1
Exhibit 2.1
FORM OF SHAREHOLDER'S UNDERTAKING
This AGREEMENT dated as of ___ October 1998 (as amended or modified from time to
time in accordance with the terms hereof, this "Agreement") is by and between
________________ ("Seller"), and Global TeleSystems Group, Inc., a Delaware,
USA, corporation, or such affiliate thereof which may be designated thereby
(Global TeleSystems Group, Inc. or such designated affiliate thereof hereinafter
referred to as "Offeror").
WHEREAS
Seller is a shareholder of NetSource Europe ASA ("NetSource Europe"), a
Norwegian corporation;
Offeror intends to make an offer to NetSource Europe's shareholders to acquire
from them the capital stock of NetSource Europe and therefore wishes to purchase
from Seller the NetSource Europe Shares (as defined herein) pursuant to and in
accordance with the terms and conditions set forth herein;
on 16 September 1998, certain shareholders of Netsource Europe and Offeror
entered into Shareholder's Undertakings ("the Original Shareholder's
Undertakings") under the terms of which Offeror, subject to, i.a., approval by
Offeror's board of directors not later than 18 September 1998, agreed to make an
offer to acquire the whole of the share capital of NetSource Europe by 28
September 1998; and
Offeror's board of directors did not approve to make an offer but continues to
be interested in exploring the possibility of making an offer.
NOW, THEREFORE, in consideration of the representations, warranties, covenants
and agreements hereinafter set forth, the parties hereto hereby agree as
follows:
ARTICLE 1: DEFINITIONS
1.1 Definitions.
In addition to the terms defined in the first paragraph and WHEREAS
clauses of this Agreement, whenever used herein, the following terms shall have
the meanings set forth below unless otherwise expressly provided or unless the
context clearly requires otherwise.
"Offer Document" means the formal offer document containing the terms
and conditions of the Offer compliant with applicable Norwegian securities law;
"NetSource Europe Shares" shall mean the ordinary shares in NetSource
Europe owned by Seller set forth in Schedule 1 hereto and shall include any
shares in NetSource Europe
2
attributable to or deriving from such shares and shall include any other
ordinary shares in NetSource Europe which Seller acquires and beneficially owns
after signing this Agreement; and
"Termination Fee" shall mean a proportion of USD 10,000,000 equal to
the proportion of the total share capital of NetSource Europe, fully diluted,
represented by the NetSource Europe Shares together with the other shares in
NetSource Europe in respect of which agreements on the terms set forth herein
have been entered into prior to 16 October 1998.
ARTICLE 2: OFFEROR'S OBLIGATION TO MAKE THE OFFER
(i) Offeror shall not later than 16 October 1998 make an offer to
acquire the whole of the share capital of NetSource Europe in issue at the date
on which the Offer is made (including any securities in NetSource Europe
attributable to or derived from such share capital, but excluding any such share
capital owned on such date by the Offeror or any subsidiary of the Offeror) on
the terms set forth in the term sheet attached as Schedule 2 hereto (the "Term
Sheet") (such offer hereinafter referred to as the "Offer"), provided that :
(a) shareholders of NetSource Europe, including Seller under
the terms of this Agreement, which own an aggregate number of shares in
NetSource Europe which represents not less than 34 per cent of the fully diluted
share capital of NetSource Europe shall not later than 07 October 1998 have
entered into an agreement with Offeror on the same terms as this Agreement;
(b) NetSource Europe's board of directors shall not later than
08 October 1998 have passed a resolution recommending to NetSource Europe's
shareholders to accept the Offer, provided that said recommendation may be
subject to the outcome of NetSource Europe's due diligence on Offeror set out in
clause 5 of the Term Sheet;
(c) Offeror's board of directors, or an authorised committee
thereof, shall not later than 07 October 1998 have approved to make the Offer;
(d) Offeror's due diligence review of NetSource Europe as set
out in the Term Sheet shall not have revealed any issue which entitles it, in
accordance with the provisions of the Term Sheet, to withdraw from the
transaction being the subject matter thereof; and
(e) any condition to the recommendation by NetSource Europe's
board of directors to NetSource Europe's shareholders to accept the Offer, as
contemplated by paragraph (b) above, shall not later than 14 October 1998 have
been waived and Offeror shall not later than 14 October 1998 have been informed
in writing by NetSource Europe's board of directors that its recommendation is
unconditional.
(ii) The Offer shall be deemed to have been made upon dispatch of
the Offer Document to registered shareholders of NetSource Europe, provided that
the Offeror shall have the right not to dispatch the Offer Document to
shareholders' to whom dispatch of the Offer Document would be either unlawful or
would be unreasonably time-or cost-consuming but in
3
that event provided that the Offeror contemporaneously offers to purchase such
shareholders' shares in NetSource Europe on the same terms as the Offer, except
as to the consideration, which for those shares shall be a cash price per
NetSource Europe share equal to the aggregate of (i) the cash portion per
NetSource Europe share of the initial Offer consideration and (ii) the value per
NetSource Europe share of the initial share consideration consisting of Offeror
shares, determined on the basis of the NASDAQ volume weighted average trading
price for Offeror common stock on the settlement day for the Offer.
ARTICLE 3: SELLER'S OBLIGATION TO ACCEPT THE OFFER
Seller shall accept or procure acceptance of the Offer in respect of
all NetSource Europe Shares by not later than 3.00 p.m. on the third day after
the dispatch of the Offer Document, provided, however, that
(i) Offeror's board of directors, or an authorised committee thereof,
shall not later than 07 October 1998 have approved to make the Offer;
(ii) the Offer shall have been made by dispatch of the Offer Document
not later than 16 October 1998; and
(iii) NetSource Europe's board of directors shall prior to or on 14
October 1998 have passed no resolution not to recommend the Offer based on the
outcome of NetSource Europe's due diligence on Offeror set out in Clause 5 of
the Term Sheet;
and Seller's obligation to accept the Offer shall not be affected by Offeror's
waiver, whether prior to or after the making of the Offer, of any of the
conditions set forth in Clause 6 of the Term Sheet.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Offeror as follows as of the date of
this Agreement:
(i) Seller is the beneficial and registered owner of the NetSource
Europe Shares (except any of the NetSource Europe shares acquired after the date
hereof) and the NetSource Europe Shares (except any of the NetSource Europe
shares acquired after the date hereof) are free from all liens, charges,
equities or encumbrances; and
(ii) there are no other shares in the NetSource Europe registered in
Seller's name or beneficially owned, or managed and controlled, by Seller or in
which Seller has an interest and Seller has no rights, warrants or options to
acquire or subscribe for ordinary shares in the NetSource Europe, except that
Seller controls the shares in NetSource Europe (if any) set forth in Schedule 3,
which are owned by the legal entities (if any) set forth in Schedule 3.
4
ARTICLE 5: OTHER UNDERTAKINGS OF SELLER
Seller undertakes to Offeror as follows:
(i) Seller shall procure that the respective legal entities
controlled by Seller (if any) set forth in Schedule 3 shall agree to be bound by
the terms set forth in this Agreement, in respect of the shares (if any) in
NetSource Europe set forth in Schedule 3;
(ii) save as set forth in this Agreement, Seller shall not sell or
otherwise dispose of or permit the sale or other disposition of all or any of
the NetSource Europe Shares or any interest in any of the NetSource Europe
Shares prior to and on the earlier of the following: (1) 07 October 1998 if the
condition set forth in Article 2 paragraph (i) (c) has not then been satisfied,
(2) 16 October 1998 if the Offer has not then been made, (3) close of the Offer,
(4) lapse of the Offer and (5) withdrawal of the Offer;
(iii) Seller shall procure that no other agreement or arrangement
(including any undertaking) shall be entered into (other than with the Offeror)
which could result in the disposal of, or the creation or existence of any
encumbrance on, all or any of the NetSource Europe Shares or any interest
therein or which might in any way restrict the disposal of the NetSource Europe
Shares or any of them and no other offer shall be accepted in respect of the
NetSource Europe Shares or any of them, in all cases prior to and on the earlier
of the following: (1) 07 October 1998 if the condition set forth in Article 2
paragraph (i) (c) has not then been satisfied, (2) 16 October 1998 if the Offer
has not then been made, (3) close of the Offer, (4) lapse of the Offer and (5)
withdrawal of the Offer;
(iv) Seller shall after the date hereof and up to and including the
earlier of the following: (1) 07 October 1998 if the condition set forth in
Article 2 paragraph (i) (c) has not then been satisfied, (2) 16 October 1998 if
the Offer has not then been made, (3) close of the Offer, (4) lapse of the
Offer, (5) withdrawal of the Offer, refrain from knowingly taking any action or
making any statement which is or may be prejudicial to the success of the Offer,
including, without limitation:
(1) soliciting any other offer by any third party for any part
of the issued share capital of NetSource Europe;
(2) entering into discussions or negotiations with, or providing
any information to, or facilitating in any way any offer for
any of the share capital of NetSource Europe by, any such
third party; or
(3) communicating with any person in relation to or discussing
with any person the terms of the Offer or any matter
relating thereto without the prior written consent of the
Offeror provided that this shall not apply to any
communications or discussions with other NetSource Europe
shareholders and Seller's or NetSource Europe's professional
advisers;
5
(4) exercising any consent or approval rights in respect of the
acquisition by Offeror of shares in NetSource Europe,
contractual or other, it being fully understood that all
such rights are hereby being waived with effect from the
closing of the Offer;
(v) subject to the Offer having become unconditional in all respects,
Seller shall against contemporaneous settlement deliver beneficial ownership and
registered title to the NetSource Europe Shares to the Offeror free from all
liens, charges, equities and encumbrances whatsoever and with all rights to
dividends and other distributions hereafter declared, made or paid; and
(vi) Seller shall not exercise and shall procure that the voting
rights attached to the NetSource Europe Shares are not exercised, except as
approved in writing by the Offeror on any NetSource Europe resolution to (1)
amend the NetSource Europe's share capital, (2) issue or approve the issuance of
any rights to shares in NetSource Europe in whatever form they may be proposed
(3) liquidate NetSource Europe prior to and on the earlier of the following: (1)
07 October 1998 if the condition set forth in Article 2 paragraph (i) (c) has
not then been satisfied, (2) 16 October 1998 if the Offer has not then been
made, (3) close of the Offer, (4) lapse of the Offer and (5) withdrawal of the
Offer.
ARTICLE 6: TERMINATION FEES
(i) In the event that Offeror fails to make an Offer, even if the
conditions set forth in Article 2 are satisfied, Offeror shall pay to NetSource
Europe the Termination Fee. However, if the Offer is made, but after 16 October
1998, such delay shall only be deemed a failure to make the Offer if (1) the
Offer has not been made within 7 days after the time at which shareholders of
NetSource Europe, including Seller under the terms of this Agreement, which own
an aggregate number of shares in NetSource Europe which represents not less than
34 per cent of the fully diluted share capital of NetSource Europe, on or after
the 16 October 1998 have required in writing to Offeror that the Offer be made
and (2) the delay has not been caused by circumstances beyond the reasonable
control of Offeror which Offeror should reasonably have anticipated or should
reasonably have mitigated. Acceptance of the Offer, regardless of when it was
made, shall be deemed a waiver of the right to require payment of the
Termination Fee provided that the Offeror completes purchase of the NetSource
Europe Shares.
(ii) In the event that Seller defaults on its obligations set forth in
Article 3, and notwithstanding Offeror's other remedies as a result thereof,
Seller shall pay to Offeror a proportion of the Termination Fee equal to the
NetSource Europe Shares' proportion of the NetSource Europe share capital in
respect of which agreements on the terms set forth herein have been entered into
prior to the day the Offer the offer is made (e.g. if the NetSource Europe
Shares amount to 1% of NetSource Europe share capital and agreements have been
entered into in respect of 50% of NetSource Europe share capital, the proportion
shall be 1/50).
6
ARTICLE 7: OTHER
(i) This Agreement replaces any of the Original Shareholder's
Undertakings entered into between the parties hereto. No party hereto shall
after the execution hereof have any right or obligation under any of the
Original Shareholder's Undertakings.
(ii) Each party agrees to treat any information received about the
other party's business as well as the nature and existence of the contemplated
Offer and any negotiations confidential, except to the extent from time to time
in the public domain or the extent disclosure is from time to time required by
applicable laws and provided that the other party receives prior written notice
of a contemplated disclosure containing the same information which will be
disclosed. Any public announcement shall be subject to approval in writing by
NetSource Europe and Offeror, with such approval not being unreasonably
withheld.
(iii) This agreement shall be governed by and construed in accordance
with the laws of Norway. Any dispute that is not resolved by negotiation shall
be finally settled by arbitration in Oslo in accordance with the rules of
Chapter 32 of the Norwegian Civil Procedure Act.
IN WITNESS WHEREOF, this Agreement has been duly executed on behalf of the
parties hereto by fax counterparts and in two originals.
____ October 1998
Seller: Offeror:
- --------------- --------------
By: Name: By: Name:
Title: Title:
List of Schedules
Schedule 1 The NetSource Europe Shares
Schedule 2 The Term Sheet
Schedule 3 Shares in NetSource Europe controlled by Seller and name of their
owners
7
SCHEDULE 1 - NETSOURCE EUROPE SHARES OWNED BY SELLER
Number of NetSource Europe shares VPS account no
- --------------------------------- --------------
8
SCHEDULE 2 - THE TERM SHEET
Outline of Terms
PROPOSED ACQUISITION OF A 100% INTEREST IN NETSOURCE EUROPE ASA
1. Transaction Purchase of the share capital of NETSOURCE EUROPE ASA
("NETSOURCE EUROPE").
2. Offeror The offering company will be Global TeleSystems Group,
Inc. ("GTS") or a wholly-owned direct or indirect
subsidiary of GTS.
3. Consideration The purchase price will consist of GTS common stock and
cash paid as follows:
o An initial payment of 4,750,000 shares plus $15
million in cash on a fully diluted basis (i.e., to
be reduced proportionally for any rights to have
issued shares in NETSOURCE EUROPE outstanding at
the date the offer is made). The initial payment
shall be payable at settlement, which shall take
place within one week after satisfaction of the
conditions set forth in clause 6 and in any event,
subject to the provisions of this term sheet, not
later than 30 November 1998. GTS shall have the
right to replace payment of not less than 15% but
up to 35% of the 4,750,000 shares with payment in
cash, same day value, based on the volume weighted
average trading price of GTS' shares on the
settlement date, provided GTS' board determines the
percentage to be paid in cash not later than 07
October 1998.
o An additional payment of GTS stock valued at up to
$35 million on a fully diluted basis shall be paid
based on the achievement of certain planned budget
targets for the twelve month period ended 31
December 1999. Of this amount 31/35 shall be paid
to NETSOURCE EUROPE shareholders and 4/35 to the
NETSOURCE EUROPE key personnel agreed upon pursuant
to clause 4., The final list of key personnel and
the criteria for distribution among key personnel
shall have been agreed between NETSOURCE EUROPE's
board of directors and GTS not later than 16
October 1998. GTS shall have the right to pay all
or part of the additional payment of $35 million in
cash. The additional payment shall be paid as
follows: $2 million paid provided NETSOURCE EUROPE
achieves the planned budget targets for Q1 1999
results, $5 million paid provided NETSOURCE EUROPE
achieves the planned budget targets for cumulative
results through the end of Q2 1999, $8 million paid
provided NETSOURCE EUROPE achieves the planned
budget targets for cumulative results through the
end of Q3 1999 and $20 million paid provided
NETSOURCE EUROPE achieves the planned budget
targets for the entire 1999 calendar year.
Payments, if any, shall be made within 30 days from
final determination of NETSOURCE EUROPE's accounts
for the quarter in question and the final
determination of NETSOURCE EUROPE's annual 1999
accounts, as appropriate.
9
For any given quarter, the planned budget targets
for results shall be deemed achieved if all of the
following criteria are satisfied (for the negative
figures the criterion shall be satisfied if a
smaller negative number or a positive number is
achieved):
--------------------------------------------------------
Quarter CUMULATIVE CUMULATIVE CUMULATIVE
of 1999 CONSOLIDATED CONSOLIDATED CONSOLIDATED
NET REVENUE GROSS MARGIN EBITDA
--------------------------------------------------------
million $ % million $
--------------------------------------------------------
Q1 37.0 25.8 - 2.12
--------------------------------------------------------
Q2 85.1 26.8 - 1.93
--------------------------------------------------------
Q3 132.3 27.4 - 2.14
--------------------------------------------------------
Q4 199.0 28.0 - 0.56
--------------------------------------------------------
If any quarterly additional payment is not earned
for a given period, it shall not be paid regardless
of future results. In the event that NETSOURCE
EUROPE achieves not less than 80% of each of the
1999 annual planned budget targets by the end of Q4
1999, an additional payment, equal to 20% of the $
20 million Q4 additional payment that would have
been payable if the planned budgets targets for the
entire 1999 calendar year had been achieved, shall
be payable.
The criteria set forth above shall be adjusted for
any acquisitions, divestitures, green-field
start-ups, and any other fundamental changes to the
business. The criteria set forth above are based on
Norwegian generally accepted accounting principles,
but shall be converted to figures based on United
States generally accepted accounting principles,
which figures shall have been agreed between
NETSOURCE EUROPE's board of directors and GTS not
later than 16 October 1998.
The number of shares payable as the additional
payment, and/or the cash payment in lieu thereof,
shall be based on the average of the
volume-weighted average trading price of GTS stock
for the ten trading days prior to the end of each
quarter based on the figures for the NETSOURCE
EUROPE business used by GTS in preparing the 10Q
for that quarter filed by GTS with the SEC, subject
to a cumulative maximum of 1.4 million shares.
o All payments offered shall be on a per share basis.
The share exchange ratio shall be adjusted to
reflect any distributions from and/or share capital
changes in GTS after 7 October 1998. To the
10
extent the share exchange will otherwise result in
a NETSOURCE EUROPE shareholder receiving a fraction
of a GTS share, the number of shares shall be
rounded to the nearest share.
o All GTS common stock received by NETSOURCE EUROPE
shareholders will be unregistered. GTS will file to
register all the shares for the initial payment and
all the shares for the additional payment as soon
as reasonably practicable. Filing costs shall be
born by GTS.
4. Key Personnel GTS intends to offer incentive compensation, including
(at the discretion of the GTS Board) GTS stock options,
to key personnel of the business going forward. GTS
expects that such key personnel which NETSOURCE EUROPE's
board of directors and GTS shall have agreed not later
than 16 October 1998 would sign two-year employment
agreements or agree to continue their existing services
arrangement with NETSOURCE EUROPE for a two-year period
on terms to be agreed, such employment and services
agreements to contain appropriate non-compete covenants.
5. Timing GTS shall promptly commence a financial, legal and
operational due diligence review of NETSOURCE EUROPE.
The offer shall not be binding on GTS if GTS in the
course of its due diligence review identifies new issues
negatively material to the valuation of NETSOURCE
EUROPE, provided, however, that if requested by
NETSOURCE EUROPE's board of directors, GTS and NETSOURCE
EUROPE shall jointly commission two of the following
investment bankers to promptly deliver an opinion on
whether the issues identified were material to valuation
of NETSOURCE EUROPE and only if their opinion is that
this was the case shall the offer not be binding on GTS:
Morgan Stanley, Lazard Brothers (London), ING Barings
and Goldman Sachs. Each of GTS and NETSOURCE EUROPE
shall select one of the investment bankers to be
commissioned. In the event that the two appointed
investment bankers do not reach agreement with respect
to the materiality of the issue(s) in question, they
shall agree on the appointment of a firm of
internationally reputed investment bankers independent
of both GTS and NETSOURCE EUROPE to deliver its own
opinion which shall then determine whether GTS is bound
by the offer or not.
For the purpose of advising its shareholders whether or
not to accept GTS' offer, NETSOURCE EUROPE shall
promptly dispatch financial analyst(s) to McLean,
Virginia, where GTS shall give a full presentation of
its business and financial condition, to the extent
customary to financial analysts. GTS shall also provide
to NETSOURCE EUROPE copies of all covenants contained in
its material financing agreements
11
(debentures, bonds, loan agreements, financial leases,
etc). For the purposes of the preceding sentence,
"material financing agreements" shall mean any
agreements involving liabilities in excess of USD 40
million. GTS shall provide to NETSOURCE EUROPE a
presentation of material pending litigation and disputes
to which it is a party.
The offer shall be made not later than 16 October 1998.
GTS shall have the right to not make the above offer to
shareholders to whom making thereof would be either
unlawful or would be unreasonably time- or
cost-consuming, provided that GTS contemporaneously
offers to purchase such shareholders' shares in
NETSOURCE EUROPE on the same terms as the offer, except
as to the consideration, which for those shares shall be
a cash price per NETSOURCE EUROPE share equal to the
aggregate of (i) the cash portion per NETSOURCE EUROPE
share of the initial offer consideration and (ii) the
value per NETSOURCE EUROPE share of the initial offer
consideration consisting of GTS shares, determined on
the basis of the NASDAQ volume weighted average trading
price for GTS common stock on the day of settlement.
6. Conditions The offer shall be subject to
(i) 67% acceptance rate (fully diluted);
(ii) successful completion of due diligence,
cfr. clause 5 above;
(iii) the restructuring of NETSOURCE EUROPE's
debt other than its loan from Kistefos AS
contemporaneously with payment of the
initial consideration to comply with GTS'
high-yield loan covenants but no later than
30 November 1998 or 7 days after the
settlement date, whichever is earlier,
provided that such debt to be restructured
shall be clearly identified in the offer;
(iv) the negotiation of acceptable employment
and services agreements concerning key
NETSOURCE EUROPE personnel;
(v) satisfactory lock-up agreements in respect
of GTS shares paid as consideration to such
key personnel which NETSOURCE EUROPE's
board of directors and GTS shall have
agreed not later than 16 October 1998;
(vi) the compliance in all material respects by
shareholders who have undertaken to accept
the offer prior to it being made with the
terms of their undertakings;
(vii) the waiver of any and all rights to require
a repurchase of part of or all of the share
capital of International Telecommunications
Ltd, an Irish corporation, from NETSOURCE
EUROPE; and
12
(viii) any regulatory approvals which are material
to the completion of the purchases pursuant
to the offer or to the continued business
thereafter of NETSOURCE EUROPE and its
subsidiaries shall have been obtained by 30
November 1998, provided that such approvals
shall be clearly identified in the offer.
7. Governing law The offer shall be construed in accordance with and
governed by the laws of Norway and Oslo shall be venue
for determination of any disputes arising out of or in
connection with the offer.
13
SCHEDULE 3 - NETSOURCE EUROPE SHARES CONTROLLED BY SELLER
Number of NetSource Europe shares VPS account no Name of owner
- --------------------------------- -------------- -------------