FOR SETTLEMENT PURPOSES ONLY
MUTUAL COOPERATION AGREEMENT
This agreement ("Agreement") is entered into as of this 3rd day of
June, 1998, by and between Jazz Telecom S.A., a Spanish corporation ("JazzTel"),
having an address at Vereda de Los Chopos, number ▇▇, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇; Viatel, Inc., a Delaware corporation ("Viatel"), having an address at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("Varsavsky")
having an address at Vda. De Los Chopos ▇▇. ▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇.
W I T N E S S E T H :
WHEREAS, subject to JazzTel's completion of a high yield debt offering,
JazzTel intends to build competitive local exchange networks in several Spanish
markets, a 20 Gb/s, SDH broadband fiber optic network connecting various cities
in Spain (the "Inland Cable System") and a state-of-the-art fiber optic
submarine cable with a capacity of at least 20 Gb/s between beach point landing
stations located in the United Kingdom and Spain (the "Submarine Cable System");
and
WHEREAS, Viatel is a facilities based public telecommunications
operator in the United Kingdom and various other jurisdictions, providing
private line and switched voice and data services to carriers and end users; and
WHEREAS, Viatel is constructing a 20 Gb/s, SDH broadband fiber optic
network connecting the United Kingdom, the Netherlands, Belgium, France and
Germany (the "Circe Cable System"); and
WHEREAS, Viatel and JazzTel desire to enter into this Agreement
providing access to each other's services under favorable rates and conditions;
and
WHEREAS, Viatel and Varsavsky have reached certain understandings
concerning the Varsavsky Shares (as defined herein).
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. CONSTRUCTION OF FIBER OPTIC SUBMARINE CABLE SYSTEM.
A. Subject to JazzTel's completion of a high yield debt offering with
net proceeds to JazzTel of at least U.S.$100,000,000 (the
"Offering Condition"), Viatel and JazzTel intend to use
commercially reasonable efforts to execute and deliver a
construction contract no later than January 1, 1999 governing the
construction of the Submarine Cable System with a ready for
service date of no later than January 1, 2000. All other material
terms and conditions, including vendor selection for the Submarine
Cable System, shall be mutually agreed to by the parties.
B. Subject to the execution of a construction contract and the
satisfaction of the Offering Condition, Viatel agrees to invest
the lesser of U.S.$25.0 million or fifty percent (50%) of the
total construction costs of the Submarine Cable System. JazzTel
will invest the balance of the funds necessary to construct the
Submarine Cable System.
C. Each of Viatel and JazzTel shall be a co-owner of the Submarine
Cable System in direct proportion to its total investment in such
System.
D. Viatel, at its sole expense, will use commercially reasonable
efforts to (a) arrange for 20 Gb/s of protected self-healing
backhaul capacity (either on its own network or via third parties)
from the beach point landing station in the United Kingdom of the
Submarine Cable System to Telehouse London, and (b) apply for the
regulatory and environmental permits required to land an
international cable in the United Kingdom.
E. JazzTel, at its sole expense, will use commercially reasonable
efforts to (a) arrange for 20 Gb/s of protected self-healing
backhaul capacity (either on its own network or via third parties)
from the beach point landing station in Spain of the Submarine
Cable System to an agreed upon location in downtown area of
Madrid) and (b) apply for the regulatory and environmental permits
required to land an international cable in Spain.
FOR SETTLEMENT PURPOSES ONLY
F. In consideration for the backhaul exchange, each of Viatel and
JazzTel shall grant to the other a 25-year indefeasible right of
use ("IRU") in the inland cable systems (backhaul) in proportion
to such entity's ownership interest in the Submarine Cable System.
For example, Viatel and JazzTel own 50% of the Submarine Cable
System (with the Submarine Cable System having 20 Gb/s of
capacity) then Viatel shall grant JazzTel an IRU for a 25-year
period for 16 STM-4s on the United Kingdom backhaul system and
JazzTel shall grant Viatel an IRU for a 25-year period for 16
STM-4s on the Spain backhaul system.
2. JAZZTEL INVESTMENT.
Subject to the approval of its Board of Directors and the Offering
Condition, Viatel shall purchase U.S.$6,000,000 of JazzTel common stock. The
economic terms of such investment shall be identical to those of JazzTel's other
equity investors and acceptable to Viatel. Viatel shall submit this Agreement to
its Board of Directors for final approval within ten (10) business days of the
execution of this Agreement. If such approval and acceptance is not received
within such ten (10) business day period, then this Agreement shall be void.
3. INTERNATIONAL CARRIER.
A. For a period of two years from the date hereof, JazzTel shall
select Viatel as its preferred international switched minutes
carrier, on a destination by destination basis, for at least 1/3
of all of its "international traffic" (defined as all traffic
except calls to destinations within Spain and the United Kingdom);
PROVIDED, HOWEVER, that Viatel's per minute rate to the
destination is not greater than the per minute rate of any other
carrier with whom JazzTel has interconnection to that destination.
For any destination, JazzTel shall give Viatel reasonable notice
and the opportunity to match any competitive offer before using
any such other carrier. Should Viatel fail to match such offer,
JazzTel may use any carrier offering such rates.
B. For a period of two years from the date hereof, Viatel shall offer
JazzTel wholesale rates for international switched minutes from
London at rates and payment terms that are equal to or better than
the rates and payment terms Viatel offers to any other Viatel
customer in London.
C. For a period of two years from the date hereof, Viatel shall give
JazzTel at least 1/3 of its Spain domestic switched minute
traffic; PROVIDED, HOWEVER, that JazzTel's domestic switched
minute rate for termination in Spain is no greater than any other
carrier in Spain with whom Viatel has interconnection,
D. JazzTel and Viatel shall meet at least quarterly to review
international switched minute rates on a destination by
destination basis and to use good faith efforts to enable Viatel
to carry as much of JazzTel's traffic as possible, subject to the
terms hereof.
4. INDEFEASIBLE RIGHT OF USE.
A. In connection with the JazzTel Inland Cable, JazzTel hereby agrees
to sell to Viatel, for U.S.$13.0 million, three (3) IRUs, each for
a 20-year period, at the STM-4 level, between (a) Madrid and
Barcelona, (b) Madrid and Bilbao and (c) Bilbao and Barcelona. The
IRUs shall be available for use no later than March 31, 1999. If
JazzTel sells an IRU on the JazzTel Inland Cable for a 20-year
period for an STM-4 on the stated routes for less than U.S.$13.0
million during the first year the system is in service, JazzTel
shall provide Viatel with a credit toward future capacity
purchases on the JazzTel Inland Cable equal to the difference
between U.S.$13.0 million and the lowest actual sale price
multiplied by the actual number of STM-4s purchased by Viatel for
U.S.$13.0 million.
B. Viatel shall offer to sell to JazzTel three (3) IRUs, each for a
20-year period, at the STM-4 level, between any three (3) cities
connected by the CIRCE PAN-EUROPEAN NETWORK for U.S.$13.0 million
per STM-4, PROVIDED, HOWEVER, that JazzTel shall only be entitled
FOR SETTLEMENT PURPOSES ONLY
to purchase IRUs at this price only to the extent that the
aggregate kilometers for the desired segments under the desired
IRUs do not exceed the aggregate kilometers between (a) Madrid
and Barcelona, (b) Madrid and Bilbao and (c) Bilbao and
Barcelona. JazzTel shall accept such offer by delivering written
notice to Viatel by December 31, 1998, together with payment of
the purchase price for such IRU. Failure of JazzTel to deliver
written notice together with the purchase price by such date,
shall be deemed a rejection of Viatel's offer. If Viatel sells an
IRU for a 20-year period for an STM-4 on CIRCE for less than
U.S.$13.0 million prior to December 31, 1999, Viatel shall
provide JazzTel with a credit toward future capacity purchases on
CIRCE equal to the difference between U.S.$13.0 million and the
lowest actual sale price multiplied by the actual number of
STM-4s JazzTel purchased at or less than U.S.$13.0 million.
C. It is hereby agreed that the maximum administrative and O&M
expenses on the IRUs sold by JazzTel and Viatel to the other shall
be U.S.$350,000 for each STM-4 per year. The terms of each such
IRU shall be governed by terms substantially similar to Viatel's
standard IRU Agreement for the CIRCE PAN-EUROPEAN NETWORK, a copy
of which is attached hereto as Exhibit A (the "Standard IRU
Agreement").
D. JazzTel shall offer, where available, JazzTel local loop circuits
(2.048 Mb/s to 155 Mb/s as requested by Viatel) to Viatel or its
subsidiaries for resale to Viatel's customers at rates that are
equal to or better than the rates JazzTel offers to any customer
of JazzTel; PROVIDED, HOWEVER, that Viatel's local loop discount
shall always be at least 35% less than JazzTel's retail price for
such circuits.
E. Viatel shall offer, where available, Viatel local loop circuits
(2.048 Mb/s to 155 Mb/s as requested by JazzTel) to JazzTel for
resale to JazzTel's customers at rates that are equal to or better
than the rates Viatel offers to any other customer of Viatel in
that country; PROVIDED, HOWEVER, that JazzTel's local loop
discount shall always be at least 35% less than Viatel's retail
price for such circuits.
5. LOCK-UP.
▇. ▇▇▇▇▇▇▇▇▇ represents and warrants that he owns directly a total of
5.45 million shares (the "Varsavsky Shares"). of common stock of
Viatel (the "Common Stock").
B. Subject to sales contemplated by Sections 5C, 6 and 7 hereof,
Varsavsky agrees with Viatel that he will not offer, sell,
transfer or otherwise dispose or contract to offer, sell,
transfer or otherwise dispose of, directly or indirectly, or
pledge or encumber (except to the extent existing on the date
hereof) or announce an offering of, any of the Varsavsky Shares
for a period of twelve (12) months after the date of execution of
this Agreement. In order to enforce the foregoing covenant,
Viatel may impose stop-transfer instructions with respect to the
Varsavsky Shares and may require that the Varsavsky Shares bear
an appropriate legend. In addition, Viatel shall have the right
to seek injunctive relief to prevent a sale of the Varsavsky
Shares which is in violation of this Agreement. Varsavsky shall
provide Viatel with written notice of any contemplated sale of
the Varsavsky Shares, whether or not prohibited by the terms of
this Section.
C. Notwithstanding the provisions of Section 5B hereof, (i) Varsavsky
shall be permitted to sell his shares in a private placement to
any financial institution that is a "qualified institutional
buyer," as such term is defined in Rule 144A promulgated under the
Securities Act of 1933, as amended (the "Act"), or certain
individuals who have sufficient net worth and sophistication to
allow a purchase of the Varsavsky Shares in a transaction exempt
from registration under the Act and (ii) Credit Suisse First
Boston shall be entitled to foreclose upon the Varsavsky Shares
pledged as security for that certain margin loan between it and
Varsavsky (the "Margin Loan") after an event of default by
Varsavsky, but solely after all applicable notice and grace
periods.
FOR SETTLEMENT PURPOSES ONLY
▇. ▇▇▇▇▇▇▇▇▇ shall prevent any default on the Margin Loan secured by
the Varsavsky Shares (other than a default based solely upon the
market price of the Common Stock as traded on the NASDAQ/NMS).
Upon receipt of any notice from Credit Suisse First Boston,
Varsavsky shall immediately deliver (with delivery confirmed) a
copy of such notice to Viatel.
▇. ▇▇▇▇▇▇▇▇▇ shall use his best efforts to amend the Margin Loan to
comply with the terms of this Agreement and thereafter agrees that
he shall not further amend such Loan in any manner adverse to
Viatel (such as amending the Margin Loan agreement to provide for
accelerated repayment), excluding such amendments that would not
be adverse to Viatel (such as amending the Margin Loan to provide
for reduced interest payments or security).
F. Within five days of the date of any amendment of the Margin Loan,
Varsavsky shall provide a copy of such amended Loan to Viatel at
the address listed above.
6. CERTAIN REPRESENTATIONS AND AGREEMENTS.
▇. ▇▇▇▇▇▇▇▇▇ represents and warrants to Viatel that the documents
attached hereto as Exhibit B are true and complete copies of all
documentation executed by Varsavsky in connection with the Margin
Loan.
▇. ▇▇▇▇▇▇▇▇▇ represents and warrants to Viatel that the Margin Loan
has a maximum principal amount of U.S.$15.0 million.
▇. ▇▇▇▇▇▇▇▇▇ represents and warrants to Viatel that as of May 28,
1998 he had borrowed an aggregate amount of U.S.$6.7 million under
the Margin Loan.
▇. ▇▇▇▇▇▇▇▇▇ hereby agrees with Viatel that during the lock-up period
he shall not borrow more than an additional U.S.$5.0 million
under the Margin Loan (the "Permissible Borrowing") until such
time as the market price of the Common Stock is at least equal to
the market price of such Stock on the date the Margin Loan was
incurred, at which point the Permissible Borrowing shall be the
amount available for borrowing under the Margin Loan, PROVIDED,
HOWEVER, that Varsavsky may borrow only additional amounts under
the Margin Loan or increase or refinance the Margin Loan subject
to the approval of Viatel, which approval shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing,
(i) in the event that the price per share of the Common Stock
equals or exceeds U.S.$10.00 per share, the Permissible Borrowing
shall be increased to U.S.$7.0 million (ii) the Permissible
Borrowing shall be reduced by an amount equal to the net cash
proceeds received from the sale of any Varsavsky Shares to
executive officers of Viatel for a per share price equal to the
average closing price of the Common Stock for the ten (10)
business days prior to the date of this Agreement.
E. JazzTel hereby represent and warrants that all necessary approvals
have been obtained for the execution and delivery of this
Agreement.
▇. ▇▇▇▇▇▇▇▇▇ and JazzTel agree not to take any action, or cause any
other person to take any action, which is intended, or would
reasonably be expected, to harm the reputation of Viatel, its
subsidiaries and affiliates and their current and former officers
and directors; PROVIDED, HOWEVER, the forgoing limitation shall
not apply to (i) compliance with any legal process or subpoena or
(ii) statements made in response to an authorized inquiry from a
court or regulatory or administrative body. Varsavsky and JazzTel
agree not to take any action, or cause any other person to take
any action, which is intended, or would reasonably be expected,
to lead to adverse publicity for Viatel, its subsidiaries and
affiliates and their current and former officers and directors.
In no event shall any public statements be made about Viatel
without the prior written consent of Viatel.
FOR SETTLEMENT PURPOSES ONLY
G. Viatel agrees that it will not take any action, or cause any other
person to take any action, which is intended, or would reasonably
be expected, to harm the reputation of Varsavsky or JazzTel;
PROVIDED, HOWEVER, the forgoing limitation shall not apply to (i)
compliance with any legal process or subpoena, (ii) statements
made in response to an authorized inquiry from a court or
regulatory or administrative body or (iii) statements or
information contained in documents required to be filed by Viatel
with the Securities Exchange Commission or any other applicable
regulatory or administrative body. Except as required by law or
contemplated above, Viatel agrees that it will not take any
action, or cause any other person to take any action, which is
intended, or would reasonably be expected, to lead to adverse
publicity for Varsavsky or JazzTel. In no event shall any public
statements be made about Varsavsky or JazzTel without the prior
written consent of such party.
7. REGISTRATION RIGHTS.
A. If (i) within twelve (12) months from the date of this Agreement,
the closing stock price of the Common Stock is at least equal to
$12.00 per share on the NASDAQ/NMS for at least twenty (20)
consecutive business days and (ii) Viatel's investment bank,
currently ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, determines in its reasonable discretion,
that a secondary offering of the Varsavsky Shares is feasible,
then Viatel shall be required to register the Varsavsky Shares for
sale in a registered offering (the "Registration"). Viatel and
Varsavsky shall reach an understanding relating any other
investment bank with respect to the underwriting for the Varsavsky
Shares.
▇. ▇▇▇▇▇▇▇▇▇ hereby agrees that he will sell at least 3.5 million
Varsavsky Shares in the Registration, or such lesser amount as may
be required by the lead underwriter.
C. If Viatel files a registration statement in respect of Common
Stock (other than a registration statement on Form S-4 or Form S-8
or under Section 7A hereof) whether on behalf of Viatel or other
stockholders of Viatel, then Varsavsky shall be entitled to "piggy
back" rights with respect to such registration statement, subject
to standard pro rata "cut back" requirements in the sole
discretion of the lead underwriter for such offering.
▇. ▇▇▇▇▇▇▇▇▇ shall pay all expenses incurred in connection with the
Registration, including, without limitation, all registration,
filing, and qualification fees, printers' and accounting fees,
fees and disbursements of counsel for the Company, to the extent
that such expenses are allocable to the Varsavsky Shares
determined on a pro rata basis.
E. Except as may be permitted or required under Sections 5C and 6D
hereof or this Section 7, Varsavsky hereby agrees that he shall
not, for at least 12 months after the effective date of a
registration statement, to the extent requested by Viatel,
directly or indirectly, offer, sell, transfer or otherwise
dispose or contract to offer, sell, transfer or otherwise dispose
of, directly or indirectly, or further pledge or encumber or
announce an offering of, any of the Varsavsky Shares. In order to
enforce the foregoing covenant, Viatel may impose stop-transfer
instructions with respect to the Varsavsky Shares and may require
that the Varsavsky Shares bear an appropriate legend. In
addition, Viatel shall have the right to seek injunctive relief
to prevent a sale of the Varsavsky Shares which is in violation
of this Agreement. Varsavsky shall provide Viatel with written
notice of any contemplated sale of the Varsavsky Shares, whether
or not prohibited by the terms of this Section.
8. RELEASE.
A. Viatel, on behalf of itself and its directors and officers, does
hereby forever release JazzTel and its subsidiaries and their
respective officers and directors and agents (solely in their
capacity as such) and Varsavsky from any and all claims, of any
kind or nature whatsoever, known or unknown, from the beginning
of time up to the date of this Agreement, except that this
FOR SETTLEMENT PURPOSES ONLY
release does not release JazzTel and its subsidiaries and their
respective officers and directors and Varsavsky from any of their
respective obligations hereunder.
B. JazzTel and its respective subsidiaries and affiliates and their
respective directors, officers and agents (solely in their
capacity as such) and Varsavsky do hereby forever release Viatel
and its subsidiaries and affiliates and their respective
officers, directors and agents from any and all claims, of any
kind or nature whatsoever, known or unknown, from the beginning
of time up to the date of this Agreement, except that the release
does not release Viatel and its subsidiaries and their respective
officers and directors from any obligation hereunder.
9. LIQUIDATED DAMAGES.
A. If any court or tribunal of competent jurisdiction determines that
Varsavsky (in his capacity as an individual and not as an officer
or director of JazzTel) has (i) during the first twelve months of
this Agreement, violated any material provision of Section 5, 6 or
7 hereof or (ii) at any time during which any transfer of the
Varsavsky Shares are prohibited under Section 7E hereof, violated
any provision of Section 5 (except subsections A and B thereof),
6D and 7E hereof, then Varsavsky shall make a U.S.$500,000 lump
sum payment for each violation as agreed upon liquidated damages
in addition to any other damages that are required to be paid
court or tribunal of competent jurisdiction; PROVIDED, HOWEVER, in
no event shall punitive damages hereunder exceed $5.0 million.
10. MISCELLANEOUS.
A. In the event of a breach of this Agreement, either in whole or in
part, the prevailing party, in addition to the recovery of its
damages, and/or other relief, shall be entitled to recover any costs,
including reasonable attorneys' fees, incurred in instituting,
prosecuting or defending any action arising by reason of the breach of
this Agreement.
B. The validity, interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of New York. The
parties hereto agree that any action, proceeding, or claim arising out
of or relating in any way to this Agreement shall be brought and
enforced in the courts of London, England. Each party hereto hereby
irrevocably waives any objection to such jurisdiction or inconvenient
forum.
▇. ▇▇▇▇▇▇▇▇▇ declares that he has read this Agreement and that he
understands the terms and purpose of this Agreement. Varsavsky
warrants that he has all the requisite power and authority to enter
into this Agreement individually and on behalf of JazzTel. This
Agreement can only be modified by a writing signed by the parties to
which the modified versions shall apply.
D. If any term or provision of this Agreement shall be held invalid or
unenforceable, the remaining terms and provisions of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be duly
executed the day and year first written above.
JAZZ TELECOM, S.A.
/s/ ▇▇▇▇▇ ▇▇▇▇
By:---------------------------------------
a duly authorized officer
VIATEL, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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