PRIVILEGED AND CONFIDENTIAL
STRICTLY CONFIDENTIAL
Exhibit 4.18
VIATEL HOLDING (BERMUDA) LIMITED
EBT CONTRIBUTION COVENANT
[NAME] DEPENDENT TRUST
Contents
CLAUSE PAGE
1. DEFINITIONS.................................................................. 1
2. CONTRIBUTION TO THE EBT...................................................... 17
3. CALCULATION OF EQUITY VALUE AND TRANSACTION VALUE............................ 24
4. CESSATION OF EMPLOYMENT OF THE RELEVANT EMPLOYEE............................. 27
5. PAYMENT OF PARTIAL LIQUIDITY CONTRIBUTIONS, CONTRIBUTIONS AND ADDITIONAL
CONTRIBUTIONS WHERE CONSIDERATION IS PAYABLE OTHERWISE THAN IN CASH.......... 28
6. FULL LIQUIDITY EVENT......................................................... 30
7. PARTIAL LIQUIDITY EVENT...................................................... 30
8. MULTIPLE LIQUIDITY EVENTS.................................................... 31
9. REORGANISATION............................................................... 32
10. ADMINISTRATION............................................................... 32
11. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999................................. 32
12. GOVERNING LAW................................................................ 32
13. DISPUTE RESOLUTION........................................................... 33
EBT CONTRIBUTION COVENANT
This covenant is entered into on the 19 day of July 2005
BETWEEN:
(i) VIATEL HOLDING (BERMUDA) LIMITED (Company number 31325) whose registered
office is at Canon's Court, 00 Xxxxxxxx Xxxxxx, Xxxxxxxx XX00, Xxxxxxx
(the "COMPANY"); and
(ii) EB TRUSTEES LIMITED whose registered office is at Whiteley Xxxxxxxx, Xxx
Street, St Helier, Jersey JE4 9WG as trustee of the VTL Employee Benefit
Trust (the "TRUSTEE").
WHEREAS:
(A) The Company wishes to covenant with the Trustee to make certain
contributions to the VTL Employee Benefit Trust on the terms set out in
this covenant.
(B) The Trustee wishes to accept the contributions from the Company on the
terms set out in this covenant.
1. DEFINITIONS
1.1 In this covenant, except where the context otherwise requires, the words
and expressions set out below shall bear the following respective
meanings, namely:
"ADDITIONAL the amount (if any) to be paid by the
CONTRIBUTION(S)" Company to the Trustee in relation to a Full
Liquidity Event calculated in accordance
with clause 2.6;
"ADDITIONAL PERCENTAGE the meaning given to it in clause 2.6;
CONTRIBUTION"
"AFFILIATE" in relation to a company any other company
Controlling, Controlled by or under common
Control with, that company and "AFFILIATED"
shall be construed accordingly;
"BOARD" the board of directors of the Company from
time to time;
"BUSINESS DAYS" all days excluding Saturdays, Sundays and
any day on which the London Stock Exchange
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is closed for the transaction of business;
"CAUSE" the meaning set out in clause 4.2.1;
"CHANGE OF CONTROL" (a) with respect to the Company, the
Company ceasing to be Controlled
directly or indirectly by the
Investors (it being understood that
the transfer by one or more Investors
of shares that leaves such Investor or
other Investors (on a Fully Diluted
Basis) with Control of the Company
does not constitute a Change of
Control of the Company); and
(b) with respect to a Subsidiary, such
Subsidiary ceasing to be Controlled by
the Company;
"CLOSING DATE" 21 April 2004;
"CONTRIBUTION" the amount (if any) to be paid by the
Company to the Trustee in relation to a Full
Liquidity Event calculated in accordance
with clauses 2.4 and 2.5;
"CONTROL" in relation to a company:
(a) a person shall be taken to have
control of a company if he exercises,
or is able to exercise or is entitled
to acquire, direct or indirect control
over the company's affairs, and in
particular, but without prejudice to
the generality of the preceding words,
if he possesses or is entitled to
acquire:
(i) the greater part of the share
capital or issued share capital
of the company or of the voting
power in the company; or
(ii) such part of the issued share
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capital of the company as would,
if the whole of the income of
the company were in fact
distributed among the
shareholders entitle him to
receive the greater part of the
amount so distributed; or
(iii) such rights as would, in the
event of the winding-up of the
company or in any other
circumstances, entitled him to
receive the greater part of the
assets of the company which
would then be available for
distribution among the
shareholders;
(b) where two or more persons together
satisfy any of the conditions of
paragraph (a) above, they shall be
taken to have control of the company;
(c) for the purposes of paragraph (a)
above a person shall be treated as
entitled to acquire anything which he
is entitled to acquire at a future
date, or will at a future date be
entitled to acquire;
(d) for the purposes of paragraphs (a) and
(b) above, there shall be attributed
to any person any rights or powers of
a nominee for him, that is to say, any
rights or powers which another person
possesses on his behalf or may be
required to exercise on his direction
or behalf; and
(e) for the purposes of paragraphs (a) and
(b) above, there may also be
attributed to any person all the
rights and powers of any company or
companies of which he has control,
including those
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attributed to a company under
paragraph (d) above,
and "Controlled" shall be construed
accordingly;
"CONTROLLING SUBSIDIARY" any Subsidiary of the Company which owns or
controls all or substantially all of the
assets of the Group;
"DATE OF CESSATION" the date on which a Relevant Employee ceases
to be an employee of any member of the Group
and does not immediately become an employee
of another member of the Group;
"DEPENDENT TRUST" that part of the Trust Fund held on distinct
trust for the Relevant Employee and his
family;
"DETERMINATION DATE" the meaning given to it in clause 3.5 or
3.6, as appropriate;
"DILUTIVE ISSUE" the issue of shares in the Company such that
on a Fully Diluted Basis no one Investor or
group of Investors collectively, holds a
Significant Interest in the Company;
"DISTRIBUTION" following a conversion of the Viatel
Convertible Notes (i) the pro rata
distribution of any of the Company's assets
in cash or otherwise to the holders of all
of the common stock of the Company including
(without limitation) by way of repurchase,
redemption or cancellation of shares; or
(ii) the non-pro rata purchase or redemption
of common stock of the Company from one or
more Investors (in a transaction not made
available to all holders of common stock);
"EBT" the VTL Employee Benefit Trust as
established by the Company on -, - 2005;
"EQUITY VALUE" the meaning set out in clause 3.1;
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"EXCHANGE RATE" with respect to a particular currency on a
particular date, the closing mid-point rate
for the conversion of that currency into US
Dollars on that date as set out in the
London edition of the Financial Times first
published after that date;
"FLOTATION" the Company or a Controlling Subsidiary
effecting a Listing (including the transfer
of shares in the Company or a Controlling
Subsidiary to a Listed Entity (other than a
Qualified Transferee) and the amalgamation
or merger of the Company with a Listed
Entity or the subsidiary of a Listed Entity
(in either cash not being a Qualified
Transferee) in circumstances which do not
constitute a Sale solely by virtue of the
fact that following the transfer of such
shares, amalgamation or transfer the
Investors Control the Listed Entity (and if
relevant, its subsidiary);
"FULL LIQUIDITY EVENT" the meaning set out in clause 6;
"FULLY DILUTED BASIS" means that all securities of an entity
convertible into, or exchangeable or
exercisable for, ordinary shares of that
entity have been so converted, exchanged or
exercised and such ordinary shares have been
issued;
"FURTHER CONTRIBUTION(S)" any payment made or to be made by the
Company to the Trustee, in accordance with
clause 2.8;
"GOOD REASON" the meaning set out in clause 4.2.2;
"GROUP" the Company and any Subsidiary of the
Company or, where the context permits, any
one or more of them, and references to
"member of the Group" shall be construed
accordingly;
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"INVESTMENT AGREEMENT" the investment and note purchase agreement
entered into by the Company and others on 21
April 2004;
"INVESTORS" the Purchasers (as such term is defined in
the Investment Agreement);
"LIQUIDATION" in relation to a company, the entry of a
winding up order by a court having
jurisdiction or the passing of a resolution
by the shareholders of the company, for the
solvent winding up of the company;
"LIQUID CONSIDERATION" cash equivalents and shares of a Listed
Entity which (a) are not subject to any
restrictions on sale and (b) have an average
monthly trading volume at the Determination
Date sufficient so that in the view of the
Board, the Investors are likely to be able
to dispose of all such shares received as
consideration or otherwise in connection
with a Full Liquidity Event or Partial
Liquidity Event without adversely affecting
the average trading price thereof;
"LISTED ENTITY" any company which has effected a Listing and
continues to be Listed;
"LISTING" in relation to a company:
(a) a public offering for cash of an
amount of that company's shares equal
to at least 20% of the issued share
capital of that company where,
following such offering, the shares of
the company are registered with the US
Securities and Exchange Commission
pursuant to the Securities and
Exchange Act 1934 or traded on a US
securities exchange or in the National
Association of Securities Dealers
Automated Quotation System (NASDAQ);
or
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(b) the admission of any part of the share
capital of that company to listing on
the Official List of the UK Listing
Authority and to trading on the London
Stock Exchange plc's market for listed
securities; or
(c) the admission of any part of the share
capital of that company to trading on
any other securities exchange;
in any case, following a resolution of the
board of the relevant company, to pursue
such a Listing, and "LISTED" shall be
construed accordingly;
"MATERIAL ASSET" on any date, any asset(s) or undertaking of
a member of the Group where:
(a) the amount payable on the transfer of
such asset(s) or undertaking exceeds
US$10 million; or
(b) such asset(s) or undertaking represent
10% or more of the net assets of the
entire Group (as shown in the audited
consolidated accounts of the Group
last published prior to that date); or
(c) the board of the Company determines
that such assets or undertaking should
otherwise be classed as material in
the context of the business of the
Group as a whole for the purposes of
this covenant;
and the following shall in any event (but
without limitation) constitute `Material
Assets' notwithstanding and without
prejudice to paragraphs (a) to (c) above:
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(i) the asset(s) and undertaking
comprising the Group's
telecommunications network in any
single country in Europe (as of the
Closing Date), including (without
limitation) ducts, cables, rights of
way, easements, indefeasible rights of
use, points of presence, co-location
facilities and repeater stations;
(ii) the asset(s) and undertaking
comprising the Group's commercial
operations in the UK or Switzerland or
in the whole of Europe including
(without limitation) contracts for the
supply of communications services;
"MATERIAL SUBSIDIARY" any Subsidiary of the Company which owns a
Material Asset;
"MAXIMUM ADDITIONAL the maximum percentage of Equity Value used
PERCENTAGE CONTRIBUTION" to calculate the amount of any Additional
Contribution due to the EBT pursuant to
clause 2.6;
"MAXIMUM PERCENTAGE the maximum percentage of Equity Value used
CONTRIBUTION" to calculate the amount of any Contribution
due to the EBT pursuant to clause 2.4;
"PARTIAL LIQUIDITY the amount (if any) paid or to be paid by
CONTRIBUTION" the Company to the Trustee in relation to a
Partial Liquidity Event calculated in
accordance with clause 2.7;
"PARTIAL LIQUIDITY EVENT" the meaning set out in clause 7;
"PAYMENT DUE DATE" the tenth Business Day following a
Determination Date;
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"POST-FLOTATION TRANSFER" following a Flotation of the Company or a
Controlling Subsidiary, a transfer by the
Investors (or any one or more of them) of
common stock in the Company or a transfer by
the Company of shares in a Controlling
Subsidiary, in either event to a person or
to an entity that is not a Qualified
Transferee the proceeds of which are either:
(a) together, equal to or in excess of
$10 million; or
(b) when aggregated with the proceeds of
all previous transfers (to persons or
entities that are not Qualified
Transferees) of common stock of the
Company or shares in the Controlling
Subsidiary made by any of the
Investors or the Company (as
appropriate) following such Flotation,
equal to or in excess of $10 million;
and so that (for the avoidance of doubt) any
transfer of common stock by any Investor or
shares by the Company (as appropriate)
following a Flotation shall constitute a
Post-Flotation Transfer if the aggregate
proceeds of all previous transfers of common
stock of the Company or shares of a
Controlling Subsidiary (as appropriate) (to
persons or entities that are not Qualified
Transferees) by that Investor and/or any
other Investor, or the Company (as
appropriate) is equal to or in excess of $10
million;
"QUALIFIED TRANSFEREE" any Investor or any Affiliate of any
Investor, but excluding any such Affiliate
that is primarily involved in a line of
business that is substantially different
from the lines of business primarily engaged
in by the Investor (and any parent entity of
the Investor on a
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consolidated basis) with whom such Affiliate
is Affiliated, it being understood that for
this purpose the business of holding
investments shall be deemed to be a business
in which each Investor is primarily engaged;
"RELEVANT DATE" (a) in relation to a Full Liquidity Event:
(i) by way of a Sale of the Company,
the date of the transfer of the
shares(s) which results in the
occurrence of a Sale;
(ii) by way of a Liquidation of the
Company, the date following
commencement of the Liquidation
on which the liquidator
determines that a distribution
of surplus assets of the Company
can be made (without taking into
account the provisions of this
covenant);
(b) in relation to a Partial Liquidity
Event:
(i) by way of the transfer (to a
person or entity that is not a
Qualified Transferee) of a
Material Asset followed by a
Distribution of proceeds, the
date of the Distribution of the
proceeds in connection with such
transfer;
(ii) by way of the Liquidation of a
Material Subsidiary followed by
a Distribution of the proceeds
of the Liquidation, the date of
Distribution of such proceeds in
connection with such
Liquidation;
(iii) by way of a Post-Flotation
Transfer of shares in a
Controlling Subsidiary (to a
person or entity
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that is not a Qualified
Transferee) followed by a
Distribution of the proceeds of
such transfer, the date of the
Distribution of the proceeds in
connection with such
Post-Flotation Transfer;
(iv) by way of a Tag-Along
Transaction, the date of the
transfer of the relevant shares;
(v) by way of a Post-Flotation
Transfer of shares in the
Company, the date of the
transfer of the relevant shares;
(vi) by way of an amalgamation or
merger of the Company under
clause 7.1.5, the date on which
the amalgamation or merger takes
place;
and, for the avoidance of doubt, more than
one Relevant Date can occur in relation to a
Partial Liquidity Event in accordance with
the provisions of clause 3.4;
"RELEVANT EMPLOYEE" [NAME];
"REMUNERATION COMMITTEE" the remuneration committee of the board of
Directors of the Company as duly authorised
from time to time;
"REORGANISATION" (a) any amalgamation or merger for
internal reorganisation purposes of
the Company with another body
corporate (other than where the
Company is the principal surviving or
remaining body corporate);
(b) any reorganisation of the Company as
a result of which all or part of the
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business of the Group becomes
Controlled by a new company which is
not currently a member of the Group,
but which is itself Controlled by the
Investors (whether alone or together
with any other persons) in the same or
substantially the same proportions as
the Investors hold or would hold
shares in the Company, on a Fully
Diluted Basis, immediately prior to
the reorganisation; or
(c) the acquisition (other than by way
of a subscription for shares) by a
company (including, without
limitation, a Listed Entity) of shares
in the Company or an amalgamation or
merger of the Company with another
company in circumstances which do not
constitute a Sale by virtue of the
fact that following the transfer,
merger or amalgamation, given the
shareholding structure of the
acquiring company or surviving entity,
either there has been no effective
Change of Control of the Company or
the Investors retain a Significant
Interest in the acquiring company, or
surviving entity; or
(d) a Dilutive Issue,
but notwithstanding the foregoing, no
amalgamation, reorganisation, acquisition,
issue or other transaction that constitutes
a Reorganisation shall, unless the Board
determine otherwise in accordance with
clause 8, also constitute a Partial
Liquidity Event or a Full Liquidity Event
and no amalgamation, reorganisation,
acquisition, issue or other transaction that
constitutes a Partial Liquidity Event or a
Full Liquidity Event
12
shall, unless the Board determines otherwise
in accordance with clause 8, also constitute
a Reorganisation;
"SALE" in relation to the Company, the transfer by
one or more Investors of shares by way of
Tag-Along Transaction or a Post-Flotation
Transfer or the amalgamation or merger of
the Company with another company, or other
sale of shares following a Tag-Along
Transaction or amalgamation or merger (in
one transaction or as a series of related
transactions) as a result of which:
(a) there is a Change of Control of the
Company following which, no one
Investor, or group of Investors
collectively, holds a Significant
Interest in the Company (or, following
an amalgamation or merger, in the
surviving entity); or
(b) (in the event of a transfer of shares
following the previous occurrence of a
Change of Control of the Company which
does not constitute a Sale under
paragraph (a) above) no one Investor,
or group of Investors collectively,
holds a Significant Interest in the
Company (or, following an amalgamation
or merger, in the surviving entity);
"SERVICE AGREEMENT" the service agreement between the Relevant
Employee and [the Company][VTL UK Limited]
dated [date];
"SHAREHOLDER" in relation to the Company, the holders of
shares in the Company;
"SHARES" any shares or common stock in a company and
any right to acquire or convert any
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security into, shares or common stock in a
company;
"SHAREHOLDERS' AGREEMENT" the shareholders' agreement entered into by
the Company and others on 21 April 2004;
"SIDE LETTER" the letter of even date herewith between the
Company and the Trustee;
"SIGNIFICANT INTEREST" in relation to a company, the holding of or
the ability to be able to exercise or to
acquire direct or indirect control over,
more than 20% of the voting rights attaching
to that company's shares on a Fully Diluted
Basis;
"SUBSIDIARY" a subsidiary undertaking as defined in
section 258 of the Companies Act 1985;
"TAG-ALONG TRANSACTION" a sale of shares to a person or entity that
is not a Qualified Transferee that triggered
(or would have been capable of triggering)
any of the "tag-along" rights as set out in
Section 3.4(a) or 3.4(d) of the
Shareholders' Agreement;
"TAXES ACT" the Income and Corporation Taxes Act 1988;
"TRANSACTION VALUE" the meaning set out in clause 3.2;
"TRANSACTION VALUE at any date, the aggregate of the
THRESHOLD" Transaction Values of all Partial Liquidity
Events with Relevant Dates on or prior to
such date being equal to or exceeding $100
million;
"TRANSFER" (in relation to any asset) the direct or
indirect transfer of that asset (and for the
avoidance of doubt, but without limitation,
reference to an asset shall include a share)
whether by way of sale, gift, holding on
trust and whether at law or in equity,
including in the case of a share, an
agreement to exercise generally the voting
rights attaching to that share at the
direction of any third party, but excluding
(a) the grant of a
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revocable proxy with regard to any share;
and (b) the grant, release or exercise of
any security granted over any asset for the
purposes of securing a monetary obligation
(it being understood that a Flotation cannot
of itself be a "transfer" and the transfer
of shares in an entity shall only constitute
a "transfer" of that entity (as distinct
from the shares) if such transfer of shares
results in a Change of Control of that
entity);
"TRIGGER DATE" (a) in relation to a Full Liquidity Event:
(i) by way of a Sale of the Company, the
date of the transfer of the share(s)
which result in the occurrence of a
Sale;
(ii) by way of a Liquidation of the
Company, the date on which the
resolution to wind the Company up is
passed by the shareholders or the date
on which an order to wind up the
Company is granted, whichever is the
earlier; and
(b) in relation to a Partial Liquidity
Event:
(i) by way of the transfer of a Material
Asset, the date of disposal of such
asset;
(ii) by way of the Liquidation of a
Material Subsidiary the date on which
the resolution to wind up the company
is passed by the shareholders or the
date on which an order to wind up the
company is granted, whichever is the
earlier;
(iii) by way of a Post-Flotation Transfer of
shares in a Controlling Subsidiary the
date of the transfer of such shares;
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(iv) by way of a Tag-along Transaction, the
date of the relevant transfer of
shares;
(v) by way of a Post-Flotation Transfer of
shares in the Company, the date of the
relevant transfer of shares; and
(vi) by way of an amalgamation or merger of
the Company under clause 7.1.5, the
date on which the amalgamation or
merger takes place;
"TRUST FUND" the meaning given to it under the EBT;
"VIATEL CONVERTIBLE NOTES" the Viatel Holding (Bermuda) Limited 8%
Convertible Senior Secured Notes due 2014;
and
"WAIVER" the form of Waiver set forth in Annex A
hereto.
1.2 In this covenant:
1.2.1 any reference to a statutory or regulatory provision shall be
deemed to include that provision as it may from time to time be
amended or re-enacted, and, wherever the context so admits or
requires, the singular shall include the plural and vice versa and
the masculine shall include the feminine;
1.2.2 "PARENT UNDERTAKING" shall have the meaning ascribed to it in
section 258 of the Companies Act 1985;
1.2.3 reference to any English legal term for any action, remedy, method
of judicial proceeding, legal document, legal status, court,
official or any legal concept or thing includes, in respect of any
jurisdiction other than England, a reference to whatever most
closely approximates in that jurisdiction to the relevant English
legal term;
1.2.4 any phrase introduced by the terms "INCLUDE", "INCLUDING", "IN
PARTICULAR" or any similar expression shall be construed as
illustrative and shall not limit the sense of the words preceding
those terms; and
1.2.5 a reference to a company shall be to a body corporate, whenever
incorporated.
1.3 Any reference in this covenant to a sum expressed in $ (US Dollars), in
the context of any sum denominated in any other currency (such as for
example, but without limitation, a
16
reference to the proceeds of sale of shares exceeding a sum in US Dollars)
shall be converted into US Dollars at the Exchange Rate on the relevant
date. In the case of any value required to be converted into US Dollars
for the purposes of calculating the Transaction Value or Equity Value or
the amount of a Partial Liquidity Contribution or Contribution or
Additional Contribution, if appropriate, due following a Partial Liquidity
Event or a Full Liquidity Event, the relevant date shall be the Relevant
Date in relation to such Partial Liquidity Event or Full Liquidity Event.
2. CONTRIBUTION TO THE EBT
2.1 The Company hereby undertakes, subject to the provisions of clause 5, that
on or prior to any Payment Due Date, it will make a Partial Liquidity
Contribution (if the Payment Due Date relates to a Partial Liquidity
Event) or a Contribution and, if applicable, an Additional Contribution
(if the Payment Due Date relates to a Full Liquidity Event) in cash to the
Trustee, as trustee of the EBT, calculated in accordance with the terms of
this covenant. The Trustee hereby declares itself trustee of the benefit
of this covenant to hold the same for the benefit of the persons who are
the beneficiaries under the terms of the EBT, in accordance with the terms
of the EBT. Notwithstanding any other term of this covenant:
2.1.1 if neither a Partial Liquidity Event nor a Full Liquidity Event has
occurred by 21 April 2014 no Partial Liquidity Contribution or
Contribution or Additional Contribution will be made to the Trustee
and in this event this covenant shall terminate on 21 April 2014;
2.1.2 no Partial Liquidity Contribution or Contribution or Additional
Contribution shall be made with respect to any transaction or event
with respect to which the Relevant Date is after 21 April 2014; and
2.1.3 no Partial Liquidity Contribution or Contribution or Additional
Contribution will be made with respect to any Relevant Employee who
has not executed and delivered the Waiver on or prior to 10 Business
Days after the date of this covenant.
2.2 Notwithstanding anything to the contrary in this covenant, the obligations
of the Company under clause 2.1 above shall be alternative to and not
additional to the obligations of [the Company] [VTL UK Limited] ("EXISTING
OBLIGATIONS") under clause [ ] of the Service Agreement. If the Existing
Obligations remain in full force and effect, the Company shall not be
liable to make any payment under clause 2.1 above.
2.3 The Trustee agrees that any Partial Liquidity Contribution, Contribution
(and, if applicable, any Additional Contribution) made by the Company
under this covenant will
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immediately be transferred by the Trustee to the [NAME] Dependent Trust
and will be held by the Trustee in accordance with the terms of that
trust.
2.4 In relation to a Full Liquidity Event the amount of the Contribution will
depend on:
2.4.1 the Equity Value at the Relevant Date of the Full Liquidity Event
and will be calculated as a percentage of such Equity Value as
follows:
EQUITY VALUE US$ MAXIMUM PERCENTAGE CONTRIBUTION
--------------------- -------------------------------
Less than 100 million 0
100 million
350 million or more
and the Maximum Percentage Contribution used to calculate the amount
of Contribution due where the Equity Value is greater than $US100
million, but less than US$350 million, shall be pro rated on a
straight line basis; and
2.4.2 whether the Relevant Employee has ceased to be an employee of a
member of the Group (and has not immediately become an employee of
another member of the Group) prior to the Trigger Date relating to
the Full Liquidity Event, in which case, only a proportion of the
Contribution otherwise due will be deemed to have vested, as
follows:
AMOUNT OF MAXIMUM
PERCENTAGE CONTRIBUTION
TRANCHE DATE OF CESSATION WHICH VESTS
------- ------------------------------ -----------------------
1 prior to 21 April 2005 1/3
2 21 April 2005 to 20 April 2006 2/3
3 on or after 21 April 2006 3/3
SAVE that:
(a) in the event of the cessation of employment of the Relevant
Employee due to one of the reasons set out in clause 4.1, the
vesting of the entitlement to a Contribution shall be
accelerated as set out in clause 4.1; and
(b) in the event that there has been a Change of Control of the
Company on or prior to the Date of Cessation the entitlement
to a Contribution shall be
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accelerated in full so that the whole amount of the
Contribution (if any) shall be payable on any Full Liquidity
Event with a Trigger Date on or following such Date of
Cessation; and
2.4.3 whether any Partial Liquidity Contributions have previously been
made in connection with a Partial Liquidity Event or any other
Further Contributions have been made under clause 2.8 (other than
Further Contributions made under clause 2.8 which are not linked to
a Partial Liquidity Event) and the Trustee has exercised its
discretion and passed such payments to the Dependant Trust, in which
case there shall be deducted from the Contribution due in relation
to the Full Liquidity Event, the aggregate of all previous Partial
Liquidity Contributions (if any) and any such Further Contributions
made under clause 2.8. For the avoidance of doubt, if a payment has
been made to the Trustee pursuant to clause 2.8 in connection with a
Partial Liquidity Event, but at the Relevant Date of the Full
Liquidity Event, such payment has not been transferred in its
entirety to the Dependent Trust then payment shall, for the purposes
of this clause and clause 2.5, be deemed to have been made into each
dependent trust held by the Trustee for the benefit of employees of
the Company and their families in force at that time, in accordance
with any letter of wishes given by the Company to the Trustee in
respect of such payment and, in the absence of any such letter, into
each such dependent trust pro rata based on prior contributions.
2.5 For the avoidance of doubt, the Relevant Employee does not need to be an
employee of any member of the Group at the Relevant Date, the
Determination Date or the Payment Due Date, in relation to any Full
Liquidity Event in order for the full amount of any Contribution to become
payable pursuant to this covenant, provided that either he was an employee
of any member of the Group at the Trigger Date relating to such Full
Liquidity Event or, if he has ceased to be an employee at the Trigger
Date, a Change of Control had occurred on or prior to the Date of
Cessation. If the Relevant Employee has ceased to be an employee of a
member of the Group (and does not immediately become an employee of
another member of the Group) prior to the Trigger Date in relation to a
Full Liquidity Event (and no Change of Control had occurred prior to the
Date of Cessation), the amount of the Contribution to be made after the
Date of Cessation in relation to such Full Liquidity Event, will be
calculated as follows:
[(A x B) x E] - C
where:
A = the Maximum Percentage Contribution applicable to that Full
Liquidity Event, in accordance with clause 2.4.1;
19
B = the fraction of the Maximum Percentage Contribution which has
vested in accordance with clause 2.4.2 at the Date of Cessation
(subject to any acceleration pursuant to clause 2.4.2);
C = the aggregate of all previous Partial Liquidity Contributions (if
any) made to the Trustee in respect of such Relevant Employee prior
to the Relevant Date of that Full Liquidity Event, as a result of
any previous Partial Liquidity Events and any other Further
Contributions made under clause 2.8 (other than Further
Contributions not linked to a Partial Liquidity Event) and in
respect of which the Trustee has exercised its discretion to
transfer such payment into the Dependent Trust (or is deemed to have
done so pursuant to clause 2.4.3); and
E = the Equity Value applicable to that Full Liquidity Event.
2.6 Additional Contributions
2.6.1 In addition, the Company may, following the first anniversary of the
Closing Date and any subsequent anniversary of the Closing Date, as
appropriate at the discretion of the Remuneration Committee (after
recommendations by the Chief Executive Officer of the Company) and
dependent upon the Relevant Employee having achieved objectives and
performance standards during the 12 months from the Closing Date
and/or during any subsequent 12 month period for the duration of the
Service Agreement, determine that, on a Full Liquidity Event, an
Additional Contribution will be made. Any such Additional
Contribution will be calculated as a percentage of the Equity Value
at the Relevant Date of a Full Liquidity Event. The Board shall send
a written notice to the Trustee within 10 Business Days of such a
determination informing the Trustee that an award under this clause
2.6.1 has been made and the applicable percentage range (within the
maximum ranges set out below) for the purposes of calculating any
Additional Contribution due ("ADDITIONAL PERCENTAGE Contribution").
The total of all awards of an Additional Percentage Contribution
under this clause 2.6.1 shall be within the following maximum
aggregate Additional Percentage Ranges:
MAXIMUM ADDITIONAL PERCENTAGE
EQUITY VALUE US$ CONTRIBUTION
--------------------- -----------------------------
Less than 100 million 0
100 million
350 million or more
20
and the Maximum Additional Percentage Contribution and/or the
Additional Percentage Contribution used to calculate the amount of
Additional Contribution due where the Equity Value is greater than
US$100 million but less than US$350 million, shall be pro rated on a
straight line basis. Additional Percentage Contributions where
awarded, shall be fully vested on the date on which the Board
determines that an Additional Percentage Contribution shall be made.
2.6.2 For the avoidance of doubt, the Relevant Employee does not need to
be an employee of any member of the Group at the Relevant Date, the
Determination Date or the Payment Due Date in relation to any Full
Liquidity Event in order for the amount of any Additional
Contribution awarded under this paragraph 2.6 to become payable,
provided that he was an employee of any member of the Group at the
Trigger Date relating to such Full Liquidity Event or, if he has
ceased to be an employee at the Trigger Date, a Change of Control of
the Company had occurred on/or prior to the Date of Cessation.
2.7 In relation to a Partial Liquidity Event:
2.7.1 the amount of the Partial Liquidity Contribution shall depend on
whether, at the Relevant Date in relation to that Partial Liquidity
Event, the Transaction Value Threshold has been met or exceeded, in
which case the Partial Liquidity Contribution shall be calculated as
follows:
{[X x (Y + Z)] x TV} - PC
where:
X = 60% in relation to all Partial Liquidity Events where the
aggregate of the Transaction Value relating to that Partial
Liquidity Event and the Transaction Values of all previous Partial
Liquidity Events does not exceed US$200 million, and 100% in
relation to all Partial Liquidity Events where the aggregate of the
Transaction Value relating to that Partial Liquidity Event and the
Transaction Values of all previous Partial Liquidity Events exceeds
US$200 million;
Y = in relation to a Partial Liquidity Event, the Maximum Percentage
Contribution payable in relation to that Partial Liquidity Event
pursuant to the table set out in clause 2.4.1 if "TV" (as defined
below) were substituted for "Equity Value" and "Partial Liquidity
Event" were substituted for "Full Liquidity Event" in such clause;
Z = in relation to a Partial Liquidity Event, the aggregate of any
Additional Percentage Contributions (if any have been awarded by the
Board pursuant to
21
clause 2.6.1) payable in relation to a Partial Liquidity Event
pursuant to any awards made by the Board under clause 2.6.1, (for
the avoidance of doubt subject to the Maximum Additional Percentage
Contribution set out in the table in clause 2.6.1) as if "TV" (as
defined below) were substituted for "Equity Value" and "Partial
Liquidity Event" were substituted for "Full Liquidity Event" in
clause 2.6.1;
TV = in relation to any Partial Liquidity Event in respect of which
the Transaction Value Threshold has been met or exceeded, the
aggregate of the Transaction Value relating to that Partial
Liquidity Event and the Transaction Values of all previous Partial
Liquidity Events; and
PC = in relation to a Partial Liquidity Event, the aggregate amount
of all previous Partial Liquidity Contributions made to the Trustee
pursuant to this clause 2.7 in respect of the Relevant Employee
prior to the Relevant Date of that Partial Liquidity Event;
and so that, for the avoidance of doubt, once the Transaction Value
Threshold has been met or exceeded, a Partial Liquidity Contribution
shall (subject to the other terms of this covenant) be payable in
respect of all subsequent Partial Liquidity Events;
2.7.2 if a Partial Liquidity Contribution is required to be made under
clause 2.7.1, such Partial Liquidity Contribution shall be made
whether or not the Relevant Employee has ceased to be an employee of
any member of the Group at the Relevant Date or the Determination
Date or the Payment Due Date so long as the Relevant Employee was
employed by a member of the Group at the Trigger Date relating to
that Partial Liquidity Event (and, if no Partial Liquidity
Contributions have previously been made, at the Trigger Date
relating to the most recent Partial Liquidity Event). Subject to the
following provisions of this clause 2.7.2, no Partial Liquidity
Contribution shall be made with respect to any Partial Liquidity
Event, the Trigger Date of which occurs following the Date of
Cessation of the Relevant Employee's employment. Notwithstanding the
foregoing provisions of this clause 2.7.2, in the event that,
pursuant to clause 3.4, there is more than one Relevant Date, more
than one Determination Date, and more than one Payment Due Date in
relation to any Partial Liquidity Event, then provided that the
Relevant Employee was employed by a member of the Group at the
Trigger Date relating to that Partial Liquidity Event he shall be
entitled to receive all Partial Liquidity Contributions which become
payable following any number of subsequent Relevant Dates relating
to that same Partial Liquidity Event, except that such Relevant
Employee shall not be entitled
22
to receive payments with respect to any Partial Liquidity Event
following the Relevant Date of a Full Liquidity Event.
2.8 In addition, the Company may, at the discretion of the Remuneration
Committee (after recommendations by the Chief Executive Officer of the
Company), make Further Contributions to the Trustee in such amounts as the
Remuneration Committee, in its sole discretion, determines, such payments
to be held on the terms of the EBT.
2.9 Side Letter Cap
Notwithstanding anything to the contrary in this covenant:
2.9.1 on any Partial Liquidity Event, the Company shall be under no
obligation to make any payment in excess of the Partial Liquidity
Contribution due under clause 2.7.1;
2.9.2 on a Full Liquidity Event, the Company shall be under no obligation
to make any payment in excess of the aggregate of the Maximum
Percentage Contribution due under clause 2.4.1 and the Maximum
Additional Percentage Contribution (if any) due under clause 2.6,
minus, the amount of all previous Partial Liquidity Contributions;
and:
2.9.3 the Company shall not be under any obligation to make any payment to
the Trustee under this covenant or otherwise to the extent that such
payment together with any other payments made to the Trustee under
or in connection with the EBT in relation to any Partial Liquidity
Event or Full Liquidity Event would cause a violation of the
provisions of paragraph 5 of the Side Letter ("SIDE LETTER CAP");
provided that:
(a) this clause 2.9 shall not prevent the Company in its discretion from
making Further Contributions pursuant to clause 2.8 in relation to
any Full Liquidity Event or Partial Liquidity Event as long as the
Side Letter Cap is not exceeded or from making Further Contributions
pursuant to clause 2.8 otherwise than in connection with any Full
Liquidity Event or Partial Liquidity Event, irrespective of the Side
Letter Cap; and
(b) nothing in this covenant shall require the Trustee to repay any
amounts previously received by it in respect of any Partial
Liquidity Event occurring prior to any other Partial Liquidity Event
or Full Liquidity Event.
23
3. CALCULATION OF EQUITY VALUE AND TRANSACTION VALUE
3.1 For the purposes of this covenant and in relation to a Full Liquidity
Event, "EQUITY VALUE" shall have the meaning as determined pursuant to and
in accordance with Schedule 3 to the Investment Agreement (for the
avoidance of doubt excluding the value of any shares no longer in issue
due to their having been repurchased, redeemed or otherwise ceasing to be
outstanding following the Closing Date), as adjusted to include the value
of all Distributions made to shareholders since the Closing Date but prior
to the Relevant Date in relation to such Full Liquidity Event, and subject
to any further adjustments deemed to be equitable and necessary, in the
complete discretion of the Board, in order to give effect to the
intentions of all parties pursuant to the principles set out in this
covenant (provided that such valuation and adjustments do not result in
double counting). For the purposes of calculating Equity Value, the value
of any non-cash Distribution or consideration received shall be calculated
in accordance with clause 3.3.
3.2 For the purposes of this covenant the following terms shall have the
following meanings:
"TRANSACTION VALUE" shall mean the following, it being understood that in
any case in which there is any ambiguity with respect to the proper
determination of Transaction Value, it shall be in the discretion of the
Board to determine the Transaction Value in a manner that operates fairly
as between the Company and the Trustee:
(a) with respect to a Partial Liquidity Event described in clauses 7.1.1
to 7.1.3 (inclusive) the aggregate amount of all Distributions
(being an amount equal to the aggregate amount of all cash
Distributions and the value (as determined in accordance with clause
3.3) of all non-cash Distributions) made by the Company in
connection with such Partial Liquidity Event; and
(b) with respect to a Partial Liquidity Event described in clauses 7.1.4
to 7.1.6 (inclusive) the aggregate of all of the Individual
Transaction Values in relation to such Partial Liquidity Event;
where:
"INDIVIDUAL TRANSACTION VALUE" in relation to each Investor
transferring shares or in the case of an amalgamation or merger,
surrendering shares for consideration as envisaged by clause 7.1.5,
as part of any Partial Liquidity Event, the Implied Value in
relation to that transfer or surrender of shares by that Investor as
part of that Partial Liquidity Event multiplied by the Applicable
Fraction in relation to that transfer or surrender of shares by that
Investor as part of that Partial Liquidity Event;
24
"IMPLIED VALUE" shall mean in relation to the transfer or surrender
of any shares of common stock by any Investor as part of any Partial
Liquidity Event, the per common share consideration received by that
Investor, net of all transaction and brokerage costs, and (subject
to clause 3.4) net of the maximum amount of consideration due to
that Investor that may be held back in any escrow arrangements,
multiplied by the number of shares of common stock of the Company in
issue at the date of such transfer or surrender, immediately prior
to such transfer or surrender, on a Fully Diluted Basis; and
"APPLICABLE FRACTION" shall mean a fraction, the numerator of which
is the number of shares of common stock in the Company transferred
or surrendered by that Investor on such Partial Liquidity Event, and
the denominator of which is the total number of shares of common
stock in the Company [in issue] on the date of such transfer or
surrender, immediately prior to such transfer of surrender on a
Fully Diluted Basis.
3.3 In the event that any part of the Distribution made in connection with a
Partial Liquidity Event arising under clause 7.1.1, to 7.1.3 (inclusive)
or the consideration received by any Investor in connection with a Partial
Liquidity Event arising under clauses 7.1.4 to 7.1.6 (inclusive) consists
of assets other than cash (excluding the right to be paid a sum in cash or
receive a non-cash asset on a future date (whether or not, in the case of
cash that sum is quantifiable on the Relevant Date) which rights shall be
taken into consideration in accordance with the provisions of clause 3.4)
the value of such assets shall be determined in good faith by the Board
within 30 days of the Relevant Date.
3.4 In the event that:
3.4.1 in relation to a Partial Liquidity Event arising under clauses 7.1.1
to 7.1.3 (inclusive), either:
3.4.1.1 a Distribution is declared, but not immediately paid; or
3.4.1.2 more than one Distribution is declared in relation to such
Partial Liquidity Event; or
3.4.2 in relation to a Partial Liquidity Event arising under clauses
7.1.4, 7.1.5 or 7.1.6 either:
3.4.2.1 the consideration payable in relation to that Partial
Liquidity Event includes a right to be paid a sum in cash
or to receive a non-cash asset on a future date; or
25
3.4.2.2 any amount of cash which is deducted from, or any assets
which are withheld from, the amount payable or the assets
transferred to, the relevant Investors and placed into
escrow, is released from escrow to the relevant Investors;
and, as a result of which either the shareholders of the Company or the
relevant Investors (as applicable) receive additional cash or other assets
on a future date ("DEFERRED PAYMENT") then each date or dates on which any
such Deferred Payment becomes payable to the shareholders of the Company
or the relevant Investors (as applicable) shall constitute an additional
Relevant Date in relation to that Partial Liquidity Event and shall
trigger an additional obligation on the Board to determine the Transaction
Value in accordance with clause 3.5 as if such event constituted a
separate Partial Liquidity Event (and an additional obligation of the
Company to make an additional Partial Liquidity Contribution in relation
to that Partial Liquidity Event) and, for the avoidance of doubt the
payment of any cash or the transfer of any assets, released from any
escrow or similar arrangements to any relevant Investors (whether before
or after any subsequent Full Liquidity Event) shall trigger such
obligations on the part of the Board and the Company. If, in accordance
with the foregoing provisions of this clause 3.4, a release of additional
consideration to Investors from an escrow (or similar) arrangement is made
after a Full Liquidity Event, in calculating the additional Partial
Liquidity Contribution due, the Equity Value of the Full Liquidity Event
shall be taken into account when determining whether the Transaction Value
Threshold has been met or exceeded, and for determining "X" for the
purposes of clause 2.7.1. Notwithstanding the foregoing, if any payment
that would be required to be made pursuant to this clause 3.4 after the
Relevant Date of a Full Liquidity Event would have resulted in a reduction
of the amount payable pursuant to clauses 2.4 and 2.5 if such payment
pursuant to this clause 3.4 had been made prior to the Determination Date
of such Full Liquidity Event, then such payment otherwise required by this
clause 3.4 shall be reduced to the extent of such otherwise resulting
reduction (but not below zero).
3.5 Subject to clause 3.6 within 30 days of the Relevant Date of a Full
Liquidity Event or a Partial Liquidity Event (including, for the avoidance
of doubt, each Relevant Date relating to the same Partial Liquidity Event
pursuant to clause 3.4) the Board shall determine the Equity Value in
accordance with clause 3.1 (with respect to Full Liquidity Events) or the
Transaction Value in accordance with clauses 3.2 to 3.4 inclusive (with
respect to Partial Liquidity Events), and shall give written notice of
their determination to the Company and the Trustee within such 30-day
period the date of such notice being, in each case, the "DETERMINATION
Date" in relation to such Full Liquidity Event or Partial Liquidity Event,
save in relation to (a) a Partial Liquidity Event in respect of which no
Partial Liquidity Contribution is due by virtue of the fact that the
Transaction Value Threshold has not been reached, in which case, the
Determination Date in relation to that Partial Liquidity
26
Event shall be the Determination Date (if any) of the first Partial
Liquidity Event in respect of which a Partial Liquidity Contribution is
made pursuant to clause 2.7; and (b) if the Full Liquidity Event is a
Liquidation then the Determination Date shall be the date on which the
Liquidator makes a distribution to shareholders of a substantial
proportion of the assets available for distribution in the Liquidation.
3.6 In the event that a Full Liquidity Event also triggers an obligation to
calculate Total Equity Value (as defined in the Viatel Convertible Loan
Notes) then Equity Value shall be determined in accordance with the same
procedure as is set out in Section 4.3(b) of the Viatel Convertible Notes
for the determination of Total Equity Value (which, for the avoidance of
doubt means that negotiations between the Board and the holders of the
Viatel Convertible Notes shall, so far as they are relevant for the
calculation of Equity Value, bind the Trustee) but adjusted as
contemplated by clause 3.1 hereof, and the Board shall give written notice
to the Company and the Trustee of the Equity Value, within 10 Business
Days of the date on which the "EQUITY VALUE" is agreed or determined
pursuant to such procedure and the date of such notice shall, unless such
Full Liquidity Event is a Liquidation, constitute the "DETERMINATION DATE"
in relation to that Full Liquidity Event. If the Full Liquidity Event is a
Liquidation then the Determination Date shall be the date on which the
Liquidator makes a distribution to shareholders of a substantial
proportion of the assets available for distribution in the Liquidation.
4. CESSATION OF EMPLOYMENT OF THE RELEVANT EMPLOYEE
4.1 If the Relevant Employee ceases to be an employee of a member of the Group
(and does not immediately become an employee of another member of the
Group) due to:
4.1.1 the Company or another member of the Group terminating the Relevant
Employee's employment without Cause; or
4.1.2 the Relevant Employee terminating his employment for Good Reason; or
4.1.3 the Relevant Employee's death or disability (disability for these
purposes being as determined by the Remuneration Committee),
the amount of the Maximum Percentage Contribution which shall be deemed to
have vested (as contemplated by clause 2.4.2) in relation to a Full
Liquidity Event, the Trigger Date of which occurs following the Date of
Cessation but on or prior to 21 April 2014, shall be increased by assuming
that the Relevant Employee's Date of Cessation falls into the "Tranche"
immediately following the "Tranche" in which the Date of Cessation falls
for the purposes of clause 2.4.2. Any part of the Maximum Percentage
Contribution which does not vest in accordance with this clause 4.1 (or is
not accellerated in accordance with clause 2.4.2(b)) shall lapse
automatically at the Date of Cessation.
27
4.2 For the purpose of clause 4.1 above:
4.2.1 "CAUSE" means (i) the grounds on which the Relevant Employee's
employment may be summarily terminated without further payment to
the Relevant Employee as set out in clause 11.4 of the Service
Agreement; and/or (ii) the Relevant Employee's failure to
satisfactorily perform (as determined by the CEO) the duties set out
in his Service Agreement or assigned to him by the CEO or his
immediate line manager and/or (iii) the Relevant Employee's failure
to achieve the objectives assigned to him by the CEO or his
immediate line manager.
4.2.2 The Relevant Employee's employment will be terminated by him with
"Good Reason" if he resigns in circumstances where the Company (or
the Group Company which is his employer, if different) is in
fundamental breach of its obligations under his Service Agreement
such that on the balance of probabilities the circumstances of the
resignation amount to constructive dismissal as determined within 15
Business Days of appointment by a barrister of at least 7 years'
standing appointed jointly by the Company and the Relevant Employee.
The cost of such appointment shall be paid by the Company if the
barrister determines that on the balance of probabilities the
circumstances did amount to constructive dismissal and otherwise by
the Relevant Employee.
4.3 Subject to the provisions of clause 2.4.2(b), if the Relevant Employee
ceases to be an employee of a member of the Group (and does not
immediately become an employee of another member of the Group ) for any
reason other than those set out in clause 4.1 above, the Trustee will be
entitled, upon the Payment Due Date in relation to any Full Liquidity
Event the Trigger Date of which occurs following the Date of Cessation but
on or prior to 21 April 2014, to be paid (with respect to the Relevant
Employee) only that part of the Maximum Percentage Contribution which has
vested on or prior to the Date of Cessation and will be paid that amount
by the Company in accordance with clause 2.1. In such event, any part of
the Maximum Contribution in relation to a Full Liquidity Event which has
not vested prior to such Date of Cessation shall lapse automatically at
the Date of Cessation.
5. PAYMENT OF PARTIAL LIQUIDITY CONTRIBUTIONS, CONTRIBUTIONS AND ADDITIONAL
CONTRIBUTIONS WHERE CONSIDERATION IS PAYABLE OTHERWISE THAN IN CASH
5.1 In the event that:
5.1.1 a Partial Liquidity Event requiring a Partial Liquidity Contribution
occurs; or
28
5.1.2 a Full Liquidity Event occurs;
and in any case, the amounts payable to the shareholders of the Company
and/or relevant Investors (as applicable) in relation to such Partial
Liquidity Event and/or Full Liquidity Event are not payable wholly in cash
or Liquid Consideration ("NON-LIQUID PAYMENT") then the following
provisions of this clause 5 shall apply.
5.2 To the extent that, in relation to any Full Liquidity Event or Partial
Liquidity Event the amount payable to the shareholders of the Company
and/or relevant Investors (as applicable) is payable in cash, then the
same pro rata portion of the Partial Liquidity Contribution, in relation
to a Partial Liquidity Event, or the Contribution (and, if applicable,
Additional Contribution) in relation to a Full Liquidity Event shall be
payable in cash.
5.3 To the extent that, in relation to any Full Liquidity Event or Partial
Liquidity Event, the amount is to be satisfied by Liquid Consideration
then:
5.3.1 the Company shall use reasonable endeavours prior to the relevant
Payment Due Date, to ensure that the Partial Liquidity Contribution,
in relation to a Partial Liquidity Event, or the Contribution (and,
if applicable, Additional Contribution) in relation to a Full
Liquidity Event, can be satisfied entirely in cash; but
5.3.2 if the Company having used reasonable endeavours to ensure payment
in cash pursuant to clause 5.3.1 prior to the relevant Payment Due
Date, is unable to do so on a basis reasonably satisfactory to the
Board, then the Company shall be entitled to satisfy its obligation
to make the Partial Liquidity Contribution, in relation to a Partial
Liquidity Event or the Contribution (and, if applicable, Additional
Contribution) in relation to a Full Liquidity Event, and the Trustee
shall be bound to accept satisfaction of the Partial Liquidity
Contribution, or the Contribution and, if applicable, Additional
Contribution (as appropriate) by transfer into the EBT of such
amount of the Liquid Consideration as has a value (in the discretion
of the Remuneration Committee) equal to the amount of the Partial
Liquidity Contribution or Contribution and, if applicable,
Additional Contribution (as appropriate) which is not payable in
cash pursuant to clause 5.2.
5.4 To the extent that in relation to any Full Liquidity Event or Partial
Liquidity Event, the amount is to be satisfied by a Non-liquid Payment,
then the Company shall satisfy its obligation to make the Partial
Liquidity Contribution, in relation to a Partial Liquidity Event or the
Contribution (and, if applicable, Additional Contribution) in relation to
a Full Liquidity Event, and the Trustee shall be bound to accept
satisfaction of the Partial Liquidity Contribution or the Contribution
and, if applicable, Additional Contribution (as appropriate) by transfer
into the EBT of (at the discretion of the Board) either: (a) such
29
amount of the Non-liquid Payment as has a value (in the discretion of the
Board) equal to the amount of the Partial Liquidity Contribution or
Contribution and, if applicable, Additional Contribution (as appropriate)
which is not payable in cash or Liquid Consideration pursuant to clauses
5.2 and/or 5.3 and for the avoidance of doubt, if the Non-liquid Payment
constitutes shares which are subject to restrictions on sale, the
Trustee's entitlement hereunder shall be to receive such shares subject to
equivalent restrictions on sale as those applicable to the shares received
by the Company and/or the relevant Investors (as applicable); or (b) an
amount of cash equal to the amount of such Partial Liquidity Contribution
or Contribution and, if applicable, Additional Contribution (as
appropriate).
5.5 Notwithstanding anything to the contrary in this covenant, neither:
5.5.1 complying with the obligation to use "reasonable endeavours" in
clause 5.3.1; nor
5.5.2 any other provision of this covenant will oblige the shareholders of
the Company, any of the Investors or any other person to incur
costs, fees or expenses in connection with the conversion of any
amount of Liquid Consideration into cash, which in the aggregate are
in excess of 1% of the total value of that amount of Liquid
Consideration.
6. FULL LIQUIDITY EVENT
6.1 A Full Liquidity Event shall be the first occurrence of any of the
following events:
6.1.1 a Sale; or
6.1.2 a Liquidation of the Company,
and under no circumstances shall there be more than one Full Liquidity
Event pursuant to this covenant.
7. PARTIAL LIQUIDITY EVENT
7.1 A Partial Liquidity Event shall be the occurrence of any of the following
events, in each case prior to a Full Liquidity Event:
7.1.1 the transfer of any Material Asset including without limitation an
amalgamation or merger of a Material Subsidiary, to or with a person
or entity that is not a Qualified Transferee whether in one
transaction or a series of related transactions (but excluding a
transfer or amalgamation or merger by one member of the Group to
another member of the Group) but only if followed by a Distribution
of proceeds of
30
such transfer to the Investors and/or (if appropriate as determined
by the Board) their Qualified Transferees;
7.1.2 the Liquidation of a Material Subsidiary followed by a Distribution
of proceeds of such Liquidation to the Investors and/or (if
appropriate as determined by the Board) their Qualified Transferees;
7.1.3 a Post-Flotation Transfer of shares in a Controlling Subsidiary but
only if followed by a Distribution of proceeds of such transfer to
the Investors and/or (if appropriate as determined by the Board)
their Qualified Transferees;
7.1.4 a Tag-Along Transaction (which is not a Sale);
7.1.5 an amalgamation or merger of the Company which is not a Sale but
results in the receipt by Investors of proceeds as consideration in
exchange for the surrender of common stock of the Company (it being
understood that interests in the Company or in a successor thereto
are not such proceeds, and an amalgamation or merger by which the
Company is making an acquisition is not a Partial Liquidity Event);
or
7.1.6 a Post-Flotation Transfer of shares in the Company (which is not a
Sale);
and for the purposes of this covenant, and in accordance with clause 8, if
an event or series of events could be classified as a Partial Liquidity
Event under more than one sub-clause of this clause 7.1, the Board shall
determine which, if any, subsection applies, but no event or series of
events shall be deemed to constitute two or more separate Partial
Liquidity Events simply because such event or series of events could be
considered a Partial Liquidity Event under more than one such sub-clause.
The Board shall have the responsibility to determine if an amalgamation or
merger of the Company is one in which the Company is making an
acquisition.
8. MULTIPLE LIQUIDITY EVENTS
In the event that more than one Event (as defined below) occurs as part of
one single transaction or a series of closely connected transactions, then
the Board shall determine which provisions of this covenant shall apply
and, if necessary, any adjustment to the provisions of this covenant which
should be made to ensure that the provisions of this covenant operate
fairly as between the Company and the Trustee and for the avoidance of
doubt but without limitation, shall be entitled (in its sole discretion)
to find that a Partial Liquidity Event and a Reorganisation can both take
place pursuant to this covenant and shall be entitled (in its sole
discretion) to find that any particular Partial Liquidity Event is not
also a Reorganisation. For the purposes of this clause 8, each or any of a
Partial Liquidity Event, a Full Liquidity Event and a Reorganisation shall
constitute an "EVENT".
31
9. REORGANISATION
In the event that at any time prior to a Full Liquidity Event a
Reorganisation occurs, the Company shall (so far as it is legally able)
ensure that the body corporate principally surviving or resulting from the
Reorganisation, or the new holding company of the Group following the
Reorganisation, ("NEWCO"), or, in the case of a Reorganisation under
sub-paragraph (d) of the definition of Reorganisation, the Company,
covenants to the Trustee on identical or substantially similar terms to
the terms of this covenant (in any event, reasonably acceptable to the
Board, taking into account the intentions of the parties to this covenant)
so that the Relevant Employee should be in the same economic position
(taking account of any ongoing obligations of any other entity that holds
or retains assets of the Group and taking into account the principles of
Section 3.1 hereof and Schedule 3 of the Investment Agreement) following
the Reorganisation as he was before. Such covenant may be contingent upon
the Company receiving a release (in form and substance reasonably
acceptable to it) from all obligations (other than accrued obligations,
unless these are also assumed by Newco) hereunder.
10. ADMINISTRATION
10.1 Any notice or other document which the Company is required or may desire
to give to the Trustee pursuant to this covenant shall be sufficiently
given if delivered to it by post in a prepaid cover addressed to the
Trustee at its registered office and if so sent shall be deemed to have
been duly given on the date of posting.
10.2 Any notice or other document which the Trustee is required or may desire
to give to the Company pursuant to this covenant shall be sufficiently
given if delivered to it by post in a prepaid cover addressed to the
Company at its registered office and if so sent shall be deemed to have
been duly given on the date of posting.
11. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
A person who is not the Trustee or a company who is not a member of the
Group has no right under the Contracts (Rights of Third Parties) Act 1999
to rely upon or enforce any provisions of this covenant.
12. GOVERNING LAW AND COUNTERPARTS
12.1 This covenant is governed by and shall be interpreted in accordance with
the laws of England.
12.2 This covenant may be executed in one or more counterparts, each of which
when executed and delivered shall be an original but when taken together
shall constitute one and the same instrument.
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13. DISPUTE RESOLUTION
13.1 The parties shall use their best efforts to negotiate in good faith and
settle amicably any dispute that may arise out of or relate to this
covenant (or its construction, validity or termination) (a "DISPUTE"). If
a Dispute cannot be settled through negotiations by appropriate
representatives of the Trustee and the Board then either party may give to
the other a notice in writing (a "DISPUTE NOTICE"). Within seven days of
the Dispute Notice being given the parties shall refer the Dispute to the
chairman of the Board, in the case of the Company, and the managing
director, in the case of the Trustee, who shall meet in order to attempt
to resolve the dispute. If the Dispute is not settled by agreement in
writing between the parties within 14 days of the Dispute Notice it shall
be resolved in accordance with clauses 13.2 and 13.3.
13.2 If a Dispute is not successfully resolved in accordance with clause 13.1,
such Dispute shall be referred to mediation in accordance with the Centre
for Dispute Resolution ("CEDR") Model Mediation Procedure. The mediation
shall be conducted by a single mediator appointed by mutual agreement, or
(failing mutual agreement within seven days of a notice from either party
to the other calling upon the other so to agree) by the CEDR/President of
the London Chamber of Commerce. Both parties agree to co-operate fully
with such mediator, provide such assistance as is necessary to enable the
mediator to discharge his duties, and to bear equally between them the
fees and expenses of the mediator.
13.3 If the Dispute is not settled by agreement in writing between the parties
within 30 days after the appointment of a mediator, or such other period
as the parties may agree, it shall be referred to a single arbitrator to
be agreed between the parties. Failing such agreement within 30 days of
the request by one party to the other that a matter be referred to
arbitration in accordance with this clause such reference shall be to an
arbitrator appointed by the President for the time being of the
International Chamber of Commerce ("ICC") in London. The arbitration shall
be conducted in London in the English language in accordance with the
arbitration rules of the ICC in force at the date of this covenant. The
decision of such arbitrator shall be final and binding upon the parties.
Any reference under this clause shall be deemed to be a reference to
arbitration within the meaning of the Arbitration Act 1996.
33
13.4 The parties shall keep confidential and not use for any collateral or
ulterior purpose the subject matter of the arbitration and all
information, documents and materials produced for, or arising in relation
to, the arbitration including any award arising out of it except insofar
as is necessary to implement and enforce any award or otherwise as
required by law.
THIS COVENANT is entered into as a DEED and is executed and delivered by or on
behalf of the parties on the date set out at the top of page one.
THE COMMON SEAL of )
VIATEL HOLDING (BERMUDA) LIMITED )
was affixed to this Deed )
in the presence of )
__________________________________
Authorised Person
__________________________________
Authorised Person
THE COMMON SEAL of )
EB TRUSTEES LIMITED )
was affixed to this Deed )
in the presence of )
__________________________________
Authorised Person
__________________________________
Authorised Person
34
ANNEX A
AGREED FORM WAIVER LETTER
I, [ ] of [ ], hereby waive all and any
rights I may have to participate in an equity compensation plan as set out in
[ ] of my [service/employment] agreement
dated [ ] with [Viatel Holding (Bermuda) Limited/VTL (UK) Limited].
Executed and delivered as a deed on ________________ 2005
by: __________________________________
[ ]
Witnessed by:
______________________________________
Signature
______________________________________
Name
______________________________________
______________________________________
______________________________________
Address
______________________________________
Occupation
35
