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EXHIBIT 99.2
LOCK-UP AGREEMENT
Agreement dated as of March 27, 2001 between Global
TeleSystems (Europe) Ltd., a company incorporated under the laws of the United
Kingdom (the "Company"), Global TeleSystems Inc. ("GTS"), a Delaware corporation
("GTS"), and each of the Bondholders identified in Schedule I hereto.
BACKGROUND
A. The Company desires to satisfy all claims arising under or
relating to the Bonds (as defined below) as part of a corporate restructuring of
Business Services (the "Restructuring"). An outline of the terms and conditions
relating to the Restructuring is set forth in the Summary of Terms and
Conditions attached as Exhibit A (the "Summary"). The Company, GTS, an
unofficial committee (the "Committee") of holders of the Bonds (the
"Bondholders") and their respective advisors have negotiated the Summary.
B. The Summary contemplates that the Restructuring will be
effected pursuant to a scheme of arrangement under Part XIII of the Companies
Act of 1985 (the "Scheme").
C. On condition that the Scheme and Restructuring are
consistent with this Agreement and the Summary, each Bondholder Group Member (as
defined below) is willing, subject to the terms and conditions set forth herein,
to support and do everything required of it in its capacity as a Bondholder to
ensure the implementation of the Scheme and the Restructuring.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions.
(a) In this Agreement:
"Bondholder Group" means the group of Bondholders
listed in Schedule I, and "Bondholder Group Member" shall mean any one
of them.
"Bonds" means, collectively, $ 230,000,000 principal
amount 11 1/2% Senior Notes due 2007, $ 150,000,000 principal amount
10[ ]% Senior Notes due, DM 125,000,000 principal amount 11 1/2% Senior
Notes due 2007 and DM 150,000,000 principal amount 11% Senior Notes due
2008 issued by the Company.
"Business Day" means a day (other than a Saturday or
Sunday) on which banks are open for general business in New York City,
London and Frankfurt.
"Business Plan" means the business plan drawn up for
the management and operation of Business Services.
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"Business Services" means the business unit
comprising the entities listed in Schedule II.
"Claim" means, in relation to any Bondholder and on
the Effective Date, any claim arising from or related to the Bonds or
the indentures or other documents governing the Bonds, including,
without limitation, the total amount in Dollars of principal and
interest accrued on the Bonds that such Bondholder is the beneficial
owner of, with any amount in Deutschemarks converted to Dollars at the
Deutschemark/Dollar Exchange Rate.
"Committee" means the unofficial committee of
Bondholders that has negotiated the Summary with GTS, the Company and
their respective advisors.
"Company" means Global Telesystems (Europe) Ltd., a
company incorporated under the laws of England and Wales with
registered number 3254558.
"Public Consent Solicitation" means the Solicitation
of Consents to Amendments with Respect to the Indentures Governing the
Bonds that the Company intends to undertake in connection with the
Bonds in order to modify and amend certain provisions of the Bonds to
permit the Company to, among other things, enter into the Working
Capital Facility and Xxxxx Facility contemplated in the Summary.
"Court" means the High Court, a division of the
Supreme Court of England and Wales.
"Deutschemark/Dollar Exchange Rate" means the rate of
exchange for Deutschemarks into Dollars on the date the Scheme is
sanctioned by the Court.
"Deutschemarks" and "DM" mean German Deutschemarks.
"Dollars" and "$" mean the lawful currency of the
United States of America from time to time.
"GTS" has the meaning set forth in the recital of
parties to this Agreement.
"Indentures" means, collectively, the indentures
governing the Bonds.
"Majority Bondholder Group" has the meaning set forth
in paragraph 3 below.
"Restructuring Documents" means any and all
agreements or documents implementing the Restructuring, including, but
not limited to, the Summary, consent solicitation documents and
documents associated with the Scheme.
"Scheme" has the meaning set forth in the recitals to
this Agreement.
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(b) Capitalized terms used but not defined in this Agreement
have the meanings set forth in the Summary.
(c) In this Agreement, references to a "Section", "Schedule"
or "Exhibit" are references to Sections of, and Schedules and Exhibits
to, this Agreement.
2. Support of the Scheme.
(a) Subject to Section 3, each Bondholder Group Member hereby
agrees that it will, and will procure its nominee (as record holder of
all Bonds beneficially owned or under management by it), to support and
do everything required of it in its capacity as a Bondholder to ensure
the implementation of the Scheme.
(b) Each Bondholder Group Member understands that the
Company's obligation to consummate the Scheme will be subject to
certain conditions, including the sanctioning of the Scheme by the
Court.
(c) Prior to the termination of this Agreement, each
Bondholder Group Member agrees to forbear from exercising, and from
supporting any exercise by other Bondholders (or their trustee or
representative) of, remedies against the Company and GTS (and their
respective affiliates, officers and directors) in connection with the
Bonds under the Credit Agreement, including, without limitation, (i)
acceleration and (ii) commencement of any action or proceeding to
collect or recover any amount on the Bonds which is due and payable.
3. Termination of Agreement by a Bondholder Group Member. Each
Bondholder Group Member may terminate this Agreement, insofar as it relates to
such Bondholder Group Member, by providing written notice to the Company if:
(a) either:
(i) the Company shall not have delivered a business
plan for the operation of Business Services (the "Business
Plan") to the Bondholder Group on or before April 30, 2001; or
(ii) Bondholder Group Members representing more than
50% of the aggregate Claims of the Bondholder Group (the
"Majority Bondholder Group"), acting reasonably and in good
faith, provide written notice to the Company within seven (7)
Business Days after delivery of the Business Plan that (A) the
Business Plan differs in one or more material respects from
the Business Plan previously described by the Company to the
Committee and (B) such Business Plan is not acceptable to the
Bondholder Group;
(b) as of May 31, 2001, the Company has not applied to the
Court to order meetings of the Bondholders and the shareholders of the
Company to agree the Scheme;
(c) as of July 31, 2001, the Effective Date has not occurred;
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(d) the Restructuring Documents provide or are modified to
provide for any terms that are materially adverse to or materially
inconsistent with any of the terms or conditions of the Summary, unless
the Majority Bondholder Group otherwise consents;
(e) the Company materially breaches this Agreement or fails to
satisfy any of the terms or conditions of the Summary; or
(f) there shall have been a material adverse change to the
financial condition or the operations of Business Services since the
date of the Agreement.
Termination of the Agreement shall occur automatically upon
the date notice is received by the Company.
4. Disposition of Bonds. Each Bondholder Group Member hereby
covenants and agrees that, on or prior to July 31, 2001, it shall not, and shall
not agree to, sell, transfer, assign, hypothecate or otherwise dispose of any
Bonds now owned or that may hereafter be acquired by such Bondholder Group
Member at any time, except pursuant to the Scheme, unless the person to which
the Bonds are sold, transferred, assigned, hypothecated or otherwise disposed of
executes and delivers to the Company a counterpart of and agrees to be bound by
this Agreement.
5. Title to Bonds. Each Bondholder Group Member represents and
warrants that:
(a) it is the beneficial owner of Bonds, or is the nominee,
investment manager or advisor for beneficial holders of Bonds, as
indicated on Schedule I;
(b) other than pursuant to this Agreement, such Bonds are free
and clear of any pledge, lien, security interest, charge, claim,
equity, option, proxy, voting restriction, right of first refusal or
other limitation on disposition or encumbrance of any kind, that would
adversely affect in any way such Bondholder Group Member's performance
of its obligations contained in this Agreement; and
(c) it has the full right, power and authority to sell,
transfer and deliver such Bonds pursuant to the Scheme and to enter
into this Agreement.
6. Notices. All notices and consents hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered by
courier service, messenger, or telecopy, or initially deposited in the mails, by
certified or registered mail, postage prepaid return receipt requested, to the
following addresses, or such other addresses as may be furnished hereafter by
notice in writing, to the following parties:
(a) if to the Company, to:
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Attention: Chief Executive Officer
Telephone: 00 000 000 0000
Telecopy: 44 207 769 8083
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with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxxx, Esq.
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) if to GTS, to:
0000 Xxxxxx Xxxx
0xx Xxxxx
Xxxxxxxxx, Xx 00000
Attention: Chief Administrative Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxxx, Esq.
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(c) if to any Bondholder Group Member, to such Bondholder
Group Member at the address shown for such holder on the
applicable signature page hereto, to the attention of the
person who has signed this Agreement on behalf of such holder;
with a copy to:
x/x Xxxx X. Xxxxxxx, Xxx.
Milbank, Tweed, Xxxxxx & XxXxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
7. Specific Performance. It is understood and agreed by each
of the parties hereto that money damages would not be a sufficient remedy for
any breach of this Agreement by any party and each non-breaching party shall be
entitled to the remedy of specific
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performance and injunctive or other equitable relief as a remedy for any such
breach, without the necessity of securing or posting a bond or other security in
connection with such remedy.
8. Survival. Notwithstanding the sale of its Bonds in
accordance with Paragraph 4 hereof or the termination of a Bondholder Group
Member's obligations hereunder in accordance with Paragraph 3 hereof, GTS and
the Company's obligations and agreements set forth in Paragraphs 13 and 14 (with
respect to expenses incurred through the date of such termination) hereof shall
survive such termination and shall continue in full force and effect for the
benefit of each Bondholder Group Member in accordance with the terms hereof.
9. Good Faith Negotiation of Restructuring Documents. GTS, the
Company and each Bondholder Group Member covenants and agrees (a) to negotiate
in good faith the Restructuring Documents, which GTS and the Company covenants
will be, in all respects, materially consistent with this Agreement and the
Summary and (b) to act in good faith to support and to ensure the implementation
of the Scheme.
10. Representations and Warranties of GTS and the Company. GTS
and the Company each represents and warrants that the following statements are
true, correct and complete as of the date hereof:
(a) Corporate Power and Authority. It has all requisite power
and authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its respective obligations
under, this Agreement;
(b) Authorization. The execution and delivery of this
Agreement and the performance of its obligations hereunder have been
duly authorized by all necessary action on its part, and the
Restructuring, this Agreement and the attached Summary have been
approved in writing by their respective Boards of Directors;
(c) No Conflicts. The execution, delivery and performance by
it of this Agreement do not and shall not (i) violate any provision of
law, rule or regulation applicable to it or any of its subsidiaries or
its certificate of incorporation or by-laws or those of any of its
subsidiaries or (ii) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any material
contractual obligation to which it or any of its subsidiaries is a
party or under its memorandum of association or other formational
documents;
(d) Governmental Consents. The execution, delivery and
performance by it of this Agreement do not and shall not require any
registration or filing with, consent or approval of, or notice to, or
other action to, with or by, any governmental authority or regulatory
body, except such filings as may be necessary and/or required with
regard to the amendment of the Indentures or with regard to the Scheme;
and
11. Binding Obligation. This Agreement is the legally valid
and binding obligation of it, enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, scheme of arrangement or other similar laws relating
to or limiting creditors' rights generally or by equitable principles relating
to enforceability.
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12. Further Acquisition of Securities. This Agreement shall in
no way be construed to preclude any of the Bondholder Group Members from
acquiring additional Bonds. However, any and all rights and claims obtained by a
Bondholder Group Member with respect to, on account of or pursuant to any
subsequently acquired Bonds shall automatically be subject to the terms of, and
the obligations of such Bondholder Group Member under, this Agreement and the
Summary.
13. Disclosure of Individual Holdings. Unless required by
applicable law or regulation, neither GTS or the Company shall not disclose the
holdings of any Bondholder Group Members without the prior written consent of
such Bondholder Group Member; and if announcement or disclosure is so required
by law or regulation, GTS and the Company, shall afford the Bondholder Group
Members a reasonable opportunity to review and comment upon any such
announcement or disclosure prior to GTS or the Company making such announcement
or disclosure. The foregoing shall not prohibit GTS or the Company from
disclosing the approximate aggregate holdings of Bonds among the Bondholder
Group.
14. Fees and Expenses. GTS and the Company shall perform and
shall not terminate the fee agreements with Milbank, Tweed, Xxxxxx & XxXxxx, LLP
("Milbank") and Pricewaterhouse Coopers ("PwC") except as otherwise provided in
their applicable engagement agreements. If any party brings an action against
any other party based upon a breach by such other party of its obligations under
this paragraph, the prevailing party shall be entitled to all reasonable
expenses incurred, including reasonable attorneys', accountants' and financial
advisors' fees in connection with such action.
15. Reservation of Rights. This Agreement and the Summary are
part of a proposed settlement of a dispute among the parties hereto. Except as
expressly provided in this Agreement: (a) nothing herein is intended to, or
does, in any manner waive, limit, impair or restrict the ability of GTS, the
Company, each Bondholder Group Member and any trustee under the Indentures to
protect and preserve its rights, remedies and interests, including without
limitation, its claims against the other; (b) nothing herein shall be deemed an
admission of any kind; and (c) nothing contained herein effects a modification
of the rights of GTS, the Company and the Bondholders or any trustee under the
Indentures, unless and until the Public Consent Solicitation is approved by the
requisite number and amount of Bondholders and, if the Scheme has been
sanctioned by the Court, when the Restructuring becomes effective. If the
transactions contemplated herein are not consummated, or if this Agreement is
terminated for any reason, the parties hereto fully reserve any and all of their
rights. Pursuant to Federal Rule of Evidence 408 and any other applicable rules
of evidence, this Agreement and all negotiations relating thereto shall not be
admissible into evidence in any proceeding other than a proceeding to enforce
its terms.
16. Representation by Counsel. Each party hereto acknowledges
that it has been represented by counsel in connection with this Agreement and
the transactions contemplated by this Agreement. Accordingly, any rule of law or
any legal decision that would provide any party hereto with a defense to the
enforcement of the terms of this Agreement against such party based upon lack of
legal counsel, shall have no application and is expressly waived.
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17. Headings. The headings of the paragraphs and subparagraphs
of this Agreement are inserted for convenience only and shall not affect the
interpretation hereof.
18. Successors and Assigns. This Agreement is intended to bind
and inure to the benefit of the parties and their respective successors,
assigns, heirs, executors, administrators and representatives.
19. Several, Not Joint, Obligations. The agreements,
representations and obligations of the Bondholder Group Members under this
Agreement and the Summary are, in all respects, several and not joint.
20. Prior Negotiations. This Agreement supersedes all prior
negotiations with respect to the subject matter hereof.
21. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same Agreement.
22. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
GLOBAL TELESYSTEMS (EUROPE) LTD. GLOBAL TELESYSTEMS GROUP INC.
By: By:
------------------------------ ------------------------------------
Name: Name:
Title: Title:
THE BONDHOLDER GROUP
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GLOBAL TELESYSTEMS (EUROPE) LTD.
RESTRUCTURING PROPOSAL
SUMMARY OF TERMS AND CONDITIONS
This Summary of Terms and Conditions (this "Summary") outlines the restructuring
(the "Restructuring") referred to in the Lock-Up Agreement dated March 27, 2001
among Global TeleSystems (Europe) Ltd. (the "Company"), Global TeleSystems Inc.
("GTS") and the ad hoc group (hereafter, the "Bondholder Group") of holders (the
"Bondholders") of the Company's USD $230,000,000 principal amount 11 1/2% Senior
Notes due 2007, USD $150,000,000 principal amount 10[ ]% Senior Notes due 2008,
DM 125,000,000 principal amount 11 1/2% Senior Notes due 2007 and DM 150,000,000
principal amount 11% Senior Notes due 2008 (the "Agreement").
This Summary shall, upon execution of the Agreement, be incorporated in, form a
part of and be subject to the terms and conditions set forth in the Agreement.
Capitalized terms used but not defined in this Summary shall have the meanings
given to them in the Agreement.
TREATMENT OF CLAIMS AND
ALLOCATION OF EQUITY
Bond Claims If the Scheme has been sanctioned by the Court, then
on the effective date of the Restructuring (the
"Effective Date") and in full satisfaction of all
claims arising from or in relation to the Bonds, the
Bondholders, will, after giving effect to the
Restructuring Transactions, become the beneficial
owners of a company newly incorporated by the
Bondholders ("Newco") by receiving an amount of
common stock of Newco (the "Common Stock") equal to:
(a) 90% of the Common Stock outstanding; less
(b) the amount of Common Stock issued to key
employees of Newco and its subsidiaries (the
"Newco Group") on the Effective Date
pursuant to the Employee Incentive Plan
described below.
The Bondholders shall be beneficially entitled to all
such Common Stock (collectively, the "Bondholder
Common Stock") pro rata to their respective Claims,
as calculated and distributed by the Bank of New York
as book-entry depositary/trustee.
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GTS If the Scheme has been sanctioned by the Court, then
on the Effective Date and after giving effect to the
Restructuring Transactions, GTS or its Subsidiaries
as specified below, or as specified later by GTS,
will become the holder of:
(a) 10% of the Common Stock;
(b) warrants (the "50% Warrants") to purchase,
at any time before the fifth anniversary of
the Effective Date, an amount of Common
Stock equal to 5% of the Common Stock
outstanding on the exercise date. The price
per share of Common Stock purchased under
the 50% Warrants shall be the price that
would cause the aggregate value of the
Common Stock issued to the Bondholders on
the Effective Date to be equal to 50% of
the aggregate of the Claims of all the
Bondholders; and
(c) warrants (the "100% Warrants") to purchase,
at any time before the fifth anniversary of
the Effective Date, an amount of Common
Stock equal to 5% of the Common Stock
outstanding on the exercise date. The price
per share of Common Stock purchased under
the 100% Warrants shall be the price that
would cause the aggregate value of the
Common Stock issued to the Bondholders on
the Effective Date to be equal to 100% of
the aggregate of the Claims of all the
Bondholders.
50% Warrants and 100% Exercised 50% and 100% Warrants shall dilute all
Warrants holders of Warrants Common Stock ratably, including
Bondholders, GTS and employees of the Newco Group.
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Employee Incentive Plan On the Effective Date, Newco Group will adopt an
employee incentive plan (the "Employee Incentive
Plan") that will provide key employees of the Newco
Group with grants of, or rights to earn-in, Common
Stock, stock options, restricted shares, warrants or
other similar consideration ("Employee Warrants"
which, together with the 50% Warrants and the 100%
Warrants, comprise the "Warrants") equal to no more
than 20% of the Common Stock outstanding on the
Effective Date. All exercised Employee Warrants
shall dilute the Bondholder Common Stock and any
Common Stock held by employees of the Newco Group by
virtue of the Employee Incentive Plan at the time
the Employee Warrants are exercised. The Employee
Warrants shall not dilute the Common Stock that GTS
will hold by virtue of this Term Sheet.
Forbearance Prior to the termination of the Agreement, each
Bondholder Group Member agrees to forbear from
exercising, and from supporting any exercise by
other Bondholders (or their trustee or
representative) of, remedies against the Company and
GTS (and their respective affiliates, officers and
directors) in connection with the Bonds under the
Credit Agreement, including, without limitation, (i)
acceleration and (ii) commencement of any action or
proceeding to collect or recover any amount on the
Bonds which is due and payable.
Restructuring Transactions As of the Effective Date, the following transactions
(collectively, the "Restructuring Transactions")
shall be consummated:
GTS subordinated debt (a) GTS will exchange its claims arising from
for equity its remaining(1) subordinated loans to the
Company for ordinary shares of the Company,
thereby capitalising its debt claim;
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1 Those subordinated loans that have not been discharged as consideration
for asset transfers out of Business Services.
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Newco incorporation (b) The Bondholders will form Newco. Newco will
purchase from the Bondholders all of the
claims against the Company arising from or
in relation to the Bonds for a further issue
of shares to the Bondholders.
Bond for equity swap (c) Newco will capitalize the debt due from the
Company arising from or in relation to the
Bonds, and in exchange Newco will receive
newly issued stock such that Newco will own
99% of the common stock of the Company after
such issuance.
Conversion of GTS (d) GTS will convert its 1% interest in the
interest to shares Company into deferred deferred shares in the
Company without voting rights or dividend
rights. At the earliest possible future
date, the Company will reduce its capital
such that GTS' interest in the Company will
be eliminated.
GTS Contributes Shares (e) Newco will issue to GTS 2% of its
of GTS Belgium and fully-diluted Common Stock (which will have
NetSource pre-emptive rights attached to it) in
exchange for GTS' transfer to Newco of GTS'
ownership interest in Netsource Europe as a
and Global TeleSystems (Belgium) SA. GTS
will later contribute the 2% interest in
Newco to Holdings BV.
Common Stock and (f) Newco will issue to Global Telesystems
Warrants to GTS Holdings BV ("Holdings BV"): (i) 8% of its
fully-diluted Common Stock (which will have
pre-emptive rights attached to it); (ii) the
50% Warrants and (iii) the 100% Warrants in
exchange for the transfer to Newco by
Holdings BV of its ownership interests in
Global TeleSystems (Nederland) B.V., Global
TeleSystems (Denmark) AS, Global TeleSystems
(Sverige) AB.
GTS Italy GTS will not transfer, or procure that its
Subsidiaries transfer, the ownership of GTS Italia
S.r.l. to Newco. GTS shall retain all its shares in
and the liabilities of GTS Italia S.r.l. and may, in
its sole discretion, sell the assets of or wind down
GTS Italia S.r.l.
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Asset Transfers On or before the Effective Date (a) the Company
and/or its subsidiaries ("Business Services") shall
transfer to GTS and/or its Subsidiaries those assets
identified in Exhibit A (the "Business Services
Transfer Assets") and (b) GTS shall or shall procure
that its Subsidiaries transfer to Business Services
those assets identified in Exhibit B (the "GTS
Transfer Assets"; collectively with the Business
Services Transfer Assets, the "Transfer Assets").
Each Business Services Transfer Asset shall be sold
for and each GTS Transfer Asset shall be purchased
for fair market value. Consideration for these
transfers may in the first instance and to the extent
possible, have their respective values set off (i)
against one another or (ii) against any intercompany
claims outstanding.
GTS shall assume all liabilities connected to and
associated with the Business Services Transfer Assets
that arise on or subsequent to the date that the
Business Services Transfer Assets are transferred to
GTS. Business Services shall assume all liabilities
connected to and associated with the GTS Transfer
Assets that arise on or subsequent to the date that
the GTS Transfer Assets are transferred to Business
Services.
Payment of In consideration of (a) GTS and/or its Subsidiaries'
Intercompany Claims receipt of the Business Services Transfer Assets, GTS
and each of its Subsidiaries shall treat as paid as
of December 31, 2000 or March 31, 2001 all
intercompany claims they possess against Business
Services as of the Effective Date (other than those
claims contemplated or that arise under this Term
Sheet) and (b) Business Services' receipt of the GTS
Transfer Assets, Business Services shall treat as
paid as of December 31, 2000 or March 31, 2001 all
intercompany claims it possesses against GTS and its
Subsidiaries as of the Effective Date (other than
those claims contemplated or that arise under this
Term Sheet).
Prepaid calling cards The parties hereto expect that the prepaid calling
card business will be sold or liquidated on or before
March 31, 2001. Any costs associated with the prepaid
calling card business or the sale or liquidation of
said prepaid calling card business thereafter will be
paid by the Company in the ordinary course of
business.
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Trade and Other Claims Trade debt and claims against the Company or the
Newco Group, other than claims of the Bondholders and
GTS as described herein, will not be impaired by this
restructuring and will be paid in the ordinary course
of business.
FINANCING
Business Plan Provided that all financing after June 1, 2001 is
conditioned upon GTS' selling assets or subsidiaries
sufficient to allow GTS to provide such financing,
GTS will make the following financing available (i)
as of and after April 1, 2001, to Newco or any
entities in Business Services listed on Schedule II
to the Agreement, as applicable, and (ii) as of and
after the Effective Date, to Newco Group:
Working Capital (a) a revolving credit facility of up to E.35
Facility million, in accordance with the summary
terms and conditions set forth in Exhibit C
(the "Working Capital Facility"), for the
purpose of funding the Business Plan;
provided that the Working Capital Facility
shall not be used for the purpose of making
payments of amounts owed by Business
Services to Xxxxx;
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Xxxxx Facility (b) a revolving credit facility of up to E.20
million, in accordance with the summary
terms and conditions set forth in Exhibit D
(the "Xxxxx Facility"), for the purpose of
funding payments of amounts owed by any
entities in Business Services listed on
Schedule II to the Agreement to Xxxxx for
Xxxxx transmission services or capacity;
provided that, on the Effective Date, all
amounts then or thereafter outstanding under
the Xxxxx Facility shall be repaid through
the issuance to GTS of preferred stock in
Newco with a liquidation preference based
upon the principal amount of the Xxxxx
Facility, and accreting and accumulating
dividends at 12% per annum not payable in
cash, and shall have such other standard
terms as conditions as described in the
Scheme; and all security interests securing
the Xxxxx Facility shall be canceled.
All loans under the Xxxxx Facility will be
made via the direct payment by GTS to Xxxxx
of amounts owed to Xxxxx by Business
Services, as the case may be. Such payments
by GTS shall be made automatically 30 days
after the related invoice has been sent to
the Business Services for its review and
reasonable approval unless the Company or
Newco informs GTS prior to that time that
the amounts set forth in the invoice are not
properly due and the reasons for such
conclusion. Payments shall be due within 30
days following the date of the invoice.
Warranty Regarding GTS warrants that the cumulative costs of
Sufficiency of Xxxxx all Xxxxx transport services to be provided
Facility to Business Services for the period April 1,
2001 through December 31, 2001, shall not
exceed the funds available under the Xxxxx
Facility; provided that the number of
circuits and capacity requested and utilized
by Business Services is not materially
greater than that set forth in the orders
provided by Business Services to Xxxxx prior
to the execution of this Terms Sheet. To the
extent that the cumulative costs of such
capacity exceed the funds available under
the Xxxxx Facility for the above-referenced
period, GTS shall increase and fund the
Xxxxx Facility dollar for dollar.
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Conditions Precedent The obligation of GTS to execute and deliver
the Working Capital Facility and the Xxxxx
Facility is subject to, among other things,
(i) with respect to funding provided after
the Consent Period (as defined below), a
majority of holders of the respective series
of Bonds approve amendments to the
indentures governing the Bonds to permit the
financing on the terms and conditions set
forth herein; (ii) the production of
satisfactory loan and security
documentation, (iii) the due performance of
the Company's and Newco Group's obligations
hereunder, including the transfer of the
Business Services Transfer Assets and (iv)
with respect to financing to be provided on
and after June 1, 2001, GTS selling assets
or subsidiaries sufficient to allow GTS to
provide such financing. The obligation of
GTS to fund the Working Capital Facility and
Xxxxx facility after June 1, 2001, is
conditioned upon GTS' selling assets or
subsidiaries sufficient to allow GTS to
provide such financing.
Public Consent Solicitation Notwithstanding any other provision of the
Agreement or this Summary to the contrary,
(i) GTS will continue to fund the Company in
a manner consistent with past practice from
the date hereof until the termination of the
Public Consent Solicitation (the "Consent
Period"), (ii) after the termination of the
Consent Period, GTS will not be obligated to
fund the Company unless the requisite
consents of Bondholders are received in the
Public Consent Solicitation and (iii) all
funding of the Company by GTS after April 1,
2001 shall, upon obtaining the requisite
consents of the Bondholders pursuant to the
Public Consent Solicitation, be deemed to
have been made on a secured basis as set
forth herein.
Subordination If the Company or the Newco Group, as the
case may be, obtains funds from any Person
other than GTS for the purpose of funding
the Business Plan ("Third Party Finance"),
then GTS' right to repayment of any amounts
outstanding under, and security interests
with respect to, the Working Capital
Facility, may be subordinated to an
aggregate amount of up to E.15 million of
such Third Party Finance.
Any Third Party Finance in excess of E.15
million shall, at the option of Newco either
(a) be ranked subordinate to the working
capital facility or (b) be senior to the
Working Capital Facility to the extent that
such Third Party Finance reduces the working
capital facility dollar for dollar.
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OPERATIONS Prior and subsequent to the Effective Date,
Business Services or the Newco Group, as the
case may be, shall continue operations in
the ordinary course of business; provided
that, as of the date of the Agreement:
Data sales (a) Business Services or the Newco
Group, as the case may be, may
become a reseller of data services,
market such services and enter into
agreements with other Persons to
provide such services to such other
Persons as the management employees
of Business Services or the Newco
Group, as the case may be, in their
sole discretion, may decide;
Business Operations (b) GTS and Business Services, or the
Newco Group, as the case may be,
will cooperate to procure the
effective separation of accounting,
regulatory, finance and IT systems
and business operations prior to,
or within a reasonable time not to
exceed, ninety (90) days after the
Effective Date.
Reconfiguring the (c) Business Services has existing
Xxxxx "backbone" orders with Xxxxx for the creation
of a new network configuration for
Xxxxx transport. GTS and Business
Services, or the Newco Group, as
the case may be, will use best
efforts to cooperate in
provisioning the new star
configuration backbone network on
Xxxxx as expeditiously as
reasonably practical.
Sale of Business (d) GTS and the Bondholder Group will
Services immediately commence discussions
regarding whether the continuation
of the process to sell all or any
part of Business Services is in
their collective best interests. In
the event that the parties hereto
determine that such a sale is not
in their collective best interests,
any and all such sale efforts shall
immediately cease, unless both
parties agree to continue some
portion thereof.
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Financial due diligence (e) (i) GTS shall, or shall procure
that Business Services shall,
provide to the Bondholders and
their advisors a weekly cash
statement tracking the sources and
uses of Business Services' cash;
(ii) Cash management functions of
Business Services shall be operated
in the normal course of business
during the month of March 2001 such
that the working capital position
of Business Services as of April 1,
2001, the start date of the Working
Capital Facility, is not materially
different than the working capital
position as of March 1, 2001. The
"Days Outstanding" for both total
accounts payable (DOAP) and
accounts receivable (DSO) will be
calculated as of month-end February
2001 and month-end March 2001. The
net change in DOAP from month-end
February to month-end March will be
netted against the net change in
DSO from month-end February to
month-end March. If the total net
change in working capital is five
days or less, then that will be
considered sufficient evidence of
operating the business in the
normal course. Any difference
greater or less than five days will
cause an appropriate adjustment in
the Working Capital Facility amount
as of the Effective Date.
Fees and expenses (f) GTS will pay the reasonable fees
and expenses of the advisors to the
Bondholders in connection with the
Restructuring in accordance with
any previously agreed terms;
Litigation settlement (g) The settlement payment relating to
payment the claim by Ecotel against Global
TeleSystems (Deutschland) GmbH will
be paid in full by GTS on or before
March 31, 2001;
Payments for Xxxxx (h) Payment on an arm's length basis
Transport Services will be made by Business Services,
or any member of the Newco Group
(or GTS on Business Service's
behalf under the Xxxxx Loan
Facility), as the case may be, to
Xxxxx or its Subsidiaries for any
use of Ebone's transport services
by Business Services or such member
of the Newco Group, provided,
however, that Business Services, or
each member of the Newco Group,
shall receive "most favored
customer" pricing for ordered
circuits.
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Working Capital Facility (i) As of Effective Date, GTS must
evidence to the Bondholder Group's
reasonable satisfaction that GTS
will be able to fund any as yet
unfunded working capital available
to the Newco Group under the
Working Capital Facility;
Non-solicitation (j) Subject to the exception that
Business Services shall have a one
time right, exercisable by no later
than April 1, 2001, to solicit for
rehire up to 20 (20) employees of
Xxxxx who were formerly employees
of Business Services, Business
Services, and its successors, on
the one hand, and GTS and its
Subsidiaries, on the other hand,
shall not solicit each others'
employees for a period of twelve
(12) months after the Effective
Date. Otherwise, there shall be no
non-compete agreements between GTS
and Business Services;
Retention payments (k) Business Services will use its best
endeavours and be solely
responsible to negotiate new
management contracts with key
employees on reasonable terms. GTS
will remain liable for any
retention bonus payments owing to
employees of the Company or the
Newco Group pursuant to agreements
which are in effect as of the date
of the Agreement.
GTS represents to the Bondholder Group that
no existing agreement with any employee of
Business Services would cause or allow such
employee to be entitled to severance
payments as a result of the consummation of
the Restructuring or the transactions
contemplated herein.
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Brand Name (l) Provided that all members and
employees of the Business Services
or Newco Group make clear to all
third parties that Business
Services and the Newco Group are
independent of, and have no
affiliation with, GTS, and that GTS
has no liability for actions taken
by a Business Services company or
employee or the Newco Group during
such term, the Newco Group shall
have the right to use GTS' brand
name and logo at no cost to the
Newco Group, for ninety (90) days
from the Effective Date and shall
cease to use such brand name and
logo immediately thereafter. This
intellectual property allowed to be
used by the NewCo Group shall
include trademarks, trademark
applications, rights in any design,
copyrights, logos, trade names and
business names presently used by
Business Services.
LAN Customers LAN on-demand customers shall remain with
Business Services.
CONDITIONS
Scheme The Company will not apply to the Court to
adopt the Scheme or order meetings of the
Bondholders and the shareholders of the
Company to consider the Scheme unless and
until:
Business Plan (a) Bondholder Group Members holding a
majority of the Dollar Equivalent
in principal amount of the
aggregate Dollar Equivalent of
Bonds held by the Bondholder Group
have executed Agreements and
approved the Business Plan;
Scheme documentation (b) GTS and the Bondholder Group have
approved the form and substance of
the proposed documentation for the
Scheme, the Restructuring and for
the financing described above;
Legal due diligence (c) the Bondholder Group shall have
completed verification that
Business Services holds regulatory
licenses required for is
operations.
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Closing The occurrence of the Effective Date shall
be subject to the following conditions
precedent:
Xxxxx Services (a) Business Services and Xxxxx shall
reach an acceptable arm's length
agreement for the provision of
Xxxxx services to Business Services
(and, after the Effective date, the
Newco Group or its members),
calling for Newco to receive "most
favored customer" pricing for
ordered circuits.
Material changes (b) there shall have been no material
adverse change to the financial
condition or the operations of
Business Services since the date of
the Agreement;
Scheme approval (c) the Bondholders and the
shareholders of the Company shall
have approved the Scheme with the
required majorities, the Court
shall have sanctioned the Scheme
and the Scheme shall have been
filed with the Registrar of
Companies;
Contingent liabilities (d) GTS shall represent and warrant
that to the best of its knowledge
there are no material contingent
liabilities of Business Services
not disclosed in its financial
statements and shall indemnify and
hold harmless the Newco Group to
the extent that it has knowledge of
contingent liabilities that it has
failed to disclose; and
Documentation (e) documentation of all aspects of the
Restructuring shall be satisfactory
to the Company, GTS and the
Committee.
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MISCELLANEOUS
Indemnification GTS shall indemnify and hold harmless the
entities listed on Schedule II to the
Agreement, or the Newco Group, as the case
may be, from any and all loss, liability and
expense incurred or suffered by such
entities arising out of: (a) any
misrepresentation or breach of warranty,
covenant or agreement made or to be
performed by GTS pursuant to this Term
Sheet; (b) any assumed liability arising out
of the GTS Transfer Assets; (c) any
liability incurred by Business Services
arising from acts or omissions by GTS Italia
s.r.l. prior to the date of its acquisition
by the Company; and (d) any costs or
expenses incurred by such entities arising
from or related to claims asserted by or the
settlement of claims by or against Ecotel.
The entities listed on Schedule II to the
Agreement and Newco shall indemnify and hold
harmless GTS from any and all loss,
liability and expense incurred or suffered
by GTS arising out of: (a) any
misrepresentation or breach of warranty,
covenant or agreement made or to be
performed by such entities or Newco pursuant
to this Term Sheet; and (b) any assumed
liability arising out of the Business
Services Transfer Assets.
Financial Statements The Company shall provide its financial
statements for the year ending December 31,
2000, audited in accordance with U.S. GAAP,
to the Bondholder Group as such statements
become available.
Board Members A nominee of GTS shall have the right to
attend meetings of the board of directors
("Board Meetings") of Newco, but the nominee
shall have no rights to vote at any Board
Meetings and be indemnified by Newco for any
action taken action taken at a Board
meeting. GTS shall have the right to receive
minutes of the Board Meetings together with
any and all information circulated to the
directors of Newco in their role as such.
Public Securities The parties to the Agreement contemplate
that when practicable and market conditions
are suitable after the Effective Date, the
Common Stock may be registered and publicly
traded.
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EXHIBIT C
SUMMARY OF TERMS AND CONDITIONS OF WORKING CAPITAL FACILITY
This Summary of Terms and Conditions outlines certain terms of the Working
Capital Facility referred to in the term sheet annexed to a letter agreement
dated March 27, 2001 among the Company, GTS and the Bondholders (each as defined
therein) (the "Agreement"). This Summary of Terms and Conditions is part of and
subject to the Agreement. Certain capitalized terms used herein are defined in
the Agreement.
BORROWER: Any entity in Business Services listed on
Schedule II to the Agreement or Newco , as
applicable
LENDER: GTS
GUARANTORS: All direct and indirect subsidiaries of the
Company and Newco.
FACILITY: A revolving credit facility in an aggregate
principal amount of up to E.35 million.
All advances outstanding under the Working
Capital Facility (the "Advances") shall
become due and payable on December 31, 2003
(the "Maturity Date").
ADVANCES: Advances will be made by GTS to fund the
operations of the Company or Newco, as
applicable, on a monthly basis in accordance
with the Business Plan.
TERM: The Working Capital Facility shall be a
revolving credit facility from April 1, 2001
to December 31, 2001. Thereafter the Working
Capital Facility shall convert to a term
loan facility payable on the Maturity Date.
CLOSING DATE: On or before April 1, 2001.
PURPOSE: Proceeds of the Advances under the Facility
will be used solely to provide financing for
working capital, letters of credit, capital
expenditures and other general corporate
purposes of the Company or the Newco Group,
as applicable as permitted by the loan
documentation.
INTEREST: Advances will accrue interest at the rate of
12% per annum, payable on the Maturity Date.
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SECURITY/PRIORITY: The Working Capital Facility will be secured
by a fixed and floating charge on all assets
of the Company or Newco, as applicable
including, without limitation, all of shares
in their respective direct subsidiaries.
The Facility will be on a senior basis and
will be expressly senior to claims arising
under or related to the Bonds.
PREPAYMENT: Prior to the Effective Date, the Company
will have the right to repay the loan, in an
amount equal to 95% of the outstanding loan
balance, including all accrued interest, at
any time following the Effective Date. Newco
will have the right to prepay the Working
Capital facility in an amount equal to 95%
of its gross value, which value shall
include all accrued interest, at any time
prior to January 31, 2002; provided that the
prepayment discount will reduce by 0.5
percent each month from February 1, 2002
through November 30, 2002, after which Newco
will have the right to prepay the Working
Capital facility in an amount equal to 100%
of its stated value, which shall be the
principal sum of the amounts advanced under
the Working Capital Facility and all accrued
interest thereon, without the benefit of any
redemption discount.
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EXHIBIT D
XXXXX FACILITY
SUMMARY OF TERMS AND CONDITIONS
This Summary of Terms and Conditions outlines certain terms of the Xxxxx
Facility referred to in the term sheet annexed to a letter agreement dated March
27, 2001 among the Company, GTS and the Bondholders (each as defined therein)
(the "Agreement"). This Summary of Terms and Conditions is part of and subject
to the Agreement. Certain capitalized terms used herein are defined in the
Agreement.
BORROWER: Any entity in Business Services listed on
Schedule II to the Agreement or Newco , as
applicable
GUARANTORS: All direct and indirect subsidiaries of the
Company and Newco.
FACILITY: A revolving credit facility in an aggregate
principal amount of up to E.20 million.
ADVANCES: Advances will be made by GTS to fund the
operations of the Company or Newco, as the
case may be, in the normal course of
business based on a cumulative monthly
limit. Advances for amounts payable to Xxxxx
will be made by GTS directly to Xxxxx on
behalf of the Company or Newco, as
applicable.
CLOSING DATE: On or before April 1, 2001
PURPOSE: Proceeds of the Advances under the Xxxxx
Facility will be used solely to provide
financing for to enable the Company or the
Newco Group, as applicable, make payments
for its use of the Xxxxx network.
INTEREST: Advances will bear interest at the rate of
12% per annum.
SECURITY/PRIORITY: The Xxxxx Facility will be secured by a
fixed and floating charge on all assets of
the Company or Newco, as applicable
including, without limitation, all of shares
in their respective direct subsidiaries.
To the extent of the collateral, the
Facility will be on a senior basis and will
be expressly senior to claims arising under
or related to the Bonds.
On the Effective Date, all obligations under
the Xxxxx Facility shall be paid through the
issuance of shares of preferred stock
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in Newco ("Xxxxx Preferred Stock") and all
security interests in favor of GTS shall be
extinguished.
PREPAYMENT: Prior to the Effective Date, the Company
will have the right to repay the loan, in an
amount equal to 95% of the outstanding loan
balance, including all accrued interest, at
any time and following the Effective Date
and the conversion of the Xxxxx Facility to
the Xxxxx Preferred Stock. Newco will have
the right to redeem the Xxxxx Preferred
Stock in an amount equal to 95% of its par
value, which value shall include all accrued
interest, at any time prior to January 31,
2002; provided that the early redemption
discount will reduce by 0.5 percent each
month from February 1, 2002 through November
30, 2002, after which Newco will have the
right to redeem the Xxxxx Preferred Stock in
an amount equal to 100% of its par value,
which shall be the principal sum of the
amounts advanced under the Xxxxx Facility
and all accrued interest thereon, without
the benefit of any redemption discount.
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