid and non-assessable;
the Common Stock conforms in all material respects to all statements
relating thereto contained in the Prospectus and such description
conforms to the rights set forth in the instruments defining the same;
no holder of the Securities will be subject to personal liability by
reason of being such a holder; and the issuance of the Securities is
not subject to the preemptive or other similar rights of any
securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company
nor any of its Ventures (as defined below) is in violation of its
charter or by-laws (or equivalent constitutive documents) or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its Ventures is
a party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any Venture is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not, singly or in the aggregate, result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated in
this Agreement and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Prospectus under the
caption "Use of Proceeds") and compliance by the Company with its
obligations under this Agreement have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or
any Venture pursuant to, the Agreements and
<PAGE> 13
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Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions
of the charter or by-laws (or equivalent constitutive documents) of the
Company or any Venture or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Venture or any of their assets,
properties or operations. As used herein, (a) "Ventures" means all
entities in which the Company has a direct or indirect greater than 25%
equity interest or voting power and (b) a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any Venture.
(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any Venture exists or, to the knowledge of
the Company, is threatened, which, in either case, may reasonably be
expected to, singly or in the aggregate, result in a Material Adverse
Effect.
(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any Venture, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which,
singly or in the aggregate, might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets of the Company
or any Venture or the consummation of the transactions contemplated in
this Agreement or the performance by the Company of its obligations
hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any Venture is a party
or of which any of their respective property or assets is the subject
which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, singly or in
the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
<PAGE> 14
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(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
(xv) Possession of Intellectual Property. The Company and the
Ventures own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the
business now operated by them, except to the extent the failure to so
own, possess or be able to acquire would not result in a Material
Adverse Effect, and neither the Company nor any Venture has received
any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of
the Company or any Venture therein, and which infringement or conflict
(if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
(xvi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities under this Agreement or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations and foreign or state securities or blue sky laws.
(xvii) Possession of Licenses and Permits. Except as otherwise
disclosed in the Registration Statement, the Company and the Ventures
possess such material permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them; the
Company and the Ventures are in
<PAGE> 15
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compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in
the aggregate, result in a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except
when the invalidity of such Governmental Licenses or the failure of
such Governmental Licenses to be in full force and effect would not
have a Material Adverse Effect; and neither the Company nor any Venture
has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xviii) Title to Property. The Company and the Ventures have
good and marketable title to all real property owned by the Company and
the Ventures and good title to all other properties owned by them, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any Venture; and all of the leases and subleases
material to the business of the Company and the Ventures, considered as
one enterprise, and under which the Company or any Venture holds
properties described in the Prospectus, are in full force and effect,
and neither the Company nor any Venture has any notice of any material
claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any Venture under any of the leases or
subleases mentioned above, or affecting or questioning the rights of
the Company or such Venture to the continued possession of the leased
or subleased premises under any such lease or sublease.
(xix) Compliance with Cuba Act. The Company has complied with,
and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xx) Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment company" or an entity "controlled"
by an "investment company" as such
<PAGE> 16
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terms are defined in the Investment Company Act of 1940, as amended
(the "1940 Act").
(xxi) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any Venture is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and the Ventures have all permits,
authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any Ventures
and (D) there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or
an action, suit or proceeding by any private party or governmental body
or agency, against or affecting the Company or any Ventures relating to
Hazardous Materials or any Environmental Laws.
(xxii) Registration Rights. Except as disclosed in the
Prospectus or in connection with the transaction regarding Omnicom
described in the Prospectus , there are no persons with registration
rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.
(b) Representations and Warranties by the Selling
Shareholders. Each Selling Shareholder severally represents and warrants to
each Underwriter and the Company as of the date
<PAGE> 17
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hereof, as of the Closing Time, and as of each Date of Delivery (if any) and
agrees with each Underwriter, as follows:
(i) Accurate Disclosure. Such Selling Shareholder has reviewed
and is familiar with the Registration Statement and the Prospectus and
neither the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein in the light of
the circumstances under which they were made, not misleading; provided,
that the representations and warranties set forth in this paragraph
1(b)(i) apply only to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to such
Selling Shareholder furnished to the Company in writing by such Selling
Shareholder expressly for use therein. It is understood and agreed that
the only written information furnished to the Company by each
respective Selling Shareholder specifically for use in the Registration
Statement is the information relating to such Selling Shareholder set
forth in the table under the caption "Selling Stockholders" in the
Prospectus.
(ii) Authorization of Agreements. Such Selling Shareholder has
the full right, power and authority to enter into this Agreement and a
Custody Agreement (the "Custody Agreement") and such Selling
Shareholder has the full right, power and authority to sell, transfer
and deliver the Securities to be sold by such Selling Shareholder
hereunder. The execution and delivery of this Agreement and the Custody
Agreement and the sale and delivery of the Securities to be sold by
such Selling Shareholder and the consummation of the transactions
contemplated herein and compliance by such Selling Shareholder with its
obligations hereunder have been duly authorized by such Selling
Shareholder and do not and will not, whether with or without the giving
of notice or passage of time or both, conflict with or constitute a
breach of, or default under, or result in the creation or imposition of
any tax, lien, charge or encumbrance upon the Securities to be sold by
such Selling Shareholder or any property or assets of such Selling
Shareholder pursuant to any material contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which such Selling Shareholder is a party or
by which such Selling Shareholder may be bound, or to which any of the
property or assets of such Selling Shareholder is subject, nor will
such action result in any violation
<PAGE> 18
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of the provisions of the charter or by-laws or other organizational
instrument of such Selling Shareholder, if applicable, or any
applicable treaty, law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over such Selling Shareholder
or any of its properties.
(iii) Valid and Marketable Title. Such Selling Shareholder has
and will at the Closing Time have valid and marketable title to the
Securities to be sold by such Selling Shareholder hereunder, free and
clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind, other than pursuant to this
Agreement; and upon delivery of such Securities and payment of the
purchase price therefor as herein contemplated, assuming each such
Underwriter has no notice of any adverse claim, each of the
Underwriters will receive valid and marketable title to the Securities
purchased by it from such Selling Shareholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.
(iv) Due Execution of Custody Agreement. Such Selling
Shareholder has duly executed and delivered the Custody Agreement with
the Company, as custodian (the "Custodian"); the Custodian is
authorized to deliver the Securities to be sold by such Selling
Shareholder.
(v) Absence of Manipulation. Such Selling Shareholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by such Selling
Shareholder of its obligations hereunder or in the Custody Agreement or
in connection with the sale and delivery of the Securities hereunder or
the consummation of the transactions contemplated by this Agreement,
except such as may have previously been made or obtained or as may be
required under the 1933 Act or the 1933 Act Regulations or
<PAGE> 19
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state securities laws and except for such filings, consents, approvals
or authorizations that could not reasonably be expected to have a
material adverse effect on the ability of such Selling Shareholder to
consummate the transactions contemplated by this Agreement.
(vii) Certificates Suitable for Transfer. Certificates for all
of the Securities to be sold by such Selling Shareholder pursuant to
this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Securities to the Underwriters pursuant to this Agreement.
(c) Officer's Certificates. Any certificate signed by any
officer of the Company or any Ventures delivered to Merrill Lynch, the
Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company herein to each Underwriter as to the
matters covered thereby; and any certificate signed by or on behalf of a Selling
Shareholder as such and delivered to the Representatives or to counsel for the
Underwriters pursuant to the terms of this Agreement shall be deemed a
representation and warranty by such Selling Shareholder to the Underwriters as
to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. Each Selling Shareholder, severally
and not jointly, agrees to sell to each Underwriter, severally and not jointly,
and on the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, each Underwriter,
severally and not jointly, agrees to purchase from each Selling Shareholder, at
the price per share set forth in Schedule C, that proportion of the number of
Initial Securities set forth in Schedule B opposite the name of such Selling
Shareholder which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter, plus any additional number of Initial
Securities which such Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof, bears to the total number of Initial
Securities, subject in each case, to such adjustments among the Underwriters as
the Representatives in their sole discretion shall make to eliminate any sales
or purchases of fractional shares.
<PAGE> 20
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(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, each Selling Shareholder, severally and not
jointly, hereby grants an option to the Underwriters, severally and not
jointly, to purchase up to an additional 812,337 shares of Common Stock as set
forth in Schedule B, at the price per share set forth in Schedule C, less an
amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised not more than two times in whole or in part only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial Securities upon notice by Merrill
Lynch to the Company and the Selling Shareholders setting forth the number of
Option Securities as to which the several Underwriters are then exercising the
option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery for the Option Securities (a
"Date of Delivery") shall be determined by the Merrill Lynch, but shall not be
later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Securities, each of the
Underwriters, acting severally and not jointly, on the basis of the
representations and warranties of the Company and each Selling Shareholder
contained herein and subject to the terms and conditions herein set forth, will
purchase that proportion of the total number of Option Securities then being
purchased which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter bears to the total number of Initial
Securities, subject in each case to such adjustments as Merrill Lynch in its
discretion shall make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for the Initial
Securities shall be made at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005 or at such other place as shall be agreed upon
by Merrill Lynch and the Company, at 9:00 A.M. (Eastern time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on the date
hereof) business day after the date hereof (unless postponed in accordance with
the provisions of Section 10), or such other time not later than ten business
days after such date as shall be agreed upon by Merrill Lynch and the Company
(such time and date of payment and delivery being herein called "Closing
Time").
<PAGE> 21
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In addition, in the event that any or all of the Option
Securities are purchased by the Underwriters, payment of the purchase price for
such Option Securities shall be made at the above-mentioned offices, or at such
other place as shall be agreed upon by Merrill Lynch and the Company, on each
Date of Delivery as specified in the notice from Merrill Lynch to the Company.
Payment shall be made to the Selling Shareholders by wire
transfer of immediately available funds to bank accounts designated by the
Custodian pursuant to each Selling Shareholder's Custody Agreement. It is
understood that each Underwriter has authorized the Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial Securities and the Option Securities, if any, which it
has agreed to purchase. Merrill Lynch, individually and not as representative of
the Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial Securities or the Option Securities, if any, to
be purchased by any Underwriter whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants
with each Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify
the Merrill Lynch immediately, and confirm the notice in writing, (i)
when any post-effective amendment to the Registration Statement shall
become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission,
<PAGE> 22
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(iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus
or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings
for any of such purposes. The Company will promptly effect the filings
necessary pursuant to Rule 424(b) and will take such steps as it deems
necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file
such prospectus. The Company will make every reasonable effort to
prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give Merrill Lynch
notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any
Term Sheet or any amendment, supplement or revision to either the
prospectus included in the Registration Statement at the time it became
effective or to the Prospectus, will furnish Merrill Lynch with copies
of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use
any such document to which Merrill Lynch or counsel for the
Underwriters shall reasonably object within three Business Days after
being furnished such documents.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will
also deliver to the Representatives, without charge, a conformed copy
of the Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission
<PAGE> 23
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pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectus. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
during the period when the Prospectus is required to be delivered under
the 1933 Act or the Securities Exchange of 1934 (the "1934 Act"), such
number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request. The Prospectus and any amendments
or supplements thereto furnished to the Underwriters will be identical
to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company
will comply with the 1933 Act and the 1933 Act Regulations so as to
permit the completion of the distribution of the Securities as
contemplated in this Agreement and the Prospectus. If at any time when
a prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, any event shall occur or condition shall
exist as a result of which it is necessary, in the reasonable opinion
of counsel for the Underwriters or for the Company, to amend the
Registration Statement or amend or supplement any Prospectus in order
that the Prospectus will not include any untrue statements of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or
if it shall be necessary, in the reasonable opinion of any such
counsel, at any such time to amend the Registration Statement or amend
or supplement any Prospectus in order to comply with the requirements
of the 1933 Act or the 1933 Act Regulations, the Company will promptly
prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectus
comply with such requirements, and the Company will furnish to the
Underwriters such number of copies of such amendment or supplement as
the Underwriters may reasonably request.
<PAGE> 24
-20-
(f) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act.
(g) Listing. The Company will use its best efforts to effect
the admission of the Securities being issued and sold by the Company
pursuant to this Agreement on the European Association of Securities
Dealers Automated Quotation ("EASDAQ") system and comply with the
requirements of such exchange to maintain such listing. The Company
will use its best efforts to effect and maintain the quotation of the
Securities being issued and sold by the Company pursuant to this
Agreement on the Nasdaq National Market and will file with the Nasdaq
National Market all documents and notices required by the Nasdaq
National Market of companies that have securities that are traded in
the over-the-counter market and quotations for which are reported by
the Nasdaq National Market.
(h) Restriction on Sale of Securities. During the 60-day
period after the date of the Prospectus, the Company will not, without
the prior written consent of Merrill Lynch, directly or indirectly,
issue, sell, offer or agree to sell, grant any option for the sale of,
or otherwise dispose of or transfer any shares of capital stock of the
Company or any securities that are convertible into or exercisable or
exchangeable for capital stock or file a registration statement under
the 1933 Act with respect to the foregoing (excluding (A) the
Convertible Preferred Stock, (B) Common Stock issuable by the Company
upon conversion of the Company's Senior Subordinated Convertible Bonds
due 2000 or Senior Subordinated Convertible Bonds due 2010 or the
Convertible Preferred Stock, or as dividends on the Convertible
Preferred Stock or other securities convertible or exchangeable into
Common Stock outstanding as of the date hereof, (C) any shares of
Common Stock issued or options to purchase Common Stock granted
pursuant to existing employee benefit plans (including any shares of
Common Stock to be added to any such plan at the 1999 Annual Meeting of
Stockholders) of the Company referred to in the Prospectus or (D) any
shares of Common Stock or securities convertible into or exchangeable
for Common Stock issued as consideration for or to otherwise finance an
acquisition of an interest in or the assets of a business).
<PAGE> 25
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(i) Reporting Requirements. The Company, during the period
when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act and rules and regulations of the
Commission thereunder within the time periods referred to therein.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to
the performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, if any, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
printing and delivery to the Underwriters of copies of each preliminary
prospectus, any Term Sheets and of the Prospectus and any amendments or
supplements thereto, (vi) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (vii)
the fees and expenses of any transfer agent or registrar for the Securities,
(viii) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Securities and (ix) the fees and expenses incurred in connection with the
listing of the Securities being sold by the Selling Shareholders pursuant to
this Agreement on EASDAQ and inclusion of the Securities being sold by the
Selling Shareholders pursuant to this Agreement in the Nasdaq National Market.
(b) Expenses of the Selling Shareholders. The Selling
Shareholders, severally and not jointly, will pay all expenses incident to the
performance of their respective obligations under, and the consummation of the
transactions contemplated by, this Agreement, including (i) any stamp duties,
capital duties and stock transfer taxes, if any, payable upon the sale of the
Securities to the Underwriters, and (ii) the fees and disbursements of their
respective counsel and accountants.
<PAGE> 26
-22-
(c) Termination of Agreement. If this Agreement is terminated
by the Representatives in accordance with the provisions of Section 5, Section
9(a)(i) or Section 11 hereof, the Company shall reimburse the Underwriters for
all of their out-of-pocket expenses reasonably incurred by the Underwriters in
connection with this Agreement or the offering of the Securities contemplated
hereunder, including the reasonable fees and disbursements of counsel and
special counsel for the Underwriters.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of (i) any failure or refusal on the part of one or more
Selling Shareholders to comply with the terms or to fulfill any of the
conditions of this Agreement, or (ii) the inability for any reason of one or
more Selling Shareholders to perform its obligations under this Agreement, such
Selling Shareholder or Selling Shareholders, as the case may be, will reimburse
the Underwriters, for their out-of-pocket expenses reasonably incurred by the
Underwriters in connection with this Agreement or the offering of Securities
contemplated hereunder, including the reasonable fees and disbursements of
counsel and special counsel to the Underwriters, to the extent such termination
is due to the events described in the foregoing clause (i) or (ii).
(d) Allocation of Expenses. The provisions of this Section
shall not affect any agreement that the Company and the Selling Shareholders
may make for the sharing of such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The
obligations of the several Underwriters hereunder are subject to the accuracy of
the representations and warranties of the Company and the Selling Shareholders
contained in Section 1 hereof and in certificates of any officer of the Company
or any subsidiary of the Company or on behalf of any Selling Shareholder
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement has become effective and at Closing Time no stop order
suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to
<PAGE> 27
-23-
the Underwriters. A prospectus containing the Rule 430A Information
shall have been filed with the Commission in accordance with Rule
424(b) (or a post-effective amendment providing such information shall
have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon
Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of
Closing Time, of each of Shearman & Sterling, counsel for the Company,
Grier Raclin, Senior Vice President and General Counsel of the Company,
Coudert Brothers, special counsel for the Company and special
regulatory counsel for Hermes Europe Railtel B.V. and Esprit Telecom
Group plc, and Loeff Claeys Verbeke, special Dutch counsel, each in
form and substance satisfactory to counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of
the other Underwriters to the effect set forth in Exhibits A-1 through
A-4 hereto.
(c) Opinion of Counsel for the Selling Shareholders. At
Closing Time, the Underwriters shall have received the favorable
opinion, dated as of the Closing Time, of the respective counsel for
each Selling Shareholder, in form and substance satisfactory to counsel
for the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters substantially to the effect
set forth in Exhibit A-5 hereto and to such further effect as counsel
to the Underwriters may reasonably request.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of
Closing Time, of each of Cahill Gordon & Reindel, counsel for the
Underwriters, and Clifford Chance, special Russian counsel to the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters as to such matters as are reasonably
requested by the Representatives.
(e) Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of
which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business
<PAGE> 28
-24-
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary
course of business, and the Representatives shall have received a
certificate of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company, dated
as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect
as though expressly made at and as of Closing Time, (iii) the Company
has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to Closing Time, and (iv)
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to the knowledge of such officer, are
contemplated by the Commission.
(f) Certificates of Selling Shareholders. At Closing Time, the
Underwriters shall have received certificates signed by each Selling
Shareholder or an Attorney-in-Fact on behalf of each Selling
Shareholder, dated as of Closing Time, to the effect that (i) the
representations and warranties of each Selling Shareholder contained in
Section 1(b) hereof are true and correct in all respects with the same
force and effect as though expressly made at and as of Closing Time and
(ii) each Selling Shareholder has complied in all material respects
with all agreements and all conditions on its part to be performed
under this Agreement at or prior to Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution
of this Agreement, the Underwriters shall have received from Ernst &
Young a letter dated such date, in form and substance satisfactory to
the Representatives, together with signed or reproduced copies of such
letter for each of the other Underwriters containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement
and the Prospectus.
(h) Bring-down Comfort Letter. At Closing Time, the
Underwriters shall have received from Ernst & Young a letter, dated as
of Closing Time, to the effect that they reaffirm the statements made
in the letter furnished
<PAGE> 29
-25-
pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days
prior to Closing Time.
(i) Listing. At Closing Time, the Securities being sold by the
Selling Shareholders pursuant to this Agreement shall have been
accepted for listing on EASDAQ, subject only to official notice of
issuance. At Closing Time, the Securities being sold by the Selling
Shareholders pursuant to this Agreement shall have been accepted for
inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(j) No Objection. The NASD has confirmed that it has not
raised any objection with respect to the fairness and reasonableness of
the underwriting terms and arrangements.
(k) Conditions to Purchase of Option Securities. In the event
that the Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the Option Securities, the
representations and warranties of the Company and the Selling
Shareholders contained herein and the statements in any certificates
furnished by the Company, any subsidiary of the Company and the Selling
Shareholders hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Representatives
shall have received:
(i) Officers' Certificate. A certificate, dated such
Date of Delivery, of the President or a Vice President of the
Company and of the chief financial or chief accounting officer
of the Company confirming that the certificate delivered at
the Closing Time pursuant to Section 5(d) hereof remains true
and correct as of such Date of Delivery.
(ii) Certificate of the Selling Shareholders. A
certificate, dated such Date of Delivery, of an
Attorney-in-Fact on behalf of each Selling Shareholder
confirming that the certificate delivered at Closing Time
pursuant to Section 5(f) hereof remains true and correct as of
such Date of Delivery.
(iii) Opinion of Counsel for Company. The favorable
opinion, dated as of such Date of Delivery, of each of the
counsels listed in Section 5(b), each in form and substance
satisfactory to counsel for the
<PAGE> 30
-26-
Underwriters, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(b) hereof.
(iv) Opinion of Counsel for the Selling Shareholders.
The favorable opinion, dated as of such Date of Delivery, of
the respective counsel for each Selling Shareholder, in form
and substance satisfactory to counsel for the Underwriters,
relating to the Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinion
required by Section 5(c) hereof.
(v) Opinion of Counsel for Underwriters. The
favorable opinion of Cahill Gordon & Reindel, counsel for the
Underwriters and Clifford Chance, special counsel to the
Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(vi) Bring-down Comfort Letter. A letter from Ernst &
Young, in form and substance satisfactory to the
Representatives and dated such Date of Delivery, substantially
in the same form and substance as the letter furnished to the
Representatives pursuant to Section 5(f) hereof, except that
the "specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to
such Date of Delivery.
(l) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with
such documents and opinions as they may reasonably request for the
purpose of enabling them to pass upon the issuance and sale of the
Securities as herein contemplated, or in order to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Securities by
the Company and with the sale of the Securities by the Selling
Shareholders as herein contemplated shall be reasonably satisfactory in
form and substance to the Representatives and counsel for the
Underwriters.
<PAGE> 31
-27-
(m) Termination of Agreement. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several Underwriters to purchase
the relevant Option Securities, may be terminated by the
Representatives by notice to the Company at any time at or prior to
Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company and the
Selling Shareholders, jointly and severally, agree to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
and the directors, officers and employees of any Underwriter or any such
controlling person, 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 the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, 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 included in any preliminary prospectus or
the 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
<PAGE> 32
-28-
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(c) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of any Underwriter through the Representatives expressly for use in
the Registration Statement (or any amendment or supplement thereto), including
the Rule 430A Information and the Rule 434 Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); provided, further that the Company shall not be liable for any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or made in reliance upon and in conformity with Selling
Shareholder Information (as defined); provided, further that neither the Company
nor any Selling Shareholder will be liable to an Underwriter with respect to any
preliminary prospectus to the extent that any such loss, liability, claim,
damage or expense resulted from the fact that such Underwriter, in contravention
of a requirement of this Agreement or applicable law, sold Securities to a
person to whom such Underwriter failed to send or give, at or prior to the
Closing Date, a copy of the Prospectus, as then amended or supplemented if: (i)
the Company has previously furnished copies thereof (sufficiently in advance of
the Closing Date to allow for distribution by the Closing Date) to the
Underwriters and the loss, liability, claim, damage or expense of such
Underwriter resulted from an untrue statement or omission of a material fact
contained in or omitted from the preliminary prospectus which was corrected in
the Prospectus as, if applicable, amended or supplemented prior to the Closing
Date and such Prospectus was required by law to be delivered at or prior to the
written confirmation of sale to such person and (ii) such failure to give or
send such Prospectus by the
<PAGE> 33
-29-
Closing Date to the party or parties asserting such loss, liability, claim,
damage or expense would have constituted the sole defense to the claim asserted
by such person; provided, further, that each Selling Shareholder shall be liable
only with reference to information relating to such Selling Shareholder
furnished to the Company in writing by or on behalf of such Selling Shareholder
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement thereto (it being understood that such
information is limited to the extent and as described in Section 1(b)(i) hereof)
(the "Selling Shareholder Information"); provided, further, that each Selling
Shareholder's aggregate liability under this Section 6(a) shall be limited to an
amount equal to the gross proceeds (after deducting the underwriting discount,
but before deducting expenses) received by such Selling Shareholder from the
sale of the Securities pursuant to the Purchase Agreement.
(b) Indemnification of Company, Directors and Officers and
Selling Shareholders. Each Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, each
Selling Shareholder and each person, if any, who controls any Selling
Shareholder 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 subsection (a) of this Section, 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 or supplement thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives expressly for use in the Registration Statement (or
any amendment or supplement thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(c) Actions Against Parties; Notification. Each indemnified
party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a
<PAGE> 34
-30-
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 6(a) above, counsel to the indemnified
parties shall be selected by Merrill Lynch, and, in the case of parties
indemnified pursuant to Section 6(b) above, counsel to the indemnified parties
shall be selected by the Company. An indemnifying party may participate at its
own expense in the defense of any such action; provided, however, that counsel
to the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 6 or Section 7 hereof (whether or not the
indemnified parties are actual or potential parties thereto), 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) Settlement Without Consent if Failure to Reimburse. If at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) 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.
<PAGE> 35
-31-
(e) Other Agreements with Respect to Indemnification. The
provisions of this Section shall not affect any agreement among the Company and
the Selling Shareholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for
in Section 6 hereof 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 incurred by such indemnified party, as incurred, (i) in such
proportions that (a) the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet, bears to the offering price appearing thereon and
(b) the Company and the Selling Shareholders are severally responsible for the
balance on the same basis as each of them would have been obligated to provide
indemnification pursuant to Section 6 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 Company on the one hand and the Selling
Shareholders on the second hand and of the Underwriters on the third 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 Company and the Selling Shareholders
and the Underwriters 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 Company or the Selling Shareholders or by the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of
<PAGE> 36
-32-
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 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 any 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.
Notwithstanding the provisions of this Section 7, (i) no
Selling Shareholder shall be required to contribute any amount in excess of the
amount of the total net proceeds received by such Selling Shareholder from the
Securities purchased from such Selling Shareholder and (ii) no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of 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 7, each person, if any, who
controls a Underwriter 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
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company or any the Selling Shareholder 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 Company or such Selling Shareholder, as the case may be. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Securities set forth opposite
their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or in certificates of officers of the Company or any Venture or
the Selling Shareholders submitted pursuant hereto, shall remain operative and
in full force and effect, regardless of any investigation made
<PAGE> 37
-33-
by or on behalf of any Underwriter or controlling person, or by or on behalf of
the Company or the Selling Shareholders, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate
this Agreement, by notice to the Company and the Selling Shareholders, at any
time at or prior to Closing Time (i) if there has been, since the time of
execution of this Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Representatives, impracticable to
market the Securities or to enforce contracts for the sale of the Securities, or
(iii) if trading in any securities of the Company has been suspended or
materially limited by the Commission, EASDAQ or the Nasdaq National Market, or
if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the NASD or any other governmental authority, or
(iv) if a banking moratorium has been declared by either Federal or New York
authorities.
(b) Liabilities. If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full force
and effect.
SECTION 10. Default by One or More of the Underwriters. If one
or more of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
<PAGE> 38
-34-
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Representatives shall not
have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the Underwriters to purchase and of the Selling
Shareholders to sell the Option Securities to be purchased and sold on
such Date of Delivery shall terminate without liability on the part of
any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the Underwriters to purchase and the Selling Shareholders to sell the
relevant Option Securities, as the case may be, either (i) the Representatives
or (ii) the Company and any Selling Shareholder shall have the right to postpone
Closing Time or the relevant Date of Delivery, as the case may be, for a period
not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.
SECTION 11. Default by One or More of the Selling
Shareholders. (a) If one or more of the Selling Shareholders selling an
aggregate of at least $15,000,000 of Securities shall fail at Closing Time or at
a Date of Delivery to sell and
<PAGE> 39
-35-
deliver the number of Securities which such Selling Shareholder or Selling
Shareholders are obligated to sell hereunder, and the remaining Selling
Shareholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number to be sold by all Selling Shareholders as set forth in Schedule B hereto,
then the Underwriters may, at option of the Representatives, by notice from the
Representatives to the Company and the non-defaulting Selling Shareholders,
either (a) terminate this Agreement without any liability on the fault of any
non-defaulting party except that the provisions of Sections 1, 4, 6, 7 and 8
shall remain in full force and effect or (b) elect to purchase the Securities
which the non-defaulting Selling Shareholders have agreed to sell hereunder. No
action taken pursuant to this Section 11 shall relieve any Selling Shareholder
so defaulting from liability, if any, in respect of such default.
In the event of a default by any Selling Shareholder as
referred to in this Section 11, each of the Representatives, the Company and the
non-defaulting Selling Shareholders shall have the right to postpone Closing
Time or the Date of Delivery for a period not exceeding seven days in order to
effect any required change in the Registration Statement or Prospectus or in any
other documents or arrangements.
SECTION 12. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives c/o Merrill Lynch & Co.,
Merrill Lynch Pierce, Fenner & Smith Incorporated at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Robert Kramer;
notices to the Company shall be directed to it at 1751 Pinnacle Drive, North
Tower - 12th Floor, McLean, VA 22102, attention of William H. Seippel; and
notices to the Selling Shareholders shall be directed to the Company at 1751
Pinnacle Drive, North Tower - 12th Floor, McLean, VA 22102, attention of William
H. Seippel.
SECTION 13. Parties. This Agreement shall each inure to the
benefit of and be binding upon the Underwriters, the Company and the Selling
Shareholders and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Shareholders and their respective successors and the controlling persons and
officers and directors referred to in
<PAGE> 40
-36-
Sections 6 and 7 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
<PAGE> 41
-37-
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters, the Company and the Selling Shareholders in
accordance with its terms.
Very truly yours,
GLOBAL TELESYSTEMS GROUP, INC.
By /s/ Grier C. Raclin
--------------------------------------------
Title: Vice President - External Affairs
General Counsel and Corporate
Secretary
APAX FUNDS NOMINEES LIMITED WARBURG, PINCUS VENTURES, L.P.
By: /s/ John P. McMonigall By: /s/ Stephen Distler
-------------------------- -----------------------------
Name: John P. McMonigall Name: Stephen Distler
Title: Director Title: Partner
<PAGE> 42
-38-
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
DRESDNER KLEINWORT BENSON
NORTH AMERICA LLC
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS INC.
PRUDENTIAL SECURITIES INCORPORATED
ING BARING FURMAN SELZ LLC
BANCBOSTON ROBERTSON STEPHENS INC.
CIBC OPPENHEIMER CORP.
ABN AMRO INCORPORATED
ARNHOLD AND S. BLEICHROEDER, INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Robert Kramer
--------------------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
<PAGE> 43
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
Name of Underwriter Securities
- ------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ........................................... 1,121,484
Bear, Stearns & Co. Inc. ............................................. 487,000
BT Alex. Brown Incorporated .......................................... 487,000
Donaldson, Lufkin & Jenrette Securities
Corporation ...................................................... 487,000
Dresdner Kleinwort Benson North
America LLC ...................................................... 487,000
Lehman Brothers Inc. ................................................. 487,000
BancBoston Robertson Stephens Inc. ................................... 243,300
CIBC Oppenheimer Corp. ............................................... 243,300
ING Baring Furman Selz LLC ........................................... 243,300
Prudential Securities Incorporated ................................... 243,300
ABN AMRO Incorporated ................................................ 124,300
Arnhold and S. Bleichroeder, Inc. .................................... 124,300
Credit Suisse First Boston Corporation ............................... 124,300
Doft & Co., Inc. ..................................................... 54,000
Lazard Freres & Co. LLC .............................................. 54,000
Schroder & Co. Inc. .................................................. 54,000
J.C. Bradford & Co. .................................................. 27,000
First Union Capital Markets Corp. .................................... 27,000
Gabelli & Company, Inc. .............................................. 27,000
Gerard Klauer Mattison & Co., Inc. ................................... 27,000
</TABLE>
Schedule A-1
<PAGE> 44
<TABLE>
<S> <C>
Legg Mason Wood Walker, Incorporated ................................. 27,000
McDonald Investments Inc. ............................................ 27,000
Neuberger Berman, LLC ................................................ 27,000
Ragen MacKenzie Incorporated ......................................... 27,000
Raymond James & Associates, Inc. ..................................... 27,000
The Robinson-Humphrey Company, LLC ................................... 27,000
Scotia Capital Markets (USA) Inc. .................................... 27,000
Tucker Anthony Incorporated .......................................... 27,000
Utendahl Capital Partners, L.P. ...................................... 27,000
------------
Total ................................................................ 5,415,584
============
</TABLE>
Schedule A-2
<PAGE> 45
SCHEDULE B
<TABLE>
<CAPTION>
Number of Maximum Number
Initial of Option
Securities Securities
to be Sold to be Sold
---------- ----------
<S> <C> <C>
Apax Funds Nominees Limited........... 3,708,891 556,333
Warburg, Pincus Ventures, L.P......... 1,706,693 256,004
--------- ---------
Total................................. 5,415,584 812,337
</TABLE>
Schedule B-1
<PAGE> 46
SCHEDULE C
GLOBAL TELESYSTEMS GROUP, INC.
Shares of Common Stock
(Par Value $.10 Per Share)
1. The public offering price per share for the Securities,
determined as provided in said Section 2, shall be $57.50.
2. The purchase price per share for the Securities to be paid
by the several Underwriters shall be $55.345, being an amount equal to
the public offering price set forth above less $2.155 per share;
provided that the purchase price per share for any Option Securities
purchased upon the exercise of the over-allotment option described in
Section 2(b) shall be reduced by an amount per share equal to any
dividends or distributions declared by the Company and payable on the
Initial Securities but not payable on the Option Securities.
Schedule C-1
<PAGE> 47
Exhibit A-1
FORM OF OPINION OF SHEARMAN & STERLING
TO BE DELIVERED PURSUANT TO SECTION 5(b)(1)
1. The Company is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware with corporate
power and authority under such laws to own, lease and operate its
properties and conduct its business as described in the Prospectus;
2. The Purchase Agreement was duly authorized, executed and
delivered by the Company;
3. Any required filing of the Prospectus pursuant to Rule
424(b) has been made in the manner and within the time period required
by Rule 424(b);
4. The authorized and, to such counsel's knowledge, issued and
outstanding capital stock of the Company was, at December 31, 1998, as
set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization"; all of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable;
5. The Shares to be purchased by the Underwriters from the
Selling Shareholders have been duly authorized and are validly issued,
fully paid, and non-assessable and are not subject to preemptive rights
pursuant to the Delaware GCL, the Certificate of Incorporation or
By-Laws of the Company or any agreement listed on Annex A attached
hereto;
6. The execution and delivery by the Company of the Purchase
Agreement and the consummation of the transactions contemplated in the
Purchase Agreement, and compliance by the Company with the terms
thereof (1) will not result in any violation of the Certificate of
Incorporation or By-Laws of the Company, and (2) will not conflict
with, or constitute default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to (A) any
- ---------------------
(1) Capitalized terms not defined herein have the meanings given to them in
the Purchase Agreement.
A-1-1
<PAGE> 48
of the agreements set forth in Annex A attached hereto, (B) any
existing applicable law, rule or regulation which, in each instance in
our experience, are normally applicable to corporations such as the
Company or transactions of this type, other than the securities or blue
sky laws of the various states, as to which, in each case, we express
no opinion or (C) any judgment, order or decree of any Federal or New
York court, governmental agency or body or arbitrator known by us to be
applicable to the Company (except for such conflicts, defaults or
liens, charges or encumbrances, with respect to clause (2) above, that
would not reasonably be expected to result in a Material Adverse
Effect);
7. To the best of such counsel's knowledge, no authorization,
approval, consent or license of any government, governmental
instrumentality or court is required for the consummation by the
Company of the transactions contemplated by the Purchase Agreement,
except for such consents, approvals, authorizations or orders as have
been obtained under the Securities Act or may be required under the
securities or blue sky laws of any jurisdiction in the United States in
connection with the offer and sale of the Shares;
8. The statements in the Prospectus under the captions
"Description of Capital Stock," "United States Federal Income Tax
Considerations to Non-U.S. Stockholders," "Underwriting," in the third
paragraph under the caption "Shares Eligible for Future Sale," and in
the Registration Statement under Item 14, insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, fairly summarize the matters referred to therein;
9. The Company is not now required to register under the
Investment Company Act of 1940, as amended to date; and
10. The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the charter and
by-laws of the Company and the requirements of the Nasdaq National
Market.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the Underwriters and counsel for the Underwriters
and representatives of the independent public accountants of the Company at
which the contents of the Registration Statement and Prospectus and
A-1-2
<PAGE> 49
related matters were discussed and that, (i) in such counsel's opinion, the
Registration Statement and the Prospectus (other than the financial statements
and other financial data contained therein or omitted therefrom, as to which
such counsel need not comment) appear on their face to be appropriate
responsively in all material respects to the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder; (ii) no
facts came to such counsel's attention which gave such counsel reason to believe
that (a) the Registration Statement (other than the financial statements and
other financial data contained therein or omitted therefrom, as to which such
counsel need not comment), at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(b) the Prospectus (other than the financial statements and other financial data
contained therein or omitted therefrom, as to which we have not been requested
to comment), as of their date or the Closing Date, contained or contain an
untrue statement of a material fact or omitted or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (iii) such counsel does not know
of any contract or other document of a character required to be filed as an
exhibit to the Registration Statement that is not so filed.
A-1-3
<PAGE> 50
Exhibit A-2
FORM OF OPINION OF GRIER RACLIN
TO BE DELIVERED PURSUANT TO SECTION 5(b)
1. Each subsidiary listed in Annex B hereto (each, a
"Subsidiary") is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware with corporate power
and authority under such laws to own, lease and operate its properties
and conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each United States jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure so to qualify or
to be in good standing, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), earnings or business affairs of the
Company, its subsidiaries and Ventures considered as one enterprise on
a combined basis ("Material Adverse Effect"); except as otherwise
disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized
and validly issued and, to the best of such counsel's knowledge, is
fully paid and non-assessable and is owned by the Company, directly or
indirectly through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive rights of any securityholder of such
Subsidiary;
2. The authorized and issued and outstanding capital stock of
the Company was, at December 31, 1998, as set forth in the Prospectus
in the column entitled "Actual" under the caption "Capitalization"; all
of the issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable; and none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive rights of any
securityholder of the Company;
3. To the best of such counsel's knowledge, neither the
Company nor any of its Subsidiaries listed in Annex B is in violation
of, in conflict with, in breach of or in default of (A) its Certificate
of Incorporation or By-Laws or (B) the terms of any of the agreements
set forth in
A-2-1
<PAGE> 51
Annex A attached hereto to which the Company is a party or by which it
is bound or any of its properties is subject, except, in the case of
clause (B) only, to the extent that any such violation, conflict,
breach or default would not reasonably be expected to result in a
Material Adverse Effect;
4. To the best of such counsel's knowledge, the execution and
delivery by the Company of the Purchase Agreements and the consummation
of the transactions contemplated in the Purchase Agreements and in the
Registration Statement, and compliance by the Company with the terms
thereof will not result in any (1) violation of the Certificate of
Incorporation or By-Laws of the Company, and (2) will not conflict
with, or constitute default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to (A) any of the agreements set forth
in Annex A attached hereto, (B) any existing applicable law, rule or
regulation which, in each instance in such counsel's experience, are
normally applicable to corporations such as the Company or transactions
of this type, other than the securities or blue sky laws of the various
states, as to which, in each case, need not express any opinion or (C)
any judgment, order or decree of any Federal or New York court,
governmental agency or body or arbitrator known by me to be applicable
to the Company (except for such conflicts, defaults or liens, charges
or encumbrances, with respect to clause (2) above, that would not
reasonably be expected to result in a Material Adverse Effect);
5. To the best of such counsel's knowledge, (a) there is no
pending action, suit, proceeding, inquiry or investigation before or
brought by any U.S. court or governmental agency or body, with which
the Company or any of its subsidiaries has been served, (I) to which
the Company or any of its subsidiaries is a party or (II) to which the
property of the Company or any of its subsidiaries is subject, or (b)
any such action, suit, proceeding, inquiry or investigation threatened,
in each case which might reasonably be expected to result in a Material
Adverse Effect; and
6. To the best of such counsel's knowledge, there are no
persons with registration rights or other similar rights to have any
securities registered pursuant to the Registration Statement or, except
as described in the Prospectus, otherwise registered by the Company
under the 1933 Act.
A-2-2
<PAGE> 52
In addition, such counsel shall state that (i) in such
counsel's opinion, the Registration Statement and the Prospectus (other than the
financial statements and other financial data contained therein or omitted
therefrom, as to which such counsel need not comment) appear on their face to be
appropriate responsively in all material respects to the requirements of the
Securities Act and the applicable rules and regulations of the Commission
thereunder; (ii) no facts came to such counsel's attention which gave such
counsel reason to believe that (a) the Registration Statement (other than the
financial statements and other financial data contained therein or omitted
therefrom, as to which such counsel need not comment), at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (b) the Prospectus (other than the
financial statements and other financial data contained therein or omitted
therefrom, as to which we have not been requested to comment), as of their date
or the Closing Date, contained or contain an untrue statement of a material fact
or omitted or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (iii) such counsel does not know of any contract or other
document of a character required to be filed as an exhibit to the Registration
Statement that is not so filed.
A-2-3
<PAGE> 53
Exhibit A-3
FORM OF OPINION OF COUDERT BROTHERS
TO BE DELIVERED PURSUANT TO SECTION 5(b)
1. The statements in the Prospectus relating to the Offering
under the captions "RISK FACTORS Delays in regulatory liberalization in
EU member states could adversity affect our service offerings in these
countries" and "BUSINESS - Licenses and Regulatory Issues," insofar as
they purport to constitute a summary of the matters expressly referred
to therein, fairly describe such matters in all material respects.
2. Hermes Europe Railtel B.V. ("Hermes") and Esprit Telecom
Group plc ("Esprit"), or their respective subsidiaries, have obtained
all necessary licences, authorizations, consents and approvals
(collectively the "Authorizations") of and from, and has made all
necessary filings with and notices to all Danish, Swedish, Spanish,
Luxembourgian, United Kingdom, Belgian, French, German, Italian, Dutch,
Swiss, and United States governmental authorities, regulatory agencies,
courts and tribunals necessary to render lawful the conduct of its
business as an operator of telecommunication facilities and provider of
telecommunication services within the said countries, as such is
described in the Registration Statement dated April 19, 1999 relating
to the Offering (with respect to each of Hermes and Esprit, the
"Business").
3. So far as such counsel is aware, having made due inquiry of
the Company
(a) Neither Hermes nor Esprit has received any notice of
proceedings relating to the revocation or
modification of any such Authorizations, and
(b) Each of Hermes and Esprit is conducting its business
in accordance with the Authorizations and is not in
violation of, or in default under, any condition or
other provision of the Authorizations or any national
or regional laws, regulation, rule, order or judgment
with respect to the Authorizations or the conduct of
the Business.
4. Each of the Russian companies listed on Schedule 1 (the
"Russian Companies") has been duly organized
A-3-1
<PAGE> 54
and is validly existing as a legal entity registered under the laws of
the Russian Federation and has the corporate power and authority to
carry on its business and to own, lease and operate its properties as
disclosed in the Prospectus.
5. All of the outstanding shares of capital stock or ownership
interests, as applicable, of each of the Russian Companies have been
duly authorized and validly issued and the issuance of such shares was
properly registered with the appropriate authorities competent therefor,
and, to the best of such counsel's knowledge, to the extent owned,
directly or indirectly, by GTS, are owned free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature.
GTS owns, directly or indirectly, that percentage of the issued and
outstanding shares of capital stock or ownership interests of the
Russian Companies set forth on Schedule 1 hereto as being owned by GTS.
6. Except as disclosed in the Prospectus, under current
legislation of the Russian Federation, as applicable, (i) subject to the
qualifications set forth in paragraph (e) hereof, dividends and other
distributions declared and payable on the issued and outstanding shares
of the Russian Companies may be paid to the foreign shareholders in U.S.
Dollars and may be transferred by such foreign shareholders out of the
Russian Federation, as the case may be; (ii) all such dividends are, and
other distributions may be, subject to withholding taxes unless an
international treaty provides otherwise and the procedures set forth in
applicable Russian legislation enabling the foreign shareholders to
avail themselves of such treaty benefits are followed; and (iii) such
dividends and distributions are otherwise free and clear of any other
tax or deduction in the Russian Federation, provided that all profits
and other taxes have been paid by the relevant Russian Company prior to
the payment of such dividends and distributions.
7. Except as disclosed in the Prospectus, each Russian Company
has such telecommunications permits, licenses and authorizations of
governmental or regulatory authorities, including, without limitation,
licenses issued by the State Committee of the Russian Federation on
Communications and Information (formerly the Ministry of Communications)
(the "Telecommunications Licenses"), permissions issued by the State
Service for Communications Oversight (also referred to as
Gossviaznadzor), and/or radio-frequency allocations issued by the State
Commission for Radio Frequencies (all of the foregoing, without
A-3-2
<PAGE> 55
limitation, being the "Telecommunications Permits"), which are
necessary to own, lease, and operate its respective properties and to
conduct its business as disclosed in the Prospectus. Such
Telecommunications Permits contain no restriction that is likely to
have a material adverse effect on the business, condition (financial or
other), properties, net worth, results of operations or prospects (a
"Material Adverse Effect") of such Russian Company. Except as disclosed
in the Prospectus, to the best of such counsel's knowledge, each of the
Russian Companies has fulfilled and performed all of its material
obligations with respect to such Telecommunications Permits and no
event has occurred which creates, or after notice or lapse of time or
both would create, a material likelihood that such Telecommunications
Permits would be revoked or terminated.
8. To the best of such counsel's knowledge, there are no
outstanding subscriptions, rights, warrants, options, calls,
convertible securities, or commitments of sale entitling any person to
purchase or otherwise acquire from any of the Russian Companies any
shares of the capital stock of, or other ownership interest in, any of
such Russian Companies, with the exception of those arising as a matter
of Russian law and those included in the foundation documents
(including the shareholders' agreements), and any amendments thereto,
of the Russian Companies.
9. Except as otherwise set forth in the Prospectus, there are
no legal or governmental proceedings pending or threatened in writing
to which any Russian Company is a party or of which any of its property
is the subject, which could have a Material Adverse Effect on the
Russian Companies as a whole.
A-3-3
<PAGE> 56
Exhibit A-4
FORM OF OPINION OF LOEFF CLAEYS VERBEKE
TO BE DELIVERED PURSUANT TO SECTION 5(b)
1. Each of Commstruct International B.V., Vostok Mobile B.V., Hermes
Europe Railtel B.V. ("HER") and Hermes Europe Railtel Holdings B.V.
(the "Companies") has been duly incorporated and is validly existing as
a "besloten vennootschap met beperkte aansprakelijkheid" (private
company with limited liability) under the laws of the Netherlands.
2. Each of the Companies has the corporate power and authority to own its
property and to conduct its business in accordance with their
respective objects clauses as set forth in Section 2 of their
respective Articles.
3. Under the laws of the Netherlands there are no qualification
requirements to do business for any of the Companies.
4. Under the laws of the Netherlands (i) all dividends and other
distributions declared and payable on the issued and outstanding shares
of the Companies may be paid in Dutch Guilders, (ii) such Dutch
Guilders may be converted into foreign currency that may be transferred
out of the Netherlands, (iii) all such dividends and other
distributions are subject to withholding taxes unless an international
treaty provides otherwise and the procedures set forth in the
Netherlands or other applicable legislation are followed, and (iv) such
dividends and distributions are otherwise free and clear of any other
tax or deduction in the Netherlands.
5. The Shares have been duly and validly authorized and validly issued and
are validly outstanding and, except that the HER Shares II issued to
GTS Hermes, Inc. must be paid up by GTS Hermes, Inc. to their par value
upon call by HER, the Shares are non assessable.
6. The matters of Dutch law mentioned in the paragraphs of the
Registration Statement filed on April 19, 1999 as attached in Schedule
II hereto, are correct.
A-4-1
<PAGE> 57
Exhibit A-5
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) No filing with, or consent, approval, authorization,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign (other than the issuance
of the order of the Commission declaring the Registration Statement effective
and such authorizations, approvals or consents as may be necessary under state
securities laws, as to which [I][we] need express no opinion), is necessary or
required to be obtained by the Selling Shareholder(s) for the performance of
[each/the] Selling Shareholder of its obligations under the Purchase Agreement
or in the Power of Attorney and Custody Agreement, or in connection with the
offer, sale or delivery of the Securities and except for such filings, consents,
approvals or authorizations that could not reasonably be expected to have a
material adverse effect on the ability of such Selling Shareholder(s) to
consummate the transactions contemplated by this Agreement.
(ii) The Custody Agreement has been duly executed and
delivered by the [respective] Selling Shareholder(s) [named therein] and
constitutes the legal, valid and binding agreement of [such/the] Selling
Shareholder.
(iii) The Purchase Agreement has been duly authorized,
executed and delivered by or on behalf of [each/the] Selling Shareholder.
(iv) The execution, delivery and performance of the Purchase
Agreement and the Custody Agreement and the sale and delivery of the Securities
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement and compliance by the Selling Shareholder(s)
with its obligations under the Purchase Agreement have been duly authorized by
all necessary action on the part of the Selling Shareholder(s) and do not and
will not, whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default under or result in the
creation or imposition of any tax, lien, charge or encumbrance upon the
Securities or any property or assets of the Selling Shareholder(s) pursuant to,
any material contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, license, lease or other instrument or agreement to which
[any/the] Selling Shareholder is a party or by which [he/she/it/they] may be
bound, or to which any of the property or assets of the Selling Shareholder(s)
may be subject nor will
A-5-1
<PAGE> 58
such action result in any violation of the provisions of the charter or by-laws
of the Selling Shareholder(s), if applicable, or any law, administrative
regulation, judgment or order of any governmental agency or body or any
administrative or court decree having jurisdiction over [such/the] Selling
Shareholder or any of its properties.
(vi) Assuming that each of the Underwriters acquires the
certificates representing the Securities to be sold by [each/the] Selling
Shareholder in good faith and without notice of any adverse claims, as defined
in Section 8-302 of the Uniform Commercial Code as in effect in the State of New
York (the "UCC"), upon delivery of the certificates representing such Securities
to the person designated by the Underwriters, endorsed to the Underwriters, or
endorsed in blank, the Underwriters will acquire all of the rights of the
Selling Shareholder(s) in the certificates representing such Securities free of
any adverse claims (within the meaning of Section 8-302 of the UCC).
A-5-2
<PAGE> 1
EXHIBIT 10.2
- --------------------------------------------------------------------------------
GLOBAL TELESYSTEMS GROUP, INC.
8,700,000 Depositary Shares
Each Representing 1/100 of a Share
of 7 1/4% Cumulative Convertible Preferred Stock
PURCHASE AGREEMENT
Dated as of April 19, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
8,700,000
Depositary Shares Each
Representing 1/100 of a Share of 7 1/4%
Cumulative Convertible Preferred Stock
Global TeleSystems Group, Inc.
PURCHASE AGREEMENT
April 19, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Bear, Stearns & Co. Inc.
BT Alex. Brown Incorporated
Lehman Brothers Inc.
c/o Merrill Lynch & Co.
North Tower
World Financial Center
New York, NY 10281
Ladies and Gentlemen:
Global TeleSystems Group, Inc. (the "Company"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, confirms its agreement (the "Agreement") with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Donaldson,
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co. Inc., BT Alex.
Brown Incorporated and Lehman Brothers Inc. (collectively, the "Initial
Purchasers"), with respect to the issue and sale by the Company and the purchase
by the Initial Purchasers, acting severally and not jointly, of the respective
number of Depositary Shares each representing 1/100 of a share of 7 1/4%
Cumulative Convertible Preferred Stock (liquidation preference equivalent to
$5,000 per share) of the Company (the "Preferred Stock") set forth in Schedule
A, and with respect to the grant by the Company to the Initial Purchasers,
acting severally and not jointly, of the option described in Section 2(b) hereof
to purchase all or any part of 1,300,000 additional Depositary Shares each
representing 1/100 of a share of Preferred Stock to cover over-allotments, if
any. The aforesaid 8,700,000 Depositary Shares (the "Firm Shares") to be
purchased by the Initial Purchasers and all or any
<PAGE> 3
part of the 1,300,000 Depositary Shares subject to the option described in
Section 2(b) hereof (the "Option Shares") are hereinafter called, collectively,
the "Shares." The Shares will be issued in the name of Cede & Co. as nominee of
The Depository Trust Company ("DTC") pursuant to the Letter of Representations,
to be dated as of the Closing Time (as defined herein) between the Company, The
Bank of New York and DTC (the "DTC Agreement"). The Preferred Stock is
convertible into Common Stock (the "Common Stock") of the Company.
The Shares are to be issued pursuant to a deposit agreement
(the "Deposit Agreement") to be dated as of April 23, 1999, among the Company,
The Bank of New York, as depositary (the "Depositary"), and holders from time to
time of the Depositary Receipts (the "Depositary Receipts") issued by the
Depositary and evidencing the Shares. Each Share will initially represent the
right to receive 1/100 of a share of Preferred Stock deposited pursuant to the
Deposit Agreement.
The holders of the Shares (including the Initial Purchasers
and Subsequent Purchasers (as defined)) will be entitled to the benefits of a
registration rights agreement, to be dated as of April 23, 1999 (the
"Registration Rights Agreement"), between the Company and the Initial
Purchasers. Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission under the
circumstances set forth therein a shelf registration statement pursuant to Rule
415 under the 1933 Act (as defined) relating to the resale of the Shares, the
Preferred Stock and, upon conversion of the Shares and Preferred Stock, the
Common Stock, and to use its commercially reasonable best efforts to cause such
shelf registration statement to be declared effective.
This Agreement, the Deposit Agreement, the Registration Rights
Agreement, the Company's certificate of incorporation and a Certificate of
Designations, Preferences and Relative, Participating, Optional and Other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions with respect to the Shares, are hereinafter referred to
collectively as the "Operative Documents."
The Company understands that the Initial Purchasers propose to
make an offering of the Shares on the terms and in the manner set forth herein
and in the Offering Memorandum (as defined) and agrees that the Initial
Purchasers may resell, subject to the conditions set forth herein, all or a
portion of the Shares to purchasers ("Subsequent Purchasers") at any time after
the date of this Agreement. The Shares are to be offered and sold through the
Initial Purchasers without being registered under the Securities Act of 1933, as
amended (the "1933 Act"), in reliance upon the exemption afforded by Rule 144A
("Rule 144A") of the rules and regulations of the Securities and Exchange
Commission (the "Commission") under the 1933 Act (the "1933 Act Regulations").
Pursuant to the terms of the Shares, investors that acquire Shares may only
resell or otherwise transfer such Shares if such Shares are hereafter registered
under the 1933 Act or if an exemption from the registration requirements of the
1933 Act is available (including the exemption afforded by Rule 144A).
-3-
<PAGE> 4
The Company has prepared and delivered to the Initial
Purchasers copies of a preliminary offering memorandum dated April 6, 1999 (the
"Preliminary Offering Memorandum") and has prepared and will deliver to the
Initial Purchasers, as soon as practicable, but not later than April 20, 1999,
copies of a final offering memorandum dated April 19, 1999 (the "Final Offering
Memorandum"), each for use by the Initial Purchasers in connection with their
solicitation of purchases of, or offering of, the Shares. "Offering Memorandum"
means, with respect to any date or time referred to in this Agreement, the most
recent offering memorandum (whether the Preliminary Offering Memorandum or the
Final Offering Memorandum, or any amendment or supplement to either such
document), including exhibits thereto and any documents incorporated therein by
reference, which has been prepared and delivered by the Company to the Initial
Purchasers in connection with their solicitation of purchases of, or offering
of, the Shares. Capitalized terms used in this Agreement and not otherwise
defined herein are as defined in the Offering Memorandum; provided, however,
that the term "Offering Memorandum" shall not be deemed to cover any offering
memorandum delivered to the Initial Purchasers after the Company has delivered
an offering memorandum to the Initial Purchasers for use in confirming sales.
All references in this Agreement to financial statements and schedules and other
information which is "contained," "included" or "stated", or words of similar
import, in the Offering Memorandum (or other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information which are incorporated by reference in the Offering Memorandum.
SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to the
Initial Purchasers as of the date hereof, as of the Closing Time, and as of each
Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees with
the Initial Purchasers, as follows:
(i) Similar Offerings. The Company has
not, directly or indirectly, solicited any offer to buy or offered to sell, and
will not, directly or indirectly, solicit any offer to buy or offer to sell, in
the United States or to any United States citizen or resident, any security
which is or would be integrated with the sale of the Shares in a manner that
would require the Shares to be registered under the 1933 Act.
(ii) Offering Memorandum. The Offering
Memorandum does not, and at the Closing Time will not, include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation,
warranty and agreement shall not apply to statements in or omissions from the
-4-
<PAGE> 5
Offering Memorandum made in reliance upon and in conformity with information
furnished to the Company in writing by the Initial Purchasers expressly for use
in the Offering Memorandum.
(iii) Incorporated Documents. The
documents incorporated or deemed to be incorporated by reference in the Offering
Memorandum, at the time they were or hereafter are filed with the Securities and
Exchange Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the Securities and
Exchange Commission thereunder and, when read together with the other
information in the Offering Memorandum, at the time the Offering Memorandum was
issued did not, and as of the Closing Time (and, if any Option Shares are
purchased, at the Date of Delivery) will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statement therein not misleading.
(iv) Independent Accountants The
accountants who certified the financial statements and supporting schedules
included in the Offering Memorandum are independent public accountants as
required by the 1933 Act and the 1933 Act Regulations.
(v) Financial Statements. The financial
statements included in the Offering Memorandum, together with the related
schedules and notes, present fairly the financial position of the entities to
which they relate as of the dates indicated and their respective results of
operations, stockholders' equity and cash flows for the periods specified; said
financial statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved. The selected financial data and the summary financial
information included in the Offering Memorandum present fairly the information
shown therein and, in the case of the consolidated financial data therein, have
been compiled on a basis consistent with that of the audited financial
statements included in the Offering Memorandum, and in the case of the combined
financial data therein, have been compiled from financial statements prepared on
a basis consistent with that of the audited financial statements included in the
Offering Memorandum.
(vi) No Material Adverse Change in
Business. Since the respective dates as of which information is given in the
Offering Memorandum, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries (as defined below) considered as one enterprise, whether or not
arising in the ordinary course of business (a "Material Adverse Effect"), (B)
there have been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which are
material with respect to the Company and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
-5-
<PAGE> 6
(vii) Good Standing of the Company. The
Company has been duly organized and is validly existing as a corporation in good
standing under the laws of the state of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum and to enter into and perform its
obligations under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not, singly or in the
aggregate, result in a Material Adverse Effect.
(viii) Good Standing of Subsidiaries. Each
"significant subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) and all entities in which the Company has a direct or indirect
majority equity interest or voting power (each a "Subsidiary" and, collectively,
the "Subsidiaries") has been duly organized (to the extent applicable) and is
validly existing as a corporation, general partnership, limited partnership,
limited liability company, closed joint stock company, or similar entity in good
standing (to the extent applicable) under the laws of the jurisdiction of its
organization, has organizational power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not, singly or in the aggregate, result in a Material Adverse
Effect; except as otherwise disclosed in the Offering Memorandum, all of the
issued and outstanding capital stock or other ownership interests of each such
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable (to the extent applicable) and is owned by the Company, directly
or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity, except that the Company's capital
stock in Commstock International B.V. and in GTS Hungary has been pledged to
Ericsson Finans A.B. and Creditanstalt Bank as collateral for certain
borrowings; none of the outstanding shares of capital stock or other ownership
interests of any Subsidiary was issued in violation of the preemptive or similar
rights of any securityholder of such Subsidiary.
(ix) Capitalization. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Offering Memorandum in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to this
Agreement pursuant to reservations, agreements or employee benefit plans
referred to in the Offering Memorandum or pursuant to the exercise of
convertible securities or
-6-
<PAGE> 7
options referred to in the Offering Memorandum). The shares of issued and
outstanding capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or other
similar rights of any securityholder of the Company.
(x) Authorization of Agreement. This
Agreement has been duly authorized, executed and delivered by the Company.
(xi) Authorization of Deposit Agreement.
The Deposit Agreement has been duly authorized by the Company and, when executed
and delivered by the Company (assuming the due authorization, execution and
delivery thereof by the Depositary) will constitute a valid and legally binding
agreement of the Company, enforceable in accordance with its terms, subject, as
to enforceability, to bankruptcy, insolvency, reorganization and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles; upon issuance by the Depositary of Depositary Receipts
evidencing the Shares and the deposit of Preferred Stock in respect thereof in
accordance with the provisions of the Deposit Agreement, such Depositary
Receipts will be duly and validly issued and the persons in whose names the
Depositary Receipts are registered will be entitled to the rights specified
therein and in the Deposit Agreement; and the Deposit Agreement and the
Depositary Receipts conform in all material respects to the descriptions thereof
contained in the Offering Memorandum.
(xii) Authorization of Registration Rights
Agreement. The Registration Rights Agreement has been duly authorized by the
Company and, when duly executed and delivered by the Company (assuming the due
authorization, execution and delivery thereof by the Initial Purchasers) will
constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
(xiii) Authorization and Description of
Shares. The Shares to be purchased by the Initial Purchasers from the Company
have been duly and validly authorized for issuance and sale to the Initial
Purchasers pursuant to this Agreement, and, when issued and delivered by the
Company pursuant to this Agreement, against payment of the consideration set
forth herein, will be validly issued, fully paid and non-assessable; the
Preferred Stock has been duly and validly authorized and, when issued and
delivered as provided herein, will be duly and validly issued and fully paid and
non-assessable; the shares of Common Stock initially issuable upon conversion of
the Shares have been duly and validly authorized and reserved for issuance and,
when issued and delivered in accordance with the provisions of the Shares, will
be duly and validly issued, fully paid and non-assessable; the
-7-
<PAGE> 8
Shares, Preferred Stock and Common Stock conform in all material respects to all
statements relating thereto contained in the Offering Memorandum and such
descriptions conform to the rights set forth in the instruments defining the
same; the Preferred Stock may be freely deposited by the Company with the
Depositary against issuances of Depositary Receipts; no holder of the Shares
will be subject to personal liability by reason of being such a holder; and the
issuances of the Shares, the Preferred Stock and the Common Stock initially
issuable upon conversion of the Shares, respectively, are not subject to the
preemptive or other similar rights of any securityholder of the Company.
(xiv) Absence of Defaults and Conflicts.
Neither the Company nor any of its Ventures (as defined below) is in violation
of its charter or by-laws (or equivalent constitutive documents) or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which the
Company or any of its Ventures is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or any Venture
is subject (collectively, "Agreements and Instruments") except for such defaults
that would not, singly or in the aggregate, result in a Material Adverse Effect;
and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated in this Agreement, the Deposit
Agreement, the Registration Rights Agreement and in the Offering Memorandum
(including the issuance and sale of the Shares and the use of the proceeds from
the sale of the Shares as described in the Offering Memorandum under the caption
"Use of Proceeds") and compliance by the Company with its obligations under this
Agreement, the Deposit Agreement and the Registration Rights Agreement have been
duly authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any Venture
pursuant to, the Agreements and Instruments (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws (or equivalent constitutive documents) of
the Company or any Venture or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any Venture
or any of their assets, properties or operations. As used herein, (a) "Ventures"
means all entities in which the Company has a direct or indirect greater than
25% equity interest or voting power and (b) a "Repayment Event" means any event
or condition which gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such indebtedness
by the Company or any Venture.
-8-
<PAGE> 9
(xv) Absence of Labor Dispute. No labor
dispute with the employees of the Company or any Venture exists or, to the
knowledge of the Company, is threatened, which, in either case, may reasonably
be expected to, singly or in the aggregate, result in a Material Adverse Effect.
(xvi) Absence of Proceedings. There is no
action, suit, proceeding, inquiry or investigation before or brought by any
court or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the Company or
any Venture, which is required to be disclosed in the Offering Memorandum (other
than as disclosed therein), or which, singly or in the aggregate, might
reasonably be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties or
assets of the Company or any Venture or the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any Venture is a party or of
which any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine litigation
incidental to the business, singly or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
(xvii) Possession of Intellectual Property.
The Company and the Ventures own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
trade names or other intellectual property (collectively, "Intellectual
Property") necessary to carry on the business now operated by them, except to
the extent the failure to so own, possess or be able to acquire would not result
in a Material Adverse Effect, and neither the Company nor any Venture has
received any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property invalid
or inadequate to protect the interest of the Company or any Venture therein, and
which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.
(xviii) Possession of Licenses and Permits.
Except as otherwise disclosed in the Offering Memorandum, the Company and the
Ventures possess such material permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies necessary to
conduct the business now operated by them; the Company and the Ventures are in
compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the aggregate,
result in a Mate-
-9-
<PAGE> 10
rial Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and effect would
not have a Material Adverse Effect; and neither the Company nor any Venture has
received any notice of proceedings relating to the revocation or modification of
any such Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xix) Title to Property. The Company and
the Ventures have good and marketable title to all real property owned by the
Company and the Ventures and good title to all other properties owned by them,
in each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such as (a)
are described in the Offering Memorandum or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
Venture; and all of the leases and subleases material to the business of the
Company and the Ventures, considered as one enterprise, and under which the
Company or any Venture holds properties described in the Offering Memorandum,
are in full force and effect, and neither the Company nor any Venture has any
notice of any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company or any Venture under any of the leases or
subleases mentioned above, or affecting or questioning the rights of the Company
or such Venture to the continued possession of the leased or subleased premises
under any such lease or sublease.
(xx) Investment Company Act. Neither the
Company nor any of its Subsidiaries is, nor upon the issuance and sale of the
Shares as herein contemplated and the application of the net proceeds therefrom
as described in the Offering Memorandum will be, an "investment company" or an
entity "controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
(xxi) Environmental Laws. Except as
described in the Offering Memorandum and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company nor any
Venture is in violation of any federal, state, local or foreign statute, law,
rule, regulation, ordinance, code, policy or rule of common law or any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the
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Company and the Ventures have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or any Ventures and (D) there are no
events or circumstances that might reasonably be expected to form the basis of
an order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the Company
or any Ventures relating to Hazardous Materials or any Environmental Laws.
(xxii) Registration Rights. Except as
disclosed in the Offering Memorandum or in connection with the transaction
regarding Omnicom described in the Offering Memorandum , there are no persons
with registration rights or other similar rights to have any securities
registered by the Company under the 1933 Act.
(xxiii) Stabilization. The Company has not
taken and will not take, directly or indirectly, any action designed to, or that
might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Shares or the Common Stock.
(xxiv) 144A Eligibility. The Shares are
eligible for resale pursuant to Rule 144A and will not be, at the Closing Time,
of the same class as securities listed on a national securities exchange
registered under Section 6 of the Securities Exchange Act of 1934, as amended
(the "1934 Act") or quoted in a U.S. automated inter-dealer quotation system.
(xxv) No General Solicitation. Neither
the Company or any of its Affiliates (as defined in Rule 501(b) under the 1933
Act) nor any person acting on its or any of their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) has engaged or will
engage, in connection with the offering of the Shares, in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the
1933) Act.
(xxvi) No Integration. Within the period
of the preceding six (6) months prior to the date hereof, neither the Company
nor any other person acting on behalf of the Company has offered or sold to any
person any preferred shares, or any securities of the same or a similar class of
the Shares, other than the Shares offered and sold to the Initial Purchasers.
(xxvii) Absence of Further Requirements.
No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any
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<PAGE> 12
governmental entity of the United States or any state, other than those that
have been made or obtained, is necessary or required for the performance by the
Company of its obligations under the Operative Documents or the consummation by
the Company of the transactions contemplated by the Operative Documents, except
for such filings and approvals as may be necessary under state securities laws
in connection with the offering of the Shares in the manner contemplated hereby.
(b) Any certificate signed by any duly
authorized officer of the Company or any of its subsidiaries and delivered to
you or to counsel for the Initial Purchasers shall be deemed a representation
and warranty by the Company to the Initial Purchasers as to the matters covered
thereby.
SECTION 2. Sale and Delivery to Initial Purchasers;
Closing.
(a) On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to the Initial Purchasers, and the Initial
Purchasers agree to severally and not jointly purchase from the Company, an
aggregate of 8,700,000 Shares at a price of $48.50 per Share. The parties agree
that the initial offering price of the Shares will be $50.00 per Share.
(b) In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the Initial
Purchasers, severally and not jointly, to purchase up to an additional 1,300,000
Shares, at the price per Share set forth in Section 2(a) hereof, plus an amount
per Share equal to any accrued and unpaid dividends or distributions from the
Closing Time. The option hereby granted will expire 30 days after the date
hereof and may be exercised not more than two times in whole or in part only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Firm Shares upon notice by Merrill Lynch to the
Company setting forth the number of Option Shares as to which the several
Initial Purchasers are then exercising the option and the time and date of
payment and delivery for such Option Shares. Any such time and date of delivery
for the Option Shares (a "Date of Delivery") shall be determined by the Merrill
Lynch, but shall not be later than seven full business days after the exercise
of said option, nor in any event prior to the Closing Time, as hereinafter
defined. If the option is exercised as to all or any portion of the Option
Shares, each of the Initial Purchasers, acting severally and not jointly, on the
basis of the representations and warranties of the Company contained herein and
subject to the terms and conditions herein set forth, will purchase that
proportion of the total number of Option Shares then being purchased which the
number of Firm Shares set forth in Schedule A opposite the name of such Initial
Purchasers bears to the total number of Firm Shares, subject in each case to
such adjustments as Merrill Lynch in its discretion shall make to eliminate any
sales or purchases of fractional shares.
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(c) Deliveries of certificates for the Firm
Shares shall be made at the offices of Cahill Gordon & Reindel in The City of
New York or such other place as shall be agreed upon by the Initial Purchasers
and the Company and payment of the purchase price for the Firm Shares shall be
made by the Initial Purchasers to the Company by wire transfer of immediately
available funds contemporaneous with closing, at 9:00 a.m., New York City time,
on April 23, 1999 or such other time not later than ten (10) business days after
such date as shall be agreed upon by the Initial Purchasers and the Company
(such time and date of payment and delivery being referred to herein as the
"Closing Time"). In addition, in the event that any or all of the Option Shares
are purchased by the Initial Purchasers, payment of the purchase price for such
Option Shares shall be made at the above-mentioned offices, or at such other
place as shall be agreed upon by Merrill Lynch and the Company, on each Date of
Delivery as specified in the notice from Merrill Lynch to the Company.
(d) As compensation to the Initial Purchasers
for its commitment hereunder, the Company hereby agrees to pay, at the Closing
Time or the relevant Date of Delivery, if any, to the Initial Purchasers by wire
transfer, in immediately available funds $1.50 per Share to be delivered by the
Company hereunder at the Closing Time or the relevant Date of Delivery, if any.
Payment for the Shares purchased by the Initial Purchasers
shall be made to the Company by wire transfer of immediately available funds to
a bank designated by the Company, against delivery to the Initial Purchasers of
certificates for the Shares to be purchased by them. Unless otherwise specified
in writing by the Initial Purchasers prior to the Closing Time or the relevant
Date of Delivery, as the case may be, the Firm Shares and Option Shares, if any,
shall be issued in global form as one or more certificates registered in the
name of Cede & Co. as nominee of DTC pursuant to the DTC Agreement and shall be
made available for examination by the Initial Purchasers in The City of New York
at least one (1) business day prior to the Closing Time or the relevant Date of
Delivery, as the case may be.
(e) Qualified Institutional Buyer. Each Initial Purchaser
severally and not jointly represents and warrants to, and agrees with, the
Company that it is a "qualified institutional buyer" within the meaning of Rule
144A under the 1933 Act (a "Qualified Institutional Buyer").
SECTION 3. Covenants of the Company. The Company
covenants with the Initial Purchasers as follows:
(a) Offering Memorandum. The Company, as
promptly as possible, will furnish to the Initial Purchasers, without charge,
such number of copies of the Preliminary Offering Memorandum, the Final Offering
Memorandum and any amendments and supplements thereto and documents incorporated
by reference therein as the Initial Purchaser may reasonable request.
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(b) Notice and Effect of Material Events. Prior
to the completion of the placement of the Shares by the Initial Purchasers, the
Company will immediately notify the Initial Purchasers, and confirm such notice
in writing, of (x) any filing made by the Company of information relating to the
offering of the Shares with any regulatory body in the United States, and (y)
any Material Adverse Effect, which (i) makes any statement in the Offering
Memorandum false or misleading or (ii) is not disclosed in the Offering
Memorandum. In such event or if during such time any event shall occur as a
result of which it is necessary, in the reasonable opinion of the Company, its
counsel or the Initial Purchasers or counsel to the Initial Purchasers, to amend
or supplement the Final Offering Memorandum in order that the Final Offering
Memorandum not include any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein not misleading
in the light of the circumstances then existing, the Company will forthwith
amend or supplement the Final Offering Memorandum by preparing and furnishing to
the Initial Purchasers an amendment or amendments of, or a supplement or
supplements to, the Final Offering Memorandum (in form and substance
satisfactory to the Initial Purchasers) so that, as so amended or supplemented,
the Final Offering Memorandum will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is delivered
to a Subsequent Purchaser, not misleading.
(c) Amendment to Offering Memorandum. The
Company will advise the Initial Purchasers promptly of any proposal to amend or
supplement the Offering Memorandum and will not amend or supplement the Offering
Memorandum without the consent of the Initial Purchasers, which consent shall
not be unreasonably withheld. Neither the consent of the Initial Purchasers nor
the Initial Purchasers' delivery of any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 5 hereof.
(d) DTC and PORTAL. The Company will cooperate
with the Initial Purchasers and use its reasonable best efforts to (i) permit
the Shares to be eligible for clearance and settlement through the facilities of
DTC and (ii) permit the Shares to be designated as PORTAL Securities in
accordance with the ruled and regulations of the National Association of
Securities Dealers, Inc.
(e) Blue Sky Qualifications. The Company shall
cooperate with the Initial Purchasers in arranging for the qualification of the
Shares for offering and sale under the securities or "Blue Sky" laws of such
jurisdictions as the Initial Purchasers may designate and will continue such
qualifications in effect for as long as may be necessary to complete the resale
of the Shares; provided, however, that in connection therewith, the Company
shall not
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<PAGE> 15
be required to qualify as a foreign corporation or to execute a general consent
to service of process in any jurisdiction or subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction where it is not then
so subject.
(f) Use of Proceeds. The Company will use the
proceeds received by it from the sale of the Shares in the manner specified in
the Offering Memorandum under "Use of Proceeds."
(g) Deposit of Preferred Stock. Prior to the
Closing Time, the Company will deposit the Preferred Stock with the Depositary
in accordance with the provisions of the Deposit Agreement and otherwise to
comply with the Deposit Agreement so that Depositary Receipts evidencing Shares
will be executed (and, if applicable, countersigned) and issued by the
Depositary against receipt of such Preferred Stock and delivered to the Initial
Purchasers at the Closing Time.
(h) Reserve of Common Stock. The Company will
reserve and keep available at all times, free of any preemptive rights, shares
of Common Stock for the purpose of enabling the Company to satisfy any
obligations to issue shares of Common Stock upon conversion of the Shares.
(i) Lock-Up. During the 60-day period after the
date of the Offering Memorandum, the Company will not, without the prior written
consent of Merrill Lynch, directly or indirectly, issue, sell, offer or agree to
sell, grant any option for the sale of, or otherwise dispose of or transfer any
shares of capital stock of the Company or any securities that are convertible
into or exercisable or exchangeable for capital stock or file a registration
statement under the 1933 Act with respect to the foregoing (excluding (A) the
Preferred Stock, (B) Common Stock issuable by the Company upon conversion of the
Company's Senior Subordinated Convertible Bonds due 2000 or Senior Subordinated
Convertible Bonds due 2010 or the Preferred Stock, or as dividends on the
Preferred Stock or other securities convertible or exchangeable into Common
Stock outstanding as of the date hereof, (C) any shares of Common Stock issued
or options to purchase Common Stock granted pursuant to existing employee
benefit plans (including any shares of Common Stock to be added to any such plan
at the 1999 Annual Meeting of Stockholders) of the Company referred to in the
Offering Memorandum or (D) any shares of Common Stock or securities convertible
into or exchangeable for Common Stock issued as consideration for or to
otherwise finance an acquisition of an interest in or the assets of a business).
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the preparation and printing
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of the Offering Memorandum (including financial statements and any schedules or
exhibits) and of each amendment or supplement thereto, (ii) the preparation,
printing and delivery to the Initial Purchasers of the Operative Documents and
such other documents as may be required in connection with the offering,
purchase, sale and delivery of the Shares, (iii) the preparation, issuance and
delivery of the certificates for the Shares to the Initial Purchasers, (iv) the
fees and disbursements of the Company's counsel, accountants and other advisors,
(v) the fees of nationally recognized statistical rating organizations and (vi)
the expenses relating to the eligibility of the Shares for clearance and
settlement through the facilities of DTC.
(b) Termination of Agreement. If this Agreement
is terminated by the Initial Purchasers in accordance with the provisions of
Section 5(k) or Section 10(a)(i) hereof, the Company shall reimburse the Initial
Purchasers for all of its out-of-pocket expenses, including the fees and
disbursements of Cahill Gordon & Reindel, counsel for the Initial Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations. The
obligations of the Initial Purchasers hereunder are subject to the accuracy of
the representations and warranties of the Company contained in Section 1 hereof
or in certificates of any officer of the Company or any of its subsidiaries
delivered pursuant to the provisions hereof, to the performance by the Company
of its agreements and obligations hereunder, and to the following further
conditions:
(a) Opinions of Counsel for the Company. At the
Closing Time, the Initial Purchasers shall have received the favorable opinions,
dated as of the Closing Time, of each of Shearman & Sterling, counsel for the
Company, Grier Raclin, Senior Vice President and General Counsel of the Company,
Coudert Brothers, special counsel for the Company and special regulatory counsel
for Hermes Europe Railtel B.V. and Esprit Telecom Group plc, and Loeff Claeys
Verbeke, special Dutch counsel, Telecom Group plc each in form. and substance
satisfactory to counsel for the Initial Purchasers to the effect set forth in
Exhibits A-1 through A-4 hereto.
(b) Opinion of Counsel for Initial Purchasers.
At the Closing Time, the Initial Purchasers shall have received the favorable
opinion, dated as of the Closing Time, of Cahill Gordon & Reindel, counsel for
the Initial Purchasers, and Clifford Chance, special Russian counsel to the
Initial Purchasers, with respect to the issuance of the Shares, the disclosure
in the Offering Memorandum and such other related matters as the Initial
Purchasers may require. Such counsel may also state that they have relied,
without independent investigation or verification, as to factual matters, upon
certificates of officers of the Company or any of its subsidiaries and public
officials.
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<PAGE> 17
(c) Certificates. At Closing Time, there shall
not have been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time and (iii) the Company has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time.
(d) Accountant's Comfort Letter. At the time of
the execution of this Agreement, the Initial Purchasers shall have received a
letter from Ernst & Young LLP (the "Company Accountants"), dated such date, in
form and substance reasonably satisfactory to the Initial Purchasers, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to initial purchasers in private placements with respect to
the financial statements and financial information included in the Offering
Memorandum.
(e) Bring-down Comfort Letter. At the Closing
Time, the Initial Purchasers shall have received from the Company Accountants a
letter, dated as of the Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (e) of this
Section, except that the specified date referred to shall be a date not more
than three (3 ) business days prior to the Closing Time.
(f) Deposit Agreement. The Company and the
Depositary shall have entered into the Deposit Agreement.
(g) Registration Rights Agreement. The Company
and the Initial Purchasers shall have entered into the Registration Rights
Agreement.
(h) Board of Directors Authorization. Prior to
the Closing Time, the Board of Directors of the Company shall have duly approved
and authorized the sale of the Shares by the Company and shall have duly
authorized the proper officers of the Company to (i) execute the Operative
Documents and all other documents necessary for the completion of the sale of
the Shares and (ii) take all other actions on behalf of the Company necessary
for the completion of the sale of the Shares.
(i) Conditions to Purchase Of Option Shares.
In the event that the Initial Purchasers exercise their option provided in
Section 2(b) hereof to purchase all or any
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portion of the Option Shares, the representations and warranties of the Company
contained herein and the statements in any certificates furnished by the Company
and any subsidiary of the Company hereunder shall be true and correct as of each
Date of Delivery and, at the relevant Date of Delivery, the Initial Purchasers
shall have received:
(i) Officers' Certificate. A
certificate, dated such Date of Delivery, of the President or a Vice President
of the Company and of the chief financial or chief accounting officer of the
Company confirming that the certificate delivered at the Closing Time pursuant
to Section 5(c) hereof remains true and correct as of such Date of Delivery.
(ii) Opinions of Counsel for the Company.
At the relevant Date of Delivery, the Initial Purchasers shall have received the
favorable opinions, dated as of such Date of Delivery, of each of Shearman &
Sterling, counsel for the Company, Grier Raclin, Senior Vice President and
General Counsel of the Company, Coudert Brothers, special counsel for the
Company and special regulatory counsel for Hermes Europe Railtel B.V. and Esprit
Telecom Group plc, and Loeff Claeys Verbeke, special Dutch counsel, Telecom
Group plc each in form. and substance satisfactory to counsel for the Initial
Purchasers to the effect set forth in Exhibits A-1 through A-5 hereto.
(iii) Opinion of Counsel for Initial
Purchasers. At the relevant Date of Delivery, the Initial Purchasers shall have
received the favorable opinion, dated as of such Date of Delivery of Cahill
Gordon & Reindel, counsel for the Initial Purchasers, and Clifford Chance,
special Russian counsel to the Initial Purchasers, with respect to the issuance
of the Shares, the disclosure in the Offering Memorandum and such other related
matters as the Initial Purchasers may require. Such counsel may also state that
they have relied, without independent investigation or verification, as to
factual matters, upon certificates of officers of the Company or any of its
subsidiaries and public officials.
(iv) Bring-down Comfort Letter. At the
relevant Date of Delivery, the Initial Purchasers shall have received from the
Company Accountants a letter, dated as of such Date of Delivery, to the effect
that they reaffirm the statements made in the letter furnished pursuant to
subsection (e) of this Section, except that the specified date referred to shall
be a date not more than three (3 ) business days prior to such Date of Delivery.
(j) Additional Documents. At the Closing Time
and at each Date of Delivery, counsel for the Initial Purchasers shall have been
furnished such documents and opinions as they may reasonably require for the
purpose of enabling them to pass upon the issuance and sale of the Shares as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties of the Company, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Shares as herein contemplated shall
be satisfactory in form and substance to the Initial Purchasers and counsel for
the Initial Purchasers.
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(k) Termination of Agreement. If any condition
specified in this Section 5 shall not have been fulfilled when and as required
to be fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Shares on a Date of Delivery which is after the Closing Time,
the obligations of the Initial Purchasers to purchase the relevant Option
Shares, may be terminated by the Initial Purchasers by notice to the Company at
any time at or prior to the Closing Time or such Date of Delivery, as the case
may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof and except that Sections 1,
7, 8 and 9 hereof shall survive any such termination and remain in full force
and effect.
SECTION 6. Subsequent Offers and Sales of the Shares.
(a) Offer and Sale Procedures. The Initial
Purchasers and the Company hereby establish and agree to observe the following
procedures in connection with the offer and sale of the Shares:
(i) Offers and Sales only to Qualified
Institutional Buyers. Offers and sales of the Shares will be made only by the
Initial Purchasers or Affiliates thereof qualified to do so in the jurisdictions
in which such offers or sales are made. Each such offer or sale shall only be
made to persons whom the offeror or seller reasonably believes to be Qualified
Institutional Buyers.
(ii) No General Solicitation. No general
solicitation or general advertising (within the meaning of Rule 502(c) under the
1933 Act) will be used in connection with the offering of the Shares.
(iii) Purchases by Non-Bank Fiduciaries.
In the case of a non-bank Subsequent Purchaser of Shares acting as a fiduciary
for one or more third parties, in connection with an offer and sale to such
Subsequent Purchaser by an Initial Purchaser, each third party shall, in the
reasonable belief of the Initial Purchaser, be a Qualified Institutional Buyer.
(iv) Subsequent Purchaser Notification.
Prior to or contemporaneously with the purchase of the Shares, the Initial
Purchasers will take reasonable steps to inform, and cause each of its
Affiliates to take reasonable steps to inform, persons acquiring Shares from
such Initial Purchasers or Affiliate, as the case may be, in the United States
that the Shares (A) have not been and will not be registered under the 1933 Act,
(B) are being sold to them without registration under the 1933 Act in reliance
on Rule 144A or in accordance
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with another exemption from registration under the 1933 Act, as the case may be,
and (C) may not be offered, sold or otherwise transferred except (1) to the
Company, (2) pursuant to an effective registration statement under the 1933 Act,
(3) so long as such Shares are eligible for resale pursuant to Rule 144A, to a
person whom the seller reasonably believes is a Qualified Institutional Buyer
that is purchasing such Shares for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that the transfer is being
made in reliance on Rule 144A, (4) to an Institutional Accredited Investor (as
defined in Rule 501(a)(1), (2), (3), or (7) under the 1933 Act) that is
purchasing such Shares for its own account or for the account of another
Institutional Accredited Investor for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in violation of
the 1933 Act, or (5) pursuant to any other available exemption from registration
requirements of the 1933 Act (including the exemption provided by Rule 144).
(v) Restrictions on Transfer. The
transfer restrictions and the other provisions of this Agreement and the
Offering Memorandum, including the legend required thereby, shall apply to the
Shares except as otherwise agreed by the Company and the Initial Purchasers.
Following the sale of the Shares by the Initial Purchasers to Subsequent
Purchasers in accordance with the terms and procedures contained herein, the
Initial Purchasers shall not be liable or responsible to the Company for any
losses, damages or liabilities suffered or incurred by the Company, including
any losses, damages or liabilities under the 1933 Act, arising from or relating
to any resale or transfer of any Share.
(vi) Delivery of Offering Memorandum.
The Initial Purchasers will promptly deliver to each purchaser of the Shares
from the Initial Purchasers, in connection with its original placement of the
Shares, a copy of the Offering Memorandum, as amended and supplemented at the
date of such delivery.
(b) Covenants of the Company. The Company
covenants with the Initial Purchasers as follows:
(i) Integration. The Company agrees
that it will not, and will cause its Affiliates not to, make any offer or sale
of securities of the Company of any class if, as a result of the doctrine of
"integration" referred to in Rule 502 under the 1933 Act, such offer or sale
would render invalid (for the purpose of (i) the sale of the Shares by the
Company to the Initial Purchasers, (ii) the resale of the Shares by the Initial
Purchasers to Subsequent Purchasers or (iii) the resale of the Shares by such
Subsequent Purchasers to others) the exemption from the registration
requirements of the 1933 Act provided by Section 4(2) thereof or by Rule 144A or
otherwise.
(ii) Additional Information. The Company
agrees that, in order to render the Shares eligible for resale pursuant to Rule
144A under the 1933 Act, while
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any of the Shares remain outstanding, the Company will make available, upon
request, to any holder of Shares or prospective purchasers of Shares the
information specified in Rule 144A(d)(4), unless such information is furnished
to the Commission pursuant to Section 13 or 15(d) of the 1934 Act. In addition,
the Company agrees to provide to each holder of Shares (i) within 45 days of the
end of each of the first three quarters of each fiscal year of the Company,
unaudited consolidated financial statements of the Company for each such quarter
and (ii) within 90 days of the end of each fiscal year of the Company, audited
consolidated financial statements of the Company for each such year, unless such
information is furnished to the Commission pursuant to Section 13 or 15(d) of
the 1934 Act.. The information and financial statements referred to in this
paragraph (ii), whether made available to holders or prospective purchasers or
furnished to the Commission, is herein referred to as "Additional Information".
(iii) Restriction on Repurchases. Until
the expiration of two (2) years (or such shorter period as may hereafter be
referred to in Rule 144(k) (or similar successor rule)) after the original
issuance of the Shares, the Company will not, and will cause its Affiliates not
to, purchase or agree to purchase or otherwise acquire any Shares which are
"restricted securities" (as such term is defined under Rule 144(a)(3) under the
1933 Act), whether as beneficial owner or otherwise.
SECTION 7. Indemnification.
(a) Indemnification of Initial Purchasers. The
Company agrees to indemnify and hold harmless the Initial Purchasers, each
person, if any, who controls any Initial Purchaser within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act and the directors, officers and
employees of the Initial Purchasers or any such controlling person 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 included in any
Preliminary Offering Memorandum or the Final Offering Memorandum (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
7(d) hereof) any such settlement is effected with the written consent of the
Company; and
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(iii) against any and all expense
whatsoever, as incurred (including the fees and disbursements of counsel chosen
by Merrill Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or (ii)
above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company on
behalf of any Initial Purchaser through Merrill Lynch expressly for use in the
Offering Memorandum (or any amendment or supplement thereto).
(b) Indemnification of Company, Directors and
Officers. Each Initial Purchaser agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors and officers, and each person, if
any, who controls the Company 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 7(a) above, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Offering Memorandum in reliance upon
and in conformity with written information furnished to the Company by such
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum.
(c) Actions against Parties; Notification. Each
indemnified party shall give notice as promptly as reasonably practicable to
each indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof, and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified pursuant
to Section 7(a) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 7(b)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
-22-
<PAGE> 23
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect to which indemnification or contribution could be sought under this
Section 7 or Section 8 hereof (whether or not the indemnified parties are actual
or potential parties thereto), 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) Settlement without Consent if Failure to
Reimburse. If at any time an indemnified party shall have validly requested an
indemnifying party to reimburse the indemnified party for fees and disbursements
of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 7(a)(ii) 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.
SECTION 8. Contribution. In order to provide for just and
equitable contribution in circumstances under which the indemnification provided
for in Section 7 hereof is for any reason held to be unenforceable by 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
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Initial Purchasers, on the other hand, from the offering of the
Shares pursuant to this Agreement 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 Company, on the one hand, and the Initial Purchasers,
on the other 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 benefits received by the Company, on the one
hand, and the Initial Purchasers, on the other hand, in connection with the
offering of the Shares pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total proceeds from the offering of the
Shares pursuant to this Agreement (before deducting expenses) received by the
Company and the total discount received by the Initial Purchasers bear to the
aggregate initial offering price of the Shares.
-23-
<PAGE> 24
The relative fault of the Company, on the one hand, and the
Initial Purchasers, on the other hand, shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statements of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by the Initial Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 8. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 8 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 any 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.
Notwithstanding the provisions of this Section 8, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Shares were sold by it to Subsequent
Purchasers exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who
controls an Initial Purchaser 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, and each officer and director of the Company and each person,
if any, who controls the Company 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 Company. The Initial Purchasers' respective obligations to contribute
pursuant to this Section 8 are several in proportion to the number of Shares set
forth opposite their respective names in Schedule A hereto and not joint.
-24-
<PAGE> 25
SECTION 9. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or in certificates of officers of the Company submitted pursuant
hereto shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Initial Purchasers or controlling
person, or by or on behalf of the Company or controlling person, and shall
survive delivery of the Shares to the Initial Purchasers.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Initial
Purchasers may terminate this Agreement, by notice to the Company, at any time
at or prior to the Closing Time if, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Offering Memorandum, (i) there has occurred any Material Adverse Effect, or (ii)
there has occurred any material adverse change in the financial markets in the
United States or the international financial markets, any outbreak of
hostilities or escalation thereof or any other calamity or crisis, or any change
or development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Initial Purchaser, impracticable to
market the Shares or to enforce contracts for the sale of the Shares, or (iii)
trading in any securities of the Company has been suspended or limited by the
Commission, European Association of Securities Dealers Automated Quotation
Market or Nasdaq National Market, or if trading generally on the American Stock
Exchange, the New York Stock Exchange or the Nasdaq National Market has been
suspended or limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (iv) a banking
moratorium has been declared by United States federal or New York authorities.
(b) Liabilities. If this Agreement is
terminated pursuant to this Section, such termination shall be without liability
of any party to any other party except as provided in Section 4 hereof, and
provided further that Sections 1, 7, 8, 12 and 15 hereof shall survive such
termination and remain in full force and effect.
-25-
<PAGE> 26
SECTION 11. Default By One of the Initial Purchasers. If one
of the Initial Purchasers shall fail at the Closing Time or a Date of Delivery
to purchase the Shares which it is obligated to purchase under this Agreement
(the "Defaulted Shares"), the other Initial Purchasers shall have the right, but
not the obligation, within 24 hours thereafter, to make arrangements for the
non-defaulting Initial Purchasers, or any other Initial Purchasers reasonably
satisfactory to the Company, to purchase all, but not less than all, of the
Defaulted Shares in such amounts as may be agreed upon and upon the terms herein
set forth; if, however, the other Initial Purchasers shall not have completed
such arrangements within such 24-hour period, if the number of Defaulted Shares
does not exceed 10% of the number of Shares to be purchased on such date, each
of the non-defaulting Initial Purchasers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective purchaser obligations hereunder bear to the purchaser obligations of
all non-defaulting Initial Purchasers.
No action pursuant to this Section shall relieve any
defaulting Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the non-defaulting Initial Purchasers or
the Company shall have the right to postpone the Closing Time or the relevant
Date of Delivery, as the case may be, for a period not exceeding seven days in
order to effect any required changes in the Offering Memorandum or in any other
documents or arrangements. As used herein, the term "Initial Purchaser" includes
any person substituted for an Initial Purchaser under this Section 12.
SECTION 12. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Initial Purchasers shall be directed to the Representatives c/o Merrill Lynch &
Co., Merrill Lynch Pierce, Fenner & Smith Incorporated at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Robert Kramer;
notices to the Company shall be directed to it at 1751 Pinnacle Drive, North
Tower - 12th Floor, McLean, VA 22102, attention of William H. Seippel; and
notices to the Selling Shareholders shall be directed to the Company at 1751
Pinnacle Drive, North Tower - 12th Floor, McLean, VA 22102, attention of William
H. Seippel.
SECTION 13. Parties. This Agreement shall each inure to the
benefit of and be binding upon the Initial Purchasers and the Company and their
respective successors. Subject to Section 6(b)(iii), nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Initial Purchasers and the Company,
and their respective successors and the controlling persons and other persons
referred to in Sections 7 and 8 hereof and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision
-26-
<PAGE> 27
herein contained, and this Agreement and all conditions and provisions hereof
are intended to be for the sole and exclusive benefit of the Initial Purchasers
and the Company and their respective successors, and said controlling persons
and other persons and their heirs and legal representatives, and for the benefit
of no other person, firm or corporation. No purchaser of Shares from the Initial
Purchasers shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section
headings herein are for convenience only and shall not affect the construction
hereof.
-27-
<PAGE> 28
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Initial Purchaser and the Company in accordance with its
terms.
Very truly yours,
GLOBAL TELESYSTEMS GROUP, INC.
By: /s/ Grier C. Raclin
--------------------------------------
Name: Grier C. Raclin
Title: Vice President - External
Affairs, General Counsel
and Corporate Secretary
CONFIRMED AND ACCEPTED, as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS INC.
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Richard Warley
---------------------------------
Authorized Signatory
<PAGE> 29
SCHEDULE A
<TABLE>
<CAPTION>
Name of Initial Purchaser Number of Firm Shares
- ------------------------- ---------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................ 4,350,000
Donaldson, Lufkin & Jenrette Securities
Corporation................................... 2,175,000
Bear, Stearns & Co. Inc......................... 725,000
BT Alex. Brown Incorporated..................... 725,000
Lehman Brothers Inc............................. 725,000
-------
Total........................................... 8,700,000
</TABLE>
<PAGE> 30
Exhibit A-1
FORM OF OPINION OF SHEARMAN & STERLING
TO BE DELIVERED PURSUANT TO SECTION 5(a)(1)
1. The Company is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware with corporate
power and authority under such laws to own, lease and operate its
properties and conduct its business as described in the Offering
Memorandum;
2. The Purchase Agreement has been duly authorized, executed
and delivered by the Company;
3. The Deposit Agreement has been duly authorized, executed
and delivered by the Company and (assuming the due authorization,
execution and delivery by the Depositary) constitutes a valid and
legally binding agreement of the Company, enforceable in accordance
with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; upon issuance by the Depositary of Depositary Receipts
evidencing the Shares and the deposit of Preferred Stock in respect
thereof in accordance with the provisions of the Deposit Agreement,
such Depositary Receipts will be duly and validly issued and the
persons in whose names the Depositary Receipts are registered will be
entitled to the rights specified therein and in the Deposit Agreement;
4. The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and (assuming the due
authorization, execution and delivery by the Initial Purchasers)
constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
5. The authorized and, to such counsel's knowledge, issued and
outstanding capital stock of the Company was, at December 31, 1998, as
set forth in the Offering
- ---------------------------
(1) Capitalized terms not defined herein have the meanings given to them in
the Purchase Agreement.
A-1-1
<PAGE> 31
Memorandum in the column entitled "Actual" under the caption
"Capitalization"; all of the issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable;
6. The Shares have been duly and validly authorized, issued
and delivered for sale to the Initial Purchasers pursuant to the
Purchase Agreement, and are fully paid and non-assessable; the
Preferred Stock have been duly and validly authorized, issued and
delivered and are fully paid and non-assessable; the shares of Common
Stock initially issuable upon conversion of the Shares have been duly
and validly authorized and reserved for issuance and, when issued and
delivered in accordance with the provisions of the Shares, will be duly
and validly issued, fully paid and non-assessable; the Shares,
Preferred Stock and Common Stock conform in all material respects to
all statements relating thereto contained in the Offering Memorandum
and such description conforms to the rights set forth in the
instruments defining the same; the Preferred Stock were freely
deposited by the Company with the Depositary against issuance of
Depositary Receipts; no holder of the Shares will be subject to
personal liability by reason of being such a holder; and the issuances
of the Shares, the Preferred Stock and the Common Stock initially
issuable upon conversion of the Shares, respectively, are not subject
to the preemptive or other similar rights of any securityholder of the
Company pursuant to the Delaware GCL, the Certificate of Incorporation
or By-Laws of the Company or any agreement listed on Annex A attached
hereto;
7. The execution and delivery by the Company of the Purchase
Agreement, the Deposit Agreement and the Registration Rights Agreement
and the consummation of the transactions contemplated in the Purchase
Agreement, the Deposit Agreement, the Registration Rights Agreement and
in the Offering Memorandum and compliance by the Company with the terms
thereof (1) will not result in any violation of the Certificate of
Incorporation or By-Laws of the Company, and (2) will not conflict
with, or constitute default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to (A) any of the agreements set forth
in Annex A attached hereto, (B) any existing applicable law, rule or
regulation which, in each instance in our experience, are normally
applicable to corporations such as the Company or transactions of this
type, other than the securities or blue sky laws of the various states,
as to which, in each case, we express no opinion or (C) any judgment,
order or decree of any Federal or New York court, governmental agency
or body or arbitrator known by us to be applicable to the Company
(except for such conflicts, defaults or liens, charges or encumbrances,
with respect to clause (2) above, that would not reasonably be expected
to result in a Material Adverse Effect);
8. To the best of such counsel's knowledge, no authorization,
approval, consent or license of any government, governmental
instrumentality or court is required for the consummation by the
Company of the transactions contemplated by the Purchase Agreement, the
Deposit Agreement or the Registration Rights Agreement;
A-1-2
<PAGE> 32
9. The statements in the Offering Memorandum under the
captions "Description of Capital Stock," "Description of Depositary
Shares," "Description of Convertible Preferred Stock,""Tax
Considerations," "Plan of Distribution" and in the third paragraph
under the caption "Shares Eligible for Future Sale," insofar as such
statements constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly summarize the matters referred
to therein;
10. The Company is not now, and after giving effect to the
Company's use of proceeds from the offering will not be, required to
register under the Investment Company Act of 1940, as amended to date;
and
11. The form of certificate used to evidence the Shares, the
Preferred Stock and the Common Stock initially issuable upon conversion
of the Shares, respectively, comply in all material respects with all
applicable statutory requirements, with any applicable requirements of
the charter and by-laws of the Company, and, with respect to such
Common Stock, the requirements of the Nasdaq National Market.
In addition, such counsel shall state that such counsel has
participated in conferences with representatives of the Initial Purchasers,
officers and other representatives of the Company and representatives of the
independent certified accountants of the Company, at which conferences the
contents of the Offering Memorandum and the business and affairs of the Company
and its subsidiaries were discussed, and although such counsel has not verified
and does not pass upon or assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering Memorandum
(except and only to the extent set forth in paragraph 9 above), on the basis of
the foregoing participation, no facts have come to the attention of such counsel
that lead such counsel to believe that the Offering Memorandum at the date
thereof or as of the Closing Time, contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need not express any
comment with respect to the financial statements, including the notes thereto
and supporting schedules, or any other financial or statistical data found in or
derived from the internal accounting or other records of the Company set forth
or referred to in the Offering Memorandum).
A-1-3
<PAGE> 33
Exhibit A-2
FORM OF OPINION OF GRIER RACLIN
TO BE DELIVERED PURSUANT TO SECTION 5(a)
1. Each subsidiary listed in Annex B hereto (each, a
"Subsidiary") is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware with corporate power
and authority under such laws to own, lease and operate its properties
and conduct its business as described in the Offering Memorandum and is
duly qualified as a foreign corporation to transact business and is in
good standing in each United States jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing, individually or in the
aggregate, would not reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), earnings or business
affairs of the Company, its subsidiaries and Ventures considered as one
enterprise on a combined basis ("Material Adverse Effect"); except as
otherwise disclosed in the Offering Memorandum, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized
and validly issued and, to the best of such counsel's knowledge, is
fully paid and non-assessable and is owned by the Company, directly or
indirectly through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive rights of any securityholder of such
Subsidiary;
2. The authorized and issued and outstanding capital stock of
the Company was, at December 31, 1998, as set forth in the Offering
Memorandum in the column entitled "Actual" under the caption
"Capitalization"; all of the issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable; and none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive
rights of any securityholder of the Company;
3. To the best of such counsel's knowledge, neither the
Company nor any of the Subsidiaries is in violation of, in conflict
with, in breach of or in default of (A) its Certificate of
Incorporation or By-Laws or (B) the terms of any of the agreements set
forth in Annex A attached hereto to which the Company is a party or by
which it is bound or any of its properties is subject, except, in the
case of clause (B) only, to the extent that any such violation,
conflict, breach or default would not reasonably be expected to result
in a Material Adverse Effect;
A-2-1
<PAGE> 34
4. To the best of such counsel's knowledge, the execution and
delivery by the Company of the Purchase Agreement, the Deposit
Agreement and the Registration Rights Agreement and the consummation of
the transactions contemplated in the Purchase Agreement, the Deposit
Agreement, the Registration Rights Agreement and in the Offering
Memorandum, and compliance by the Company with the terms thereof will
not result in any (1) violation of the Certificate of Incorporation or
By-Laws of the Company, and (2) will not conflict with, or constitute
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
pursuant to (A) any of the agreements set forth in Annex A attached
hereto, (B) any existing applicable law, rule or regulation which, in
each instance in such counsel's experience, are normally applicable to
corporations such as the Company or transactions of this type, other
than the securities or blue sky laws of the various states, as to
which, in each case, need not express any opinion or (C) any judgment,
order or decree of any Federal or New York court, governmental agency
or body or arbitrator known by me to be applicable to the Company
(except for such conflicts, defaults or liens, charges or encumbrances,
with respect to clause (2) above, that would not reasonably be expected
to result in a Material Adverse Effect);
5. To the best of such counsel's knowledge, (a) there is no
pending action, suit, proceeding, inquiry or investigation before or
brought by any U.S. court or governmental agency or body, with which
the Company or any of its subsidiaries has been served, (I) to which
the Company or any of its subsidiaries is a party or (II) to which the
property of the Company or any of its subsidiaries is subject, or (b)
any such action, suit, proceeding, inquiry or investigation threatened,
in each case which might reasonably be expected to result in a Material
Adverse Effect; and
6. To the best of such counsel's knowledge, there are no
persons with registration rights or other similar rights to have any
securities registered except as described in the Offering Memorandum,
by the Company under the 1933 Act.
In addition, such counsel shall state that no facts have come
to the attention of such counsel that lead such counsel to believe that the
Offering Memorandum at the date thereof or as of the Closing Time, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need not express any comment with respect to the financial
statements, including the notes thereto and supporting schedules, or any other
financial or statistical data found in or derived from the internal accounting
or other records of the Company set forth or referred to in the Offering
Memorandum).
A-2-2
<PAGE> 35
Exhibit A-3
FORM OF OPINION OF COUDERT BROTHERS
TO BE DELIVERED PURSUANT TO SECTION 5(a)
1. The statements in the Offering Memorandum relating to the
offering under the captions "RISK FACTORS - Delays in regulatory
liberalization in EU member states could adversely affect our service
offerings in those countries" and "BUSINESS - Licenses and Regulatory
Issues," insofar as they purport to constitute a summary of the matters
expressly referred to therein, fairly describe such matters in all
material respects.
2. Hermes Europe Railtel B.V. ("Hermes") and Esprit Telecom
Group plc ("Esprit") or their respective subsidiaries, have obtained
all necessary licences, authorizations, consents and approvals
(collectively the "Authorizations") of and from, and has made all
necessary filings with and notices to all Danish, Swedish, Spanish,
Luxembourgian, United Kingdom, Belgian, French, German, Italian, Dutch,
Swiss, and United States governmental authorities, regulatory agencies,
courts and tribunals necessary to render lawful the conduct of its
business as an operator of telecommunication facilities and provider of
telecommunication services within the said countries, as such is
described in the Offering Memorandum dated April 19, 1999 relating to
the offering (with respect to each of Hermes and Esprit, the
"Business").
3. So far as such counsel is aware, having made due inquiry of
the Company
(a) Neither Hermes nor Esprit received any notice of
proceedings relating to the revocation or
modification of any such Authorizations, and
(b) Each of Hermes and Esprit is conducting its business
in accordance with the Authorizations and is not in
violation of, or in default under, any condition or
other provision of the Authorizations or any national
or regional laws, regulation, rule, order or judgment
with respect to the Authorizations or the conduct of
the Business.
4. Each of the Russian companies listed on Schedule 1 (the
"Russian Companies") has been duly organized and is validly existing as
a legal entity registered under the laws of the Russian Federation and
has the corporate power and authority to carry on its business and to
own, lease and operate its properties as disclosed in the Offering
Memorandum.
A-3-1
<PAGE> 36
5. All of the outstanding shares of capital stock or ownership
interests, as applicable, of each of the Russian Companies have been
duly authorized and validly issued and the issuance of such shares was
properly registered with the appropriate authorities competent
therefor, and, to the best of such counsel's knowledge, to the extent
owned, directly or indirectly, by GTS, are owned free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any
nature. GTS owns, directly or indirectly, that percentage of the issued
and outstanding shares of capital stock or ownership interests of the
Russian Companies set forth on Schedule 1 hereto as being owned by GTS.
6. Except as disclosed in the Offering Memorandum, under
current legislation of the Russian Federation, as applicable, (i)
subject to the qualifications set forth in paragraph (e) hereof,
dividends and other distributions declared and payable on the issued
and outstanding shares of the Russian Companies may be paid to the
foreign shareholders in U.S. Dollars and may be transferred by such
foreign shareholders out of the Russian Federation, as the case may be;
(ii) all such dividends are, and other distributions may be, subject to
withholding taxes unless an international treaty provides otherwise and
the procedures set forth in applicable Russian legislation enabling the
foreign shareholders to avail themselves of such treaty benefits are
followed; and (iii) such dividends and distributions are otherwise free
and clear of any other tax or deduction in the Russian Federation,
provided that all profits and other taxes have been paid by the
relevant Russian Company prior to the payment of such dividends and
distributions.
7. Except as disclosed in the Offering Memorandum, each
Russian Company has such telecommunications permits, licenses and
authorizations of governmental or regulatory authorities, including,
without limitation, licenses issued by the State Committee of the
Russian Federation on Communications and Information (formerly the
Ministry of Communications) (the "Telecommunications Licenses"),
permissions issued by the State Service for Communications Oversight
(also referred to as Gossviaznadzor), and/or radio-frequency
allocations issued by the State Commission for Radio Frequencies (all
of the foregoing, without limitation, being the "Telecommunications
Permits"), which are necessary to own, lease, and operate its
respective properties and to conduct its business as disclosed in the
Offering Memorandum. Such Telecommunications Permits contain no
restriction that is likely to have a material adverse effect on the
business, condition (financial or other), properties, net worth,
results of operations or prospects (a "Material Adverse Effect") of
such Russian Company. Except as disclosed in the Offering Memorandum,
to the best of such counsel's knowledge, each of the Russian Companies
has fulfilled and performed all of its mate-
A-3-2
<PAGE> 37
rial obligations with respect to such Telecommunications Permits and no
event has occurred which creates, or after notice or lapse of time or
both would create, a material likelihood that such Telecommunications
Permits would be revoked or terminated.
8. To the best of such counsel's knowledge, there are no
outstanding subscriptions, rights, warrants, options, calls,
convertible securities, or commitments of sale entitling any person to
purchase or otherwise acquire from any of the Russian Companies any
shares of the capital stock of, or other ownership interest in, any of
such Russian Companies, with the exception of those arising as a matter
of Russian law and those included in the foundation documents
(including the shareholders' agreements), and any amendments thereto,
of the Russian Companies.
9. Except as otherwise set forth in the Offering Memorandum,
there are no legal or governmental proceedings pending or threatened in
writing to which any Russian Company is a party or of which any of its
property is the subject, which could have a Material Adverse Effect on
the Russian Companies as a whole.
A-3-3
<PAGE> 38
Exhibit A-4
FORM OF OPINION OF LOEFF CLAEYS VERBEKE
TO BE DELIVERED PURSUANT TO SECTION 5(a)
1. Each of Commstruct International B.V., Vostok Mobile B.V., Hermes
Europe Railtel B.V. ("HER") and Hermes Europe Railtel Holdings B.V.
(the "Companies") has been duly incorporated and is validly existing as
a "besloten vennootschap met beperkte aansprakelijkheid" (private
company with limited liability) under the laws of the Netherlands.
2. Each of the Companies has the corporate power and authority to own its
property and to conduct its business in accordance with their
respective objects clauses as set forth in Section 2 of their
respective Articles.
3. Under the laws of the Netherlands there are no qualification
requirements to do business for any of the Companies.
4. Under the laws of the Netherlands (i) all dividends and other
distributions declared and payable on the issued and outstanding shares
of the Companies may be paid in Dutch Guilders, (ii) such Dutch
Guilders may be converted into foreign currency that may be transferred
out of the Netherlands, (iii) all such dividends and other
distributions are subject to withholding taxes unless an international
treaty provides otherwise and the procedures set forth in the
Netherlands or other applicable legislation are followed, and (iv) such
dividends and distributions are otherwise free and clear of any other
tax or deduction in the Netherlands.
5. The Shares and Preferred Stock have been duly and validly authorized
and validly issued and are validly outstanding and, except that the HER
Shares II issued to GTS Hermes, Inc. must be paid up by GTS Hermes,
Inc. to their par value upon call by HER, the Shares and Preferred
Stock are non-assessable.
6. The matters of Dutch law mentioned in the paragraphs of the Offering
Memorandum dated as of April 19, 1999 as attached in Schedule II
hereto, are correct.
A-4-1
<PAGE> 1
EXHIBIT 10.3
AGREEMENT FOR THE TRANSFER OF
OMNICOM SHARES
BY AND AMONG:
ALAIN NICOLAZZI
FLORENT MARTENNE-DUPLAN
PHILIPPE AIT YAHIA
(The "Founders")
AND VARIOUS OTHER OMNICOM SHAREHOLDERS
(The "Sellers")
AND
ESPRIT TELECOM HOLDINGS, LIMITED
(The "Purchaser")
and
Global TeleSystems Group, Inc. ("GTS")
Date: 14 April 1999
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<PAGE> 2
- --------------------------------------------------------------------------------
AGREEMENT FOR THE TRANSFER OF OMNICOM SHARES
- --------------------------------------------------------------------------------
BY AND AMONG
Mr. ALAIN NICOLAZZI, an individual of French nationality, residing at 23, rue
des Moulins, 78290 Croissy sur Seine, France,
(hereinafter referred to as "Mr. Nicolazzi"),
NICOM INVESTISSEMENTS ("Company A"), a French societe civile with an issued
capital of 69,978,300 Euros having its registered office at 23 rue des Moulins,
78290 Croissy sur Seine, France, registered with the Trade and Company Registry
of Versailles under number D422439448 represented by Mr. Nicolazzi in his
capacity as "gerant", duly authorized for that purpose,
Ms. Marie Nicolazzi, a child of Mr. Nicolazzi and an individual of French
nationality, residing at 23, rue des Moulins, 78290 Croissy sur Seine, France,
represented by her parents, Mr. Nicolazzi and Mrs. Valerie Nicolazzi, Nee Diez,
AND
Ms. Camille Nicolazzi, a child of Mr. Nicolazzi and an individual of French
nationality, residing at 23, rue des Moulins, 78290 Croissy sur Seine, France,
represented by her parents, Mr. Nicolazzi and Mrs. Valerie Nicolazzi, nee Diez,
AND
Mr. Remi Nicolazzi, a child of Mr. Nicolazzi and an individual of French
nationality, residing at 23, rue des Moulins, 78290 Croissy sur Seine, France,
represented by his parents, Mr. Nicolazzi and Mrs. Valerie Nicolazzi, nee Diez,
(Mr. Nicolazzi, Company A, and the Nicolazzi children collectively are referred
to hereafter as the "Nicolazzi Group")
Mr. FLORENT MARTENNE-DUPLAN, an individual of French nationality, residing at
12, villa Memoris, 94120 Fontenay sous Bois, France,
(hereinafter referred to as "Mr. Martenne-Duplan")
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<PAGE> 3
FINANCIERE DU MARAIS, ("Company B"), a French societe civile with an issued
capital of 12,915,500 Euros having its registered office at 10 avenue Pozzo di
Borgo, 92210 SAINT CLOUD, France, registered with the Trade and Company Registry
of Nanterre under number D422474890 represented by Mr. Martenne-Duplan in his
capacity as "gerant", duly authorized for that purpose,
Mr. Sebastien Martenne-Duplan, a child of Mr. Martenne-Duplan and an individual
of French nationality, residing at 12, villa Memoris, 94120 Fontenay sous Bois,
France, represented by his parents, Mr. Martenne-Duplan and Mrs. Jeanne
Martenne-Duplan nee Nanni,
AND
Mr. Antonin Martenne-Duplan, a child of Mr. Martenne-Duplan and an individual of
French nationality, residing at 12, villa Memoris, 94120 Fontenay sous Bois,
France, represented by his parents, Mr. Martenne-Duplan and Mrs. Jeanne
Martenne-Duplan nee Nanni,
AND
Ms. Magali Martenne-Duplan, a child of Mr. Martenne-Duplan and an individual of
French nationality, residing at 12, villa Memoris, 94120 Fontenay sous Bois,
France, represented by her parents, Mr. Martenne-Duplan and Mrs. Jeanne
Martenne-Duplan nee Nanni,
(Mr. Martenne-Duplan, Company B, and the Martenne-Duplan children collectively
are referred to hereafter as the "Martenne-Duplan Group")
Mr. PHILIPPE AIT YAHIA, an individual of French nationality, residing at 21, rue
des Hauts Closeaux 92310, Sevres, France,
(hereinafter referred to as "Mr. Ait Yahia"),
HESPERIA ("Company C"), a French societe civile with an issued capital of
7,372,400 Euros having its registered office at 21 rue des Hauts Closeaux 92310,
Sevres, France, registered with the Trade and Company Registry of Nanterre under
number D422474176 represented by Mr. Ait-Yahia in his capacity as "gerant", duly
authorized for that purpose,
Mr. Samuel Ait Yahia, a child of Mr. Ait Yahia and an individual of French
nationality, residing at 21 rue des Hauts Closeaux 92310, Sevres, France,
represented by his parents, Mr. Ait Yahia and Ms. Sandrine Nicourd,
AND
(Mr. Ait Yahia, Company C, and the Ait Yahia child collectively are referred to
hereafter as the "Ait Yahia Group")
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<PAGE> 4
(Mr. Nicolazzi, Mr. Martenne-Duplan and Mr. Ait Yahia being hereinafter
collectively referred to as the "Founders")
(The Nicolazzi Group, the Martenne-Duplan Group, the Ait Yahia Group, being
hereinafter collectively referred to as the "Sellers")
(Any of the Nicolazzi Group, the Martenne-Duplan Group or the Ait Yahia Group,
being hereinafter sometimes referred to singularly as a "Group")
AND
Esprit Telecom Holdings, Limited, a corporation duly registered in England with
an authorized capital of 1,00,000 pounds sterling, having its registered office
at Minerva House, Velpy Street, Reading, RG1 1AR, represented by Mr. Robert
Schriesheim, duly authorized for that purpose,
(hereinafter referred to as the "Purchaser")
Global TeleSystems Group, Inc. ("GTS"), a Delaware corporation having its
offices at 1751 Pinnacle Drive, North Tower, 12th Floor, McLean, Virginia 22102,
represented by Mr. Robert Schreisheim in his capacity as Executive Vice
President and Chief Corporate Development Officer, duly authorized for that
purpose.
[remainder of page intentionally left blank]
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<PAGE> 5
RECITALS
WHEREAS, Edison is a French corporation ("societe anonyme") with, as of December
31, 1998, an authorized capital of 9,500,205 French francs consisting of
1,900,041 shares with a par value of 5 French francs per share, having its
registered office at 86 rue de Thiers, 92100, Boulogne Billancourt, registered
with the Nanterre Trade and Company Registry under number B392 156485
(hereinafter referred to as the "Company");
WHEREAS, the Sellers own and hold 927,357 shares of common stock in the Company
(hereinafter referred to as the "Shares"), representing, as of December 31,
1998, 48.81% of the issued and outstanding capital of the Company;
WHEREAS, the Company is listed on the Nouveau Marche of the Paris Bourse
("Nouveau Marche");
WHEREAS, the Purchaser has informed the Sellers of its intent to acquire the
Shares and any of the Company's common stock and convertible bonds and will
undertake to make an offer (an "Offer") to all of the minority shareholders of
the Company and all of the holders of the Company's convertible bonds to
purchase the remaining common stock and convertible bonds of the Company;
WHEREAS, in connection with the purchase of the Shares, the Purchaser also
intends to purchase common stock of the Company owned by Mr. Laurent Desportes
pursuant to a separate agreement of even date herewith;
WHEREAS, the Purchaser has informed the Sellers of its intent to transfer all of
the Shares and any of the Company's common stock acquired pursuant to the Offer
to a subsidiary of the Purchaser, Esprit Telecom France S.A.; and
WHEREAS, the Sellers have agreed to transfer the Shares to the Purchaser
pursuant to the terms and subject to the conditions set forth in this Agreement
and the Purchaser has agreed to acquire the Shares pursuant to the terms and
subject to the conditions set forth in this Agreement.
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<PAGE> 6
IT HAS BEEN AGREED AS FOLLOWS
ARTICLE 1. TRANSFER
1.1 Sale of the Shares
Subject to the terms and conditions set forth in this Agreement, each
Seller hereby undertakes to transfer, on the Transfer Date (as defined
below), all of the Shares it owns and holds in the Company (the number
of Shares in the Company held by each Seller is set forth in Appendix
1.1) to the Purchaser who hereby undertakes to acquire such Shares, on
the Transfer Date, in consideration of which each Seller will receive
the purchase price as set forth in Article 1.2.
The Purchaser shall acquire the interest in and title to the Shares and
all the rights and dividends deriving therefrom and shall be subrogated
in all the rights and obligations relating to the Shares as of the
Transfer Date (as defined below). Accordingly, the Purchaser shall be
entitled to be paid any dividend paid after the Transfer Date.
The Sellers and the Purchaser shall take any action required for such
transfer to be possible in compliance with French stock exchange
regulations. The Purchaser and the Sellers shall appoint any brokers in
connection with the transfer of the Shares.
1.2 Purchase Price
(i) The consideration for the sale of the Shares shall be equal to
a per Share price (the "Purchase Price") of 195 Euros composed
of: (a) 97.50 Euros per Share in immediately available funds
and (b) 97.50 Euros per Share in the to be newly issued common
shares ("GTS Shares") of Global TeleSystems Group, Inc.
("GTS"). GTS undertakes on behalf of the Purchaser to issue
the GTS Shares to each Seller as part of the consideration
payable by the Purchaser. The value of the GTS Shares is
53.5842 Euros, which has been determined by taking the average
of each of the daily closing quotations of GTS Shares on the
NASDAQ market as published in The Wall Street Journal for the
period March 26, 1999 through and including April 9, 1999,
converted to Euros at the exchange rate of 1.0778 Euros per
U.S. dollar.
The aggregate purchase price shall be divided among the
Sellers in the following manner:
- 27,786,295.96 Euros and 172,852 GTS Shares shall be the
purchase price of the shares held by Mr. Nicolazzi;
- 5,849,886.39 Euros and 109,176 GTS Shares shall be the
purchase price of the shares held by Mr.
Martenne-Duplan;
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<PAGE> 7
- 9,396,666.43 Euros and 105,662 GTS Shares shall be the
purchase price of the shares held by Mr. Philippe Ait
Yahia;
- 2,744,072.06 Euros and 5,691 GTS Shares shall be the
purchase price of the shares held by Ms. Marie
Nicolazzi;
- 2,744,072.06 Euros and 5,691 GTS Shares shall be the
purchase price of the shares held by Ms. Camille
Nicolazzi;
- 2,744,072.06 Euros and 5,691 GTS Shares shall be the
purchase price of the shares held by Mr. Remi Nicolazzi;
- 1,669,260.13 Euros and 27,074 GTS Shares shall be the
purchase price of the shares held by Mr. Sebastien
Martenne-Duplan;
- 1,669,260.13 Euros and 27,074 GTS Shares shall be the
purchase price of the shares held by Mr. Antonin
Martenne-Duplan;
- 1,669,260.13 Euros and 27,074 GTS Shares shall be the
purchase price of the shares held by Ms. Magali
Martenne-Duplan;
- 2,808,032.52 Euros and 5,822 GTS Shares shall be the
purchase price of the shares held by Mr. Samuel Ait
Yahia;
- 24,058,906.60 Euros and 931,275 GTS Shares shall be the
purchase price of the shares held by Company A;
- 6,497,009.22 Euros and 133,476 GTS Shares shall be the
purchase price of the shares held by Company B;
- 779,979.46 Euros and 130,838 GTS Shares shall be the
purchase price of the shares held by Company C;
it being understood that the cash and GTS Shares received in
consideration for the Company Shares held in "nue propriete"
by the children of the Founders will be held by them in "nue
propriete".
(ii) The GTS Shares (a) shall be unregistered, validly
issued, and fully paid-up and (b) shall have the same
rights and obligations as other shares of GTS on the
Transfer Date, including but not limited to the right to
receive any dividends declared by GTS on and after the
Transfer Date.
Each of the Sellers hereby undertakes that:
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<PAGE> 8
(a) immediately after the Transfer Date, he shall be
permitted to transfer to third parties up to fifty
percent (50%) of the GTS Shares (the "Transferable
GTS Shares") in accordance with applicable
securities law, including those referenced in
Article 1.2(ii)(d); and
(b) on the Transfer Date (as defined below), he shall
cause each of the Guarantors (as defined below) to
escrow with an independent escrow agent selected by
Purchaser pursuant to three (3) escrow agreements
(the "Escrow Agreements") to be negotiated in good
faith before the Transfer Date, GTS Shares (the
"Escrowed Shares") in the following manner: Company
A shall escrow 248,003 GTS Shares representing
66.45% (the "Nicolazzi Percentage"); Company B
shall escrow 71,640 GTS Shares, representing 19.19%
(the "Martenne-Duplan Percentage"); and Company C
shall escrow 53,601 GTS Shares, representing 14.36%
(the "Ait Yahia Percentage") (sometimes referred to
hereafter generally as a "Guarantor Percentage").
On the Transfer Date, the Escrowed Shares have a
value of twenty million (20,000,000 Euros) based on
the value of each GTS Share of 53.5842 Euros. The
Escrowed Shares shall be treated respectively in
accordance with the Escrow Agreements which shall
provide, inter alia, that, until the later of June
30, 2000 and thirty days after the filing by GTS of
its 1999 Form 10-k, the Guarantors shall not
transfer the Escrowed Shares; and
(c) with respect to the remaining GTS Shares (i.e., the
GTS Shares minus the sum of the Transferable GTS
Shares and the Escrowed Shares; the "Remaining GTS
Shares"), no Seller shall transfer any such GTS
Shares until six months after the Transfer Date
provided, however, that the Remaining Shares may be
transferred in accordance with applicable
securities laws, including those referenced in
Article 1.2(ii)(d); and
(d) prior to the registration, it will not sell or
transfer all or any part of the GTS Shares unless
and until it shall first have given notice to GTS
describing in reasonable detail such sale or
transfer and have furnished to GTS either (i) an
opinion of U.S. legal counsel, (selected by such
Seller and in form and substance reasonably
satisfactory to Purchaser) to the effect that the
proposed sale or transfer may be made without
registration under the Securities Act of 1993, as
amended (the "Securities Act") or (ii) an
interpretative letter from the staff of the
Securities and Exchange Commission ("SEC") to the
effect that no enforcement action will be
recommended if the proposed sale or transfer is
made without registration under the Securities Act.
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<PAGE> 9
Notwithstanding the foregoing, no restriction on
the right of the Sellers to transfer their
respective GTS Shares shall apply to:
(i) Sales or transfers of GTS Shares by a
Seller to an affiliate or relative of such
Seller; provided that such affiliate or
relative agrees to be bound by the terms and
conditions of this Agreement to the same
extent as the transferor Seller;
(ii) Sales or transfers of GTS Shares made
in reliance upon Rule 144 or 145 (or any
successor provision) under the Securities
Act;
(iii) Sales or transfers of GTS Shares by
operation of law, whether pursuant to a
statutory merger or consolidation or
otherwise;
(iv) Sales or transfers of GTS Shares
pursuant to and following the commencement
of any tender offer or exchange offer by GTS
or any third party to purchase outstanding
GTS Shares or pursuant to any business
combination transaction or other transaction
approved by the shareholders of GTS;
(v) pledges or hypothecations of GTS Shares
to one or more bona fide financial
institutions and any foreclosure thereof;
and
(vi) Sales or transfers of GTS Shares
pursuant to an effective registration
statement filed under the Securities Act;
provided, however, that in no event shall Escrowed
Shares be transferred prior to the end of the six
month escrow period unless they are replaced by
assets of an equivalent value and in form acceptable
to Purchaser in its sole discretion; provided,
however, that the Purchaser agrees that Euros, U.S.
dollars or French francs in an amount equal to the
then-current market value of the Escrowed Shares or
the securities offered in connection with the offer
shall be acceptable to the Purchaser.
Purchaser shall, subject to the restrictions of this
Article, and upon request of the Sellers, assist and
cooperate with the Sellers for the purpose of any
transfer of their respective GTS Shares.
Prior to the Registration Date, Purchaser may cause
GTS to place legends as follows on the certificates
for the GTS Shares concerning the restrictions set
forth in the preceding paragraphs of this Article 1.2
and may refuse to transfer any of such GTS Shares on
its books should the holder thereof attempt to
transfer any of them otherwise than in compliance
with the preceding paragraphs of this Article 1.2:
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<PAGE> 10
Each of the Transferable GTS Shares, the Escrowed
Shares and the Remaining GTS Shares shall be legended
as follows:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1993, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE OR OTHER SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE TRANSFERRED
UNLESS SUCH TRANSFER IS MADE IN CONNECTION
WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT OR SUCH ACT DOES NOT APPLY."
In addition, the Escrowed Shares shall be legended as
follows:
"THE SECURITIES EVIDENCED HEREBY ARE SUBJECT
TO THE TERMS OF THAT CERTAIN ESCROW
AGREEMENT DATED AS OF APRIL 21, 1999 WHICH,
INTER ALIA, PROHIBITS TRANSFER OF THESE
SECURITIES UNTIL THE LATER OF JUNE 30, 2000
AND THIRTY (30) DAYS AFTER THE FILING BY
ISSUER OF ITS 1999 FORM 10-K."
In addition, the Remaining GTS Shares shall be legended as
follows:
"THE SECURITIES EVIDENCED HEREBY MAY NOT BE
TRANSFERRED UNTIL OCTOBER 21, 1999."
1.3 Transfer Date
(i) The transfer of the Shares will take place as soon as
possible, but in any event no later than five (5) business
days from the date of execution of this Agreement (the
"Transfer Date").
(ii) On the Transfer Date:
(a) the Purchaser and the Sellers shall take any action
necessary for the transfer of the Shares in
compliance with the French stock exchange
regulations;
(b) concurrent with, and subject to, Purchaser's receipt
of the items set forth in Section 1.3(ii) (d), the
Purchaser shall:
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<PAGE> 11
- deliver to each of the Sellers the cash part
of the Purchase Price set forth in Article
1.2(i) in immediately available funds, by
wire transfer or bank check as requested by
such Seller;
- deliver all documents evidencing the issue
and allotment to the Sellers of the GTS
Shares, including, without limitation,
legended share certificates;
- provide to each of the Sellers a legal
opinion in a form reasonably satisfactory to
Sellers;
- provide to the Guarantors the duly executed
(by Purchaser) Escrow Agreements;
- provide to the Sellers a duly executed (by
Purchaser) original of the Consultancy
Agreements (as defined below);
- provide to the Sellers a certificate duly
executed by the Purchaser (the "Purchaser's
Certificate") affirming that, to the best
knowledge of the Purchaser, no material
adverse change in the situation of GTS has
occurred from and after the date of execution
of this Agreement through and including the
Transfer Date;
(c) concurrent with, and subject to, Purchaser's
receipt of the items set forth in Section
1.3(ii) (d), GTS shall:
- provide to the Sellers an officer's
certificate of good standing of GTS in a form
reasonably acceptable to Sellers; and
- provide to the Sellers a duly executed (by
GTS) original of the Registration Rights
Agreement (as defined below).
(d) concurrent with and subject to the Seller's
receipt of the items set forth in 1.3(ii)(b)
and (c), the Sellers shall deliver the
following documents to the Purchaser:
- the duly executed share transfer forms in
respect of the Shares;
- a certificate duly executed by the Guarantors
(the "Guarantors' Certificate") affirming
that, to the best knowledge of the Founders,
no material adverse change in the situation
of the Company has occurred from and after
the date of execution of this Agreement
through and including the Transfer Date;
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<PAGE> 12
- a true and correct copy of the "avis de
reunion" to be published in the BALO and the
minutes of the board meeting convening an
ordinary general meeting of the shareholders
of the Company (I) appointing four (4)
additional board members (Messrs. Hans Peter
Kohlhamer, Pierre Henri Drevon, Jean-Pierre
Vandromme, and Timothy Enneking) nominated by
Purchaser to the Company's board of directors
and (II) giving the advice of the board as to
the Offer and (III) amending the Stock Option
Plan;
- the minutes of a board meeting recording the
resignation of Mr. Ait Yahia and Mr.
Martenne-Duplan as managing directors
("directeurs generaux") and nominating one
substitute managing director (Pierre-Henri
Drevon) ;
- certificate of the Founders, acting as
directors of the Company, stating that they
shall not take without prior approval of the
Purchaser, any action out of the ordinary
course of business, except for actions deemed
by the Founders to be reasonably required to
preserve the going concern value of the
Company, beginning on the date of execution
of this Agreement until the shareholders'
meeting;
- the legal opinion of (I) Sellers' counsel,
(II) "Notaire", and (III) special counsel to
the Sellers, each in a form reasonably
satisfactory to the Purchaser; - the duly
executed (by the Founders) Consultancy
Agreements (as defined below); and
- the duly executed (by the Guarantors) Escrow
Agreements to be negotiated in good faith
prior to the Transfer Date.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
Each of Company A, Company B, and Company C (each, a "Guarantor"; collectively,
the "Guarantors") severally and not jointly ("responsabilite conjointe et
non-solidaire") represents and warrants to the Purchaser as of the date hereof
as follows:
2.1 Organization of the Company
The Company is a corporation duly organized and validly existing under
the laws of France and has all necessary corporate power and authority
to own, operate and lease its properties and to conduct its business as
presently conducted.
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<PAGE> 13
The Company has delivered to the Purchaser true and correct copies of
its Articles of Incorporation ("statuts"), and all amendments thereto,
and has delivered or provided for the Purchaser's review true and
correct copies of all of the minutes of all directors' and
shareholders' meetings held prior to the date hereof.
The Company and the Subsidiaries of the Company (as defined below) have
not ceased making payments to creditors nor are they insolvent or
unable to pay their debts ("cessation de paiement").
2.2 Capital Structure
As of December 31, 1998, the issued capital stock of the Company
consists of 1,900,041 shares of common stock of which 1,900,041 shares
were issued and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. No Shares are
subject to preemptive rights, rights of first refusal, or any other
similar rights and, to the best knowledge of the Guarantors, no shares
of common stock of the Company are subject to preemptive rights, rights
of first refusal, or any other similar rights.
129,894 convertible bonds and 55,620 stock options are outstanding, and
the Company has not issued any other convertible bonds or stock
options. Beginning on December 31, 1998 through and including the date
immediately preceding the execution of this Agreement, two thousand
nine hundred fifty-three (2,935) bonds have been converted into common
shares of the Company and the Company has not otherwise issued capital
stock of the Company in addition to that set forth in the immediately
preceding paragraph. Except as provided herein, the Company has not
issued any other securities or rights giving access to capital or
voting rights.
There exists no contract or commitment of any nature, whether signed or
unsigned, with a view to allocating or issuing shares, or giving any
person the right to buy or pre-empt, in whole or in part, the Shares of
the Company.
Save as provided herein and as set forth in Appendix 2.2.1, there are
no outstanding options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of common stock of the Company or
arrangements by which the Company is or may become bound to issue
additional shares of common stock of the Company.
Stock options have been granted to the Company's employees set forth in
Appendix 2.2.2 hereto and in accordance with that certain Reglement du
Plan d' Options de Souscriptions 1997/1999 (the "Stock Option Plan").
The Company has not received any notice from a shareholder stating that
it owns two percent (2%) or more of the common stock of the Company.
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<PAGE> 14
The Shares represent no less than 48.73% of the issued share capital
and each Share represents at least one voting right in the Company as
of the date of execution of this Agreement.
2.3 Shareholders in other companies
All shares or other shareholdings or rights that the Company owns and
holds in any other company, partnership or legal entity (hereinafter
referred to as the "Subsidiaries of the Company") are set forth in
Appendix 2.3. These shareholdings or other rights are held free of any
liens, privileges, charges, guarantees, options, or other rights.
2.4 Licenses
The Company and the Subsidiaries of the Company have obtained all
licenses, permits, authorizations and approvals necessary to conduct
its business. In particular, the Company (a) has received in France
from the Autorite de Regulation des Telecommunications ("l'ART") the
authorization to use a 5 prefix number, short numbers ("3060" and
"3055") and validly owns French national network and service operator's
license ("L33-1" and "L34-1") and (b) is the beneficiary of a "regime
d'annonce" in Switzerland.
2.5 Financial Statements
The consolidated accounts (and their appendices) as of December 31,
1998 (hereinafter referred to as the "Financial Statements of the
Company"), a copy of which is set forth in Appendix 2.5.1, have been
certified true and correct by the statutory auditors, comply with
French GAAP and fairly present the assets and liabilities, financial
situation and results of the Company as of December 31, 1998. In
addition, the unaudited total revenue, revenue breakdown, and number of
minutes figures provided with respect to the period beginning on
January 1, 1999 through and including February 28, 1999, attached as
Appendix 2.5.2 hereto, fairly represented as of the date thereof, and
fairly represent as of the date hereof, the total revenue, revenue
breakdown and number of minutes of the Company.
2.6 Intermediary Period
Except as set forth on Appendix 2.6., from December 31, 1998 through
and including the date of execution of this Agreement, (i) the
management of the Company has been carried out using the same methods
and in a manner consistent with the former management thereof, so as to
ensure the continuity of the running of the business, (ii) there has
been no change in the assets and liabilities (whether accrued,
absolute, contingent, off balance sheet or otherwise), financial
situation or results of the Company or of the Subsidiaries of the
Company constituting or that, with the passage of time, would
constitute a material adverse impact and (iii) the Company has neither
declared nor paid a dividend with respect to its common stock.
Moreover, except as set forth in Appendix 2.6., the
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<PAGE> 15
Company has not entered into any agreement or made any decision outside
the ordinary course of business.
2.7 Taxes
The Company and the Subsidiaries of the Company have (i) duly filed all
required tax returns in accordance with the applicable laws and
regulations and (ii) have paid all taxes which are due and payable,
other than those presently payable without penalty or interest and
other than those which are subject of a good faith contest.
2.8 Litigation
Except as set forth in Appendix 2.8 hereto, neither the Company nor the
Subsidiaries of the Company are engaged in any judicial, criminal,
administrative or arbitral proceedings, as plaintiff or defendant, in
which the claim exceeds on fifteen thousand (15,000) Euros and, to the
best of the Guarantors' knowledge, no such proceedings have been
threatened.
2.9 Intellectual Property
The Company and the Subsidiaries of the Company own or are entitled to
the exclusive use of all trademarks, trade names, software, domain name
and more generally all intellectual property rights, if any, that they
use in the course of their business. None of these rights infringes the
rights of any party, except to the extent such infringement would not
have a material adverse effect on the rights of such party. The
documentation pertaining to trademark and trade names is set forth in
Appendix 2.9 hereto.
Except as set forth in Appendix 2.8 hereto, no claims, actions or
litigation with respect to the aforesaid intellectual property rights
have been asserted or are, to the Sellers' knowledge, threatened by any
litigation, arbitration or administrative proceeding the outcome of
which could reasonably be expected to have a material adverse effect on
the ownership and use of such intellectual property rights by the
Company or the Subsidiaries of the Company.
2.10 Lock-up
As of the date hereof, la Societe du Nouveau Marche ("SNM") has
expressly released the Sellers from their undertakings not to transfer
their respective Shares for a three (3) year period starting from the
date the Company's Shares were listed on the Nouveau Marche.
2.11 Form Contracts
The unexecuted contracts provided by Sellers to Purchaser for its
review during the due diligence period do not differ in any material
respects from the contracts executed and delivered by the Company.
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<PAGE> 16
2.12 Change of Control
On and after the Transfer Date, all contracts and agreements made
available to Purchaser to which the Company was a party and which were
in force prior to the Transfer Date shall continue to be in full force
and effect in accordance with the terms thereof, except those contracts
and agreements capable of being terminated of right by the counterparty
on account of a change in control of the Company and those set forth in
Appendix 2.12. All material contracts and agreements to which the
Company is a party have been made available to the Purchaser.
ARTICLE 3. FURTHER REPRESENTATIONS AND WARRANTIES OF THE
GUARANTORS
Each of the Guarantors further represents and warrants, but only as to itself
and each of the members of its Group, to the Purchaser that, on the date hereof,
the representations and warranties set forth below are true and correct:
3.1 Power and authority
Neither the Guarantor nor any member of its Group is subject to any
contractual or other restriction or impediment which in any way
restricts his rights or capacity to validly enter into and be bound by
the terms of this Agreement or on the execution of the agreements to be
executed by any of the Sellers referenced in Article 1.3(ii)(d)
(collectively, the "Seller Agreements"), and to carry out all of his
obligations hereunder and thereunder. Each Guarantor and each member of
the Guarantors' Group has the full power, authority and capacity to
enter into and sign this Agreement and the other Seller Agreements.
Upon execution and delivery of this Agreement and the other Seller
Agreements by all parties, the Seller Agreements shall be enforceable
against each Guarantor and each member of its Group in accordance with
their terms and the obligations of each Guarantor and each member of
its Group set forth in the Seller Agreements shall be binding on it.
3.2 Ownership of the Shares
The Shares of each member of the Guarantor's Group are freely
negotiable and are free from any liens, pledges or other rights
whatsoever. On the Transfer Date, provided that the Purchaser shall not
have taken any action adverse to the granting of good and marketable
title, the Purchaser shall own good and marketable title to the Shares
and the Shares of each member of the Guarantor's Group, and the Shares
of each member of the Guarantor's Group shall be free from any liens,
pledges, or other rights whatsoever.
The transfer of title of the Shares of the Guarantor's Group does not
require any administrative or public consent and does not breach any of
the Sellers' contractual or other obligations and is not contrary to
any laws or regulations.
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<PAGE> 17
3.3 Securities law
Each of the Sellers acknowledges that (a) the GTS Shares are not being
registered under the Securities Act on the ground that the issuance
thereof is exempt from registration under Section 4(2) of the
Securities Act as not involving any public offering and (b) GTS's
reliance on such exemption is predicated in part on the representation
made to it by the Sellers that each (i) has such knowledge and
experience in financial and business matters that he is capable of
evaluating the merits and risks of acquiring the GTS Shares and is
capable of bearing the economic loss of this entire investment and (ii)
is acquiring the GTS Shares for investment for his own account with no
present intention of dividing its participation with others or
reselling or otherwise distributing the same.
3.4 Disclaimer
The Purchaser hereby acknowledges that, except as expressly set forth
in Articles 2 and 3, the Guarantors make no representations or
warranties with respect to the subject matter of this transaction,
including, without limiting the foregoing, any representations or
warranties with respect to the information contained in the data room.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to each of the Sellers on the date hereof,
as follows:
4.1 Organization of the Purchaser
The Purchaser is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation and has all
necessary corporate power and authority to own, operate and lease its
properties and to conduct its business as presently conducted.
The Purchaser has not ceased making payments to creditors nor is it
insolvent or unable to pay its debts.
4.2 Power and authority
Neither the Purchaser nor GTS is subject to any contractual or other
restriction or impediment which in any way restricts its rights or
capacity to validly enter into and be bound by the terms of this
Agreement and, on the execution of the agreements to be executed by
Purchaser or GTS referenced in Article 1.3(ii)(b) and (c)
(collectively, with this Agreement, the "Purchaser Agreements"), and to
carry out all of his obligations hereunder and thereunder. The
Purchaser and GTS have the full power, authority and capacity to enter
into and sign the Purchaser Agreements. Upon the execution and delivery
of the Purchaser Agreements by all parties, the Purchaser Agreements
shall be enforceable against the Purchaser, and all provisions
specifically applicable to GTS shall be enforceable against GTS, in
accordance with their terms and the obligations of each of the
Purchaser and GTS shall be binding upon it.
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<PAGE> 18
4.3 Disclosure
GTS has made public disclosure of all material information with respect
to GTS in accordance with applicable SEC rules and regulations.
4.4 Disclaimer
Sellers hereby acknowledge that, except as expressly set forth in
Article 4, Purchaser makes no representation or warranty with respect
to the subject matter of this transaction.
ARTICLE 5. REPRESENTATION AND WARRANTY OF GTS
GTS represents and warrants to each of the Sellers, as of the date hereof, the
following:
5.1 Title
On the Transfer Date, provided that the Sellers shall not have taken
any action adverse to the granting of good and/or marketable title to
the GTS Shares, the Sellers shall have good title to the GTS Shares
and, subject to the terms of the Registration Rights Agreement and U.S.
securities laws, marketable title to the GTS Shares and GTS shall
indemnify the Sellers in the event GTS breaches this representation.
5.2 Disclaimer
Seller hereby acknowledges that, except as expressly set forth in
Article 5, GTS makes no representation or warranty with respect to the
subject matter of this transaction.
ARTICLE 6. INDEMNIFICATION
6.1 Indemnification obligation
(i) Subject to the terms and conditions set forth hereafter and
provided for herein, each Guarantor hereby undertakes,
severally and not jointly ("responsabilite conjointe et
non-solidaire") (the "Purchaser Indemnity") to indemnify and
pay:
(a) 100% of any direct and non-contingent and liquidated damages
incurred and paid for by the Purchaser including, without
limitation, amounts related to any claim, action, proceeding,
litigation or similar actions (including reasonable attorneys'
fees and expenses) as a result of the breach or violation of,
a misstatement in, an omission with respect to, any
representations and warranties by such Guarantor set forth in
Article 3 of this Agreement;
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<PAGE> 19
(b) an amount corresponding to its Guarantor Percentage of 100% of
any direct and non-contingent and liquidated damages incurred
and paid for by the Purchaser including, without limitation,
amounts related to any claim, action, proceeding, litigation
or similar actions (including reasonable attorneys' fees and
expenses) as a result of litigation pending before the
Tribunal de Commerce de Nanterre with respect to Intrad Inc.;
and
(c) an amount corresponding to its Guarantor Percentage of 100% of
any direct and non-contingent liquidated damage actually
incurred and paid for by the Company or any Subsidiaries of
the Company as a result of the breach of, a misstatement in,
an omission with respect to, any warranty or representation
set forth in Article 2 of this Agreement including, without
limitation, amounts related to any claim, action, proceeding,
litigation or similar actions (including reasonable attorneys'
fees and expenses) with respect to facts in existence before
the date hereof,.
The amount of any Purchaser Loss or Intrad Loss (each as defined below)
under Article 6.1(i)(b) or (c) shall be reduced by
- any increase in the value of any of the Company's assets, including
the amount of any provisions which are recovered ("reprise sur
provisions") and/or decrease of any of the Company's liabilities
appearing prior to 31 December 1998 compared to their respective value
accounted for in the Financial Statements of the Company;
- the amount of any tax savings, including the increase of the loss
carried forward, or any benefit accrued to the Company in connection
with the recording of such Purchaser Loss or Intrad Loss.
- any amount payable by a third party including (a) any payments due to
the Company by an insurance company to indemnify the Company for such
Purchaser Loss or Intrad Loss and (b) any indemnification obligation of
any third party to the Company. In the event that any Purchaser Loss or
Intrad Loss may be covered by insurance or indemnified by a third
pursuant to an indemnity, the Purchaser shall not have any right to
Purchaser Indemnity until the Purchaser shall have exhausted all
insurance claims or claims for indemnification that may exist against
any such third party, and
- the amount of any provision or reserve relating to the Purchaser Loss
or Intrad Loss as recorded in the Financial Statements of the Company.
(ii) Subject to the terms and conditions set forth hereafter and
provided for herein, the Purchaser hereby undertakes to
indemnify and pay to the Sellers (the "Seller Indemnity"),
100% of any direct non-contingent and liquidated damages
incurred and paid for by the Sellers as a result of the breach
or violation of a misstatement in, an omission with respect
to, representations and warranties set forth in Article 4 of
this Agreement, including, without limitation, amounts related
to any claim,
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<PAGE> 20
action, proceeding, litigation or similar actions (including
reasonable attorneys' fees and expenses).
(iii) For the purposes of this Article 6, any amount referenced to
in Article 6.1(i)(a) and 6.1(i)(c) shall be referred to as a
"Purchaser Loss" , any amount referenced in Article 6.1(i)(b)
shall be referred to as an "Intrad Loss", and any amount
referenced in Article 6.1(ii) shall be referred to as a
"Seller Loss."
6.2 Limitation and mitigation of liability
(i) Guarantors' liability
For the purposes of this Article 6, it is understood that:
(a) the Purchaser shall undertake to mitigate or reduce
all claims which could give rise to Guarantors'
liability under this Agreement. Purchaser Losses that
have been incurred as a result of the Purchaser's
failure to use its bests efforts to mitigate such
Purchaser Losses shall not be taken into
consideration;
(b) a Purchaser Loss that results from a change in the
laws, regulations, interpretations or practices
applicable to the Company with effect after the date
hereof shall not give rise to the payment of a
Sellers Indemnity;
(c) with respect to Purchaser Losses resulting from
claims made by third parties, only the amount which
has been definitively and finally determined and paid
according to a final, non-appealable and binding
decision of any competent court, arbitral tribunal or
administrative authority shall be taken into account
for the calculation of the Sellers Indemnity;
(d) the Guarantors shall not be liable with respect to a
claim for any Purchaser Loss to the extent that such
Purchaser Loss is actually recovered by the Purchaser
from any third party (including insurance companies)
or could have been recovered by the Purchaser had the
Purchaser used its best efforts to mitigate such
Purchaser Loss;
(e) the Purchaser shall not be entitled to recover
damages for any misrepresentation or for the breach
of any of the representations and warranties under
Articles 2 and 3 or otherwise obtain reimbursement or
restitution more than once in respect of the same
facts or matters giving rise to such
misrepresentation or breach;
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<PAGE> 21
(f) no warranty in favor of the Purchaser, whether
statutory or contractual, other that those contained
in this Agreement, may be invoked by the Purchaser
against the Guarantors;
(g) Purchaser Losses that only result in (a) a charge
being deferred (including but not limited to the
following, a reassessment by the relevant authorities
of depreciation allowances or reserves), (b) a profit
being deferred from one tax year to another or (c) a
tax credit being imputable will not be taken into
account for the calculation of the Sellers Indemnity;
(h) the Purchaser shall not be entitled to recover any
Purchaser Loss or Losses for any misrepresentation
and/or for any breach of any of the representations
and warranties or otherwise obtain any reimbursement
or restitution in respect of any information which is
accurately disclosed in this Agreement and any
Appendices hereto. For the avoidance of doubt, any
disclosure made with respect to any representation of
warranty made by the Guarantors hereunder shall apply
to all other representations and warranties as if
such disclosure was specifically made in respect
thereof;
(i) the Purchaser represents that it is not aware, at the
date of this Agreement, of any matter which could
give rise to a claim against the Guarantors.
The provisions of this Article 6.2 (i) shall not be applicable
to Purchaser Loss resulting from any misrepresentation and/or
for any breach of the representations and warranties set forth
in Article 3.
(ii) Liability of Purchaser
For the purposes of this Article 6, it is understood that:
(a) the Guarantors undertake to mitigate or reduce all
claims which could give rise to Purchaser's or GTS's
liability under this Agreement. Only Seller Losses in
excess of Seller Losses that would have been incurred
as a result of the Guarantors' failure to use their
respective best efforts to mitigate such Seller
Losses shall not be taken into consideration;
(b) a Seller Loss that results from a change in the laws,
regulations, interpretations or practices applicable
to the Purchaser or GTS with effect after the date
hereof shall not give rise to the payment of the
Seller Indemnity;
(c) with respect to Seller Losses resulting from claims
made by third parties, only the amount which has been
definitively and finally determined and paid
according to a final, non-appealable and binding
decision of any
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<PAGE> 22
competent court, arbitral tribunal or administrative
authority shall be taken into account for the
calculation of the Indemnity;
(d) neither the Purchaser nor GTS shall be liable with
respect to a claim for any Seller Loss to the extent
that such Seller Loss is actually recovered by the
Guarantors from any third party (including insurance
companies) or could have been recovered by the
Guarantors had the Guarantors used their best efforts
to mitigate such Seller Loss;
(e) the Guarantors shall not be entitled to recover
damages for any misrepresentation or for the breach
of any of the representations and warranties under
Articles 4 and 5 or otherwise obtain reimbursement or
restitution more than once in respect of the same
facts or matters giving rise to such
misrepresentation or breach;
(f) no warranty in favor of the Guarantor, other than
those contained in this Agreement, may be invoked by
the Guarantor against the Purchaser;
(g) Seller Losses that only result in (a) a charge being
deferred (including but not limited to the following,
a reassessment by the relevant authorities of
depreciation allowances or reserves), (b) a profit
being deferred from one tax year to another or (c) a
tax credit being imputable will not be taken into
account for the calculation of the Indemnity;
(h) the Guarantors shall not be entitled to recover any
Seller Loss or Losses for any misrepresentation
and/or for any breach of any of the representations
and warranties or otherwise obtain any reimbursement
or restitution in respect of any information which is
accurately disclosed in this Agreement and any
Appendixes hereto;
(i) the Guarantors shall not be entitled to recover any
Seller Loss or Losses for any misrepresentation
and/or for any breach of any of the representations
and warranties or otherwise obtain any reimbursement
or restitution in respect of any information which is
accurately disclosed in this Agreement and any
Appendices hereto. For the avoidance of doubt, any
disclosure made with respect to any representation or
warranty made by the Purchaser hereunder shall apply
to all other representations and warranties as if
such disclosure was specifically made in respect
thereof;
The provisions of this Article 6.2 (ii) shall not be applicable to Seller Loss
resulting from any misrepresentation and/or for any breach of the
representations and warranties set forth in Articles 4.1, 4.2, and 5.
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<PAGE> 23
6.3 Notification by the Purchaser
Within thirty (30) days of the occurrence of any event which shall give
rise to a Purchaser Loss or Intrad Loss under the terms of the
Agreement, but the amount of which has not been definitively and
finally determined as provided for in Article 6.1 (i) of this
Agreement, such event shall be notified to the representative of the
Guarantors (except for Purchaser Loss or Intrad Losses relating to
taxes and social security, for which such delay shall be reduced to ten
(10) days after receipt of written notification from the relevant
government authority) (hereinafter the "Notice").
The Notice shall contain the details which are required for the
application of Article 6.4 hereinafter.
6.4 Procedures in case of litigation
In the event a written claim or proceeding is initiated by a third
person against the Company with respect to which it is reasonably
foreseeable that such claim or proceeding would result in a breach of
Article 2 or Article 3, the Purchaser shall use and cause the Company
to use its best efforts to provide the representative of the Guarantors
with such information and/or documents as are reasonably necessary to
keep the Guarantors informed of all material, non-confidential matters
relating to the progress of such claim or proceeding. During the
proceeding, the Guarantors shall be authorized to advise the Purchaser
and the Purchaser is required to follow such advice at the sole cost
and expense of the Guarantors unless, in the reasonable opinion of the
Purchaser, such advice is unreasonable or would compromise any defense.
Any claim made by or against a third party with respect to the
litigation shall not be settled or compromised without the prior
written approval of the representative of the Guarantors which approval
shall not be unreasonably withheld.
6.5 Threshold applicable to each claim and deductible
(i) Threshold.
(a) Purchaser Indemnity. If any Purchaser Indemnity is less
than fifteen thousand (15,000) Euros, then such Guarantors
shall not have have any indemnification obligation with
respect to the Purchaser. (b) Seller Indemnity. If any Seller
Indemnity is less than fifteen thousand (15,000) Euros, then
the Purchaser shall not have any indemnification obligation
with respect to the Guarantors.
(ii) Deductible.
(a) Purchaser Indemnity. The indemnification obligation of
each Guarantor with respect to a Purchaser Indemnity shall
only exist when and to the extent that the aggregate amount of
Purchaser Indemnities (m) are notified by the Purchaser to
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<PAGE> 24
the Guarantors pursuant to this Article 6 and (n) exceed for
each Guarantor its Guarantor Percentage of one million
(1,000,000) Euros.
(b) Seller Indemnity. The indemnification obligation of the
Purchaser with respect to a Seller Indemnity shall only exist
when and to the extent that the aggregate amount of Seller
Indemnities exceed for the Guarantors one million (1,000,000)
Euros.
(c) Intrad Loss. The indemnification obligations of each
Guarantor with respect to an Intrad Loss shall only exist when
and to the extent that the aggregate amount of the Intrad Loss
exceeds for each Guarantor its Guarantor Percentage of one
hundred fifty thousand (150,000) Euros. Any Intrad Loss in
excess of one hundred fifty thousand (150,000) Euros shall be
applied against the deductible set forth in Article
6.5(ii)(a).
6.6 Maximum amount of Indemnity
(i) Purchaser Indemnity. The total amount of all sums that may be
due and payable to the Purchaser by a Guarantor pursuant to
all claims for Purchaser Indemnity notified by the Purchaser
pursuant to Article 6 of this Agreement shall in no event
exceed for each Guarantor its Guarantor Percentage of the
value of (a) the Escrowed Shares as such value may increase or
decrease on and after the Transfer Date for Purchaser
Indemnities resulting from a misrepresentation and/or from a
breach of the representations and warranties set forth in
Article 2, and (b) the aggregate purchase price for Purchaser
Indemnities resulting from a misrepresentation and/or from a
breach of the representations and warranties set forth in
Article 3. The Purchaser acknowledges and agrees that it
solely shall have recourse to the Escrowed Shares and to no
other assets of the Sellers with respect to any Purchaser
Indemnity.
(ii) Seller Indemnity. The total amount of all sums that may be due
and payable to the Guarantors by the Purchaser or GTS pursuant
to all claims for Sellers Indemnity notified by the
representative of the Guarantors pursuant to Article 6 of this
Agreement shall in no event exceed the aggregate purchase
price for Seller Indemnities resulting from a
misrepresentation and/or from a breach of the representations
and warranties set forth in Articles 4 or 5.
6.7 Claim for Indemnity
(i) Within thirty (30) days of the determination of the amount of
a Purchaser Indemnity, the Purchaser shall notify Escrow Agent
of the Purchaser Indemnity.
The Guarantors shall pay the Purchaser Indemnity to the
Purchaser, within thirty (30) days of the date the Guarantors
and the Purchaser agree in writing on the amount of such
Purchaser Indemnity or, in the event the Guarantors and the
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<PAGE> 25
Purchaser fail to reach a written agreement, the date on which
a competent court or arbitral tribunal has, in a final,
non-appealable and binding decision, determined the amount of
such Purchaser Indemnity. Pursuant to the terms of the Escrow
Agreement, the Purchaser may seek payment of the Purchaser
Indemnity.
(ii) The Purchaser shall pay the Sellers Indemnity to the Sellers,
within thirty (30) days of the date the Sellers and the
Purchaser agree in writing on the amount of the Indemnity or,
in the event the Guarantors and the Purchaser fail to reach a
written agreement, the date on which a competent court or
arbitral tribunal has, in a final, non-appealable and binding
decision, determined the amount of such Indemnity.
6.8 Expiration Date
The representations and warranties made by the Sellers, Guarantors, and
the Purchaser hereunder shall remain in full force and effect until 30
June 2000 (the "Expiration Date"), provided however that the
representations and warranties set forth in Articles 3 and 5 will
remain in full force and effect five (5) years after the Expiration
Date.
Only Notices received by the appropriate party hereto prior to the
Expiration Date shall give rise to a Purchaser Indemnity or a Sellers
Indemnity under the terms and conditions of Article 6 of this
Agreement.
As an exception to the aforesaid, all claims for Purchaser Indemnity or
for Sellers Indemnity in relation to tax matters may be validly
notified up to one (1) month after the expiry of the statute of
limitations applicable to the facts or actions in question.
ARTICLE 7. COMPLIANCE BY PURCHASER WITH STOCK EXCHANGE
REGULATIONS
The Purchaser shall, as soon as practicable after the execution of this
Agreement, file with the Conseil des Marche Financiers (the "CMF") an Offer to
purchase all of the remaining shares of the Company and the Company's
convertible bonds.
ARTICLE 8. UNDERTAKINGS OF GTS TO REGISTER GTS SHARES
GTS hereby undertakes to file in order to register the GTS Shares owned by the
Sellers with the SEC in a reasonable period of time but no later than October 1,
1999 pursuant to a registration rights agreement (the "Registration Rights
Agreement") to be negotiated by the parties in good faith before the Transfer
Date.
GTS hereby undertakes, that in the event unregistered shares of GTS are issued
as a result of an exercise of any of the GTS stock options granted to Company
employees pursuant to this Agreement, to include such unregistered shares in the
immediately succeeding Form S-8 Registration Statement filed with the SEC in
which such inclusion is possible.
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<PAGE> 26
ARTICLE 9. ACKNOWLEDGMENT AND UNDERTAKINGS OF THE PURCHASER WITH
REGARDS TO THE STOCK OPTION PLAN AND OF GTS WITH
REGARDS TO EMPLOYEE BENEFITS
The Purchaser acknowledges that the Stock Option Plan has been amended prior to
the execution of this Agreement to provide that the vesting period has been
reduced to one (1) year, although the stock options may not be exercised before
two (2) years after the granting thereof. Purchaser further undertakes not to
amend the Stock Option Plan as it exists as of the date of execution of this
Agreement and to permit the conversion of options in the Company to options on
GTS Shares.
GTS undertakes to implement and to cause the Company to implement, as soon as
reasonably practicable, after the Transfer Date, the provisions of the term
sheet (the "Retention Plan") which is annexed hereto as Appendix 9.
ARTICLE 10. UNDERTAKINGS OF THE PURCHASER WITH REGARDS TO FRENCH
REGULATIONS
The Purchaser hereby (i) acknowledges the undertakings set forth in Appendix 10
hereto which have been taken by the Company as a condition to the granting by
the Autorite de Regulation des Telecommunications of (a) the authorization to
use the 5 prefix and (b) the network and service operator's license ("L33-1" and
"L34-1"), and (ii) undertakes to fully and unconditionally comply with all such
undertakings.
ARTICLE 11. UNDERTAKINGS OF THE FOUNDERS
11.1 Each of Mr. Nicolazzi, Mr. Martenne-Duplan and Mr. Ait Yahia agree to
(a) continue as Company board members for a term as mutually agreed
upon and (b) enter into the consultancy agreements (the "Consultancy
Agreements") substantially in the form of the agreements annexed hereto
as Appendix 11.
11.2 For a two (2) year period starting from the Transfer Date, each of the
Founders undertakes not to associate himself with, or collaborate in,
directly or indirectly, in France, Italy, Spain or Switzerland, any
activity, enterprise or company having activities similar or identical
to the activity of the Company or contemplated by the Company as of the
Transfer Date, including, without limitation, any activity encompassing
the provision of internet services or goods. For clarification
purposes, such undertaking shall include but not be limited to (i)
incorporating a company, (ii) obtaining at least a five per cent (5%)
share or voting participation (excluding existing ones) in, or
modifying the activity of, an existing company, or (iii) becoming a
director, employee, representative of, or consultant for, such company.
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<PAGE> 27
11.3 For a two (2) year period starting from the Transfer Date, each of the
Founders undertakes not to solicit, directly or indirectly, or entice
or endeavor to solicit or entice away from employment with the
Purchaser or an affiliate of the Purchaser, the Company or any
Subsidiary of the Company any person employed thereby as an employee,
director, representative, consultant unless the prior written approval
of the Purchaser has been obtained.
11.4 Each of the Founders undertakes to use his best efforts to assist
Purchaser in the successful purchase of all of the shares of the
Company and the Company's convertible bonds.
ARTICLE 12. CONFIDENTIALITY AND ANNOUNCEMENTS
12.1 Each party, undertakes to keep confidential and to cause its directors,
employees and representatives to keep confidential all information of
any kind whatsoever obtained pursuant to this Agreement or relating to
the transactions hereto. Each party undertakes not to disclose such
information to any third party without the prior written approval of
the other parties hereto, unless it is ordered to do so by law or by a
decision or a judgment rendered by a competent court, and in which case
the party concerned shall notify the other parties hereto before
disclosing said information.
12.2 Notwithstanding the provisions contained in Article 12.1 above, the
Purchaser shall be authorized to disclose this Agreement in order to
implement the Offer, including to disclose this Agreement to the CMF.
The form and the contents of such disclosure shall be subject to the
prior written approval of the representative of the Guarantors, which
approval shall not be unreasonably withheld. The Purchaser and the
Founders jointly shall issue any press release(s) with respect to this
Agreement and the transactions contemplated hereby.
ARTICLE 13. GUARANTORS' REPRESENTATIVE
The Guarantors hereby agree to appoint Mr. Alan Nicolazzi as the representative
of the Guarantors for the purposes of this Agreement. The Guarantors have the
right to appoint someone other than Mr. Nicolazzi or replace Mr. Nicolazzi,
provided that they notify the Purchaser in writing.
ARTICLE 14. ACKNOWLEDGMENT OF THE PURCHASER
As of December 31, 1998, the value of the equity of the Company was less than
half of the issued capital of the Company, entailing the obligation of the
Purchaser (assuming the occurrence of the Transfer Date) to augment the value of
the equity of the Company up to half of the issued capital or to wind up the
Company.
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<PAGE> 28
ARTICLE 15. MISCELLANEOUS
15.1 Notices
All notices, claims and other communications made as a result of this
Agreement shall be sent by certified letter, return receipt requested,
or by facsimile or telex confirmed by certified letter, to the
addresses set forth on the signatures pages of this Agreement, which
addresses may be amended at any time by delivery to all parties hereto
a written change of address notification.
The date of receipt of the notice or communication shall be the date of
receipt of the certified letter, return receipt requested.
15.2 Appendixes and Recitals
All of the Appendixes and recitals of this Agreement constitute an
integral part hereof and together form a single, indivisible whole.
15.3 Entire Agreement
This Agreement constitute and express the entire understanding of the
parties hereto with regard to the subject matter contained herein and,
save for the confidentiality agreement executed as of February 25,
1999, the confidentiality letters executed as of March 31, 1999 and the
data room guides executed by representatives of the Purchaser and its
advisors, supersedes all prior and contemporaneous contracts,
agreements, negotiations, understandings and drafts entered into by the
parties for the same subject matter. With respect to the
above-mentioned confidentiality agreements, confidentiality letters,
any restrictions on the trading of securities contained therein hereby
is deemed to be of no further force or effect as of the Transfer Date.
15.4 Amendments and modifications
No amendment or modification of this Agreement shall be valid unless
made in writing and signed by all of the parties hereto. No waiver of
any provision hereof shall be valid unless it is in writing and signed
by the parties hereto.
15.5 Assignment
No assignment by one of the Parties of all or any of its rights or
obligations hereunder shall be authorized without the prior written
consent of all the other parties hereto.
15.6 Applicable law
This agreement shall be governed by, and construed in accordance with,
the laws of the Republic of France.
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<PAGE> 29
15.7 Arbitration
(a) Resolution of Disputes by Arbitration. All disputes,
controversies or claims arising out of, in relation to, or in
connection with this Agreement or the validity,
interpretation, performance or breach thereof, shall be
finally settled by ad hoc arbitration, to be conducted as set
forth below.
(b) Conduct of Arbitration. The arbitration shall be conducted as
provided by this Article and in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of
Commerce then in effect (currently as set forth in ICC
Publication No. 447, revised and in force from January 1,
1988), except that, in the event of any conflict between those
rules and the arbitration provisions of this Agreement, the
provisions of this Agreement shall govern. The arbitration
shall be conducted in accordance with the following
procedures:
(i) A party seeking arbitration shall deliver to the
other parties and to the Company a written notice of
an arbitral claim (an "Arbitration Notice").
(ii) The number of arbitrators shall be either one, if the
Purchaser and the Sellers mutually select an
arbitrator within fifteen (15) days after receipt of
an Arbitration Notice or three (3) arbitrators if the
Purchaser and Sellers are unable mutually to select
one (1) arbitrator. In the event the parties are
unable mutually to select one arbitrator in
accordance with this Article, the Sellers shall
appoint one (1) arbitrator and the Purchaser shall
appoint one (1) arbitrator, with the appointed
arbitrators mutually to select the third arbitrator.
If, within thirty (30) days after the delivery of the
Arbitration Notice, the Sellers shall not have
appointed one (1) arbitrator, or the Purchaser shall
not have appointed one (1) arbitrator, or the two
arbitrators shall not have selected a third
arbitrator, each as contemplated above, then the
second and/or third arbitrator (or, if applicable,
all arbitrators) shall be appointed by the
International Chamber of Commerce within thirty (30)
days thereafter from the list of arbitrators of the
International Chamber of Commerce.
(iii) If any arbitrator is unable to perform his duties as
a member of the tribunal due to death, resignation,
refusal or incompetence, the vacancy shall be filled
by the same procedure by which the non-performing
arbitrator was appointed.
(iv) The languages used in arbitration, including the
language of the proceedings, the language of the
award and the reasons supporting it, shall be English
or French.
(v) The place of the arbitration shall be Paris, France.
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<PAGE> 30
Executed in Paris
This 14th day of April, 1999
In 15 counterparts
THE SELLERS
By: /s/ ALAIN NICOLAZZI
---------------------------------
Name: Mr. Alain Nicolazzi
Address:
23, rue des Moulins
78290 Croissy sur Seine
France
NICOM INVESTISSEMENTS
By: /s/ ALAIN NICOLAZZI
---------------------------------
Name: Mr. Alain Nicolazzi
Title: Gerant
Address:
23, rue des Moulins
78290 Croissy sur Seine
France
By: /s/ MARIE NICOLAZZI
---------------------------------
Name: Ms. Marie Nicolazzi
Address:
23, rue des Moulins
78290 Croissy sur Seine
France
By: /s/ CAMILLE NICOLAZZI
---------------------------------
Name: Ms. Camille Nicolazzi
Address:
23, rue des Moulins
78290 Croissy sur Seine
France
By: /s/ REMI NICOLAZZI
---------------------------------
Name: Mr. Remi Nicolazzi
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<PAGE> 31
Address:
23, rue des Moulins
78290 Croissy sur Seine
France
By: /s/ FLORENT MARTENNE-DUPLAN
---------------------------------
Name: Mr. Florent Martenne-Duplan
Address:
12, villa Memoris
94120 Fontenay sous Bois
France
FINANCIERE DU MARAIS
By: /s/ FLORENT MARTENNE-DUPLAN
---------------------------------
Name: Mr. Florent Martenne-Duplan
Title: Gerant
Address:
12, villa Memoris
94120 Fontenay sous Bois
France
By: /s/ SEBASTIEN MARTENNE-DUPLAN
---------------------------------
Name: Mr. Sebastien Martenne-Duplan
Address:
12, villa Memoris
94120 Fontenay sous Bois
France
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<PAGE> 32
By: /s/ ANTONIN MARTENNE-DUPLAN
---------------------------------
Name: Mr. Antonin Martenne-Duplan
Address:
12, villa Memoris
94120 Fontenay sous Bois
France
By: /s/ MAGALI MARTENNE-DUPLAN
---------------------------------
Name: Ms. Magali Martenne-Duplan
Address:
12, villa Memoris
94120 Fontenay sous Bois
France
By: /s/ PHILIPPE AIT YAHIA
---------------------------------
Name: Mr. Philippe Ait Yahia
Address:
21, rue des Hauts Closeaux
92310 Sevres
France
HESPERIA
By: /s/ PHILIPPE AIT YAHIA
---------------------------------
Name: Mr. Philippe Ait Yahia
Title: Gerant
Address:
21, rue des Hauts Closeaux
92310 Sevres
France
By: /s/ SAMUEL AIT YAHIA
---------------------------------
Name: Mr. Samuel Ait Yahia
Address:
21, rue des Hauts Closeaux
92310 Sevres
France
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<PAGE> 33
THE PURCHASER
ESPRIT TELECOM HOLDINGS, LIMITED
By: /s/ ROBERT SCHRIESHEIM
---------------------------------
Name: Mr. Robert Schriesheim
Title: Its authorized representative
GTS
GLOBAL TELESYSTEMS GROUP, INC.
By: /s/ ROBERT SCHREISHEIM
---------------------------------
Name: Mr. Robert Schriesheim
Title: Executive Vice President &
Corporation Development Office
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