SECURITYHOLDERS AGREEMENT
dated as of February 28, 1997
between
GST TELECOMMUNICATIONS, INC.
and
OCEAN HORIZON SRL
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.................................................1
ARTICLE II
RIGHTS AND OBLIGATIONS WITH
RESPECT TO TRANSFER
SECTION 2.1 Restrictive Legend..........................................5
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1 Demand Registration.........................................5
SECTION 3.2 Piggy-Back Registration.....................................6
SECTION 3.3 Reduction of Offering.......................................6
SECTION 3.4 Registration Procedures.....................................7
SECTION 3.5 Shelf Registration.........................................10
SECTION 3.6 Registration Expenses......................................10
SECTION 3.7 Indemnification by the Issuer..............................10
SECTION 3.8 Indemnification by Selling Holders.........................11
SECTION 3.9 Conduct of Indemnification Proceedings.....................11
SECTION 3.10 Contribution...............................................12
SECTION 3.11 Participation in Underwritten Registrations................13
SECTION 3.12 Rule 144...................................................14
SECTION 3.13 Holdback Agreements........................................14
SECTION 3.14 Transfer of Registration Rights............................15
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ARTICLE IV
COVENANTS
SECTION 4.1 Information................................................15
SECTION 4.2 Prohibited Issuance of Additional Series A
Preference Shares......................................16
SECTION 4.3 Director Nomination........................................16
SECTION 4.4 Indemnity..................................................16
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Headings...................................................20
SECTION 5.2 No Inconsistent Agreements.................................20
SECTION 5.3 Frustration of Purpose.....................................20
SECTION 5.4 Entire Agreement...........................................20
SECTION 5.5 Notices....................................................21
SECTION 5.6 Applicable Law.............................................21
SECTION 5.7 Severability...............................................21
SECTION 5.8 Termination................................................21
SECTION 5.9 Successors, Assigns, Transferees...........................21
SECTION 5.10 Amendments; Waivers........................................22
SECTION 5.11 Counterparts; Effectiveness................................22
SECTION 5.12 Recapitalization, etc......................................22
SECTION 5.13 Remedies...................................................22
SECTION 5.14 Certain Transactions.......................................22
SECTION 5.15 Consent to Jurisdiction....................................23
EXHIBIT A - Form of Management Reporting Package
ii
SECURITYHOLDERS AGREEMENT
SECURITYHOLDERS AGREEMENT dated as of February 28, 1997 between GST
Telecommunications, Inc., a federally chartered Canadian corporation ("ISSUER"),
and Ocean Horizon SRL, a society with restricted liability formed under the laws
of Barbados (the "PURCHASER").
WHEREAS, the Issuer and the Purchaser have entered into the Securities
Purchase Agreement (as defined below) pursuant to which the Purchaser has agreed
to purchase Series A Preference Shares (as defined below) in accordance with the
terms thereof.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. (a) The following terms, as used herein, have
the following meanings:
"AFFILIATE", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, such
Person. For purposes of this definition, "control" (including, with correlative
meaning, the terms "controlling", "controlled by" and "under common control
with"), means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"ARTICLES" means the Articles of Incorporation of the Issuer in the
form attached as Exhibit D to the Securities Purchase Agreement as amended by
the Amendment to Articles in the form attached as Exhibit E to the Securities
Purchase Agreement.
"BOARD OF DIRECTORS" means the Board of Directors of the Issuer.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"CLOSING DATE" means the date of the closing of the purchase of Series
A Preference Shares pursuant to the Securities Purchase Agreement.
"COMMISSION" means the Securities and Exchange Commission and any
successor agency having similar powers.
"COMMON SHARES" means the Common Shares, no par value, of the Issuer.
"EQUITY SECURITIES" means the Series A Preference Shares and the Series
A Common Shares.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor statute.
"HOLDER" means any registered holder of Equity Securities.
"PERSON" means an individual, partnership, corporation, trust, joint
shares company, association, joint venture, society with restricted liability or
any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"PURCHASER" has the meaning set forth in the first paragraph of this
Agreement.
"REGISTRABLE SECURITIES" means any Series A Common Shares whether or
not such shares have been issued at the time a registration request is made
under Section 3.1, 3.2 or 3.5; PROVIDED that such securities shall cease to be
Registrable Securities when a registration statement relating to such securities
shall have been declared effective by the Commission and such securities shall
have been disposed of pursuant to such effective registration statement.
"REGISTRATION EXPENSES" means all (i) registration and filing fees,
(ii) fees and expenses of compliance with all state or provincial securities or
blue sky laws (including reasonable fees and disbursements of a qualified
independent underwriter, if any, counsel in connection therewith and the
reasonable fees and disbursements of counsel in connection with such
qualifications of the Registrable Securities), (iii) printing expenses, (iv)
internal expenses of the Issuer (including, without limitation, all salaries and
expenses of officers and employees performing legal or accounting duties), (v)
fees and disbursements of counsel for the Issuer, (vi) customary fees and
expenses for independent certified public accountants retained by the Issuer
(including the expenses of any comfort letters or costs associated with the
delivery by independent certified public accountants of a comfort letter or
comfort letters), (vii) fees and expenses of any special experts retained by the
Issuer in connection with such registration, (viii) fees and expenses of listing
the Registrable Securities on all securities exchanges on which the shares of
Common Shares are listed or on the NASDAQ National Market System, (ix)
reasonable fees and expenses
of the Underwriter (excluding discounts or commissions relating to the
distribution of the Registrable Securities) and (x) out-of-pocket expenses of
the Issuer.
"RULE 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute.
"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase Agreement
dated as of the date hereof by and among the Issuer and the Purchaser.
"SELLING HOLDER" means a Holder who proposes to Transfer Registrable
Securities pursuant to Article III.
"SERIES A COMMON SHARES" means the Common Shares issued or issuable
upon conversion of the Series A Preference Shares, any Common Shares issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
in exchange for, or in replacement of, such Common Shares and any other interest
in the Issuer that has been or may be acquired upon the conversion of the Series
A Preference Shares and Common Shares issuable pursuant to Section 4.4 hereof.
"SERIES A PREFERENCE SHARES" means the Series A Preference Shares, no
par value, of the Issuer, having the rights and privileges set forth in the
Articles.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which a majority of the shares or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"TRANSFER" means any transfer, in whole or in part, by sale, pledge,
assignment, grant or other means.
"UNDERWRITER" means a securities dealer who purchases any Registrable
Securities as a principal in connection with a distribution of such Registrable
Securities and not as part of such dealer's market-making activities.
"VOTING SECURITIES" means any class or series of shares and any bond,
debenture or other obligation of the Issuer having the right to vote generally
on matters voted on by the shareholders of the Issuer.
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(b) Each of the following terms is defined in the Section opposite such
term:
TERM SECTION
---- -------
Demand Registrant 3.1
Demand Registration 3.1
Effective Date 6.12
Indemnified Party 3.8
Indemnifying Party 3.8
Piggy-Back Registration 3.2
Princes Gate Nominee 4.1
Registration Request 3.1
Shelf Registration 3.5
ARTICLE II
RIGHTS AND OBLIGATIONS WITH
RESPECT TO TRANSFER
SECTION 2.1. RESTRICTIVE LEGEND. (a) For so long as this Agreement
remains in effect, each certificate representing an Equity Security (other than
the Series A Common Shares) owned by any Holder or a subsequent transferee shall
(unless otherwise permitted by the provisions of Section 2.1(b) or required by
the Articles) include a legend in substantially the following form:
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE ACT, THE RULES AND
REGULATIONS PROMULGATED THEREUNDER AND ANY APPLICABLE STATE SECURITIES
LAWS.
THE SECURITY REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO A
SECURITYHOLDERS AGREEMENT DATED AS OF FEBRUARY 28, 1997 THAT FIXES
CERTAIN RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE HOLDER OF THIS
SECURITY. A COPY OF THE AGREEMENT IS ON FILE AT THE COMPANY'S PRINCIPAL
OFFICE.
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(b) Any Holder or transferee of an Equity Security may, upon providing
evidence reasonably satisfactory to the Issuer that such Equity Security either
is not a "restricted security" (as defined in Rule 144) or may be sold pursuant
to Rule 144(k), exchange the certificate representing such Equity Security for a
new certificate that does not bear the legend set forth in Section 2.1(a).
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1. DEMAND REGISTRATION. (a) REQUEST FOR REGISTRATION. At any
time after the date hereof for so long as any Holder owns or has a right to
acquire any Registrable Securities, the holders of a majority of the outstanding
Registrable Securities (determined on a fully diluted basis assuming the
conversion of all the Series A Preference Shares then outstanding)
(collectively, the "HOLDERS") may make a written request (the "REGISTRATION
REQUEST") for registration (a "DEMAND REGISTRATION") under the Securities Act of
Registrable Securities; provided that a Registration Request made solely to
register Registrable Securities to be received upon an anticipated Mandatory
Conversion, may only be made on or after the date which is 90 (ninety) days
prior to the third anniversary of the Issue Date. The Registration Request will
specify the number and class of Registrable Securities proposed to be sold and
will also specify the intended method of disposition thereof; PROVIDED that each
Registration Request must be for an offering of at least 1,000,000 shares (or,
if less, the number of Registrable Securities of all Holders) or where the gross
proceeds of the proposed offering are expected to be at least $10,000,000,
PROVIDED FURTHER that the Issuer shall not be obligated to effect more than one
Demand Registration in any six-month period.
(b) EFFECTIVE REGISTRATION. A registration requested pursuant to this
Section 3.1 shall not be deemed to be effected (i) if a registration statement
with respect thereto shall not have become effective, (ii) if, after it has
become effective, such registration is interfered with for any reason by any
stop order, injunction or other order or requirement of the Commission or any
other governmental agency or any court, and the result of such interference is
to prevent the Holder from disposing of the Registrable Securities to be sold
thereunder in accordance with the intended methods of disposition or (iii) if
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with any underwritten registration shall
not be satisfied or waived with the consent of the Issuer, the Holder or the
Underwriter, as applicable.
(c) UNDERWRITING. If the Demand Registrant so elects, the offering of
Registrable Securities pursuant to a Demand Registration shall be in the form of
an underwritten offering. The Demand Registrant shall select the book-running
lead
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Underwriter and any additional investment bankers and managers in connection
with the offering, each of which shall be reasonably satisfactory to the Issuer.
SECTION 3.2. PIGGY-BACK REGISTRATION. If the Issuer proposes to file a
registration statement under the Securities Act with respect to an offering of
its equity securities (i) for its own account (other than a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission)) or (ii) for the account of any holders of its securities, then the
Issuer shall give written notice of such proposed filing to the Holders as soon
as practicable (but in any event not less than 20 days before the anticipated
filing date), and such notice shall offer the Holders the opportunity to
register such number of shares of Registrable Securities that are then eligible
for registration. If any Holder wishes to register securities of the same class
or series as the Issuer or such holder, such registration shall be on the same
terms and conditions as the registration of the Issuer or such holders'
securities (a "PIGGY-BACK REGISTRATION"). If the Piggy Back Registration is of a
different class, then the Issuer shall have the option of effecting a concurrent
registration statement.
SECTION 3.3. REDUCTION OF OFFERING. Notwithstanding anything contained
in any other Section herein, if the lead Underwriter of an offering described in
Section 3.1 or 3.2 delivers a written opinion to the Issuer that the success of
such offering would be materially and adversely affected by inclusion of all the
securities of each class requested to be included, then the Issuer may, upon
written notice to the Holders, reduce (if and to the extent stated by such
Underwriter to be necessary to eliminate such effect) the number of the
securities of each class requested to be registered so that the resultant
aggregate number of the securities of each class requested to be registered that
will be included in such registration shall be equal to the numbers of the
securities of each class stated in such Underwriter's letter; PROVIDED, HOWEVER,
that (i) priority in a registration initiated by a holder exercising a
contractual right to demand such registration shall be (a) first securities
offered for the account of such holder, and (b) second, pro rata among any other
securities of the Issuer requested to be registered pursuant to a contractual
right of registration and securities offered for the account of the Issuer and
(ii) priority in a registration initiated pursuant to Section 3.2 hereof shall
be (a) first, securities offered for the account of the Issuer, and (b) second,
pro rata among other securities of the Issuer requested to be registered
pursuant to a contractual right of registration.
SECTION 3.4. REGISTRATION PROCEDURES. Whenever the Issuer is required
to effect the registration of Registrable Securities pursuant to Section 3.1
hereof, the Issuer will use its best efforts to effect the registration and the
sale of such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
Registration Request or a registration request pursuant to Section 3.5:
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(a) The Issuer will as expeditiously as possible prepare and
file with the Commission a registration statement on any form for which
the Issuer then qualifies or which counsel for the Issuer shall deem
appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with
the intended method of distribution thereof, and use its best efforts
to cause such filed registration statement to become and remain
effective for a period of not less than 180 days; PROVIDED that if the
Issuer shall furnish to the Demand Registrant a certificate signed by
either its Chairman, President, or Vice-President within 5 (five) days
of Issuer's receipt of a Registration Request stating that in his good
faith judgment it would materially adversely affect the Issuer or its
shareholders for such a registration statement to be filed as
expeditiously as possible, the Issuer shall have a period of not more
than 90 days within which to file such registration statement measured
from the date of receipt of the Registration Request in accordance with
Section 3.1.
(b) The Issuer will, if requested, prior to filing a
registration statement or prospectus or any amendment or supplement
thereto, furnish to the Demand Registrant and each Underwriter, if any,
such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included
in such registration statement (including each preliminary prospectus)
and such other documents as the Demand Registrant or such Underwriter
may reasonably request in order to facilitate the sale of the
Registrable Securities.
(c) After the filing of the registration statement, the Issuer
will promptly notify the Demand Registrant of any stop order issued or
threatened by the Commission and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered.
(d) The Issuer will use its best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue
sky laws of such jurisdictions in the United States as the Demand
Registrant reasonably requests, to keep such registration or
qualification in effect for so long as such registration statement
remains in effect, and to take any other action which may be reasonably
necessary or advisable to enable the Demand Registrant to consummate
the disposition in such jurisdictions of the securities owned by the
Demand Registrant and (ii) cause such Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Issuer, to enable the Demand Registrant to consummate
7
the disposition of such Registrable Securities; PROVIDED, that the
Issuer will not be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction other than taxation arising with respect to the
registration of securities or (iii) consent to general service of
process in any such jurisdiction.
(e) The Issuer will use its best efforts to qualify the
Registrable Securities for distribution to the public under such
securities laws of the provinces of Canada as the Demand Registrant
reasonably requests, to keep such qualification in effect for so long
as such registration statement remains in effect, and to take any other
action which may be reasonably necessary (including preparation of a
prospectus meeting applicable provincial securities requirements
("PROVINCIAL SECURITIES LAWS") or advisable or required by law to
enable the Demand Registrant to consummate the distribution of the
Registerable Securities in such provinces; PROVIDED, that the Issuer
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this paragraph (e), (ii) subject itself to taxation in any such
jurisdiction other than taxation arising with respect to the
registration of securities or (iii) consent to general service of
process in any such jurisdiction.
(f) At any time when a prospectus relating to the sale of
Registrable Securities is required to be delivered under the Securities
Act or Provincial Securities Laws, the Issuer will immediately notify
the Demand Registrant of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the Purchaser of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and promptly
make available to the Demand Registrant and the Underwriters any such
supplement or amendment. The Demand Registrant agrees that, upon
receipt of any notice from the Issuer of the happening of any event of
the kind described in the preceding sentence, the Demand Registrant
will forthwith discontinue the offer and sale of Registrable Securities
pursuant to the registration statement covering such Registrable
Securities until receipt of the copies of such supplemented or amended
prospectus and, if so directed by the Issuer, the Demand Registrant
will deliver to the Issuer all copies, other than permanent file copies
then in the possession of the Demand Registrant, of the most recent
prospectus covering such Registrable Securities at the time of receipt
of such notice. In the event the Issuer shall give such notice, the
Issuer shall extend the period during which such registration statement
or qualification, as the case may be, shall be
maintained effective as provided in Sections 3.4(a) or (c) hereof by
the number of days during the period from and including the date of the
giving of such notice to the date when the Issuer shall make available
to the Demand Registrant such supplemented or amended prospectus.
(g) At any time when a prospectus relating to the sale of
Registrable Securities is required to be delivered pursuant to the
federal or provincial securities laws of Canada, the Issuer shall
prepare a prospectus which complies with the securities laws of each
Canadian province in which Registrable Securities are to be offered for
sale, and as delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(h) The Issuer will enter into customary agreements (including
an underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities.
(i) The Issuer will furnish to the Demand Registrant and to
each Underwriter, if any, a signed counterpart, addressed to the Demand
Registrant or such Underwriter, of (i) an opinion or opinions of
counsel to the Issuer and (ii) a comfort letter or comfort letters from
the Issuer's independent public accountants, each in customary form and
covering such matters as are customarily covered by opinions and
comfort letters, as the Demand Registrant or the lead Underwriter
therefor reasonably requests.
(j) The Issuer will otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make
available to its securityholders, as soon as reasonably practicable, an
earnings statement covering a period of 12 months, beginning within
three months after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act.
(k) The Issuer will provide and cause to be maintained a
transfer agent and registrar for all Registrable Securities covered by
such registration statement from and after a date not later than the
effective date of such registration statement.
(l) The Issuer will use its best efforts (i) to cause all such
Registrable Securities covered by such registration statement to be
listed on any national securities exchange (if such Registrable
Securities are not already listed), and on each other securities
exchange in the United States and Canada, on which similar
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securities issued by the Issuer are then listed, if the listing of such
Registrable Securities is then permitted under the rules of such
exchange; or (ii) to secure the designation of all such Registrable
Securities covered by such registration statement as a NASDAQ "national
market system security" within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities, in each case if the Registrable Securities so
qualify, and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register as such with respect
to such Registrable Securities with the National Association of
Securities Dealers, in the case of each action referred to in this
clause (ii) if requested by the Holder or by the lead Underwriter.
(m) Without limiting the foregoing, if and whenever the Issuer
is required to use its best efforts to effect the registration of any
Registrable Securities pursuant to Section 3.1 or 3.5, the Issuer will
be required to provide all customary and reasonably necessary
assistance in connection with the Underwriter's due diligence
investigation and the registration and marketing of such Registrable
Securities, including making its management available to assist in the
preparation of marketing materials and for roadshow presentations.
SECTION 3.5. SHELF REGISTRATION. Upon the request of any Holder at any
time after the date hereof, the Issuer will use its best efforts to file a
"shelf" registration statement (the "SHELF REGISTRATION") with respect to the
Registrable Securities on an appropriate form pursuant to Rule 415 (or any
similar provision that may be adopted by the Commission) under the Securities
Act and to cause such Shelf Registration to become effective and to keep such
Shelf Registration in effect until the Holders shall no longer hold any
Registrable Securities; PROVIDED THAT each such request must be for at least
1,000,000 shares (or, if less, the number of Registrable Securities of all
Holders) or where the gross proceeds of an offering would be expected to be at
least $10,000,000. Any offer or sale of Registrable Securities pursuant to the
Shelf Registration in an underwritten public offering shall be deemed to be a
Demand Registration subject to the provisions of Sections 3.1, 3.3 and 3.13
hereof.
SECTION 3.6. REGISTRATION EXPENSES. Registration Expenses incurred in
connection with any registration made or requested to be made pursuant to this
Article III will be borne by the Issuer, whether or not any such registration
statement becomes effective, to the extent permitted by applicable law.
SECTION 3.7. INDEMNIFICATION BY THE ISSUER. To the extent permitted by
applicable law, the Issuer agrees to indemnify and hold harmless each Selling
Holder, its officers, directors and agents, and each Person, if any, who
controls each such Selling Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and
10
expenses caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus relating to
the Registrable Securities (as amended or supplemented if the Issuer shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information furnished in writing to the Issuer
by or on behalf of any such Selling Holder expressly for use therein. The Issuer
also agrees, to the extent permitted by applicable law, to indemnify any
Underwriters of the Registrable Securities, their officers and directors and
each Person who controls such underwriters on substantially the same basis as
that of the indemnification of the Selling Holders provided in this Section 3.7.
SECTION 3.8. INDEMNIFICATION BY SELLING HOLDERS. To the extent
permitted by applicable law, each Selling Holder agrees, severally but not
jointly, to indemnify and hold harmless the Issuer, its officers, directors and
agents and each Person, if any, who controls the Issuer within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, to
the same extent as the foregoing indemnity from the Issuer to such Selling
Holder, but only with reference to information related to such Selling Holder
furnished in writing by or on behalf of such Selling Holder expressly for use in
any registration statement or prospectus relating to the Registrable Securities,
or any amendment or supplement thereto, or any preliminary prospectus. Each
Selling Holder also agrees, to the extent permitted by applicable law, to
indemnify and hold harmless Underwriters of the Registrable Securities, their
officers and directors and each Person who controls such Underwriters on
substantially the same basis as that of the indemnification of the Issuer
provided in this Section 3.8.
SECTION 3.9. CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 3.7 or 3.8, such Person (the "INDEMNIFIED PARTY") shall promptly notify
the Person against whom such indemnity may be sought (the "INDEMNIFYING PARTY")
in writing and the Indemnifying Party upon request of the Indemnified Party
shall retain counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party and any others the Indemnifying Party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to the proceeding. In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential
11
differing interests between them. It is understood that the Indemnifying Party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the Indemnified
Parties. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its consent, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Party shall have requested an Indemnifying Party to reimburse the Indemnified
Party for fees and expenses of counsel as contemplated by the third sentence of
this paragraph, the Indemnifying Party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 Business Days after receipt by such
Indemnifying Party of the aforesaid request and (ii) such Indemnifying Party
shall not have reimbursed the Indemnified Party in accordance with such request
prior to the date of such settlement. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Party is or
could have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement (x) includes an unconditional release
of such Indemnified Party from all liability arising out of such proceeding and
(y) provides that such Indemnified Party does not admit any fault or guilt with
respect to the subject matter of such proceeding.
SECTION 3.10. CONTRIBUTION. (a) If the indemnification provided for
herein is for any reason unavailable to the Indemnified Parties in respect of
any losses, claims, damages or liabilities referred to herein, then each such
Indemnifying Party, to the extent permitted by applicable law, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) as between the Issuer and any Selling Holder on the one hand and
the Underwriters on the other, in such proportion as is appropriate to reflect
the relative benefits received by the Issuer and such Selling Holder on the one
hand and the Underwriters on the other from the offering of the securities, or
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Issuer and such Selling Holder on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations and (ii) as between the Issuer on the one hand
and any Selling Holder on the other, in such proportion as is appropriate to
reflect the relative fault of the Issuer and of such Selling Holder in
connection with such statements or omissions, as well as any other relevant
equitable considerations. The relative benefits received by
12
the Issuer and any Selling Holder on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Issuer and such Selling Holder bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the prospectus. The relative
fault of the Issuer and any Selling Holder on the one hand and of the
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuer and such Selling Holder or by the Underwriters. The
relative fault of the Issuer on the one hand and any Selling Holder on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(b) The Issuer and each Selling Holder agree that it would not be just
and equitable if contribution pursuant to this Section 3.10 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 3.10, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such Selling Holder were
offered to the public (less underwriters' discounts and commissions) exceeds the
amount of any damages which such Selling Holder 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 Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
SECTION 3.11. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person
may participate in any underwritten registration hereunder unless such Person
(a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements
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and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements and these registration rights.
SECTION 3.12. RULE 144. The Issuer covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
and will take such further action as the Selling Holders shall reasonably
request, all to the extent required from time to time to enable the Selling
Holders to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule is amended from time to time, or (b) any similar
rule or regulation hereafter adopted by the Commission. Upon the request of the
Agent, the Issuer will deliver to the Agent a written statement as to whether it
has complied with such requirements.
SECTION 3.13. HOLDBACK AGREEMENTS. (a) RESTRICTIONS ON PUBLIC SALE BY
HOLDER OF REGISTRABLE SECURITIES. If and to the extent requested by the Issuer,
in the case of a non-underwritten public offering, and if and to the extent
requested by the lead Underwriter or Underwriters, in the case of an
underwritten public offering, the Holders agree not to effect, except as part of
such registration or a concurrent registration, any public sale or distribution
of the issue being registered or a similar security of the Issuer, or any
securities convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144, during the 10 days prior to, and during
such period that the Issuer (in the case of a non-underwritten public offering)
or the lead Underwriter (in the case of an underwritten public offering) may
reasonably request, but in no event longer than 90 days, beginning on, the
effective date of such registration statement.
(b) RESTRICTIONS ON PUBLIC SALE BY THE ISSUER. The Issuer agrees (i)
not to effect any public sale or distribution of any securities similar to those
being registered in accordance with Section 3.1 or Section 3.2 hereof, or any
securities convertible into or exchangeable or exercisable for such securities,
during the 10 days prior to, and during such period as the lead Underwriter may
reasonably request, but in no event longer than 90 days, beginning on, the
effective date of any registration statement (except as part of such
registration statement and except pursuant to registrations on Form S-4 or S-8
or any successor or similar form thereto or pursuant to an unregistered offering
to employees of the Issuer or its Subsidiaries pursuant to an employee benefit
plan as defined in Rule 405 of Regulation C of the Securities Act) or the
commencement of a public distribution of Registrable Securities, (ii) that any
agreement entered into after the date of this Agreement pursuant to which the
Issuer issues or agrees to issue any privately placed securities shall contain a
provision under which holders of such securities agree not to effect any public
sale or distribution of any such securities during the periods described in (i)
above, in each case including a sale pursuant to Rule 144 (except as part of any
such registration, if permitted); PROVIDED, however, that the provisions of this
paragraph (b)
15
shall not prevent the exercise, conversion or exchange of any securities
pursuant to their terms into or for other securities, (iii) the Issuer will
enforce such "holdback" or "lock-up" agreements described in (ii) above and any
other "holdback" or "lock-up" agreements the Issuer is party to from time to
time in connection with an underwritten offering under Section 3.1 or 3.2 and
(iv) to use its commercially reasonable best efforts to obtain "holdback" or
"lock-up" agreements from other holders of the Issuer's common shares to the
extent reasonably requested by the holders requesting such underwritten
offering; PROVIDED THAT the Issuer shall have no obligation to pay any amount to
obtain such agreements.
SECTION 3.14. TRANSFER OF REGISTRATION RIGHTS. The rights of each
Holder under this Article III are transferable to each transferee of such Holder
to whom the transferor assigns its rights.
ARTICLE IV
COVENANTS
SECTION 4.1. INFORMATION. So long as any of the Series A Preference
Shares remain outstanding, the Issuer shall deliver to the Purchaser (PROVIDED
that the Purchaser agrees not to distribute such information to other Persons
other than by way of a summary thereof, without the consent of the Issuer, such
consent not to be unreasonably withheld or delayed):
(a) as soon as practicable and in any event no later than thirty (30)
days after the end of each fiscal month of the Issuer, the GST
Telecommunications, Inc. Management Reporting Package, substantially in the form
set forth in Exhibit A hereto.
(b) promptly upon receipt thereof, copies of all reports submitted to
the Issuer by independent public accountants in connection with each annual,
interim or special audit of the Issuer's financial statements made by such
accountant, including, without limitation, the comment letter submitted by such
accountants to management in connection with their annual audit;
(c) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Issuer to its securityholders or by any Subsidiary of the
Issuer to its securityholders other than the Issuer or another Subsidiary, of
all regular and periodic reports and all registration statements and
prospectuses, if any, filed by the Issuer or any of its Subsidiaries with any
securities exchange or with the Commission or any governmental authority
succeeding to any of its functions, and of all press releases and other written
statements made available generally by the Issuer or any Subsidiary to the
public concerning material developments in the business of the Issuer and its
Subsidiaries;
15
(d) within thirty (30) days after the last day of each fiscal year, a
certificate signed by the Issuer's Chief Financial Officer certifying that the
Issuer is in compliance in all material respects with the terms and conditions
of the Securities;
(e) all information provided in writing to the members of the Board of
Directors of the Issuer other than immaterial information which is provided to
only a portion of the Board of Directors; and
(f) from time to time such additional information regarding the
financial position, operations or business of the Issuer and its Subsidiaries as
the Agent may reasonably request.
If the Issuer determines that it has become a passive foreign
investment company ("PFIC"), within the meaning of Section 1296 of the Internal
Revenue Code of 1986, as amended (the "Code"), within two months after the end
of each year it will supply the PFIC annual information statement necessary for
holders of Series A Preference Shares or Common Shares to make the qualified
election under Section 1295 of the Code for each year to PGI at the end of such
year. The Agent shall also be entitled to receive notice of and to attend in
person any equity analysts meetings at which the Issuer or any of its
Subsidiaries will be presenting information on its business or financial
affairs. The Issuer shall pay the reasonable out-of-pocket expenses of the
Preferred Director incurred in observing or attending Board meetings and the
Agent incurred in attending such equity analyst meetings.
SECTION 4.2. PROHIBITED ISSUANCE OF ADDITIONAL SERIES A PREFERENCE
SHARES. As long as any Series A Preference Shares remain outstanding, the Issuer
shall not issue any additional Series A Preference Shares.
SECTION 4.3. DIRECTOR NOMINATION. At the time that no Series A
Preference Shares remain outstanding, the Issuer agrees to (x) nominate for
election as a director at annual meetings for election of directors a person
chosen by the holders of a majority of the Series A Common Shares then held by
the parties hereto, other than the Issuer, (y) include such person on the slate
of directors proposed by the Issuer for election at such meetings and (z)
appoint such person as a director until the annual meeting next to occur;
PROVIDED that the rights under this Section 4.3 shall expire at the time the
parties hereto, other than the Issuer, hold fewer than 5% of the aggregate
Series A Common Shares.
SECTION 4.4. INDEMNITY. (a) If any Holder or Specified Member of such
Holder incurs any Canadian Taxes (whether such Taxes are to be paid directly by
such Holder or Specified Member, are to be paid by the Issuer, are to be
withheld or deducted by the Issuer from an amount payable or in respect of the
value of any property deliverable to such Holder or Specified Member, or are to
be otherwise incurred, and
16
whether or not such Canadian Taxes are correctly or validly assessed), in
relation to the Series A Preference Shares held or previously held by such
Holder (including, without limitation, any Canadian Taxes, howsoever levied or
collected, as contemplated above, incurred as a result of or in relation to the
issuance, ownership, possession, sale, conversion, redemption, or cancellation
of such Series A Preference Shares, the receipt of investment return on or
return of capital of such Series A Preference Shares, the receipt, crediting,
accrual or payment of a deemed or actual dividend on such Series A Preference
Shares or of interest with respect to any amount owed pursuant to the terms of
such Series A Preference Shares, or the winding-up, liquidation, merger,
consolidation, sale of assets or reincorporation of the Issuer), other than
Canadian Taxes incurred by such Holder or Specified Member, as the case may be,
to the extent that such Person was resident in Canada for purposes of Canadian
federal income tax law, or was carrying on business in Canada in respect of the
Series A Preference Shares, at the time of the event giving rise to the Canadian
Taxes (Canadian Taxes satisfying the aforementioned conditions being hereinafter
referred to as "Covered Taxes"), the Issuer shall indemnify and hold the Holder
or Specified Member harmless with respect to such Covered Taxes and shall pay to
such Holder or Specified Member, as the case may be, an amount (an "Additional
Amount") hereunder which, after subtraction of all Taxes that have been or are
expected to be incurred by such Holder or any Specified Member of such Holder in
connection with the receipt or accrual of such Additional Amount (whether such
Taxes are to be paid directly by such Holder or any such Specified Member, are
to be paid by the Issuer, are to be withheld or deducted by the Issuer from an
amount payable or in respect of the value of any property deliverable to such
Holder or Specified Member, or are otherwise incurred), shall be equal to the
amount of the Covered Taxes incurred by such Holder or Specified Member. For
purposes of this Section 4.4, any reference to Taxes (or Canadian Taxes) being
incurred by a particular Person shall be deemed to include, without limitation,
circumstances where such Taxes are imposed upon such Person or where such Person
directly or indirectly sustains any cost, loss or liability for or in respect of
such Taxes.
(b) Where the Issuer is required to withhold or deduct any Canadian
Taxes from an amount paid or payable, or in respect of the value of any property
delivered or deliverable, to a Holder or a Specified Member in respect of the
Series A Preference Shares (and does so withhold or deduct such Canadian Taxes),
the Issuer shall (i) promptly notify the applicable Holder or Specified Member
of such requirement, (ii) pay the amount so required to be deducted or withheld
to the applicable taxing authority on a timely basis, (iii) furnish promptly to
the Holder or Specified Member in respect of which such deduction or withholding
is made all available official receipts and such other documentation requested
by such Holder or Specified Member evidencing the payment to the relevant taxing
authority, and (iv) immediately pay to the Holder or Specified Member the
Additional Amount required by paragraph (a) with respect to the Canadian Taxes
so deducted or withheld.
17
(c) The Issuer shall make any payment required by paragraph (a) of this
Section 4.4 (other than any payment which must be made immediately pursuant to
item (iv) of paragraph (b)) within 30 calendar days from the date the relevant
Holder or Specified Member makes written demand therefor, setting forth in
reasonable detail a description of the Taxes that give rise to such demand,
which demand shall be conclusive as to the amount that must be paid to the
Holder or Specified Member whether or not the Taxes that give rise to such
demand were correctly or validly assessed.
(d) To the extent that the Issuer is prohibited from paying any
Additional Amount in cash, a Holder or a Specified Member, as the case may be,
may elect to have the Issuer, within the time periods specified in paragraphs
(b) and (c), issue to the Holder or Specified Member, as the case may be, a
number of Common Shares equal to such Additional Amount which is prohibited from
being paid in cash divided by the product of the Fair Market Value of a Common
Share on the date such shares are issued and 95%. In the event and to the extent
that the Company is prohibited from paying any such Additional Amount in cash
due to restrictions contained in instruments of indebtedness to which it is a
party ("DEBT INSTRUMENTS") and in the event and to the extent the person to whom
such amount is owed does not exercise the option to receive such amount in
Common Shares as set forth above, then, the following shall apply (but only to
the Additional Amounts or portions thereof which were not so paid in cash or by
way of the issuance of Common Shares):
(A) The Company shall have a continuing obligation to, as soon
as possible, pay such amount (or portions, thereof as
permitted by the Debt Instruments from time to time) in cash,
provided that the Company shall only be obligated to satisfy
such obligation to the extent it is not prohibited from doing
so under the terms of its Debt Instruments; and
(B) The person to whom such amount is owed shall have the
right, at any time, and from time to time, at such person's
option, to require the Company to pay such amount by issuing
to such person a number of fully-paid and non-assessable
Common Shares equal to such amount or any portion thereof
divided by the product of the Fair Market Value (as defined in
the Amendment to Articles) of a Common Share at the time it is
issued and 95%.
(e) To the extent that the Issuer wishes to contest any Holder's or any
Specified Member of such Holder's liability to any taxing authority for any
Covered Taxes, the Holder shall make reasonable efforts, at the sole expense of
the Issuer, to provide information relevant to such contest to the Issuer, it
being understood that neither such Holder, nor any of its Specified Members,
shall be under any obligation to contest or be a party to the contesting of its
liability for any Covered Taxes or to assume any financial or other cost, risk,
or liability with respect to the contesting of such Covered
18
Taxes by the Issuer. Provided the Issuer has satisfied its indemnity obligation
under this Section 4.4 in full, any Covered Taxes recovered from a Canadian
Taxing Authority, pursuant to a contest thereof by the Issuer, shall be the
property of and shall be paid to the Issuer.
(f) Notwithstanding paragraph (e), in no event shall any Holder or
Specified Member be required to submit any of its tax returns or any part
thereof to the Issuer or any other Person or to prepare its tax returns other
than as such Holder or Specified Member in its sole discretion shall determine.
Nothing herein shall require any Holder or Specified Member to disclose to the
Issuer any information regarding its tax affairs or tax computations, or to
arrange its tax affairs so as to take advantage of any deductions, tax credits,
or other relief that may be available.
(g) The indemnity provided in this Section 4.4 shall apply to every
Holder and to every Person who is, at any time, a Specified Member of such a
Holder, as well as to any subsequent Holder or Specified Member thereof. The
application of the indemnity provided in this Section 4.4 to subsequent Holders
and Specified Members thereof shall in no way diminish the rights and benefits
of the initial Holders and Specified Members of such initial holders.
(h) The right of any Person to receive payments pursuant to this
Section 4.4 shall survive the sale, exchange, redemption, conversion or other
disposition of any Series A Preference Shares.
(i) Each Holder has the right to enforce the provisions hereof with
respect to, or for the benefit of, any of its Specified Members or with respect
to Additional Amounts due in respect of, or to, such Specified Members,
irrespective of whether such Specified Members would have the right to enforce
the provisions hereof under applicable law.
"TAXES" means all domestic and foreign federal, provincial, state,
municipal, territorial or other taxes, imposts, duties, rates, deductions,
levies, assessments, fees, charges, dues or withholdings of any nature lawfully
levied, assessed or imposed, including, without limitation, all income, capital
gains, sales and use, property, capital, value added, stamp, registration,
documentation and withholding taxes, and all excise taxes, customs and import
duties, together with all interest, fines, penalties and expenses with respect
thereto.
"CANADIAN TAXES" means any Taxes levied, assessed or imposed by a
Canadian Taxing Authority; but does not include (i) any Taxes imposed by a
Canadian Taxing Authority solely under Paragraph 2(3)(c) and 115(1)(b) of the
Income Tax Act (Canada) on any "capital gain", as defined in such Act, realized
by, and taxed as such to, a Holder or a Specified Member upon the sale to a
Person other than the Issuer of
19
Series A Preference Shares and (ii) any corporate level Taxes imposed by a
Canadian Taxing Authority on, and for which the sole liability rests with, the
Issuer. For greater certainty and notwithstanding (i), Taxes imposed by a
Canadian Taxing Authority as a result of the conversion, redemption, or
cancellation of the Series A Preference Shares, as a result of the winding-up,
liquidation, merger, consolidation, reorganization, recapitalization or
reincorporation of the Issuer, or as a result of any other similar transaction
or change in capital structure of the Issuer, constitute Canadian Taxes for the
purpose of this Agreement.
"CANADIAN TAXING AUTHORITY" means any Canadian jurisdiction or taxing
authority, including, without limitation, the Canadian federal government or the
government of any Canadian province or territory.
"HOLDER" means, for purposes of this Section 4.4, any holder or former
holder of a Series A Preference Share.
"SPECIFIED MEMBER" means any Person who is or was a member of, a
quotaholder of, a partner in, or a beneficiary of a Holder, or any person who
otherwise holds or held a direct or indirect interest (whether through one or
more intermediary Persons) in a Holder or in the Series A Preference Shares of a
Holder.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
SECTION 5.2. NO INCONSISTENT AGREEMENTS. The Issuer will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with, or otherwise grant registration rights superior to, the rights granted to
the Holders under this Agreement. Except as disclosed on Schedule 3.04(h) of the
Securities Purchase Agreement, each of the Issuer and the Holders represents
that it is not and agrees that it will not become a party to any other agreement
relating to the voting or transfer of Voting Securities, or the management of
the Issuer, or granting any registration rights to any Person with respect to
any of the Issuer's equity securities. The Issuer agrees that it will not amend
or modify the foregoing Agreements, or any "registration rights" agreement it is
currently party to, in any way that would be material and adverse to the Holders
without the prior consent of the Holders.
20
SECTION 5.3. FRUSTRATION OF PURPOSE. Neither the Issuer nor any Holder
may do directly or indirectly that which is prohibited by this Agreement.
SECTION 5.4. ENTIRE AGREEMENT. This Agreement, the Securities Purchase
Agreement, the Series A Preference Shares and the Articles constitute the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein, and there are no restrictions, promises,
representations, warranties, covenants, or undertakings with respect to the
subject matter hereof, other than those expressly set forth or referred to
herein or therein. This Agreement and such other agreements and instruments
supersede all prior agreements and understandings between the parties hereto
with respect to the subject matter hereof.
SECTION 5.5. NOTICES. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto shall
be in writing (including telex, telecopier or similar writing) and shall be
given to such party at its address, telex or telecopier number set forth on its
signature page or to such other address as the party to whom notice is to be
given may provide in a written notice to the party giving such notice, a copy of
which written notice shall be on file with the Secretary of the Issuer. Each
such notice, request or other communication shall be effective (i) if given by
telex or telecopy, when such telex or telecopy is transmitted to the telex or
telecopy number specified in its signature page and the appropriate answerback
or confirmation, as the case may be, is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section 5.5.
SECTION 5.6. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5.7. SEVERABILITY. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this Agreement,
including any such provision, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.
SECTION 5.8. TERMINATION. This Agreement shall terminate and be of no
further force or effect with respect to each Holder when such Holder no longer
owns any Equity Securities (except as to matters preceding the Holder's
disposition of Equity Securities); PROVIDED that the provisions of Sections 3.6,
3.7, 3.8, 3.9, 3.10, 4.4, 5.1, 5.3 through 5.13 and 5.15 shall survive any such
termination.
SECTION 5.9. SUCCESSORS, ASSIGNS, TRANSFEREES. The provisions of this
Agreement shall be binding upon and accrue to the benefit of the parties hereto,
the
21
Holders and Specified Members described in Section 4.4 and their respective
heirs, successors and permitted assigns. Neither this Agreement nor any
provision hereof shall be construed so as to confer any right or benefit upon
any Person other than the parties to this Agreement, such Persons described in
Section 4.4 and their respective successors and permitted assigns, except that
the Holders and Specified Members referred to in Section 4.4 shall be third
party beneficiaries of the rights set forth in Section 4.4 and shall be entitled
to enforce the provisions thereof.
SECTION 5.10. AMENDMENTS; WAIVERS. (a) No failure or delay on the part
of any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
(b) Neither this Agreement nor any term or provision hereof may be
amended or waived except by an instrument in writing signed, in the case of an
amendment, by the parties thereto or, in the case of a waiver, by the party
against whom the enforcement of such waiver is sought.
SECTION 5.11. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
executed in any number of counterparts, each of which shall be an original with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto, or by the
Agent on behalf of any of the Purchaser, and the closings under the Securities
Purchase Agreement shall have occurred (the "EFFECTIVE DATE").
SECTION 5.12. RECAPITALIZATION, ETC. If any capital shares or other
securities are issued in respect of, or in exchange or substitution for, any
Equity Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
shareholders or combination of the Common Shares or any other change in capital
structure of the Issuer, appropriate adjustments shall be made with respect to
the relevant provisions of this Agreement so as to fairly and equitably
preserve, as far as practicable, the original rights and obligations of the
parties hereto under this Agreement.
SECTION 5.13. REMEDIES. The parties hereby acknowledge that money
damages would not be adequate compensation for the damages that a party would
suffer by reason of a failure of any other party to perform any of the
obligations under this Agreement. Therefore, each party hereto agrees that
specific performance is the only
22
appropriate remedy under this Agreement and hereby waives the claim or defense
that any other party has an adequate remedy at law.
SECTION 5.14. CERTAIN TRANSACTIONS. The Issuer agrees that it will not
merge or consolidate with any other Person or sell, assign, transfer, lease or
convey all or substantially all of its assets to any Person, unless and until
the Issuer has delivered to the Holders of Series A Preference Shares an opinion
of counsel in form and substance satisfactory to the Holders of a majority of
such shares stating that the Holders of the Series A Preference Shares (and each
of their respective Specified Members) will not recognize income, gain or loss
for US federal income tax purposes as a result of such merger, consolidation or
sale, assignment, transfer, lease or conveyance of assets and will be subject to
US federal income tax on the same amount and in the same manner and at the same
times as would have been the case if any of such merger, consolidation or sale,
assignment, transfer, lease or conveyance of assets had not occurred.
SECTION 5.15. CONSENT TO JURISDICTION. Each Holder and the Issuer
irrevocably submit to the exclusive jurisdiction of any United States Federal
Court sitting in the Borough of Manhattan, the City of New York over any suit,
action or proceeding arising out of or relating to this Agreement, the
Securities Purchase Agreement, the Series A Preference Shares or the Series A
Common Shares. Each of the Holders hereby irrevocably appoints the Person listed
in Exhibit B hereto and the Issuer hereby irrevocably appoints GST USA, Inc. as
its authorized agent to accept and acknowledge on its behalf service of any and
all process which may be served in any such suit, action or proceeding in any
such court and represents and warrants that such agent has accepted such
appointment. Each Holder and the Issuer consents to process being served in any
such suit, action or proceeding by serving a copy thereof upon its agent for
service of process referred to above, provided that to the extent lawful and
possible, written notice of such service shall also be mailed to such Holder and
the Issuer. Each Holder and the Issuer agrees that such service shall be deemed
in every respect effective service of process upon such Holder and the Issuer in
any such suit, action or proceeding and shall be taken and held to be valid
personal service upon and personal delivery to such Holder and the Issuer.
Nothing in this paragraph shall affect or limit any right to serve process in
any manner permitted by law or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
23
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
GST TELECOMMUNICATIONS, INC.
By /s/ Xxxx Xxxxx
----------------------------
Name: Xxxx Xxxxx
Title: Chief Executive Officer
By /s/ Xxxxxxx Xxxxx
-----------------------------
Name: Xxxxxxx Xxxxx
Title: Vice Chairman
Address: 0000 X.X. Xxxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
OCEAN HORIZON SRL
By /s/ Xxxxx Xxxx
-----------------------------------
Name: Xxxxx Xxxx
Title: Manager
Address: X.X. Xxx 000
Xxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
