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EXHIBIT 10.2
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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
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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
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
Bear, Xxxxxxx & Co. Inc.
BT Alex. Xxxxx Incorporated
Xxxxxx Brothers Inc.
x/x Xxxxxxx Xxxxx & Xx.
Xxxxx Xxxxx
World Financial Center
Xxx Xxxx, XX 00000
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 Xxxxxxx Xxxxx & Co.,
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated ("Xxxxxxx Xxxxx"), Xxxxxxxxx,
Xxxxxx & Xxxxxxxx Securities Corporation, Bear, Xxxxxxx & Co. Inc., BT Alex.
Xxxxx Incorporated and Xxxxxx 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
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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).
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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
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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.
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(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
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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
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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.
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(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-
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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 0000
Xxx) 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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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 Xxxxxxx Xxxxx 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 Xxxxxxx
Xxxxx, 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 Xxxxxxx Xxxxx 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 Xxxxxx Xxxxxx & Xxxxxxx 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 Xxxxxxx Xxxxx and the Company, on each Date of
Delivery as specified in the notice from Xxxxxxx Xxxxx 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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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 Xxxxxxx Xxxxx, 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 Xxxxxx Xxxxxx & Xxxxxxx, 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, Xxxxx Xxxxxx, 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 Xxxxxx
Xxxxxxx, 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 Xxxxxx Xxxxxx & Xxxxxxx, counsel for
the Initial Purchasers, and Xxxxxxxx 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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(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, Xxxxx Xxxxxx, 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 Xxxxxx Xxxxxxx, 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 Xxxxxx
Xxxxxx & Xxxxxxx, counsel for the Initial Purchasers, and Xxxxxxxx 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
0000 Xxx) 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 0000 Xxx) 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 Xxxxxxx Xxxxx), 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 Xxxxxxx Xxxxx 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 Xxxxxxx Xxxxx 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
Xxxxxxx Xxxxx, 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
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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.
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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 0000 Xxx) 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-
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-
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 Xxxxx &
Co., Xxxxxxx Xxxxx Xxxxxx, Xxxxxx & Xxxxx Incorporated at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Xxxxxx Xxxxxx;
notices to the Company shall be directed to it at 0000 Xxxxxxxx Xxxxx, Xxxxx
Xxxxx - 00xx Xxxxx, XxXxxx, XX 00000, attention of Xxxxxxx X. Xxxxxxx; and
notices to the Selling Shareholders shall be directed to the Company at 0000
Xxxxxxxx Xxxxx, Xxxxx Xxxxx - 00xx Xxxxx, XxXxxx, XX 00000, attention of Xxxxxxx
X. Xxxxxxx.
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-
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-
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/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President - External
Affairs, General Counsel
and Corporate Secretary
CONFIRMED AND ACCEPTED, as of the date first above written:
XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
XXXXXXXXX, LUFKIN & XXXXXXXX SECURITIES
CORPORATION
BEAR, XXXXXXX & CO. INC.
BT ALEX. XXXXX INCORPORATED
XXXXXX BROTHERS INC.
By: Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
By: /s/ Xxxxxxx Xxxxxx
---------------------------------
Authorized Signatory
29
SCHEDULE A
Name of Initial Purchaser Number of Firm Shares
------------------------- ---------------------
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated........................ 4,350,000
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities
Corporation................................... 2,175,000
Bear, Xxxxxxx & Co. Inc......................... 725,000
BT Alex. Xxxxx Incorporated..................... 725,000
Xxxxxx Brothers Inc............................. 725,000
-------
Total........................................... 8,700,000
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
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
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
33
Exhibit A-2
FORM OF OPINION OF XXXXX XXXXXX
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;
X-0-0
00
0. 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
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
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
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
38
Exhibit A-4
FORM OF OPINION OF LOEFF XXXXXX XXXXXXX
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
