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EXHIBIT 10.8(b)
June 6, 1996
Global TeleSystems Group, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx 00xx Xxxxx
XxXxxx, Xxxxxxxx 00000
Global TeleSystems Group, Inc.
Ladies and Gentlemen:
We refer to (a) the following agreements (collectively, the "Cap Re
Agreements"): (i) the Senior Note Purchase Agreement, dated as of February 2,
1996, between Global TeleSystems Group, Inc. (the "Company") and Emerging
Markets Growth Fund, Inc., as purchaser; and (ii) the Senior Note Purchase
Agreement, dated as of February 2, 1996, between the Company and Capital
International Emerging Markets Fund, as purchaser (such purchasers being,
collectively, the "Cap Re Purchasers"); and (b) the items listed on the
attached Schedule (together with the items disclosed in the Schedules to the
Cap Re Agreements, the "Scheduled Items"). Terms defined or referenced in the
Cap Re Agreements and not otherwise defined or referenced herein are used
herein as therein defined or referenced.
The Company and the Cap Re Purchasers hereby agree as follows:
1. Articles 5, 8 and 9 of the Cap Re Agreements (including, without
limitation, the defined terms used, and the Schedules referred to, therein) are
amended and restated, on and as of February 2, 1996, to the maximum extent
necessary such that:
(a) the occurrence and continuance of each and every Scheduled Item
shall be permitted for any and all purposes of the Transaction Documents
referred to in the Cap Re Agreements (collectively, the "Cap Re Transaction
Documents"); and
(b) (i) no representation, warranty, certification or statement made
by the Company in any Cap Re Transaction Document or in any other document
delivered pursuant thereto or in connection therewith shall at any time be
deemed incorrect in any respect, (ii) neither the Company nor any of its
Subsidiaries shall at any time be deemed to have defaulted in its due
observance or performance of any covenant or
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agreement contained in any Cap Re Transaction Document and (iii) no Event
of Default (or event (a "Potential Default") that, with the giving of
notice or lapse of time or both, would constitute an Event of Default)
shall at any time be deemed to have occurred and be continuing under the
Cap Re Documents, in each case under clauses (b)(i), (b)(ii) and (b)(iii)
above, as a result of any one or more failures, defaults, violations, acts,
omissions, events, transactions, facts and circumstances described in the
Scheduled Items. The Cap Re Agreements as amended hereby shall remain in
full force and effect.
2. THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
This letter agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same letter agreement. Delivery of an
executed counterpart of a signature page of this letter agreement by telecopier
shall be effective as delivery of a manually executed counterpart of this
letter agreement.
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SCHEDULE TO LETTER WAIVER
1. ADDITIONAL EXISTING, PENDING OR OTHER POSSIBLE INDEBTEDNESS OF THE COMPANY
OR ITS SUBSIDIARIES NOT DISCLOSED ON SCHEDULE A TO THE CAP RE AGREEMENTS
o ADDITIONAL CWAG LEASES
The Company has agreed to guarantee the payments of GTS Hungaro, Inc.
under a finance lease with CWAG for up to $2.5 million in microwave
and VSAT equipment for a term of approximately 48 months.
o NOKIA
Vendor contracts between Telecommunications of Moscow and Nokia for
switch permits deferred payments and phased extensions.
o INTERCOMPANY INDEBTEDNESS
NET AFFILIATE SCHEDULE
(in thousands)
COMPANY 3/31/96(1)(2)
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GTS Hermes, Inc(3) $16,003
GTS Europe South 4,438
GTS Hungaro
10,913
GTS Czech, Inc. 2,374
GTS Bulgaria, Inc. 59
Moscoregoff, Inc. 1,501
GTS Cellular, Inc. 6,192
SFMT Rusnet , Inc. 19,429
SFMT Sovintel 1, Inc.
7,338
Sovam Teleport 6,102
TCM 125
SFMT China, Inc. 7,062
GTS India, Inc. 652
Hungary 0
Eurohivo 0
C-Datacom Int'l 0
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Total $82,188
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1 These amounts do not reflect the final adjustments that will be made prior
to the closing of the 1st quarter FY '96 results.
2 Excludes GTS holding companies investments in operating co.'s.
3 The Company and HitRail B.V. each made temporary loans of
approximately ECU 11 Million to Hermes Europe Railtel B.V. in February
1996. It is contemplated that these loans will be "converted" to equity
when the structure of Hermes is completed.
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2. ADDITIONAL EVENTS AND DEVELOPMENTS NOT DISCLOSED ON SCHEDULES TO THE
CAP RE AGREEMENTS
o In connection with certain capital equipment purchasing practices,
SFMT-Rusnet, Inc. ("Rusnet"), a wholly owned Delaware Subsidiary of the
Company, purchased equipment and installation services in connection
with the TeleRoss business in the CIS. Such equipment and services were
sold by Rusnet to SFIT, Ltd., Co. and TeleRoss at prices below those
paid to the vendors involved. Approximately $7.5 million in such assets
and services are currently improperly recorded in the accounts of
Rusnet. In performing these practices, Rusnet may have exposed itself to
the risk of having a permanent establishment in Russia. Rusnet has also
participated in the compensatory arrangements described above. In
addition, Rusnet has incurred salary, travel and entertainment expenses
and other administrative related expenses totaling approximately $4.1
million on behalf of TeleRoss and SFIT. In transferring the $7.5 million
in assets and services to Russian Subsidiaries, and in billing the $4.1
million in costs to TeleRoss and SFIT, Rusnet potentially exposes itself
to liabilities and penalties associated with income tax withholding, VAT
and customs duties withholding and hard currency payments approval. If
such taxes and duties are determinable and collected by the Russian tax
authorities, such liabilities could have a material adverse effect on
the assets, properties, financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole, or on the ability of
the Company to perform its obligations under the Cap Re Agreements.
o EDN Sovintel is not technically in compliance with its
telecommunications license #1202 issued by the Ministry of
Communications ("MOC") of the Russian Federation in two respects. First,
Sovintel has organized a point of presence in St. Petersburg and started
commercial activities there. Sovintel's current license contemplates
operations only in Moscow and the Moscow region. Second, Sovintel offers
point-to-point services, whereas its license authorizes operating
international telephony services. Such license provides that it will be
annulled if any of its terms are not observed and that the license will
be terminated 30 days after notification from the MOC. Sovintel is in
the process of requesting an amendment to such license to authorize
operations in St. Petersburg. Sovintel's inquiries to the MOC has
indicated that a separate new license may be required in the case of
authority to offer point-to-point services. Such inquiries have also
indicated that an application for such a new license will not be
processed before the Russian elections are completed.
o Under Section 8.1 of each of the Cap Re Agreements, the Company is
obligated to deliver its audited financial statements within 150 days
after the end of each fiscal year. The Company has not provided its 1995
audited financial statements to the Purchasers within such time frame.
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Please indicate your agreement to the foregoing by executing a counterpart
of this letter agreement in the appropriate space provided below.
Very truly yours,
EMERGING MARKETS GROWTH FUND, INC.
By /s/ [ILLEGIBLE]
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Name: Xxxxxx-Xxxxx Bouvet de Maisonneuve
Title: Authorized Representative
CAPITAL INTERNATIONAL EMERGING MARKETS FUND
By /s/ XXXXX XXXXXXX /s/ XXXXX XXXXXXX
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Xxxxx Xxxxxxx Name: Xxxxx Xxxxxxx
Director Title: Director
Accepted and Agreed:
GLOBAL TELESYSTEMS GROUP, INC.
By
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Name:
Title:
