<PAGE>
As filed with the Securities and Exchange Commission on July 15, 1996.
REGISTRATION STATEMENT NO. 333-05857
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
Pre-Effective Amendment No.2
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
______________
TELCO COMMUNICATIONS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
Virginia 4813 54-1674283
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
DONALD A. BURNS
4219 LAFAYETTE CENTER DRIVE PRESIDENT AND CHIEF EXECUTIVE OFFICER
CHANTILLY, VIRGINIA 22021 TELCO COMMUNICATIONS GROUP, INC.
(703) 631-5600 4219 LAFAYETTE CENTER DRIVE
(Address, including zip code, and telephone CHANTILLY, VIRGINIA 22021
number, including area code, (703) 631-5600
of registrant's principal executive offices) (Name, address, including zip code,
and telephone number, including area
code, of agent for service)
________________
Copies to:
MORRIS F. DEFEO, JR. DENNIS J. BLOCK
SWIDLER & BERLIN, CHARTERED AKIKO MIKUMO
3000 K STREET, N.W., SUITE 300 WEIL, GOTSHAL & MANGES, LLP
WASHINGTON, D.C. 20007 767 FIFTH AVE.,
(202) 424-7500 NEW YORK, N.Y. 10153
(212) 310-8000
________________
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
__________________
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
-------------------------------------------
The table below sets forth the expenses to be incurred by the Company in
connection with the issuance and distribution of the shares registered for offer
and sale hereby, other than underwriting discounts and commissions. All amounts
shown represent estimates except the Securities Act registration fee and the
NASD filing fee.
<TABLE>
<S> <C>
Registration fee under the Securities Act of 1933 $ 62,358
NASD filing fee 18,584
NASDAQ National Market fee *
Printing expenses *
Registrar and Transfer Agent's fees and expenses *
Accountants' fees and expenses *
Legal fees and expenses (not including Blue Sky) *
Blue Sky fees and expenses *
Miscellaneous *
______
Total $ *
======
</TABLE>
_______
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
-----------------------------------------
Article 10 of the Virginia Stock Corporation Act allows, in general, for
indemnification, in certain circumstances, by a corporation of any person
threatened with or made a party to any action, suit, or proceeding by reason of
the fact that he or she is, or was, a director, officer, employee, or agent of
such corporation. Indemnification is also authorized with respect to a criminal
action or proceeding where the person had no reasonable cause to believe that
his conduct was unlawful. Article 9 of the Virginia Stock Corporation Act
provides limitations on damages payable by officers and directors, except in
cases of willful misconduct or knowing violation of criminal law or any federal
or state securities law.
The Company's Articles of Incorporation provide for mandatory
indemnification of its directors and officers against liability incurred by them
in proceedings instituted or threatened against them by third parties, or by or
on behalf of the Registrant itself, relating to the manner in which they
performed their duties unless they have been guilty of willful misconduct or a
knowing violation of the criminal law.
II-1
<PAGE>
In the U.S. Underwriting Agreement and International Underwriting
Agreement, proposed forms of which have been filed as Exhibits 1.1 and 1.2
hereto, respectively, the U.S. Underwriters and Managers will agree to
indemnify, under certain conditions, the Registrant's officers, directors and
controlling persons against certain liabilities, including liabilities under the
Securities Act of 1933.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
---------------------------------------
In connection with the organization of the Company, 1 share of the
Company's Common Stock was issued to Henry G. Luken, III, 1.14 shares were
issued to Donald A. Burns, and .86 shares were issued to Walter C. Anderson on
August 15, 1993.
On November 9, 1993, an additional 1,580.75, 1,803.86 and 1,362.39 shares
of the Company's Common Stock were issued to Mr. Luken, Mr. Burns and
Mr. Anderson, respectively.
On July 1, 1994, the Company declared a 10-for-1 stock split and issued
additional shares of Common Stock to Mr. Burns, Mr. Luken and Mr. Anderson,
increasing their holdings to 18,050, 15,318 and 13,633 shares of Common Stock,
respectively.
On July 1, 1994 options for 1,467.5 shares of Common Stock were granted to
Mr. Rachlin, at an exercise price of $131.08 per share.
On July 20, 1994, the Company reacquired 13,633 shares of its Common Stock
from Mr. Anderson for $25,000. On July 25, 1994, the Company issued 15,224.50
shares of its Common Stock to Iceberg Transport, S.A., a Panamanian corporation,
in a private placement for $50,000.
On November 30, 1994 options for 1,876 shares were issued to Ms. Marine-
Street at an exercise price of $746.42 per share.
On December 30, 1994 options for 500 shares were issued to Mr. Stodter at
an exercise price of $784.13 per share.
On September 1, 1995 options for 500 shares were issued to Ms. Anastasi at
an exercise price of $1374.82 per share.
On June 27, 1994 a warrant to purchase 1,174 shares at a nominal exercise
price was issued to Signet Media Capital Group.
On March 19, 1996, options to acquire 1,000 shares were issued to Mr.
Merrick at an exercise price of $3,200 per share.
On April 4, 1996, options to acquire 2,500 shares were issued to Mr.
Canton at an exercise price of $3,200 per share.
On May 3, 1996, the number of shares subject to the warrant previously
issued to Signet Media Capital Group was adjusted to 1,255.
II-2
<PAGE>
On April 1, 1996, Bonita Anderson, James Sznajder, Dennis Jarman and Bryan
Rachlin exchanged their options in Long Distance Wholesale Club for options the
acquire 60.025, 120.05, 200.511, and 240.1 shares of Common Stock, respectively,
under the Company's Stock Option Plan.
On ___________, 1996, the Company declared a 425-for-1 stock split.
Accordingly, the foregoing share amounts in this Item 15 are on a pre-stock
split basis.
Each issuance of securities described above was made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act as a
transaction by an issuer not involving any public offering. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. All recipients had adequate access,
through their relationships with the Company, to information about the Company.
ITEM 16(A). EXHIBITS.
--------
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
<S> <C> <C>
*1.1 Form of U.S Underwriting Agreement
*1.2 Form of International Underwriting Agreement
*2.1 Tel Labs, Inc. Share Exchange Agreement
*2.2 Long Distance Wholesale Club, Inc. Share Exchange Agreement
*3.1 Restated Articles of Incorporation of Telco
Communications Group, Inc.
*3.2 Amended and Restated Bylaws of Telco Communications
Group, Inc.
*4.1 Form of Common Stock Certificate of Telco
Communications Group, Inc.
*5.1 Opinion of Swidler & Berlin, Chartered
*10.1 Agreement for the Provision of Billing and Collection
Services between Telco Development Group of Delaware,
Inc. and the Ameritech Companies dated July 1, 1995
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
<S> <C> <C>
*10.2 Agreement for the Provision of Billing and Collection
Services between the Bell Atlantic Operating Telephone
Companies and Telco Development Group, Inc. dated
June 10, 1994
*10.3 Clearinghouse Billing and Collection Services Operating
Contract between Telco Development Group, Inc. and
Bell South Communications dated January 3, 1994
10.4 Agreement for Billing Services by Tel Labs, Inc. and
Esprit Telecom dated December 29, 1995
10.5 Agreement for Billing Services by Tel Labs, Inc. and
Long Distance Wholesale Club, Inc. dated July 19, 1995
10.6 One Plus Billing & Information Management Services
Agreement between Long Distance Wholesale Club, Inc.,
and Telco Development Group of Delaware, Inc. dated
January 23, 1996
*10.7 Agreement between Nevada Bell and Telco Development
Group of Delaware, Inc. for Billing and Collection
Service dated September 3, 1995
*10.8 Agreement for Interstate Billing and Collection Services
Agreement between New England Telephone and
Telegraph Company and Telco Development Group of
Delaware, Inc. dated July 31, 1995
*10.9 Agreement for Interstate Billing and Collection Services
between New York Telephone Company and Telco
Development Group of Delaware, Inc. dated July 31,
1995
*10.10 Agreement for the Provision of Billing and Collection
Services between Pacific Bell and Telco Development
Group of Delaware, Inc. dated April 4, 1995
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
<S> <C> <C>
*10.11 Casual Billing Services Agreement between the Southern
New England Telephone Company and Telco
Development Group of Delaware, Inc. dated February 9,
1996.
10.12 Agreement for the Provision of Billing and Collection
Services between Southwestern Bell Telephone Company
and Telco Development Group of Delaware, Inc. dated
December 16, 1994; and Amendment to the Agreement
for the Provision of Billing and Collection Services
between Southwestern Bell Telephone Company and
Telco Development Group of Delaware, Inc. dated
December 19, 1994
10.13 One Plus Billing and Information Management Services
Agreement between Telco Development Group of
Delaware, Inc. and Telco Communications Group, Inc. dated
December 30, 1995
10.14 Agreement for Billing Services by Tel Labs, Inc. and
Telco Communications Group, Inc. (undated)
*10.15 Agreement for the Provision of Billing and Collection
Services for Clearing Agents between U S WEST, Inc. and
Telco Development Group of Delaware, Inc. dated April
1, 1995
*10.16 Standard Agreement for the Provision of Billing and
Collection Services between United Telephone Company
of Florida and Telco Development Group, Inc. dated
October 19, 1994
10.17 Service Agreement between IXC Carrier, Inc. and Telco
Communication Group, Inc. dated December 15, 1995
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
----- ----------- -------------
<S> <C> <C>
10.18 Telco Communications Group, Inc. Wholesale Customer
Agreement for Special International Pricing with Esprit
Telecom dated February 21, 1996.
*10.19 Amended and Restated 1994 Stock Plan
10.20 Lease Agreement between CPL Properties and Telco
Communications Group, Inc. effective March 1, 1995
(Davenport, Iowa Switch Site)
10.21 Lease Agreement between Thomas Kurschner and Telco
Communications Group, Inc. effective November 2, 1995
(Las Vegas, Nevada Switch Site)
10.22 Deed of Lease Agreement between Bricks in the Sticks,
Ltd. and Telco Communications Group, Inc. effective
March 1, 1995 (Chattanooga, Tennessee Switch Site).
10.23 Lease Agreement between The University of Texas
System and Telco Communications Group, Inc. effective
August 22, 1994 (Austin, Texas Switch Site)
10.24 Agreement of Lease between 13th and L Associates and
Telco Communications Group, Inc. effective August 25,
1994 (Washington, DC Switch Site)
10.25 Deed of Lease agreement between Bricks in the Sticks,
Ltd. and Tel Labs, Inc. effective July 1, 1994 (Corporate
Office)
10.26 Deed of Lease Agreement between Bricks in the Sticks,
Ltd. and Telco Communications Group, Inc. effective
March 1, 1995 (Corporate Office)
10.27 Master Lease Agreement between Telco Communications
Group, Inc. and Dana Commercial Credit Corporation
dated September 14, 1995; Addendum to the Master
Lease Agreement dated September 15, 1995; and Lease
Schedules 001 and 002.
*10.28 Equipment Lease between DGI Technologies, Inc. and
Telco Communications Group, dated October 1, 1994
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
------ ----------- -------------
<S> <C> <C>
10.29 Equipment Leases between DSC Finance Corporation and
Telco Communications Group, Inc. (Master Lease dated
January 1, 1994 and Schedules A-P1)
10.30 Credit Agreement between Telco Communications
Group, Incorporated, Signet Bank and the Banks listed
therein, dated as of January 24, 1996
*10.31 Employment Agreement between Telco Communications Group,
Inc. and Donald A. Burns
10.32 Employment Agrement between Telco Communications Group,
Inc. and Thomas J. Cirrito dated as of April 1, 1996
10.33 Employment and Stock Option Agreement between Telco
Communications Group, Inc. and Stephen G. Canton dated
as of April 4, 1996
10.34 Employment Agreement between Telco Communications Group,
Inc. and Bryan K. Rachlin dated as of July 10, 1996
10.35 Employment Agreement between Telco Communications Group, Inc.
and Nicholas A. Merrick dated as of March 19, 1996
10.36 Employment Agreement betweem Telco Communications Group, Inc.
and Janet D. Anastasi dated as of May 2, 1996
10.37 Employment Agreement between Telco Communications Group, Inc.
and Natalie Marine-Street dated as of May 3, 1996
10.38 Employment Agreement between Telco Communications Group, Inc.
and Mark J. Stodter dated as of May 2, 1996
*10.39 Employment Agreement between Telco Communications Group, Inc.
and Henry G. Luken, III
*10.40 Indemnification Agreement
*10.41 Registration Rights Agreement
*11.1 Statement Regarding Computation of Per Share Earnings
*21.1 Subsidiaries of Telco Communications Group, Inc.
**23.1 Consent of Chase and Associates CPAs, PC
**23.2 Consent of Deloitte & Touche LLP
*23.3 Consent of Swidler & Berlin, Chartered (to be included in
Exhibit 5.1 to this Registration Statement)
**24.1 Power of Attorney
*27.1 Financial Data Schedule
</TABLE>
___________
* To be filed by amendment.
** Previously filed.
Item 16(b). Financial Statement Schedules.
-----------------------------
None.
II-7
<PAGE>
ITEM 17. UNDERTAKINGS.
------------
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-8
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chantilly, Commonwealth
of Virginia, on July 15, 1996.
TELCO COMMUNICATIONS GROUP, INC.
By: /s/ Donald A. Burns
__________________________
Donald A. Burns
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on July 15, 1996.
Signature Title
--------- -----
*
- ----------------------- Chairman of the Board and Director
Henry G. Luken, III
/s/ Donald A. Burns Vice Chairman of the Board, President, Chief
- ----------------------- Executive Officer and Director (Principal
Donald A. Burns Executive Officer)
*
- ----------------------- President of Consumer Division
Thomas J. Cirrito and Director
<PAGE>
*
- ----------------------- Director
Robert W. Ross
*
- ----------------------- Chief Financial Officer and Treasurer
Nicholas A. Merrick (Principal Financial Officer)
*
- ----------------------- Vice President and Corporate Controller
Janet D. Anastasi (Principal Accounting Officer)
*Donald A. Burns, by signing his name hereto, signs this document on behalf of
each of the persons so indicated above pursuant to powers of attorney duly
executed by such persons and filed with the Securities and Exchange Commission.
/s/ Donald A. Burns
- --------------------
Donald A. Burns, Attorney-in-Fact
<PAGE>
EXHIBIT 10.4
AGREEMENT FOR BILLING SERVICES BY
TEL LABS, INC.
Whereas Tel Labs, Inc., a Virginia Corporation ("Labs") is a
data processing firm; and
Whereas Esprit Telecom, a Jersey, Channel Islands Corporation ("Customer")
-------------------------
desires to use the services of Labs to produce telephone bills; and
Whereas Labs and Customer desire to reduce their respective rights, obligations
and duties to writing (the Agreement);
Now Therefore in consideration of the mutual covenants contained herein as well
as other good and valuable consideration the sufficiency of which is hereby
acknowledged Labs and Customer agree to be bound to the following terms and
conditions:
Section 1. Description of Services.
------------------------
"Billing Services" under this Agreement are the preparation and
rendering of bills or tapes which can be used to produce invoices
for telecommunication related service charges on behalf of Customer.
The service includes but is not limited to the following:
(a) Prebilling formatting of call detail records ("CDR") for bill
preparation; (b) appending the CDR records with pertinent billing
information; (c) applying tax information supplied to Labs by
Customer; (d) rating Customer's CDR'S; (e) provide Customer
management reports; and if requested and at an additional cost to
Customer (f) printing and mailing of end user bills.
Labs will use its best efforts to process Customers CDR's within
forty-eight (48) hours of receipt by Labs. Labs shall have no
obligation to determine the authenticity, genuineness or accuracy of
items delivered by Customer or the accuracy or correctness of the
invoices or reports generated therefrom.
Section 2. Setup of New Accounts.
----------------------
Labs will provide a tested billing system to Customer with approved
design specifications and objectives for processing Customer billing
as described herein within thirty (30) days of final ratification of
this Agreement provided that Customer supply Labs with all of the
necessary information to complete the Customer's billing system. The
cost to set up a new account shall be One Thousand Dollars ($1,000).
l
<PAGE>
The information needed by Labs shall include, but shall not be
limited to the following:
a) a test tape containing Customer's CDR'S.
b) Customer will select a bill format which is acceptable to Labs.
c) Customer will provide Labs with a camera ready Logo which they
wish to appear on their printed bills. (if applicable).
d) Customer, will provide Labs with completed rate tables in a form
acceptable to Labs.
e) Customer will provide it's end user information (i.e. name,
address, monthly charge and discounts, if any).
f) Customer will provide Labs with the tax information they wish Labs
to apply.
Section 3. Monthly Service.
---------------
3.1 Customer's CDR'S.
-----------------
Customer shall provide Labs with all of the CDR's it wishes
Labs to process. To insure that Customer receives credit for
all of its answered CDR'S; Labs will provide Customer with a
facsimile transmission describing each tape which Labs has
received and the number of answered phone calls contained
therein ("Receipt Report"). Labs will telephone Customer to
advise him that the Receipt Report has been sent. Customer must
acknowledge the receipt of the Receipt Report and confirm the
number of answered phone calls within 48 hours of delivery of
the Receipt Report. If Customer shall fail to respond to the
Receipt Report, Labs shall have no responsibility for
processing any more or less than the number of answered phone
calls it reported to Customer on its Receipt Report.
Labs will send all facsimile transmissions including the
Receipt Report to _____ or to any other facsimile number
provided in writing to Labs.
3.2 Customer's Rate Tables.
-----------------------
Prior to processing any of Customer's CDR'S; Customer shall
provide, in a format acceptable to Labs, the rate table(s)
Customer would like Labs to apply to its CDR'S. Customer may
modify, change or amend its rate tables as often as they
desire. Customer will advise Labs, in writing, of any
2
<PAGE>
changes to the rate tables it would like Labs to apply. In
order to be applied to next months billing cycle, all changes
must be received in a format acceptable to Labs no later than
the 25th day of the month preceding its desired application.
Should Customer fail to provide Labs with updated rate tables
prior to the 25th day of the previous month, Labs will apply
the rate tables it used in the preceding months billing cycle.
If an incorrect rate table is used due to an error by Customer;
then Customer's CDR's will be rerated at Customer's expense.
Each time Customer's CDR'S are rated, Customer shall be billed
as provided for in paragraph 4. If an incorrect rate table is
used due to an error by Labs; then Customer's CDR's will be
rerated at no cost to Customer. Labs shall not be liable for
any incidental or consequential damages which might arise out
of the use of an incorrect rate table.
3.3 Customer's Tax Tables.
----------------------
Customer acknowledges that Labs is a data processing firm and
is neither a taxing expert, nor a taxing agent or
representative of the Federal, State or any Local Governmental
agency. In the application of Billing Services, Labs shall
apply taxes based on the tax information provided by the
Customer. Labs will apply such tax information without warranty
as to accuracy, completeness or applicability to Customer's end
users. In the event Customer or its tax information vendor
modifies, changes or amends their tax tables in such a way as
to cause Labs the necessity of modifying or amending the means
in which it applies said taxes, then Customer will reimburse
Labs for the time it takes to amend or modify its Billing
Program in order to apply the changes in the tax information.
3.4 Indemnification by Customer.
----------------------------
The Customer shall pay, indemnify and hold Labs harmless from
any liability, claims or demands (including costs, expenses and
reasonable attorney's fees) resulting from any federal, state
or local taxing authority's assessments, including interest and
penalties, that may result from challenges to the applicability
or correctness of the tax information provided by the Customer.
The Customer shall also pay, indemnify and hold Labs harmless
from any liability, claims or demands (including costs,
expenses and reasonable attorney's fees) from and against any
tax, penalty or interest which may be due or claimed to be due
as a result of Customer's failure to collect and/or pay any
federal, state or local tax(es).
3.5. Vertex Users Group Fees.
------------------------
3
<PAGE>
If Customer elects to use Vertex as its source for tax
information and compliance, it does so at its own risk.
Customer acknowledges that Labs is not an owner, agent or
supplier of Vertex. Labs has purchased the Vertex tax database
solely as an accommodation for use by Customer at its own
election. Labs will not mark up the cost of the Vertex data
base. Labs will make that data base available to Customer on a
cost basis. Customer will pay its proportionate share of the
cost of Vertex on an annual basis. Customer's proportionate
cost shall be based entirely on the number of users in the
Vertex data base users group. That cost will be determined by
dividing the annual cost of Vertex by the total number of users
in the Vertex Users Group.
3.6 Customer Tax Information.
-------------------------
Labs shall, at Customers request, furnish Customer with any and
all information in Labs possession relating to the taxes
Customer requested Labs to apply. Such information shall be in
the format normally used by Labs. If a change in format or
additional information is required by the Customer in order to
prepare and file tax returns, the requested format or
information shall be supplied and Customer shall reimburse Labs
for its costs of providing such additional information or
change in format. The requested information shall be furnished
by Labs to the extent permitted by law and without warranty as
to accuracy or completeness.
3.7 Telephone Maintenance System.
-----------------------------
Telephone Maintenance System (PM) is a software program
designed and owned by Labs. It is a program that can assist
Customer in its day to day management of its telephone
business. It can maintain Customer's data base of end users and
end user information. Customer can then use this information in
a convenient format to analyze account receivables, calling
patterns and other pertinent information. If Customer elects to
use PM, Labs will supply Customer with a basic copy of PM free
of charge. If Customer is using PM, Labs will supply Customer
on a monthly basis an update to Customer's client data base.
That update will provide Customer with its end users billing
activity for the immediately preceding month.
3.8 Training.
---------
If Customer elects to use PM, Labs will, at no cost to
customer, provide four (4) hours of training at Labs corporate
office in Chantilly, Virginia. All additional training
requested will be billed on an hourly rate as defined in
paragraph 4.2. After the initial PM training, any PM support
questions will be billed at the hourly rates provided for in
paragraph 4.2.
4
<PAGE>
3.9 Management Reports.
-------------------
Labs will produce on a monthly basis a traffic termination
report and a revenue report. The termination report will be
provided on a LATA basis. The revenue report will be provided
on an account basis. Labs will [CANNOT READ] at Customer's
expense any additional management reports they desire.
3.10 Liability.
----------
Liability under this agreement shall be as follows:
3.10.1 Customer shall retain a copy of the billing detail
records it furnished Labs for ninety (90) days from the
date delivered to Labs.
3.10.2 If Labs discovers an error or omission in the data
furnished to it by Customer, Labs will notify the
Customer of such error or omission within sixty (60)
days of its receipt. If Customer supplies Labs
with corrected data, Labs will rerate Customer's
CDR's at Customer's expense. If Customer fails to
provide the correct data within five days of Labs
request, Labs will have no liability for any damages
arising from failure to provide Billing Services to
an affected end users.
3.10.3 If Customer discovers an error or omission in
the data it furnished Labs within sixty (60) days of
its submission: Customer will correct the error or
omission and resubmit the data to Labs. Labs will
rerate the data and provide Customer with appropriate
end user bills or adjustment information. Labs will
have no liability for any damages which might arise
out of generating incorrect end user invoices based
upon incorrect or omitted data provided by Customer.
3.10.4 If Customer billing detail is not available
because Labs lost or damaged records or incurred
processing system outages, Labs will attempt to
recover the lost Customer billing detail. If the lost
or damaged Customer billing detail cannot be
recovered, the Customer will be asked to resupply the
Customer billing detail. If the Customer has not
complied with the retention requirements of paragraph
3.10.1, Labs will have no liability.
3.10.5 If Customer discovers an error in the application of
Billing Services provided by Labs, it will notify Labs
of the discovered error. Labs will make a reasonable
effort to correct the error and bill the appropriate
end user within the limits permitted by law. Labs shall
5
<PAGE>
have no liability for errors which are discovered more
than sixty days from the date of Customer's end user
bill. If the error was discovered within sixty (60)
days of the affected end users bill, Labs will rerate
the affected data and produce adjustment
information for the Customers use. Labs liability
under paragraph 3.10.5 shall be limited to the amount
of the discovered error which remains uncollected
from Customer's end user 120 days after the end user
has been billed for the amount in error. In no event
shall Labs liability ever exceed the amount Labs
receive from Customer for Billing Service provided to
Customer during the sixty (60) days immediately
prior to the discovered error. Notwithstanding anything
to the contrary contained herein these corrections will
be paid for by Labs only if the Customer's billing
specifications provided to Labs completely and
accurately address the circumstances under which the
billing errors were discovered.
3.10.6 IN THE ABSENCE OF WILLFUL MISCONDUCT, LABS
SHALL HAVE NO LIABILITY FOR DAMAGES TO THE CUSTOMER
OR TO ANY OTHER PERSON OR ENTITY OTHER THAN AS SET
FORTH IN PARAGRAPH 3.10.
Section 4. Charges and Fees.
-----------------
4.1 Base Charges.
-------------
The base charge for the application of Billing Services is
directly related to a Term Commitment, the type of format
Customer request and the source of where an end user bill is
produced. If Customer wishes to have its end users call detail
appear on the Local Exchange Carrier (LEC) bill, they will need
to instruct Labs to prepare its CDR's in an EMI format. If
Customer would prefer to bill its end users directly as opposed
to having them billed on the LEC invoice, Customer will need to
instruct Labs to process its CDR's in Labs standard format. The
cost for Billing Services is provided on the attached Exhibit
A.
Notwithstanding anything to the contrary contained herein, if
Customer is currently billing more than one hundred thousand
(100,000) CDR's per month, Customer may elect an initial term
for this Agreement of two (2) or three (3) years. Should
Customer elect to extend the initial term of this Agreement,
Customer shall pay Labs a minimum Processing Fee, as described
in Exhibit A attached hereto, each month for the entire term of
this Agreement. In consideration for such, Labs will charge
Customer a
6
<PAGE>
reduced billing services fee for the term selected which
coincides with the Labs fee schedule as presented in Exhibit A,
attached hereto.
Early Termination of Extended Term Agreement: If Customer
---------------------------------------------
elects to extend the initial term of this Agreement and should
Customer terminate or breach this Agreement before the
expiration of the full initial term elected by Customer upon
execution hereof, Labs will recalculate and Customer shall pay
to Labs a Labs Processing Fee for all CDR's processed under
this Agreement based on the current Labs Processing Fee
schedule at the one (1) year rate, attached hereto as Exhibit
A, plus ten percent (10%) for each CDR processed under this
Agreement, at Customer's monthly volume levels.
4.2 Additional Services. Any services, updates or reports not
--------------------
specifically described in this Agreement shall be considered
"Additional Services". Services, updates or reports which are
specifically described in the Agreement, but which Customer
request to be performed a second time shall be considered an
"Additional Service(s)". Additional Services shall be billed at
the hourly rates listed below:
<TABLE>
<S> <C>
Programming & System changes
by Senior Programmer $110.00 per hour*
Staff Programming $75.00 per hour*
Computer run time $100.00 per hour
Data input, keying & verifying $25.00 per hour
Customer Service Support $25.00 per hour
</TABLE>
*Labs retains ownership of all programming and system changes billed at this
rate.
4.3 Customer Requests.
------------------
All Customer requests for Additional Services shall be
submitted in writing and include sufficient information needed
by Labs to develop a suitable response. The information
submitted by Customer must include a short narrative
describing the goal Customer is attempting to accomplish by its
7
<PAGE>
request. The Customer may be asked to clarify or enhance the
specifications and/or its narrative.
Labs will provide Customer, within seven business days of
receipt by Labs of a request for Additional Service its cost
estimate based on the above rates for the requested Additional
Services. Labs will also provide an estimate of the completion
date for the Additional Services. If Customer would like Labs
to perform the Additional Services, Customer shall provide Labs
with written authorization to begin the Additional Services and
payment of one third (1/3) of the estimated expenses. The final
bill for Additional Services shall be paid to Labs upon
implementation of the Additional Services. Modifications,
changes or amendments after the Additional Service(s) has been
implemented shall be billed to Customer at the above rates.
The base charge and hourly figures quoted in paragraphs 4.1 and
4.2 are subject to change upon providing sixty (60) days
written notice to the Customer.
4.3.1 Preauthorized Development and Implementation.
---------------------------------------------
By written notification, Customer can preauthorize
development and implementation of Additional Services.
Upon receipt of such notice Labs will evaluate and
begin development and implementation activities for
the request. Customer will be charged the appropriate
rates for these activities as described in paragraph
4.2.
4.3.2 Cancellation of Additional Services.
------------------------------------
If Customer cancels a request for Additional Services
after Labs has begun work on the request, Customer will
compensate Labs for expenses incurred up to the point
of cancellation, as well as any charges reasonably
required to terminate Labs's activities.
4.4 Right of Refusal.
-----------------
Labs reserves the right to refuse to develop or implement any
Additional Services requested by Customer.
4.5 Printing End User Bills.
------------------------
Labs will arrange at Customer's request to have the Customer's
end users bills printed. The cost for printing Customer's end
users bills shall be 5.5 cents per page. If Customer elects to
use its own print shop to produce its end users bill Labs will
charge 1.0 cents per page to coordinate the printing process.
The cost to stuff and mail end users invoices can also be
arranged. All postage fees must be paid in advance. If
Customer elects to have Labs
8
<PAGE>
handle the stuffing and mailing an estimate of postage cost
will be provided to Customer. Customer will pay that fee prior
to Billing Services being rendered.
4.6 Travel Expenses.
---------------
Customer will pay all reasonable out-of-pocket expenses for
travel, lodging and the like incurred in the performance of
this Agreement. Labs will submit statements to Customer for all
expenses and Customer will pay such statements within thirty
(30) days of the date of the statement. If requested by
Customer, Labs will provide documentation for such statements.
Any amount that remains unpaid thirty (30) days after the date
of the statement shall bear interest at the rate of one and
one-half percent (1.5%) per month from the date of the
statement.
Section 5. Payment.
--------
5.1 Amount Due Labs for Billing Services.
-------------------------------------
5.1.1 Billing Detail.
---------------
An invoice for the amount due Labs for Billing
Services will be provided to the Customer on a
monthly basis. That invoice will be due within thirty
(30) days from the date of the invoice.
5.1.2 Payment Method.
---------------
Settlement will be made by check postmarked at least
two (2) days prior to the due date. If any portion of
the amount due is received by Labs in funds which are
not immediately available to Labs on its due date,
Customer will incur a late payment charge. The
Customer will have full responsibility for ensuring
that payment is received so that it will be available
by the due date. Time is of the essence with respect
to Customers payment obligations.
5.1.3 Payment Detail.
---------------
Any payment to Labs from the Customer must be
accompanied by an indication of the invoice number
being paid.
5.1.4 Late Payment Penalty.
---------------------
Any payment not received by Labs as specified herein
will be subject to a late payment penalty. The late
payment penalty shall be 1.5% applied monthly (18% per
annum).
9
<PAGE>
5.1.5 Late Payment Resulting from Bank Error.
----------------------------------------
Any late payment resulting from bank error will not
be subject to the late payment penalty provided the
sending party (party making payment) can verify that
it was not at fault. It shall be the responsibility of
the sending party to notify the banks involved and
coordinate resolution of the discrepancy.
5.1.6 Right to Refuse to Provide Billing Services.
--------------------------------------------
Labs agrees to provide Billing Services on a monthly
basis during the term of this Agreement. Customer
agrees to pay for those Billing Services on a monthly
basis. Labs reserves the right to deny Billing
Services to Customer in the event any Billing Service
invoice remains unpaid thirty (30) days from its
invoice date. Labs shall have no obligation to
continue to provide nor will it be liable for not
providing Billing Services to Customer, if Customer
shall have outstanding at any time invoices which
remain unpaid more than thirty (30) days from its
invoice date.
Section 6. Term
----
6.1.1 Original Term and Renewal.
--------------------------
The Original Term of this Agreement shall begin with the
execution hereof and shall continue for a period of three
year(s) therefrom (Original Term) and shall automatically
renew for a one (1) year period at the end of the Original Term
of this Agreement and at the end of each renewal term until
terminated by either party giving written notice of termination
to the other party at least ninety (90) days before the end of
the original or any renewal term.
6.1.2 Early Termination of Extended Term Agreement.
---------------------------------------------
If Customer elects to extended the initial term of this
Agreement and should Customer terminate or breach this
Agreement before the expiration of the full Original Term or
any renewals thereof, elected by Customer upon execution
hereof, Labs will recalculate and Customer shall pay to Labs a
Labs Processing Fee for all CDR's processed under this
Agreement based on the current Labs Processing Fee schedule at
the one (1) year rate, attached hereto as Exhibit A, plus ten
percent (10%) for each CDR processed under this Agreement, at
Customer's monthly volume levels. This early termination will
require a single lump sum payment.
6.2 Minimum Annual Revenue Obligation.
----------------------------------
10
<PAGE>
The Customer will pay Labs a minimum annual revenue obligation
of Twelve Thousand Dollars ($12,000) on or before the
expiration of the Original Term. On each anniversary of the
Original Term of the Agreement, Labs will review the previous
year's billing revenue to determine if the minimum obligation
has been met. For purposes of satisfying this minimum annual
revenue obligation, the amount paid Labs by the Customer shall
be determined by adding the total billing charges for services
provided under this Agreement (this figure will not include the
cost of printing, stuffing, postage and courier service). The
Customer will be responsible to pay Labs the difference between
the minimum annual revenue obligation and the actual revenue
calculated by Labs should a short fall occur. Labs will invoice
Customer for any short fall. Customer agrees to pay any short
fall within thirty (30) days of the date of the invoice.
Customer acknowledges that the minimum annual revenue
obligation for the Original Term and any renewals is a
mandatory take or pay requirement.
Section 7. Termination
-----------
7.1 Termination for Cause.
----------------------
Labs or Customer may terminate this Agreement upon the breach
of this Agreement by the other party. The party claiming a
breach must identify in writing the specific details of the
breach. All notices of a breach must provide that a failure to
cure the breach within ninety (90) days for a nonmonetary
breach and ten (10) days for a monetary breach will result in
the termination of this Agreement.
7.2 Termination for Non-Payment.
----------------------------
If Customer fails to pay in full any invoice within the
time frame provided for under this Agreement, Labs may notify
Customer that such invoice is past due and provide a 10-day
period for payment of the past due amount plus any late fee
thereon. If Customer fails to pay the full amount of such
invoice plus any late fee within the 10-day period, Labs may
terminate this Agreement.
7.3 Termination Upon Insolvency.
----------------------------
If Customer (a) applies for or consents to the appointment of a
receiver, trustee or liquidator of Customer for all of or a
substantial part of its assets, (b) files a voluntary petition
in bankruptcy or admits in writing its inability to pay its
debts as and when due, (c) makes an assignment for the benefit
of its creditors, (d) files a petition or an answer seeking a
reorganization or an arrangement with creditors, or seeks to
take advantage of any insolvency
11
<PAGE>
law, (e) performs any other act of bankruptcy, or (f) files an
answer admitting the material allegations of a petition filed
against Customer in any bankruptcy, reorganization or
insolvency proceeding; or (g) an order, judgment or decree is
entered by a court of competent jurisdiction adjudicating
Customer a bankrupt or an insolvent, approving a petition
seeking such a reorganization, or appointing receiver, trustee
or liquidator of Customer for all of or a substantial part of
its assets, or (h) there otherwise commences as to Customer or
any of its assets any proceedings under any bankruptcy,
reorganization, arrangement, insolvency, readjustment
receivership or similar law or if any order, judgment, decree
or proceeding continues unstated for more than sixty (60)
consecutive days after any stay thereof expires; then this
Agreement shall automatically terminate. Notwithstanding the
foregoing in the event Customer is declared insolvent but is
not liquidated, or is placed in receivership or
conservatorship, or other similar actions are taken, the use of
the Billing Services thereafter by any new owner, receiver,
conservator, manager, or other agent or representative shall be
deemed acceptance and assumption of this Agreement on the full
terms and conditions contained herein.
Section 8. General
-------
8.1 Billing System Modifications By LABS.
-------------------------------------
The Customer may anticipate that modifications to Labs Billing
Services may be required to implement billing changes as well
as any new administrative and operating procedures. Labs will
advise Customer of any changes or modifications when they
occur.
8.2 Waivers.
--------
No amendment or waiver of any provision of this Agreement and
no consent to any default under this Agreement shall be
effective unless the same shall be in writing and signed by or
on behalf of the party against whom such amendment, waiver or
consent is claimed. In addition, any failure by a party to
strictly enforce any term, right or condition of the Agreement
shall not be construed as a waiver of such term, right or
condition.
8.3 Assignment.
-----------
Any assignment by the Customer of any right, obligation or
duty, in whole or in part, or of any other interest hereunder,
without the written consent of Labs shall be null and void.
8.4 Notice and Demands.
-------------------
12
<PAGE>
Except as otherwise provided under this Agreement, all notices,
demands or requests which may be given by either party to the
other party shall be in writing and shall be deemed to have
been duly given on the date delivered in person or deposited,
postage prepaid, in the United States mail via Certified Mail,
return receipt requested, and addressed as follows:
<TABLE>
<CAPTION>
To Labs: To Customer:
-------- ------------
<S> <C>
Tel Labs, Inc. Esprit Telecom
4219 Lafayette Center Drive 2000 L St., NW Suite 200
Chantilly, VA 22021 Washington, DC 20036
Attn: Bryan K. Rachlin Attn: Walt Anderson
</TABLE>
If personal delivery is selected as the method of providing
notice under this section, a receipt of such delivery shall be
obtained.
8.5 Force Majeure.
--------------
Labs shall not be held liable for any delay or failure in
performance of this Agreement from any cause beyond its
control, such as acts of God, acts of civil or military
authority, government regulations, embargoes, epidemics, war,
terrorist acts, riots, insurrections, fires, explosions,
earthquakes, nuclear accidents, floods, strikes, power
blackouts, volcanic action, other major environmental
disturbances, unusually severe weather conditions, inability to
secure products or services of other persons or transportation
facilities, or acts of omission or commission by third parties.
8.6 Third-Party Beneficiaries
-------------------------
This agreement shall not provide any person not a party to this
Agreement with any remedy, claim, liability, reimbursement,
cause of action or other right in excess of those existing
without reference to this Agreement.
8.7 Severability.
-------------
In the event that any of the provisions of this Agreement are
held to be unenforceable or invalid by any court of competent
jurisdiction, the validity and enforceability of the remaining
provisions will not be affected, and in lieu of such invalid or
unenforceable provision there shall be added automatically, as
part of this Agreement, a provision as similar in terms as may
be valid and enforceable.
13
<PAGE>
8.8 Relationship of Parties.
------------------------
Labs, in providing services to Customer hereunder, is acting
solely as an independent contractor and not as an employee.
Nothing in this Agreement shall be construed as creating a
partnership between the parties. Unless specifically provided
for herein: (a) Labs does not undertake by this Agreement or
otherwise to perform any obligation of Customer, whether
regulatory or contractual, or to assume any responsibility for
Customer's business or operations, and (b) Labs has the sole
right and obligation to supervise, manage, contract, direct,
procure or cause to be performed, all work to be performed by
Labs under this Agreement.
8.9 Non-Exclusivity.
----------------
Nothing in this Agreement shall be construed as limiting the
ability of Labs to offer the same or similar services to any
other person or organization.
8.10 Governing Law.
--------------
This Agreement shall be governed by the laws of the
Commonwealth of Virginia with exclusive venue and jurisdiction
of any disputes involving this Agreement in the U.S. District
Court for the Eastern District of Virginia or (in the event
subject matter jurisdiction cannot be established in the U.S.
District Court) the Circuit Court for the County of Fairfax,
State of Virginia.
8.11 Entire Agreement.
-----------------
This Agreement constitutes the entire understanding between the
parties and supersedes all prior understandings, oral or
written representation, statements, negotiations, proposals and
undertaking with respect to the subject matter hereof. The
parties acknowledge that this Agreement contains commercially
confidential information which may be considered proprietary by
either or both parties, and the parties hereto agree to limit
distribution of the Agreement to those individuals in their
respective organizations with a need to know the contents of
the Agreement.
8.12 Proprietary Rights.
-------------------
Customer acknowledges that the billing system and other Labs
systems consists of computer programs, procedures, forms,
information and other materials which constitute trade secrets
and property of great value owned by Labs. This billing system
has been acquired through the expenditures of a great amount of
time, effort, and money. Customer further acknowledges that any
disclosure to others of any such trade secrets will result in
substantial monetary loss and irreparable damage to Labs.
Customer will treat all such programs, procedures, forms,
information and materials
14
<PAGE>
confidentially and safeguard them by using the same procedures
used by Customer for data Customer regards as confidential.
Customer will not disclose to any person, directly or
indirectly, except as required in the proper performance of
this Agreement, any information regarding the billing system
and/or any and all other Labs billing systems or the terms of
this Agreement. All specifications, tapes, programs,
enhancements and other materials developed in connection with
this Agreement shall be the exclusive property of Labs. The
provisions of this Section 8.12 shall survive any termination
of this Agreement.
8.13 Executed in Counterparts.
-------------------------
This Agreement may be executed in any number of counterparts,
each of which shall be an original but such counterparts shall
together constitute one and the same document.
8.14 Headings.
---------
The headings in this Agreement are for convenience and shall
not be construed to define or limit any of the terms herein or
affect the meanings or interpretation of this Agreement.
WITNESS WHEREOF the parties have entered into this Agreement as of the date
first written above.
(Esprit Telecom) (Tel Labs, Inc.)
By: /s/ Walt Anderson By: /s/ Bryan K. Rachlin
---------------- -------------------
Name: Walt Anderson Name: Bryan K. Rachlin
--------------
Title: Chairman Title: CEO
-------------
Date: 12/14/95 Date: 12/29/95
-------------- -----------------
15
<PAGE>
EXHIBIT A
The cost for standard Labs formatting under a Three Year Term Commitment will
--------------------------
be based on the following incremental scale.
<TABLE>
<CAPTION>
numbered of answered calls price per answered call
-------------------------- -----------------------
<S> <C> <C>
The first 100,000 0.01000
The next 100,000 0.00500
The next 200,000 0.00400
The next 3,600,000 0.00333
All remaining calls 0.00250
</TABLE>
A monthly charge of $2,500 per month will be incurred for services provided by
Gary Pai.
Each time Customer's data is processed by Labs for any type of Billing Service
Customer shall be invoiced. Customer shall incur a minimum charge of One
Thousand Dollars ($1,000) each time Labs processes Customer's data.
<PAGE>
EXHIBIT 10.5
AGREEMENT FOR BILLING SERVICES BY
TEL LABS, INC.
Whereas Tel Labs, Inc., a Virginia Corporation ("Labs") is a data processing
firm; and
Whereas Long Distance Wholesale Club, Inc., a Virginia Corporation ("Customer")
desires to use the services of Labs to produce telephone bills; and
Whereas Labs and Customer desire to reduce their respective rights, obligations
and duties to writing (the Agreement);
Now Therefore in consideration of the mutual covenants contained herein as well
as other good and valuable consideration the sufficiency of which is hereby
acknowledged Labs and Customer agree to be bound to the following terms and
conditions:
Section 1. Description of Services.
-----------------------
"Billing Services" under this Agreement are the preparation
and rendering of bills or tapes which can be used to produce
invoices for telecommunication related service charges on behalf of
Customer. The service includes but is not limited to the following:
(a) Prebilling formatting of call detail records ("CDR") for bill
preparation; (b) appending the CDR records with pertinent billing
information; (c) applying tax information supplied to Labs by
Customer; (d) rating Customer's CDR'S; (e) provide Customer
management reports; and if requested and at an additional cost to
Customer (f) printing and mailing of end user bills.
Labs will use its best efforts to process Customers CDR's within
forty-eight (48) hours of receipt by Labs. Labs shall have no
obligation to determine the authenticity, genuineness or accuracy
of items delivered by Customer or the accuracy or correctness of
the invoices or reports generated therefrom.
Section 2. Setup of New Accounts.
---------------------
Intentionally Omitted.
Section 3. Monthly Service.
3.1 Customer's CDR'S.
----------------
1
<PAGE>
Customer shall provide Labs with all of the CDR's it wishes
Labs to process. To insure that Customer receives credit for
all of its answered CDR'S; Labs will provide Customer with a
facsimile transmission describing each tape which Labs has
received and the number of answered phone calls contained
therein ("Receipt Report"). Labs will telephone Customer to
advise him that the Receipt Report has been sent. Customer must
acknowledge the receipt of the Receipt Report and confirm the
number of answered phone calls within 48 hours of delivery of
the Receipt Report. If Customer shall fail to respond to the
Receipt Report, Labs shall have no responsibility for
processing any more or less than the number of answered phone
calls it reported to Customer on its Receipt Report.
Labs will send all facsimile transmissions including
the Receipt Report to or to any other
------------------
facsimile number provided in writing to Labs.
3.2 Customer's Rate Tables.
----------------------
Prior to processing any of Customer's CDR'S; Customer shall
provide, in a format acceptable to Labs, the rate table(s)
Customer would like Labs to apply to its CDR'S. Customer may
modify, change or amend its rate tables as often as they
desire. Customer will advise Labs, in writing, of any changes
to the rate tables it would like Labs to apply. In order to be
applied to next months billing cycle, all changes must be
received in a format acceptable to Labs no later than the 25th
day of the month preceding its desired application. Should
Customer fail to provide Labs with updated rate tables prior
to the 25th day of the previous month, Labs will apply the
rate tables it used in the preceding months billing cycle. If
an incorrect rate table is used due to an error by Customer;
then Customer's CDR's will be rerated at Customer's expense.
Each time Customer's CDR'S are rated, Customer shall be billed
as provided for in paragraph 4. If an incorrect rate tables is
used due to an error by Labs; then Customer's CDR's will be
rerated at no cost to Customer. Labs shall not be liable for
any incidental or consequential damages which might arise out
of the use of an incorrect rate table.
3.3 Customer's Tax Tables.
---------------------
Customer acknowledges that Labs is a data processing firm and
is neither a taxing expert, nor a taxing agent or
representative of the Federal, State or any Local Governmental
agency. In the application of Billing Service Labs shall apply
taxes based on the tax information provided by the Customer.
Labs will apply such tax information without warranty as to
accuracy, completeness or applicability to Customer's end
users. In the
2
<PAGE>
event Customer or its tax information vendor modifies, changes
or amends their tax tables in such a way as to cause Labs the
necessity of modifying or amending the means in which it
applies said taxes, then Customer will reimburse Labs for the
time it takes to amend or modify its Billing Program in order
to apply the changes in the tax information.
3.4 Indemnification bv Customer.
---------------------------
The Customer shall pay, indemnify and hold Labs harmless from
any liability, claims or demands (including costs, expenses and
reasonable attomey's fees) resulting from any federal, state or
local taxing authority's assessments, including interest and
penalties, that may result from challenges to the applicability
or correctness of the tax information provided by the Customer.
The Customer shall also pay, indemnify and hold Labs harmless
from any liability, claims or demands (including costs,
expenses and reasonable attomey's fees) from and against any
tax, penalty or interest which may be due or claimed to be due
as a result of Customer's failure to collect and/or pay any
federal, state or local tax(es).
3.5 Vertex Users Group Fees.
-----------------------
If Customer elects to use Vertex as its source for tax
information and compliance, it does so at its own risk.
Customer acknowledges that Labs is not an owner, agent or
supplier of Vertex. Labs has purchased the Vertex tax database
solely as an accommodation for use by Customer at its own
election. Labs will not mark up the cost of the Vertex data
base. Labs will make that data base available to Customer on a
cost basis. Customer will pay its proportionate share of the
cost of Vertex on an annual basis. Customer's proportionate
cost shall be based entirely on the number of users in the
Vertex data base users group. That cost will be determined by
dividing the annual cost of Vertex by the total number of users
in the Vertex Users Group.
3.6 Customer Tax Information.
------------------------
Labs shall, at Customers request, furnish Customer with any and
all information in Labs possession relating to the taxes
Customer requested Labs to apply. Such information shall be in
the format normally used by Labs. If a change in format or
additional information is required by the Customer in order to
prepare and file tax returns, the requested format or
information shall be supplied and Customer shall reimburse Labs
for its costs of providing such additional information or
change in format. The
3
<PAGE>
requested information shall be furnished by Labs to the extent
permitted by law and without warranty as to accuracy or
completeness.
3.7 Telephone Maintenance System.
----------------------------
Telephone Maintenance System (PM) is a software program
designed and owned by Labs. It is a program that can assist
Customer in its day to day management of its telephone
business. It can maintain Customer's data base of end users and
end user information. Customer can then use this information in
a convenient format to analyze account receivables, calling
patterns and other pertinent information. If Customer elects to
use PM, Labs will supply Customer with a basic copy of PM free
of charge. If Customer is using PM, Labs will supply Customer
on a monthly basis an update to Customer's client data base.
That update will provide Customer with its end users billing
activity for the immediately preceding month.
3.8 Training.
---------
If Customer elects to use PM, Labs will, at no cost to
customer, provide four (4) hours of training at Labs corporate
office in Chantilly, Virginia. All additional training
requested will be billed on an hourly rate as defined in
paragraph 4.2. After the initial PM training, any PM support
questions will be billed at the hourly rates provided for in
paragraph 4.2.
3.9 Management Reports.
------------------
Labs will produce on a monthly basis a traffic termination
report and a revenue report. The termination report will be
provided on a LATA basis. The revenue report will be provided
on an account basis. Labs will prepare at Customer's expense
any additional management reports they desire.
3.10. Liability.
---------
Liability under this agreement shall be as follows:
3.10.1 Customer shall retain a copy of the billing detail
records it furnished Labs for ninety (90) days from the
date delivered to Labs.
3.10.2 If Labs discovers an error or omission in the data
furnished to it by Customer, Labs will notify the
Customer of such error or omission within sixty (60)
days of its receipt. If Customer supplies Labs with
corrected data, Labs will rerate Customer's CDR's at
Customer's expense. If Customer fails to provide the
correct data within five days of Labs request, Labs will
have no liability for any damages arising from failure
to provide Billing Services to an affected end users.
4
<PAGE>
3.10.3 If Customer discovers an error or omission in the data
it furnished Labs within sixty (60) days of its
submission; Customer will correct the error or omission
and resubmit the data to Labs. Labs will rerate the data
and provide Customer with appropriate end user bills or
adjustment information. Labs will have no liability for
any damages which might arise out of generating
incorrect end user invoices based upon incorrect or
omitted data provided by Customer.
3.10.4 If Customer billing detail is not available because Labs
lost or damaged records or incurred processing system
outages, Labs will attempt to recover the lost Customer
billing detail. If the lost or damaged Customer billing
detail cannot be recovered, the Customer will be asked
to resupply the Customer billing detail. If the Customer
has not complied with the retention requirements of
paragraph 3.10.1, Labs will have no liability.
3.10.5 If Customer discovers an error in the application of
Billing Services provided by Labs, it will notify Labs
of the discovered error. Labs will make a reasonable
effort to correct the error and bill the appropriate end
user within the limits permitted by law. Labs shall have
no liability for errors which are discovered more than
sixty day form the date of Customer' s end user bill.
If the error was discovered within sixty (60) days of
the affected end users bill, Labs will rerate the
affected data and produce adjustment information for the
Customers use. Labs liability under paragraph 3.10.5
shall be limited to the amount of the discovered error
which remains uncollected from Customer's end user 120
days after the end user has been billed for the amount
in error. In no event shall Labs liability ever exceed
the amount Labs receive from Customer for Billing
Service provided to Customer during the sixty (60) days
immediately prior to the discovered error.
Notwithstanding anything to the contrary contained
herein these corrections will be paid for by Labs only
if the Customer's billing specifications provided to
Labs completely and accurately address the circumstances
under which the billing errors were discovered.
3.10.6 IN THE ABSENCE OF WILLFUL MISCONDUCT, LABS SHALL HAVE NO
LIABILITY FOR DAMAGES TO THE CUSTOMER OR TO ANY OTHER
PERSON OR ENTITY OTHER THAN AS SET FORTH IN PARAGRAPH
3.10.
5
<PAGE>
Section 4. Charges and Fees.
----------------
4.1 Base Charges.
------------
The base charge for the application of Billing Services is
directly related to a Term Commitment, the type of format
Customer request and the source of where an end user bill is
produced. If Customer wishes to have its end users call detail
appear on the Local Exchange Carrier (LEC) bill, they will need
to instruct Labs to prepare its CDR's in an EMI format. If
Customer would prefer to bill its end users directly as opposed
to having them billed on the LEC invoice, Customer will need to
instruct Labs to process its CDR's in Labs standard format. The
cost for Billing Services is provided on the attached Exhibit
A.
Notwithstanding anything to the contrary contained herein, if
Customer is currently billing more than one hundred thousand
(100,000) CDR's per month, Customer may elect an initial term
for this Agreement of two (2) or three (3) years. Should
Customer elect to extend the initial term of this Agreement,
Customer shall pay Labs a minimum Processing Fee, as described
in Exhibit A attached hereto, each month for the entire term of
this Agreement. In consideration for such, Labs will charge
Customer a reduced billing services fee for the term selected
which coincides with the Labs fee schedule as presented in
Exhibit A, attached hereto.
Early Termination of Extended Term Agreement: If Customer
---------------------------------------------
elects to extend the initial term of this Agreement and should
Customer terminate or breach this Agreement before the
expiration of the full initial term elected by Customer upon
execution hereof, Labs will recalculate and Customer shall pay
to Labs a Labs Processing Fee for all CDR's processed under
this Agreement based on the current Labs Processing Fee
schedule at the one (1) year rate, attached hereto as Exhibit
A, plus ten percent (10%) for each CDR processed under this
Agreement, at Customer's monthly volume levels.
4.2 Additional Services.
-------------------
Any services, updates or reports not specifically described in
this Agreement shall be considered "Additional Services".
Services, updates or reports which are specifically described
in the Agreement, but which Customer request to be performed a
second time shall be considered an "Additional Service(s)".
Additional Services shall be billed at the hourly rates listed
below:
6
<PAGE>
<TABLE>
<S> <C>
Programming & System changes
by Senior Programmer $110.00 per hour*
Staff Programming $75.00 per hour*
Computer run time $100.00 per hour
Data input, keying & verifying $25.00 per hour
Customer Service Support $25.00 per hour
</TABLE>
*Labs retains ownership of all programming and system changes
billed at this rate.
4.3 Customer Requests.
-----------------
All Customer requests for Additional Services shall be
submitted in writing and include sufficient information needed
by Labs to develop a suitable response. The information
submitted by Customer must include a short narrative describing
the goal Customer is attempting to accomplish by its request.
The Customer may be asked to clarify or enhance the
specifications and/or its narrative.
Labs will provide Customer, within seven business days of
receipt by Labs of a request for Additional Service its cost
estimate based on the above rates for the requested Additional
Services. Labs will also provide an estimate of the completion
date for the Additional Services. If Customer would like Labs
to perform the Additional Services, Customer shall provide Labs
with written authorization to begin the Additional Services and
payment of one third (1/3) of the estimated expenses. The final
bill for Additional Services shall be paid to Labs upon
implementation of the Additional Services. Modifications,
changes or amendments after the Additional Service(s) has been
implemented shall be billed to Customer at the above rates.
The base charge and hourly figures quoted in paragraphs 4.1 and
4.2 are subject to change upon providing sixty (60) days
written notice to the Customer.
4.3.1 Preauthorized Development and Implementation.
--------------------------------------------
By written notification, Customer can preauthorize
development and implementation of Additional Services.
Upon receipt of such notice
7
<PAGE>
Labs will evaluate and begin development and
implementation activities for the request. Customer will
be charged the appropriate rates for these activities as
described in paragraph 4.2.
4.3.2 Cancellation of Additional Services.
-----------------------------------
If Customer cancels a request for Additional Services
after Labs has begun work on the request, Customer will
compensate Labs for expenses incurred up to the point of
cancellation, as well as any charges reasonably required
to terminate Labs's activities.
4.4 Right of Refusal.
----------------
Labs reserves the right to refuse to develop or implement any
Additional Services requested by Customer.
4.5 Printing End User Bills.
-----------------------
Labs will arrange at Customer's request to have the Customer's
end users bills printed. The cost for printing Customer's end
users bills shall be 5.5 cents per page. If Customer elects to
use its own print shop to produce its end users bill Labs will
charge 1.0 cents per page to coordinated the printing process.
The cost to stuff and mail end users invoices can also be
arranged. All postage fees must be paid in advance. If Customer
elects to have Labs handle the stuffing and mailing an estimate
of postage cost will be provided to Customer. Customer will pay
that fee prior to Billing Services being rendered.
4.6 Travel Expenses.
---------------
Customer will pay all reasonable out-of-pocket expenses for
travel, lodging and the like incurred in the performance of
this Agreement. Labs will submit statements to Customer for all
expenses and Customer will pay such statements within thirty
(30) days of the date of the statement. If requested by
Customer, Labs will provide documentation for such statements.
Any amount that remains unpaid thirty (30) days after the date
of the statement shall bear interest at the rate of one and
one-half percent (1.5%) per month from the date of the
statement.
Section 5. Payment.
-------
5.1 Amount Due Labs for Billing Services.
------------------------------------
5.1.1 Billing Detail.
--------------
8
<PAGE>
An invoice for the amount due Labs for Billing Services
will be provided to the Customer on a monthly basis. That
invoice will be due within thirty (30) days from the date
of the invoice.
5.1.2 Payment Method.
--------------
Settlement will be made by check postmarked at least two
(2) days prior to the due date. If any portion of the
amount due is received by Labs in funds which are not
immediately available to Labs on its due date, Customer
will incur a late payment charge. The Customer will have
full responsibility for ensuring that payment is received
so that it will be available by the due date. Time is of
the essence with respect to Customers payment
obligations.
5.1.3 Payment Detail.
--------------
Any payment to Labs from the Customer must be accompanied
by an indication of the invoice number being paid.
5.1.4 Late Payment Penalty.
--------------------
Any payment not received by Labs as specified herein will
be subject to a late payment penalty. The late payment
penalty shall be 1.5% applied monthly (18% per annum).
5.1.5 Late Payment Resulting from Bank Error.
--------------------------------------
Any late payment resulting from bank error will not be
subject to the late payment penalty provided the sending
party (party making payment) can verify that it was not
at fault. It shall be the responsibility of the sending
party to notify the banks involved and coordinate
resolution of the discrepancy.
5.1.6 Right to Refuse to Provide Billing Services.
-------------------------------------------
Labs agrees to provide Billing Services on a monthly
basis during the term of this Agreement. Customer agrees
to pay for those Billing Services on a monthly basis.
Labs reserves the right to deny Billing Services to
Customer in the event any Billing Service invoice remains
unpaid thirty (30) days from its invoice date. Labs shall
have no obligation to continue to provide nor will it be
liable for not providing Billing Services to Customer, if
Customer shall have outstanding at any time invoices
which remain unpaid more than thirty (30) days from its
invoice date.
Section 6. Term
----
9
<PAGE>
6.1.1 Original Term and Renewal.
-------------------------
The Original Term of this Agreement shall begin with the
execution hereof and shall continue for a period of one year
therefrom (Original Term) and shall automatically renew for a
one (1) year period at the end of the Original Term of this
Agreement and at the end of each renewal term until terminated
by either party giving written notice of termination to the
other party at least ninety (90) days before the end of the
original or any renewal term.
6.1.2 Early Termination of Extended Term Agreement.
--------------------------------------------
If Customer elects to extended the initial term of this
Agreement and should Customer terminate or breach this
Agreement before the expiration of the full Originial Term or
any renewals thereof, elected by Customer upon execution
hereof, Labs will recalculate and Customer shall pay to Labs
a Labs Processing Fee for all CDR's processed under this
Agreement based on the current Labs Processing Fee schedule at
the one (1) year rate, attached hereto as Exhibit A, plus ten
percent (10%) for each CDR processed under this Agreement, at
Customer's monthly volume levels. This early termination will
require a single lump sum payment.
6.2 Minimum Annual Revenue Obligation.
---------------------------------
Intentionally Omitted.
Section 7. Termination
-----------
7.1 Termination for Cause.
---------------------
Labs or Customer may terminate this Agreement upon the breach
of this Agreement by the other party. The party claiming a
breach must identify in writing the specific details of the
breach. All notices of a breach must provide that a failure to
cure the breach within ninety (90) days for a nonmonetary
breach and ten (10) days for a monetary breach will result in
the termination of this Agreement.
7.2 Termination for Non-Payment.
---------------------------
If Customer fails to pay in full any invoice within the time
frame provided for under this Agreement, Labs may notify
Customer that such invoice is past due and provide a 10-day
period for payment of the past due amount plus any late fee
thereon. If Customer fails to pay the full amount of such
invoice plus any late fee within the 10-day period, Labs may
terminate this Agreement.
10
<PAGE>
7.3 Termination Upon Insolvency
---------------------------
If Customer (a) applies for or consents to the appointment of
a receiver, trustee or liquidator of Customer for all of or a
substantial part of its assets, (b) files a voluntary petition
in bankruptcy or admits in writing its inability to pay its
debts as and when due, (c) makes an assignment for the benefit
of its creditors, (d) files a petition or an answer seeking a
reorganization or an arrangement with creditors, or seeks to
take advantage of any insolvency law, (e) performs any other
act of bankruptcy, or (f) files an answer admitting the
material allegations of a petition filed against Customer in
any bankruptcy, reorganization or insolvency proceeding; or
(g) an order, judgment or decree is entered by a court of
competent jurisdiction adjudicating Customer a bankrupt or an
insolvent, approving a petition seeking such a reorganization,
or appointing receiver, trustee or liquidator of Customer for
all of or a substantial part of its assets, or (h) there
otherwise commences as to Customer or any of its assets any
proceedings under any bankruptcy, reorganization, arrangement,
insolvency, readjustment receivership or similar law or if any
order, judgment, decree or proceeding continues unstated for
more than sixty (60) consecutive days after any stay thereof
expires; then this Agreement shall automatically terminate.
Notwithstanding the foregoing, in the event Customer is
declared insolvent but is not liquidated, or is placed in
receivership or conservatorship, or other similar actions are
taken, the use of the Billing Services thereafter by any new
owner, receiver, conservator, manager, or other agent or
representative shall be deemed acceptance and assumption of
this Agreement on the full terms and conditions contained
herein.
Section 8. General
-------
8.1 Billing System Modifications By Labs.
------------------------------------
The Customer may anticipate that modifications to Labs Billing
Services may be required to implement billing changes as well
as any new administrative and operating procedures. Labs will
advise Customer of any changes or modifications when they
occur.
8.2 Waivers.
-------
No amendment or waiver of any provision of this Agreement and
no consent to any default under this Agreement shall be
effective unless the same shall be in writing and signed by or
on behalf of the party against whom such amendment, waiver or
consent is claimed. In addition, any failure by a party to
strictly enforce any term, right or condition of the Agreement
shall not be construed as a waiver of such term, right or
condition.
11
<PAGE>
8.3 Assignment.
----------
Any assignment by the Customer of any right, obligation or
duty, in whole or in part, or of any other interest hereunder,
without the written consent of Labs shall be null and void.
8.4 Notice and Demands.
------------------
Except as otherwise provided under this Agreement, all notices,
demands or requests which may be given by either party to the
other party shall be in writing and shall be deemed to have
been duly given on the date delivered in person or deposited,
postage prepaid, in the United States mail via Certified Mail,
return receipt requested, and addressed as follows:
<TABLE>
<CAPTION>
To Labs: To Customer:
-------- ------------
<S> <C>
Tel Labs, Inc. Long Distance Wholesale Club
4219 Lafayette Center Drive 1401 Wilson Blvd., Ste. 1100
Chantilly, VA 22021 Arlington, VA 22209
Attn: Bryan K. Rachlin Attn: Tom Cirrito
</TABLE>
If personal delivery is selected as the method of providing
notice under this section, a receipt of such delivery shall be
obtained.
8.5 Force Majeure.
-------------
Labs shall not be held liable for any delay or failure in
performance of this Agreement from any cause beyond its
control, such as acts of God, acts of civil or military
authority, government regulations, embargoes, epidemics, war,
terrorist acts, riots, insurrections, fires, explosions,
earthquakes, nuclear accidents, floods, strikes, power
blackouts, volcanic action, other major environmental
disturbances, unusually severe weather conditions, inability to
secure products or services of other persons or transportation
facilities, or acts of omission or commission by third parties.
8.6 Third-Party Beneficiaries.
-------------------------
This Agreement shall not provide any person not a party to this
Agreement with any remedy, claim, liability, reimbursement,
cause of action or other right in excess of those existing
without reference to this Agreement.
8.7. Severability.
------------
12
<PAGE>
In the event that any of the provisions of this Agreement are
held to be unenforceable or invalid by any court of competent
jurisdiction, the validity and enforceability of the remaining
provisions will not be affected, and in lieu of such invalid or
unenforceable provision there shall be added automatically, as
part of this Agreement, a provision as similar in terms as may
be valid and enforceable.
8.8 Relationship of Parties.
-----------------------
Labs, in providing services to Customer hereunder, is acting
solely as an independent contractor and not as an employee.
Nothing in this Agreement shall be construed as creating a
partnership between the parties. Unless specifically provided
for herein: (a) Labs does not undertake by this Agreement or
otherwise to perform any obligation of Customer, whether
regulatory or contractual, or to assume any responsibility for
Customer's business or operations, and (b) Labs has the sole
right and obligation to supervise, manage, contract, direct,
procure or cause to be perforrned, all work to be performed by
Labs under this Agreement.
8.9 Non-Exclusivity.
---------------
Nothing in this Agreement shall be construed as limiting the
ability of Labs to offer the same or similar services to any
other person or organization.
8.10 Governing Law.
-------------
This Agreement shall be governed by the laws of the
Commonwealth of Virginia with exclusive venue and jurisdiction
of any disputes involving this Agreement in the U. S. District
Court for the Eastern District of Virginia or (in the event
subject matter jurisdiction cannot be established in the U. S.
District Court) the Circuit Court for the County of Fairfax,
State of Virginia.
8.11 Entire Agreement.
----------------
This Agreement constitutes the entire understanding between the
parties and supersedes all prior understandings, oral or
written representation, statements, negotiations, proposals
and undertaking with respect to the subject matter hereof. The
parties acknowledge that this Agreement contains commercially
confidential information which may be considered proprietary
by either or both parties, and the parties hereto agree to
limit distribution of the Agreement to those individuals in
their respective organizations with a need to know the
contents of the Agreement.
8.12 Proprietary Rights.
------------------
13
<PAGE>
EXHIBIT A
The cost for EMI formatting shall be .01 (one cent) for each answered call
processed. There is no Term discount for EMI processing.
The cost for standard Labs formatting under a One Year Term Committment will be
-------------------------
based on the following incremental scale.
<TABLE>
<CAPTION>
numbered of answered calls price per answered call
-------------------------- -----------------------
<S> <C>
The first 100,000 0.01000
The next 100,000 0.00500
The next 200,000 0.00400
The next 3,600,000 0.00333
All remaining calls 0.00250
</TABLE>
Each time Customer's data is processed by Labs for any type of Billing Service
Customer shall be invoiced. Customer shall incur a minimum charge of One
Thousand Dollars ($1,000) each time Labs processes Customer's data.
<PAGE>
Customer acknowledges that the billing system and other Labs
systems consists of computer programs, procedures, forms,
information and other materials which constitute trade secrets
and property of great value owned by Labs. This billing system
has been acquired through the expenditures of a great amount of
time, effort, and money. Customer further acknowledges that any
disclosure to others of any such trade secrets will result in
substantial monetary loss and irreparable damage to Labs.
Customer will treat all such programs, procedures, forms,
information and materials confidentially and safeguard them by
using the same procedures used by Customer for data Customer
regards as confidential. Customer will not disclose to any
person, directly or indirectly, except as required in the
proper performance of this Agreement, any Information regarding
the billing system and/or any and all other Labs billing
systems or the terms of this Agreement. All specifications,
tapes, programs, enhancements and other materials developed in
connection with this Agreement shall be the exclusive property
of Labs. The provisions of this Section 8.12 shall survive any
termination of this Agreement.
8.13 Executed in Counterparts.
------------------------
This Agreement may be executed in any number of counterparts,
each of which shall be an original but such counterparts shall
together constitute one and the same document.
8.14 Headings.
--------
The headings in this Agreements are for convenience and shall
not be construed to define or limit any of the terms herein or
affect the meanings or interpretation of this Agreement.
WITNESS WHEREOF the parties have entered into this Agreement as of the
date first written above.
(LDWC) (Tel Labs, Inc.)
By: /s/ Thomas J. Cirrito By: /s/Bryan K. Rachlin
----------------------- -------------------
Name: /s/ Thomas J. Cirrito Name: Bryan K. Rachlin
---------------------
Title: Pres. & CEO Title: Chief Executive Officer
--------------------
Date: 7/19/95 Date: 7/12/95
--------------------- -----------------
14
<PAGE>
EXHIBIT 10.6
ONE PLUS
BILLING AND INFORMATION MANAGEMENT
SERVICES AGREEMENT
This Billing and Information Management Services Agreement (the "Agreement") is
entered into this 23rd day of January, 1996, by and between Telco Development
Group of Delaware, Inc. ("TDD"), a Delaware corporation and Long Distance
Wholesale Club, a Delaware corporation ("Customer") .
WITNESSETH:
WHEREAS, Customer is engaged in the business of providing certain
telecommunication services for which Customer desires to bill and collect for
these products and services through the Local Exchange Carriers ("LECs"); and
WHEREAS, TDD has entered in Billing and Collections Agreements with certain
LEC's that permits TDD to submit qualified call detail records for itself and
its Customers, and
WHEREAS, TDD has put in place certain infrastructure which allows TDD to provide
accounting and information management; and
WHEREAS, Customer desires to take advantage of the TDD infrastructure.
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
agreements contained herein and other good and valuable considerations, the
receipt and sufficiency of which is hereby acknowledged. do hereby agree as
follows:
Section 1 Definitions.
------------
As used in this Agreement, the following terms shall have the meanings set
forth below, unless the context otherwise requires:
Bad Debt: See Uncollectible Amounts and Written-Off Accounts.
---------
Billing Telephone Company (BTC): See Local Exchange Carrier.
--------------------------------
1
<PAGE>
BOC: Bell Operating Company.
---
Business Day: A day other than Saturday and Sunday on which commercial banks
-------------
are open in the State of Virginia.
Claim: Claim, loss, liability, damage, cost, correction and expense, and
------
whether ordinary, special, consequential or otherwise.
Casual Operator Services (OS) Telephone Traffic: Casual operator assisted
------------------------------------------------
telephone calls that originate from locations where Customer is the
presubscribed direct dial IXC or reseller of direct dial IXC services and
the OS telephone calls are billed: (i) to the originating telephone number,
(ii) collect to the terminating telephone number, (iii) to a third telephone
number other than the originating or terminating telephone number, or (iv)
to a LEC or IXC calling card.
EMI Billing Record: Computer readable records containing the billing data
-------------------
for Customer's Qualifying MTS calls, in the Bellcore EMI (electronic message
interface) format, for which each LEC has the capability of processing
through its billing and collection systems.
End User: A natural person, partnership, corporation, business trust, joint
---------
stock company, trust, unincorporated association, joint venture,
governmental agency or instrumentality, or other entity that subscribes to
or uses Customer's telecommunication services.
FCC: The Federal Communications Commission.
----
Foreign Intrastate Taxes: Those applicable taxes for OS and Travel Card
-------------------------
calls originating and terminating in the same state but billed in another
state as described in Section 9 herein.
Independent Telephone Companies: Those LECs that are not BOCs, which
--------------------------------
presently include, subject to revision by TDD from time to time: General
Telephone Operating Companies (GTOCs) United Telecommunications Operating
Companies (United) Altel, the alliance of Independent Telephone Companies
through Independent NEA Services. and U. S. Intelco.
Interexchange Carrier (IXC): Those telephone companies, other than the LECs,
----------------------------
that can provide intraLATA (where applicable) interLATA, interstate and
international telecommunications service.
LEC Processing Fees: As described in paragraph 4(c)(i) and 4(f).
--------------------
2
<PAGE>
Local Exchange Carrier (LEC): Any one of the local telephone companies
-----------------------------
providing intraLATA exchange telephone services.
MTS (Message Telephone Services): Direct-dialed or operator assisted
---------------------------------
station-to-station or person-to-person telephone calls billed: (i) to the
originating telephone number, (ii) collect to the terminating telephone
number, (iii) to a third telephone number other than the originating or
terminating telephone number, or (iv) to an LEC calling card or an IXC
travel card. "Enhanced Telecommunications Services" or "Information
Services" are not considered MTS calls herein and cannot be billed under
this Agreement.
One Plus Telephone Traffic: Direct dialed telephone calls which:
---------------------------
(i) originate from an equal access end office, (ii) are billed to the
originating telephone number or (iii) are billed to an IXC travel card
issued by Customer.
Post Billing Adjustment or Credit: Credit or rate adjustments applied to an
----------------------------------
End User's account by the LEC or by TDD.
Qualifying Message Telephone Service (Qualifying MTS): Casual OS Telephone
------------------------------------------------------
Traffic and One Plus Telephone Traffic which are not of objectionable
content as set forth in paragraph 7(g) of this Agreement.
RBOCs: Regional Bell Operating Companies.
------
Submission Date: As described in paragraph 3(a).
---------------
Tariffs: The rates, terms and conditions for providing intraLATA, interLATA,
--------
intrastate, interstate, and international telecommunication services as
authorized and filed with the FCC or with state and local regulatory
authorities.
Taxes: The word "Taxes" shall mean all those taxes and tax-like surcharges
------
described in paragraph 9(a) herein.
Unbillable Records: Those EMI Billing Records that pass TDD's edits and are
-------------------
submitted to the LECs for billing and collection but subsequently fail the
LEC's edits and are not posted to an End User's account by the LECs.
Uncollectible Amounts: Those amounts that are billed to an End User's
----------------------
account for Customer's Valid EMI Billing Records but are not collected due
to the End User receiving a Post Billing Adjustment or Credit to its bill or
the End User failing to pay its bill to the LEC and the account subsequently
being written off as Bad Debt by the LEC.
3
<PAGE>
TDD Rejected Records: Those EMI Billing Records that fail TDD's edits and
---------------------
are returned to Customer and not submitted to the LECs for billing and
collection.
Valid EMI Billing Records: As described in paragraph 3(b).
--------------------------
Written-Off Accounts: Those End Users' accounts that are not paid by the End
---------------------
Users and are subsequently written off as Bad Debt by the LECs.
Section 2 Scope of Agreement.
-------------------
Customer agrees to purchase from TDD the services described in Section 3
herein and TDD agrees to provide the services described herein to Customer
at the time and in the manner, and subject to the terms and upon the
conditions, set forth herein. Customer agrees that TDD shall be the
exclusive sources for LEC billing and information management services in the
United States and Canada for the billing telephone companies listed in
Exhibit A. However, nothing contained herein shall be interpreted to
prohibit Customer from contracting directly with any LEC for its own direct
LEC billing and collection agreement, provided that Customer shall notify
TDD of its intent at least sixty (60) days prior to activation of such
agreement. As TDD enters into additional billing and collection arrangements
with additional LECS, TDD will provide billing and information management
services to Customer for such LECs on the same terms and conditions as
contained herein.
Section 3 Billing Services.
-----------------
(a) Submission of EMI Billing Records. Customer shall submit to TDD its EMI
----------------------------------
Billing Records for its Qualifying MTS calls for TDD to submit to each LEC
under contract with TDD. Customer shall be responsible for submitting to TDD
EMI Billing Records that contain adequate information so that TDD and the
LECs can process such EMI Billing Records. Customer shall submit it, EMI
Billing Records to TDD once per week, except when Customer cannot satisfy
TDD's minimum volume requirements as described in paragraph 7(f) in which
case Customer shall submit its EMI Billing Records at least once per month.
The cost of these submissions shall be borne by Customer. The date TDD
receives Customer's EMI Billing Records will be, for those records, the
"Submission Date."
(b) TDD's Edits. Upon receipt of Customer's EMI Billing Records, TDD will
------------
promptly process Customer's EMI Billing Records through TDD's computer
edits. Those EMI Billing Records that pass TDD's edits shall be "Valid EMI
Billing Records." Those EMI
4
<PAGE>
Billing Records that do not pass TDD's edits shall be "TDD Rejected
Records," and TDD shall return these records to Customer.
(c) Submission to LECS. Promptly after receipt of Customer's EMI Billing Records
------------------
within five (5) Business Days after such receipt for the RBOCs and GTE, or
within ten (10) Business Days after such receipt for Independent Telephone
---------------------
Companies TDD will submit Customer's Valid EMI Billing Records to the
---------
appropriate LECs.
(d) Purchase by LEC. Each LEC shall be responsible, to the extent required by
---------------
its agreement with TDD, to purchase Customer's Valid EMI Billing Records.
(e) Billing and Collection by LEC. Each LEC shall be responsible, for such Valid
-----------------------------
EMI Billing Records purchased by the LEC, for the billing and collection of
the revenue, for Customer's Qualifying, MTS calls, from End Users residing
within the applicable billing area of such LEC.
(f) Printing of Customer's Name on End User's LEC Telephone Billing. Wherever
---------------------------------------------------------------
possible, TDD will use its best efforts to cause each Billing Telephone
Company to print Customer's name, along with the associated Valid EMI
Billing Records, on each End User's telephone bill: Customer acknowledges
that where the Billing Telephone Companies do not provide this service,
Customer's name shall not appear on the End User's telephone bill.
Section 4 LEC Payments, Fees and Charges.
-------------------------------
(a) Payment by LEC's: Each LEC shall make payments to TDD for Valid EMI Billing
-----------------
Records purchased from Customer in accordance with the LEC's billing and
collection agreement with TDD.
(b) Amount Paid by LECs: The LEC shall pay to TDD the gross amount of Valid EMI
--------------------
Billing Records purchased by the LEC less the then-applicable fees, charges,
----
charge backs, credits and adjustments as prescribed in its billing and
collection agreement with TDD.
(c) LEC Fees, Charges, Charge Backs, Credits and Adjustments: Customer
---------------------------------------------------------
acknowledges and understands that TDD and will be bound by the terms of its
billing and collection agreement with each LEC with respect to each LEC's
right to deduct or to reduce its collectible funds for: (i) the amount
charged by each LEC for processing, billing and collecting Customer's Valid
EMI Billing Records ("LEC Processing Fees"), (ii) any Unbillable Records,
(iii) any Post-Billing Adjustments or Credits provided to End Users, (iv)
any reserve for anticipated Uncollectible Amounts ("Bad Debt Holdback
Reserve"), (v) any LEC Bad Debt "true-ups" (periodic true-ups between the
Bad Debt Holdback Reserve and the actual Uncollectible
5
<PAGE>
Amounts realized by the LECS). In addition, Customer shall be responsible
for any data transmission and distribution fees for delivering or receiving
Customer's EMI Billing Records and for any other LEC charges specifically
related to billing and collecting Customer's EMI Billing Records. Customer
further agrees that payment of all amounts described in this paragraph 4(c)
shall be its sole responsibility and that TDD may withhold such amounts from
payments to Customer. Should such amounts exceed the amounts due to
Customer, such amounts shall be due and payable by Customer to TDD within
ten (10) Business Days of notification by TDD of any amounts due. A schedule
setting forth TDD's contractual LEC Processing Fees for each LEC is attached
hereto as Exhibit C.
(d) Bad Debt Holdback Reserve: TDD will holdback or cause the LECs to holdback
--------------------------
an amount estimated to be sufficient to set-off any Uncollectible Amounts
that may be determined after the date TDD makes its final payment to
Customer for Customer's Valid EMI Billing Records billed and collected by
the LEC. Any Bad Debt Holdback Reserve withheld by the LEC shall be passed
through to Customer on the same percentage or the same amount as TDD was
assessed by the individual LECs. However, once sufficient data becomes
available to TDD from the LECs to enable TDD to determine a specific Bad
Debt history attributable to Customer, the Bad Debt Holdback Reserve rate
shall be based on Customer's specific historical Uncollectible Amounts. A
schedule setting forth the past twelve months' average Bad Debt Holdback
Reserve withheld by each LEC is attached as Exhibit B.
(e) Monthly LEC Bad Debt True-up. Between six and eighteen (6-18) months after
-----------------------------
TDD submits Customer's Valid EMI Billing Records to the LECs for billing and
collection, the LECs will determine the actual amounts collected from the
End Users and true-up the difference between this amount and the face amount
of Customer's Valid EMI Billing Records purchased by the LEC. TDD will
provide Customer monthly reports on Bad Debt true-ups for these differences.
If the amount of these true-ups is "in favor" (positive) of Customer, TDD
will remit such amount to Customer when TDD receives the true-up amount from
the LECs. If the amount of these true-ups is "not in favor" (negative) of
Customer, TDD will withhold such amounts from the next scheduled payment due
to Customer. If the amounts due to Customer are not sufficient to satisfy
such true-up amounts, such amounts shall be due and payable by Customer to
TDD within ten (10) Business Days of notification by TDD of any amounts due.
(f) LEC Processing Fee Calculation. Each calendar month TDD will determine the
-------------------------------
number of End User bills (renderings) that were or will be required to bill
Customer's Valid EMI Billing Records submitted by TDD during that month and
the average number of Valid EMI Billing Records contained on each End User's
bill. TDD will multiply these quantities by its contractual LEC Processing
Fee schedule for each LEC to calculate the LEC Processing Fees associated
with billing Customer's Valid EMI Billing Records. The LEC Processing Fee
will also include any data transmission fees, distribution fees, programming
6
<PAGE>
fees and any other charges directly associated with billing, Customer's
Valid EMI Billing Records.
(g) End User Inquiry Investigation and Rebate. Customer shall be responsible for
------------------------------------------
payment of all Post-Billing Adjustments and Credits provided to End Users by
either the LEC or TDD. Such amounts may be deducted weekly from the amounts
due to Customer. If the amount due to Customer is not sufficient to satisfy
these amounts, then Customer shall pay to TDD such amount as is required to
satisfy these amounts within ten (10) Business Days of notification by TDD
of any amounts due.
(h) Rejected Records. Those EMI Billing Records that fail TDD's edits and which
-----------------
are not submitted to the LECs for billing, and collection, TDD Rejected
Records, shall be returned to Customer at no charge. Unbillable Records
rejected by the LEC, through no fault of TDD, shall be charged the same TDD
Processing Fees as described in Exhibit C attached hereto.
(i) Resubmitted EMI Billing Records: Unbillable Records which are
--------------------------------
resubmitted to the LECs for billing and collection shall be charged the
standard TDD Processing Fees as described in Exhibit C attached hereto.
Section 5 TDD Billing Service Fees, Charges and Charge Backs.
---------------------------------------------------
In addition to the LEC Processing Fees, charges, charge backs, credits and
adjustments set forth in Section 4, Customer agrees to pay to TDD and TDD
may deduct from amounts collected by the LECs on behalf of Customer and paid
to TDD, the following TDD billing service fees, charges, charge backs,
credits and assessments:
(a) A billing and information management service fee, the TDD Processing Fee,
for each Valid EMI Billing Record submitted to the LECs for billing and
collection by TDD. as specified in Exhibit C attached hereto,
(b) A fee for each End User inquiry, investigation and rebate handled by TDD on
Customer's behalf, as specified in Exhibit C attached hereto:
(c) Any Post-Billing Adjustment or Credit amounts refunded to End Users by TDD's
customer service inquiry and investigation activities, along with any LEC
charges associated with making such refunds to End Users;
7
<PAGE>
(d) A charge, as specified in Exhibit C attached hereto, for any submission of
EMI Billing Records that contains less than the minimum volume requirements
of TDD for each "library code"; and
(f) Accounts Receivable Reconciliation System: Customer shall pay TDD a fee, as
------------------------------------------
described in Exhibit C attached hereto. for TDD's accounts receivable
reconciliation system.
As collateral for all obligations now existing or hereafter arising from
Customer to TDD, Customer hereby grants to TDD a security interest in all
the following property of Customer, whether now owned or hereafter acquired
or created, and all proceeds and products thereof:
(a) All amounts paid, and all amounts owing, by each LEC to TDD on accounts for
Customer's Valid EMI Billing Records,
(b) All accounts owing from an End User to Customer arising from services which
give rise to Customer's Valid EMI Billing Records;
(c) All amounts deposited by Customer with TDD pursuant to paragraph 13(b)
hereof, and
(d) All amounts owing and all amounts to be owing from TDD to Customer.
Section 6 Payments to Customer.
---------------------
(a) Determination of Amount Due Customer: TDD will determine the amount
-------------------------------------
collected by each LEC for Customer's Valid EMI Billing Records and deduct
the then-applicable fees, charges, charge backs, credits and adjustments of
the LECs and/or TDD. If the amount due to Customer is not sufficient to
satisfy these fees, charges, charge backs, credits and adjustments, then
Customer shall pay this difference to TDD within ten (10) Business Days of
notification by TDD of any amounts due.
(b) Reserves and True-Ups for Unbillable Records: TDD will reserve an amount,
---------------------------------------------
from one month to the next, that is equal to Customer's prior history for
Unbillable Records. TDD will recalculate Customer's historical experience
quarterly from its prior three months results. Until such history can be
determined for Customer, TDD will reserve two and one-half percent (2.5%)
from the amount due to Customer. TDD will true-up this reserve each month
when the information becomes available from the LECs. TDD will then return
excess amounts to Customer or withhold additional amounts as may be required
to satisfy these liabilities from the amounts due to Customer.
8
<PAGE>
(c) Payment Schedules: TDD will advance to Customer the estimated amount
------------------
determined under paragraph 6(a) above within seven (7) Business Days of
receipt by TDD of funds from a LEC for Customer's Valid EMI Billing Records.
PROVIDED, HOWEVER, that if Customer has ceased doing business for five (5)
-----------------
Business Days, is the subject of a bankruptcy proceeding, or a receiver,
trustee or custodian is appointed over substantially all of Customer's
assets, or if Customer fails to make any deposit required by paragraph
13(b), or if TDD has reasonable grounds to believe that the fees, charges,
charge backs, credits and adjustments to Customer may exceed any amount
owing or to become owing from TDD to Customer, TDD may withhold payments to
Customer until all such amounts have been determined and deducted from the
amount owing. If the amount owing to Customer is determined not sufficient
to satisfy these fees, charges, charge backs, credits and adjustments, then
Customer shall pay the difference to TDD within ten (10) Business Days of
notification by TDD of any amount due.
(d) Method of Payment: TDD will make all advance payments and final payments
------------------
due to Customer, using ACH wire transfer each Tuesday or the first Business
Day following Tuesday should Tuesday not fall on a Business Day, based on
the schedule described in paragraph 6(c) herein.
(e) Accounting for Funds: Funds received from the LECs for Customer's Valid EMI
---------------------
Billing Records, less applicable fees, charges, charge backs, credits and
adjustments, shall be deposited and held by TDD in a common account until
such time as the amount determined to be due Customer is paid to Customer.
TDD will maintain an accounting of the balance owing or to be owing by TDD
to Customer of such amounts deposited and held by TDD.
Section 7 Customer's Obligations.
-----------------------
The Customer agrees as follows.
(a) Cooperation by Customer: Customer agrees to cooperate with TDD to the
------------------------
fullest extent possible and to the best of Customer's ability to facilitate
the provisioning of services described in Section 3 herein. Such cooperation
shall include, but shall not be limited to, the following
(i) Supplying TDD with Customer's identification codes, any and all
certifications of regulatory authority necessary for Customer to
offer its services, and any other information and documents
necessary or helpful to TDD; and
(ii) Supplying TDD with all technical information and assistance with
testing that may be necessary or helpful to TDD in providing its
services herein.
9
<PAGE>
(b) Applicable Approvals and Compliance with Law: Customer shall obtain and keep
---------------------------------------------
current all applicable federal, state and local licenses, certifications and
approvals and shall fully comply with, and has full responsibility to comply
with, all other applicable federal, state and local regulations, laws, rules
and Tariffs. Customer agrees that TDD shall not assume any responsibility
for such compliance whatsoever. Customer acknowledges and understands that
certain LEC billing systems contain edits and screens that "block"
Customer's EMI Billing Records from being billed to End Users until TDD can
demonstrate to such LECs that Customer has proper authority for providing
its services to the End User. Customer further acknowledges and understands
that it may take as long as sixty (60) days after notification to the LECs
of such authority before the LECs will begin billing Customer's EMI Billing
Records. Therefore, TDD will not be responsible for billing Customer's EMI
Billing Records for services provided prior to the LECs removing their
regulatory edits and screens from their billing systems.
(c) Validation: Customer shall validate all collect, third party and calling
-----------
card billed MTS calls using the LECs' LIDBs (line information data bases) or
some other alternative validation method that is acceptable to the LECs and
to TDD.
(d) Completed Calls: Customer acknowledges and agrees that where required,
----------------
Customer shall be in compliance with the FCC's order to determine call
connection using, hardware or software "answer detection." Customer further
agrees that it will submit to TDD only those EMI Billing Records for calls
that represent valid, completed calls as defined in Exhibit D attached
hereto.
(e) Aged EMI Billing Records: Customer shall not submit EMI Billing Records to
-------------------------
TDD that are more than ninety (90) days old or that exceed the "age of toll"
acceptable by the LECs, whichever is less.
(f) Minimum Transmission Volumes: Customer shall not submit to TDD fewer than
-----------------------------
ten thousand (10,000) EMI Billing Records per "library code" in any
transmission of its EMI Billing Records. The minimum TDD Processing, Fee as
set forth in Exhibit C attached hereto, shall apply if this minimum volume
per transmission is not met.
(g) Objectionable Content: Customer agrees, as a condition of TDD's performance
----------------------
under this Agreement, that TDD can not and will not provide billing and
information management services which TDD in its sole discretion deems
harmful, damaging or against public policy, including, but not limited to:
(i) Services which explicitly or implicitly refer to sexual conduct;
10
<PAGE>
(ii) Services which contain indecent, obscene or profane language;
(iii) Services which allude to bigotry, racism, sexism or other forms of
discrimination,
(iv) Services which through advertising, content or delivery are
deceptive, or that may take unfair advantage of minors or the
general public;
(v) Services which are publicly accessible, multi-party connections
commonly known as "gab" or "chat" services;
(vi) Services which are prohibited by Federal, state, or local laws or
Tariffs, or
(vii) Services which individual LECs exclude from the "types" of services
or products for which their policies permit them to bill and
collect.
(h) No Other Billing Arrangement: Customer warrants that the EMI Billing Records
-----------------------------
submitted and to be submitted by Customer to TDD pursuant to this Agreement
are not and will not be subject to any other valid or existing billing and
--- ---
collection agreement, have not been billed previously and will not be billed
---
by another party following their submission by Customer to TDD.
(i) Customer shall limit the number of EMI Billing Records for Casual OS
Telephone Traffic to not more than ten percent (10%) of the total
EMI Billing Records submitted to TDD on any given transmission.
Section 8 Protection of Confidential Information.
---------------------------------------
As used herein, "Confidential Information" shall mean (a) proprietary
information, (b) information marked or designated as confidential,
(c) information otherwise disclosed in a manner consistent with its
confidential nature, (d) information of one party, whether or not in written
form and whether or not designated as confidential, that is known or should
reasonably be known by the other party as being, treated as confidential,
and (e) information submitted by one party to the second party where the
second party knows or reasonably should know that the first party is
obligated to keep the information confidential. The parties hereto expressly
recognize and acknowledge that, as a result of the provision of services
pursuant to this Agreement, Confidential Information which may be
proprietary to each party must or may be disclosed to the other. Each party
hereby agrees that it will make no disclosure of Confidential Information
provided under this Agreement without the
11
<PAGE>
prior written consent of the other party. Additionally, each party shall
restrict disclosure of said information to its own employees, agents or
independent contractors to whom disclosure is necessary and who have agreed
to be bound by the obligations of confidentiality hereunder. Such employees,
agents or independent contractors shall use reasonable care, but not less
care than they use with respect to their own information of like character,
to prevent disclosure of any Confidential Information. Nothing contained in
this Agreement shall be considered as granting or conferring rights by
license or otherwise in any Confidential Information disclosed.
Section 9 Taxes.
------
(a) Calculation of Telecommunications Taxes: TDD shall be responsible for
----------------------------------------
calculating or will use its best efforts to cause the LECs to calculate the
following taxes applicable to each MTS call and allow them to be passed
through to the End User, such taxes being referred to herein collectively as
"Taxes": Federal excise tax, any state and local sales taxes or tax-like
charges, or any Foreign Intrastate Taxes or foreign tax-like charges.
Notwithstanding the foregoing, Customer acknowledges and agrees it is
responsible for compliance with all taxing requirements; therefore, Customer
shall promptly notify TDD of any tax or tax-like surcharges and the
associated rates that apply to Customer's MTS calls in any special
jurisdiction.
(b) Billing and Collection of Taxes: TDD will, for the benefit of and on behalf
--------------------------------
of Customer, use its best efforts to cause the LECs to bill End Users for
all Taxes. Customer acknowledges and agrees that TDD is acting merely as
Customer's agent with respect to arranging for the billing and collection of
Taxes, and in no event shall TDD be entitled to retain or receive from
Customer. or from any End User, any statutory fee or share of Taxes to which
the person collecting the same may be entitled under applicable law.
(c) Tax Exempt Status for End Users: TDD will have the authority, on behalf of
--------------------------------
Customer, to authorize the LECs to calculate Taxes in the same manner as the
LECs calculate Taxes for their End Users and to authorize the LECs to
establish the tax exempt status of End Users in the same manner as the LECs
establish such status for their End Users. If Customer's MTS calls are
exempt from Federal, state and local Taxes or tax-like charges, Customer
shall so indicate on each EMI Billing Record submitted to TDD.
(d) Filing and Payment of Taxes: Based upon the information calculated by TDD
----------------------------
and/or received from the LECs with respect to Taxes assessed, billed and
collected by the LECs, TDD will, on behalf of Customer, prepare and file in
a timely manner with the applicable taxing authorities all returns covering
Taxes, and will, on behalf of Customer, but only to the extent of amounts
otherwise owing from TDD to Customer, pay in full and promptly
12
<PAGE>
remit to such taxing authorities all Taxes owed thereto. Upon written
request, TDD will provide to Customer copies of any and all tax returns and
other applicable information relating to the payment of Taxes by TDD within
thirty (30) days after being filed and paid by TDD.
(e) Hold Harmless: Customer shall indemnify and hold TDD and its employees,
--------------
agents and representatives free and harmless from and against any Claim
(including, without limitation, reasonable attorneys' fees and court costs)
relating to or arising out of any Taxes, penalties, interest, additions to
tax, surcharge or other amounts to which TDD may be subject or incur,
relating to or arising out of (i) TDD's reliance upon any calculations,
determinations or other directives, or lack thereof, given by Customer to
TDD with respect to the calculation, assessment, billing, and/or collection
of any Taxes contemplated by this Agreement; or (ii) a determination by the
Internal Revenue Service or any other taxing authority that any amount paid
by TDD pursuant to paragraph 9(d) above with respect to Taxes was
insufficient, except in the event such insufficiency was the result of
negligence on the part of TDD; provided, however, that Customer shall not be
required to indemnify TDD or the employees, agents and representatives
thereof for any loss, damage, Claim, cause of action or other liability to
the extent, but only to the extent, caused by the gross negligence or
willful misconduct of TDD.
(f) Billed Taxes: Customer shall be responsible for the payment of any
-------------
additional Taxes or tax-like charges assessed against TDD based on the
revenues collected by TDD from Customer's Valid EMI Billing Records, "Billed
Taxes" under this Agreement, excluding Federal and state income Taxes.
Section 10 Force Majeure.
--------------
TDD shall not be held liable for any delay or failure in performance of any
part of this Agreement or Exhibits attached hereto from any cause beyond its
control and without its fault or negligence, such as acts of God, acts of
civil or military authority, government regulations, embargoes, epidemics,
war, terrorist acts, riots, insurrections, fires, explosions, earthquakes,
nuclear accidents, floods, strikes, power blackouts, volcanic action, other
major environmental disturbances, unusually severe weather conditions,
inability to secure products or services of other persons or transportation
facilities, or acts or omissions of transportation common carriers.
Section 11 Limitation of Liability.
------------------------
13
<PAGE>
(a) TDD will use its best efforts at all times to provide prompt and efficient
service; however, TDD makes no warranties or representations regarding the
services except as specifically stated in this paragraph 11(a). TDD will use
due care in processing all work submitted to it by customer and agrees that
it will, at its expense, correct any errors which are due solely to
malfunction of TDD's computers, operating systems or programs or errors by
TDD's employees or agents. Correction shall be limited to reprocessing
Customer's EMI Billing Records. TDD will not be responsible in any manner
for failures of, or errors in, proprietary systems and programs other than
TDD, nor shall TDD be liable for errors or failures of Customer's software
or operational systems. THIS WARRANTY IS EXCLUSIVE AND IS IN LIEU OF ALL
OTHER WARRANTIES, AND CUSTOMER HEREBY WAIVES ALL OTHER WARRANTIES,
EXPRESSED, IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO, ANY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE. Should there
be any failure in performance or errors or omissions by TDD with respect to
the information being processed and being submitted to the LECs for billing
and collection, TDD's liability shall be limited to using its best efforts
to correct such failure. In no event, except as specifically set forth
herein, shaIl TDD be liable to Customer or any third parties (including
Customer's customers) for any Claim even if TDD has been advised of the
possibility of such Claim.
(b) Due to the nature of the services being performed by TDD, Customer agrees
that in no event will TDD be liable for any Claim caused by TDD's
performance or failure to perform hereunder which is not reported by
Customer in writing to TDD within thirty (30) days of such performance or
failure to perform.
(c) Customer shall indemnity and save harmless TDD from and against any Claim
assorted against TDD by third parties and arising out of Customer's use of
the services provided under this Agreement, unless such Claim arises out of
the willful misconduct or gross negligence of TDD.
Section 12 Term of Agreement.
------------------
The initial term of this Agreement shall begin on the date on page 1 of this
Agreement or the date Customer begins submitting its EMI Billing Records to
TDD, whichever is later, and continue in full force and effect for a minimum
period of one (1) year from such date unless terminated in accordance with
paragraph 14(b)(i) and shall automatically renew for successive periods of
one (1) year unless terminated by written notice from either party at least
sixty (60) days prior to the scheduled expiration date.
14
<PAGE>
Section 13 Expiration or Termination.
--------------------------
(a) Payment Upon Expiration or Termination: Upon the expiration or termination
---------------------------------------
of this Agreement for any reason, Customer agrees to satisfy, when or before
due, any and all of its obligations arising under this Agreement.
(b) Deposit for Charges: Customer acknowledges and understands that certain LEC
--------------------
charges for Uncollectible Amounts, Bad Debt true-ups and Post-Billing
Adjustments and Credits which are determined by the LECs are sometimes not
provided to TDD for a period of up to eighteen (18) months after the final
processing of Customer's EMI Billing Records by TDD on behalf of Customer.
Customer further acknowledges and agrees that payment of these amounts shall
be its sole responsibility. To ensure such payments, Customer shall, at the
expiration or termination of this Agreement for any reason, deposit with TDD
an amount equal to two and one-half percent (2.5%) of the face amount of
Customer's gross billings for the prior twelve (12) months, or such other
amount as is estimated by TDD, based on Customer's prior history, necessary
to satisfy such charges. Such deposited amount shall be used by TDD to pay
Uncollectible Amounts, Bad Debt true-ups, Post-Billing Adjustments and
Credits and other charges incurred on behalf of Customer for billing and
collecting Customer's EMI Billing Records submitted by Customer to TDD
during the term of this Agreement. Each quarter TDD will reexamine the
amount of funds deposited and make such adjustments as TDD estimates may be
necessary to satisfy the aforementioned charges. TDD will provide Customer
with proper documentation to substantiate charges attributable to Customer
on the same and consistent method as TDD determines such charges for all of
its customers. At the end of eighteen (18) months from the expiration or
termination date, TDD will return all unused amounts to Customer.
(c) Remaining Liability: Notwithstanding the foregoing, the deposit of such
--------------------
amounts does not relieve or waive Customer's responsibility and obligation
to pay its obligations to TDD including, without limitation, any and all
fees, charges, charge backs, credits and adjustments associated with billing
and collecting its EMI Billing Records. In the event such associated fees,
charges, charge backs, credits and adjustments exceed the amount of the
deposit described in paragraph 13(b), Customer shall remit to TDD such
additional amounts as are required to satisfy Customer's obligations under
this Agreement to TDD within ten (10) Business Days of notification by TDD
of any such amounts due.
(d) Savings Clause: Except as otherwise provided herein, expiration or
---------------
termination of this Agreement under this Section 13 shall terminate all
further rights and obligations of the parties hereunder, provided that:
(i) Neither TDD nor Customer shall be relieved of its respective
obligations to pay any sums of money due or to become due or payable
or accrued under this Agreement;
15
<PAGE>
(ii) If such expiration or termination is a result of a default hereunder
or a breach hereof by a party hereto, the other party shall be
entitled to pursue any and all rights and remedies it has to redress
such default or breach in law or equity, subject to Sections 11 & 14
hereof; and
(iii) The provisions of Sections 8 and 9 hereof, except paragraph 9(b),
shall survive the expiration or termination of this Agreement.
Section 14 Default and Remedies.
---------------------
(a) Default: Either Party shall be in default hereunder if it:
--------
(i) Fails to make any payment specified hereunder when or before due and
such failure continues for five (5) Business Days after written
notice;
(ii) Breaches any other material covenant or undertaking contained in
this Agreement and fails to remedy such breach within thirty (30)
Business Days after written notice thereof from the non-defaulting
party; or
(iii) Files, or there is filed against it, any voluntary or involuntary
proceeding under the Bankruptcy Code, or makes an assignment for the
benefit of creditors, dissolves, ceases to conduct business for
three (3) Business Days, resorts to any insolvency law, declares
that it is unable to pay its debts as they mature or if a receiver,
trustee or custodian is appointed over, or an execution, attachment,
or levy is made upon, all or any material part of the property of
such party.
(b) Remedies: Time is of the essence of this Agreement. In the event of any
---------
default hereunder; the non-defaulting party shall have the following rights
and remedies:
(i) To terminate or cancel this Agreement, subject to the provisions of
paragraph 13(d), by giving written notice thereof to the defaulting
party;
(ii) To declare all amounts due under this Agreement from the defaulting
party to the non-defaulting party to be immediately due and payable;
(iii) To withhold, setoff and retain, until all obligations of Customer to
TDD have been satisfied in full, any and all amounts which may
otherwise be due and payable to
16
<PAGE>
Customer under this Agreement and apply such amounts to any balance
due or to become due from Customer to TDD.
(iv) All rights and remedies allowed by the applicable Uniform Commercial
Code;
(v) All other rights and remedies allowed by this Agreement and under
applicable law; and
(vi) All rights and remedies shall be cumulative and can be exercised
separately or concurrently.
Section 15 Amendments; Waivers.
--------------------
No modification, amendment or waiver of any provision of this Agreement, and
no consent to any default under this Agreement, shall be effective unless
the same shall be in writing and signed by or on behalf of the party against
whom such modification, amendment, waiver or consent is claimed. In
addition, no course of dealing or failure of any party to strictly enforce
any term, right or condition of this Agreement shall be construed as a
waiver or such term, right or condition.
Section 16 Assignment.
-----------
(a) By Customer or TDD. Assignment by Customer or TDD of any right,
-------------------
obligation or duty or of any other interest hereunder, in whole or in
part, shall require consent by both parties. Such consent shall not be
unreasonably withheld by either party.
(b) Generally. All rights, obligations, duties and interests of any party
----------
under this Agreement shall inure to the benefit of and be binding on all
successors in interest and assigns of such party and shall survive any
acquisition, merger, reorganization or other business combination to
which it is a party.
Section 17 Notices and Demands.
--------------------
(a) How Notice Given. Except as otherwise provided under this Agreement, all
-----------------
notices, demands and requests which may be given by any party to the
other party shall be in writing and shall be: (i) delivered in person;
(ii) mailed, postage prepaid, registered or certified return receipt
requested; (iii) placed in the hands of a national overnight delivery
17
<PAGE>
service or (iv) sent by facsimile transmission to the recipient's
facsimile machine, with an extra copy immediately following by first
class mail; and addressed as follows:
If to TDD:
Telco Development Group of Delaware
Attention: Mr. Bryan Rachlin
4219 Lafayette Center Drive
Chantilly, VA 22021
Telephone: (703) 631-5628
FAX: (703) 803-3430
If to Customer:
Long Distance Wholesale Club
Attention: Thomas J. Cirrito
1401 Wilson Boulevard, Suite 1100
Arlington, VA 22209
Telephone: (703) 741-7700
FAX: (703) 741-7707
If personal delivery is selected as the method of giving notice under
this Section, a receipt for such delivery shall be obtained. The address
to which such notices, demands, requests, elections or other
communications may be given by either party may be changed by written
notice given by such party to the other party pursuant to this Section
17.
(b) When Notice Effective: Except as otherwise expressly provided herein,
----------------------
all such notices shall be effective upon receipt if delivered by hand,
facsimile, national overnight delivery service, certified or registered
mail and otherwise five (5) Business Days after placement in the U.S.
Mails.
Section 18 No Third-party Beneficiaries.
-----------------------------
This Agreement shall not provide any person not a party to this
Agreement with any remedy, claim, liability, reimbursement, cause of
action or other right in excess of those existing without reference to
this Agreement.
Section 19 Governing Law.
--------------
18
<PAGE>
This Agreement shall be deemed to be a contract made under the laws of
the State of Virginia, and the construction, interpretation and
performance of this Agreement and all transactions hereunder shall be
governed by the domestic laws of such State.
Section 20 Entire Agreement.
-----------------
This Agreement constitutes the entire and exclusive Agreement between
the parties and supersedes all prior or contemporaneous agreements, and
oral or written representations, between them.
Section 21 Execution in Counterparts.
--------------------------
This Agreement may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together
constitute but one and the same document.
Section 22 Headings.
---------
The headings in this Agreement are for convenience only and shall not be
construed to define or limit any of the terms herein or affect the
meaning or interpretation of this Agreement.
Section 23 Arbitration
-----------
Any controversy, dispute or Claim arising out of or in connection with
this Agreement, or the breach, termination or validity hereof, shall be
settled by final and binding arbitration to be conducted by an
arbitration tribunal in the Washington D.C. Metropolitan Area pursuant
to the rules of the American Arbitration Association. In the event of
any procedural matter not covered by the aforesaid rules, the procedural
law of the State of Virginia shall govern. The arbitration tribunal
shall consist of three arbitrators. The party initiating arbitration
shall nominate one arbitrator in the request for arbitration and the
other party shall nominate a second in the answer thereto within 15 days
of receipt of the request. The two arbitrators so named will then
jointly appoint the third arbitrator. If the answering party fails to
nominate its arbitrator within the fifteen day period, or if the
arbitrators named by the parties fall to agree on the third arbitrator
within thirty days, the Office of the American
19
<PAGE>
parties fall to agree on the third arbitrator within thirty days, the
Office of the American Arbitration Association in Washington, D.C. shall
make the necessary appointments of such arbitrator(s). The decision or
award of the arbitration tribunal (by a majority determination, or if
there is no majority, then by the determination of the third arbitrator,
if any) shall be final, and judgment upon such decision or award may be
entered in the courts of the State of Virginia or the United States of
America for the Eastern District of the State of Virginia. By execution
and delivery of this Agreement, each of the parties hereto accepts for
itself and in respect of its property, generally and unconditionally,
the jurisdiction of the aforesaid courts.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first
set forth above.
Telco Development Group of Delaware, Inc. The Long Distance Wholesale Club, Inc.
------------------------------
By: /s/ Bryan K. Rachlin By: /s/ Thomas J. Cirrito
-------------------- ---------------------
Name: Bryan K. Rachlin Name: Thomas J. Cirrito
Title: President Title: President
Date: 1/23/96 Date: 1/23/96
------- -------
20
<PAGE>
EXHIBIT "A"
BILLING TELEPHONE COMPANIES
( 1) Pacific Bell
( 2) Illinois Bell Telephone Co.
( 3) Michigan Bell Telephone Co.
( 4) Ohio Bell Telephone
( 5) New Jersey Bell Telephone Co.
( 6) Diamond State Telephone Co.
( 7) Bell of Pennsylvania
( 8) Chesapeake & Potomac Telephone Co. of Washington, D.C.
( 9) Chesapeake & Potomac Telephone Co. of Maryland
(10) Chesapeake & Potomac Telephone Co. of Virginia
(11) Chesapeake & Potomac Telephone Co. of West Virginia
(12) Southwestern Bell
(13) South Central Bell
(14) Southern Bell
(15) Indiana Bell Telephone
(16) Wisconsin Bell
(17) GTE-Florida
(18) GTE-Southwest
(19) GTE-South
(20) GTE-North (Formally Midwest)
(21) United Telephone-Florida
(22) Contel West
(23) Contel Central
(24) Contel East
NOTE: NPK-NXX list (On-Net File) of above BTCs will be furnished to
Customer quarterly. Format and media (i.e., reel-to-reel magnetic
tape, diskette or electronic bulletin board), to be mutually agreed
upon by both parties.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "B"
TELCO DEVELOPMENT GROUP OF DELAWARE'S
CONTRACTUAL LEC COST
Page 1 of 4
<TABLE>
<CAPTION>
LEC# COMPANY NAME BILL RENDERING CALL RECORDS
- ---- ------------ -------------- ------------
INTER INTRA INTER INTRA
STATE STATE STATE STATE
<S> <C> <C> <C> <C> <C>
BELL OPERATING COMPANIES:
9102 NEW ENGLAND TELEPHONE 0.8600 0.8600 0.0100 0.0100
9104 NEW YORK TELEPHONE 0.8600 0.8600 0.0100 0.0100
9206 NEW JERSEY BELL 0.3300 0.3300 0.0240 0.0240
9208 PENNSYLVANIA BELL 0.3300 0.3300 0.0240 0.0240
9210 DIAMOND STATE 0.3300 0.3300 0.0240 0.0240
9211 C&P WASHINGTON, DC 0.3300 0.3300 0.0240 0.0240
9212 C&P MARYLAND 0.3300 0.3300 0.0240 0.0240
9213 C&P VIRGINIA 0.3300 0.3300 0.0240 0.0240
9214 C&P WEST VIRGINIA 0.3300 0.3300 0.0240 0.0240
9321 OHIO BELL 0.3230 0.3230 0.0500 0.0500
9323 MICHIGAN BELL 0.3230 0.3230 0.0500 0.0500
9325 INDIANA BELL 0.3230 0.3230 0.0500 0.0500
9327 WISCONSIN BELL 0.3230 0.3230 0.0500 0.0500
9329 ILLINOIS BELL 0.3230 0.3230 0.0500 0.0500
9348 CINCINNATI BELL - PENDING 0.0000 0.0000 0.0000 0.0000
9417 SOUTHERN BELL:
NORTH CAROLINA 0.3690 0.3600 0.0267 0.0610
FLORIDA 0.3690 0.0000 0.0267 0.0210
GEORGIA 0.3690 0.3600 0.0267 0.0700
SOUTH CAROLINA 0.3690 0.3600 0.0267 0.0700
9419 SOUTH CENTRAL BELL:
LOUISIANA 0.3690 0.2900 0.0267 0.0560
TENNESSEE 0.3690 0.2900 0.0267 0.0560
ALABAMA 0.3690 0.2900 0.0267 0.0560
KENTUCKY 0.3690 0.2900 0.0267 0.0560
MISSISSIPPI 0.3690 0.2900 0.0267 0.0560
9533 SOUTHWESTERN BELL:
TEXAS 0.2740 0.2740 0.0190 0.0233
MISSOURI 0.2740 0.2740 0.0190 0.0250
KANSAS 0.2740 0.2740 0.0190 0.0190
ARKANSAS 0.2740 0.2740 0.0190 0.0190
OKLAHOMA 0.2740 0.2740 0.0190 0.0190
9631 US WEST 0.3600 0.3600 0.0200 0.0200
9636 US WEST 0.3600 0.3600 0.0200 0.0200
9638 US WEST 0.3600 0.3600 0.0200 0.0200
9740 PACIFIC BELL 0.2170 0.2170 0.0110 0.0110
9742 NEVADA BELL 0.4500 0.8500 0.0350 0.0910
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "B"
TELCO DEVELOPMENT GROUP OF DELAWARE'S
CONTRACTUAL LEC COST
Page 2 of 4
<TABLE>
<CAPTION>
LEC# COMPANY NAME BILL RENDERING CALL RECORDS
- ---- ------------ -------------- ------------
INTER INTRA INTER INTRA
STATE STATE STATE STATE
<S> <C> <C> <C> <C> <C>
4000 CONTEL COMPANIES
MISSOURI 0.0762 0.0762 0.0012 0.0012
ARKANSAS 0.0762 0.0762 0.0012 0.0012
CALIFORNIA 0.0762 0 O762 0.0012 0.0012
NEVADA 0.0762 0.0762 0.0012 0.0012
OREGON 0.0762 0.0762 0.0012 0.0012
WASHINGTON 0.0762 0.0762 0.0012 0.0012
IDAHO 0.0762 0.0762 0.0012 0.0012
INDEPENDENTS
ALLTEL CORPORATION:
9901 ALABAMA 0.6050 0.6050 0.0350 0.0350
ARKANSAS 0.6050 0.6050 0.0350 0.0350
FLORIDA 0.6050 0.6050 0.0350 0.0350
GEORGIA 0.6050 0.6050 0.0350 0.0350
ILLINOIS 0.6050 0.6050 0.0350 0.0350
INDIANA 0.6050 0.6050 0.0350 0.0350
KENTUCKY 0.6050 0.6050 0.0350 0.0350
MICHIGAN 0.6050 0.6050 0.0350 0.0350
MISSOURI 0.6050 0.6050 0.0350 0.0350
MISSISSIPPI 0.6050 0.6050 0.0350 0.0350
NORTH CAROLINA 0.6050 0.6050 0.0350 0.0350
NEW YORK 0.6050 0.6050 0.0350 0.0350
OHIO 0.6050 0.6050 0.0350 0.0350
OKLAHOMA 0.6050 0.6050 0.0350 0.0350
PENNSYLVANIA 0.6050 0.6050 0.0035 0.0350
SOUTH CAROLINA 0.6050 0.6050 0.0350 0.0350
TENNESSEE 0.6050 0.6050 0.0350 0.0350
TEXAS 0.6050 0.6050 0.0350 0.0350
WEST VIRGINIA 0.6050 0.6050 0.0350 0.0350
9902 CENTEL - 1 EAST
VIRGINIA 0.3900 0.3900 0.0900 0.0900
NORTH CAROLINA 0.3900 0.3900 0.0900 0.0900
FLORIDA 0.3980 0.3900 0.0900 0.0900
9903 CENTEL - 2 MIDWEST
TEXAS 0.3900 0.3900 0.0900 0.0900
NEVADA 0.3900 0.3900 0 0900 0 0900
ILLINOIS 0.3900 0.3900 0.0900 0.0900
9904 CAROLINA TELEPHONE & TELEGRAPH 0.3900 0.3900 0.0900 0.0900
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "B"
TELCO DEVELOPMENT GROUP OF DELAWARE'S
CONTRACTUAL LEC COST
Page 3 of 4
<TABLE>
<CAPTION>
LEC# COMPANY NAME BILL RENDERING CALL RECORDS
- ---- ------------ -------------- ------------
INTER INTRA INTER INTRA
STATE STATE STATE STATE
<S> <C> <C> <C> <C> <C>
GTE COMPANIES:
169 GTE OF PENNSYLVANIA 0.0762 0.0762 0.0120 0.0120
328 GTE OF FLORIDA 0.0476 0.0670 0.0120 0.0120
479 GTE OF SOUTH:
NORTH CAROLINA 0.0634 0.0634 0.0120 0.0120
SOUTH CAROLINA 0.0634 0.0634 0.0120 0.0120
GEORGIA 0.0634 0.0634 0.0120 0.0120
TENNESSEE 0.0634 0.0634 0.0120 0.0120
WEST VIRGINIA 0.0634 0.0634 0.0120 0.0120
ALABAMA 0.0634 0.0634 0.0120 0.0120
KENTUCKY 0.0634 0.0634 0.0120 0.0120
615 GTE OF OHIO 0.0762 0.0762 0.0120 0.0120
695 GTE OF MICHIGAN 0.0762 0.0762 0.0120 0.0120
772 GTE OF INDIANA 0.0762 0.0762 0.0120 0.0120
886 GTE OF WISCONSIN 0.0762 0.0762 0.0120 0.0120
1015 GTE OF ILLINOIS 0.0762 0.0762 0.0120 0.0120
1186 GTE OF NORTH:
NEBRASKA 0.0762 0.0762 0.0120 0.0120
IOWA 0.0762 0.0762 0.0120 0.0120
MINNESOTA 0.0762 0.0762 0.0120 0.0120
MISSOURI 0.0762 0.0762 0.0120 0.0120
2080 GTE OF SOUTHWEST
ARKANSAS 0.0762 0.0762 0.0120 0.0120
NEW MEXICO 0.0762 0.0762 0.0120 0.0120
OKLAHOMA 0.0762 0.0762 0.0120 0.0120
TEXAS 0.0762 0.0762 0.0120 0.0120
2319 GTE OF CALIFORNIA 0.0762 0.0762 0.0120 0.0120
2416 GTE OF NORTHWEST
WASHINGTON 0.0762 0.0762 0.0120 0.0120
OREGON 0.0762 0.0762 0.0120 0.0120
IDAHO 0.0762 0.0762 0.0120 0.0120
MONTANA 0.0762 0.0762 0.0120 0.0120
CALIFORNIA 0.0769 0.0762 0.0120 0.0120
3100 GTE OF HAWAII 0.0762 0.0762 0.0120 0.0120
VIRGINIA 0.0634 0.0634 0.0120 0.0120
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "B"
TELCO DEVELOPMENT GROUP OF DELAWARE'S
CONTRACTUAL LEC COST
Page 4 of 4
<TABLE>
<CAPTION>
LEC# COMPANY NAME BILL RENDERING CALL RECORDS
- ---- ------------ -------------- ------------
INTER INTRA INTER INTRA
STATE STATE STATE STATE
<S> <C> <C> <C> <C> <C>
9907 UNITED TELEPHONE - MIDWEST
NEBRASKA 0.3900 0.3900 0.0900 0.0900
WYOMING 0.3900 0.3900 0.0900 0.0900
TEXAS 0.3900 0.3900 0.0900 0.0900
SOUTH EAST KANSAS 0.3900 0.3900 0.0900 0.0900
MISSOURI 0.3900 0.3900 0.0900 0.0900
UTC OF SOUTHCENTRAL
KANSAS 0.3900 0.3900 0.0900 0.0900
ARKANSAS 0.3900 0.3900 0.0900 0.0900
IOWA 0.3900 0.3900 0.0900 0.0900
MISSOURI 0.3900 0.3900 0.0900 0.0900
MINNESOTA 0.3900 0.3900 0.0900 0.0900
9909 UNITED TELEPHONE - INDIANA 0.3900 0.3900 0.0900 0.0900
9910 UNITED TELEPHONE - OHIO 0.3900 0.3900 0.0900 0.0900
9911 UNITED TELEPHONE - SOUTHEAST:
SOUTH CAROLINA 0.3900 0.3900 0.0900 0.0538
TENNESSEE 0.3900 0.3900 0.0278 0.0219
VIRGINIA 0.3900 0.3900 0.0599 0.0395
9912 UNITED TELEPHONE - FLORIDA 0.2680 0.0000 0.0100 0.0666
9913 UNITED TELEPHONE - NORTHWEST:
OREGON 0.3900 0.3900 0.0900 0.0900
WASHINGTON 0.3900 0.3900 0.0900 0.0900
9915 UNITED - EASTERN GROUP
PENNSYLVANIA 0.3900 0.3900 0 0900 0.0900
NEW JERSEY 0.3900 0.3900 0.0900 0.0900
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
Exhibit "C"
PRICING
(1) Clearinghouse Processing Fees
<TABLE>
<S> <C> <C> <C>
Volume RATE/CDR - 1 Year 2 Year 3 Year
------ ----------------- ------ ------
0 - 100,000 LEC Charge + $0.0393 $0.0393 $0.0393
Next 100,000 LEC Charge + $0.0363 $0.0343 $0.0320
Next 200,000 LEC Charge + $0.0338 $0.0318 $0.0295
Next 1,000,000 LEC Charge + $0.0318 $0.0298 $0.0275
Next 3,600,000 LEC Charge + $0.0303 $0.0283 $0.0260
All Remaining LEC Charge + $0.0293 $0.0273 $0.0250
</TABLE>
TDD's most favored Processing Fees are in addition to the TDD's
contractual LEC Processing Fees as outlined in Exhibit B attached hereto
which are calculated monthly as described in paragraph 4(f) hereof
If Customer elects an initial term of this Agreement of two (2) or three
(3) years, Customer acknowledges and agrees to pay a minimum monthly
processing fee of at least $3,930/month (100,000 records/month times
$.0393/record), for the entire two (2) or three (3) year term of the
Agreement.
(2) End User Customer Service Inquiry, Investigation and Rebate:
TDD will perform End User customer service inquiry, investigation and
rebate for those areas where the LEC billing and collection agreements
provide for such. Customer will be charged a total of $2.50 for each
customer service inquiry, investigation or rebate handled by TDD on behalf
of Customer.
(3) Minimum TDD Processing Fee per Transmission:
For each submission of EMI Billing Records to TDD, Customer shall pay a
minimum TDD Processing Fee per library code of five hundred eighty-five
dollars $585.
(4) Accounts Receivables Reconciliation System:
Customer shall pay an Initial, one-time fee for TDD's accounts receivable
reconciliation system. The charge is one thousand five hundred dollars
($1,500) for the first library code and five hundred dollars ($500) for
each additional library code. There is no charge for weekly accounts
receivable status updates.
* TDD's extended term processing fees are applied separately to the monthly
volume of EMI billing records processed for each library code assigned to
Customer. However, at Customer's option TDD will aggregate the total
volume of call records submitted under each library code to calculate the
combined volume to determine the TDD processing fee. Should Customer so
elect, Customer must submit to TDD its election in a letter signed by an
owner or officer of the Company stating its election and authorizing TDD
to charge and to deduct from amount due Customer a total of $1,000 per
month for each library code, after the first assigned to customer.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "D"
MTS CALL COMPLETION CRITERIA
A MTS call is completed if some type of direct communication or hardware or
software answer detection has been established between the originating person
and the terminating location. Collect and third number billed calls must be
verified that the receiving party or third party agrees to accept the charges
for the call. If automated technologies are used, the receiving party must
positively acknowledge the acceptance of the call. In the case of
person-to-person calls, the operator must verify that the receiving party is the
person whom the originating party requested. For other direct dialed, automated
calling card or operator assisted calls, the call shall be considered completed
when the connection is verified by means of hardware or software detection as
required by Federal, state and local regulatory authorities.
In those cases where the Customer cannot determine the exact time the
terminating person has gone "off hook" (beginning of communication with the
originating party), and Federal, state or local regulatory authorities do not
require hardware or software answer detection, a call shall be considered to be
connected if the originating and receiving parties hold the connection for more
than thirty-six (36) seconds.
Calls for four hundred eighty (480) minutes (8 hours) or more are not
considered valid, completed calls and will not be billed.
Calls to operators, customer announcements, busy signals or ringing shall not be
considered completed calls and shall not be billed.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "E"
EXCHANGE MESSAGE INTERFACE (EMI) BILLING RECORD
The following Belicore EMI billing record formats will be processed by TDD for
the LECs that are capable of billing and collecting for services using the
following EMI billing record format:
RECORD ID
010101 Domestic Message Telephone Service (MTS) Charge
010132 Domestic Directory Assistance Charge
010201 North American Originated and Billable International Charge
425001 Miscellaneous Recurring and Non-Recurring Service Charge
202203 Pack Header Record
202204 Pack Trailer Record
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "F"
TDD PROCEDURES FOR END USER CUSTOMER SERVICE
INQUIRIES, INVESTIGATIONS AND REBATES
PAGE 1 of 2
I. For those LECs whose billing and collection agreements provide for TDD to
provide End User investigation and rebate, TDD's toll-free "800" number
will appear on the End User's LEC telephone bill to be used for resolution
of any issues associated with the End User's bill.
At the time of the initial call from an End User, TDD's customer service
representative will request the End User's bill number in order to access
TDD's portion of the End Users bill. Once the account has been accessed,
the End User will be identified. If the End User is disputing any of the
following:
(a) Denying All Knowledge (DAK);
(b) Calls Not Connecting (CNC);
(c) Rates; or
(d) Fraudulent calls,
then an automated internal credit form will be prepared which contains the
following information:
(a) Bill name, number and address;
(b) Reason and dollar amount in dispute; and
(c) Copy of the EMI Billing Records being disputed.
II. This information will be forwarded to TDD's Investigations Department. All
inquiries over Fifty dollars ($50.00) will be investigated. Basic
investigation procedure shall be to investigate all End Users' bills where
the End User denies all knowledge (DAKS) of any and/or all records billed
to them through TDD. Upon receipt of the internal credit form and the
printout of the End Users' records, the following procedures shall be
followed:
(A) Notify the LEC that an End User has denied all knowledge of the
telecommunication services being billed through TDD and that an
investigation will be conducted to determine the validity of such
claim. The following information will be given:
(1) End User's full name and address,
(2) Telephone number,
(3) Statement date; and
(4) Amount in dispute
(B) Maintain details of all conversations when investigating the calls
(i.e., person's name, complete telephone number, date and time of
each call).
(C) Maintain contact with the End User and the LEC concerning the
results of investigation.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "F"
TDD PROCEDURES FOR END USER CUSTOMER SERVICE
INQUIRIES, INVESTIGATIONS AND REBATES
PAGE 2 of 2
(D) Notify Customer daily of all DAKs that exceed seventy-five dollars
($75.00). Notification will include the origination number.
III. Verify with the LEC if the End Users credit card has been canceled, and
when. Any records billed after the credit card cancellation date shall be
refunded 100% to the End User. Access numbers on computer to determine if
other calls have been billed to the End User. Call sufficient telephone
numbers listed to determine if the receiving parties know the End User who
is disputing the calls.
IV. The next step will be to call the LEC to inform them that the bill was
fraudulent or resolved, and that TDD will let the End User know how TDD
will proceed. A log of all calls and rate adjustments will be kept for
end-of-month reports. A confirmation letter will be mailed to the End
User, and the LEC will be advised of the approval or denial of credit.
V. Investigation process will be complete at this time.
VI. The following items procedures will be followed for a End User who
receives a refund check
(A) Verify that no duplicate check has been issued previously to the
same End User.
(B) Issue a refund check for the amount approved by the investigation
department.
(C) Prepare a letter of explanation to accompany the check being mailed
to the End User.
VII. The following procedures will be utilized for credit issued through Bell
Operating Companies (BOCs):
(A) IC/EC memorandum will be issued for the amount approved by the
investigation department or an electronic EMI credit record will be
prepared.
(B) IC/EC memorandum will be mailed to the End User's Local Exchange
Carrier for credit towards End User's account or EMI credit record
will be submitted with the next billing submission.
The above procedures for refund checks, electronic EMI credit records and
IC/EC memorandums usually take a total of five (5) Business Days.
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT "G"
TDD BAD DEBT FACTOR
Page 1 of 1
<TABLE>
<CAPTION>
LEC NUMBER COMPANY NAME BAD DEBT RATE
<S> <C> <C>
BELL OPERATING COMPANIES:
9206 NEW JERSEY BELL 0.0319
9208 BELL OF PENNSYLVANIA 0.0270
9210 DIAMOND STATE 0.0132
9911 C&P OF WASHINGTON D.C. 0.0172
9212 C&P OF MARYLAND 0.0139
9213 C&P OF VIRGINIA 0.0111
9214 C&P OF WEST VIRGINIA 0.0227
9321 OHIO BELL 0.0300
9323 MICHIGAN BELL 0.0300
9325 INDIANA BELL 0.0300
9327 WISCONSIN BELL 0.0300
9329 ILLINOIS BELL 0.0300
9348 CINCINNATI BELL 0.0000
9417 SOUTHERN BELL 0.0176
9419 SOUTH CENTRAL BELL 0.0176
9533 SOUTHWESTERN BELL 0.0382
9740 PACIFIC BELL 0.0300
3000 GTE SOUTH 0.0457
4001 GTE NORTH 0.0300
4600 GTE CENTRAL 0.0300
5800 UNITED FLORIDA 0.0000
6000 CAROLINA AT&T 0.0000
8700 GTE - CONTEL 0.0000
</TABLE>
COMPANY CONFIDENTIAL
<PAGE>
EXHIBIT 10.12
AGREEMENT -
TABLE OF CONTENTS
Page
----
I. Provision of Billing and Collection Services...................... 5
II. SWBT Services..................................................... 12
III. Rates and Charges For Services Ordered............................ 16
IV. Application of Taxes to End Users................................. 17
V. Purchase of Accounts Receivables.................................. 23
VI. Service Center Procedural Guidelines.............................. 23
VII. Dispute Resolution and Audits..................................... 24
VIII. Liability and Indemnification..................................... 34
IX. Proprietary Information........................................... 37
X. Amendments; Waiver................................................ 37
XI. Assignment........................................................ 38
XII. Notice and Demands................................................ 38
XIII. Third-Party Beneficiaries......................................... 39
XIV. Governing Law..................................................... 39
XV. Force Majeure..................................................... 39
XVI. Entire Agreement.................................................. 39
XVII. Severability...................................................... 40
XVIII. Executed in Counterparts.......................................... 40
XIX. Headings.......................................................... 40
XX. Termination of Service............................................ 41
XXI. Certification Requirements........................................ 44
XXII. End User Service Denial........................................... 45
XXIII. Term.............................................................. 45
XXIV. Customer Agency................................................... 45
XXV. Publicity......................................................... 46
-1-
January 1991
<PAGE>
XXVI. Compliance with Law...................................................46
Signature Page........................................................48
-2-
January 1991
<PAGE>
LIST OF SCHEDULES
Schedule I. Order for Billing and Collection Services
Schedule II. Billing and Collection Services Price List
Schedule III. Start-Up Charge
Schedule IV. Minimum Annual Purchase of Service
Schedule V. Notice of Demand List
LIST OF EXHIBITS
Exhibit A. Proprietary Information
Exhibit B. Reserved
Exhibit C. Billing and Collection Services
Requirements Document
-3-
January 1991
<PAGE>
AGREEMENT FOR THE
PROVISION OF BILLING AND COLLECTION SERVICES
BETWEEN SOUTHWESTERN BELL TELEPHONE COMPANY AND
TELCO DEVELOPMENT GROUP OF DELAWARE, INC.
-----------------------------------------
(Customer NAME)
This Agreement for the Provision of Billing and Collection Services
(hereinafter "Agreement") is entered into and effective this 16th day of
----
December, l994, between Southwestern Bell Telephone Company (hereinafter "SWBT")
- -------- --
a Corporation in good standing, organized and existing under the laws of the
State of Missouri and having its principle place of business in St. Louis,
Missouri and
TELCO DEVELOPMENT GROUP OF DELAWARE, INC.
-----------------------------------------
(Customer's Name)
a CORPORATION
----------------------------------------
(Corporation, Partnership, Sole
Proprietorship),
in good standing, organized and existing
under the laws of the State of
DELAWARE
-----------------------------------------
(N/A if not a corporation)
and having its principle place of
business in
CHANTILLY, VIRGINIA
-----------------------------------------
(City and State)
If intrastate services are provided in the state of Kansas, this Agreement shall
take effect, in Kansas, upon approval of this Agreement by the Kansas
Corporation Commission. It is understood by the parties that services may not be
immediately initiated, but that any start-up time will be included within the
term of this Agreement and that the effective date of this Agreement is not
-4-
January 1991
<PAGE>
delayed or affected by the timing of actual provision of service, see: Schedule
I (for term of service(s) ordered) attached hereto.
In consideration of the Customer's agreement to make payment for services
as described herein and on SWBT's willingness to provide said services as
described herein during the term of this Agreement, the parties agree as
follows:
I. Provision of Billing and Collection Services
A. SWBT billing and collection services shall be provided in accordance
with this Agreement and any applicable tariffs. This Agreement and its
Exhibits attached hereto and incorporated herein, complement such
tariffs to the extent that this Agreement is not in conflict or
inconsistent therewith. To the extent of any conflict or inconsistency
between this Agreement (and its Exhibits) and such tariffs, the
provisions of such tariffs shall control. However, it is the intention
of the parties that this Agreement and its Exhibits, to the extent not
in conflict with the provisions of such tariffs, are to be construed to
the extent possible in harmony with any such tariffs.
In the event that SWBT provides another Interexchange Carrier
essentially the same B&C services on the same terms and conditions at
similar message volume, SWBT shall make any such offering(s) available
to the Customer under identical terms and conditions and prices as that
offered to any other such
-5-
January 1991
<PAGE>
Interexchange Carrier for all such B&C services.
In the event that SWBT offers B&C services which are different from or
in addition to those which it provides to Customers under this
Agreement, the Parties acknowledge that a new Agreement and/or an
Amendment to this Agreement will need to be entered before SWBT will
provide such services to Customer.
B. The Customer will make an upfront initial "start up" payment within
thirty (30) days subsequent to the effective date of this agreement,
when bill rendering services are ordered. The Customers may also be
required to make an upfront start-up payment when subsequent bill
rendering services are ordered, and the subsequent services require
differing procedures (for example adjustments, inquiry, true ups, etc.)
or services in additional states. If payment is not received as
specified, this Agreement is null and void. The start-up payment, as
indicated on Schedule I, paragraph 5, attached hereto, is calculated as
shown on Schedule III, attached hereto.
Notwithstanding the above, customers who are renewing existing bill
rendering services are not subject to additional initial start-up
payments for those states for which existing bill rendering services are
being performed by SWBT for the customer.
C. Bill rendering services Customers will make a
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January 1991
<PAGE>
guaranteed minimum purchase of services from SWBT under this Agreement,
see Schedule II, paragraph 6 and Schedule IV, attached hereto.
1. Any annual (consecutive 12 months) minimum purchase of services shall
be based on the Customer's annual billed volumes. A comparison will
be made of actual billed amounts and the minimum annual purchase of
services. This comparison will be made within sixty (60) days after
the completion of each year of the contract. The Customer will pay no
less than the applicable yearly minimum purchases of services for
that year. Should the Customer's actual annual billed amounts be less
than the stated minimum annual purchase of service, an adjustment
will be made to the Customer's purchase of accounts receivables as
described in Section 6 of Exhibit C of this Agreement.
2. All annual billing and collection charges paid by the Customer under
this Agreement will be recognized in determining whether the Customer
has met any annual minimum purchase of services. The Customer's
billing and collection service charges shall be based on service
volumes multiplied by the appropriate rate element, as set forth in
the price list contained in Schedule II, attached hereto, or any
applicable tariff.
3. If during the period immediately preceding the
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January 1991
<PAGE>
effective date of this Agreement, the Customer has not subscribed to
services ordered under this Agreement, a period of time for service
start-up and testing (normally ninety (90) to one hundred and twenty
(120) calendar days after SWBT's receipt of the Customer's upfront
start-up payment) may be necessary prior to the first bill being
rendered. In such cases, a proportional reduction, not to exceed six
months, of the first year's minimum annual purchase amount will be
afforded the Customer.
D. If the Customer has subscribed to Billing and Collection services with
SWBT during a period immediately preceding the formation of this
Agreement, revenue, amounts, credits, adjustments, realized
uncollectibles and other relevant data will be used in accordance with
this Agreement and in accord with the former Agreement to make
appropriate ongoing calculations under this Agreement to permit
continuing provision of the Service(s).
E. Billing which may be processed under the terms of this Agreement:
1. Charges for the transport of messages, and
2. Charges for information (complying with
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January 1991
<PAGE>
Section I. G. and I. F. below) provided within a message, and,
3. Other non-transport service billing which is telecommunications
related, but only with specific written approval by SWBT.
4. With respect to the billing described in Section I.E.2, I.E.3 and
I.F.2 herein, the Customer agrees that SWBT may upon with six month's
written notice to Customer, terminate any or all such billing without
cause or to change the terms, conditions or prices for the provision
of such billing.
F. Billing which will not be processed by SWBT under the terms of this
Agreement:
1. Non-Transmission Service with objectionable content as described in
Section I. G. below.
2. Non-transmission Service charges which in whole or part relate, or
reasonably give the appearance of relating, to references to
telephone numbers, goods or services provided outside the message,
unless agreed to in writing by the District Manager-Business Services
Marketing, One Bell Center, Room 7-Z-1, St. Louis, Missouri 63101,
and/or other such individual(s) as SWBT may authorize, such
authorization or notice will be provided to the Customer in writing.
3. Charges which have been previously billed to the end user by the
Customer or by a third party, and
4. Charges which when initially received by SWBT for billing are over
ninety (90) days old.
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January 1991 Revised October 1991
<PAGE>
Customer forwarding of billing to SWBT of the type described in this
paragraph F or not authorized by the terms of paragraph E above
shall constitute a substantial and material breach of this
Agreement, and SWBT may proceed in accordance with Section XX. A.
G. The Customer agrees, as a condition of SWBT's performance under this
Agreement, that SWBT will not provide Billing Services which SWBT deems
harmful to its image. Customer billing to end users will not be
processed by SWBT under this Agreement where such billing is for or is
associated with objectionable content including:
- Services which explicitly or implicitly refer to sexual conduct,
- Services which contain indecent, obscene or profane language,
- Services which allude to bigotry, racism, sexism or other forms of
discrimination,
- Services which through advertising, content or delivery are
deceptive, or that may take unfair advantage of minors or the general
public, or
- Services which provide information regarding financial credit cards,
or any information related to credit
- Charges for collect calls associated with information services
including the transport of such calls
- Services which are publicly accessible, multi-party connections
commonly known as "gab" or "chat" services.
SWBT will not bill charges for 800 Services to an originating end user
(caller as opposed to called
Revised
February 1993
(10)
<PAGE>
party). This billing may be confusing due to public identification of
toll free usage with 800 Service.
It is the continuing responsibility of the Customer to ensure that its
services to be billed by SWBT comply with the foregoing standards. The
Customer will render all necessary assistance to SWBT to enable SWBT to
perform a review of the Customer's messages, as SWBT shall determine is
required, in order to help identify objectionable messages on a timely
basis. SWBT may adjust end user charges (with recourse to the Customer)
for any such services billed, or return to the Customer any such message
billing prior to end user billing. Nothing herein is intended to allow
the Customer to wait for notification from SWBT before complying with
SWBT's billing standards. Prior to sending messages to SWBT for billing
services, the Customer is to take reasonable steps to screen, from the
Customer's message billing files, all billing to be sent to SWBT in
order to comply with said standards. Upon SWBT's determination that the
Customer has forwarded billing for objectionable services, SWBT may
decline to process, and may return, any such billing and all other
associated services which are offered over the same call-to-telephone
number, or, to return all billing associated with the responsible
service provider, or delay processing of the Customer's billing to allow
the Customer the time necessary to establish methods, procedures,
computer programming or other
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January 1991
<PAGE>
reasonable steps to identify and segregate objectionable messages from
the Customers' message billing files, to ensure associated charges are
not forwarded to SWBT for billing.
Should the Customer dispute SWBT's determination of the objectionable
nature of the content of a message(s), SWBT may withhold billing of said
messages pending the resolution of the dispute.
H. Obligation for Inquiry Support Service.
When the Customer is responsible for end user inquiries concerning the
Customer's services and charges which have been billed by SWBT, and when
SWBT is informed by the end user that the end user is unable to reach
the Customer, SWBT will investigate this complaint. Should SWBT
determine that the end user is indeed unable to reasonably communicate
with the Customer, SWBT will so notify the Customer. If correction of
the problem is not made by the Customer on a timely basis, SWBT may
adjust the affected billing.
II. SWBT Services
SWBT shall provide the following services as requested by the Customer:
A. Recording:
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January 1991
<PAGE>
Recording is defined in Exhibit C of this Agreement.
B. Billing Services:
Billing Service consists of Message Processing Services and Bill
Processing Service, as described in Exhibit C of this Agreement.
1. Message Processing Service, if ordered by the Customer, consists of
the assignment of Customer charges to end user messages. The initial
program development of the Customer's rating methodology will be
offered on an individual case basis (ICB). The Customer may, through
the time and cost procedures as defined in Exhibit C of this
Agreement, submit its rate methodology for application by SWBT.
2. Bill Processing Service consists of the preparation of bills for
message-billed service, and mailing of statements of the amounts due
for end user services received from the Customer, and the collection
of moneys due from the end users. Bill Processing Services include
message-billed account establishment, posting of rated messages and
rate elements, rendering of bills, receiving payments, maintenance of
accounts, treatment of accounts, pre-billing message investigation,
and if ordered by the Customer, inquiry service and post billing
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January 1991
<PAGE>
message investigation, each as described in Exhibit C of this
Agreement
a. SWBT will process rated messages received from the Customer for
message billing and render bills to the qualified accounts as
defined in Exhibit C of this Agreement.
b. SWBT will purchase the Customer's receivables on message billed
accounts and render end user bills showing a single balance due.
Accounts receivable will be purchased in a manner described in
Section 6 of Exhibit C of this Agreement.
c. SWBT will perform the collection and treatment functions and
provide end user service denial, for transmission service charges,
as described herein and in Section 2 of Exhibit C of this
Agreement.
d. SWBT will collect end user deposits based on regulatory rules and
regulations and its exchange tariffs. Deposits are collected and
maintained solely for the benefit of SWBT. Deposits will not be
prorated or shared between the parties unless agreed to by SWBT in
writing.
3. If ordered by the Customer and agreed to by SWBT,
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January 1991
<PAGE>
SWBT will provide Selective Bill Phrase(s) or Bill Page(s) Statement
Service for the Customer's billed accounts as defined in Section 2
of Exhibit C of this Agreement.
4. SWBT will provide billing format changes, when requested by the
Customer, in accordance with SWBT administration standards for bill
format. Time and Cost request procedures described in Section 9 of
Exhibit C of this Agreement will be followed in implementing the
change.
5. Where Inquiry Service is ordered by the Customer, SWBT will perform
Inquiry Service for accounts billed by SWBT, as defined in Section 2
of Exhibit C of this Agreement. Inquiry services for transmission
services will be provided at rates set forth in Schedule II attached
hereto. Billing inquiry for non-transmission services will be offered
on an ICB basis.
C. Billing Analysis Services:
Billing Analysis Service is the provision of detection, investigation
and deterrence of billing evasion activities, as described in Exhibit C
of this Agreement.
D. Billing Information Services:
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January 1991
<PAGE>
1. Billing Information Service is the provision of account and usage
information to the Customer from SWBT maintained record systems. The
types of billing information services are described in Exhibit C of
this Agreement.
2. Billing Information Service includes the provision of end users'
Billing Names and Billing Addresses. This service is described in
Exhibit C of this Agreement.
III. Rates and Charges For Services Ordered
An order form, to be separately signed by the Customer, is attached hereto
as Schedule I. SWBT will provide services specified by the Customer and
agreed to by SWBT on said Schedule I. Rates and charges applicable to the
Billing and Collection Services covered by this Agreement are attached
hereto as Schedule II. It is understood that applicable tariffs take
precedence over any and all rates and charges contained therein.
For the purposes of billing the Customer for SWBT services provided under
this Agreement, the determination of rates and charges and procedures for
intrastate messages originating and terminating in one state and billed in
another state (billing state), will be based on the rates, charges and
procedures of the billing state and subject to that jurisdiction's
regulations.
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January 1991
<PAGE>
IV. Application of Taxes to End Users when Bill Rendering Services are Ordered
by the Customer
A. Tax Reporting
SWBT provides end user billing services of the Customer's revenues for a
fee. Unless contrary to regulatory rule or order, SWBT will not report
the Customer's billed revenues as its own receipt for tax reporting
purposes.
B. Billing of Taxes
1. Unless specifically instructed otherwise in writing by the Customer,
SWBT will apply its existing tax procedures with respect to the
application, billing, recording and collection of Federal, State or
local sales, use, excise, gross receipts or other taxes or tax-like
fees (collectively, "Taxes") imposed on or with respect to existing
Customer services billed by SWBT. These procedures shall be
performed in compliance with the respective Federal, State and local
laws. SWBT will comply with changes in the law affecting its
existing tax procedures.
2. The Customer shall have the right, upon written request, to review
SWBT's existing tax procedures
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January 1991
<PAGE>
and SWBT will supply the customer with written documentation regarding
the tax procedures (for example, taxability decision guidelines or
tables, and tax rate tables). Upon completion of its review, the
Customer may request changes through existing time and cost procedures
defined in Section 9, Exhibit C, of this Agreement, to SWBT's existing
tax procedures insofar as the Customer's services are concerned, it
being understood that the parties will use best efforts to conclude the
changes within thirty (30) days of the Customer's request.
3. With respect to changes in the law, SWBT will make its best efforts to
make the necessary system modification to implement the change prior to
the effective date. Whenever SWBT estimates that the time required for
it to implement a change in the law would preclude its implementation by
the statutory effective date, SWBT will apply to the taxing authority
for an appropriate extension of the effective date of a change.
4. In instances where implementation of a change is not complete by the
agreed upon implementation date, because of the negligence of SWBT, SWBT
agrees to hold the Customer harmless from and against any liability or
loss resulting from any tax, penalty, interest, additions to tax,
surcharges or other charges payable or incurred by the
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January 1991
<PAGE>
Customer as a result of SWBT's negligent delay in implementation. In
addition, SWBT will provide a report to the Customer of the
Customer's revenue by jurisdiction, together with a statement of
Taxes actually billed in that jurisdiction and Taxes which would have
been billed had implementation occurred by the effective date. SWBT
may back bill for any such tax change.
5. Where, through no negligence of SWBT, implementation of a change is
not complete by the statutory effective date, and the Customer
requests back billing to the end users, SWBT will undertake back
billing where feasible through existing time and cost procedures
defined in Section 9, Exhibit C of this Agreement.
C. Tax Exemption
1. SWBT, in its performance of services herein, will maintain end user
provided exemption certificates. Unless the Customer requests
otherwise, SWBT will use the end user provided exemption certificates
as a basis for exempting end users from Taxes on the Customer's
services. The Customer understands that SWBT makes no warranty as to
the validity of the end user certificates and that the Customer
relies upon SWBT's use of the certificates at the Customer's own
risk.
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January 1991
<PAGE>
2. The customer may review information relating to end user's exemption
status and require that SWBT reverse the exempt status for purposes
of the Customer's services if the Customer provides SWBT written
instructions to make the status change.
3. SWBT will be liable for any audit assessments and hold harmless and
indemnify the Customer if the exemption status of an end user is not
reversed in accordance with instructions issued by the Customer. To
the extent SWBT complies with the Customer's instructions, the
Customer will hold harmless and indemnify SWBT for any liability,
loss, or litigation cost, expense or fees (including reasonable
attorney's fees) arising out of or relating to the tax exempt status
of an end user aggrieved by SWBT's compliance with the Customer's
instructions.
D. Filing of Tax Returns
The Customer shall file all returns for Taxes imposed on or with respect
to the Customer's services and pay or remit all such Taxes and other
items and any applicable interest or penalties. SWBT shall furnish to
the Customer, on a timely basis, all information in SWBT's possession
reasonably necessary for the Customer to file its tax returns. The
timing for, and format of, such information shall be as specified in
Section 8 of Exhibit C of this Agreement.
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January 1991
<PAGE>
E. Tax Indemnity
The Customer agrees to indemnify and hold SWBT harmless from any
liability or loss resulting from any Tax, penalty, interest, additions
to tax, surcharges or other charges, expenses, costs (including
reasonable attorney fees) and fees payable or incurred by SWBT as a
result of:
1. The delay or failure of the Customer (not attributable to any
negligent act or omission of SWBT) to pay any Tax or such other item
or file any return or other information as required by law or this
Agreement; or
2. SWBT complying with this Agreement or with any determination or
direction by or advice of the Customer or using information provided
by the Customer in performing any tax related service.
The indemnity payable herein shall be payable in all events and without
regard to any determination that SWBT is the party obligated to collect
and remit such taxes or file the tax returns. Such indemnity shall be
provided to SWBT on an after-tax basis.
F. Tax Liability
SWBT agrees to pay and hold the Customer harmless from
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January 1991
<PAGE>
and against any liability or loss resulting from tax, penalties,
interest, additions to tax, surcharges, or other charges or payable
expenses (including reasonable attorney fees) incurred by the Customer
as a result of:
1. The willful or negligent failure of SWBT to provide the Customer
accurate information, as described in Section IV. C. above, with
which to file its tax returns and remit payment; or
2. The willful or negligent failure of SWBT to accurately calculate and
bill appropriate taxes, unless such calculations and billing were
done upon the Customer's direction or advice.
Such indemnity shall be provided to the Customer on an after-tax basis.
G. Additional Taxes
Should any Federal, State or local jurisdiction determine that
additional sales, use, or other taxes (including interest, penalties and
surcharges thereon) are due from SWBT as a result of SWBT's performance
of any obligation under this Agreement, and when said taxes have not
been paid by the Customer, SWBT will so advise the Customer. The
Customer agrees to be liable for any such tax, interest, penalties and
surcharge, but retains the right to protest the assessment.
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January 1991
<PAGE>
If the Customer disagrees with any assessment of taxes due from SWBT or
disagrees with an assessment of any additional tax, penalty, surcharge
and interest due from SWBT as a result of SWBT's performance of any
obligation under this Agreement, the Customer may, at its expense
(including payment of any such assessment, if required, prior to final
resolution of the issue), seek a ruling as to the applicability of any
such tax or to protest any assessment and participate in any legal
challenge to such assessment, but shall be liable for any tax, penalty,
surcharge and interest ultimately determined to be due. SWBT shall, when
requested by the Customer and at the Customer's expense, cooperate or
participate with the Customer in any such proceeding, protest or legal
challenge.
V. Purchase of Account Receivables
SWBT will purchase the Customer's account receivables that arise from bills
rendered by SWBT to the Customer's end users. SWBT's purchase of the
Customer's account receivables shall be with recourse (debit uncollected
charges back to the Customer). The purchase of the Customer's accounts
receivables will be as set forth in Section 6, Exhibit C of this Agreement.
VI. Service Center Procedural Guidelines
SWBT, in its performance under this Agreement, will apply
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January 1991
<PAGE>
its RSC/BSC guidelines which are used by SWBT in the conduct of its
business. A copy of the current guidelines has been provided to the
Customer, the receipt of which is hereby acknowledged. Upon reasonable
notice, these guidelines may be modified by SWBT from time to time in the
normal course of its business.
VII. Dispute Resolutions and Audits
A. Dispute Resolution. In the event of disputes that may arise under this
Agreement or the Tariff(s), the parties shall:
1. Discuss and negotiate the issues between the parties' authorized
representatives, with informal escalation within the parties'
organizations as necessary to pursue and achieve resolution as
expeditiously as possible.
2. In the event that either party determines that the informal
discussion and escalation process described in Subsection A(1),
above, is not achieving resolution, or is not proceeding
expeditiously, either party may submit the issue for resolution to an
Inter-Company Review Board consisting of one representative from each
Company at the Vice-Presidential level (or at such lower level as
each party's Vice President may delegate). The Inter-Company Review
Board may consider any material submitted to it by either
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January 1991
<PAGE>
party, which material shall be submitted within twenty business days
of a party's notification that it desires resolution by the Board.
Thereupon, and within ten (10) additional work days, the
Inter-Company Review Board shall state in writing to the parties its
resolution of the dispute. If the Board does not act as described, or
if a party is dissatisfied with the resolution of the Inter-Company
Review Board, the party may proceed to arbitration as described
below.
3. Arbitration
a. As between the parties, hereto, all questions as to rights and
obligations arising under the terms of this Agreement and its
Exhibits are subject to arbitration following decision by the
Inter-Company Review Board, except disputes involving SWBT's
actions under Sections I.-F. and I.-G. of this Agreement,
interpretations of the Modification of Final Judgment entered in
United States v. AT&T, 552 F. Supp. 131 (D.D.C.) (1982), aff'd sub
------------- ----
nom. Maryland v. United States, 450 U.S. 1001 (1983), injunctive
-------- -------------
relief sought until such time as the dispute is resolved through
arbitration, and those Tariff or other intrastate issues over
which a state PUC asserts primary jurisdiction.
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January 1991
<PAGE>
b. If a dispute should arise under this Agreement and its Exhibits,
either party (subject to 3.a. above) may within ten (10) business
days following the determination of the Inter-Company Review Board
described in paragraph (A.2) above make a written demand for
arbitration with the other party.
c. The parties may agree upon one arbitrator, but in the event that
they cannot agree there shall be three, one named in writing by
each of the parties within ten (10) business days after demand for
arbitration is given and a third chosen by the two arbitrators
named by the Parties. Should either party refuse or neglect to
appoint an arbitrator, the single named arbitrator is empowered by
both parties to proceed without the absent arbitrator(s).
d. Arbitration shall take place in the principal headquarters city of
the party with whom the demand for arbitration has been filed
under subparagraph (b) and a single hearing before the
arbitrator(s) of the matter to be arbitrated shall take place at
the time and location within said city as is mutually agreed upon
by the parties; provided however, that if the parties cannot
agree, the time and location shall be selected by the
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January 1991
<PAGE>
arbitrator(s). The parties (or the arbitrators, as appropriate)
shall select such time and location promptly, provided that the
time scheduled for the hearing shall not be later than sixty (60)
business days after the date of the parties appointment of the
arbitrator(s). Notwithstanding the above, if a dispute arises over
an issue common to two or more states in SWBT's region, and the
Customer has filed the demand for arbitration, the dispute will be
resolved at a single arbitration hearing conducted in St. Louis,
Missouri or in some other city if mutually agreed upon. If the
time and location in the city is selected by the arbitrator(s),
written notice thereof shall be given to each party at least
twenty (20) business days prior to the date so fixed. In the event
a panel of three arbitrators is necessitated by the parties'
inability to agree upon a single arbitrator, such notice of the
time and location of the hearing shall also identify the third
member of the panel.
At the hearing, any relevant evidence may be presented by either
party, and the formal rules of evidence applicable to judicial
proceedings shall not govern. Evidence may be admitted or excluded
in the discretion of the arbitrator(s). Said arbitrator(s) shall
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January 1991
<PAGE>
hear and determine the matter and shall execute and acknowledge a
binding decision in writing and cause a copy thereof to be
delivered to each of the parties within ten (10) business days of
the hearing date.
e. The determination of the panel shall be by majority vote, with
each arbitrator having a single vote, and shall be binding upon
the parties.
f. Except as they may conflict with the specific provisions contained
in this Section (VII), (A), (3), the arbitrator(s) shall conduct
the arbitration in accordance with the rules of the American
Arbitration Association.
g. The costs of such arbitration shall be borne equally by the
parties.
B. Audits and Examinations
1. SWBT Audits
a. Upon thirty (30) days' written notice by SWBT to the Customer (or
such shorter period as the Parties may agree upon), SWBT or its
authorized representative shall have the right to commence an
audit during normal business hours of such source documents,
systems,
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January 1991
<PAGE>
records and procedures as may under recognized accounting
practices contain information bearing upon the verification of
data substantiating that SWBT has in fact been provided with
annual percentages of the Customer's billing as set forth in
Schedule I of this Principal Agreement, but only by use of either
an independent certified public accounting firm or SWBT internal
auditor. No more than one (1) such audit may be conducted in any
calendar year unless otherwise agreed between the Parties.
b. Each Party shall bear its own expenses in connection with the
conduct of an audit by SWBT.
c. Materials of the Customer reviewed by SWBT in the course of an
audit shall be deemed Proprietary Information of the Customer
under Exhibit K hereto and their use shall be limited to the
conduct of the audit and preparation of a report for appropriate
distribution within SWBT to those with a need to have the results
of the audit. The Customer shall have the right to request that
such auditors conducting an audit execute a non-disclosure
agreement containing the substantive provisions of this Section
VII. The Customer shall have the right to request
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January 1991
<PAGE>
the names of all employees, agents, or contractors of both SWBT
and the independent certified public accounting firm receiving the
original or a copy of the report prepared by such auditors. If
SWBT, as a result of such audit, requests adjustments from or
otherwise makes a claim against the Customer, the Parties shall
jointly review any such report provided to SWBT by such auditors.
2. Customer Audits
a. Upon thirty (30) days' written notice by the Customer to SWBT, the
Customer's authorized representative shall have the right to
commence an audit or an examination, during normal SWBT business
hours (except as SWBT may agree to extend those hours), of such
records and accounts as may under recognized accounting practices
contain information bearing upon (a) amounts being billed to the
Customer's end users by SWBT as part of its provision of billing
and collection services, (b) the charges to the Customer
therefore, and (c) the charges for other services provided by SWBT
pursuant to this Agreement. The notice of audit or examination
shall identify the date upon which it is to commence, the
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January 1991
<PAGE>
location, the Customer's representatives, the subject matter of
the audit or examination and the materials to be reviewed. The
Customer's notice of audit or examination shall be directed in
accordance with Section XII and Schedule III of this Agreement.
SWBT may, within fifteen (15) days of receipt of the Customer's
notice of audit or examination, postpone the commencement of the
audit or examination for a period not to exceed sixty (60) days,
but only in the event of extenuating circumstances, which
circumstances shall be specified in writing by SWBT. SWBT shall
also indicate the date to which commencement of the audit is
postponed. No more than one audit or examination may take place at
one time, if the simultaneous audits or examinations would involve
the same SWBT functional group(s).
The Customer will accommodate SWBT in the event that two or more
Billing and Collection Customers have requested audits or
examinations during the same general time period. Because a
Customer audit requires significant SWBT time and expense, the
Customer will not request an excessive number of audits. Unless
SWBT agrees to otherwise, Customer audits conducted more
frequently than on an annual basis will be considered
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January 1991
<PAGE>
excessive. The Customer may conduct examinations of specific areas
of potential discrepancy under dispute as required and as agreed
to by SWBT.
b. Expenses
Each party shall bear its own expenses in connection with the
conduct of the audit or examination. Special data extractions and
any requested extraction of commingled information will be paid by
the Customer. For purposes of this subsection, a "special data
extraction" shall mean the creation of an output record, from
existing data files, that is not normally created (as requested by
the Customer) from software programs that are currently resident
on the production program library. In the event that the Customer
requests development of an audit or examination type software
program(s), the cost for program development and CPU time will be
paid by the Customer at rates and charges as specified in Schedule
II, attached hereto. SWBT will provide to the Customer all
documentation of said program(s) as well as all copies of the
program(s) at the conclusion of the audit or examination. The
Customer may return the program(s) for use in later audits or
examinations; however, any necessary modifications will involve
additional cost to the
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January 1991
<PAGE>
Customer.
c. Adjustments
For audits unrelated to dispute proceedings, corrective action on
audit or examination discrepancies shall be initiated within
thirty (30) days of the submission of a claim based upon an error
or omission disclosed by the audit or examination or thirty (30)
days after the resolution of a claim which is contested. For all
other audits, the Settlement Terms of Exhibit C Section 6 shall
govern payment terms of any amounts owed.
d. SWBT Information Obtained During Audits and Examinations
Information of SWBT or of third parties which is received or
reviewed by the Customer in the course of the audit or examination
shall be deemed confidential and the use of such information by
the Customer shall be limited to the conduct of the audit or
examination, preparation of a report for appropriate distribution
within the Customer's company to those with a need to have the
results of the audit or examination, and making of claims and/or
adjustments.
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January 1991
<PAGE>
VIII. Liability and Indemnification
A. Limitation of Liability. Except as otherwise provided in this
Agreement, each Party's liability to the other (as distinct from a
Party's obligation to pay for services provided pursuant to this
Agreement) for any loss, cost, claim, injury, liability, or expense,
including reasonable attorneys' fees, relating to or arising out of
any negligent act or omission in its performance of this Agreement
(not involving knowing and willful misconduct) shall be limited to
the amount of direct damage actually incurred. A party shall not be
liable for its inability to meet the terms of this Agreement where
such inability is caused by failure of the other party to provide,
after receipt of a written request, the information necessary to
allow the first party to comply with the obligations stated herein.
Absent knowing and willful misconduct, neither party shall be liable
to the other for any indirect, special, or consequential damage of
any kind whatsoever. Direct damages include (a) in the case of loss
of data or information to be supplied to the Customer, SWBT's charges
for such data or information, and (b) to the extent that SWBT's act
or omission precludes rendition of end user bills, the revenue which
would have been due the Customer but for SWBT's act or omission. The
parties agree to use their best efforts to mitigate damages.
-34-
January 1991
Revised October 1991
<PAGE>
B. Indemnification.
1. Except as otherwise provided in this Agreement, without regard to
whether services are provided under Tariff or contract, each party
(the "Indemnifying Party") will indemnify and hold harmless the
other party ("Indemnified Party") from and against any loss, cost,
claim, liability, damage expense (including reasonable attorney's
fees) to third parties, relating to or arising out of negligence
or misconduct by the Indemnifying Party its employees, agents, or
contractors, and associated with this Agreement. In addition, the
Indemnifying Party will defend any action or suit brought by a
third party against the Indemnified Party for any loss, cost,
claim, liability, damage or expense relating to or arising out of
the negligence or misconduct of or by the Indemnifying Party, its
employees, agents, or contractors, under this Agreement.
The Indemnified Party will notify the Indemnifying Party promptly
in writing of any written claims, lawsuits, or demand by third
parties for which the Indemnified Party alleges that the
Indemnifying Party is responsible under this section and tender
the defense of such claim, lawsuit or demand to the Indemnifying
Party. The
-35-
January 1991
<PAGE>
Indemnified Party also will cooperate in a reasonable manner with
the defense or settlement of such claim, demand or lawsuit. The
Indemnifying Party will not be liable under this subparagraph for
settlements by the Indemnified Party of any claim, demand or
lawsuit unless the Indemnifying Party has approved the settlement
in advance or unless the defense of the claim, demand or lawsuit
has been tendered to the Indemnifying Party in writing and the
Indemnifying Party has failed promptly to undertake the defense.
(For End User Service Denial Liability see Section XXII; For
Customer Agency Billing Liability see Section XXIV.)
2. Notwithstanding any other provision of this Section VIII, the
parties acknowledge that SWBT has no knowledge of the validity of
message payment obligations (billing charges) sent to SWBT for
billing and collections under this Agreement, and that SWBT
therefore strictly relies upon the Customer to forward only
correct billing charges that can be, if necessary, substantiated
in a court of law.
Upon request, the Customer will provide to SWBT all evidence
needed to sustain billing charges challenged by an end user, and
SWBT may adjust said charges with recourse if the Customer fails
-36-
January 1991
<PAGE>
to do so. The Customer certifies, when forwarding billing charges
to SWBT, that said charges are true and correct, and accurately
reflect proper charges legally owed by the billed party (end
user). This Customer certification of validity shall apply to all
billing charges forwarded to SWBT under this Agreement by the
Customer from whatever source. Should SWBT incur liability for
billing and collection of any billing charges forwarded by the
Customer, or for termination of an end user's local phone service
as part of said collection, or for defamation or libel or injury
to credit or otherwise incurs liability arising from or resulting
from SWBT performance of its obligations under this Agreement, the
Customer will defend, indemnify, and hold harmless SWBT for any
loss, cost, claim, damage or expense (including reasonable
attorney fees) rising from such billing and collection, so long as
SWBT has acted in reasonable conformity with this Agreement.
IX. Proprietary Information
Attached to this Agreement as Exhibit A is the parties' understanding
with respect to Proprietary Information.
X. Amendments: Waivers
This Agreement or any part thereof may be modified by
-37-
January 1991
<PAGE>
written amendment signed by both parties. No amendment or waiver of any
provision of this Agreement and no consent to any default under this
Agreement shall be effective unless the same shall be in writing and
signed by or on behalf of the party against whom such amendment, waiver
or consent is claimed. In addition, no course of dealing or failure of
any party to strictly enforce any term, right or condition of this
Agreement shall be construed as a waiver of such term, right or
condition.
XI. Assignment
Any assignment, in whole or part, by either party of any right,
obligation, or duty, or of any other interest hereunder, without the
written consent of the other party shall be void. Such written consent
shall not be unreasonably withheld or delayed. All obligations and
duties of a party to this Agreement shall be binding on all successors
in interest and assigns of such party.
XII. Notice and Demands
Except as otherwise provided under this Agreement, all notices, demands,
or requests which may be given by a party to the other party shall be in
writing and shall be deemed to have been duly given on the date
deposited, postage prepaid, in the United States mail via Certified
Mail, return receipt requested, and addressed as indicated on Schedule V
attached hereto.
-38-
January 1991
<PAGE>
XIII. Third-Party Beneficiaries
This Agreement shall not provide any non-party with any remedy, claim,
liability, reimbursement, claim of action or other right.
XIV. Governing Law
This Agreement shall be governed by the domestic laws of the State of
Missouri.
XV. Force Majeure
Neither party shall be held responsible for any delay or failure in
performance of any part of this Agreement to the extent that such delay
or failure is caused by fire, flood, epidemic, explosion, war, terrorist
acts, riots, insurrections, explosions, earthquakes, nuclear accidents,
power blackouts, strike, embargo, government requirement, civil or
military authorities, Act of God or by the public enemy, or other causes
beyond their control. If any force majeure condition occurs, the party
delayed or unable to perform shall give immediate written notice to the
other party. During the tendency of the force majeure the duties of the
parties under this Agreement shall be abated and shall resume without
liability thereafter.
XVI. Entire Agreement
-39-
January 1991
<PAGE>
This Agreement and it Schedules, and Exhibits, (and Amendments, if any)
attached hereto, constitute the entire understanding between the parties
and supersedes all prior understandings, oral or written presentations,
statements, negotiations, proposals and undertakings with respect to the
subject matter hereof.
XVII. Severability
Nothing in this Agreement is intended to obligate either party to
perform any act which is illegal or which is contrary to regulatory rule
or order, to the MFJ, or to public policy. If any provision of this
Agreement is held invalid, unenforceable or void, the remainder of the
Agreement shall continue in full force and effect, provided the
remainder allows for implementation or continuation of Billing and
Collection Services essentially as contemplated herein.
XVIII. Executed in Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together
constitute but one and the same document.
XIX. Headings
The headings and numbering of Sections and Paragraphs in this Agreement
are for convenience and shall not be
-40-
January 1991
<PAGE>
construed to define or limit any of the terms herein or affect the
meanings or interpretation of this Agreement.
XX. Termination of Service
A. If either party fails to perform under the terms of this Agreement
and remains in substantial and material non-compliance after receipt
of thirty (30) days written notice of non-compliance from the
non-breaching party this Agreement is terminated. Not withstanding
the foregoing, any breach of sections I-F and I-G defined herein must
be cured within ten (10) days. Upon termination, minimum annual
purchase of service charges for the current year and all remaining
years will be waived if SWBT is the breaching party. In that event,
SWBT would be liable for the Customer's reasonable increased billing
expense, if any, for a period of eight (8) months subsequent to
termination or the remaining term of the Agreement, whichever is
less. If the Customer is the breaching party. The Customer will
immediately (1) pay SWBT the recalculated amount for services which
have been provided to the Customer under this Agreement in accordance
with Section B.2 following and (2) will also be liable for eight (8)
months of the Customer's average service charges as provided by SWBT
under this Agreement. SWBT will determine the eight (8) months of
average service charges due by recalculating the service charges in
accordance with Section B.2 following for the eight
-41-
January 1991
<PAGE>
(8) month period immediately preceeding the termination of the
Agreement. In the event that termination occurs prior to eight (8)
months of service, the parties agree to use an eight (8) month
prorate of the annual minimum purchase of service.
B. Notwithstanding Paragraph A. above, either party may at its sole
discretion, and with eight (8) months' notification to the other
Party, terminate this agreement in its entirety.
1) In the event that SWBT elects to terminate this Agreement,
Customer minimum annual purchase of services for the current year
and all remaining contract years will be waived.
2) Should the Customer elect to terminate this Agreement prior to the
completion of the term ordered by the Customer, services which
have been provided to the Customer under this Agreement as of the
date of termination will be recalculated (using rates shown on
Schedule II, Billing and Collection Services Standard Price List)
and the Customer will immediately pay to SWBT an amount based on
the following:
a) For a three (3) or five (5) year contract term, if Customer
termination occurs within twenty-three (23) months following
the effective date of this Agreement, the one (1)
-42-
January 1991
<PAGE>
year contract rates, as shown in Schedule II,Billing and
Collection Services Standard Price List shall apply.
b) For a five (5) year contract term, if Customer termination
occurs more than [twenty-four (24) months, but less than
forty-eight (48) months following the effective date of this
Agreement, the three (3) year contract rates, as shown in
Schedule II, Billing and Collection Services Standard Price
List shall apply.
c) For those Customers who have elected the Volume Discount
Pricing Plan-I, termination of services which occur during
years one (1) through four (4) of this Agreement will be
handled as defined in Section XX-(2)-(a) and (b) above. If
termination occurs more than forty eight (48) months following
the execution of this Agreement, the five year contract rates
as shown on Schedule II, Billing and Collection Services
Standard Price List of the Agreement shall apply not to exceed
the amount required to bring the total payments to the contract
guarantee level committed by the Customer on Schedule I,
paragraph 6-b.
d) In addition, to any adjustment made pursuant
-43-
January 1991
<PAGE>
to (a) or ( b) above; the Customer's will pay the minimum
purchase of service for that year in which termination occurs.
The terminating Customer will not be responsible for minimum
purchase of services, in subsequent years.
XXI. Certification Requirements
The Customer states that it has obtained all necessary jurisdictional
certification required in those jurisdictions in which the Customer has
ordered Billing and Collection service(s). The Customer certifies that,
if the Customer should forward to SWBT any billing originating from a
third party (whether the Customer has purchased said billing or is
acting as a billing agent), the Customer will insure that the
originating service provider has obtained all required certification for
those jurisdictions in which said end user billing will be processed.
The Customer will provide evidence of all such certifications at the
request of SWBT.
The Customer will provide to SWBT the name, address and contact number
of all originating service providers and will give SWBT thirty (30) days
advance written notification of all additions, changes, or deletions of
originating service providers.
Failure of the Customer to obtain or retain proper jurisdictional
certification may result in service termination as described in Section
XX. A. of this
-44-
January 1991
<PAGE>
Agreement.
XXI. End User Service Denial
This Agreement does not obligate SWBT to terminate end user services for
non-payment of non-transmission charges, or of transmission charges in
unique end user situations. Upon completion of SWBT collection
procedures for non-payment of such charges, SWBT may adjust such charges
with recourse to the Customer.
XXIII. Term
The term of this Agreement is shown on Schedule I attached hereto. The
term of this Agreement is five (5) years for those Customers who have
elected the Volume Discount Pricing Plan. Billing and collection
services will be extended on a year-to-year basis thereafter unless
either party gives notice, no less than ninety (90) days prior to the
completion of the term, these services shall not be extended. If this
notice is not given, the terms and conditions under which billing and
collection services are provided to other Customer at this time,
including one (1) year contract rates and one (1) year minimum purchase
of service charges available at that time to other Customers, will be
applied to this Agreement.
XXIV. Customer Agency
-45-
January 1991
<PAGE>
The customer will forward only its billing for SWBT processing unless
---
the Customer notifies SWBT to the contrary in writing. For the purposes
of this paragraph, should the Customer forward billing of a third party,
such billing will be considered the Customer's billing.
Should a Customer act as an agent for a third party and forward said
billing to SWBT or should the Customer purchase billing from a third
party and forward said billing to SWBT, the Customer shall remain solely
responsible to such third parties. The Customer agrees to protect,
indemnify, and hold harmless SWBT for any and all claims by third
parties regarding such third parties' billing forwarded to SWBT by the
Customer.
XXV. Publicity
Neither party shall publish or use advertising, sales promotions, press
releases, or matters wherein the other party's name or marks are
mentioned or language from which association with the other party's name
or mark therewith may be inferred or implied without the other party's
prior written approval.
XXVI. Compliance with Law
Both parties agree that they will comply with the provisions of the Fair
Labor Standards Act of 1983, as amended, and all other applicable
federal, state and local laws, ordinances, regulations and codes with
which
-46-
January 1991
<PAGE>
they are obligated to comply in their performance hereunder, including
the procurement of required permits and certificates. Both parties
further agree not to discriminate against any employee or applicant for
employment because of race, color, religion, sex, national origin, age
or handicap, and shall during the performance of this Agreement comply
with all applicable federal and state laws and regulations on this
subject.
All employees or agents of SWBT engaged in the performance of this
Agreement shall be considered solely the employees of SWBT and shall not
be considered employees or agents of the Customer for any purpose
whatsoever.
-47-
January 1991
<PAGE>
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first written above.
SOUTHWESTERN BELL
TELEPHONE COMPANY TELCO DEVELOPMENT GROUP OF DELAWARE, INC.
-----------------------------------------
(Name of Customer)
By /s/ Sandy Kinney By /s/ Henry Luken
------------------------ ------------------------
(Signature) (Signature)
Name Sandy Kinney Name Henry Luken
------------------------ ------------------------
(Printed) (Printed)
Title Vice Pres.-Inter-Ind. Title Chairman of the Board
Mktng. & Sales ------------------------
------------------------
Date 12/16/94 Date 12/2/94
------------ ------------
-48-
January 1991
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule I Order for Billing and Collection Services
Schedule II Billing and Collection Services Price List
Schedule III Start-Up Charge
Schedule IV Minimum Annual Purchase of Service
Schedule V Notice and Demand List
-49-
January 1991
<PAGE>
LISTS OF EXHIBITS
-----------------
To Agreement For The Provision of
Billing and Collection Services
1. Exhibit A Proprietary Information
2. Exhibit C Billing and Collection Services Requirements Document
-50-
January 1991
<PAGE>
AMENDMENT TO THE AGREEMENT FOR THE
PROVISION OF BILLING AND COLLECTION SERVICES
This is an Amendment to the "Agreement for the Provision of Billing and
Collections Services" (this "Amendment"), dated as of December 19, 1994 is by
----------- --
and between Telco Development Group of Delaware ("Customer") and Southwestern
-----------------------------------
Bell Telephone Company, a Missouri Corporation (SWBT).
Whereas, the Customer and SWBT entered into that certain Agreement for the
Provision of Billing and Collections Services on or about December 16, l994 (as
----------- --
heretofore amended or otherwise modified, the "Agreement").
Whereas, the Customer desires to submit non-transmission services billings which
are 25% or more of customer's total billed revenues, and SWBT desires to provide
or Continue to provide billing services for such non-transmission services
billings and the parties agree that the calculation of the reserve requirement
will be modified with respect to such billings.
Now therefore, for good and valuable consideration, the Customer, and SWBT agree
as follows:
I. DEFINITIONS
1. Capitalized Terms. Unless otherwise indicated or required by the
-----------------
context herein, capitalized terms used herein shall have the same
meaning as that specified in the Agreement.
II. RESERVE
1. The reserve requirement defined in the Agreement (Sections 6.1.4 or
6.6.2 of Exhibit C) is hereby clarified to expressly include as
realized uncollectibles, those revenues adjusted through SWBT's
Uncollectible Apportionment System (UAS) on final accounts at
write-off, and modified to include the average of adjustments
experienced in one month for non-transmission services billings with
respect to live accounts.
2. With regard to the quarterly true-up, the Customer and SWBT agree
that the procedures set forth in Sections 6.1.3.A, 6.1.4 or 6.6.1 and
6.6.2 of Exhibit C of the Agreement will apply in establishing an
initial uncollectible bad debt allowance factor and quarterly
true-up.
III. PHASED IN ESTABLISHMENT OF RESERVE FACTOR
1. In order to establish the above described reserve, SWBT shall
calculate (1) the average amount of uncollectibles experienced with
respect to two months of transmission billings (2) the average amount
of uncollectibles experienced at write-off with respect to two months
of non-transmission services billings and (3) the average amount of
live adjustments experienced with respect to one month of
non-transmission services billings.
<PAGE>
-2-
The sum of (1), (2) and (3) will be divided by the most recent three
months' of total billed revenues (both transmission and
non-transmission services billings) to arrive at an uncollectible bad
debt allowance factor. Said factor shall be applied against total
billed revenues for three months until a satisfactory reserve is
established.
2. SWBT reserves the right to increase the reserve amount, if the
customer's uncollectibles and/or adjustments with respect to
non-transmission services billings fluctuates to such an extent that
the reserve no longer appears sufficient to cover the projected bad
debt.
IV. PURCHASE OF ACCOUNTS RECEIVABLE
1. The Customer agrees to submit new billings to SWBT no less frequently
than once a week.
2. The Customer and SWBT agree that in the event the calculation of any
Purchase of Accounts Receivable, as defined in Exhibit C, results in
a negative amount due the Customer, SWBT may hold payment of any
pending account receivable purchase(s), otherwise due to the
Customer, without penalty until such time as the Customer submits new
billings which are sufficient to result in SWBT's calculation of a
subsequent Purchase of Accounts Receivable with a positive amount due
the Customer, taking into account the negative amount due from prior
purchases.
3. If the Customer fails to submit sufficient new billings within thirty
(30) days of the date from which the Purchase of Accounts Receivable
resulted in a negative amount due the Customer, SWBT at its option,
may reduce the amount of any prior accounts receivable purchase(s) by
the current amount due from the Customer.
4. The Customer and SWBT agree that the payment date for accounts
receivable purchase(s) suspended for payment by SWBT as defined in
IV.2 and IV.3 above, will be due the Customer five additional work
days from the date on which a positive amount due is calculated or
five additional work days from the original payment date, whichever
is later.
V. AGREEMENT PROVISIONS
Except as expressly provided herein, or to the extent that they are
inconsistent with the provisions of this Amendment, the provisions of
the Agreement shall remain in full force and effect.
<PAGE>
-3-
IN WITNESS WHEREOF, the Customer and SWBT have caused this amendment to be
signed and delivered by their duly authorized representatives, all as of the
date set forth above.
SOUTHWESTERN BELL Telco Development Group of Delaware
TELEPHONE COMPANY -----------------------------------
By: /s/ James R. Oxler By: /s/ Henry G. Luken, III
---------------------------- ----------------------------
NAME: James R. Oxler NAME: Henry G. Luken, III
---------------------------- ----------------------------
TITLE: Director-Billing & Coll. TITLE: Chairman of the Board
---------------------------- ----------------------------
DATE: 12-19-94 DATE: November 22, 1994
---------------------------- ----------------------------
RETURN SIGNED AMENDMENT TO:
- ---------------------------
Southwestern Bell Telephone Company
Attention: James R. Oxler
One Bell Center, 7-D-7
St. Louis, MO 63101
<PAGE>
Attachment
EXPANDED BILLING ADDITIVE PRICE SCHEDULE
Expanded Message Billing Additive Charge
Per Message Billed
<TABLE>
<CAPTION>
End User Service Charge Additive Charge
<S> <C>
$0.00 - $5.00 $0.00
$5.01 - $10.00 $0.03
$10.01 - $20.00 $0.10
$20.01 - $50.00 $0.25
$50.01 - $100.00 $0.75
$100.01 - $150.00 $1.00
$150.01 - $300.00 $2.00
$300.01 + $10.00
</TABLE>
* SWBT reserves the right to change price with 30 days written notice.
<PAGE>
SCHEDULE I
PAGE 1 OF 3
ORDER FOR BILLING AND COLLECTION SERVICES
1. This will acknowledge that TELCO DEVELOPMENT GROUP OF DELAWARE, INC.
-----------------------------------------
(Interexchange Carrier Name)
has entered into the Agreement for Southwestern Bell Telephone Company
("Telephone Company") to provide Billing and Collections Services effective
12/16/94, except Kansas Intrastate (whose effective date which will be
--------
twenty (20) days after the submission of this Agreement to the Kansas
Corporation Commission), for a period of one (1) year , three (3) years
-----
, five (5) years X . Kansas Intrastate will expire coincidentally
----- -----
with the remainder of this Agreement on .
----------------------
2. Order for interstate and intrastate Billing and Collections Services.
<TABLE>
<CAPTION>
All 5
States ARK KAN MO OK TX
<S> <C> <C> <C> <C> <C> <C>
Recording Service
- ----- ----- ----- ----- ----- ----- -----
Message Processing
- ----- (Rating) Service ----- ----- ----- ----- ----- -----
X Message Bill Processing
- ----- (Billing) Service X
----- ----- ----- ----- ----- -----
X Volume Discount Pricing Plan-I (Schedule II-a)
-----
Flexible Volume Discount Pricing Plan (Schedule II-b)
-----
Inquiry Service
----- ----- ----- ----- ----- ----- -----
X CMDS Hosting X
----- ----- ----- ----- ----- ----- -----
X Sub-Entity Detail X
----- ----- ----- ----- ----- ----- -----
Message Billing
----- Information Services
----- ----- ----- ----- ----- -----
Bill Data
----- ----- ----- ----- ----- ----- -----
Marking Data
----- ----- ----- ----- ----- ----- -----
X Stand-Alone Billing
- ----- Information Services
Customer Name & Address
----- ----- ----- ----- ----- ----- -----
(CNA) Service
----- ----- ----- ----- ----- -----
X Billing Name & Address
----- (BNA) Service X
----- ----- ----- ----- ----- -----
Billing Analysis (Fraud
----- Investigation) Service
----- ----- ----- ----- ----- -----
</TABLE>
NOTES:
- ------
For a customer to order "Inquiry Service", "CMDS Hosting", "Sub-Entity
Detail" or "Message Billing Information Services", they must also subscribe
to "Message Bill Processing (Billing) Service".
"Recording Service", "Message Rate processing (Rating) Service" or
"Stand-Alone Billing Information Services" may be ordered without any other
services being subscribed to.
Page 1
<PAGE>
SCHEDULE I
PAGE 2 OF 3
ORDER FOR BILLING AND COLLECTION SERVICES
-----------------------------------------
3. Percent Interstate Usage (PIU)
<TABLE>
<CAPTION>
Arkansas Kansas Missouri Oklahoma Texas
<S> <C> <C> <C> <C>
60 60 60 60 60
-------- -------- -------- -------- --------
</TABLE>
4. Intrastate Capacity Ordered in Texas
------------------------------------
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 Year 4 Year 5
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
A. Message
Processing
(Rating) 0 0 0 0 0
--------- --------- --------- --------- --------
B. Message
Bill Proc.
(Billing) 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000
--------- --------- --------- --------- ---------
</TABLE>
5. New Customer's Bill Rendering Services Start-up Charge
------------------------------------------------------
The start-up payment as calculated from Schedule III of this Agreement is
$32,000 Thirty Two Thousand Dollars. THIS PAYMENT MUST BE MADE WITHIN THIRTY
------- ---------------------------
(30) DAYS OF THE EFFECTIVE DATE OF THIS AGREEMENT, see Section I-B of this
Agreement.
6. Guaranteed Minimum Purchase of Service
--------------------------------------
a. The Customer guarantees SWBT the following minimum purchase of service
for each year of this Agreement, as calculated from Schedule IV of this
Agreement. See Section I-C of this Agreement.
Year 1 80,000
----------------
Year 2 80,000
----------------
Year 3 80,000
----------------
Year 4 80,000
----------------
Year 5 80,000
----------------
Page 2
<PAGE>
SCHEDULE IV
MINIMUM ANNUAL PURCHASE OF SERVICE Page 1 of 1
----------------------------------
Billing and Collections Bill Rendering Services Minimum Annual Purchase of
Service Requirement:
Term of the Agreement:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years
---------- ---------- ----------
<S> <C> <C> <C>
Five State Annual Minimum $60,000.00 $70,000.00 $80,000.00
(Includes SWBT General Headquarters Costs)
</TABLE>
When Bill Rendering Services is not ordered
in all five states, a reduction of Annual
Minimums (for those states where Bill
Rendering Services is not ordered) will
-- ---
be calculated as follows:
<TABLE>
<CAPTION>
If Applicable,
--------------
Reduction for State(s) Not Ordered
Not Ordered State 1 Year 3 Years 5 Years Subtract From Above
- ----------- ----- ------ ------- ------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arkansas $-7,000.00 $-8,000.00 $-9,500.00
- ----------- ----------- ----------- -----------
Kansas -7,000.00 -8,000.00 -9,500.00
- ----------- ----------- ----------- -----------
Missouri -6,500.00 -7,500.00 -8,500.00
- ----------- ----------- ----------- -----------
Oklahoma -6,000.00 -7,000.00 -8,000.00
- ----------- ----------- ----------- -----------
Texas -23,000.00 -27,000.00 -30,000.00
- ----------- ----------- ----------- -----------
Customer Annual Minimum Purchase of Service $80,000.00
----------- ----------- -----------
</TABLE>
Page 1
<PAGE>
SCHEDULE V
PAGE 1 of 1
NOTICE AND DEMAND LIST
CUSTOMER Contact Name Mark Stodter
- -------- ---------------------------
Title CHIEF OPERATING OFFICER
---------------------------
Address 4219 Lafayette Center Drive
---------------------------
Chantilly, VA 22021
---------------------------
Telephone Number (703) 631 5600
---------------------------
SWBT Contact Name Randy Gasswint
- ---- ---------------------------
Title Account Manager
---------------------------
Address 208 S. Akard, Rm 532
---------------------------
Dallas, TX 75202
---------------------------
Telephone Number 214-414-5670
---------------------------
Page 1
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule I Order for Billing and Collection Services
Schedule II Billing and Collection Services Price List
Schedule III Start-Up Charge
Schedule IV Minimum Annual Purchase of Service
Schedule V Notice and Demand List
49
January 1991
<PAGE>
LISTS OF EXHIBITS
-----------------
To Agreement For The Provision of
Billing and Collection Services
1. Exhibit A Proprietary Information
2. Exhibit C Billing and Collection services Requirements
Document
50
January 1991
<PAGE>
Exhibit 10.13
ONE PLUS
BILLING AND INFORMATION MANAGEMENT
SERVICES AGREEMENT
This Billing and Information Management Services Agreement (the "Agreement") is
entered into this 30th day of December, 1995, by and between Telco Development
Group of Delaware, Inc. ("TDD"), a Delaware corporation and Telco Communications
Group, Inc., a Virginia corporation ("Customer").
WITNESSETH:
WHEREAS, Customer is engaged in the business of providing certain
telecommunication services for which Customer desires to bill and collect for
these products and services through the Local Exchange Carriers ("LECs"); and
WHEREAS, TDD has entered in Billing and Collections Agreements with certain
LEC's that permits TDD to submit qualified call detail records for itself and
its Customers, and
WHEREAS, TDD has put in place certain infrastructure which allows TDD to provide
accounting and information management; and
WHEREAS, Customer desires to take advantage of the TDD infrastructure.
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
agreements contained herein and other good and valuable considerations, the
receipt and sufficiency of which is hereby acknowledged, do hereby agree as
follows:
Section 1 Definitions.
------------
As used in this Agreement, the following terms shall have the meanings set forth
below, unless the context otherwise requires:
Bad Debt: See Uncollectible Amounts and Written-Off Accounts.
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Billing Telephone Company (BTC): See Local Exchange Carrier.
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BOC: Bell Operating Company.
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Business Day: A day other than Saturday and Sunday on which commercial banks are
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open in the State of Virginia.
Claim: Claim, loss, liability, damage, cost, correction and expense, and whether
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ordinary, special, consequential or otherwise.
Casual Operator Services (OS) Telephone Traffic: Casual operator assisted
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telephone calls that originate from locations where Customer is the
presubscribed direct dial IXC or reseller of direct dial IXC services and the
OS telephone calls are billed: (i) to the originating telephone number, (ii)
collect to the terminating telephone number, (iii) to a third telephone number
other than the originating or terminating telephone number, or (iv) to a LEC or
IXC calling card.
EMI Billing Record: Computer readable records containing the billing data for
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Customer's Qualifying MTS calls, in the Bellcore EMI (electronic message
interface) format, for which each LEC has the capability of processing through
its billing and collection systems.
End User: A natural person, partnership, corporation, business trust, joint
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stock company, trust, unincorporated association, joint venture, governmental
agency or instrumentality, or other entity that subscribes to or uses Customer's
telecommunication services.
FCC: The Federal Communications Commission.
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Foreign Intrastate Taxes: Those applicable taxes for OS and Travel Card calls
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originating and terminating in the same state but billed in another state as
described in Section 9 herein.
Independent Telephone Companies: Those LECs that are not BOCs, which presently
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include, subject to revision by TDD from time to time: General Telephone
Operating Companies (GTOCs) United Telecommunications Operating Companies
(United) Altel, the alliance of Independent Telephone Companies through
Independent NEA Services, and U.S. Intelco.
Interexchange Carrier (IXC): Those telephone companies, other than the LECs,
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that can provide intraLATA (where applicable) interLATA, interstate and
international telecommunications service.
LEC Processing Fees: As described in paragraph 4(c)(i) and 4(f).
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Local Exchange Carrier (LEC): Any one of the local telephone companies providing
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intraLATA exchange telephone services.
MTS (Message Telephone Services): Direct-dialed or operator assisted
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station-to-station or person-to-person telephone calls billed: (i) to she
originating telephone number, (ii) collect to the terminating telephone number,
(iii) to a third telephone number other than the originating or terminating
telephone number, or (iv) to an LEC calling card or an IXC travel card.
"Enhanced Telecommunications Services" or "Information Services" are not
considered MTS calls herein and cannot be billed under this Agreement.
One Plus Telephone Traffic: Direct dialed telephone calls which: (i) originate
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from an equal access end office, (ii) are billed to the originating telephone
number or (iii) are billed to an IXC travel card issued by Customer.
Post Billing Adjustment or Credit: Credit or rate adjustments applied to an
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End User's account by the LEC or by TDD.
Qualifying Message Telephone Service (Qualifying MTS): Casual OS Telephone
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Traffic and One Plus Telephone Traffic which are not of objectionable content as
set forth in paragraph 7(g) of this Agreement.
RBOCs: Regional Bell Operating Companies.
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Submission Date: As described in paragraph 3(a).
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Tariffs: The rates, terms and conditions for providing intraLATA, interLATA
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intrastate, interstate, and international telecommunication services as
authorized and filed with the FCC or with state and local regulatory
authorities.
Taxes: The word "Taxes" shall mean all those taxes and tax-like surcharges
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described in paragraph 9(a) herein.
Unbillable Records: Those EMI Billing Records that pass TDD's edits and are
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submitted to the LECs for billing and collection but subsequently fail the LEC's
edits and are not posted to an End User's account by the LECs.
Uncollectible Amounts: Those amounts that are billed to an End User's account
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for Customer's Valid EMI Billing Records but are not collected due to the End
User receiving a Post Billing Adjustment or Credit to its bill or the End User
failing to pay its bill to the LEC and the account subsequently being written
off as Bad Debt by the LEC.
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TDD Rejected Records: Those EMI Billing Records that fail TDD's edits and
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are returned to Customer and not submitted to the LECs for billing and
collection.
Valid EMI Billing Records: As described in paragraph 3(b).
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Written-Off Accounts: Those End Users' accounts that are not paid by the
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End Users and are subsequently written off as Bad Debt by the LECs.
Section 2 Scope of Agreement.
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Customer agrees to purchase from TDD the services described in Section 3
herein and TDD agrees to provide the services described herein to Customer
at the time and in the manner. and subject to the terms and upon the
conditions, set forth herein. Customer agrees that TDD shall be the
exclusive sources for LEC billing and information management services in
the United States and Canada for the billing telephone companies listed in
Exhibit A. However, nothing contained herein shall be interpreted to
prohibit Customer from contracting directly with any LEC for its own direct
LEC billing and collection agreement, provided that Customer shall notify
TDD of its intent at least sixty (60) days prior to activation of such
agreement. As TDD enters into additional billing and collection
arrangements with additional LECS, TDD will provide billing and information
management services to Customer for such LECs on the same terms and
conditions as contained herein.
Section 3 Billing Services.
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(a) Submission of EMI Billing Records. Customer shall submit to TDD its EMI
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Billing Records for its Qualifying MTS calls for TDD to submit to each
LEC under contract with TDD. Customer shall be responsible for submitting
to TDD EMI Billing Records that contain adequate information so that TDD
and the LECs can process such EMI Billing Records. Customer shall submit
it, EMI Billing Records to TDD once per week, except when Customer cannot
satisfy TDD'S minimum volume requirements as described in paragraph 7(f) in
which case Customer shall submit its EMI Billing Records at least once per
month. The cost of these submissions shall be borne by Customer. The date
TDD receives Customer's EMI Billing Records will be, for those records, the
"Submission Date."
(b) TDD's Edits. Upon receipt of Customer's EMI Billing Records, TDD will
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promptly process Customer's EMI Billing Records through TDD's computer
edits. Those EMI Billing Records that pass TDD's edits shall be "Valid
EMI Billing Records." Those EMI
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Billing Records that do not pass TDD's edits shall be "TDD Rejected
Records," and TDD shall return these records to Customer.
(c) Submission to LECS. Promptly after receipt of Customer's EMI Billing
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Records within five (5) Business Days after such receipt for the RBOCs
and GTE, or within ten (10) Business Days after such receipt for
Independent Telephone Companies TDD will submit Customer's Valid EMI
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Billing Records to the appropriate LECs.
(d) Purchase bv LEC. Each LEC shall be responsible, to the extent required
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by its agreement with TDD, to purchase Customer's Valid EMI Billing
Records.
(e) Billing and Collection by LEC. Each LEC shall be responsible, for such
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Valid EMI Billing Records purchased by the LEC, for the billing and
collection of the revenue, for Customer's Qualifying, MTS calls, from
End Users residing within the applicable billing area of such LEC.
(f) Printing of Customer's Name on End User's LEC Telephone Billing.
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Wherever possible, TDD will use its best efforts to cause each Billing
Telephone Company to print Customer's name, along with the associated Valid
EMI Billing Records, on each End User's telephone bill: Customer
acknowledges that where the Billing Telephone Companies do not provide this
service, Customer's name shall not appear on the End User's telephone bill.
Section 4 LEC Payments. Fees and Charges.
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(a) Payment by LEC's: Each LEC shall make payments to TDD for Valid
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EMI Billing Records purchased from Customer in accordance with the LEC's
billing and collection agreement with TDD.
(b) Amount Paid by LECs: The LEC shall pay to TDD the gross amount of Valid
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EMI Billing Records purchased by the LEC less the then-applicable fees,
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charges, charge backs, credits and adjustments as prescribed in its billing
and collection agreement with TDD.
(c) LEC Fees, Charges, Charge Backs, Credits and Adjustments: Customer acknowl-
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edges and understands that TDD and will be bound by the terms of its
billing and collection agreement with each LEC with respect to each LEC's
right to deduct or to reduce its collectible funds for: (i) the amount
charged by each LEC for processing, billing and collecting Customer's
Valid EMI Billing Records ("LEC Processing Fees"), (ii) any Unbillable
Records, (iii) and Post-Billing Adjustments or Credits provided to End
Users, (iv) any reserve for anticipated Uncollectible Amounts ("Bad Debt
Holdback Reserve"), (v) any LEC Bad Debt "true-ups" (periodic true-ups
between the Bad Debt Holdback Reserve and the actual Uncollectible
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Amounts realized by the LECS). In addition, Customer shall be responsible
for any data transmission and distribution fees for delivering or receiving
Customer's EMI Billing Records and for any other LEC charges specifically
related to billing and collecting Customer's EMI Billing Records. Customer
further agrees that payment of all amounts described in this paragraph 4(c)
shall be its sole responsibility and that TDD may withhold such amounts
from payments to Customer. Should such amounts exceed the amounts due to
Customer, such amounts shall be due and payable by Customer to TDD within
ten (10) Business Days of notification by TDD of any amounts due. A
schedule setting forth TDD's contractual LEC Processing Fees for each LEC
is attached hereto as Exhibit C.
(d) Bad Debt Holdback Reserve: TDD will holdback or cause the LECs to holdback
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an amount estimated to be sufficient to set-off any Uncollectible Amounts
that may be determined after the date TDD makes its final payment to
Customer for Customer's Valid EMI Billing Records billed and collected by
the LEC. Any Bad Debt Holdback Reserve withheld by the LEC shall be passed
through to Customer on the same percentage or the same amount as TDD was
assessed by the individual LECs. However, once sufficient data becomes
available to TDD from the LECs to enable TDD to determine a specific Bad
Debt history attributable to Customer, the Bad Debt Holdback Reserve rate
shall be based on Customer's specific historical Uncollectible Amounts. A
schedule setting forth the past twelve months' average Bad Debt Holdback
Reserve withheld by each LEC is attached as Exhibit B.
(e) Monthly LEC Bad Debt True-up. Between six and eighteen (6-18) months after
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TDD submits Customer's Valid EMI Billing Records to the LECs for billing
and collection, the LECs will determine the actual amounts collected from
the End Users and true-up the difference between this amount and the face
amount of Customer's Valid EMI Billing Records purchased by the LEC. TDD
will provide Customer monthly reports on Bad Debt true-ups for these
differences. If the amount of these true-ups is "in favor" (positive) of
Customer, TDD will remit such amount to Customer when TDD receives the
true-up amount from the LECs. If the amount of these true-ups is "not in
favor" (negative) of Customer, TDD will withhold such amounts from the next
scheduled payment due to Customer. If the amounts due to Customer are not
sufficient to satisfy such true-up amounts, such amounts shall be due and
payable by Customer to TDD within ten (10) Business Days of notification
by TDD of any amounts due.
(f) LEC Processing Fee Calculation. Each calendar month TDD will determine the
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number of End User bills (renderings) that were or will be required to bill
Customer's Valid EMI Billing Records submitted by TDD during that month and
the average number of Valid EMI Billing Records contained on each End
User's bill. TDD will multiply these quantities by its contractual LEC
Processing Fee schedule for each LEC to calculate the LEC Processing Fees
associated with billing Customer's Valid EMI Billing Records. The LEC
Processing Fee will also include any data transmission fees, distribution
fees, programming
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fees and any other charges directly associated with billing, Customer's
Valid EMI Billing Records.
(g) End User Inquiry Investigation and Rebate. Customer shall be responsible
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for payment of all Post-Billing Adjustments and Credits provided to End
Users by either the LEC or TDD. Such amounts may be deducted weekly from
the amounts due to Customer. If the amount due to Customer is not
sufficient to satisfy these amounts, then Customer shall pay to TDD such
amount as is required to satisfy these amounts within ten (10) Business
Days of notification by TDD of any amounts due.
(h) Rejected Records. Those EMI Billing Records that fail TDD's edits and which
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are not submitted to the LEC's for billing, and collection, TDD Rejected
Records, shall be returned to Customer at no charge. Unbillable Records
rejected by the LEC, through no fault of TDD, shall be charged the same TDD
Processing Fees as described in Exhibit C attached hereto.
(i) Resubmitted EMI Billing Records: Unbillable Records which are resubmitted
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to the LECs for billing and collection shall be charged the standard TDD
Processing Fees as described in Exhibit C attached hereto.
Section 5 TDD Billing Service Fees, Charges and Charge Backs.
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In addition to the LEC Processing Fees, charges, charge backs, credits and
adjustments set forth in Section 4, Customer agrees to pay to TDD and TDD
may deduct from amounts collected by the LECs on behalf of Customer and
paid to TDD, the following TDD billing service fees, charges, charge backs,
credits and assessments:
(a) A billing and information management service fee, the TDD Processing Fee,
for each Valid EMI Billing Record submitted to the LECs for billing and
collection by TDD, as specified in Exhibit C attached hereto,
(b) A fee for each End User inquiry, investigation and rebate handled by TDD on
Customer's behalf, as specified in Exhibit C attached hereto;
(c) Any Post-Billing Adjustment or Credit amounts refunded to End Users by
TDD's customer service inquiry and investigation activities, along with any
LEC charges associated with making such refunds to End Users;
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(d) A charge, as specified in Exhibit C attached hereto, for any submission of
EMI Billing Records that contains less than the minimum volume requirements
of TDD for each "library code"; and
(f) Accounts Receivable Reconciliation System: Customer shall pay TDD a fee, as
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described in Exhibit C attached hereto, for TDD's accounts receivable
reconciliation system.
As collateral for all obligations now existing or hereafter arising from
Customer to TDD, Customer hereby (grants to TDD a security interest in all
the following property of Customer, whether now owned or hereafter acquired
or created, and all proceeds and products thereof:
(a) All amounts paid, and all amounts owing, by each LEC to TDD on accounts
for Customer's Valid EMI Billing Records,
(b) All accounts owing from an End User to Customer arising from services which
give rise to Customer's Valid EMI Billing Records;
(c) All amounts deposited by Customer with TDD pursuant to paragraph 13(b)
hereof, and
(d) All amounts owing and all amounts to be owing from TDD to Customer.
Section 6 Payments to Customer.
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(a) Determination of Amount Due Customer: TDD will determine the amount
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collected by each LEC for Customer's Valid EMI Billing Records and deduct
the then-applicable fees, charges, charge backs, credits and adjustments of
the LECs and/or TDD. If the amount due to Customer is not sufficient to
satisfy these fees, charges, charge backs, credits and adjustments, then
Customer shall pay this difference to TDD within ten (10) Business Days of
notification by TDD of any amounts due.
(b) Reserves and True-Ups for Unbillable Records: TDD will reserve an amount,
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from one month to the next, that is equal to Customer's prior history for
Unbillable Records. TDD will recalculate Customer's historical experience
quarterly from its prior three months results. Until such history can be
determined for Customer, TDD will reserve two and one-half percent (2.5%)
from the amount due to Customer. TDD will true-up this reserve each month
when the information becomes available from the LECs. TDD will then return
excess amounts to Customer or withhold additional amounts as may be
required to satisfy these liabilities from the amounts due to Customer.
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(c) Payment Schedules: TDD will advance to Customer the estimated amount
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determined under paragraph 6(a) above within seven (7) Business Days of
receipt by TDD of funds from a LEC for Customer's Valid EMI Billing
Records, PROVIDED, HOWEVER, that if Customer has ceased doing business for
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five (5) Business Days, is the subject of a bankruptcy proceeding, or a
receiver, trustee or custodian is appointed over substantially all of
Customer's assets, or if Customer fails to make any deposit required by
paragraph 13(b), or if TDD has reasonable grounds to believe that the
fees, charges, charge backs, credits and adjustments to Customer may exceed
any amount owing or to become owing from TDD to Customer, TDD may withhold
payments to Customer until all such amounts have been determined and
deducted from the amount owing. If the amount owing to Customer is
determined not sufficient to satisfy these fees, charges, charge backs,
credits and adjustments, then Customer shall pay the difference to TDD
within ten (10) Business Days of notification by ADD of any amount due.
(d) Method of Payment: TDD will make all advance payments and final payments
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due to Customer, using ACH wire transfer each Tuesday or the first Business
Day following Tuesday should Tuesday not fall on a Business Day, based on
the schedule described in paragraph 6(c) herein.
(e) Accountings for Funds: Funds received from the LECs for Customer's Valid
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EMI Billing Records, less applicable fees, charges, charge backs,
credits and adjustments, shall be deposited and held by TDD in a common
account until such time as the amount determined to be due Customer is paid
to Customer. TDD will maintain an accounting of the balance owing or to be
owing by TDD to Customer of such amounts deposited and held by TDD.
Section 7 Customer's Obligations.
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The Customer agrees as follows.
(a) Cooperation by Customer: Customer agrees to cooperate with TDD to the
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fullest extent possible and to the best of Customer's ability to facilitate
the provisioning of services described in Section 3 herein. Such
cooperation shall include, but shall not be limited to, the following:
(i) Supplying TDD with Customer's identification codes, any and all
certifications of regulatory authority necessary for Customer to
offer its services, and any other information and documents
necessary or helpful to TDD; and
(ii) Supplying TDD with all technical information and assistance with
testing that may be necessary or helpful to TDD in providing its
services herein.
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(b) Applicable Approvals and Compliance with Law: Customer shall obtain and
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keep current all applicable federal, state and local licenses,
certifications and approvals and shall fully comply with, and has full
responsibility to comply withy all other applicable federal, state and
local regulations, laws, rules and Tariffs. Customer agrees that TDD shall
not assume any responsibility for such compliance whatsoever. Customer
acknowledges and understands that certain LEC billing systems contain edits
and screens that "block" Customer's EMI Billing Records from being billed
to End Users until TDD can demonstrate to such LECs that Customer has
proper authority for providing its services to the End User. Customer
further acknowledges and understands that it may take as long as sixty (60)
days after notification to the LECs of such authority before the LECs will
begin billing Customer's EMI Billing Records. Therefore, TDD will not be
responsible for billing Customer's EMI Billing Records for services
provided prior to the LECs removing their regulatory edits and screens from
their billing systems.
(c) Validation: Customer shall validate all collect, third party and calling
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card billed MTS calls using the LECs' LIDBs (line information data bases)
or some other alternative validation method that is acceptable to the LECs
and to TDD.
(d) Completed Calls: Customer acknowledges and agrees that where required.
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Customer shall be in compliance with the FCC's order to determine call
connection using, hardware or software "answer detection." Customer
further agrees that it will submit to TDD only those EMI Billing Records
for calls that represent valid, completed calls as defined in Exhibit D
attached hereto.
(e) Aged EMI Billing Records: Customer shall not submit EMI Billing Records
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to TDD that are more than ninety (90) days old or that exceed the "age of
toll" acceptable by the LECs, whichever is less.
(f) Minimum Transmission Volumes: Customer shall not submit to TDD fewer than
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ten thousand (10,000) EMI Billing Records per "library code" in any
transmission of its EMI Billing Records. The minimum TDD Processing, Fee as
set forth in Exhibit C attached hereto, shall apply if this minimum volume
per transmission is not met.
(g) Objectionable Content: Customer agrees, as a condition of TDD's performance
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under this Agreement, that TDD can not and will not provide billing and
information management services which TDD in its sole discretion deems
harmful, damaging or against public policy, including, but not limited to:
(i) Services which explicitly or implicitly refer to sexual conduct;
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(ii) Services which contain indecent, obscene or profane language;
(iii) Services which allude to bigotry, racism, sexism or other forms of
discrimination,
(iv) Services which through advertising, content or delivery are
deceptive, or that may take unfair advantage of minors or the
general public;
(v) Services which are publicly accessible, multi-party connections
commonly known as "gab" or "chat" services;
(vi) Services which are prohibited by Federal, state, or local laws or
Tariffs, or
(vii) Services which individual LECs exclude from the "types" of services
or products for which their policies permit them to bill and
collect.
(h) No Other Billing Arrangement: Customer warrants that the EMI Billing
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Records submitted and to be submitted by Customer to TDD pursuant to this
Agreement are not and will not be subject to any other valid or existing
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billing and collection agreement, have not been billed previously and will
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not be billed by another party following their submission by Customer to
TDD.
(i) Customer shall limit the number of EMI Billing Records for Casual OS
Telephone Traffic to not more than ten percent (10%) of the total
EMI Billing Records submitted to TDD on any given transmission.
Section 8 Protection of Confidential Information.
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As used herein, "Confidential Information" shall mean (a) proprietary
information, (b) information marked or designated as confidential, (c)
information otherwise disclosed in a manner consistent with its confidential
nature, (d) information of one party, whether or not in written form and
whether or not designated as confidential, that is known or should reasonably be
known by the other party as being, treated as confidential, and (e)
information submitted by one party to the second party where the second party
knows or reasonably should know that the first party is obligated to keep the
information confidential. The parties hereto expressly recognize and acknowledge
that, as a result of the provision of services pursuant to this Agreement,
Confidential Information which may be proprietary to each party must or may be
disclosed to the other. Each party hereby agrees that it will make no disclosure
of Confidential Information provided under this Agreement without the
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prior written consent of the other party. Additionally, each party shall
restrict disclosure of said information to its own employees, agents or
independent contractors to whom disclosure is necessary and who have agreed to
be bound by the obligations of confidentiality hereunder. Such employees, agents
or independent contractors shall use reasonable care, but not less are than
they use with respect to their own information of like character, to prevent
disclosure of any Confidential Information. Nothing contained in this Agreement
shall be considered as granting or conferring rights by license or otherwise in
any Confidential Information disclosed.
Section 9 Taxes.
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(a) Calculation of Telecommunications Taxes: TDD shall be responsible for
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calculating or will use its best efforts to cause the LECs to calculate the
following taxes applicable to each MTS call and allow them to be passed
through to the End User, such taxes being referred to herein collectively
as "Taxes": Federal excise tax, any state and local sales taxes or tax-like
charges, or any Foreign Intrastate Taxes or foreign tax-like charges.
Notwithstanding the foregoing, Customer acknowledges and agrees it is
responsible for compliance with all taxing requirements; therefore,
Customer shall promptly notify TDD of any tax or tax-like surcharges and
the associated rates that apply to Customer's MTS calls in any special
jurisdiction.
(b) Billing and Collection of Taxes: TDD will, for the benefit of and on behalf
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of Customer, use its best efforts to cause the LECs to bill End Users for
all Taxes. Customer acknowledges and agrees that TDD is acting merely as
Customer's agent with respect to arranging for the billing and collection
of Taxes, and in no event shall TDD be entitled to retain or receive from
Customer, or from any End User, any statutory fee or share of Taxes to
which the person collecting the same may be entitled under applicable law.
(c) Tax Exempt Status for End Users: TDD will have the authority, on behalf of
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Customer, to authorize the LECs to calculate Taxes in the same manner as
the LECs calculate Taxes for their End Users and to authorize the LECs to
establish the tax exempt status of End Users in the same manner as the
LECs establish such status for their End Users. If Costomer's MTS calls
are exempt from Federal, state and local Taxes or tax-like charges,
Customer shall so indicate on each EMI Billing Record submitted to TDD.
(d) Filing and Payment of Taxes: Based upon the information calculated by TDD
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and/or received from the LECs with respect to Taxes assessed, billed and
collected by the LECs, TDD will, on behalf of Customer, prepare and file in
a timely manner with the applicable taxing authorities all returns covering
Taxes, and will, on behalf of Customer, but only to the extent of amounts
otherwise owing from TDD to Customer, pay in full and promptly
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remit to such taxing authorities all Taxes owed thereto. Upon written
request, TDD will provide to Customer copies of any and all tax returns
and other applicable information relating to the payment of Taxes by TDD
within thirty (30) days after being filed and paid by TDD.
(e) Hold Harmless: Customer shall indemnify and hold TDD and its employees,
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agents and representatives free and harmless from and against any Claim
(including, without limitation, reasonable attorneys' fees and court
costs) relating to or arising out of any Taxes, penalties, interest,
additions to tax, surcharge or other amounts to which TDD may be subject
or incur, relating to or arising out of (i) TDD's reliance upon any
calculations, determinations or other directives, or lack thereof, given by
Customer to TDD with respect to the calculation, assessment, billing,
and/or collection of any Taxes contemplated by this Agreement; or (ii) a
determination by the Internal Revenue Service or any other taxing
authority that any amount paid by TDD pursuant to paragraph 9(d) above
with respect to Taxes was insufficient, except in the event such
insufficiency was the result of negligence on the part of TDD; provided,
however, that Customer shall not be required to indemnify TDD or the
employees, agents and representatives thereof for
any loss, damage, Claim, cause of action or other liability to the extent,
but only to the extent, caused by the gross negligence or willful
misconduct of TDD.
(f) Billed Taxes: Customer shall be responsible for the payment of any
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additional Taxes or tax-like charges assessed against TDD based on the
revenues collected by TDD from Customer's Valid EMI Billing Records,
"Billed Taxes" under this Agreement, excluding Federal and state income
Taxes.
Section 10 Force Majeure.
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TDD shall not be held liable for any delay or failure in performance of any
part of this Agreement or Exhibits attached hereto from any cause beyond
its control and without its fault or negligence, such as acts of God, acts
of civil or military authority, government regulations, embargoes,
epidemics, war, terrorist acts, riots, insurrections, fires, explosions,
earthquakes, nuclear accidents, floods, strikes, power blackouts, volcanic
action, other major environmental disturbances, unusually severe weather
conditions, inability to secure products or services of other persons or
transportation facilities, or acts or omissions of transportation common
carriers.
Section 11 Limitation of Liability.
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(a) TDD will use its best efforts at all times to provide prompt and efficient
service; however, TDD makes no warranties or representations regarding
the services except as specifically stated in this paragraph 11(a). TDD
will use due care in processing all work submitted to it by customer and
agrees that it will, at its expense, correct any errors which are due
solely to malfunction of TDD's computers, operating systems or programs or
errors bv TDD's employees or agents. Correction shall be limited to
reprocessing Customer's EMI Billing Records. TDD will not be responsible in
any manner for failures of, or errors in, proprietary systems and programs
other than TDD, nor shall TDD be liable for errors or failures of
Customer's software or operational systems. THIS WARRANTY IS EXCLUSIVE AND
IS IN LIEU OF ALL OTHER WARRANTIES, AND CUSTOMER HEREBY WAIVES ALL OTHER
WARRANTIES, EXPRESSED, IMPLIED, OR STATUTORY, INCLUDING, BUT NOT LIMITED
TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR
PURPOSE. Should there be any failure in performance or errors or omissions
by TDD with respect to the information being processed and being submitted
to the LECs for billing and collection. TDD's liability shall be limited to
using its best efforts to correct such failure. In no event, except as
specifically set forth herein, shall TDD be liable to Customer or any third
parties (including Customer's customers) for any Claim even if TDD has been
advised of the possibility of such Claim.
(b) Due to the nature of the services being performed bv TDD, Customer agrees
that in no event will TDD be liable for any Claim caused by TDD's
performance or failure to perform hereunder which is not reported by
Customer in writing to TDD within thirty (30) days of such performance or
failure to perform.
(c) Customer shall indemnify and save harmless TDD from and against any Claim
asserted against TDD by third parties and arising out of Customer's use of
the services provided under this Agreement, unless such Claim arises out of
the willful misconduct or gross negligence of TDD.
Section 12 Term of Agreement.
------------------
The initial term of this Agreement shall begin on the date on page 1 of
this Agreement or the date Customer begins submitting its EMI Billing
Records to TDD, whichever is later and continue in full force and effect
for a minimum period of one (1) year from such date unless terminated in
accordance with paragraph 14(b)(i) and shall automatically renew for
successive periods of one (1) year unless terminated by written notice from
either party at least sixty (60) days prior to the scheduled expiration
date.
14
<PAGE>
Section 13 Expiration or Termination.
--------------------------
(a) Payment Upon Expiration or Termination: Upon the expiration or termination
---------------------------------------
of this Agreement for any reason, Customer agrees to satisfy, when or
before due, any and all of its obligations arising under this Agreement.
(b) Deposit for Charges: Customer acknowledges and understands that certain LEC
--------------------
charges for Uncollectible Amounts, Bad Debt true-ups and Post-Billing
Adjustments and Credits which are determined by the LECs are sometimes not
provided to TDD for a period of up to eighteen (18) months after the final
processing of Customer's EMI Billing Records by TDD on behalf of Customer.
Customer further acknowledges and agrees that payment of these amounts
shall be its sole responsibility. To ensure such payments, Customer
shall, at the expiration or termination of this Agreemert for any reason,
deposit with TDD an amount equal to two and one-half percent (2.5%) of the
face amount of Customer's gross billings for the prior twelve (12) months,
or such other amount as is estimated by TDD, based on Customer's prior
history, necessary to satisfy such charges. Such deposited amount shall be
used by TDD to pay Uncollectible Amounts, Bad Debt true-ups, Post-Billing
Adjustments and Credits and other charges incurred on behalf of Customer
for billing and collecting Customer's EMI Billing Records submitted by
Customer to TDD during the term of this Agreement. Each quarter TDD will
reexamine the amount of funds deposited and make such adjustments as TDD
estimates may be necessary to satisfy the aforementioned charges. TDD will
provide Customer with proper documentation to substantiate charges
attributable to Customer on the same and consistent method as TDD
determines such charges for all of its customers. At the end of eighteen
(18) months from the expiration or termination date, TDD will return all
unused amounts to Customer.
(c) Remaining Liability: Notwithstanding the foregoing, the deposit of such
--------------------
amounts does not relieve or waive Customer's responsibility and obligation
to pay its obligations to TDD including, without limitation, any and all
fees, charges, charge backs, credits and adjustments associated with
billing and collecting its EMI Billing Records. In the event such
associated fees, charges, charge backs, credits and adjustments exceed the
amount of the deposit described in paragraph 13(b), Customer shall remit to
TDD such additional amounts as are required to satisfy Customer's
obligations under this Agreement to TDD within ten (10) Business Days of
notification by TDD of any such amounts due.
(d) Savings Clause: Except as otherwise provided herein, expiration or
---------------
termination of this Agreement under this Section 13 shall termninate all
further rights and obligations of the parties hereunder, provided that:
(i) Neither TDD nor Customer shall be relieved of its respective
obligations to pay any sums of money due or to become due or payable
or accrued under this Agreement;
15
<PAGE>
(ii) If such expiration or termination is a result of a default hereunder
or a breach hereof by a party hereto, the other party shall be
entitled to pursue any and all rights and remedies it has to redress
such default or breach in law or equity, subject to Sections 11 & 14
hereof; and
(iii) The provisions of Sections 8 and 9 hereof, except paragraph 9(b),
shall survive the expiration or termnination of this Agreement.
Section 14 Default and Remedies.
---------------------
(a) Default: Either Party shall be in default hereunder if it:
--------
(i) Fails to make any payment specified hereunder when or before due and
such failure continues for five (5) Business Days after written
notice;
(ii) Breaches any other material covenant or undertaking contained in
this Agreement and fails to remedy such breach within thirty (30)
Business Days after written notice thereof from the non-defaulting
party; or
(iii) Files, or there is filed against it, any voluntary or involuntary
proceeding under the Bankruptcy Code, or makes an assignment for the
benefit of creditors, dissolves, ceases to conduct business for
three (3) Business Days, resorts to any insolvency law, declares
that it is unable to pay its debts as they mature or if a receiver,
trustee or custodian is appointed over, or an execution, attachment,
or levy is made upon, all or any material part of the property of
such party.
(b) Remedies: Time is of the essence of this Agreement. In the event of any
---------
default hereunder; the non-defaulting party shall have the following rights
and remedies:
(i) To terminate or cancel this Agreement, subject to the provisions of
paragraph 13(d), by giving written notice thereof to the defaulting
party;
(ii) To declare all amounts due under this Agreement from the defaulting
party to the non-defaulting party to be immediately due and payable;
(iii) To withhold, setoff and retain, until all obligations of Customer to
TDD have been satisfied in full, any and all amounts which may
otherwise be due and payable to
16
<PAGE>
Customer under this Agreement and apply such amounts to any balance
due or to become due from Customer to TDD.
(iv) All rights and remedies allowed by the applicable Uniform Commercial
Code;
(v) All other rights and remedies allowed by this Agreement and under
applicable law; and
(vi) All rights and remedies shall be cumulative and can be exercised
separately or concurrently.
Section 15 Amendments; Waivers.
--------------------
No modification, amendment or waiver of any provision of this Agreement,
and no consent to any default under this Agreement, shall be effective
unless the same shall be in writing and signed by or on behalf of the
party against whom such modification, amendment, waiver or consent is
claimed. In addition, no course of dealing or failure of any party to
strictly enforce any term, right or condition of this Agreement shall be
construed as a waiver or such term, right or condition.
Section 16 Assignment.
-----------
(a) By Customer or TDD. Assignment by Customer or TDD of any right,
-------------------
obligation or duty or of any other interest hereunder, in whole or in
part, shall require consent by both parties. Such consent shall not be
unreasonably withheld by either party.
(b) Generally. All rights, obligations, duties and interests of any party under
----------
this Agreement shall inure to the benefit of and be binding on all
successors in interest and assigns of such party and shall survive any
acquisition, merger, reorganization or other business combination to which
it is a party.
Section 17 Notices and Demands.
--------------------
(a) How Notice Given. Except as otherwise provided under this Agreement, all
-----------------
notices, demands and requests which may be given by any party to the other
party shall be in writing and shall be: (i) delivered in person; (ii)
mailed, postage prepaid, registered or certified return receipt requested;
(iii) placed in the hands of a national overnight delivery
17
<PAGE>
service or (iv) sent by facsimile transmission to the recipient's facsimile
machine, with an extra copy immediately following by first class mail; and
addressed as follows:
If to TDD:
Telco Development Group of Delaware
Attention: Mr. Bryan Rachlin
4219 Lafayette Center Drive
Chantilly, VA 22021
Telephone: (703) 631-5628
FAX: (703) 803-3430
If to Customer:
Telco Communications Group, Inc.
Attn: Donald A. Burns
4219 Lafayette Center Drive
Chantilly, VA 22021
Telephone: (703) 631-5600
FAX: (703) 803-3430
If personal delivery is selected as the method of giving notice under this
Section, a receipt for such delivery shall be obtained. The address to which
such notices, demands, requests, elections or other communications may be given
by either party may be changed by written notice given by such party to the
other party pursuant to this Section 17.
(b) When Notice Effective: Except as otherwise expressly provided herein, all
----------------------
such notices shall be effective upon receipt if delivered by hand,
facsimile, national overnight delivery service, certified or registered
mail and otherwise five (5) Business Days after placement in the U.S.
Mails.
Section 18 No Third-party Beneficiaries.
-----------------------------
This Agreement shall not provide any person not a party to this Agreement
with any remedy, claim, liability, reimbursement, cause of action or other
right in excess of those existing without reference to this Agreement.
Section 19 Governing Law.
--------------
18
<PAGE>
This Agreement shall be deemed to be a contract made under the laws of the
State of Virginia, and the construction, interpretation and performance of
this Agreement and all transactions hereunder shall be governed by the
domestic laws of such State.
Section 20 Entire Agreement.
-----------------
This Agreement constitutes the entire and exclusive Agreement between the
parties and supersedes all prior or contemporaneous agreements, and oral or
written representations, between them.
Section 21 Execution in Counterparts.
--------------------------
This Agreement may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but
one and the same document.
Section 22 Headings.
---------
The headings in this Agreement are for convenience only and shall not be
construed to define or limit any of the terms herein or affect the meaning
or interpretation of this Agreement.
Section 23 Arbitration
-----------
Any controversy, dispute or Claim arising out of or in connection with this
Agreement, or the breach, termination or validity hereof, shall be settled
by final and binding arbitration to be conducted by an arbitration tribunal
in the Washington D.C. Metropolitan Area pursuant to the rules of the
American Arbitration Association. In the event of any procedural matter not
covered by the aforesaid rules, the procedural law of the State of Virginia
shall govern. The arbitration tribunal shall consist of three arbitrators.
The party initiating arbitration shall nominate one arbitrator in the
request for arbitration and the other party shall nominate a second in the
answer thereto within 15 days of receipt of the request. The two
arbitrators so named will then jointly appoint the third arbitrator. If the
answering party fails to nominate its arbitrator within the fifteen day
period, or if the arbitrators named by the parties fall to agree on the
third arbitrator within thirty days, The Office of the American
19
<PAGE>
Arbitration Association in Washington, D.C. shall make the necessary
appointments of such arbitrator(s). The decision or award of the
arbitration tribunal (by a majority determnination, or if there is no
majority, then by the determination of the third arbitrator, if any) shall
be final, and judgment upon such decision or award mav be entered in the
courts of the State of Virginia or the United States of America for the
Eastern District of the State of Virginia. By execution and delivery of
this Agreement each of the parties hereto accepts for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first
set forth above.
Telco Development Group of Delaware, Inc. Telco Communications Group, Inc.
By: /S/ Bryan K. Rachlin By: /S/ Donald A. Burns
-------------------- -------------------
Name: Bryan K. Rachlin Name: Donald A. Burns
Title: President Title: President
Date: January 2, 1996 Date: January 2, 1996
--------------- ---------------
20
<PAGE>
Exhibit 10.14
AGREEMENT FOR BILLING SERVICES BY
TEL LABS, INC.
Whereas Tel Labs, Inc., a Virginia Corporation ("Labs") is a data processing
firm; and
Whereas Telco Communications Group, Inc., a Virginia Corporation ("Customer")
desires to use the services of Labs to produce telephone bills; and
Whereas Labs and Customer desire to reduce their respective rights, obligations
and duties to writing (the Agreement);
Now Therefore in consideration of the mutual covenants contained herein as well
as other good and valuable consideration the sufficiency of which is hereby
acknowledged Labs and Customer agree to be bound to the following terms and
conditions:
Section 1. Description of Services.
-----------------------
"Billing Services" under this Agreement are the preparation and
rendering of bills or tapes which can be used to produce invoices
for telecommunication related service charges on behalf of Customer.
The service includes but is not limited to the following:
(a) Prebilling formatting of call detail records ("CDR") for bill
preparation; (b) appending the CDR records with pertinent billing
information; (c) applying tax information supplied to Labs by
Customer; (d) rating Customer's CDR'S; (e) provide Customer
management reports; and if requested and at an additional cost to
Customer (f) printing and mailing of end user bills.
Labs will use its best efforts to process Customers CDR's within
forty-eight (48) hours of receipt by Labs. Labs shall have no
obligation to determine the authenticity, genuineness or accuracy
of items delivered by Customer or the accuracy or correctness of
the invoices or reports generated therefrom.
Section 2. Setup of New Accounts.
---------------------
Labs will provide a tested billing system to Customer with approved
design specifications and objectives for processing Customer
billing as described herein within thirty (30) days of final
ratification of this Agreement provided that Customer supply Labs
with all of the necessary information to complete the Customer's
billing system. The cost to set up a new account shall be waived.
The information needed by Labs shall include, but shall not be
limited to the following:
1
<PAGE>
a) a test tape containing Customer's CDR'S.
b) Customer will select a bill format which is acceptable to Labs.
c) Customer will provide Labs with a camera ready Logo which they
wish to appear on their printed bills (if applicable).
d) Customer, will provide Labs with completed rate tables in a form
acceptable to Labs.
e) Customer will provide its end user information (i.e. name,
address, monthly charge and discounts, if any).
f) Customer will provide Labs with the tax information they wish
Labs to apply.
Section 3. Monthly Service.
---------------
3.1 Customer's CDR'S.
----------------
Customer shall provide Labs with all of the CDR's it wishes
Labs to process. To insure that Customer receives credit for
all of its answered CDR'S; Labs will provide Customer with a
facsimile transmission describing each tape which Labs has
received and the number of answered phone calls contained
therein ("Receipt Report"). Labs will telephone Customer to
advise him that the Receipt Report has been sent. Customer
must acknowledge the receipt of the Receipt Report and confirm
the number of answered phone calls within 48 hours of delivery
of the Receipt Report. If Customer shall fail to respond to the
Receipt Report, Labs shall have no responsibility for
processing any more or less than the number of answered phone
calls it reported to Customer on its Receipt Report.
Labs will deliver the Receipt Report by hand to Mark Stodter.
3.2 Customer's Rate Tables.
----------------------
Prior to processing any of Customer's CDR'S; Customer shall
provide, in a format acceptable to Labs, the rate table(s)
Customer would like Labs to apply to its CDR'S. Customer may
modify, change or amend its rate tables as often as they
desire. Customer will advise Labs, in writing, of any changes
to the rate tables it would like Labs to apply. In order to be
applied to next months billing cycle, all changes must be
received in a format acceptable to Labs no later than the 25th
day of the month preceding its desired application. Should
Customer fail to provide Labs with updated rate
2
<PAGE>
tables prior to the 25th day of the previous month, Labs will
apply the rate tables it used in the preceding months billing
cycle. If an incorrect rate table is used due to an error by
Customer; then Customer's CDR's will be rerated at Customer's
expense. Each time Customer's CDR'S are rated, Customer shall
be billed as provided for in paragraph 4. If an incorrect rate
tables is used due to an error by Labs; then Customer's CDR's
will be rerated at no cost to Customer. Labs shall not be
liable for any incidental or consequential damages which might
arise out of the use of an incorrect rate table.
3.3 Customer's Tax Tables.
---------------------
Customer acknowledges that Labs is a data processing firm and
is neither a taxing expert, nor a taxing agent or
representative of the Federal, State or any Local Governmental
agency. In the application of Billing Services, Labs shall
apply taxes based on the tax information provided by the
Customer. Labs will apply such tax information without warranty
as to accuracy, completeness or applicability to Customer's
end users. In the event Customer or its tax information vendor
modifies, changes or amends their tax tables in such a way as
to cause Labs the necessity of modifying or amending the means
in which it applies said taxes, then Customer will reimburse
Labs for the time it takes to amend or modify its Billing
Program in order to apply the changes in the tax information.
3.4 Indemnification by Customer.
---------------------------
The Customer shall pay, indemnify and hold Labs harmless from
any liability, claims or demands (including costs, expenses and
reasonable attorney's fees) resulting from any federal, state
or local taxing authority's assessments, including interest and
penalties, that may result from challenges to the applicability
or correctness of the tax information provided by the Customer.
The Customer shall also pay, indemnify and hold Labs harmless
from any liability, claims or demands (including costs,
expenses and reasonable attorney's fees) from and against any
tax, penalty or interest which may be due or claimed to be due
as a result of Customer's failure to collect and/or pay any
federal, state or local tax(es).
3.5 Vertex Users Group Fees.
-----------------------
If Customer elects to use Vertex as its source for tax
information and compliance, it does so at its own risk.
Customer acknowledges that Labs is not an owner, agent or
supplier of Vertex. Labs has purchased the Vertex tax database
solely as an accommodation for use by Customer at its own
3
<PAGE>
election. Labs will not mark up the cost of the Vertex data
base. Labs will make that data base available to Customer on a
cost basis. Customer will pay its proportionate share of the
cost of Vertex on an annual basis. Customer's proportionate
cost shall be based entirely on the number of users in
the Vertex data base users group. That cost will be determined
by dividing the annual cost of Vertex by the total number of
users in the Vertex Users Group.
3.6 Customer Tax Information.
------------------------
Labs shall, at Customers request, furnish Customer with any
and all information in Labs possession relating to the taxes
Customer requested Labs to apply. Such information shall be in
the format normally used by Labs. If a change in format or
additional information is required by the Customer in order to
prepare and file tax returns, the requested format or
information shall be supplied and Customer shall reimburse Labs
for its costs of providing such additional information or
change in format. The requested information shall be furnished
by Labs to the extent permitted by law and without warranty as
to accuracy or completeness.
3.7 Telephone Maintenance System.
----------------------------
Telephone Maintenance System (PM) is a software program
designed and owned by Labs. It is a program that can assist
Customer in its day to day management of its telephone
business. It can maintain Customer's data base of end users and
end user information. Customer can then use this information in
a convenient format to analyze account receivables, calling
patterns and other pertinent information. If Customer elects to
use PM, Labs will supply Customer with a basic copy of PM free
of charge. If Customer is using PM, Labs will supply Customer
on a monthly basis an update to Customer's client data base.
That update will provide Customer with its end users billing
activity for the immediately preceding month.
3.8 Training.
--------
If Customer elects to use PM, Labs will, at no cost to
customer, provide four (4) hours of training at Labs corporate
office in Chantilly, Virginia. All additional training
requested will be billed on an hourly rate as defined in
paragraph 4.2. After the initial PM training, any PM support
questions will be billed at the hourly rates provided for in
paragraph 4.2.
3.9 Management Reports.
-------------------
Labs will produce on a monthly basis a traffic termination
report and a revenue report. The termination report will be
provided on a LATA basis.
4
<PAGE>
The revenue report will be provided on an account basis. Labs
will prepare at Customer's expense any additional management
reports they desire.
3.10. Liability.
---------
Liability under this agreement shall be as follows:
3.10.1 Customer shall retain a copy of the billing detail
records it furnished Labs for ninety (90) days from the
date delivered to Labs.
3.10.2 If Labs discovers an error or omission in the data
furnished to it by Customer, Labs will notify the
Customer of such error or omission within sixty (60)
days of its receipt. If Customer supplies Labs with
corrected data, Labs will rerate Customer's CDR's at
Customer's expense. If Customer fails to provide the
correct data within five days of Labs request, Labs will
have no liability for any damages arising from failure
to provide Billing Services to an affected end user.
3.10.3 If Customer discovers an error or omission in the data
it furnished Labs within sixty (60) days of its
submission; Customer will correct the error or omission
and resubmit the data to Labs. Labs will rerate the data
and provide Customer with appropriate end user bills or
adjustment information. Labs will have no liability for
any damages which might arise out of generating
incorrect end user invoices based upon incorrect or
omitted data provided by Customer.
3.10.4 If Customer billing detail is not available because Labs
lost or damaged records or incurred processing system
outages, Labs will attempt to recover the lost Customer
billing detail. If the lost or damaged Customer billing
detail cannot be recovered, the Customer will be asked
to resupply the Customer billing detail. If the Customer
has not complied with the retention requirements of
paragraph 3.10.1, Labs will have no liability.
3.10.5 If Customer discovers an error in the application of
Billing Services provided by Labs, it will notify Labs
of the discovered error. Labs will make a reasonable
effort to correct the error and bill the appropriate end
user within the limits permitted by law. Labs shall have
no liability for errors which are discovered more than
sixty days from the date of Customer's end user bill. If
the error was discovered within sixty (60) days of the
affected end users bill, Labs
5
<PAGE>
will rerate the affected data and produce adjustment
information for the Customers use. Labs liability under
paragraph 3.10.5 shall be limited to the amount of the
discovered error which remains uncollected from
Customer's end user 120 days after the end user has been
billed for the amount in error. In no event shall Labs
liability ever exceed the amount Labs receive from
Customer for Billing Service provided to Customer during
the sixty (60) days immediately prior to the discovered
error. Notwithstanding anything to the contrary
contained herein these corrections will be paid for by
Labs only if the Customer's billing specifications
provided to Labs completely and accurately address the
circumstances under which the billing errors were
discovered.
3.10.6 IN THE ABSENCE OF WILLFUL MISCONDUCT, LABS SHALL HAVE NO
LIABILITY FOR DAMAGES TO THE CUSTOMER OR TO ANY OTHER
PERSON OR ENTITY OTHER THAN AS SET FORTH IN PARAGRAPH
3.10.
Section 4. Charges and Fees.
----------------
4.1 Base Charges.
------------
The base charge for the application of Billing Services is
directly related to a Term Commitment, the type of format
Customer request and the source of where an end user bill is
produced. If Customer wishes to have its end users call detail
appear on the Local Exchange Carrier (LEC) bill, they will need
to instruct Labs to prepare its CDR's in an EMI format. If
Customer would prefer to bill its end users directly as opposed
to having them billed on the LEC invoice, Customer will need
to instruct Labs to process its CDR's in Labs standard format.
The cost for Billing Services is provided on the attached
Exhibit A.
4.2 Additional Services.
-------------------
Any services, updates or reports not specifically described in
this Agreement shall be considered "Additional Services".
Services, updates or reports which are specifically described
in the Agreement, but which Customer request to be performed a
second time shall be considered an "Additional Service(s)".
Additional Services shall be billed at the hourly rates listed
below:
<TABLE>
<S> <C>
Programming & System changes
by Senior Programmer $110.00 per hour*
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Staff Programming $75.00 per hour*
Computer run time $100.00 per hour
Data input, keying & verifying $25.00 per hour
Customer Service Support $25.00 per hour
</TABLE>
*Labs retains ownership of all programming and system changes
billed at this rate.
4.3 Customer Requests.
-----------------
All Customer requests for Additional Services shall be
submitted in writing and include sufficient information needed
by Labs to develop a suitable response. The information
submitted by Customer must include a short narrative describing
the goal Customer is attempting to accomplish by its request.
The Customer may be asked to clarify or enhance the
specifications and/or its narrative.
Labs will provide Customer, within seven business days of
receipt by Labs of a request for Additional Service its cost
estimate based on the above rates for the requested Additional
Services. Labs will also provide an estimate of the completion
date for the Additional Services. If Customer would like Labs
to perform the Additional Services, Customer shall provide
Labs with written authorization to begin the Additional
Services and payment of one third (1/3) of the estimated
expenses. The final bill for Additional Services shall be paid
to Labs upon implementation of the Additional Services.
Modifications, changes or amendments after the Additional
Service(s) has been implemented shall be billed to Customer at
the above rates.
The base charge and hourly figures quoted in paragraphs 4.1 and
4.2 are subject to change upon providing sixty (60) days
written notice to the Customer.
4.3.1 Preauthorized Development and Implementation.
--------------------------------------------
By written notification, Customer can preauthorize
development and implementation of Additional Services.
Upon receipt of such notice Labs will evaluate and begin
development and implementation activities for the
request. Customer will be charged the appropriate rates
for these activities as described in paragraph 4.2.
7
<PAGE>
4.3.2 Cancellation of Additional Services.
-----------------------------------
If Customer cancels a request for Additional Services
after Labs has begun work on the request, Customer will
compensate Labs for expenses incurred up to the point of
cancellation, as well as any charges reasonably required
to terminate Labs's activities.
4.4 Right of Refusal.
----------------
Labs reserves the right to refuse to develop or implement any
Additional Services requested by Customer.
4.5 Printing End User Bills.
-----------------------
Labs will arrange at Customer's request to have the Customer's
end users bills printed. The cost for printing Customer's end
users bills shall be 5.0 cents per page. If Customer elects to
use its own print shop to produce its end users bill Labs will
charge 1.0 cents per page to coordinate the printing process.
The cost to stuff and mail end users invoices can also be
arranged. All postage fees must be paid in advance. If Customer
elects to have Labs handle the stuffing and mailing an estimate
of postage cost will be provided to Customer. Customer will pay
that fee prior to Billing Services being rendered.
4.6 Travel Expenses.
---------------
Customer will pay all reasonable out-of-pocket expenses for
travel, lodging and the like incurred in the performance of
this Agreement. Labs will submit statements to Customer for all
expenses and Customer will pay such statements within thirty
(30) days of the date of the statement. If requested by
Customer, Labs will provide documentation for such statements.
Any amount that remains unpaid thirty (30) days after the date
of the statement shall bear interest at the rate of one and
one-half percent (1.5%) per month from the date of the
statement.
Section 5. Payment.
-------
5.1 Amount Due Labs for Billing Services.
------------------------------------
5.1.1 Billing Detail.
--------------
An invoice for the amount due Labs for Billing Services
will be provided to the Customer on a monthly basis. That
invoice will be due within thirty (30) days from the date
of the invoice.
8
<PAGE>
5.1.2 Payment Method.
--------------
Settlement will be made by check postmarked at least two
(2) days prior to the due date. If any portion of the
amount due is received by Labs in funds which are not
immediately available to Labs on its due date, Customer
will incur a late payment charge. The Customer will have
full responsibility for ensuring that payment is received
so that it will be available by the due date. Time is of
the essence with respect to Customers payment
obligations.
5.1.3 Payment Detail.
--------------
Any payment to Labs from the Customer must be accompanied
by an indication of the invoice number being paid.
5.1.4 Late Payment Penalty.
--------------------
Any payment not received by Labs as specified herein will
be subject to a late payment penalty. The late payment
penalty shall be 1.5% applied monthly (18% per annum).
5.1.5 Late Payment Resulting from Bank Error.
--------------------------------------
Any late payment resulting from bank error will not be
subject to the late payment penalty provided the sending
party (party making payment) can verify that it was not
at fault. It shall be the responsibility of the sending
party to notify the banks involved and coordinate
resolution of the discrepancy.
5.1.6 Right to Refuse to Provide Billing Services.
-------------------------------------------
Labs agrees to provide Billing Services on a monthly
basis during the term of this Agreement. Customer agrees
to pay for those Billing Services on a monthly basis.
Labs reserves the right to deny Billing Services to
Customer in the event any Billing Service invoice remains
unpaid thirty (30) days from its invoice date. Labs shall
have no obligation to continue to provide nor will it be
liable for not providing Billing Services to Customer, if
Customer shall have outstanding at any time invoices
which remain unpaid more than thirty (30) days from its
invoice date.
Section 6. Term
----
6.1.1 Original Term and Renewal.
-------------------------
The Original Term of this Agreement shall begin with the
execution hereof and shall continue for a period of one (1)
year therefrom (Original Term) and shall automatically renew
for a one (1) year period at the end of the
9
<PAGE>
Original Term of this Agreement and at the end of each renewal
term until terminated by either party giving written notice of
termination to the other party at least ninety (90) days
before the end of the original or any renewal term.
6.1.2 Early Termination of Extended Term Agreement.
--------------------------------------------
If Customer elects to extended the initial term of this
Agreement and should Customer terminate or breach this
Agreement before the expiration of the full Original Term or
any renewals thereof, elected by Customer upon execution
hereof, Labs will recalculate and Customer shall pay to Labs a
Labs Processing Fee for all CDR's processed under this
Agreement based on the current Labs Processing Fee schedule at
the one (1) year rate, attached hereto as Exhibit A, plus ten
percent (10%) for each CDR processed under this Agreement, at
Customer's monthly volume levels. This early termination will
require a single lump sum payment.
6.2 Minimum Annual Revenue Obligation.
---------------------------------
The Customer will pay Labs a minimum annual revenue obligation
of Two Hundred Forty Thousand Dollars ($240,000) on or before
the expiration of the Original Term. On each anniversary of
the Original Term of the Agreement, Labs will review the
previous year's billing revenue to determine if the minimum
obligation has been met. For purposes of satisfying this
minimum annual revenue obligation, the amount paid Labs by the
Customer shall be determined by adding the total billing
charges for services provided under this Agreement (this
figure will not include the cost of printing, stuffing,
postage and courier service). The Customer will be responsible
to pay Labs the difference between the minimum annual revenue
obligation and the actual revenue calculated by Labs should a
short fall occur. Labs will invoice Customer for any short
fall. Customer agrees to pay any short fall within thirty (30)
days of the date of the invoice. If during a particular year
(other than the first year of this Agreement) the Customer
does not meet the minimum annual revenue obligation the
Customer may apply up to Ten Thousand Dollars ($10,000) of the
previous year's Billing Service revenue that was over the
minimum annual revenue obligation to the current year's
shortfall. Customer acknowledges that the minimum annual
revenue obligation for the Original Term and any renewals is a
mandatory take or pay requirement.
Section 7. Termination
-----------
7.1 Termination for Cause.
---------------------
10
<PAGE>
Labs or Customer may terminate this Agreement upon the breach
of this Agreement by the other party. The party claiming a
breach must identify in writing the specific details of the
breach. All notices of a breach must provide that a failure to
cure the breach within ninety (90) days for a nonmonetary
breach and ten (10) days for a monetary breach will result in
the termination of this Agreement.
7.2 Termination for Non-Payment.
---------------------------
If Customer fails to pay in full any invoice within the time
frame provided for under this Agreement, Labs may notify
Customer that such invoice is past due and provide a 10-day
period for payment of the past due amount plus any late fee
thereon. If Customer fails to pay the full amount of such
invoice plus any late fee within the 10-day period, Labs may
terminate this Agreement.
7.3 Termination Upon Insolvency.
---------------------------
If Customer (a) applies for or consents to the appointment of
a receiver, trustee or liquidator of Customer for all of or a
substantial part of its assets, (b) files a voluntary petition
in bankruptcy or admits in writing its inability to pay its
debts as and when due, (c) makes an assignment for the benefit
of its creditors, (d) files a petition or an answer seeking a
reorganization or an arrangement with creditors, or seeks to
take advantage of any insolvency law, (e) performs any other
act of bankruptcy, or (f) files an answer admitting the
material allegations of a petition filed against Customer in
any bankruptcy, reorganization or insolvency proceeding; or
(g) an order, judgment or decree is entered by a court of
competent jurisdiction adjudicating Customer a bankrupt or an
insolvent, approving a petition seeking such a reorganization,
or appointing receiver, trustee or liquidator of Customer for
all of or a substantial part of its assets, or (h) there
otherwise commences as to Customer or any of its assets any
proceedings, under any bankruptcy, reorganization,
arrangement, insolvency readjustment receivership or similar
law or if any order, judgment, decree or proceeding continues
unstated for more than sixty (60) consecutive days after any
stay thereof expires; then this Agreement shall automatically
terminate. Notwithstanding the foregoing, in the event
Customer is declared insolvent but is not liquidated, or is
placed in receivership or conservatorship, or other similar
actions are taken, the use of the Billing Services thereafter
by any new owner, receiver, conservator, manager, or other
agent or representative shall be deemed acceptance and
assumption of this Agreement on the full terms and conditions
contained herein.
11
<PAGE>
Section 8. General
-------
8.1 Billing System Modifications By LABS.
------------------------------------
The Customer may anticipate that modifications to Labs Billing
Services may be required to implement billing changes as well
as any new administrative and operating procedures. Labs will
advise Customer of any changes or modifications when they
occur.
8.2 Waivers.
-------
No amendment or waiver of any provision of this Agreement and
no consent to any default under this Agreement shall be
effective unless the same shall be in writing and signed by or
on behalf of the party against whom such amendment, waiver or
consent is claimed. In addition, any failure by a party to
strictly enforce any term, right or condition of the Agreement
shall not be construed as a waiver of such term, right or
condition.
8.3 Assignment.
----------
Any assignment by the Customer of any right, obligation or
duty, in whole or in part, or of any other interest hereunder,
without the written consent of Labs shall be null and void.
8.4 Notice and Demands.
------------------
Except as otherwise provided under this Agreement, all
notices, demands or requests which may be given by either
party to the other party shall be in writing and shall be
deemed to have been duly given on the date delivered in
person or deposited, postage prepaid, in the United States
mail via Certified Mail, return receipt requested, and
addressed as follows:
<TABLE>
<CAPTION>
To Labs: To Customer:
-------- ------------
<S> <C>
Tel Labs, Inc. Telco Communications
4219 Lafayette Center Drive Group, Inc.
Chantilly, VA 22021 4219 Lafayette Center Drive
Attn: Bryan K. Rachlin Chantilly, VA 22021
Attn: Donald A. Burns
</TABLE>
If personal delivery is selected as the method of providing
notice under this section, a receipt of such delivery shall be
obtained.
8.5 Force Majeure.
-------------
Labs shall not be held liable for any delay or failure in
performance of this Agreement from any cause beyond its
control, such as acts of God, acts of civil or military
authority, government regulations, embargoes, epidemics,
12
<PAGE>
war, terrorist acts, riots, insurrections, fires, explosions,
earthquakes, nuclear accidents, floods, strikes, power
blackouts, volcanic action, other major environmental
disturbances, unusually severe weather conditions, inability
to secure products or services of other persons or
transportation facilities, or acts of omission or commission
by third parties.
8.6 Third-Party Beneficiaries.
-------------------------
This Agreement shall not provide any person not a party to
this Agreement with any remedy, claim, liability,
reimbursement, cause of action or other right in excess of
those existing without reference to this Agreement.
8.7. Severability.
------------
In the event that any of the provisions of this Agreement are
held to be unenforceable or invalid by any court of competent
jurisdiction, the validity and enforceability of the remaining
provisions will not be affected, and in lieu of such invalid
or unenforceable provision there shall be added automatically,
as part of this Agreement, a provision as similar in terms as
may be valid and enforceable.
8.8 Relationship of Parties.
-----------------------
Labs, in providing services to Customer hereunder, is acting
solely as an independent contractor and not as an employee.
Nothing in this Agreement shall be construed as creating a
partnership between the parties. Unless specifically provided
for herein: (a) Labs does not undertake by this Agreement or
otherwise to perform any obligation of Customer, whether
regulatory or contractual, or to assume any responsibility for
Customer's business or operations, and (b) Labs has the sole
right and obligation to supervise, manage, contract, direct,
procure or cause to be performed, all work to be performed by
Labs under this Agreement.
8.9 Non-Exclusivity.
---------------
Nothing in this Agreement shall be construed as limiting the
ability of Labs to offer the same or similar services to any
other person or organization.
8.10 Governing Law.
-------------
This Agreement shall be governed by the laws of the
Commonwealth of Virginia with exclusive venue and jurisdiction
of any disputes involving this Agreement in the U. S.
District Court for the Eastern District of Virginia or (in
the event subject matter jurisdiction cannot be established
in the U. S. District Court) the Circuit Court for the County
of Fairfax, State of Virginia.
13
<PAGE>
8.11 Entire Agreement.
----------------
This Agreement constitutes the entire understanding between
the parties and supersedes all prior understandings, oral or
written representation, statements, negotiations, proposals
and undertaking with respect to the subject matter hereof.
The parties acknowledge that this Agreement contains
commercially confidential information which may be considered
proprietary by either or both parties, and the parties hereto
agree to limit distribution of the Agreement to those
individuals in their respective organizations with a need to
know the contents of the Agreement.
8.12 Proprietary Rights.
------------------
Customer acknowledges that the billing system and other Labs
systems consists of computer programs, procedures, forms,
information and other materials which constitute trade secrets
and property of great value owned by Labs. This billing system
has been acquired through the expenditures of a great amount
of time, effort, and money. Customer further acknowledges that
any disclosure to others of any such trade secrets will result
in substantial monetary loss and irreparable damage to Labs.
Customer will treat all such programs, procedures, forms,
information and materials confidentially and safeguard them
by using the same procedures used by Customer for data
Customer regards as confidential. Customer will not disclose
to any person, directly or indirectly, except as required in
the proper performance of this Agreement, any information
regarding the billing system and/or any and all other Labs
billing systems or the terms of this Agreement. All
specifications, tapes, programs, enhancements and other
materials developed in connection with this Agreement shall
be the exclusive property of Labs. The provisions of this
Section 8.12 shall survive any termination of this Agreement.
8.13 Executed in Counterparts.
------------------------
This Agreement may be executed in any number of counterparts,
each of which shall be an original but such counterparts shall
together constitute one and the same document.
8.14 Headings.
--------
The headings in this Agreements are for convenience and shall
not be construed to define or limit any of the terms herein or
affect the meanings or interpretation of this Agreement.
WITNESS WHEREOF the parties have entered into this Agreement as of the
date first written above.
14
<PAGE>
(Telco) (Tel Labs, Inc.)
By: /S/ Donald A. Burns By: /S/ Bryan K. Rachlin
------------------- --------------------
Name: Donald A. Burns Name: Bryan K. Rachlin
Title: President Title: CEO
Date: Date:
------------------- --------------------
15
<PAGE>
EXHIBIT 10.17
SERVICE AGREEMENT
-----------------
This Agreement is made as of December 15, 1995 between IXC Carrier, Inc.,
----------- -
a Nevada corporation ("Lessor"), 5000 Plaza on the Lake, Suite 200, Austin,
Texas 78746, and Telco Communications Group, Inc. ("Lessee") 4219 Lafayette
Center Drive, Chantilly, Virginia 22021-1209.
1. Scope and Rates. Lessor agrees to meet Lessee's DS-3 service request
---------------
in Las Vegas at Lessee's POP as Long as Lessee has chosen 4200 East Sahara as
the POP space. The rates for Service are set forth in Exhibit D, unless
otherwise specified in the applicable Purchase Order. Lessee may order the
intercity services between cities listed in Exhibit C and effective September
15, 1996 Lessor guarantees providing services to these cities within 120 days
Lessee shall have a "Take or Pay" Commitment (that is, Lessee shall pay for
Services in such amount whether or not such Services are used) of $500,000.00
per month commencing January 1, 1997 and ending 24 months thereafter or upon
Lessee's achievement of $18,000,000.00 in post - January l, 1996 revenue
hereunder, whichever comes first. Notwithstanding the foregoing, Lessor agrees
that the existing commitment of $125,000.00 per month as reflected in the
Digital Service Agreement dated October 17, 1994, shall be rolled into this
Agreement and become a part of the "Take Or Pay" Commitment. Effective January
1, 1997, all Exhibit E On-net services will be re-priced in accordance with the
attached rate schedule, Exhibit D. All payments made for DS-1 and DS-3 services
after January 1, 1996 shall apply to the $18,000,000.00 term revenue commitment.
All new On-net services will be priced at rates in Exhibit D. Lessor agrees that
IMT capacity will be provided at On-net rates after January 1, 1997 among the
following cities: Austin, TX; Davenport, IA; Chattanooga, TN; Las Vegas, NV;
Washington, D.C., and Fort Lauderdale, FL. Lessor further agrees that at least
four (4) DS-3's between Las Vegas, Nevada and San Francisco, California and 1
DS-3 between Las Vegas, Nevada and San Diego, California will be made available
at On-net rates in Exhibit D subsequent to January 1, 1997.
Lessee may, at its' option, reconfigure On-net DS-l's and DS-3's
originating in a particular On-net City by cancelling such Circuits (the "Old
Circuits") and simultaneously ordering new Circuits originating in such city
(the "New Circuits"), but only if all the following conditions are met: (i) the
Old Circuits have been in service at the time of such reconfiguration for at
least 90 days; (ii) Lessee shall pay for such reconfiguration the charge
therefor set forth in Exhibit D; and (iii) the aggregate Monthly Lease Rates
hereunder for the New Circuits must be equal to, or greater than, the aggregate
Monthly Lease Rates for the Older Circuits; and (iv) the Circuit Lease Term for
the New Circuits must not expire before the end of the last to expire of the
Circuit Lease Terms of the Old Circuits. After January 1, 1997 DS-3's which have
been in service for at least a 12 month term may be disconnected without the
requirement of revenue replacement as long as the revenue commitments above are
being met.
2. Payments. Lessee shall pay Lessor each month within 30 days of the date
--------
of invoice: (i) the monthly lease rate (prorated for any partial month) for each
Available Circuit; (ii) the charges for other services received; and (iii) any
shortfall in achieving the Take or Pay Commitment for such month. The first
invoice shall be for the first two months; each invoice thereafter shall be for
the following month. If any invoice is not paid when due: (i) a late charge
shall accrue equal to 1-1/2% (or the maximum legal rate, if less) of the unpaid
balance per month; and (ii) Lessor may suspend or terminate the Service.
3. Term. The term hereof shall continue through the end of the Circuit
----
Lease Term which is last to expire. If Service continues thereafter, the
applicable rates will be equal to 120% of the rates hereunder and Service may be
terminated by either party upon 30 days' notice. Lessee may terminate any
Circuit upon 90 days' notice; provided that if termination occurs: (i) prior to
the Activation Date, Lessee shall reimburse Lessor
<PAGE>
in accordance with the Ancillary Pricing on Exhibit B hereto; and (ii) on or
after such date, Lessee shall pay: (A) all charges for Service previously
rendered; and (B) the amount due through the end of the applicable Circuit Lease
Term (Lessor shall try to re-lease such Circuit for such term, refunding to
Lessee the amount so collected, if any). If Lessor: (i) fails to provide Service
within six months of the Requested Service Date; or (ii) fails to cure a
material breach hereof within 45 days of notice from Lessee, Lessee may, as its
only remedy, terminate the affected Circuit. No termination of any Circuit will
effect or reduce Lessee's obligation to meet the Take or Pay Commitment
described above.
a) Lessee may order DS-1 circuits constituting a Distributed DS-3
from Lessor. Although Lessee may order such DS-l's separately, Lessee
must, within 180 days of the Activation Date of the first DS-1 of such
Distributed DS-3 to be activated (such period is referred to as the "Ramp
Up Period"), order sufficient additional DS-l's as part of such
Distributed DS-3 to reach 28 DS-l's. The price for such Distributed DS-3
service during the Ramp Up Period will be in accordance with Exhibit D.
4. Limits of Liability. Lessor shall not be liable for any direct,
-------------------
indirect, reliance or consequential damages, whether foreseeable or not, or for
any damage to property, loss of profits, cost of replacement services, or
claims of customers for service problems caused by any defect, delay in
availability, or failure in the Service or by any other cause. In no event shall
Lessor be liable in excess of the aggregate amount it has collected from Lessee
hereunder. Lessor shall give Lessee a credit in accordance with its then-current
outage policy for periods in which any Circuit loses continuity and fails to
comply with applicable specifications. Such credit shall be Lessee's sole remedy
with respect to such an event; provided, however, that no such credits shall be
allowed and Lessor shall not be liable for any Service defect from causes
outside its control, including accidents, cable cuts, fires, floods,
emergencies, government regulation, wars, or acts of God. LESSOR DISCLAIMS ALL
EXPRESS AND IMPLIED WARRANTIES RELATING TO SERVICE, INCLUDING BUT NOT LIMITED
TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. LESSEE
HAS NOT RELIED ON ANY REPRESENTATION NOT SET FORTH HEREIN. LESSEE SHALL
INDEMNIFY LESSOR FROM ANY CLAIMS MADE BY ANY LESSEE CUSTOMER
5. General Terms. This Agreement shall be construed under the laws of
-------------
Texas. All notices shall be in writing and shall be deemed given as of the date
of delivery to the addresses set forth above. The waiver of a breach hereof
shall not be construed to be a waiver of any subsequent breach. Lessor may
terminate this Agreement without liability if Lessee becomes bankrupt or
insolvent. Each party may refer any dispute relating hereto to arbitration in
Austin, Texas under the rules of the American Arbitration Association. If any
term hereof is held to be invalid or unenforceable, this Agreement shall be
construed without such invalid or unenforceable term. This Agreement is the
entire agreement between the parties pertaining to the Circuits. This Agreement
may only be modified by an instrument in writing executed by each party.
Neither party may assign this Agreement without the written consent of the other
party; provided, however, that a security interest in this Agreement may be
granted by Lessor to its lenders. Lessee shall not disclose to any third party
any information regarding the rates hereunder. Lessee shall indemnify Lessor for
any damage or liablity incurred by Lessor arising from Lessee's actions or
negligence. The rates hereunder do not include any sales, use or utility taxes.
Lessee shall pay to Lessor any such taxes that Lessor may be required to collect
or pay.
<PAGE>
6. Definitions. For purposes hereof: "Available" means all necessary
----------- ---------
equipment for a Circuit has been installed. "Activation Date" means the date a
---------------
Circuit is first made Available to Lessee. "Circuit" means a DS-0, DS-1 or DS-3.
-------
"Circuit Lease Term" means the term of a Circuit specified in the applicable
------------------
Purchase Order. "Circuit Mileage" means the length of a Circuit specified in the
---------------
applicable Purchase Order. "DS-0" means a circuit complying with TR-TSY-000333
----
"Switched and Special Access Services - Transmission Parameter Limits and
Interface Combinations" Issue 1, July 1990. "DS-1 " means a circuit complying
----
with AT&T Tech. Ref. Pub. 62411, December 1990, with Addendurm 1. March 1991.
and Bellcore TR-MWT-000499, Issue 5, December 1993. "DS-3" shall mean a circuit
----
meeting the specifications set forth in AT&T Technical Reference Pub. 54014
Addendum 1, November 1992 and Bellcore TB-NWT-608499, Issue 5, December 1993.
"DDS-3" or "Distributed DS-3" shall refer to a group of twenty-eight DS-1's
-----
originating in one common On-net City and terminating in one or more On-net
cities listed in Exhibit C. "Purchase Order" means any Lessee purchase order
--------------
accepted by Lessor. "Requested Service Date" means the date Service on a Circuit
----------------------
is requested to commence specified in the applicable Purchase Order. "Service"
-------
means transmission service provided between North American DSX standard
cross-connect panels located in Lessor's terminal locations. "Take or Pay
-----------
Commitment" shall mean, with respect to a certain period and amount, that
- ----------
Lessor has the obligation to pay for DS-1 and DS-3 service hereunder in such
amount for each month during such period, whether or not such service is used.
Charges for services other than DS-1 or DS-3 service such as installation,
ancillary services, local loops and any other services shall not be counted
toward the Take or Pay Commitment.
To confirm their agreement to be bound hereby, the parties have
executed this agreement below:
<TABLE>
<S> <C>
IXC Carrier, Inc. Telco Communications Group, Inc.
5000 Plaza on the Lake, Suite 200 4219 Lafayette Center Drive
Austin, Texas 78746-1050 Chantilly, Virginia 22021-1209.
Attention: Vice President of Sales & Marketing Attention: Donald Burns
Telephone No.: (512) 328-1112 Telephone No.: (703) 631-5651
Facsimile No.: (512) 328-7902 Facsimile No.: (703) 803-3430
By: /S/John A. Colucci By: /S/Donald A. Burns
------------------------------- -----------------------------
John A. Colucci
V.P. Marketing & Sales Donald A. Burns
------------------------------- -----------------------------
(Please Print - Name and Title) (Please Print-Name and Title)
12/15/95 December 15,1995
------------------------------- -----------------------------
(Date) (Date)
</TABLE>
<PAGE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Purchase Order
Exhibit B Maintenance and other Additional Services
Exhibit C List of On-net Cities
Exhibit C-l List of On-net Cities which are subject to availability
Exhibit D List of Rates for Service
Exhibit E List of Rates for 1/1/97 re-pricing
</TABLE>
<PAGE>
---------------------------
REQ'ST SERVICE DATE: EXHIBIT "A" OFFICE USE ONLY
ACCEPTED EARLIER ACTIVATION: MSO#:
Y N IXC CARRIER, INC. --------------------
---------- ---------- RELATED MSO:
CKT ID: -------------
---------------- ---------------------------
PURCHASE ORDER FORM FOR CUSTOMER ORDER NO:
----------
Pursuant to the DIGITAL SERVICE AGREEMENT by and between IXC CARRIER, INC.
as LESSOR and as LESSEE,
-------------------------------------------------------
dated , 19 , LESSEE order and LESSOR shall provide the following
------------ --
Digital Transmission Service.
NEW RENEW QTY RATE TERM MILES
--------------- ----------------
CANCEL DISCONNECT DS-3
------------ ----------- ----- ----- ----- -----
CHANGE EXPEDITE Y N DS-1
---------- --- --- ----- ----- ----- -----
ON NET OFF NET DSO
---------- -------------- ----- ----- ----- -----
PROTOCOL RECONFIGURE CIF
-------- ---------- ----- ----- ------ -----
OTHER: OTHER
------------------------------------ ------------------------------
CUSTOMER CONTACT: PHONE # FAX #
------------------------- ------------- -------------
TECHNICAL CONTACT: PHONE # FAX #
------------------------ ------------- -------------
CITY LOCATION A: CITY LOCATION B:
-------------------------- ------------------
- ------------------------------------------ -----------------------------------
Special Switched Special Switched
---------- ---------- --------- ----------
Bypass Y N Owner Bypass Y N Owner
--- --- ------------- --- --- ------------
LESSOR TO PROVIDE: CFA: Y N LESSOR TO PROVIDE: CFA: Y N
--- --- --- ---
LOA: Y N ASR: Y N LOA: Y N ASR: Y N
--- --- --- --- --- --- --- ---
CUSTOMER (LESSEE) TO PROVIDE: CUSTOMER (LESSEE) TO PROVIDE:
LOA: Y N LOA: Y N
-- -- -- --
Coordinate Coversion: Y N Coordinate Conversion: Y N
--- --- --- ---
CIF arrangement Y N CIF arrangement Y N
-- -- -- --
CIF Attached Y N CIF Attached Y N
-- -- -- --
SPECIAL INSTRUCTIONS SPECIAL INSTRUCTIONS
---------------------- ---------------
- ------------------------------------------ -----------------------------------
- ------------------------------------------ -----------------------------------
MONTHLY LEASE RATE: NON RECURRING CHARGES:
Monthly IXC Charge:$ Installation: $ ASR $
----------- --- ---
XQPT Lease Charge: $ Installation: $ Reconfigure: $
----------- --- ---
XXXcho Canellers: $ Installation: $ Expedite: $
----------- --- ---
XXXF Racks: $ Installation: $
----------- ---
XXXF Power: $ Installation: $
----------- ---
Other: $ Installation: $
----------- ---
TOTAL: $ TOTAL OF NON RECURRING CHARGES: $
----------- --
Notwithstanding anything in the Digital Service Agreement to the contrary,
(1) a security interest in this Agreement may be granted by Lessor to any
Lender and (2) Lessor may from time to time assign all its rights and
obligation hereunder with respect to any Circuits to any Affiliate. Upon such
assignment, this Agreement shall be deemed to be multiple agreements, each
upon the terms and conditions set forth herein by and between Lessee and
such affiliate with respect to such circuit between Lessor and Lessee with
respect to the circuit not so assigned.
IN WITNESS WHEREOF, the parties have executed this PURCHASE ORDER on
the day of 19
------ ------- --
- -------------------------------------- --------------------------------------
LESSOR APPROVAL/TITLE LESSEE AUTHORIZED REPRESENTATIVE/TITLE
(SERVICE PROVIDER) (CUSTOMER)
PLEASE FAX THIS DOCUMENT TO SALES AND MARKETING DEPARTMENT FAX# (512) 328-7632
- --------------------------------------------------------------------------------
FOR OFFICE USE ONLY
VERSION 1.6/03.28.95
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT B
CUSTOMER MAINTENANCE SUPPORT
----------------------------
IXC Carrier, Inc.'s (hereinafter referred to as IXC) standard fees for
customer maintenance support services are as follows (unless set by precedence
in a service contract):
Maintenance services shall be defined as all work performed by IXC on
equipment provided by or on behalf of the Customer, or supervision of the
Customer's work within IXC's terminate facilities. Maintenance Service charges
are not billed for troubles found within that portion of a circuit provided by
IXC. The following billing rates apply for these services:
A. $75 per hour (4 hour minimum-if dispatch is required) Monday
through Friday during the business hours of 8:00 a.m. - 5:00 p.m. local time,
exclusive of the following holidays:
New Years Day
President's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day and the day after Thanksgiving
Christmas Day
B. $95 per hour (4 hour minimum) for overtime work done after
business hours (defined above) and/or on holidays (defined above) and/or all
day on Saturdays and Sundays.
C. As requests for maintenance services are typically made via
telephone, IXC must be advised, in writing as to the person(s) who are
authorized to request service. It is the Customer's responsibility to keep IXC
apprised of any changes to its list of representative(s).
D. To request technical assistance and help under the maintenance
services, a call must be made to our Network Control Center at 1-800-526-2488.
This number should be used for IXC technical assistance, troubleshooting or
testing of circuits, not for service impairment or outages. The person calling
in must be on the authorized list in order to commit for charges for this
technical assistance. If that person is not on the list, the request cannot be
accommodated.
1. The Network Control Center personnel will take the call,
record the caller's name and phone number along with facts concerning the
assistance and support needed. The caller will then be given the number of
the "Assistance Ticket."
2. Upon completion of work, this "Assistance Ticket" will be
given to IXC's Accounting Department, and the customer will subsequently
be billed based upon the information on that ticket. A copy will be
attached to the invoice.
E. Except for emergencies, IXC technicians cannot be dispatched
unless requests are made in accordance with the above call-out procedure.
Page 1 of 3
<PAGE>
ANCILLARY PRICING SCHEDULE FOR ON-NET SERVICE
<TABLE>
<CAPTION>
NON-RECURRING CHARGES DS-1 DS-3
- --------------------- ---- ----
<S> <C> <C>
New Order Installation (On-Net) Waived Waived
New Order lnstallation (Off-Net) ICB ICB
Cancellation prior to Activation (On-Net) $300.00 $1000.00
Cancellation prior to Activation (Off-Net) Pass through Pass through
DS-l Ramp-Up per DS-O $ 50.00 N/A
Order Change (less than 5 business days) $ 50.00 $ 50.00
Order Cancellation (less than 5 business days) $250.00 $ 250.00
ASR (new or disconnect) (Special Access Only) $250.00 $ 250.00
ASR Supplement $ 50.00 $ 50.00
Order Expedite $250.00 $ 250.00
Reconfiguration $300.00 $1000.00
Ramped DS-3 Installation Per DS-l $500.00 N/A
Distributed DS-3 Installation Per DS-l $100.00 N/A
</TABLE>
<TABLE>
<CAPTION>
MONTHLY RECURRING CHARGES DS-1 DS-3
- ------------------------- ---- ----
<S> <C> <C>
Cross-connect charge $ 50.00 $ 200.00
Other IXC to Lessor local access or bypass
facility
(Lessor long haul involved)
Local bypass charge $200.00 $ 500.00
Lessor POP to Lessor POP in same city, with no
Lessor long haul attached at either Lessor POP.
</TABLE>
<TABLE>
<CAPTION>
MISCELLANEOUS RECURRING NON-RECURRING
- ------------- --------- -------------
<S> <C> <C>
Ml3 l yr Term $250/mo $ 0.00
ECHO CANCELLER (per circuit end) $250/mo $ 500.00
SECOND END LOOP (Ex: for ADPCM) $50/mo $ 50.00
DEMAND MAINTENANCE $75/hr 8 a.m.-5 p.m. M-F.
4 hour minimum if dispatch
is required; $95/hr after
hours with 4 hour minimum.
RACK SPACE ICB-subject to availability.
SHELF SPACE $100/ea/mo ICB install
DC POWER $12.50/amp/mo (5 amp
minimum; 5 amp increments)
CIF AC/DC POWER ICB
ALL OTHER SERVICES See Note (2)
</TABLE>
(1) Services not described above will be considered special handling and
charges will be assessed on an individual basis.
Page 2 of 3
<PAGE>
DS0 Ancillary Pricing
<TABLE>
<S> <C>
New Order Installation 150.00
Order Cancellation Prior to
Turn up 200.00
Order Expedite 200.00
Reconfiguration 200.00
(City Pairs the Same)
DACS Charge 35.00
(Switching Only)
DS0 DACS Port Charge 25.00
(Bell access at DACS)
DS1 DACS Port 125.00
Minimum Charge per DS-0 75.00
</TABLE>
Notes:
1. All of the above charges are subject to change with a 30 day notice.
2. Services not described above will be considered special handling and charges
will be assessed on an individual basis.
Page 3 of 3
<PAGE>
EXHIBIT C
ON-NET DS-1 AND DS-3 CITIES
---------------------------
<TABLE>
<S> <C> <C>
ARIZONA Battle Creek Royal Oak
Phoenix LATA 666 175 Main Street 3100 W. 14 Mile Rd.
Phelps-Dodge Twr, Ste 1702 (616)962 (313)435
2600 N. Central (602)279
Bay City Saginaw
Tucson LATA 668 100 E. Hart 315 Meredith
Arizona Bank Bldg. (517)667 (517)771
33 N. Stone, Suite 1610
(520)792 Birmingham MISSOURI
3100 W.14 Mile Rd. Kansas City LATA 524
CALIFORNIA (313)435 Bank of Kansas City
Los Angeles LATA 730 1125 Grand Ave., Suite 1704
One Wilshire Dearborn (816)283
624 S. Grand, Suite 1615 3900 Southfield Highway
(213)622 (313)323 St. Louis LATA 520
900 Walnut, Suite 220
DISTRICT OF COLUMBIA Detroit LATA 340 (314)231
*Washington, D.C. LATA 236 Book Bldg, Suite 2609
1220 L Street N.W., 1st Floor 1249 Washington Blvd. NEVADA
(202)833 (313)961 Las Vegas LATA 821
(TBD-to be determined
Detroit
ILLINOIS 1860 Gratiot Ave. NEW JERSEY
Chicago LATA 358 (313)259 Newark LATA 224
Prudential Building 744 Broad Street, 3rd Floor
130 E. Randolph, Suite 4001 Flint (201)824
(312)861 2001 S. Grand Traverse
(313)767 NEW YORK
New York LATA 132
INDIANA Grand Rapids 60 Hudson St., 2nd Floor
Indianapolis LATA 336 209 Graham, S.W. (212)732
Merchants Bank Bldg. (616)235
11 S. Meridian OHIO
Suite 1798/1799 Jackson Akron LATA 325
(317)637 170 W. North Street 1 Cascade Plaza, Suite 1950
(517)783 Main & Bowery
South Bend LATA 332 (216)535
213 W. Washington, St. Kalamazoo
15th Floor 303 Mills St. Cincinnati LATA 922
(219)289 (616)385 2300 Carew Tower
Suite 4701
Lansing 441 Vine St. (513)651
MARYLAND 230 South St.
Baltimore LATA 238 (517)482 Cleveland LATA 320
1220 S. Howard R.F. Keith Bldg., Suite 2117
(301)752 Midland 1621 Euclid Ave.
1000 Jefferson (216)771
MICHIGAN (517)631
Columbus LATA 324
Ann Arbor Pontiac Borden Bldg., Suite 1412
1615 Plymouth Rd. 324 S. Saginaw 180 E. Broad St.
(313)994 (313)338 614(469)
</TABLE>
Page l of 2
<PAGE>
<TABLE>
<S> <C>
Dayton LATA 328 Fort Worth LATA 552 *Customer may be required to pay
1 National Bank Bldg. 810 E. Main, Suite 1705 cross connect fee.
Suite 2220 (817)870
130 W. Second (513)461
Harlingen LATA 568
Toledo LATA 326 513 E. Jackson
319 Madison Ave., Ste 2901 Matz Building
(419)242 (210)425
OKLAHOMA Houston LATA 560
Oklahoma City LATA 536 293 N. Main Street
100 N. Broadway, Ste 3020 (713)224
(405)232
Lubbock LATA 544
Tulsa LATA 538 1220 Broadway, #1901
Lookout Mountain (806)762
3500 S. 26th West Avenue
(918)584 McAllen LATA 568
200 S. 10th Street, Suite 704
PENNSYLVANIA (210)632
Philadelphia LATA 228
2401 Locust St., 2nd Floor Midland LATA 542
(215)564 KMID-TV Studio
La Force Blvd &
Pittsburgh LATA 234 Air Terminal
Oliver Building (915)561
535 Smithfield St., Ste 2650
(412)281 San Angelo LATA 961
36 E. Twohig, 15th Floor
TEXAS (915)653
Abilene LATA 550
1049 N. Third, Suite 500 San Antonio LATA 566
(915)675 660 S. Santa Rosa
(210)225
Austin LATA 558
621 Pleasant Valley Road Waco LATA 556
(512)389 925 Washington St. Bell C.
(817) Bell CO
Corpus Christi LATA 564
606 N. Carancahua, Ste 816
Wilson Plaza
(512)883
Dallas LATA 552
2323 Bryan, Suite 380
2223 Houston St.
(214)954 (214)969
El Paso LATA 540
El Paso National Bank Bldg.
201 E. Main, Suite 1702
(915)533
</TABLE>
Page 2 of 2
<PAGE>
EXHIBIT C-1
ON-NET DS-1 AND DS-3 CITIES
---------------------------
SUBJECT TO AVAILABILITY
-----------------------
<TABLE>
<S> <C> <C>
CALIFORNIA FLORIDA
Bakersfield LATA 734 Ft. Lauderdale LATA 458
1430 Truxton Ave., Ste 730 1522 N.W. 23rd Avenue
(805)327 (305)486
Miami LATA 460
Fresno LATA 728 2153 NW 22nd Street
4605 E. Vine (305)324
(209)486
GEORGIA
Atlanta LATA 438
San Diego LATA 732 165 Boulevard S.E.
3750 Convoy Street, Ste. 312 (404)659
(619)569
IOWA
Davenport
San Francisco LATA 722 (TBD-to be determined)
Metropolitan Life Bldg.
425 Market St., Ste 3800C
(415)543 NEW MEXICO
Albuquerque LATA 664
200 Lomas Blvd, N.W.
13th Floor
(505)247
COLORADO
Colorado Springs LATA 658 TENNESSEE
102 S. Tejon, Suite 780 Chattanooga
(719)471 (TBD-to be determined)
Denver LATA 656 TEXAS
931 14th Street, Suite 622 Amarillo LATA 546
(303)572 Amarillo Petroleum Bldg.
203 W. 8th, Suite 607/608
</TABLE>
1
<PAGE>
EXHIBIT D
---------
<TABLE>
<CAPTION>
ON-NET SERVICE MINIMUM CHARGE
- -------------- --------------
<S> <C> <C> <C>
DS-0 I.C.B. $ 75.00
DS-1 $300.00
V & H Miles Rate
----------- ----
1-250 .10
251-1000 .0925
1001+ .085
DS-3 $1800.00
V & H Miles Rate
----------- ----
1-200 .0500
201-500 .0470
501-1000 .0460
1000+ .0450
DDS-3
V & H Miles Rate
----------- ----
1-250 .085
251-1000 .079
1001+ .073
</TABLE>
Minimum in service term is for twelve (12) months.
<TABLE>
<CAPTION>
OFF-NET SERVICE MINIMUM CHARGE
- --------------- --------------
<S> <C> <C>
DS-0 I.C.B. I.C.B.
DS-1 I.C.B. I.C.B.
DS-3 I.C.B. I.C.B.
</TABLE>
The term for Off-Net Service is based on an individual case basis.
<PAGE>
EXHIBIT E
<TABLE>
<CAPTION>
01/01/96 01/01/97
Circuit I.D. City Pair Product Service Order V&H Monthly Rate Monthly Rate
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TCT012964 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT012509 OKCYOK-TULSOK DS-1 525-0158 98 0.144 $338.69 0.10 $235.20
TCT012510 AUSTTX-WACOTX DS-1 525-0159 96 0.1302 $300.00 0.10 $230.40
TCT012508 OKCYOK-TULSOK DS-1 525-0158 98 0.144 $338.69 0.10 $235.20
TCT012114 AUSTTX-LTRKAR DS-1 525-0156 -- -- $1,321.34 -- $1,321.34
TCT012115 AUSTTX-WACOTX DS-1 525-0157 96 0.1302 $300.00 0.10 $230.40
TCT012648 AUSTTX-WACOTX DS-1 525-0163 96 0.1302 $300.00 0.10 $230.40
TCT012962 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT012963 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT012961 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT012649 AUSTTX-WACOTX DS-1 525-0163 96 0.1302 $300.00 0.10 $230.40
TCT012960 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT010692 AUSTTX-MDLDTX DS-1 525-0109 293 0.09 $632.88 0.0925 $650.46
TCT010691 AUSTTX-HRLNTX DS-1 525-0108 277 0.125 $831.00 0.0925 $614.94
TCT010706 AUSTTX-HRLNTX DS-1 525-0115A 277 0.125 $831.00 0.0925 $614.94
TCT010708 AUSTTX-LBCKTX DS-1 525-0116A 336 0.09 $725.76 0.0925 $745.92
TCT010707 AUSTTX-LBCKTX DS-1 525-0116A 336 0.09 $725.76 0.0925 $745.92
TCT010687 AUSTTX-HRLNTX DS-1 525-0108 277 0.125 $831.00 0.10 $664.80
TCT010686 AUSTTX-ABLNTX DS-1 525-0107B 194 0.09 $419.04 0.0925 $430.68
TCT010688 AUSTTX-HRLNTX DS-1 525-0108 277 0.125 $831.00 0.0925 $614.94
TCT010690 AUSTTX-HRLNTX DS-1 525-0108 277 0.125 $831.00 0.0925 $614.94
TCT010689 AUSTTX-HRLNTX DS-1 525-0108 277 0.125 $831.00 0.0925 $614.94
TCT010713 AUSTX-CRCHTX DS-1 525-0118C 168 0.125 $504.00 0.10 $403.20
TCT010714 AUSTX-CRCHTX DS-1 525-0118C 168 0.125 $504.00 0.10 $403.20
TCT010711 AUSTTX-LBCKTX DS-1 525-0116A 336 0.09 $725.76 0.0925 $745.92
TCT010693 AUSTTX-MDLDTX DS-1 525-0109 293 0.09 $632.88 0.10 $703.20
TCT010712 AUSTX-CRCHTX DS-1 525-0118C 168 0.125 $504.00 0.0925 $372.96
TCT010718 AUSTX-AMRLTX DS-1 525-0119B 418 0.09 $902.88 0.0925 $927.96
TCT010710 AUSTTX-LBCKTX DS-1 525-0116A 336 0.09 $725.76 0.0925 $745.92
TCT010717 AUSTX-CRCHTX DS-1 525-0118C 168 0.125 $504.00 0.10 $403.20
TCT010715 AUSTX-CRCHTX DS-1 525-0118C 168 0.125 $504.00 0.10 $403.20
TCT010716 AUSTX-CRCHTX DS-1 525-0118C 168 0.125 $504.00 0.10 $403.20
TCT010722 AUSTX-WACOTX DS-1 525-0120B 96 0.1302 $300.00 0.10 $230.40
TCT010721 AUSTX-WACOTX DS-1 525-0120B 96 0.1302 $300.00 0.10 $230.40
TCT010723 AUSTX-WACOTX DS-1 525-0120B 96 0.1302 $300.00 0.10 $230.40
TCT010725 AUSTX-MDLDTX DS-1 525-0121B 293 0.09 $632.88 0.0925 $650.46
TCT010724 AUSTX-MDLDTX DS-1 525-0121B 293 0.09 $632.88 0.0925 $650.46
TCT010703 AUSTTX-ELPSTX DS-1 525-0114A 534 0.09 $1,153.44 0.0925 $1,185.48
TCT010719 AUSTX-AMRLTX DS-1 525-0119B 418 0.09 $902.88 0.0925 $927.96
TCT010720 AUSTX-AMRLTX DS-1 525-0119B 418 0.09 $902.88 0.0925 $927.96
TCT010699 AUSTTX-AMRLTX DS-1 525-0112A 418 0.09 $902.88 0.0925 $927.96
TCT010700 AUSTTX-AMRLTX DS-1 525-0112A 418 0.09 $902.88 0.0925 $927.96
TCT010682 AUSTTX-ELPSTX DS-1 525-0106A 534 0.09 $1,153.44 0.0925 $1,185.48
TCT010681 AUSTTX-ELPSTX DS-1 525-0106A 534 0.09 $1,153.44 0.0925 $1,185.48
TCT010683 AUSTTX-ELPSTX DS-1 525-0106A 534 0.05 $1,153.44 0.0925 $1,185.48
TCT010685 AUSTTX-ABLNTX DS-1 525-0107B 194 0.09 $419.04 0.10 $465.60
TCT010684 AUSTTX-ELPSTX DS-1 525-0106A 534 0.09 $1,153.44 0.0925 $1,185.48
TCT010705 AUSTTX-HRLNTX DS-1 525-0115A 277 0.125 $831.00 0.0925 $614.94
TCT010704 AUSTTX-ELPSTX DS-1 525-0114A 534 0.09 $1,153.44 0.0925 $1,185.48
TCT010697 AUSTTX-WACOTX DS-1 525-011OA 96 0.1302 $300.00 0.10 $230.40
TCT010698 AUSTTX-WACOTX DS-1 525-011OA 96 0.1302 $300.00 0.10 $230.40
TCT008606 AUSTTX-HSTNTX LOL 525-0155B $1,440.00 $1,440.00
TCT013043 AUSTTX-BRFDTX LOL 525-0137A $330.00 $330.00
TCT008479 AUSTTX-DLLSTX LOL 525-0134 $900 00 $900.00
</TABLE>
2
<PAGE>
EXHIBIT E
<TABLE>
<CAPTION>
01/01/96 01/01/97
Circuit I.D. City Pair Product Service Order V&H Monthly Rate Monthly Rate
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TCT008479 AUSTTX-DLLSTX DS-3 525-0134 182 0.06 $7,338.24 0.05 $6,115.20
TCT008563 AUSTTX-DLLSTX DS-3 525-0148 182 0.06 $6,727.00 0.05 $6,115.20
TCT008544 AUSTTX-ALBQNM DS-3 525-0147 619 0.08 $33,280.00 0.46 $33,280.00
TCT008565 AUSTTX-OKCYOK DS-3 525-0150A 358 0.06 $13,232.00 0.047 $11,307.07
TCT008564 AUSTTX-HSTNTX DS-3 525-0149A 144 0.06 $5,323.00 0.05 $4,838.40
TCT008546 AUSTTX-DLLSTX DS-3 525-0146 182 0.06 $6,726.72 0.05 $6,115,20
TCT008549 WASHDC-CLMBOH DS-3 525-0143A 326 0.06 $12,050.00 0.047 $10,296.38
TCT008606 AUSTTX-HSTNTX DS-3 525-0155B 144 0.06 $5,323.00 0.05 $4,838.40
TCT008550 WASHDC-TLDOOH DS-3 525-0145A 392 0.06 $14,489.00 0.047 $12,380.93
TCT008547 WASHDC-AKRNOH DS-3 525-0144 281 0.06 $10,423.00 0.047 $8,875.10
TCT008452 AUSTTX-HSTNTX DS-3 525-0103A 144 0.06 $5,806.08 0.05 $4,838.40
TCT008714 DVNPIA-LNNGMI DS-3 525-0161B 338 0.06 $12,493.00 0.047 $10,675.39
TCT008455 AUSTTX-FTWOTX DS-3 525-0105A 173 0.06 $6,975.36 0.05 $5,812.80
TCT008454 AUSTTX-DLLSTX DS-3 525-0104A 182 0.06 $7,338.24 0.05 $6,115.20
TCT008450 AUSTTX-HSTNTX DS-3 525-0101B 144 0.06 $5,806.08 0.05 $4,838.40
TCT008480 AUSTTX-HSTNTX DS-3 525-0131A 144 0.06 $5,806.08 0.05 $4,838.40
TCT008449 AUSTTX-SNANTX DS-3 525-0100A 74 0.06 $2,983.68 0.05 $2,486.40
TCT008456 AUSTTX-OKCYOK DS-3 525-0122B 358 0.06 $14,434.56 0.047 $11,307.07
TCT008713 DVNPIA-GDRPMI DS-3 525-0160B 318 0.06 $11,754.00 0.047 $10,043.71
TCT012027 AUSTTX-WCFLTX DS-1 525-0136 -- -- $1,638.00 -- $1,638.00
TCT012028 AUSTTX-WCFLTX DS-1 525-0136 -- -- $1,638.00 -- $1,638.00
TCT010933 WASHDC-AUSTTX DS-1 525-0129 1312 0.09 $2,833.92 0.085 $2,676.48
TCT010931 WASHDC-AUSTTX DS-1 525-0129 1312 0.09 $2,833.92 0.085 $2,676.48
TCT010932 WASHDC-AUSTTX DS-1 525-0129 1312 0.09 $2,833.92 0.085 $2,676.48
TCT012029 AUSTTX-WCFLTX DS-1 525-0136 -- -- $1,638.00 -- $1,638.00
TCT011842 OKCYOK-TULSOK DS-1 525-0153 98 0.144 $338.71 0.10 $235.20
TCT011843 OKCYOK-TULSOK DS-1 525-0153 98 0.144 $338.69 0.10 $235.20
TCT011413 AUSTTX-TULSOK DS-1 525-0140 416 0.09 $898.56 0.0925 $923.52
TCT013043 AUSTTX-BRFDTX DS-1 525-0137A 336 0.2355 $1,899.42 -- $1,899.42
TCT011412 AUSTTX-SNANTX DS-1 525-0138 74 0.1689 $300.00 0.10 $177.60
TCT010930 WASHDC-AUSTTX DS-1 525-0129 1312 0.09 $2,833.92 0.085 $2,676.48
TCT010732 OKCYOK-TULSOK DS-1 525-0123A 98 0.1276 $300.00 0.10 $235.20
TCT010733 OKCYOK-TULSOK DS-1 525-0123A 98 0.1276 $300.00 0.10 $235.20
TCT010731 OKCYOK-TULSOK DS-1 525-0123A 98 0.1276 $300.00 0.10 $235.20
TCT010729 OKCYOK-TULSOK DS-1 525-0123A 98 0.1276 $300.00 0.10 $235.20
TCT010730 OKCYOK-TULSOK DS-1 525-0123A 98 0.1276 $300.00 0.10 $235.20
TCT010734 OKCYOK-TULSOK DS-1 525-0123A 98 0.1276 $300.00 0.10 $235.20
TCT010928 WASHDC-AUSTTX DS-1 525-0129 1312 0.09 $2,833.92 0.085 $2,676.48
TCT010929 WASHDC-AUSTTX DS-1 525-0129 1312 0.09 $2,833.92 0.085 $2,676.48
TCT010737 OKCYOK-TULSOK DS-1 525-0123A 98 0.1276 $300.00 0.10 $235.20
TCT010735 OKCYOK-TULSOK DS-1 525-0123A 98 0.1276 $300.00 0.10 $235.20
TCT010736 OKCYOK-TULSOK DS-1 525-0123A 98 0.1276 $300.00 0.10 $235.20
TCT011844 OKCYOK-TULSOK DS-1 525-0153 98 0.144 $338.69 0.10 $235.20
TCT012968 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT012969 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT012967 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT012965 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT012966 LNNGMI-SGNWMI DS-1 525-0164A 57 0.1462 $200.00 0.10 $136.80
TCT013239 LNNGMI-SGNWMI DS-1 525-0168A 57 0.1462 $200.00 0.10 $136.80
TCT013243 LNNGMI-SGNWMI DS-1 525-0168A 57 0.1462 $200.00 0.10 $136.80
TCT013244 LNNGMI-SGNWMI DS-1 525-0168A 57 0.1462 $200.00 0.10 $136.80
TCT013242 LNNGMI-SGNWMI DS-1 525-0168A 57 0.1462 $200.00 0.10 $136.80
TCT013240 LNNGMI-SGNWMI DS-1 525-0168A 57 0.1462 $200.00 0.10 $136.80
TCT013241 LNNGMI-SGNWMI DS-1 525-0168A 57 0.1462 $200.00 0.10 $136.80
</TABLE>
1
<PAGE>
EXHIBIT E
<TABLE>
<CAPTION>
01/01/96 01/01/97
Circuit I.D. City Pair Product Service Order V&H Monthly Rate Monthly Rate
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TCT008547 WASHDC-AKRNOH M13 525-0144 $300.00 $300.00
TCT008456 AUSTTX-OKCYOK M13 525-0122B $300.00 $300.00
TCT008565 AUSTTX-OKCYOK M13 525-0150A $300.00 $300.00
TCT008714 DVNPIA-LNNGMI M13 525-0161B $300.00 $300.00
TCT008478 WASHDC-WASHDC M13 525-0127A $300.00 $300.00
TCT008565 AUSTTX-OKCYOK OTH 525-0150A $1,000.00 $1,000.00
TCT008606 AUSTTX-HSTNTX OTH 525-0155B $1,000.00 $1,000.00
TCT008450 AUSTTX-HSTNTX OTH 525-0101B $200.00 $200.00
TCT012114 AUSTTX-LTRKAR OTH 525-0156 $100.00 $100.00
TCT012028 AUSTTX-WCFLTX OTH 525-0136 $250.00 $250.00
TCT012029 AUSTTX-WCFLTX OTH 525-0136 $250.00 $250.00
TCT008478 WASHDC-WASHDC OTH 525-0127A $500.00 $500.00
TCT008481 AUSTTX-AUSTTX OTH 525-0133 $1,000.00 $1,000.00
TCT008477 AUSTTX-AUSTTX OTH 525-0132 $1,000.00 $1,000.00
TCT012027 AUSTTX-WCFLTX OTH 525-0136 $250.00 $250.00
TCT008546 AUSTTX-DLLSTX OTH 525-0146 $1,000.00 $1,000.00
TCT008544 AUSTTX-ALBQNM OTH 525-0147 $1,000.00 $1,000.00
TCT008563 AUSTTX-DLLSTX OTH 525-0148 $1,000.00 $1,000.00
TCT008564 AUSTTX-HSTNTX OTH 525-0149A $1,000.00 $1,000.00
TCT011842 TULSOK- SWA 525-0153 $120.51 $120.51
TCT011843 TULSOK- SWA 525-0153 $120.51 $120.51
TCT011844 TULSOK- SWA 525-0153 $120.51 $120.51
TCT012509 TULSOK- SWA 525-0158 $120.51 $120.51
TCT012114 LTRKAR- SWA 525-0156 $120.51 $120.51
TCT013043 LBCKTX- SWA 525-0137A $160.75 $160.75
TCT012508 TULSOK- SWA 525-0158 $120.51 $120.51
TCT008550 WASHDC-TLDOOH SWA 525-0145A $1,350.00 $1,350.00
TCT011711 OKCYOK- SWP 525-0151B $165.00 $165.00
TCT011710 OKCYOK- SWP 525-0151B $165.00 $165.00
TCT011712 OKCYOK-OKCYOK SWP 525-0151B $165.00 $165.00
TCT011714 OKCYOK- SWP 525-0151B $165.00 $165.00
TCT011713 OKCYOK- SWP 525-0151B $165.00 $165.00
TCT011705 OKCYOK-OKCYOK SWP 525-0151B $165.00 $165.00
TCT011704 OKCYOK-OKCYOK SWP 525-0151B $165.00 $165.00
TCT011707 OKCYOK-OKCYOK SWP 525-0151B $165.00 $165.00
TCT011706 OKCYOK-OKCYOK SWP 525-0151B $165.00 $165.00
TCT011703 OKCYOK-OKCYOK SWP 525-0151B $165.00 $165.00
TCT011700 OKCYOK- SWP 525-0151B $165.00 $165.00
TCT013043 SNANTX- SWP 525-0137A $165.00 $165.00
TCT011702 OKCYOK-OKCYOK SWP 525-1051B $165.00 $165.00
TCT011701 OKCYOK-OKCYOK SWP 525-0151B $165.00 $165.00
TCT011709 OKCYOK- SWP 525-0151B $165.00 $165.00
TCT011708 OKCYOK- SWP 525-0151B $165.00 $165.00
TCT008478 WASHDC-WASHDC XC3 525-0127A $400.00 $400.00
-------------- ------------
$270,481.84 $241,992.05
============== ============
</TABLE>
<PAGE>
Exhibit 10.18
TELCO COMMUNICATIONS GROUP, INC.
WHOLESALE CUSTOMER
AGREEMENT for SPECIAL INTERNATIONAL PRICING
This agreement is made as of the 21st day of February, 1996, (the "International
-------- ----
Effective Date"), by and between Telco Communications Group, Inc. ("TCG") and
Esprit Telecom ("Customer") and is an addendum to the Switchless Reseller
- --------------
Services Agreement or any other existing agreement between the parties.
1. Customer's Commitment.
----------------------
Commencing on February 21, 1996 and continuing through February 20, 1997 (the
----------------- -----------------
"International Commitment Period"), Customer agrees to pay to TCG a minimum of
$100,000 per month ("Customer's International Commitment") for International 1+
usage (either switched access or dedicated access).
2. Cancellation.
-------------
At the end of the International Commitment Period, the terms and conditions of
this Agreement (including without limitation, Customer's International
Commitment and the Special International Service Rates) will remain in full
force and effect until the cancellation by either party on thirty (30) days
prior written notice. Upon termination of this Agreement, Customer's rates for
International Service will be the standard International Service rates available
to wholesale customers as defined in TCG's FCC No. 2 tariff as of the date of
the termination of the Agreement, including all subsequent revisions or
modfications made to such tariff.
3. Special International Service Rates.
------------------------------------
During the International Commitment Period, rates for Special International
Service provided pursuant to this Agreement are shown on the Special
International Pricing Exhibit ("Pricing Exhibit") which is attached hereto and
dated concurrently herewith. TCG reserves the right, however, to modify charges
for and/or delete TCG service offerings to specific locations set forth in the
Pricing Exhibit. Should TCG elect to increase the Special International Service
rates or discontinue Service, Customer's International Commitment, effective as
of the effective date of such price increase or discontinuance of Service, shall
be reduced by the average total monthly amount of Customer's TCG 1+ usage to
that international destination only, during the three (3) full calendar months
prior to the month in which the price increase became effective.
<PAGE>
4. Deficiency Charge.
------------------
For any month during the International Commitment Period in which Customer does
not maintain Customer's International Commitment, Customer will pay TCG the
difference between Customer's International Commitment and Customer's actual
International Monthly Revenue (the "International Deficiency Charge"). The
International Deficiency Charge will be due at the same time payment is due for
Service provided to Customer.
Should Customer terminate the Agreement for any reason or if TCG terminates the
Agreement prior to expiration of the International Commitment Period due to the
Customer's default of any of its obligations, Customer shall be required to pay
the Customer's International Commitment multiplied by the number of months
remaining in the International Commitment Period.
IN WITNESS WHEREOF, the parties have executed this Agreement.
<TABLE>
<S> <C> <C>
Authorized Signature: /s/Terry Lewis /s/Natalie Marine-Street
------------------------ ------------------------
Customer Telco Communications Group, Inc
Print Name: Terry Lewis Natalie Marine-Street
------------------------ ------------------------
Title: Group Network Director Executive Vice President
------------------------ ------------------------
Date: 2/21/96 3/13/96
------------------------ ------------------------
</TABLE>
Updated 1/21/96
<PAGE>
SPECIAL PRICING EXHIBIT
ESPRIT
011 International
100K Commitment
Telco
- -----
Communications Group, Inc. Effective 1/21/96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
COUNTRY COUNTRY STANDARD STANDARD DISCOUNT DISCOUNT ECONOMIC ECONOMIC
NAME CODE FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AFGHANISTAN 93 0.992 0.992 0.992 0.992 0.992 0.992
ALBANIA 355 0.705 0.705 0.705 0.705 0.705 0.705
ALGERIA 213 0.658 0.658 0.658 0.658 0.612 0.612
AMER SAMOA 684 0.889 0.889 0.696 0.696 0.605 0.605
ANDORRA 376 0.260 0.260 0.260 0.260 0.260 0.260
ANGOLA 244 1.025 1.025 1.025 1.025 1.025 1.025
ANGUILLA AG 1000 0.447 0.447 0.447 0.447 0.447 0.447
ANTARC CASEY 1039 0.529 0.529 0.529 0.529 0.529 0.529
ANTARC SCOTT 1040 0.529 0.529 0.529 0.529 0.529 0.529
ANTIGUA AN 1001 0.447 0.447 0.447 0.447 0.447 0.447
ARGENTINA 54 0.513 0.513 0.513 0.513 0.513 0.513
ARMENIA 374 0.799 0.799 0.799 0.799 0.799 0.799
ARUBA 297 0.464 0.464 0.454 0.454 0.402 0.402
ASCENSION IS 247 0.870 0.870 0.870 0.870 0.787 0.787
AUSTRALIA 61 0.165 0.165 0.165 0.165 0.165 0.165
AUSTRIA 43 0.274 0.274 0.274 0.274 0.274 0.274
AZERBAIJAN 994 0.799 0.799 0.799 0.799 0.799 0.799
BAHAMAS BA 1002 0.241 0.241 0.225 0.225 0.225 0.225
BAHRAIN 973 0.724 0.726 0.724 0.726 0.724 0.726
BANGLADESH 880 0.978 0.978 0.978 0.978
BARBADOS BD 1003 0.447 0.447 0.447 0.447 0.447 0.447
BELARUS 375 0.717 0.717 0.717 0.717 0.648 0.648
BELGIUM 32 0.231 0.231 0.231 0.231 0.231 0.231
BELIZE 501 0.655 0.655 0.655 0.655 0.655 0.655
BENIN 229 0.648 0.648 0.648 0.648 0.648 0.648
BERMUDA BM 1004 0.355 0.355 0.355 0.355 0.355 0.355
BHUTAN 975 1.127 1.127 1.017 1.017
BOLIVIA 591 0.655 0.655 0.655 0.655 0.655 0.655
BOSNIA HERZ 387 0.588 0.588 0.588 0.588 0.588 0.588
BOTSWANA 267 0.796 0.796 0.796 0.796 0.796 0.796
BR VRG IS BV 1005 0.447 0.447 0.447 0.447 0.447 0.447
BRAZIL 55 0.437 0.437 0.437 0.437 0.437 0.437
BRUNEI 673 0.704 0.704 0.704 0.704 0.704 0.704
BULGARIA 359 0.575 0.575 0.575 0.575 0.575 0.575
BURKINA FASO 226 0.692 0.692 0.692 0.692 0.692 0.692
BURMA 95 1.142 1.142 1.142 1.142 1.142 1.142
BURUNDI 257 0.975 0.975 0.975 0.975 0.975 0.975
C AFRCN REP 236 1.532 1.532 1.376 1.376 1.376 1.376
CAMBODIA 855 1.328 1.329 1.328 1.329 1.328 1.329
CAMEROON 237 0.792 0.792 0.792 0.792 0.792 0.792
CAPE VRDE IS 238 0.889 0.889 0.889 0.889 0.889 0.889
CAYMAN IS Cl 1006 0.447 0.447 0.447 0.447 0.447 0.447
CHAD REPUB 235 1.553 1.553 1.538 1.538 1.538 1.538
CHILE 56 0.456 0.456 0.456 0.456 0.456 0.456
CHINA 86 0.907 0.907 0.907 0.907 0.907 0.907
</TABLE>
Page 1 of 6
<PAGE>
ESPRIT
011 International
100K Commitment
Telco
- -----
Communications Group, Inc. Effective 1/21/96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
COUNTRY COUNTRY STANDARD STANDARD DISCOUNT DISCOUNT ECONOMIC ECONOMIC
NAME CODE FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CHRISTMAS IS 1034 0.521 0.521 0.521 0.521 0.521 0.521
CIS 7 0.748 0.748 0.748 0.748 0.748 0.748
COCOS IS 1035 0.521 0.521 0.521 0.521 0.521 0.521
COLOMBIA 57 0.510 0.510 0.510 0.510 0.510 0.510
COMOROS 1037 1.679 1.679 1.679 1.679 1.514 1.514
CONGO 242 0.754 0.753 0.754 0.753 0.754 0.753
COOK IS 682 1.238 1.238 1.238 1.238 1.238 1.238
COSTA RICA 506 0.476 0.474 0.476 0.474 0.476 0.474
CROATIA 385 0.515 0.515 0.515 0.515 0.515 0.515
CUBA 53 0.575 0.575 0.575 0.575 0.575 0.575
CYPRUS 357 0.503 0.503 0.503 0.503 0.503 0.503
CZECH SLOVAK 42 0.337 0.337 0.337 0.337 0.337 0.337
DENMARK 45 0.279 0.279 0.295 0.295 0.295 0.295
DIEGO GARCIA 246 0.888 0.888 0.805 0.805 0.805 0.805
DJIBOUTI 253 0.769 0.769 0.769 0.769 0.769 0.769
DOMINICA DM 1007 0.447 0.447 0.447 0.447 0.447 0.447
DOMNICN DR 1008 0.305 0.305 0.305 0.305 0.305 0.305
ECUADOR 593 0.520 0.520 0.520 0.520 0.520 0.520
EGYPT 20 0.637 0.636 0.637 0.636 0.604 0.600
EL SALVADOR 503 0.492 0.492 0.492 0.492 0.492 0.492
EQ. GUINEA 240 1.195 1.195 1.195 1.195 1.195 1.195
ERITREA 291 1.115 1.115 1.115 1.115 1.115 1.115
ESTONIA 1038 0.434 0.434 0.434 0.434 0.434 0.434
ETHIOPIA 251 0.957 0.957 0.957 0.957 0.957 0.957
FAEROE IS 298 0.502 0.502 0.502 0.502 0.456 0.456
FALKLAND IS 500 0.740 0.740 0.740 0.740 0.740 0.740
FIJI ISLANDS 679 0.897 0.897 0.897 0.897 0.897 0.897
FINLAND 358 0.274 0.274 0.274 0.274 0.274 0.274
FR ANTILLES 596 0.493 0.492 0.493 0.492 0.493 0.492
FR GUIANA 594 0.661 0.661 0.661 0.661 0.583 0.583
FR POLYNESIA 689 0.520 0.520 0.520 0.520 0.520 0.520
FRANCE (not Paris) 33X 0.224 0.224 0.224 0.224 0.224 0.224
FRNCE MONACO 1033 0.224 0.224 0.224 0.224 0.224 0.224
GABON 241 0.775 0.775 0.775 0.775 0.705 0.705
GAMBIA 220 0.648 0.648 0.648 0.648 0.648 0.648
GEORGIA 1024 0.799 0.799 0.799 0.799 0.799 0.799
GERMANY 49 0.215 0.215 0.215 0.215 0.215 0.215
GHANA 233 0.565 0.565 0.565 0.565 0.565 0.565
GIBRALTAR 350 0.357 0.357 0.357 0.357 0.357 0.357
GREECE 30 0.301 0.301 0.301 0.301 0.301 0.301
GREENLAND 299 0.529 0.529 0.529 0.529 0.529 0.529
GRENADA GN 1009 0.483 0.483 0.483 0.483 0.483 0.483
GUADELOUPE 590 0.502 0.502 0.419 0.419 0.355 0.355
GUAM 671 0.345 0.345 0.345 0.345 0.345 0.345
GUANTANAMO 1032 0.571 0.571 0.571 0.571 0.571 0.571
</TABLE>
Page 2 of 6
<PAGE>
ESPRIT
011 International
100K Commitment
Telco
- -----
Communications Group, Inc. Effective 1/21/96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
COUNTRY COUNTRY STANDARD STANDARD DISCOUNT DISCOUNT ECONOMIC ECONOMIC
NAME CODE FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GUATEMALA 502 0.515 0.515 0.515 0.515 0.515 0.515
GUINEA 224 0.950 0.950 0.801 0.801 0.653 0.653
GUINEA BSSAU 245 0.791 0.789 0.791 0.789 0.791 0.789
GUYANA 592 0.787 0.787 0.787 0.787 0.640 0.640
HAITI 509 0.525 0.525 0.525 0.525 0.525 0.525
HONDURAS 504 0.520 0.520 0.483 0.483 0.483 0.483
HONG KONG 852 0.280 0.280 0.280 0.280 0.280 0.280
HUNGARY 36 0.390 0.390 0.390 0.390 0.346 0.346
ICELAND 354 0.405 0.405 0.405 0.405 0.405 0.405
INDIA 91 0.555 0.555 0.555 0.555
INDONESIA 62 0.705 0.705 0.705 0.705 0.705 0.705
IRAN 98 0.950 0.950 0.950 0.950 0.853 0.853
IRAQ 964 1.099 1.099 1.099 1.099 1.099 1.099
IRELAND 353 0.274 0.274 0.274 0.274 0.274 0.274
ISRAEL 972 0.594 0.594 0.594 0.594 0.594 0.594
ITALY 39 0.301 0.301 0.301 0.301 0.301 0.301
ITLY VAT CTY 396 0.320 0.320 0.320 0.320 0.320 0.320
IVORY COAST 225 0.973 0.973 0.973 0.973 0.973 0.973
JAMAICA JM 1010 0.539 0.539 0.539 0.539 0.539 0.539
JAPAN 81 0.225 0.225 0.225 0.225 0.225 0.225
JORDAN 962 0.667 0.667 0.667 0.667 0.667 0.667
KAZAKHSTAN 1025 0.799 0.799 0.799 0.799 0.799 0.799
KENYA 254 0.784 0.784 0.784 0.784 0.784 0.784
KIRIBATI 686 0.694 0.694 0.694 0.694 0.694 0.694
KOREA REPUB 82 0.475 0.475 0.475 0.475 0.475 0.475
KUWAIT 965 0.672 0.672 0.672 0.672 0.672 0.672
KYRGYZSTAN 1026 0.799 0.799 0.799 0.799 0.799 0.799
LAOS 856 1.293 1.293 1.293 1.293 1.293 1.293
LATVIA 371 0.525 0.525 0.525 0.525 0.525 0.525
LEBANON 961 0.731 0.731 0.731 0.731 0.731 0.731
LESOTHO 266 0.827 0.827 0.801 0.801 0.653 0.653
LIBERIA 231 0.505 0.505 0.505 0.505 0.505 0.505
LIBYA 218 0.658 0.658 0.658 0.658 0.658 0.658
LIECHTENSTN 417 0.272 0.272 0.272 0.272 0.272 0.272
LITHUANIA 370 0.644 0.644 0.644 0.644 0.644 0.644
LUXEMBOURG 352 0.295 0.295 0.295 0.295 0.295 0.295
MACAO 853 0.686 0.686 0.686 0.686 0.686 0.686
MACEDONIA 389 0.900 0.900 0.782 0.782 0.782 0.782
MADAGASCAR 261 1.553 1.553 1.538 1.538 1.538 1.538
MALAWI 265 0.575 0.575 0.575 0.575 0.529 0.529
MALAYSIA 60 0.475 0.475 0.475 0.475 0.475 0.475
MALDIVES 960 1.205 1.205 1.205 1.205 1.205 1.205
MALI REPUB 223 1.072 1.072 1.008 1.008 0.907 0.907
MALTA 356 0.521 0.521 0.521 0.521 0.521 0.521
MARISAT ATL WST 874 7.103 7.103 7.103 7.103 7.103 7.103
</TABLE>
Page 3 of 6
<PAGE>
ESPRIT
011 International
100K Commitment
Telco
- -----
Communications Group, Inc. Effective 1/21/96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
COUNTRY COUNTRY STANDARD STANDARD DISCOUNT DISCOUNT ECONOMIC ECONOMIC
NAME CODE FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MARISAT IND OC 873 7.103 7.103 7.103 7.103 7.103 7.103
MARISAT PAC 872 7.103 7.103 7.103 7.103 7.103 7.103
MARSAT ATL EST 871 7.103 7.103 7.103 7.103 7.103 7.103
MARSHALL IS 692 1.357 1.357 1.164 1.164 0.934 0.934
MAURITANIA 222 0.958 0.958 0.958 0.958 0.958 0.958
MAURITIUS 230 1.054 1.054 0.943 0.943 0.769 0.769
MAYOTTE IS 1036 0.980 0.980 0.980 0.980 0.980 0.980
MEXICO R1 521 0.169 0.169 0.130 0.130
MEXICO R2 522 0.217 0.217 0.169 0.169
MEXICO R3 523 0.346 0.346 0.265 0.265
MEXICO R4 524 0.383 0.383 0.301 0.301
MEXICO R5 525 0.442 0.442 0.319 0.319
MEXICO R6 526 0.493 0.493 0.353 0.353
MEXICO R7 527 0.572 0.572 0.476 0.476
MEXICO R8 528 0.572 0.572 0.476 0.476
MICRONESIA 691 1.155 1.155 1.081 1.081 0.870 0.870
MOLDOVA 373 0.636 0.636 0.636 0.636 0.579 0.579
MONGOLIA 976 1.469 1.469 1.452 1.452 1.452 1.452
MONSERRAT MR 1011 0.483 0.483 0.483 0.483 0.483 0.483
MOROCCO 212 0.440 0.440 0.440 0.440 0.440 0.440
MOZAMBIQUE 258 0.581 0.581 0.581 0.581 0.581 0.581
N CALEDONIA 687 1.142 1.142 0.985 0.985 0.792 0.792
NAMIBIA 264 0.818 0.818 0.801 0.801 0.661 0.661
NAURU 674 1.023 1.023 1.023 1.023 1.023 1.023
NEPAL 977 1.257 1.257 0.699 0.699
NETH ANTILLE 599 0.220 0.220 0.220 0.220 0.220 0.220
NETHERLANDS 31 0.233 0.233 0.233 0.233 0.233 0.233
NEVIS NI 1012 0.483 0.483 0.483 0.483 0.483 0.483
NEW ZEALAND 64 0.285 0.285 0.285 0.285 0.285 0.285
NICARAGUA 505 0.605 0.605 0.605 0.605 0.605 0.605
NIGER 227 0.865 0.865 0.865 0.865 0.865 0.865
NIGERIA 234 0.530 0.530 0.530 0.530 0.530 0.530
NIUE 683 1.325 1.325 1.325 1.325 1.325 1.325
NORFOLK IS 1041 0.465 0.465 0.465 0.465 0.465 0.465
NORWAY 47 0.235 0.235 0.235 0.235 0.235 0.235
OMAN 968 0.900 0.900 0.900 0.900 0.900 0.900
PAKISTAN 92 0.805 0.805 0.805 0.805
PALAU 680 1.307 1.307 1.307 1.307 1.307 1.307
PANAMA 507 0.539 0.539 0.539 0.539 0.539 0.539
PAPUA N GUIN 675 0.704 0.704 0.704 0.704 0.612 0.612
PARAGUAY 595 0.670 0.670 0.649 0.649 0.649 0.649
PERU 51 0.585 0.585 0.585 0.585 0.585 0.585
PHILIPPINES 63 0.515 0.515 0.515 0.515 0.515 0.515
POLAND 48 0.408 0.408 0.408 0.408 0.408 0.408
PORTUGAL 351 0.293 0.293 0.293 0.293 0.293 0.293
</TABLE>
Page 4 of 6
<PAGE>
ESPRIT
011 International
100K Commitment
Telco
- -----
Communications Group, Inc. Effective 1/21/96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
COUNTRY COUNTRY STANDARD STANDARD DISCOUNT DISCOUNT ECONOMIC ECONOMIC
NAME CODE FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
QATAR 974 0.871 0.871 0.871 0.871 0.713 0.713
REUNION IS 262 0.943 0.943 0.943 0.943 0.943 0.943
ROMANIA 40 0.626 0.626 0.626 0.626 0.626 0.626
RUSSIA 1031 0.582 0.582 0.582 0.582 0.582 0.582
RWANDA 250 1.137 1.137 1.008 1.008 0.824 0.824
SAIPAN 670 0.684 0.684 0.684 0.684 0.684 0.684
SAN MARINO 378 0.487 0.487 0.463 0.463 0.463 0.463
SAO TOME 239 1.025 1.025 1.025 1.025 1.025 1.025
SAUDI ARABIA 966 0.723 0.723 0.723 0.723 0.670 0.670
SENEGAL 221 1.032 1.032 0.986 0.987 0.772 0.771
SEYCHLLES IS 248 1.147 1.149 1.147 1.149 1.147 1.149
SIERRA LEONE 232 0.958 0.958 0.758 0.758 0.593 0.593
SINGAPORE 65 0.185 0.185 0.185 0.185 0.185 0.185
SLOVENIA 386 0.655 0.655 0.655 0.655 0.655 0.655
SOLOMON IS 677 0.862 0.861 0.862 0.861 0.862 0.861
SOMALIA 252 1.752 1.752 1.564 1.564 1.564 1.564
SOUTH AFRICA 27 0.483 0.483 0.465 0.465 0.402 0.402
SPAIN 34 0.274 0.274 0.274 0.274 0.274 0.274
SRI LANKA 94 0.750 0.750 0.741 0.741
ST HELENA 290 0.827 0.827 0.827 0.827 0.827 0.827
ST KITTS KI 1013 0.483 0.483 0.483 0.483 0.483 0.483
ST LUCIA SL 1014 0.483 0.483 0.483 0.483 0.483 0.483
ST PIERRE 508 0.268 0.268 0.268 0.268 0.268 0.268
ST VINCENTSV 1015 0.483 0.483 0.483 0.483 0.483 0.483
SUDAN 249 0.381 0.381 0.381 0.381 0.381 0.381
SURINAME 597 0.740 0.740 0.740 0.740 0.740 0.740
SWAZILAND 268 0.504 0.504 0.504 0.504 0.504 0.504
SWEDEN 46 0.145 0.145 0.145 0.145 0.145 0.145
SWITZERLAND 41 0.215 0.215 0.215 0.215 0.215 0.215
SYRIA 963 1.107 1.107 1.107 1.107 1.107 1.107
TAIWAN 886 0.345 0.345 0.345 0.345 0.345 0.345
TAJIKISTAN 1027 0.799 0.799 0.799 0.799 0.799 0.799
TANZANIA 255 0.712 0.708 0.712 0.708 0.712 0.708
THAILAND 66 0.635 0.635 0.635 0.635 0.635 0.635
TOGO 228 1.068 1.068 0.878 0.879 0.734 0.735
TONGA IS 676 1.167 1.167 1.167 1.167 1.167 1.167
TRINIDAD TR 1016 0.483 0.483 0.483 0.483 0.483 0.483
TUNISIA 216 0.620 0.620 0.620 0.620 0.620 0.620
TURKEMENISTN 1028 0.799 0.799 0.799 0.799 0.799 0.799
TURKEY 90 0.455 0.455 0.455 0.455 0.455 0.455
TURKS CAICTC 1017 0.447 0.447 0.447 0.447 0.447 0.447
TUVALU 688 1.010 1.010 1.010 1.010 1.010 1.010
UGANDA 256 0.739 0.739 0.739 0.739 0.739 0.739
UKRAINE 380 0.615 0.615 0.615 0.615 0.615 0.615
UNITED KINGD 44 0.114 0.114 0.114 0.114 0.114 0.114
</TABLE>
Page 5 of 6
<PAGE>
ESPRIT
011 International
100K Commitment
Telco
- -----
Communications Group, Inc. Effective 1/21/96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
COUNTRY COUNTRY STANDARD STANDARD DISCOUNT DISCOUNT ECONOMIC ECONOMIC
NAME CODE FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN FIRST MIN ADD'L MIN
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
UNT ARB EMIR 971 0.585 0.585 0.585 0.585 0.585 0.585
URUGUAY 598 0.710 0.708 0.710 0.708 0.710 0.708
UZBEKISTAN 1030 0.799 0.799 0.799 0.799 0.799 0.799
VANUATU 678 0.965 0.965 0.965 0.965 0.965 0.965
VENEZUELA 58 0.345 0.345 0.345 0.345 0.345 0.345
VIETNAM 84 0.887 0.887 0.887 0.887 0.887 0.887
W SAMOA 685 0.818 0.818 0.783 0.783 0.678 0.678
WALLS FTNA 681 1.265 1.265 1.265 1.265 1.265 1.265
YEMEN 967 0.672 0.672 0.672 0.672 0.672 0.672
YUGOSLAVIA 381 0.635 0.635 0.635 0.635 0.635 0.635
ZAIRE 243 0.715 0.715 0.715 0.715 0.715 0.715
ZAMBIA 260 0.717 0.717 0.717 0.717 0.717 0.717
ZIMBABWE 263 0.548 0.548 0.469 0.469 0.381 0.381
- -------------------------------------------------------------------------------------------------------
</TABLE>
Note: 1000 series country codes are pseudo-codes created by Telco for countries
which share a single country code.
Page 6 of 6
<PAGE>
Exhibit 10.20
LEASE AGREEMENT
THIS LEASE AGREEMENT, ENTERED INTO BY AND BETWEEN CPL PROPERTIES, LTD.,
---------------------
(HEREINAFTER CALLED "LANDLORD"), AND TELCO COMMUNICATIONS, GROUP, INC.,
----------------------------------
(HEREINAFTER CALLED "TENANT"), AS OF MARCH 1ST, 1995.
----------------
1. PREMISES.
LANDLORD HEREBY LEASES TO TENANT, AND TENANT HEREBY LEASES FROM
LANDLORD 3,470 SQUARE FEET, MORE OR LESS, OF SPACE ON THE FOURTH FLOOR(S) IN THE
BUILDING KNOWN AS NORTHWEST BANK BUILDING/DOWNTOWN, (HEREINAFTER CALLED
"BUILDING") AND LOCATED ON A TRACT OF LAND MORE PARTICULARLY IDENTIFIED IN THE
ATTACHED EXHIBIT "A". THE SPACE HEREBY LEASED IN THE BUILDING IS HEREINAFTER
CALLED THE "LEASED PREMISES"; AND IS SHOWN OUTLINED ON THE FLOOR PLAN DESIGNATED
EXHIBIT "C", WHICH IS ATTACHED HERETO.
2. TERM.
THE INITIAL TERM OF THIS LEASE IS FIVE (5) YEAR(S), COMMENCING ON
---- -
MARCH 1 1995, AND EXPIRING FEBRUARY 28, 2000, UNLESS SOONER TERMINATED AS
- ------------ -----------------
PROVIDED HEREIN.
RENEWAL OPTIONS: TENANT SHALL HAVE THREE (3) FIVE-YEAR OPTIONS TO
RENEW, WITH 180-DAYS' WRITTEN NOTICE TO LANDLORD TO EXERCISE SAID OPTION.
3. RENT.
"BASE RENT" IS DEFINED AS BEING THE COMBINATION OF BASE RENT,
INITIAL ELECTRICAL CHARGE AND FULL SERVICE OPERATING COSTS.
TENANT COVENANTS TO PAY TO LANDLORD, WITHOUT DEMAND AND WITHOUT
SET-OFF OR DEDUCTION, AT LANDLORD'S ADDRESS DESIGNATED IN PARAGRAPH 26 OF THIS
LEASE, OR AT SUCH OTHER PLACE AS LANDLORD MAY FROM TIME-TO-TIME DESIGNATE IN
WRITING THE FOLLOWING BASE RENTAL:
<TABLE>
<CAPTION>
ANNUAL BASE RENT MONTHLY BASE RENT
---------------- -----------------
<S> <C> <C>
3-1-95 TO 2-28-2000 $46,775.60 $3,897.97
</TABLE>
NOTE: TENANT SHALL PAY THE FIRST TWO (2) MONTHS' RENTAL ($7,795.94) AT
THE TIME THE LEASE IS FULLY EXECUTED; SAID TWO MONTHS' RENTAL TO BE APPLIED TO
TENANT'S FIRST TWO MONTHS' RENTAL OBLIGATION.
<TABLE>
<CAPTION>
OPTION RENTAL:
--------------
<S> <C>
3-1-00 TO 2-28-05 $9.70 PER SQUARE FOOT BASE RENTAL,
------------
PLUS TENANT'S INITIAL ELECTRICAL
CHARGE AND FULL SERVICE OPERATING
COSTS (PER SQUARE FOOT), AS CALCU-
LATED AT THAT TIME;
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3-1-05 TO 2-28-10 $11.39 PER SQUARE FOOT BASE RENTAL,
------------
PLUS TENANT'S INITIAL ELECTRICAL
CHARGE AND FULL SERVICE OPERATING
COSTS (PER SQUARE FOOT), AS
CALCULATED AT THAT TIME;
3-1-10 TO 2-28-15 $13.38 PER SQUARE FOOT BASE RENTAL,
------------
PLUS TENANT'S INITIAL ELECTRICAL
CHARGE AND FULL SERVICE OPERATING
COSTS (PER SQUARE FOOT), AS
CALCULATED AT THAT TIME.
</TABLE>
THE RENT SET-OUT ABOVE IS TO BE PAID TO LANDLORD, IN ADVANCE ON THE
FIRST DAY OF EACH CALENDAR MONTH DURING THE TERM, AND ADJUSTED AS HEREINAFTER
PROVIDED. IN THE EVENT THE LEASE TERM DOES NOT BEGIN ON THE FIRST DAY OF THE
MONTH, A PRO-RATA PART OF SUCH MONTHLY RENTAL SHALL BE DUE. IN ADDITION, TENANT
SHALL PAY ITS PRO-RATA SHARE OF "COMMON AREA" ON ITS FLOOR, AS DEFINED IN
PARAGRAPH 17(A) AND 17(B) HEREOF.
4. USE.
TENANT SHALL USE THE LEASED PREMISES FOR SWITCH SITE AND FOR NO
-----------
OTHER PURPOSE.
5. SERVICES TO BE PROVIDED BY LANDLORD.
SUBJECT TO THE RULES AND REGULATIONS HEREINAFTER REFERRED TO,
LANDLORD SHALL FURNISH TO TENANT, AT LANDLORD'S EXPENSE, THE FOLLOWING SERVICES
FOR THE OCCUPIED PORTION OF THE LEASED PREMISES DURING THE LEASE TERM:
(A) AIR CONDITIONING AND HEATING AT SUCH TEMPERATURES AND IN SUCH
AMOUNTS AS MAY BE REASONABLY REQUIRED FOR COMFORTABLE USE AND OCCUPANCY MONDAY
THROUGH FRIDAY, UNDER NORMAL OFFICE CONDITIONS, AND FROM 8:00 A.M. TO 2:00 P.M.
ON SATURDAY, BUT NOT ON SUNDAYS, NEW YEAR'S DAY, JULY 4TH, LABOR DAY,
THANKSGIVING, CHRISTMAS OR OTHER LEGAL HOLIDAYS. HEATING, VENTILATION AND AIR
CONDITIONING SHALL BE AVAILABLE AS REQUIRED, 24 HOURS DAILY, SEVEN DAYS A WEEK;
AND ALL EXCESS ENERGY USE OVER $1.30 PER SQUARE FOOT PER YEAR SHALL BE
SEPARATELY METERED AND BILLED MONTHLY TO TENANT.
(B) WATER FOR DRINKING, LAVATORY AND TOILET PURPOSES ON THE FLOOR(S)
ON WHICH THE LEASED PREMISES ARE LOCATED.
(C) JANITOR SERVICE IN AND ABOUT THE LEASED PREMISES, FIVE (5) DAYS
PER WEEK AND PERIODIC WINDOW WASHING.
(D) ELEVATOR FOR ACCESS TO AND EGRESS FROM THE BUILDING AND THE
FLOOR(S) ON WHICH THE LEASED PREMISES ARE SITUATED.
(E) REPLACEMENT OF FLUORESCENT LAMPS IN BUILDING STANDARD CEILING
MOUNTED FIXTURES, INSTALLED BY LANDLORD, AND ELECTRIC SERVICE REQUIRED TO
OPERATE THE STANDARD LIGHTING TYPEWRITERS, SMALL AUTOMATIC BUSINESS OR
ACCOUNTING MACHINES, ETC. IT SHALL NOT INCLUDE CURRENT FOR THE OPERATION OF ANY
COOLING OR ABNORMAL AMOUNTS OF CURRENT,
<PAGE>
SUCH AS LARGE AUTOMATIC BUSINESS MACHINES OR SYSTEMS. IF TENANT DESIRES TO
INSTALL ANY SUCH EQUIPMENT OR APPARATUS, TENANT SHALL NOTIFY LANDLORD IN
WRITING, AND UPON A SATISFACTORY AGREEMENT CONCERNING THE HANDLING OF
INSTALLATION COSTS AND RESPONSIBILITY AND THE ADDITIONAL MONTHLY CHARGES TO BE
PAID BY TENANT, SUCH EQUIPMENT OR APPARATUS MAY BE INSTALLED.
NO SLOWDOWN, INTERRUPTION, STOPPAGE OR MALFUNCTION OF ANY SUCH
SERVICES SHALL CONSTITUTE AN EVICTION OR DISTURBANCE OF TENANT'S USE AND
POSSESSION OF THE LEASED PREMISES OF BUILDING OR A BREACH BY LANDLORD OF ANY OF
ITS OBLIGATIONS HEREUNDER (INCLUDING THE OBLIGATION TO PAY RENT) OR GRANT TENANT
ANY RIGHT OF OFF-SET OR RECOUPMENT; AND IN NO EVENT SHALL LANDLORD BE LIABLE FOR
DAMAGES TO PERSONS OR PROPERTY, OR BE IN DEFAULT HEREUNDER, AS A RESULT OF SUCH
SLOWDOWN, INTERRUPTION, HOWEVER, LANDLORD SHALL USE REASONABLE DILIGENCE TO
RESTORE SUCH SERVICE.
NOTWITHSTANDING ANY OTHER TERM OR PROVISION HEREOF, TENANT SHALL PAY
TO LANDLORD, MONTHLY AS BILLED, SUCH CHARGES AS MAY BE SEPARATELY METERED OR AS
LANDLORD'S ENGINEER MAY COMPUTE FOR ANY ENERGY SERVICE INCLUDING FOR OPERATION,
HEATING, VENTILATING OR COOLING UTILIZED BY TENANT FOR COMPUTERS, DATA
PROCESSING OR OTHER EQUIPMENT (EXCEPT TYPEWRITERS, DICTATING EQUIPMENT, ADDING
MACHINES, DESK-TOP CALCULATORS AND OTHER OFFICE EQUIPMENT OF LOW ENERGY
CONSUMPTION) OR OTHER ENERGY SERVICE NOT STANDARD FOR THE BUILDING.
6. REPAIRS AND MAINTENANCE.
(A) LANDLORD WILL, AT ITS OWN COST AND EXPENSE, EXCEPT AS MAY BE
PROVIDED ELSEWHERE HEREIN, MAKE NECESSARY REPAIRS OF DAMAGE TO THE BUILDING
CORRIDORS, LOBBY, STRUCTURAL MEMBERS OF THE BUILDING AND EQUIPMENT USED TO
PROVIDE THE SERVICES REFERRED TO IN PARAGRAPH 5 HEREOF, UNLESS ANY SUCH DAMAGE
IS CAUSED BY ACTS OR OMISSIONS OF TENANT, ITS AGENTS, CUSTOMERS, EMPLOYEES OR
INVITEES, IN WHICH EVENT TENANT WILL BEAR THE COST OF SUCH REPAIRS. TENANT WILL
PROMPTLY GIVE LANDLORD WRITTEN NOTICE OF ANY DAMAGE REQUIRING REPAIR BY
LANDLORD, AS AFORESAID.
(B) TENANT WILL NOT DAMAGE THE LEASED PREMISES OR THE BUILDING AND
SHALL KEEP THE LEASED PREMISES, INCLUDING ALL FIXTURES INSTALLED BY TENANT, IN
GOOD AND TENANTABLE CONDITION; AND SHALL PROMPTLY MAKE ALL NECESSARY REPAIRS,
EXCEPT THOSE TO BE MADE BY LANDLORD AS PROVIDED IN PARAGRAPH 6(A), AND, EXCEPT
AS PROVIDED IN PARAGRAPH 6(C), ALL AT TENANT'S SOLE EXPENSE UNDER THE
SUPERVISION AND WITH THE APPROVAL OF LANDLORD SUCH REPAIRS AND REPLACEMENTS
SHALL BE IN QUALITY AND CLASS EQUAL TO THE ORIGINAL WORK. IF TENANT FAILS TO
MAKE SUCH REPAIRS OR REPLACEMENT PROMPTLY, THEN LANDLORD AT ITS OPTION, MAY MAKE
SUCH REPAIRS OR REPLACEMENTS, AND TENANT SHALL PAY THE COST THEREOF TO LANDLORD
WITHIN FIVE (5) DAYS OF DEMAND. UPON TERMINATION OF THIS LEASE, TENANT WILL
SURRENDER AND DELIVER UP THE LEASED PREMISES TO LANDLORD IN THE SAME CONDITION
IN WHICH THEY EXISTED ATTHE COMMENCEMENT OF THE LEASE, EXCEPTING ONLY ORDINARY
WEAR AND TEAR, ACTS OF GOD, AND DAMAGE ARISING FROM ANY CAUSE NOT REQUIRED
HEREUNDER TO BE REPAIRED BY TENANT.
<PAGE>
(C) TENANT SHALL HAVE NO OBLIGATION TO REPAIR DAMAGE TO THE LEASED
PREMISES OR THE BUILDING IF SUCH DAMAGE SHALL BE CAUSED BY FIRE OR OTHER
CASUALTY, NOT A RESULT OF THE ACTS OR OMISSIONS OF TENANT, ITS AGENTS,
CUSTOMERS, EMPLOYEES OR INVITEES, AND WHICH IS COVERED BY INSURANCE MAINTAINED
BY LANDLORD ON THE BUILDING (IN APPLY), OR IF THE DAMAGE OCCURS AS A RESULT OF
AN EMINENT DOMAIN TAKING (IN WHICH THE PROVISIONS OF PARAGRAPH 18 APPLY).
7. FIRE OR OTHER CASUALTY.
(A) IF, AT ANY TIME DURING THE LEASE TERM, THE LEASED PREMISES OR
ANY PORTION OF THE BUILDING SHALL BE DAMAGED OR DESTROYED BY FIRE OR OTHER
CASUALTY, NOT A RESULT OF THE ACTS OR OMISSIONS OF TENANT, ITS AGENTS,
CUSTOMERS, EMPLOYEES OR INVITEES, AND WHICH IS COVERED BY INSURANCE MAINTAINED
BY LANDLORD ON THE BUILDING (IN WHICH EVENT THE PROVISIONS OR PARAGRAPH 7 HEREOF
SHALL APPLY), OR IF THE DAMAGE OCCURS AS A RESULT OF AN EMINENT DOMAIN TAKING
(IN WHICH THE PROVISIONS OF PARAGRAPH 18 APPLY), THEN LANDLORD SHALL HAVE THE
ELECTION TO TERMINATE THIS LEASE OR TO REPAIR AND RECONSTRUCT THE LEASED
PREMISES OR BUILDING TO THE CONDITION IN WHICH IT EXISTED IMMEDIATELY PRIOR TO
SUCH DAMAGE OR DESTRUCTION.
(B) IF LANDLORD ELECTS TO REPAIR AND RESTORE THE LEASED PREMISES OR
THE BUILDING, THEN RENT SHALL ABATE DURING THE PERIOD AND TO THE EXTENT THAT THE
LEASED PREMISES ARE NOT REASONABLY USABLE FOR THE PURPOSES FOR WHICH THEY WERE
LEASED HEREUNDER. IF, HOWEVER, THE DAMAGE SHALL HAVE BEEN THE RESULT OF TENANT'S
ACTS OR OMISSIONS, OR THOSE OF HIS EMPLOYEES, CUSTOMERS OR INVITEES, THEN RENT
SHALL ABATE ONLY TO THE EXTENT OF ANY RENT INSURANCE PROCEEDS RECEIVED BY
LANDLORD IN LIEU OF RENT.
IF LANDLORD SHALL ELECT TO REPAIR AND RESTORE THE LEASED PREMISES,
THIS LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT AND SUCH REPAIRS AND
RESTORATION SHALL BE MADE WITHIN A REASONABLE TIME AFTER THE DAMAGE SHALL HAVE
OCCURRED, SUBJECT TO DELAYS ARISING FROM SHORTAGES OF LABOR OR MATERIAL, DELAYS
IN INSURANCE ADJUSTMENT, ACTS OF GOD, WAR OR OTHER CONDITIONS OR EVENTS BEYOND
LANDLORD'S CONTROL. IF THIS LEASE SHALL BE TERMINATED, AS HEREIN PERMITTED,
LANDLORD SHALL REFUND TO TENANT ANY PREPAID RENT (UNACCRUED AS OF THE DATE OF
DAMAGE OR DESTRUCTION) LESS ANY SUM THEN OWING TO LANDLORD BY TENANT. IF
LANDLORD SHALL ELECT TO REPAIR AND RECONSTRUCT THE LEASED PREMISES, OR THE
BUILDING, THEN THE LEASE TERM SHALL BE EXTENDED BY A PERIOD OF TIME EQUAL TO THE
PERIOD DURING SUCH REPAIR AND RECONSTRUCTION WHEN THE LEASED PREMISES ARE NOT
REASONABLY USABLE BY TENANT FOR THE PURPOSES FOR WHICH THEY ARE LEASED
HEREUNDER. LANDLORD SHALL NOT BE OBLIGATED TO RESTORE FIXTURES, IMPROVEMENTS OR
OTHER PROPERTY OF TENANT.
8. COMPLIANCE WITH LAWS AND USAGE.
TENANT, AT ITS OWN EXPENSE, WILL COMPLY WITH ALL FEDERAL, STATE,
MUNICIPAL AND OTHER LAWS, ORDINANCES, RULES AND REGULATIONS APPLICABLE TO
TENANT; WILL NOT ENGAGE IN ANY ACTIVITY WHICH WOULD CAUSE LANDLORD'S FIRE AND
EXTENDED COVERAGE INSURANCE TO BE CANCELLED OR THE RATE THEREFORE TO BE
INCREASED (OR, AT LANDLORD'S OPTION, WILL PAY ANY SUCH INCREASE); WILL NOT
COMMIT ANY ACT WHICH IS A NUISANCE OR ANNOYANCE TO LANDLORD OR TO OTHER TENANTS,
OR WHICH MIGHT APPRECIABLY DAMAGE LANDLORD'S GOODWILL OR REPUTATION, OR
<PAGE>
TEND TO INJURE OR DEPRECIATE THE BUILDING; AND WILL NOT COMMIT OR PERMIT WASTE
IN THE LEASED PREMISES OR BUILDING. TENANT WILL NOT PAINT, ERECT OR DISPLAY ANY
SiGN, ADVERTISEMENT, PLACARD OR LETTERING WHICH IS VISIBLE IN THE CORRIDORS OR
LOBBY OF THE BUILDING, OR ON THE OUTSIDE OF THE BUILDING, WITHOUT LANDLORD'S
PRIOR WRITTEN APPROVAL.
9. LIABILITY AND INDEMNITY.
(A) TENANT AGREES TO INDEMNIFY AND SAVE LANDLORD HARMLESS FROM ALL
LIABILITIES AND CLAIMS FROM INJURY OR DAMAGE (INCLUDING COSTS AND EXPENSES OF
DEFENDING AGAINST SUCH CLAIMS) ARISING OR ALLEGED TO BE CAUSED BY EMPLOYEES,
CONTRACTORS, CUSTOMERS, LICENSEES OR INVITEES OF TENANT, OR ARISING FROM ANY
INJURY OR DAMAGE OCCURRING DURING THE TERM OF THIS LEASE IN OR ABOUT THE LEASED
PREMISES. TENANT AGREES TO USE AND OCCUPY THE LEASED PREMISES AND OTHER
FACILITIES OF THE BUILDING AT ITS OWN RISK AND HEREBY RELEASES LANDLORD, ITS
AGENTS AND EMPLOYEES, FROM ALL CLAIMS FOR ANY DAMAGE OR INJURY TO THE FULL
EXTENT PERMITTED BY LAW.
(B) TENANT, ITS AGENTS, EMPLOYEES, CUSTOMERS OR INVITEES, SHALL HAVE
NO RIGHT OR CLAIM AGAINST LANDLORD, ITS AGENTS OR EMPLOYEES, FOR BODILY INJURY
(FATAL OR NONFATAL) OR PROPERTY DAMAGE (WHETHER CAUSED BY THE CONDITION OF THE
LEASED PREMISES OR THE BUILDING OR FOR ANY OTHER REASON) BY WAY OF SUBROGATION
OR ASSIGNMENT, AND TENANT IS HEREBY WAIVING AND RELINQUISHING ANY SUCH RIGHT,
GROSS NEGLIGENCE EXCEPTED.
(C) TENANT AGREES THAT LANDLORD SHALL NOT BE RESPONSIBLE OR LIABLE
TO TENANT, ITS EMPLOYEES, AGENTS, CUSTOMERS OR INVITEES FOR BODILY INJURY (FATAL
OR NONFATAL) OR PROPERTY DAMAGE OCCASIONED BY THE ACTS OR OMISSIONS OF ANY
TENANT OF THE BUILDING, OR ANY SUCH TENANT'S EMPLOYEES, AGENTS, CUSTOMERS OR
INVITEES ON OR ABOUT THE LEASED PREMISES AND THE BUILDING.
(D) LANDLORD AGREES TO INDEMNIFY AND SAVE TENANT HARMLESS FROM ALL
LIABILITIES AND CLAIMS FROM INJURY OR DAMAGE (INCLUDING COSTS AND EXPENSES OF
DEFENDING AGAINST SUCH CLAIMS) ARISING OR ALLEGED TO BE CAUSED BY EMPLOYEES,
CONTRACTORS, CUSTOMERS, LICENSEES OR INVITEES OF LANDLORD, OR ARISING FROM ANY
INJURY OR DAMAGE OCCURRING DURING THE TERM OF THIS LEASE IN OR ABOUT THE LEASED
PREMISES. TENANT AGREES TO USE AND OCCUPY THE LEASED PREMISES AND OTHER
FACILITIES OF THE BUILDING AT ITS OWN RISK AND HEREBY RELEASES LANDLORD, ITS
AGENTS AND EMPLOYEES, FROM ALL CLAIMS FOR ANY DAMAGE OR INJURY TO THE FULL
EXTENT PERMITTED BY LAW.
(E) LANDLORD AGREES THAT TENANT SHALL NOT BE RESPONSIBLE OR LIABLE
TO LANDLORD, ITS EMPLOYEES, AGENTS, CUSTOMERS OR INVITEES FOR BODILY INJURY
(FATAL OR NONFATAL) OR PROPERTY DAMAGE OCCASIONED BY THE ACTS OR OMISSIONS OF
ANY TENANT OF THE BUILDING, OR ANY SUCH TENANT'S EMPLOYEES, AGENTS, CUSTOMERS OR
INVITEES ON OR ABOUT THE LEASED PREMISES AND THE BUILDING.
<PAGE>
10. ADDITIONS AND FIXTURES.
(A) TENANT WILL MAKE NO ALTERATION, CHANGE, IMPROVEMENT, REPAIR,
REPLACEMENT OR ADDITION TO THE LEASED PREMISES WITHOUT THE PRIOR WRITTEN CONSENT
OF LANDLORD. IF SUCH PRIOR WRITTEN CONSENT OF LANDLORD IS GRANTED, THE WORK IN
SUCH CONNECTION SHALL BE AT TENANT'S EXPENSE AND SHALL BE CARRIED OUT BY WORKMEN
OF LANDLORD OR BY WORKMEN AND CONTRACTORS APPROVED IN ADVANCE IN WRITING BY
LANDLORD, AND IN A MANNER AND UPON TERMS AND CONDITIONS AND AT TIMES
SATISFACTORY TO, AND APPROVED IN ADVANCE IN WRITING, BY LANDLORD. IN ANY
INSTANCE IN WHICH LANDLORD GRANTS SUCH CONSENT, SUCH CONSENT SHALL BE
CONDITIONED UPON TENANT'S CONTRACTORS, LABORERS, MATERIALMEN AND OTHERS
FURNISHING LABOR OR MATERIALS FOR TENANT, WORKING IN HARMONY AND NOT INTERFERING
WITH ANY LABOR UTILIZED BY LANDLORD, LANDLORD'S CONTRACTORS OR MECHANICS, OR BY
ANY OTHER TENANT OR SUCH OTHER TENANTS, CONTRACTORS OR MECHANICS, AND IF AT ANY
TIME SUCH ENTRY BY ONE OR MORE PERSONS FURNISHING LABOR OR MATERIALS FOR
TENANT'S WORK SHALL CAUSE DISHARMONY OR INTERFERENCE, THE CONSENT GRANTED BY
LANDLORD TO TENANT MAY BE WITHDRAWN BY LANDLORD DELIVERING TO TENANT 48 HOURS'
WRITTEN NOTICE.
(B) TENANT MAY REMOVE THOSE OF ITS TRADE, FIXTURES, OFFICE SUPPLIES
AND MOVABLE OFFICE FURNITURE AND EQUIPMENT WHICH ARE NOT ATTACHED TO THE
BUILDING, PROVIDED: (1) SUCH REMOVAL IS MADE PRIOR TO THE TERMINATION OF THE
TERM OF THIS LEASE; (2) TENANT IS NOT IN DEFAULT OF ANY OBLIGATION OR CONVENANT
UNDER THIS LEASE AT THE TIME OF SUCH REMOVAL, AND (3) THE LEASED PREMISES (WHERE
SUCH ITEMS SHALL HAVE BEEN LOCATED) SHALL BE PLACED IN THE CONDITION OF SUCH
LEASED PREMISES AT THE INCEPTION OF THE LEASE, SUBJECT TO REASONABLE
DETERIORATION AND WEAR AND TEAR. ALL OTHER PROPERTY IN THE LEASED PREMISES AND
ANY ALTERATIONS OR ADDITIONS TO THE LEASED PREMISES (INCLUDING BUT NOT LIMITED
TO CARPETING, PANELING, WALL COVERING OR LIGHTING), AND ANY OTHER ARTICLE
ATTACHED OR AFFIXED TO THE FLOOR, WALL OR CEILING OF THE LEASED PREMISES SHALL
BECOME THE PROPERTY OF LANDLORD AND SHALL REMAIN UPON AND BE SURRENDERED WITH
THE LEASED PREMISES, EXCEPT TENANT'S SWITCH, AS PART THEREOF AT THE TERMINATION
OF THIS LEASE, TENANT HEREBY WAIVING ALL RIGHTS TO ANY PAYMENT OR COMPENSATION
THEREFORE. IF, HOWEVER, LANDLORD SO REQUIRES IN WRITING, TENANT WILL, PRIOR TO
TERMINATION OF THIS LEASE, REMOVE ANY AND ALL ALTERATIONS, ADDITIONS, FIXTURES,
EQUIPMENT AND PROPERTY PLACED OR INSTALLED BY IT IN THE LEASED PREMISES AND WILL
REPAIR ANY DAMAGE CAUSED BY SUCH REMOVAL TO THE CONDITION DESCRIBED IN THE FIRST
SENTENCE OF THIS PARAGRAPH 10(B).
LANDLORD HAS THE OPTION, FOR A PERIOD OF 30 DAYS AFTER TENANT HAS
GIVEN LANDLORD NOTICE OF ITS INTENT TO VACATE AFTER THIS LEASE AND ANY
EXTENSIONS OF THIS LEASE ARE NO LONGER IN FORCE AND EFFECT, OF ACCEPTING THE
PREMISES "AS IS" OR REQUIRING TENANT TO DEMOLISH AND REMOVE TENANT'S
IMPROVEMENTS.
11. ASSIGNMENT AND SUB-LETTING.
TENANT, HIS HEIRS, SUCCESSORS, PERSONAL REPRESENTATIVES OR ASSIGNS,
WILL NOT ASSIGN THIS LEASE OR SUBLEASE THE LEASED PREMISES, OR ANY PART THEREOF,
OR MORTGAGE, PLEDGE OR HYPOTHECATE THIS LEASEHOLD OR IN ANY MANNER TRANSFER OR
ASSIGN, BY OPERATION OF LAW OR OTHERWISE, HIS LEASEHOLD INTEREST, OR GRANT ANY
CONCESSION OR LICENSE WITHIN THE LEASED PREMISES, WITHOUT THE PRIOR EXPRESS
WRITTEN CONSENT OF LANDLORD, AND ANY ATTEMPT TO DO ANY OF THE FOREGOING WITHOUT
LANDLORD'S CONSENT SHALL BE VOID.
<PAGE>
ANY CONSENT BY LANDLORD TO ANY ACT OF ASSIGNMENT OR SUBLEASING SHALL
APPLY ONLY TO THE SPECIFIC TRANSACTION THEREBY AUTHORIZED. SUCH CONSENT SHALL
NOT BE CONSTRUED AS A WAIVER OF THE DUTY OF TENANT, HIS HEIRS, PERSONAL
REPRESENTATIVES, SUCCESSORS OR ASSIGNS, TO OBTAIN FROM LANDLORD CONSENT TO ANY
OTHER OR SUBSEQUENT ASSIGNMENT OR SUBLEASING, OR AS MODIFYING OR LIMITING THE
RIGHTS OF LANDLORD UNDER THE FOREGOING COVENANT BY TENANT NOT TO ASSIGN OR
SUBLEASE WITHOUT SUCH CONSENT. ANY VIOLATION OF ANY PROVISION OF THIS LEASE,
WHETHER BY ACT OR OMISSION, SHALL BE DEEMED A VIOLATION OF SUCH PROVISION BY
TENANT, AND TENANT SHALL BE LIABLE TO LANDLORD FOR ANY AND ALL ACTS AND
OMISSIONS OF ANY AND ALL ASSIGNEES, SUBTENANTS, UNDERTENANTS AND OCCUPANTS. IF
THIS LEASE SHALL BE ASSIGNED, LANDLORD MAY COLLECT RENT FROM ASSIGNEE; AND IF
THE LEASED PREMISES, OR ANY PART THEREOF SHALL BE SUBLEASED OR OCCUPIED BY ANY
PARTY OTHER THAN TENANT, LANDLORD, UPON TENANT'S DEFAULT, MAY AND IS HEREBY
EMPOWERED TO COLLECT RENT FROM THE SUBTENANT, UNDERTENANT OR OCCUPANT. IN ANY
SUCH EVENT, LANDLORD MAY APPLY THE NET AMOUNT RECEIVED BY IT TO THE RENT HEREIN
RESERVED, AND NO SUCH COLLECTION SHALL BE DEEMED A WAIVER OF THE COVENANT HEREIN
AGAINST ASSIGNMENT OR SUBLEASING, OR THE ACCEPTANCE OF THE ASSIGNEE, SUBTENANT,
UNDERTENANT OR OCCUPANT AS THE TENANT HEREUNDER, OR A RELEASE OF TENANT FROM THE
FURTHER PERFORMANCE OF THE COVENANTS HEREIN CONTAINED ON THE PART OF THE TENANT.
THE TERM "ASSIGN" SHALL INCLUDE (I) AN ASSIGNMENT OF A PART INTEREST
IN THIS LEASE, AS WELL AS ANY ASSIGNMENT FROM CO-TENANT TO ANOTHER, AND (II) AN
ASSIGNMENT TO THE PRIOR OWNER OF THE TENANT'S INTEREST HEREIN OR PART HEREOF. AN
ASSIGNMENT SHALL ALSO INCLUDE ONE OR MORE SALES OR TRANSFERS, BY OPERATION OF
LAW OR OTHERWISE, OR CREATION OF NEW STOCK, BY WHICH AN AGGREGATE OF MORE THAN
FIFTY PERCENT (50%) OF TENANT'S VOTING STOCK SHALL BE VESTED IN A PARTY OR
PARTIES, THEN THE PRECEDING SENTENCE SHALL NOT APPLY; HOWEVER, IF TENANT'S
STOCK, OR IF AT LEAST EIGHTY PERCENT (80%) OF TENANT'S STOCK IS OWNED BY A
CORPORATION WHOSE STOCK IS LISTED ON A RECOGNIZED SECURITY EXCHANGE, NOR SHALL
IT APPLY IF FORTY PERCENT (40%) OR MORE OF TENANT STOCK SHALL BE OWNED BY TWENTY
(20) OR MORE SHAREHOLDERS AS OF THE DATE OF THIS LEASE.
12. SUBORDINATION.
THIS LEASE AND THE RIGHTS OF TENANT HEREUNDER ARE SUBJECT AND
SUBORDINATE TO ANY PRIOR GROUND LEASE AFFECTING THE PROPERTY ON WHICH THE
BUILDING IS SITUATED (INCLUDING RENEWALS AND EXTENSIONS THEREOF), AND TO ANY
DEED OF TRUST LIEN NOW OR HEREAFTER AFFECTING THE BUILDING OR THE PROPERTY ON
WHICH THE BUILDING IS LOCATED, OR ANY PART THEREOF, WITH RESPECT TO LANDLORD AND
ANY MORTGAGEE OR ANY MORTGAGEE AND/OR BENEFICIARY OF ANY DEED OF TRUST NOW OR
HEREAFTER A LIEN ON THE BUILDING AND/OR THE LEASED PREMISES ("LANDLORD'S
MORTGAGEE"). TENANT AGREES THAT ANY SUCH LANDLORD'S MORTGAGEE SHALL HAVE THE
RIGHT AT ANY TIME TO ELECT BY A NOTICE IN WRITING GIVEN TO TENANT, TO MAKE THIS
LEASE SUPERIOR TO SUCH MORTGAGE AND/OR DEED OF TRUST AND, UPON THE GIVING OF
SUCH NOTICE TO TENANT, THIS LEASE SHALL BE DEEMED PRIOR AND SUPERIOR TO SUCH
MORTGAGE AND/OR DEED OF TRUST IN RESPECT OF WHICH SAID NOTICE WAS GIVEN; OR ANY
SUCH LANDLORD'S MORTGAGEE MAY, BY LIKE NOTICE, MAKE THIS LEASE SUBORDINATE TO
SUCH MORTGAGE AND/OR DEED OF TRUST IN RESPECT OF WHICH SAID NOTICE WAS GIVEN.
<PAGE>
13. ADJUSTMENT OF RENT.
THE BASE RENTAL PROVIDED FOR HEREIN IS BASED, IN PART, UPON
LANDLORD'S ESTIMATE THAT BASIC COST (AS HEREINAFTER DEFINED) OR REPAIRING,
MAINTAINING AND OPERATING THE BUILDING DURING EACH CALENDAR YEAR OF THE LEASE
TERM WILL BE FIVE AND 17/100 DOLLARS ($5.17) PER SQUARE FOOT OF RENTABLE AREA OF
--------------- -----
OFFICE SPACE IN THE BUILDING, SUCH AMOUNT BEING HEREINAFTER REFERRED TO AS
"ESTIMATED BASIC COST".
14. BASIC COST.
"BASIC COST", AS SAID TERM IS USED HEREIN, SHALL CONSIST OF THE
OPERATING EXPENSES OF THE BUILDING, WHICH SHALL BE COMPUTED ON THE ACCRUAL
BASIS. ALL OPERATING EXPENSES SHALL BE DETERMINED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES WHICH SHALL BE CONSISTENTLY APPLIED. THE TERM
"OPERATING EXPENSES", AS USED HEREIN, SHALL MEAN ALL EXPENSES, COSTS AND
DISBURSEMENTS (BUT NOT REPLACEMENT OF CAPITAL INVESTMENT ITEMS, NOR GENERAL
OFFICE EXPENSE, NOR SPECIFIC COSTS ESPECIALLY BILLED TO AND PAID BY SPECIFIC
TENANTS, NOR RENTAL COMMISSIONS) OF EVERY KIND AND NATURE WHICH LANDLORD SHALL
PAY OR BECOME OBLIGATED TO PAY BECAUSE OF, OR IN CONNECTION WITH, THE OWNERSHIP
AND OPERATION OF THE BUILDING, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING:
(A) WAGES AND SALARIES OF ALL EMPLOYEES ENGAGED IN OPERATION AND
MAINTENANCE OF THE BUILDING, INCLUDING TAXES, INSURANCE AND BENEFITS RELATING
THERETO.
(B) ALL SUPPLIES AND MATERIALS USED IN OPERATION AND MAINTENANCE OF
THE BUILDING.
(C) COST OF WATER AND POWER, HEATING, LIGHTING, AIR CONDITIONING AND
VENTILATING UP TO $1.30 PER SQUARE FOOT OF TENANT'S DEMISED AREA.
(D) COST OF ALL MAINTENANCE AND SERVICE AGREEMENTS ON EQUIPMENT,
INCLUDING WINDOW CLEANING AND ELEVATOR MAINTENANCE.
(E) COST OF CASUALTY AND LIABILITY INSURANCE APPLICABLE TO THE
BUILDING AND LANDLORD'S PERSONAL PROPERTY USED IN CONNECTION THEREWITH.
(F) ALL TAXES AND ASSESSMENTS AND OTHER GOVERNMENTAL CHARGES WHETHER
FEDERAL, STATE, COUNTY OR MUNICIPAL AND WHETHER THEY BE BY TAXING DISTRICTS OR
AUTHORITIES PRESENTLY TAXING THE LEASED PREMISES OR BY OTHER SUBSEQUENTLY
CREATED OR OTHERWISE, AND ANY OTHER TAXES AND IMPROVEMENT ASSESSMENTS
ATTRIBUTABLE TO THE BUILDING OR ITS OPERATION EXCLUDING, HOWEVER, FEDERAL AND
STATE TAXES ON INCOME. IT IS AGREED THAT TENANT WILL BE RESPONSIBLE FOR AD
VALOREM TAXES ON ITS PERSONAL PROPERTY AND ON THE VALUE OF LEASEHOLD
IMPROVEMENTS TO THE EXTENT THAT THE SAME EXCEED STANDARD BUILDING ALLOWANCES.
(G) COST OF REPAIRS AND GENERAL MAINTENANCE (EXCLUDING REPAIRS AND
GENERAL MAINTENANCE OF THE ROOF, FOUNDATION AND EXTERIOR WALLS OF THE BUILDING,
REPAIRS AND GENERAL MAINTENANCE PAID BY PROCEEDS OF INSURANCE OR BY TENANT OR
OTHER THIRD PARTIES AND ALTERATIONS ATTRIBUTABLE SOLELY TO TENANTS OF THE
BUILDING OTHER THAN TENANT).
<PAGE>
15. RENT ADJUSTMENT.
IF TENANT IS INVOICED FOR A RENT ADJUSTMENT, IT SHALL BE DUE WITHIN
30 DAYS OF THE DATE OF THE INVOICE, PROVIDED THE INVOICED AMOUNT IS LESS THAN
10% OF THE THEN ANNUAL RENT. IF THE INVOICE FOR ADJUSTED RENT IS FOR AN AMOUNT
GREATER THAN 10% OF THE ANNUAL RENT, TENANT SHALL BE ALLOWED 90 DAYS IN WHICH TO
MAKE PAYMENT.
IN THE EVENT THAT THE BASIC COST OF LANDLORD'S OPERATION OF THE
BUILDING DURING ANY CALENDAR YEAR OF THE TERM OF THIS LEASE SHALL EXCEED THE
ESTIMATED BASIC COST SET OUT IN PARAGRAPH 13, TENANT SHALL PAY TO LANDLORD, AS
ADDITIONAL RENT, ITS PRO-RATA SHARE OF THE INCREASE IN SUCH BASIC COST FOR SUCH
YEAR OVER THE ESTIMATED BASIC COST. THE TERM "ADJUSTED RATE OF RENT" SHALL MEAN
THE SUM OF THE RENT DEFINED IN THIS PARAGRAPH 15. TENANT'S PRO-RATA SHARE SHALL
BE A FRACTION OF THE TOTAL OF SUCH INCREASE, THE NUMERATOR OF WHICH SHALL BE THE
RENTABLE AREA CONTAINED IN THE LEASED PREMISES THEN LEASED BY TENANT IN THE
BUILDING AND THE DENOMINATOR OF WHICH SHALL BE THE TOTAL RENTABLE AREA CONTAINED
IN THE BUILDING, EXCLUSIVE OF THE NORTHWEST BANK FIRST FLOOR SPACE; SUCH PAYMENT
FOR THE PRIOR CALENDAR YEAR BY TENANT SHALL BE DUE THIRTY (30) DAYS AFTER IT IS
BILLED TO IT BY LANDLORD. TENANT SHALL PAY THE REASONABLY ESTIMATED RENTAL
ESCALATION FOR THE FORTHCOMING CALENDAR YEAR IN EQUAL MONTHLY INSTALLMENTS
DURING THAT CALENDAR YEAR. IN THE EVENT THAT THE ESTIMATED RENTAL ESCALATION
SHALL EXCEED THE ACTUAL BASIC COST, THEN LANDLORD SHALL REFUND SUCH OVERPAYMENT;
IN THE EVENT THE ACTUAL BASIC COST SHALL EXCEED THE ESTIMATED RENTAL ESCALATION,
THEN LANDLORD SHALL BE PAID SUCH UNDERPAYMENT BY TENANT WITHIN THIRTY (30) DAYS
FROM BILLING. TENANT SHALL HAVE THE RIGHT TO AUDIT LANDLORD'S BOOKS AND
RECORDS RELATING TO BASIC COST OR LANDLORD, AT ITS SOLE DISCRETION, MAY PROVIDE
AN AUDIT PREPARED BY A CERTIFIED PUBLIC ACCOUNTANT OF RECOGNIZED STANDING IN
DAVENPORT. "BASIC COST" SHALL NOT INCLUDE THE COST OF CAPITAL IMPROVEMENTS OR
OTHER ITEMS REQUIRED TO BE CAPITALIZED FOR FEDERAL INCOME TAXES, DEPRECIATION,
INTEREST AND PENALTIES AND OTHER LATE CHARGES. INCREASED UTILITY AND HVAC COSTS
RESULTING FROM COMPUTERS AND OTHER SPECIAL EQUIPMENT OF LANDLORD OR TENANT
(PROVIDED, HOWEVER, THAT IF TENANT IS NOT CHARGED FOR INCREASED UTILITY OR HVAC
COSTS RESULTING FROM COMPUTERS OR OTHER SPECIAL EQUIPMENT IN ACCORDANCE WITH
PARAGRAPH 5, THEN SUCH COSTS SHALL BE PART OF THE BASIC COST) OR ANY OTHER USER
OF THE BUILDING, FUEL ADJUSTMENT COSTS PROVIDED FOR IN PARAGRAPH 16 HEREOF,
BROKER COMMISSIONS, COST OF MAINTAINING LANDLORD'S LEGAL EXISTENCE, LANDLORD'S
ADMINISTRATIVE AND OVERHEAD COSTS, THE COSTS OF ITEMS OR SERVICES TO BE PAID FOR
BY TENANT OR OTHER TENANTS OF THE BUILDING, GROUND OR BUILDING RENT,
DEPRECIATION, INTEREST AND PRINCIPAL PAYMENTS ON MORTGAGES AND OTHER DEBT COSTS,
IF ANY.
16. FUEL ADJUSTMENT COSTS.
NOTWITHSTANDING ANYTHING IN THIS LEASE TO THE CONTRARY, TENANT
COVENANTS AND AGREES TO PAY TO LANDLORD AS ADDITIONAL RENT, ON THE FIRST DAY OF
EACH CALENDAR MONTH, FOR EACH AND EVERY MONTH IN THE TERM OF THIS LEASE, IN
LAWFUL MONEY OF THE UNITED STATES, AN AMOUNT EQUAL TO TENANT'S PRO-RATA SHARE OF
ALL FUEL ADJUSTMENT COSTS CHARGED BY ANY PRIVATE OR MUNICIPAL CORPORATION
FURNISHING UTILITIES TO THE BUILDING FOR THE PRECEDING MONTH. TENANT'S PRO-RATA
SHARE OF SUCH FUEL ADJUSTMENT COSTS SHALL BE A FRACTION OF THE TOTAL OF SUCH
COSTS, THE NUMERATOR OF WHICH SHALL BE THE RENTABLE AREA OF THE LEASED PREMISES
AND THE DENOMINATOR OF WHICH SHALL BE THE TOTAL RENTABLE AREA OF THE BUILDING,
EX-
<PAGE>
CLUDING THE NORTHWEST BANK FIRST FLOOR SPACE. FOR PURPOSES OF THIS PARAGRAPH 16,
THE PHRASE "FUEL ADJUSTMENT COSTS" SHALL MEAN THE PORTION OF LANDLORD'S UTILITY
BILLS WHICH REPRESENTS INCREASES IN ENERGY COSTS TO THE UTILITY COMPANY IN
PROVIDING ITS SERVICES AND WHICH INCREASES IN COSTS HAVE NOT BEEN CONSOLIDATED
INTO A CHANGE IN THE PUBLISHED RATE OF ORDINANCE UPON WHICH BILLINGS FOR SUCH
UTILITY SERVICES ARE BASED. SUMS PAID AS FUEL ADJUSTMENT COSTS UNDER THIS
PROVISION OF THIS LEASE SHALL NOT BE INCLUDED IN DETERMINING INCREASES IN
OPERATING EXPENSES UNDER ANY OTHER PROVISIONS OF THIS PARAGRAPH.
17. RENTABLE AREA.
THE TERM "RENTABLE AREA" SHALL MEAN THE AREA OR AREAS DETERMINED, IN
SQUARE FEET, AS FOLLOWS:
(A) THE RENTABLE AREA ON A SINGLE-TENANT FLOOR SHALL BE THE ENTIRE
AREA BOUNDED BY THE INSIDE FACE OF THE GLASS WHICH FORMS THE EXTERIOR OF THE
BUILDING, EXCLUDING ONLY THE AREA CONTAINED IN THE "CORE" OF THE BUILDING. THE
"CORE" CONSISTS OF THE FOLLOWING: TWO STAIRWELLS, TWO CHASES IN THE MECHANICAL
ROOMS, TWO PLUMBING CHASES AND THE ELEVATOR SHAFT. THE RENTABLE AREA OF FLOOR IS
10,884 SQUARE FEET.
- ------
(B) THE RENTABLE AREA FOR A PARTIAL FLOOR TENANT SHALL BE THE ENTIRE
AREA BOUNDED BY THE INSIDE FACE OF ANY GLASS WHICH FORMS THE EXTERIOR OF THE
BUILDING TO THE EXTERIOR FACE OF ANY PARTITIONS THAT SEPARATE THE LEASED
PREMISES FROM COMMON AREA AND THE MIDPOINT OF PARTITIONS THAT SEPARATE THE
LEASED PREMISES FROM OTHER PREMISES. THE COMMON AREAS REFERRED TO SHALL BE
DETERMINED BASED UPON THE RATIO OF THE RENTABLE AREA OF THE LEASED PREMISES (NOT
INCLUDING ANY PART OF COMMON AREAS) TO THE TOTAL RENTABLE AREA ON THE FLOOR ON
WHICH LEASED PREMISES ARE LOCATED (NOT INCLUDING ANY PART OF THE COMMON AREAS).
THE TERM "COMMON AREAS", AS USED HEREIN, SHALL MEAN ALL BUILDING CORRIDORS,
LOBBIES, RESTROOMS, JANITOR CLOSETS, VENDING ROOMS, TELEPHONE ROOMS, MECHANICAL
ROOMS, ELECTRICAL ROOMS AND OTHER AREAS NOT FOR THE EXCLUSIVE USE OF ANY
PARTICULAR TENANT THAT ARE LOCATED ON THE SAME FLOOR AS THE LEASED PREMISES. NO
DEDUCTIONS FROM RENTABLE AREA SHALL BE MADE FOR COLUMNS OR OTHER STRUCTURAL
PORTIONS OR PROJECTIONS NECESSARY TO THE BUILDING. TENANT'S SHARE OF THE COMMON
AREA OF THE FOURTH FLOOR IS 31.88%.
------ ------
18. CONDEMNATION.
IF ALL OR ANY PART OF OR INTEREST IN THE LEASED PREMISES SHALL BE
TAKEN AS A RESULT OF THE EXERCISE OF THE POWER OF EMINENT DOMAIN OR PRIVATE
PURCHASE BY A PARTY GRANTED THE POWER OF EMINENT DOMAIN IN LIEU THEREOF, THIS
LEASE SHALL TERMINATE AS TO THE PART SO TAKEN AS OF THE DATE OF TAKING. IF ONLY
A PART OF OR INTEREST IN THE LEASED PREMISES, OR IF A SUBSTANTIAL PORTION OF THE
BUILDING IS SO TAKEN, EITHER LANDLORD OR TENANT SHALL HAVE THE RIGHT TO
TERMINATE THIS LEASE AS TO THE BALANCE OF THE LEASED PREMISES BY WRITTEN NOTICE
TO THE OTHER WITHIN THIRTY (30) DAYS AFTER THE DATE OF TAKING; PROVIDED,
HOWEVER, THAT A CONDITION TO THE EXERCISE BY TENANT OF SUCH RIGHT TO TERMINATE
SHALL BE THAT THE PORTION OF THE LEASED PREMISES OR BUILDING TAKEN SHALL BE OF
SUCH EXTENT AND NATURE AS TO SUBSTANTIALLY HANDICAP, IMPEDE OR IMPAIR TENANT'S
USE OF THE LEASED PREMISES, OR THE BALANCE OF THE LEASED PREMISES REMAINING, FOR
THE PURPOSES FOR WHICH IT WAS LEASED
<PAGE>
HEREUNDER. IN THE EVENT OF ANY TAKING, LANDLORD SHALL BE ENTITLED TO ANY AND ALL
COMPENSATION, DAMAGES, INCOME, RENT AND AWARDS WITH RESPECT THERETO EXCEPT FOR
AN AWARD, IF ANY, SPECIFIED BY THE CONDEMNING AUTHORITY FOR THE FIXTURES AND
OTHER PROPERTY, IF ANY, THAT TENANT HAS THE RIGHT TO REMOVE UPON TERMINATION OF
THIS LEASE. TENANT SHALL HAVE NO CLAIM AGAINST LANDLORD OR CONDEMNING AUTHORITY
FOR THE VALUE OF ANY UNEXPIRED TERM. IN THE EVENT OF A PARTIAL TAKING OF THE
LEASED PREMISES WHICH DOES NOT RESULT IN A TERMINATION OF THIS LEASE, THE RENT
THEREAFTER TO BE PAID SHALL BE EQUITABLY AND PROPORTIONATELY REDUCED.
19. ACCESS BY LANDLORD.
LANDLORD, ITS AGENTS, EMPLOYEES AND REPRESENTATIVES SHALL HAVE
ACCESS TO AND THE RIGHT TO ENTER UPON THE LEASED PREMISES AT ANY REASONABLE TIME
TO EXAMINE THE CONDITION THEREOF, TO MAKE ANY REPAIRS OR ALTERATIONS REQUIRED TO
BE MADE BY LANDLORD HEREUNDER, TO SHOW THE LEASED PREMISES TO PROSPECTIVE
PURCHASERS OR PROSPECTIVE TENANTS, AND FOR ANY OTHER PURPOSE DEEMED REASONABLE
BY LANDLORD; EXCEPTING IN THE CASE OF AN EMERGENCY, TENANT SHALL BE GIVEN 24
HOURS' NOTICE.
20. EVENTS OF TENANT'S DEFAULT.
EVENTS OF DEFAULT. THE FOLLOWING EVENTS SHALL BE DEEMED TO BE EVENTS
OF DEFAULT BY TENANT UNDER THIS LEASE:
(A) TENANT SHALL HAVE FAILED TO PAY ANY INSTALLMENT OF RENT OR ANY
OTHER CHARGE PROVIDED HEREIN, OR ANY PORTION THEREOF WHEN THE SAME SHALL REMAIN
UNPAID FOR A PERIOD OF THIRTY (30) DAYS AFTER WRITTEN NOTICE FROM LANDLORD; OR
(B) TENANT SHALL HAVE FAILED TO COMPLY WITH ANY OTHER PROVISIONS OF
THIS LEASE AND SHALL NOT CURE SUCH FAILURE WITHIN THIRTY (30) DAYS AFTER
LANDLORD, BY WRITTEN NOTICE, HAS INFORMED TENANT OF SUCH NONCOMPLIANCE (IN THE
CASE OF A DEFAULT WHICH CANNOT WITH DUE DILIGENCE BE CURED WITHIN A PERIOD OF
THIRTY (30) DAYS, TENANT SHALL HAVE SUCH ADDITIONAL TIME TO CURE SAME AS MAY
REASONABLY BE NECESSARY, PROVIDED TENANT PROCEEDS PROMPTLY AND WITH DUE
DILIGENCE TO CURE SUCH DEFAULT AFTER RECEIPT OF SAID NOTICE); OR
(C) TENANT OR ITS GUARANTOR, IF ANY, SHALL FILE IN ANY COURT A
PETITION IN BANKRUPTCY OR INSOLVENCY OR FOR REORGANIZATION WITHIN THE MEANING OF
THE BANKRUPTCY ACT OF 1979 AS AMENDED, OR FOR ARRANGEMENT WITHIN THE MEANING OF
SAID BANKRUPTCY ACT AS AMENDED (OR FOR REORGANIZATION OR ARRANGEMENT UNDER ANY
FUTURE BANKRUPTCY ACT FOR THE SAME OR SIMILAR RELIEF), OR FOR THE APPOINTMENT OF
A RECEIVER OR TRUSTEE OF ALL OR A PORTION OF TENANT'S PROPERTY; OR
(D) AN INVOLUNTARY PETITION OF THE KIND REFERRED TO IN SUBPARAGRAPH
(C) OF THIS SECTION SHALL BE FILED AGAINST TENANT OR ITS SECTION SHALL BE FILED
AGAINST TENANT OR ITS PARENT COMPANY, IF ANY, AND SUCH PETITION SHALL NOT BE
VACATED OR WITHDRAWN WITHIN THIRTY (30) DAYS AFTER THE DATE OF FILING THEREOF,
OR
(E) TENANT OR ITS GUARANTOR, IF ANY, SHALL MAKE AN ASSIGNMENT FOR
THE BENEFIT OF CREDITORS; OR
(F) TENANT OR ITS GUARANTOR, IF ANY, SHALL BE ADJUDICATED BANKRUPT;
OR
<PAGE>
(G) TENANT SHALL CEASE TO CONDUCT ITS NORMAL BUSINESS OPERATIONS IN
THE DEMISED PREMISES OR SHALL VACATE OR ABANDON THE DEMISED PREMISES AND LEAVE
THE SAME VACATED OR ABANDONED FOR A PERIOD OF THIRTY (30) DAYS; OR
(H) TENANT SHALL DO OR PERMIT TO BE DONE ANYTHING WHICH CREATES A
LIEN UPON THE DEMISED PREMISES, WHICH IS NOT DISCHARGED OR SATISFACTORILY
PROVIDED FOR WITHIN THIRTY (30) DAYS:
THEN LANDLORD, UPON THIRTY (30) DAYS' WRITTEN NOTICE TO TENANT, MAY ELECT TO
CANCEL AND TERMINATE THIS LEASE.
21. COSTS, EXPENSES AND ATTORNEYS' FEES.
(A) IN CASE LANDLORD SHALL, WITHOUT FAULT ON ITS PART, BE MADE A
PARTY TO ANY LITIGATION COMMENCED BY OR AGAINST TENANT, THEN TENANT SHALL PAY
ALL COSTS, EXPENSES AND REASONABLE ATTORNEYS FEES INCURRED IN SCOTT COUNTY,
IOWA, OR PAID BY LANDLORD IN CONNECTION WITH SUCH LITIGATION.
(B) THE NON-PREVAILING PARTY SHALL PAY ALL ATTORNEYS' FEES, ONLY AS
BETWEEN A LITIGATED DISPUTE BETWEEN LANDLORD AND TENANT.
22. LANDLORD'S LIEN.
LANDLORD SHALL HAVE AT ALL TIMES A VALID LIEN FOR ALL RENTALS AND
OTHER SUMS OF MONEY BECOMING DUE HEREUNDER FROM TENANT, UPON ALL GOODS, WARES,
EQUIPMENT, FIXTURES, FURNITURE AND OTHER PERSONAL PROPERTY OF TENANT SITUATED ON
THE DEMISED PREMISES, AND SUCH PROPERTY SHALL NOT BE REMOVED THEREFROM WITHOUT
THE CONSENT OF LANDLORD UNTIL ALL ARREARAGES IN RENT AS WELL AS ANY AND ALL
OTHER SUMS OF MONEY THEN DUE TO LANDLORD HEREUNDER SHALL FIRST HAVE BEEN PAID
AND DISCHARGED. UPON THE OCCURRENCE OF AN EVENT OF DEFAULT BY TENANT, LANDLORD
MAY, IN ADDITION TO ANY OTHER REMEDIES PROVIDED HEREIN OR BY LAW, ENTER UPON THE
DEMISED PREMISES AND TAKE POSSESSION OF ANY AND ALL GOODS, WARES, EQUIPMENT,
FIXTURES, FURNITURE AND OTHER PERSONAL PROPERTY OF TENANT SITUATED ON THE
PREMISES WITHOUT LIABILITY FOR TRESPASS OR CONVERSION, AND SELL THE SAME UPON
TEN (10) DAYS' WRITTEN NOTICE AT PUBLIC OR PRIVATE SALE, WITH OR WITHOUT HAVING
SUCH PROPERTY AT THE SALE, AT WHICH LANDLORD OR HIS ASSIGNS MAY PURCHASE, AND
APPLY THE PROCEEDS THEREOF, LESS ANY AND ALL EXPENSES CONNECTED WITH THE TAKING
OR POSSESSION AND SALE OF THE PROPERTY, AS A CREDIT AGAINST ANY SUMS DUE BY
TENANT TO LANDLORD. ANY SURPLUS SHALL BE PAID TO TENANT, AND TENANT AGREES TO
PAY ANY DEFICIENCY FORTHWITH. ALTERNATIVELY, THE LIEN HEREBY GRANTED MAY BE
FORECLOSURE OF CHATTEL MORTGAGES OR IN ANY OTHER FORM PROVIDED BY LAW. THE
STATUTORY LIEN FOR RENT IS NOT HEREBY WAIVED, THE EXPRESS CONTRACTUAL LIEN
HEREIN GRANTED BEING IN ADDITION AND SUPPLEMENTARY THERETO.
23. RIGHT OF ASSIGNMENT BY LANDLORD.
THE TERM "LANDLORD" SHALL MEAN ONLY THE OWNER, FOR THE TIME BEING,
OF THE BUILDING, AND AUTOMATICALLY UPON THE SALE, ASSIGNMENT, TRANSFER OR OTHER
CONVEYANCE BY SUCH OWNER OF ITS INTEREST IN THE BUILDING, SUCH OWNER SHALL
THEREUPON BE RELEASED AND DISCHARGED FROM ALL COVENANTS AND OBLIGATIONS OF THE
LANDLORD THEREAFTER ACCRUING.
<PAGE>
24. NON-WAIVER.
NEITHER ACCEPTANCE OF RENT BY LANDLORD NOR FAILURE BY LANDLORD TO
COMPLAIN OF ANY ACTION, NON-ACTION OR DEFAULT OF TENANT SHALL CONSTITUTE A
WAIVER OF ANY OF LANDLORD'S RIGHTS HEREUNDER. WAIVER BY LANDLORD OF ANY RIGHT
FOR ANY DEFAULT OF TENANT SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHT FOR EITHER
A SUBSEQUENT DEFAULT OF THE SAME OBLIGATION OR ANY OTHER DEFAULT. RECEIPT BY
LANDLORD OF TENANT'S KEYS TO THE LEASED PREMISES SHALL NOT CONSTITUTE AN
ACCEPTANCE OF SURRENDER OF THE LEASED PREMISES.
25. INJUNCTION.
UPON ANY BREACH OR THREATENED BREACH BY TENANT OF ANY OF THE
AGREEMENTS, TERMS, COVENANTS OR CONDITIONS CONTAINED IN THIS LEASE, LANDLORD
SHALL BE ENTITLED TO ENJOIN SUCH BREACH OR THREATENED BREACH, AND SHALL HAVE THE
RIGHT TO INVOKE ANY RIGHT AND REMEDY ALLOWED AT LAW OR IN EQUITY OR BY STATUE OR
OTHERWISE AS THOUGH RE-ENTRY AND OTHER REMEDIES WERE NOT PROVIDED FOR IN THIS
LEASE.
26. HOLDING OVER.
IF TENANT SHALL REMAIN IN POSSESSION OF THE LEASED PREMISES AFTER
THE EXPIRATION OF THE TERM OF THIS LEASE, WITHOUT THE EXECUTION BY LANDLORD AND
TENANT OF A NEW LEASE AGREEMENT, THEN TENANT SHALL BE DEEMED TO BE OCCUPYING THE
LEASED PREMISES AS A TENANT-AT-SUFFERANCE, SUBJECT TO ALL THE COVENANTS AND
OBLIGATIONS OF THIS LEASE AND AT A MONTHLY RENTAL OF TWICE THE MONTHLY RENTAL
PROVIDED HEREUNDER.
27. NOTICE.
ANY NOTICE WHICH MAY OR SHALL BE GIVEN UNDER THE TERMS OF THIS LEASE
SHALL BE IN WRITING AND SHALL BE EITHER DELIVERED IN PERSON OR SENT BY UNITED
STATES REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID
AND ADDRESSED AS FOLLOWS:
TO THE LANDLORD AT:
CPL PROPERTIES, LTD.
101 WEST SECOND STREET
SUITE 500
DAVENPORT, IOWA 52801
PH: 319-322-7686
FAX: 319-322-7781
TO THE TENANT AT:
TELCO COMMUNICATIONS GROUP, INC.
4219 LAFAYETTE CENTER DRIVE
CHANTILLY, VA 22021-1214
ATTN: MR. BRIAN RACHLIN
A PARTY MAY CHANGE SUCH ADDRESS FROM TIME TO TIME BY GIVING NOTICE
AS PROVIDED ABOVE. NOTICE SHALL BE DEEMED GIVEN WHEN DELIVERED (IF DELIVERED BY
HAND) OR WHEN DEPOSITED IN THE UNITED STATES MAIL, POSTAGE PREPAID, AS PROVIDED
ABOVE (IF SENT BY MAIL).
<PAGE>
28. NOTICE TO LANDLORD AND MORTGAGEE.
IF ANY ACT OR OMISSION BY LANDLORD SHALL OCCUR WHICH WOULD GIVE
TENANT THE RIGHT TO AND DAMAGES FROM LANDLORD OR THE RIGHT TO TERMINATE THIS
LEASE BY REASON OF A CONSTRUCTIVE OR ACTUAL EVICTION FROM ALL OR PART OF THE
LEASED PREMISES OR OTHERWISE, TENANT SHALL NOT SUE FOR SUCH DAMAGES OR EXERCISE
ANY SUCH RIGHT TO TERMINATE UNTIL (I) IT SHALL HAVE GIVEN WRITTEN NOTICE OF SUCH
ACT OR OMMISSION TO LANDLORD AND TO HOLDER(S) OF THE INDEBTEDNESS OR OTHER
OBLIGATIONS SECURED BY ANY MORTGAGE OR DEED OF TRUST AFFECTING THE LEASED
PREMISES OR THE BUILDING, IF THE NAME AND ADDRESS OF SUCH HOLDER(S) SHALL
PREVIOUSLY HAVE BEEN FURNISHED TO TENANT, AND (II) A REASONABLE.PERIOD OF TIME
FOR REMEDYING SUCH ACT OR OMISSION SHALL HAVE ELAPSED FOLLOWING THE GIVING OF
SUCH NOTICE, DURING WHICH TIME LANDLORD AND SUCH HOLDER(S) OR EITHER OF THEM,
THEIR AGENTS OR EMPLOYEES, SHALL BE ENTITLED TO ENTER UPON THE LEASED PREMISES
AND DO THEREIN WHATEVER MAY BE NECESSARY TO REMEDY SUCH ACT OR OMISSION. DURING
THE PERIOD AFTER THE GIVING OF SUCH NOTICE AND DURING THE REMEDYING OF SUCH ACT
OR OMISSIONS, THE RENT PAYABLE BY TENANT FOR SUCH PERIOD AS PROVIDED IN THIS
LEASE SHALL BE ABATED AND APPORTIONED ONLY TO THE EXTENT THAT ANY PART OF THE
LEASED PREMISES SHALL NOT REASONABLY BE USABLE BY TENANT FOR THE PURPOSES FOR
WHICH THE LEASED PREMISES WERE RENTED.
29. DELAYED OCCUPANCY.
IF, FOR ANY REASON, THE LEASED PREMISES SHALL NOT BE READY FOR
OCCUPANCY BY TENANT AT COMMENCEMENT OF THE TERM HEREOF, THIS LEASE SHALL NOT BE
AFFECTED THEREBY, NOR SHALL TENANT HAVE ANY CLAIM AGAINST LANDLORD BY REASON
THEREOF, BUT NO RENT SHALL BE PAYABLE FOR THE PERIOD DURING WHICH THE LEASED
PREMISES ARE NOT READY FOR OCCUPANCY FOR ANY REASON OTHER THAN OMISSION, DELAY
OR DEFAULT ON THE PART OF THE TENANT OR ANYONE ACTING UNDER TENANT. SUCH
ABATEMENT OF RENT SHALL CONSTITUTE FULL SETTLEMENT OF ALL CLAIMS BY TENANT BY
REASON OF THE PREMISES NOT BEING READY FOR OCCUPANCY AT COMMENCEMENT OF THE TERM
HEREOF. LANDLORD, IN ITS SOLE DISCRETION, MAY ELECT TO EXTEND THE TERM OF THE
LEASE FOR A TIME PERIOD EQUAL TO THE TIME PERIOD SUCH RENT SHALL HAVE ABATED,
AND LANDLORD SHALL MAKE SUCH ELECTION BY GIVING WRITTEN NOTICE THEREOF TO TENANT
AS PROVIDED IN PARAGRAPH 26 OF THIS LEASE.
30. SEVERABILITY.
EACH AND EVERY COVENANT AND AGREEMENT CONTAINED IN THIS LEASE IS,
AND SHALL BE CONSTRUED TO BE A SEPARATE AND INDEPENDENT COVENANT AND AGREEMENT.
IF ANY TERM OR PROVISION OF THIS LEASE OR THE APPLICATION THEREOF TO ANY PERSON
OR CIRCUMSTANCES SHALL TO ANY EXTENT BE INVALID AND UNENFORCEABLE, THE REMAINDER
OF THIS LEASE, OR THE APPLICATION OF SUCH TERM OR PROVISION TO PERSONS OR
CIRCUMSTANCES OTHER THAN THOSE AS TO WHICH IT IS INVALID OR UNENFORCEABLE, SHALL
NOT BE AFFECTED THEREBY.
31. ESTOPPEL CERTIFICATE.
TENANT WILL, AT ANY TIME AND FROM TIME TO TIME, UPON TEN (10) DAYS'
PRIOR REQUEST BY LANDLORD, EXECUTE, ACKNOWLEDGE AND DELIVER TO LANDLORD A
STATEMENT IN WRITING CERTIFYING THAT THIS LEASE IS UNMODIFIED AND IN FULL EFFECT
(OR, IF THERE HAVE BEEN MODIFICATIONS, THAT THIS LEASE IS IN FULL EFFECT AS
MODIFIED, AND SETTING FORTH SUCH MODIFICATIONS) AND THE DATES TO WHICH THE RENT
HAS BEEN
<PAGE>
PAID, AND EITHER STATING THAT TO THE KNOWLEDGE OF THE SIGNER OF THE CERTIFICATE
NO DEFAULT OF WHICH THE SIGNER MAY HAVE KNOWLEDGE, AND SUCH STATEMENT IS
UNDERSTOOD TO BE INTENDED TO BE RELIED UPON BY ANY PROSPECTIVE PURCHASER OR
MORTGAGEE OF THE BUILDING, THE REAL ESTATE ON WHICH THE BUILDING IS LOCATED, OR
ANY PORTION THEREOF.
32. PERSONAL LIABILITY.
THE LIABILITY OF LANDLORD TO TENANT FOR ANY DEFAULT BY LANDLORD
UNDER THE LEASE SHALL BE LIMITED TO THE INTEREST OF LANDLORD IN THE BUILDING AND
THE REAL ESTATE ON WHICH THE BUILDING IS LOCATED, AND LANDLORD SHALL HAVE NO
CORPORATE OR PERSONAL LIABILITY FOR ANY DEFICIENCY.
33. QUIET ENJOYMENT.
PROVIDED TENANT PAYS THE RENT PAYABLE HEREUNDER AS AND WHEN DUE AND
PAYABLE, KEEPS AND FULFILLS ALL OF THE TERMS, COVENANTS, AGREEMENTS AND
CONDITIONS TO BE PERFORMED BY TENANT HEREUNDER, AND IS NOT IN DEFAULT UNDER THIS
LEASE, TENANT SHALL AT ALL TIMES DURING THE LEASE TERM PEACEABLY AND QUIETLY
ENJOY THE LEASED PREMISES WITHOUT ANY DISTURBANCE FROM LANDLORD, OR FROM ANY
OTHER PERSON CLAIMING BY, THROUGH, OR UNDER LANDLORD, SUBJECT TO THE TERMS,
PROVISIONS, COVENANTS, AGREEMENTS AND CONDITIONS OF THIS LEASE AND TO THE DEEDS
OF TRUST, MORTGAGES, GROUND LEASES, ORDINANCES, LEASES AND UTILITY EASEMENTS AND
AGREEMENTS TO WHICH THIS LEASE IS SUBJECT AND SUBORDINATE, AS HEREINABOVE SET
FORTH.
34. ENTIRE AGREEMENT AND BINDING EFFECT.
THIS INSTRUMENT AND ANY ATTACHED ADDENDA OR EXHIBITS SIGNED OR
OTHERWISE INITIALLED BY THE PARTIES CONSTITUTE THE ENTIRE AGREEMENT BETWEEN
LANDLORD AND TENANT; NO PRIOR WRITTEN OR PRIOR CONTEMPORANEOUS ORAL PROMISES OR
REPRESENTATIONS SHALL BE BINDING. THIS LEASE SHALL NOT BE AMENDED, CHANGED OR
EXTENDED (EXCEPT AS PROVIDED IN PARAGRAPH 28) EXCEPT BY WRITTEN INSTRUMENT
SIGNED BY BOTH PARTIES HERETO. PARAGRAPH CAPTIONS HEREIN ARE FOR CONVENIENCE
ONLY, AND NEITHER LIMIT NOR AMPLIFY THE PROVISIONS OF THIS INSTRUMENT, AND THE
WORDS OF ANY GENDER SHALL INCLUDE EACH OTHER GENDER WHERE APPROPRIATE. THE
PROVISIONS OF THIS INSTRUMENT SHALL BE BINDING UPON THE INURE TO THE BENEFIT OF
THE HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS OF THE PARTIES, BUT
THIS PROVISION SHALL IN NO WAY ALTER THE RESTRICTIONS HEREIN IN CONNECTION WITH
ASSIGNMENT AND SUB-LETTING BY TENANT.
35. RULES AND REGULATIONS.
TENANT AND TENANT'S AGENTS, EMPLOYEES AND INVITEES WILL COMPLY WITH
ALL REQUIREMENTS OF THE RULES AND REGULATIONS (AS CHANGED FROM TIME TO TIME AS
HEREINAFTER PROVIDED) WHICH ARE HEREIN. LANDLORD SHALL AT ALL TIMES HAVE THE
RIGHT TO CHANGE SUCH RULES AND REGULATIONS OR TO PROMULATE OTHER RULES AND
REGULATIONS IN SUCH REASONABLE MANNER AS MAY BE DEEMED ADVISABLE FOR SAFETY,
CARE OR CLEANLINESS OF THE BUILDING AND RELATED FACILITIES OR PREMISES, AND FOR
PRESERVATION OF GOOD ORDER THEREIN, PROVIDED, HOWEVER, THAT SUCH CHANGES SHALL
NOT BECOME EFFECTIVE AND PART OF THIS LEASE UNTIL A COPY THEREOF SHALL HAVE BEEN
DELIVERED TO TENANT. TENANT SHALL FURTHER BE RESPONSIBLE FOR THE COMPLIANCE WITH
SUCH RULES AND REGULATIONS BY THE EMPLOYEES, SERVANTS, AGENTS, VISITORS AND
INVITEES OF TENANT. ATTACHED AS EXHIBIT "D" IS A COPY OF THE PRESENT BUILDING
RULES AND REGULATIONS.
<PAGE>
36. GRAPHICS.
LANDLORD AGREES TO PROVIDE AND INSTALL AT TENANT'S COST ALL LETTERS
OR NUMERALS ON DOORS IN THE LEASED PREMISES; ALL SUCH LETTERS OR NUMERALS SHALL
BE IN ACCORDANCE WITH BUILDING STANDARD GRAPHICS, AND NO OTHERS SHALL BE USED OR
PERMITTED ON THE PREMISES.
37. TENANT ALLOWANCES.
IN PREPARING THE LEASED PREMISES FOR OCCUPANCY BY TENANT, LANDLORD
SHALL BE REQUIRED TO BEAR THE EXPENSE OF INSTALLING THE ITEMS LISTED IN EXHIBIT
"B", ATTACHED HERETO AND MADE A PART HEREOF, ONLY TO THE EXTENT THAT THEY DO NOT
EXCEED THE RESPECTIVE ALLOWANCES INDICATED IN SAID EXHIBIT "B". ALL
INSTALLATIONS IN EXCESS THEREOF SHALL BE FOR TENANT'S ACCOUNT AND AT TENANT'S
COST (AND TENANT SHALL PAY AD VALOREM TAXES THEREON), WHICH COST SHALL BE
PAYABLE BY TENANT TO LANDLORD AS ADDITIONAL RENT HEREUNDER PROMPTLY UPON BEING
INVOICED THEREFORE, AND FAILURE BY TENANT TO PAY SAME IN FULL WITHIN THIRTY (30)
DAYS SHALL CONSTITUTE FAILURE TO PAY RENT WHEN DUE AND AN EVENT OF DEFAULT BY
TENANT HEREUNDER GIVING RISE TO ALL REMEDIES AVAILABLE TO LANDLORD UNDER THIS
LEASE AND AT LAW FOR NONPAYMENT OF RENT.
38. TENANT SHALL HAVE THE RIGHT TO PARK TWO (2) CARS IN THE C. B. &
--- - -------
Q. LOT, AT A CHARGE INCLUDED IN RENTAL ABOVE, DOLLARS ($0) PER CAR, PER MONTH.
- ------ ------------------------ --
ADDITIONAL PARKING SPACES WILL BE AT A COST OF THIRTY ($30.00) PER CAR PER
---------------
MONTH. SPECIFIC SPACES IN THE PARKING AREAS ARE TO BE ASSIGNED TO TENANT, BUT
LANDLORD MAY ISSUE TO TENANT THE AFORESAID NUMBER OF PARKING STICKERS OR TAGS,
EACH OF WHICH WILL AUTHORIZE PARKING IN THE PARKING AREAS OF A CAR ON WHICH THE
STICKER OR TAG IS DISPLAYED, OR LANDLORD WILL PROVIDE A REASONABLE ALTERNATIVE
MEANS OF IDENTIFYING AND CONTROLLING CARS AUTHORIZED TO BE PARKED IN THE PARKING
AREAS. LANDLORD MAY DESIGNATE THE AREA WITHIN WHICH EACH SUCH CAR MAY BE PARKED,
AND LANDLORD MAY CHANGE SUCH DESIGNATIONS FROM TIME TO TIME. LANDLORD MAY MAKE,
MODIFY AND ENFORCE RULES AND REGULATIONS RELATING TO THE PARKING OF AUTOMOBILES
IN THE PARKING AREAS, AND TENANT WILL ABIDE BY SUCH RULES AND REGULATIONS.
39. KEYS.
LANDLORD AGREES TO FURNISH TENANT WITH NECESSARY KEYS TO EACH
CORRIDOR DOOR ENTERING THE LEASED PREMISES, AND ADDITIONAL KEYS WILL BE
FURNISHED AT A CHARGE BY LANDLORD EQUAL TO ITS COST PLUS 15% ON AN ORDER SIGNED
BY TENANT OR TENANT'S AUTHORIZED REPRESENTATIVE. ALL SUCH KEYS SHALL REMAIN THE
PROPERTY OF LANDLORD. NO ADDITIONAL LOCKS SHALL BE ALLOWED ON ANY DOOR OF LEASED
PREMISES WITHOUT LANDLORD'S PERMISSION, AND EXCEPT THOSE FURNISHED BY LANDLORD.
UPON TERMINATION OF THIS LEASE, TENANT SHALL SURRENDER TO LANDLORD ALL KEYS OF
THE LEASED PREMISES, AND GIVE TO LANDLORD THE EXPLANATION OF THE COMBINATION OF
ALL LOCKS FOR SAFES, SAFE CABINETS AND VAULT DOORS, IF ANY, IN THE LEASED
PREMISES.
EXECUTED IN MULTIPLE COUNTERPARTS, EACH OF WHICH SHALL HAVE THE
FORCE AND EFFECT OF AN ORIGINAL, ON THIS ________ DAY OF ___________________,
19_____.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
LANDLORD TENANT
CPL PROPERTIES, LTD. TELCO COMMUNICATIONS GROUP,
BY /s/DAVID W. STEINMAN BY /s/D. DONALD A. BURNS
-------------------- ---------------------------
ITS PRESIDENT ITS PRESIDENT
------------------- ---------------------------
BY
----------------------------
ITS
---------------------------
</TABLE>
STATE OF IOWA)
--------------
) SS
COUNTY OF Scott)
----------
ON MARCH 1, 1995, BEFORE ME, THE UNDERSIGNED, A NOTARY PUBLIC IN AND FOR SAID
-------------
STATE, PERSONALLY APPEARED JAMES W. STEINMAN, KNOWN TO ME TO BE THE PRESIDENT OF
----------------- ---------
THE CORPORATION THAT EXECUTED THE WITHIN INSTRUMENT AND KNOWN TO ME TO BE THE
PERSONS WHO EXECUTED THE WRITTEN INSTRUMENT ON BEHALF OF CPL PROPERTIES, LTD,
--------------------
THE LANDLORD, AD SONS CORPORATION CORPORATION, AND THEREIN NAMED AND
-------------------------------
ACKNOWLEDGED TO ME THAT SUCH CORPORATION EXECUTED THE WITHIN INSTRUMENT PURSUANT
TO ITS BY-LAWS OR A RESOLUTION OF ITS BOARD OF DIRECTIONS AND THAT JAMES W.
--------
STEINMAN AS PRESIDENT OF CPL PROPERTIES LTD. VOLUNTARILY EXECUTED THE THEREIN
- --------------------------------------------
INSTRUMENT.
/S/
--------------------------------
NOTARY IN AND FOR SCOTT
--------------
COUNTY, STATE OF IOWA
--------------
STATE OF MARYLAND )
-----------------
) SS
COUNTY OF MONTGOMERY )
-----------------
ON MARCH 3, 1995, BEFORE ME, THE UNDERSIGNED, A NOTARY PUBLIC IN AND FOR SAID
-------------
STATE, PERSONALLY APPEARED DONALD A. BURNS, KNOWN TO ME TO BE THE PRESIDENT OF
--------------- ---------
THE CORPORATION THAT EXECUTED THE WITHIN INSTRUMENT AND KNOWN TO ME TO BE THE
PERSONS WHO EXECUTED THE WRITTEN INSTRUMENT ON BEHALF OF TELCO COMMUNICATIONS
--------------------
GROUP, INC., THE TENANT, A VIRGINIA CORPORATION, AND THEREIN NAMED AND
- ----------- ----------
ACKNOWLEDGED TO ME THAT SUCH CORPORATION EXECUTED THE WITHIN INSTRUMENT PURSUANT
TO ITS BY-LAWS OR A RESOLUTION OF ITS BOARD OF DIRECTIONS AND THAT DONALD A.
---------
BURNS, AS PRESIDENT OF TELCO COMMUNICATIONS GROUP, INC. VOLUNTARILY EXECUTED THE
- -------------------------------------------------------
THEREIN INSTRUMENT.
/S/ RAY PAUL
----------------------------------
NOTARY IN AND FOR MONTGOMERY
-------------------
COUNTY, STATE OF MARYLAND
--------------------
<PAGE>
EXHIBIT "A"
-----------
THE EAST HALF OF LOT 7 IN BLOCK 41 IN LECLAIRE'S FIRST ADDITION TO THE CITY OF
DAVENPORT, IOWA; AND LOT 6 IN BLOCK 41 IN LECLAIRE'S ADDITION TO THE TOWN
(NON-CITY) OF DAVENPORT, IOWA.
<PAGE>
EXHIBIT "B"
-----------
WORKLETTER
LANDLORD SHALL, AT ITS SOLE COST AND EXPENSE, DEMOLISH AND REMOVE THE EXISTING
WALLS, PARTITIONS AND ALL CARPET, AS SHOWN ON THE DRAWING ATTACHED TO THIS
EXHIBIT "B".
THE SUSPENDED ACOUSTICAL CEILING, LIGHT FIXTURES AND EXISTING HEATING,
VENTILATION, AIR CONDITIONING AND ELECTRICAL CONFIGURATION SHALL NOT BE ALTERED
BY LANDLORD.
POSSESSION TO BE GIVEN TO TENANT WITHIN 15 DAYS OF THE DATE THE LEASE IS FULLY
EXECUTED, BUT NOT LATER THAN MARCH 15, 1995.
TENANT SHALL HAVE THE RIGHT, AT ITS SOLE EXPENSE, TO MAKE SUCH IMPROVEMENTS ON
THE PREMISES AS IT MAY DEEM NECESSARY FOR THE CONSTRUCTION, MAINTENANCE AND
OPERATION OF A SWITCH FACILITY SITE. UPON TERMINATION OF THIS LEASE, TENANT
SHALL, TO THE EXTENT REASONABLE, RESTORE THE PREMISES TO ITS ORIGINAL CONDITION
AT THE COMMENCEMENT OF THIS LEASE, EXCEPT FOR ORDINARY WEAR AND TEAR AND DAMAGES
BY THE ELEMENTS OR DAMAGES OVER WHICH TENANT HAD NO CONTROL.
<PAGE>
EXHIBIT "C"
-----------
[FLOOR PLAN APPEARS HERE]
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
EXHIBIT "D"
-----------
RULES AND REGULATIONS
1. TENANT WILL TAKE GOOD CARE OF THE PREMISES AT ALL TIMES, KEEPING
THEM CLEAN AND FREE FROM DANGER OR DAMAGE BY FIRE, OPEN WINDOWS, OPEN FAUCETS,
OR IMPROPER HANDLING OF APPARATUS OR EQUIPMENT OF ALL KINDS.
2. THE SIDEWALKS, HALLS, PASSAGES, EXITS, ENTRANCES, ELEVATORS AND
STAIRWAYS SHALL NOT BE OBSTRUCTED BY ANY OF THE TENANTS OR USED BY THEM FOR ANY
PURPOSES OTHER THAN FOR INGRESS TO AND EGRESS FROM THEIR RESPECTIVE PREMISES.
THE HALLS, PASSAGES, EXITS, ENTRANCES, ELEVATORS, STAIRWAYS AND ROOF ARE NOT FOR
THE USE OF THE GENERAL PUBLIC AND LANDLORD SHALL, IN ALL CASES, RETAIN THE RIGHT
TO CONTROL AND PREVENT ACCESS THERETO BY ALL PERSONS WHOSE PRESENCE, IN THE
JUDGMENT OF THE LANDLORD, SHALL BE PREJUDICIAL TO THE SAFETY, CHARACTER,
REPUTATION AND INTERESTS OF THE BUILDING AND ITS TENANTS, PROVIDED THAT NOTHING
HEREIN CONTAINED SHALL BE CONSTRUED TO PREVENT SUCH ACCESS TO PERSONS WITH WHOM
TENANT NORMALLY DEALS IN THE ORDINARY COURSE OF TENANT'S BUSINESS UNLESS SUCH
PERSONS ARE ENGAGED IN ILLEGAL ACTIVITIES. NO TENANT AND NO EMPLOYEES OR
INVITEES OF ANY TENANT SHALL GO UPON THE ROOF OF THE BUILDING.
3. NO SIGN, PLACARD, PICTURE, ADVERTISEMENT OR NAME OR NOTICE SHALL BE
INSCRIBED, DISPLAYED OR PRINTED OR AFFIXED ON OR TO ANY PART OF THE OUTSIDE OR
INSIDE OF THE OFFICE BUILDING WITHOUT THE WRITTEN CONSENT OF LANDLORD, FIRST
HAND OBTAINED; AND, LANDLORD SHALL HAVE THE RIGHT TO REMOVE ANY SUCH SIGN,
PLACARD, PICTURE, ADVERTISEMENT, NAME OR NOTICE WITHOUT NOTICE TO AND AT THE
EXPENSE OF TENANT.
4. TENANT SHALL NOT USE ANY BLINDS, SHADES, AWNINGS OR SCREENS IN
CONNECTION WITH ANY WINDOW OR DOOR OF THE PREMISES UNLESS APPROVED IN WRITING BY
LANDLORD. TENANT SHALL NOT USE ANY DRAPE OR WINDOW COVERING FACING ANY EXTERIOR
GLASS SURFACE OR INTERIOR HALLWAY, OTHER THAN THE STANDARD WINDOW TREATMENT
ESTABLISHED BY LANDLORD, UNLESS APPROVED BY LANDLORD.
5. TENANT WILL NOT PERMIT ANIMALS, BIRDS OR BICYCLES TO BE BROUGHT OR
KEPT IN OR ABOUT THE BUILDING.
6. LANDLORD WILL PERMIT COOKING, INSTALLATION OF REFRIGERATORS OR ANY
OTHER TYPE OF SPECIALIZED ELECTRONIC EQUIPMENT WITH WRITTEN CONSENT OF LANDLORD.
7. TENANT WILL HAVE ALL DECORATING, CARPENTRY WORK OR ANY LABOR
REQUIRED FOR THE INSTALLATION OF TENANT'S EQUIPMENT, FURNISHING OR OTHER
PROPERTY, PERFORMED AT ITS EXPENSE AND ONLY BY THE EMPLOYEES OF LANDLORD OR WITH
THE CONSENT OF LANDLORD BY PERSONS DULY AUTHORIZED BY LANDLORD.
8. TENANT SHALL NOT ALTER ANY LOCK NOR INSTALL ANY NEW OR ADDITIONAL
LOCKS OR ANY BOLTS ON ANY DOOR OF THE PREMISES WITHOUT THE WRITTEN CONSENT OF
LANDLORD.
9. EACH TENANT, UPON THE TERMINATION OF THE TENANCY, SHALL DELIVER TO
LANDLORD THE KEYS OF OFFICES, ROOMS AND TOILET ROOMS WHICH SHALL HAVE BEEN
FURNISHED TENANT OR WHICH TENANT SHALL HAVE HAD MADE, AND IN THE EVENT OF LOSS
OF ANY KEYS SO FURNISHED, SHALL PAY LANDLORD THEREAFTER.
<PAGE>
10. TENANT SHALL SEE THAT THE DOORS OF THE PREMISES ARE CLOSED AND
SECURELY LOCKED BEFORE LEAVING THE BUILDING, AND MUST OBSERVE STRICT CARE AND
CAUTION THAT ALL WATER FAUCETS OR WATER APPARATUS ARE ENTIRELY SHUT-OFF BEFORE
TENANT OR TENANT'S EMPLOYEES LEAVE THE BUILDING, AND THAT ALL ELECTRICITY, GAS
OR AIR SHALL LIKEWISE BE CAREFULLY SHUT-OFF, SO AS TO PREVENT WASTE OR DAMAGE,
AND FOR ANY DEFAULT OR CARELESSNESS, TENANT SHALL MAKE GOOD ALL INJURIES
SUSTAINED BY OTHER TENANTS OR OCCUPANTS OF THE BUILDING OR LANDLORD.
12. LANDLORD WILL DIRECT ELECTRICIANS AS TO WHERE AND HOW TELEPHONE AND
TELEGRAPH WIRES ARE TO BE INTRODUCED. NO BORING OR CUTTING FOR WIRES WILL BE
ALLOWED WITHOUT THE CONSENT OF LANDLORD. THE LOCATION OF TELEPHONES, CALL BOXES
AND OTHER OFFICE EQUIPMENT AFFIXED TO THE PREMIES SHALL BE SUBJECT TO THE
APPROVAL OF LANDLORD.
13. TENANT WILL NOT INSTALL ANY ELECTRICAL LIGHTING OR POWER EQUIPMENT
IN THE PREMISES WITHOUT FIRST OBTAINING THE WRITTEN APPROVAL OF LANDLORD.
14. TENANT WILL NOT USE THE WATER CLOSETS, URINALS AND OTHER WATER
FIXTURES FOR ANY OTHER PURPOSE THAN THAT FOR WHICH THEY WERE CONSTRUCTED.
15. NO FURNITURE, FREIGHT OR EQUIPMENT OF ANY KIND SHALL BE BROUGHT
INTO THE BUILDING WITHOUT THE CONSENT OF LANDLORD AND ALL MOVING OF THE SAME
INTO OR OUT OF THE BUILDING SHALL BE DONE AT SUCH TIME AND IN SUCH MANNER AS
LANDLORD SHALL DESIGNATE. LANDLORD SHALL HAVE THE RIGHT TO PRESCRIBE THE WEIGHT,
SIZE AND POSITION OF ALL SAFES AND OTHER HEAVY EQUIPMENT BROUGHT INTO THE
BUILDING AND ALSO THE TIMES AND MANNER OF MOVING THE SAME IN AND OUT OF THE
BUILDING. SAFES OR OTHER HEAVY OBJECTS SHALL, IF CONSIDERED NECESSARY BY
LANDLORD, STAND ON A PLATFORM OF SUCH THICKNESS AS IS NECESSARY TO PROPERLY
DISTRIBUTE THE WEIGHT. LANDLORD WILL NOT BE RESPONSIBLE FOR LOSS OF OR DAMAGE TO
ANY SUCH SAFE OR PROPERTY FROM ANY CAUSE, AND ALL DAMAGE DONE TO THE BUILDING BY
MOVING OR MAINTAINING ANY SUCH SAFE OR OTHER PROPERTY SHALL BE REPAIRED AT THE
EXPENSE OF TENANT.
16. NO FURNITURE, PACKAGES, SUPPLIES, EQUIPMENT OR MERCHANDISE WILL BE
RECEIVED IN THE BUILDING OR CARRIED UP OR DOWN IN THE ELEVATORS, EXCEPT BETWEEN
SUCH HOURS AND IN SUCH ELEVATORS AS SHALL BE DESIGNATED BY LANDLORD.
17. TENANT WILL NOT MARK, POINT, DRILL INTO OR IN ANY WAY DEFACE THE
WINDOWS, DOORS, WALLS, CEILINGS, PARTITIONS, FLOORS OR THE WOOD, STONE OR
ALUMINUM WORK IN THE BUILDING AND SHALL NOT PUT THEREIN ANY SPIKES, HOOKS,
SCREWS OR NAILS WITHOUT LANDLORD'S WRITTEN CONSENT.
18. NO VENDING MACHINE OF ANY DESCRIPTION SHALL BE INSTALLED,
MAINTAINED OR OPERATED UPON THE PREMIES WITHOUT THE WRITTEN CONSENT OF LANDLORD.
19. CANVASSING, SOLICITING AND PEDDLING WITHIN THE ENTIRE OFFICE
BUILDING IS PROHIBITED UNLESS SPECIFICALLY APPROVED BY LANDLORD AND EACH TENANT
SHALL COOPERATE TO PREVENT SUCH ACTIVITY.
20. TENANT SHALL COMPLY WITH ALL REASONABLE SECURITY RULES PROMULGATED
BY LANDLORD INCLUDING THE USE OF A CARD ENTRANCE SYSTEM FOR OFF-HOUR ADMISSION.
<PAGE>
21. A DIRECTORY WILL BE MAINTAINED IN THE LOBBY OF THE BUILDING BY
LANDLORD, WITH THE NAMES AND SUITE NUMBERS OF THE TENANT OF THE BUILDING
PROPERLY NUMBERED AND LETTERED, BUT WILL BE RENEWED AND CHANGED AT THE EXPENSE
OF TENANT.
22. TENANT WILL ABIDE BY AND PERFORM ALL SUCH REASONABLE RULES AND
REGULATIONS AS LANDLORD MAY NOW OR HEREAFTER MAKE WHICH ARE ACCORDING TO
LANDLORD'S JUDGMENT FOR THE GENERAL GOOD OF THE BUILDING AND ITS TENANTS.
23. LANDLORD MAY MAKE REASONABLE CHANGES TO THESE RULES AND REGULATIONS
AT ITS DISCRETION, UPON WRITTEN NOTICE TO ALL TENANTS.
<PAGE>
Exhibit 10.21
SAHARA LAMB SHOPPING CENTER
This Lease entered into this 2nd day of November, 1995 by and
between THOMAS KURSCHNER ("Landlord") and TELCO
COMMUNICATIONS GROUP INC. a Virginia Corporation ("Tenant")
DEMISE OF 1. (a) Landlord hereby leases to Tenant and Tenant
PREMISES: hereby leases from Landlord these certain premises located in
COMMON AREAS the Sahara-Lamb Shopping Center at 4225 E. Sahara, Las Vegas
Clark County, Nevada (the "Center"), which premises are known
as Store No. 8 and 10/B and have 4970. square feet of floor
area (the "Premises"). The location of the Premises is
depleted on Exhibit A attached hereto. The demise of the
Premises by Landlord to Tenant is made upon the terms,
covenants and conditions combined in this Lease.
(b) Tenant shall have, as appurtenant to the
Premises, the nonexclusive easement to use in common all
automobile parking areas, driveways, entrances, exits,
sidewalks, and other areas and improvements provided by
Landlord for general use in common by all tenants of the
Center, their employees, customers and other invitees. All
such nonexclusive easement areas shall at all times be
subject to the exclusive control and management of Landlord.
Landlord shall have the right to establish, modify and
enforce from time to time reasonable rules and regulations
with respect to all such nonexclusive easement areas and the
right to make from time to time reasonable changes in the
location of such nonexclusive easement areas. Without
limiting any of the foregoing of this paragraph (b), Landlord
shall have the right to construct, maintain and operate
lighting facilities on all nonexclusive areas and
improvements, to police the same, from time to time to change
the area, level, location and arrangement of parking areas
and other facilities hereinabove referred to; to restrict
parking by tenants, their officers, agents and employees to
employee parking areas designated by Landlord as employee
parking areas; to close all or any portion of said areas or
facilities temporarily or permanently for the purpose of
constructing additional improvements or for any other
purpose, to discourage non-customer parking and to do and
perform such other acts in and to said nonexclusive easement
areas and improvements as the Landlord shall determine to be
advisable.
TERM, 2. The term of this Lease shall commence on January 1,
COMMENCEMENT 1995 and shall continue until and end on December 31, 2000
OF BUSINESS AND unless sooner terminated as hereinafter provided. The parties
BUSINESS NAME hereto acknowledge that certain obligations under various
articles hereof may commence prior to the lease term, or
survive the termination of the lease term, i.e. construction,
hold harmless, liability insurance, etc.; and the parties
agree to be bound by these articles prior to commencement of
the lease term or subsequent to the termination of the lease
term. N/A
19 , Tenant agrees that it shall conduct business under the
name of TELCO COMMUNICATIONS AND/OR, DIAL & SAVE
Tenant shall not change the name under which it does business
without first obtaining the written consent of Landlord.
BASE 3. (a) As used in this Lease, the term "Rent" is deemed
MONTHLY to include (i) the Base Monthly Rental (as such may be
RENT increased pursuant to paragraph (d) of this SEction 3), (ii)
Additional Rent, (iii) all amounts due pursuant to paragraph
(e) of this Section 3, and (iv) all other sums due under this
Lease from Tenant to Landlord. All Rent shall be paid to
Landlord without notice or demand, and without abatement,
offset, suspension, deferment, diminution or reduction.
(b) Tenant agrees to pay a Base Monthly Rental
throughout the lease term in lawful money of the United
States of America, as follows:
(i) The sum of one thousand three hundred sixty
six dollars and seventy five cents ($ 1366.75) in
advance upon the first day of each calendar month
during the period commencing on the commencement of
the lease term and ending on the last day of the
sixth (6th) full calendar month during the lease
term;
(ii) The sum of two thousand seven hundred
thirty three dollars and fifty cents ($ 2733.50) in
advance upon the first day of each calendar month
during the period beginning on the first day of the
seventh (7th) full calendar month and ending on the
last day of the (12th) full calendar month during
the lease term:
-1-
<PAGE>
(iii) The sum of 2733.50 plus CPI increase
($ ) in advance upon the first day of
each calendar month during the period beginning on
the first day thirteenth month (13th) full calendar
month ending on the last day of the twenty-fourth
(24th) full calendar month during the lease term;
(iv) The sum of second twelve months rental
amount plus CPI increase ($ ) in advance upon the
first day of each calendar month during the period
beginning on the first day of the twenty-fifth
(25th) full calendar month ending on the last day of
the thirty-sixth (36th) full calendar month during
the lease term;
**Page 8,
#43 (c) In the event the lease term commences other than
on the first day of a calendar month, or if the termination
date is not the last day of a month, a prorated monthly
installment of the Base Monthly Rental shall be paid for the
fractional month during which this Lease commences and/or
terminates. Payment or Rent shall be made by Tenant to
Landlord at such addresses as shall from time to time be
designated by Landlord to Tenant in writing.
(d) If any payment of Base Monthly Rentals is not
received by Landlord by the fifth (5th) day of the calendar
month in which is due, then the Base Monthly Rental due for
such month shall be increased by five percent (5%) of such
Base Monthly Rental due for such month. Nothing in this Lease
shall be construed to permit the payment of rent after the
date on which it is due. The parties hereby agree that such
increase in the Base Monthly Rental represents a fair and
reasonable estimate of the costs Landlord will incur by
reason of late payment by Tenant. Acceptance by Landlord of
such increased Base Monthly Rental shall in no event
constitute a waiver of Tenant's default with respect to any
Rent not paid when due, nor excuse or cure any default by
Tenant under this Lease, nor prevent Landlord from exercising
any of the other rights and remedies granted hereunder.
(e) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(f) In the event Tenant fails to make any payment
when due hereunder, Landlord shall have the right to demand
that all subsequent payments due hereunder be made in cash,
cashier's check or certified check.
ADDITIONAL 4. (a) Tenant shall pay to Landlord as Additional Rent
RENT all Taxes and Operating Expenses attributable to the Premises
for each Fiscal Year or portion thereof during the lease
term. Tenant's share of Taxes and Operating Expenses
attributable to the Premises for a fiscal year shall be
determined by dividing the number of square feet of floor
space in the Premises by the total number of square feet of
rentable floor space which exists in the Center on an average
annual basis for such Fiscal Year and multiply the result
times the total amount of Taxes and Operating Expenses for
the Center during such Fiscal Year. "Fiscal Year" shall mean
any 12 month period elected by Landlord for federal income
tax purposes.
(b) "Taxes" shall mean the aggregate amount of real
estate taxes and assessments (exclusive of penalties,
interest and discount thereon or with respect to a refund
thereof) imposed upon the buildings and land which comprise
the Center, including, without limitation, (i) real estate
taxes upon any "air rights" or payable by the Landlord to a
ground lessor with respect thereto and (ii) any special
assessments levied after the date of this lease for public
benefits to land and/or building which assessments, if
payable in installments, shall be deemed payable in the
maximum number of permissible installments in the manner in
which such taxes and assessments are imposed as of the date
hereof, provided, that if because of any change in the
taxation of real estate, any other tax or assessment
(including, without limitation, any occupancy, gross
receipts, income or rental tax) is imposed upon Landlord or
with respect to center or the occupancy, rents or income
therefrom, in substitution for, or in addition to, any of the
foregoing Taxes, such other tax or assessment shall be deemed
part of the Taxes.
(c) "Operating Expenses" shall mean all expenses, costs
and disbursements of every kind and nature incurred by
Landlord with respect to or arising from or in connection
with the ownership, management, operation, repair,
replacement and maintenance of the Center, including, but not
limited to, salaries, wages, insurance and health and welfare
benefits, and employee taxes related to employees engaged in
the operation, maintenance or security of the Center,
maintenance and service agreements including without
limitation those for equipment, alarm service, landscaping
sprinkler systems, window cleaning, elevators and cleaning,
insurance of every kind or nature required to property
protect from casualty or liability the Center, the
improvements therein and Landlord's property therein,
management fees and expenses, all utilities, including
without limitation the cost of water, energy, heating,
lighting, air conditioning, ventilation and sewer charges, if
any; all ordinary repairs, maintenance and replacement on and
to the Center, the improvements therein and the personal
property, fixtures, machinery, equipment, systems and
apparatus located therein or used in connection therewith;
common area lighting, maintenance and repairs; landscaping;
scavenger service, and supplies and materials. Operating
expenses shall not include items paid directly by tenants of
the Center; costs of alterations of tenants' premises; costs
of capital improvements; depreciation in respect to the
buildings comprising the Center; interest and principal
payments on mortgages; Taxes; and leasing commissions or
fees. The level of quality of the maintenance and operation
of the Center shall be at Landlord's sole discretion,
provided, however, that such maintenance and operation shall
be at least equal to that of first class shopping centers in
the greater Las Vegas area.
(d) Commencing on the first day of the first calendar
month of the lease term and on the first day of each month
thereafter until delivery of the statement described below,
Tenant shall pay Landlord the sum of $497.00. Additional Rent
on account of Taxes and Operating Expenses for the Fiscal
Year in which the term of this Lease commences. As soon as
reasonably possible after the termination of each Fiscal Year
during the term of this Lease and after termination of this
Lease, Landlord shall deliver to Tenant a statement in
reasonable detail certified by a representative of Landlord
showing for the preceding Fiscal Year or fraction thereof the
amount of Taxes and Operating Expenses attributable to the
Premises. Commencing on the first day of the first calendar
month following delivery of such statement to Tenant and on
the first day of each month thereafter until the delivery to
Tenant of the next such statement, Tenant shall pay to
Landlord as Additional Rent 1/12th of the total amount of
Tenant's share of the previous Fiscal Year's Operating
Expenses and Taxes attributable to the Premises as indicated
by such statement plus any increase in Taxes and/or Operating
Expenses which Landlord reasonably projects will occur in the
next proceeding Fiscal Year. The statements to be rendered to
Tenant shall indicate for the preceding Fiscal Year the
amount of Additional Rent already paid on account by Tenant
for such preceding Fiscal Year and the amount of Additional
Rent remaining due from or overpaid by Tenant on account of
such preceding Fiscal Year. Within thirty (30) days of the
date of delivery of such statement, Tenant shall pay to
Landlord or Landlord shall pay to Tenant the balance, if any
required to be paid pursuant to this paragraph (d), except
that Landlord may, at its option, credit any amounts due from
it to Tenant against the Base monthly Rental thereafter next
due. Appropriate prorations shall be made for those periods
at the beginning or end of the Lease Term which are less than
a full Fiscal Year. If Landlord should elect to change its
Fiscal Year, Landlord shall notify Tenant thereof, and all
calculations and payments required to be made at the end of a
Fiscal Year shall be made and prorated accordingly.
<PAGE>
SECURITY 5. Concurrent, upon Tenant's execution of this Lease,
DEPOSIT Tenant has deposited with Landlord the sum of $3230.50 (three
thousand two hundred thirty and 50/100 said sum shall be held
by Landlord as security for the faithful performance by
Tenant of all the terms, covenants, and conditions of this
Lease to be kept and performed by Tenant during the term
hereof. If Tenant defaults with respect to any provision of
this Lease including but not limited to the provisions
relating to the payment of rent, Landlord may, but shall not
be required to use, apply or retain all or any part of this
security deposit for the payment of any rent of any other sum
in default or for the payment of any amount which Landlord
may spend or become obligated to spend by reason of Tenant's
default, or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of Tenant's
default if any portion of said deposit is so used or applied
Tenant shall, within five (5) days after written demand
therefor, deposit cash with Landlord in an amount sufficient
to restore the security deposit to its original amount and
Tenant's failure to do so shall be a default under this
Lease. Landlord shall not be required to keep this security
deposit separate from its general funds, and Tenant shall not
be entitled to interest on such deposit, unless otherwise
required by law if Tenant shall fully and faithfully peform
every provision of this Lease to be performed by it, the
security deposit or any balance thereof shall be returned to
Tenant within sixty (60) days following expiration of the
Lease term Landlord may deliver the funds deposited hereunder
by Tenant to a purchaser of Landlord's interest in the
Premises and thereupon Landlord shall be discharged from any
further liability with respect to such deposit.
PURPOSE 6. Tenant agrees to use and occupy the Premises during
the term of this Lease for the purpose of Communications
deploying and operating a long distance switching center and
for no other purpose whatever without the written consent of
Landlord Tenant shall not use or permit the Premises or any
part thereof, to be used, for purpose or purposes other than
the purpose or purposes for which said premises are hereby
leased, and no use shall be made of the Demised Premises or
acts done, which will include the rate of insurance upon the
Center or any part thereof over the standard rate of
insurance prevailing in the area in which the Center is
located or cause a cancellation of any part thereof, or make
impossible for Landlord to make XXXXXXXXXXX covering the
Center or any part thereof. Any other provision hereof to the
contrary XXXXXXXXXXXXX permit anything to be done in or about
the Premises which within any way obstruct or interfere with
the terms of other tenants or occupants of the Center or
injure or annoy them or use or allow the Premises to be used
for any improper, immoral, unlawful or objectionable purpose,
nor shall Tenant cause, maintain or permit any nuisance in,
on or about the Premises. Tenant will not commit or suffer to
be committed any waste in or upon the Premises. Tenant shall
not conduct any auction on the Premises or the Center.
HOURS OF 7. Tenant shall continuously during the entire term
BUSINESS hereof conduct and carry on Tenant's business on the Premises
and shall keep the Premises open for business and cause
Tenant's business to be conducted therein during the usual
business hours of each and every business day as is customary
for businesses of like character in the Las Vegas
metropolitan area which Tenant agrees shall be 24 hours a
day, seven days a week.
LAW AND 8. (a) Tenant at its own cost and expense shall comply
REGULATIONS promptly with all laws, rules, and orders of all Federal,
State and Municipal Governments, or departments, which may be
applicable to the Premises.
(b) Tenant shall faithfully observe and comply with
the rules and regulations attached hereto as Exhibit B as
from time to time modified by Landlord. Landlord shall not be
responsible to Tenant for the nonperformance or any other
tenant of the Center of any of said rules and regulations.
(c) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
ALTERATIONS 9. (a) Tenant shall not, without Landlord's prior
AND written consent, make any alterations, additions or utility
ADDITIONS installations in, on or about the Premises. As used in this
Paragraph 9, the term "utility installations" shall include
without limitation ducting, power panels, fluorescent
fixtures, space heaters, conduit and wiring. As a condition
to giving such consent, Landlord may require that Tenant
agree in writing to remove any such alterations, additions,
improvements or utility installations at the expiration of
the term and to restore the Premises to their prior
condition. Tenant shall notify Landlord sufficiently in
advance of the commencement of any such work in order for
Landlords to file appropriate Notices of Nonresponsibility in
connection with such work. Tenant shall keep the Premises and
the Center free from any liens arising out of any work
performed, materials furnished or obligations incurred by or
on behalf of Tenant. Tenant agrees to pay any fees, charges
or penalties arising out of alterations or improvements
performed by Tenant.
(b) See paragraph 48.
(c) If space is equipped with air conditioning and
heating system, Lessor has designed air conditioning and
heating system for standard office occupancy only. Such
systems are NOT designed for excessive traffic, exposure to
outside temperatures, excessive equipment, excessive
personnel, nor computer room environment. Upgrading of air
conditioning and heating systems can be done at Lessee's
expense.
GLASS AND 10. Tenant shall be responsible for all doors and glass
DOORS damages by wind, vandalism etc. on the Premises and Tenant
shall forthwith replace or repair same at Tenant's sole
expense.
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REPAIRS 11. Tenant, at xxx.'s sole expense, shall repair and
maintain the premises and every part thereof including but not
limited to all windows, glazing, skylights, and signs in good,
safe and sanitary condition except those portions XXXX Landlord
agrees to maintain in this Paragraph 11. Subject to Landlord's
right to be XXXXXXXXXXXXXXXXXXXXXXX XXXXXXX Additional Rent.
Landlord shall repair and maintain only the XXXXXXXXXXXXX exterior
XXXXXXXXXXXXXXXXXXXXXXXXX embedded or subsurface non-accessible
plumbing serving the Premises sidewalks, driveways, landscaping
and paving lots. Tenant shall reimburse Landlord for any costs
incurred in repair and maintenance of damage caused by the
intentional or negligent act of Tenant, or Tenant's officers,
agents partners, employees tradesmen or customers. Landlord
shall not be liable to Tenant or any other Party whatsoever for
any damage or injury caused by Landlord's XXXXXXXXXXXXX maintain
said exterior walls, exterior roof, cement-embedded or sub-surface
non-accessible plumbing, landscaping, sidewalks, driveways and
parking lots unless Tenant has given Landlord written notice of
the XXXXXXXXXXXXXXXXXXXXXXXX of the Premises and Landlord has
failed to make said repairs within a reasonable time after
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX entry hereunder. Tenant
accepts the Premises as being in good and sanitary order,
condition and repair and understands and agreed that Landlord has
no obligation to alter, remodel, improve, repair, decorate or
paint the Premises or invest thereof, except as specifically
herein set forth, and no representations respecting the condition
of the Premises have been made by Landlord to Tenant, except as
specifically herein set forth.
SIGNS 12. Tenant acknowledges that the Premises have a
designated location on the exterior of the Premises on which to
place a sign. Tenant agrees to immediately notify Landlord as to
the name of Tenant's business which Tenant desires to place on
such sign. Landlord thereafter will cause a sign to be installed
on such designated location setting forth the name of Tenant's
business in such size, color and style as Landlord has adopted for
all such signs in the Center. Tenant agrees that all costs and
expenses of such sign and the installation thereof on the Premises
are the sole responsibility of Tenant and Tenant agrees to
reimburse Landlord for such costs and expenses immediately upon
receipt of Landlord's statement for such costs and expenses.
Tenant shall not place or permit to be placed any advertising sign
marquee XXXX decoration or other attachment on the common areas
the inside or outside of the windows of the Premises XXXXXXXXXXXXX
front, windows, doors or exterior walls of the Premises without
the prior written consent of Landlord XXXXXXXXXX without
liability, enter upon the Premises or elsewhere and remove any
such advertising sign marqueeXXXXXXXX decoration or attachment
affixed in violation of this Paragraph 12 all at Tenant's expense.
UTILITIES 13. Tenant shall pay for all water, gas, heat, light,
AND WASTE power, sewer charges, telephone services and all other service and
DISPOSAL utilities supplied to the Premises together with any taxes
thereon. Tenant agrees to provide at XXXXXXXXXXXXXXXXXXXXXXXXXXX
all trash and garbage collection from the Premises on such
frequency as required by XXXXXXXXXXXXXXXXXXXXXXXXXXXX dumpsters
from the Clark County Sanitation District for the disposal of
Tenant's trash and garbage.
ASSIGNMENT 14. (a) Tenant shall not either XXXX or by operation
AND of law assign, transfer, mortgage, XXXXXXXXXXXXXXXXXX XXXXXXXXXXX
SUBLETTING XXXXXXXXXXXX privilege appurtenant thereto, or allow any other
person (the employees agents, servants, and XXXXXXXX XXXXXXX
XXXXXXXexcepted) to occupy or use the said Premises, or any
portion thereof without first obtaining the written consent of
Landlord, which consent shall not be unreasonably withheld Tenant
shall pay Landlord's P... connection with determining whether to
grant such consent. A consent XXXXXXX by any other person shall
not be deemed to be a consent to any subsequent
XXXXXXXXXXXXXXXXXXXXXX another person. Consent to any such
assignment or subletting shall in no way relieve Tenant any XXXXXX
Lease. Any such assignment or subletting without such consent
shall be void, and shall, at the option of the Landlord constitute
a default under the terms of this Lease. Tenant agrees to pay
Landlord's reasonable expenses XXXXXXX connection with determining
whether to grant Landlord's consent under this Paragraph 14.
(b) If Tenant is a corporation or a partnership,
any change in the xxxx XXXXX XXXXXXX XXXXX XXXXXXX XXXXXXX XXXXX
XXXX Inc. (Midcom/MCCI) is specifically excepted from this
paragraph XXXXXXX.
LANDLORD'S 15. If during the term of this Lease, Landlord shall
CONVEYANCE convey its interest in the Premises then from and after the
effective date of the conveyance, Landlord shall be released and
discharged from any and all obligation under this Lease except
those already accrued.
WAIVER OF 16. To the full extent permitted by law, Tenant
LIABILITY releases Landlord and its partners and the respective agents and
employees of the foregoing, from and waives all claims for damages
to person or property sustained by Tenant or any occupant of the
Premises resulting from the Premises or any other part of the
Center or any equipment or XXXXXXXX becoming out of repair or
resulting from any accident in or about the Center
XXXXXXXXXXXXXXXXXXXX omission of any tenant or occupant of the
Center or their invitees or any other person including
XXXXXXXXXXXXXXXXXXXXor the agents, employees or contractors of any
of the foregoing. This Paragraph 16 shall XXXXXXXXXXXXXXX
exclusively to the flooding of basements or other subsurface areas
and to damage caused by XXXXXXXXX devices, air conditioning,
apparatus, water, frost, steam, excessive heat or cold,
XXXXXXXXXXXXXXXXX odors or noise, or the bursting or leaking of
pipes or plumbing fixtures. If any such damage XXXXXXXXXXXX Center
or any part thereof, or whether to Landlord or to any other
tenants in the Center XXXXXXXXXX Tenant, Landlord may, at
Landlord's expense, repair such damage and Tenant shall, upon
demand, xx Landlord reimburse Landlord forthwith for the total
cost of such repairs, plus twenty percent thereof for overhead XXX
property, belonging to Tenant or any occupant of the premises
that is in the premises or any other part of the Center shall be
there XXXX Tenant or other person only, and Landlord shall not be
liable for damage thereto or XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
OLD 17. Tenant shall indemnify and hold harmless Landlord
HARMLESS against and from any and all claims arising from Tenant's use of
the Premises and Center or from the conduct of its business or
from any activity, work, or other things done,permitted or
suffered by the Tenant in or about the Premises or the Center, and
shall further indemnify and hold harmless Landlord against and
from any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed
under the terms of this Lease, or arising from any act or
negligence of the Tenant, or any officer, agent, employee, guest,
or invitee of Tenant, and from all costs, attorney's fees, and
liabilities incurred in or about the defense of any such claim or
any action or proceeding brought thereon and in case any action or
proceeding be brought against Landlord by reason of such claim,
Tenant upon notice from Landlord shall defend the same at Tenant's
expense by counsel reasonably satisfactory to Landlord.
SUBROGATION 18. Whenever (a) any loss, cost, damage or expense
resulting from fire, explosion or any other casualty or occurrence
is incurred by either of the parties to this lease in connection
with the Premises, and (b) such party is then covered in whole or
in part by insurance with respect to such loss, cost, damage or
expense, then the party so insured hereby releases the other party
from any liability the other party may have on account of such
loss, cost, damage or expense to the extent of the net insurance
proceeds recovered (after deducting all costs and expenses,
including reasonable attorneys' fees, incurred in such recovery)
by reason of such insurance and waives any right of subrogation
which might otherwise exist in or accrue to any person on account
thereof, provided that such release of liability and waiver of the
right of subrogation shall not be operative in any case where the
effect thereof is to invalidate such insurance coverage or
increase the cost thereof.
LIABILITY 19. Tenant shall, at Tenant's sole cost and expense,
INSURANCE obtain and keep in force during the term of this Lease a policy of
comprehensive public liability insurance insuring Landlord, Tenant
and Landlord's mortgage
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against any xxxxxty arising out of the ownership, use, occupancy
or maintenance of the Premises and areas appurtxxxxx thereto. Such
insurance shall be in the amount of not less than $xxxxxxxx for
injury or death of one person in any one accident or occurrence
and in the amount xxxxxxxxxxxxx $1,000,000.00 for injury or death
of more than one person in any one accident or occurrence. Such
insurance shall further insure Landlord and Tenant against
liability for property damage of at least $ 500,000.00. The limit
of any such insurance shall not, however, limit the liability in
the Tenant hereunder. Tenant may provide this insurance under a
blanket policy provided that said insurance shall have a
Landlord's protective liability endorsement attache thereto. If
Tenant shall fail to procure or maintain such insurance, Landlord
may, but shall not be required to procure and maintain
xxxxxxxxxxxxxxxx expense of Tenant. Insurance required hereunder
shall be in companies approved by Landlord xxxxxxxxx shall not be
unreasonably withheld. Tenant shall deliver to Landlord upon
request copies of policies liability insurance required herein or
certificates evidencing the existence and amounts of xxxxxxwith
loss payable clauses satisfactory to Landlord. No policy shall be
cancellable or subject xxxxxxx coverage without thirty (30) days
prior written notice to Landlord. All such policies not
xxxxxxxxxxxx not in excess of coverage which Landlord may carry.
RECONSTRUCTION 20. (a) Except as provided in Paragraph (b) next below, in the
event the Premises are damaged by xxxxxxxxxxxx covered by extended
coverage insurance. Landlord agrees to forthwith repair xxxx and
this Lease xxxxxxxxx force and effect, except that Tenant
shall be entitled to a proportionate reduction of the Base Monthly
Rent xxxxxxxxxx of damage until such damage is repaired, such
proportionate reduction to be based upon the extent xxxxxxxxxxxx
and making of such repairs shall reasonably interfere with the
business carried on by the Tenant in the Premises xxxx damage is
due to the fault or neglect of Tenant or its employees, there
shall be no xxxxxxxxxxxxxx.
(b) In the event the Premises are damaged as a result of
any cause other than the xxxxxxxxxxxxxxxxxxxxxxx extended coverage
insurance, the Landlord shall forthwith repair the same, provided
the extent of the xxxxxxxxxxxxxxxxxxx than ten (10%) percent
of the then full replacement cost
of the Premises in the event (i) the Premises are xxxxxxxxxxxxxxx
result of any cause other than the perils covered by fire and
extended coverage insurance to an xxxxxxxxxxxxxxxx percent or more
of the full replacement cost or(ii) the Center is damaged to the
extent of not xxxxxxxxxxxxxxx of the rentable square feet of the
Center regardless of whether the Premises be xxxxx the following
options of which Landlord must notify Tenant within sixty (60)
days after xxxxxxxxxxxxxxxxxxxxxxxxxxrestore such damage, this
Lease continuing in full force and effect, but the xxxxx reduced
as provided in paragraph (a) above or (2) terminate the Lease
xxxxxxxxxxxxxxxxxxxxxxxx date shall be no less than fifteen (15)
days and no more than the xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx shall
expire and all intersest of the Tenant in the Premises shall
terminate on the date xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Base monthly
Rent, reduced by a proportionate reduction based upon the extent
of any to xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx with business carried
on by the Tenant in the Premises shall be paid up to
xxxxxxxxxxxxxxxxxxxx.
(c) Notwithstanding anything to the contrary contained in
this Paragraph xxxxxxxxxxxxxxxxxxx obligation whatsoever to
repair, reconstruct or restore the Premises when the damages
xxxxxxxxxxxxxxxxxxxxxxxx covered under this Paragragh 20 occurs
during the last two months of the xxxxxxxxxxxxxxxxxxxxxxxxxx.
(d) In no event shall Landlord be required to repair any
injury or damage by fire or other cause xxxxxxxxxx repairs or
replacements of any leasehold improvements, fixtures, or other
personal property of Tenant.
CONDEMNATION 21. (a) If the whole of the Premises shall be acquired or
condemned by xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx use or purpose
the the term of this lease shall cease and terminate
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx possession of the Premises.
Rent shall be adjusted as of the date of such termination.
(b) If any part of the Premises shall be acquired or
condemned as MP... taking or condemnation shall render the
Premises unsuitable for the business of Tenant, then the term of
this lease shall cease and terminate as of the date Tenant is
required to surrender possession of the Premises Rent
xxxxxxxxxxxxxxx of the date of such termination. In the event of a
partial taking of condemnation which is not extensive enough to
render the Premises unsuitable for the business of the Tenant,
then the Landlord shall promptly restore the Premises
xxxxxxxxxxxxxxx comparable to its condition at the time of such
condemnation less the portion lost in the
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx continue in full force and
effect except that there shall be a prorata reduction of the Base
Monthly xxxxxxxxxxxxxxxxxxxxxx of additional rent which are based
on the number of square termination.
(c) If the whole of the common parking areas in the Center
xxxxxxxxxxxxxxxxxxxxxxxxxxxx term of this Lease shall cease and
terminate as of the date possession of such areas MP... Landlord
shall take immediate steps to provide other parking facilities
with a xxxxxxxxxxxxxxxxxxx feet of sales area in all of the Center
buildings of not less than two to MP... provided to be surrendered
in the event that Landlord shall provide such other parking
xxxxxxxxxxxx continue in full force and effect without any
reduction or abatement of rent in the event of
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx aforesaid rent shall be
adjusted as of the date of said termination.
(d) If any part of the parking area in the Center shall be
acquired or condemned as xxxxxxxxxxxxxxxxxxxxxxxxxxxxx thereof,
the ratio of square feet of parking are to square feet of sales
area in all of the Center xxxxxxxxxxxxxxxxxxxxx such acquisition
or condemnation is reduced to a ration below two to one, than the
term of this Lease xxxxxxxxxx terminate upon the date possession
of such areas is required to be surrendered
xxxxxxxxxxxxxxxxxxxxxxx steps toward increasing the parking ratio
to a ratio of two to one, in which event this MP... in full force
and effect without any reduction or abatement of rent. In event of
termination of this Lease as aforesaid rent shall be adjusted as
of the date of said termination.
(e) In the event that twenty-five percent or more of the
rentable area of the Center buildings shall be acquired xx
condemned as aforesaid, then, regardless of whether any portion of
the parking area in the Center is acquired or condemned. Landlord
shall have the right, by serving Tenant with written notice
thereof within thirty days after the date of surrender, to
terminate this Lease as of the date possession is required to be
surrendered in the event of termination of this Lease as
aforesaid, rent shall be adjusted as of the date of said
termination.
(f) In the event of any condemnation or taking as aforesaid,
whether whole or partial the Tenant shall have no claim against
Landlord as a result thereof and shall not be entitled to any part
of the award paid for such condemnation and Landlord is to receive
the full amount of such award, whether payable as compensation for
diminution in value of the leasehold or to the fee of the
Premises, the Tenant hereby expressly waiving any right or claim
to any part thereof provided, however, that, to the extent
Landlord's award is not thereby diminished. Tenant shall have the
right to claim and recover from the condemning authority, but not
from Landlord, such compensation as may be separately awarded or
recoverable by Tenant in Tenant's own right on account of any and
all damage to Tenant's business by reason of the condemnation and
for or on account of any cost or loss to which Tenant might be put
in removing Tenant's merchandise, furniture, fixtures, leasehold
improvements and equipment.
ENTRY BY 22 Landlord reserves, and shall at any and all times have,
LANDLORD the right to enter the Premises without abatement xxxxxxxxx order
to inspect the same, to submit said Premises to prospective
purchases or Tenants xxxxxxxxxxxxxxx responsibility, to repair and
maintain the Premises and any portion of the Center and MP...
scaffolding and other necessary structures where reasonably
required by the character of the
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx always providing that the
entrance to the Premises shall not be unreasonably
xxxxxxxxxxxxxxxxxxxxxxxxxxxx the business of the Tenant shall not
be interfered with unreasonably. Tenant hereby waives any claim
xxxxxxxxxxxxxxxxxxxxxxxxxxx
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<PAGE>
any injury or inconxxxxxce to or interference with Tenant's
business address of occupancy or quiet enjoyment of the Premises,
and any other loss occasioned thereby. For each of the aforesaid
purposes, landlord shall at all times have and retain a key with
which to unlock all of the doors in, upon and about the Premises,
excluding Tenant's xxxxxxx xxxxx xxx files, and Landlord shall
have the right to use any and all means which Landlord may deem
proper to open said doors without liability to Tenant except for
any failure to exercise due care for Tenant's property and any
entry to the premises obtained by Landlord by any of said means,
shall not under any circumstances be xxxxxxxx xxx xxxxxx xxxxx a
forcible or unlawful entry into, or a detainer of, the Premises,
or an xxxxxx of Tenant from the Premises xx xxx xxxx xxx thereof.
SUBORDINATION 23. This Lease at Landlord's option or at the option of the
holder of the first deed of trust or mortgage on the Center shall
be subject and subordinate to the lien of any such mortgage or
deed of trust in any amount or amounts whatsoever xx xxxx xxxx now
or hereafter placed on or against the real property or
improvements xxxxxxxx xxxxxxx xx which the Premises xxxxxxxxxx or
on or against Landlord's interest or estate therein, without the
xxxxxxxx of the execution and xxxxxxx xxxx xxxxxx instruments on
the part of Tenant to effectuate such subordination. If any such
mortgagee of such xxxxx have this Lease prior to the lien of its
mortgage or deed of trust, and shall give written notice thereof
to Tenant this Lease shall be deemed prior to such mortgage or
deed of trust, whether this Lease is dated prior or subsequent to
the date of said mortgage or deed of trust or the date of the
recording thereof. Tenant covenants and agrees to execute and
xxxxxxx xxxx demand, without charge therefore, such further
instruments evidencing such subordination of this Lease to xx xxx
such mortgages or deeds of trust as may be required by Landlord as
Landlord Tenant hereby appoints Landlord as xxxxxxx xxxxxxxxx in-
fact, irrevocably, to execute and deliver any such agreements,
instruments leases or other documents.
ESTOPPEL 24. Tenant shall at any time upon not less than ten(10)
CERTIFICATE days' prior written notice from Landlord execute, acknowledge and
deliver to landlord a statement in writing (i) certifying that
this Lease is unmodified and in full force and effect xxxxxx
modified, stating the nature of such modification and certifying
that the Lease, as so modified, is in full force and effecy xxxxx
xxx xxxxx and the date to which the rent and other charges are
paid in advance, if any and (ii) acknowledging that there are not
to Tenants knowledge, any uncured defaults on the part of Landlord
hereunder. or specifying such default xxx xxxxxx. Any such
statement may be conclusively relied upon by a prospective
purchaser or xxxxxxxxxx xx xxx Premises. Tenant's failure to
deliver such statement within such time shall be conclusive upon
Tenant xxxxx xxxx xxxxxx force and effect, without modification
except as may be represented by Landlord (ii) that there are xxxxx
xxxxxx xx x Landlord's performance, and (iii) that not more than
(1) month's rent has been paid in advance xx xxxxxxx finance or
refinance the Premises or any part thereof. Tenant hereby agrees
to deliver to any xxxxx xxxxxx Landlord such financial statements
of Tenant as may be reasonably required by such lender. All such
xxxxxx statements shall be received by landlord in confidence and
shall be used only for the purposes xxxxxxx .
TENANTS 25 The occurrence of any one or more of the following
DEFAULT event shall constitute xxxxxxx xxxxxx xxxx xxxxx xxxxxx Tenant.
(a) The vacating or abandonment of the Premises by
Tenant
(b) The failure by Tenant to make any payment of Rent
or any other payment required to be made by Tenant
hereunder as and when due
(c) The failure by Tenant to observe or perform any of
the covenants, conditions or provisionsxxxxxxxx xxxxxxx
xxxxx xxxxxx xxx to be observed or performed by the
Tenant other than described in paragraph xx xxxxxx xxxxx
xxxxxxxx continue for a period of ten (10) days after
written notice thereof by Landlord to Tenantxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxx the nature of Tenant's default
is such that more than ten (10) days are reasonably
required xx xxxxx xxxxxxxxxxxxx Tenant shall not be
deemed to be in fault if Tenant commences such cure
within said ten (10) days xxxx xxxxxx xxxxxxxx xxxxxxxxx
thereafter diligently prosecutes such cure to completion
(d) The making by Tenant of any general assignment xx
xxxxxxxxxxxxxxxxxxxx xxxx by or against Tenant of a
petition to have Tenant xxxxxxxxxxxxxxxxxxxxxxxxxx
arrangement under the law relating to bankruptcy unless
xxxxxxxxx xxxxxxxx is dismissed within sixty (60) days;
or the appointment of a trustee or a receiver to take
possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this
Lease where possession is not restored to Tenant within
thirty (30) days; or the attachment, execution or other
xxxxxx seizure of substantially all of the Tenant's
assets located at the premises or of Tenant's interest
in this Lease where such seizure is not discharged
within thirty (30) days.
REMEDIES 26. In the event of any such default or breach by Tenant,
IN DEFAULT Landlord may at any time thereafter in his discretion with
xxxxxxxxxx notice or demand and without limiting Landlord in the
exercise of a right or remedy which Landlord may have by reason
of such default or breach:
(a) Terminate Tenant's right to possession of the
Premises by any lawful means in which case this Lease
shall terminate and Tenant shall immediately surrender
possession of Premises to Landlord. In such event,
Landlord shall be entitled to recover from Tenant all
damages incurred by Landlord by reason of Tenant's xxxx
xxxxxxxx xxx but not limited to, the cost of recovering
possession of the Premises; expences of xx xxxxx xxxxxxx
xxxxxxxx including necessary renovation and alteration
of the Premises; reasonable attorney's fees; the court
xxxx xx xxx xxxx xxxxxxxx xxxxxxx having jurisdiction
thereof of the amount by which the unpaid rent and other
charges xxxxx xxx xxxx xxx balance of the lease term
after the time of such award exceeds the amount of such
less xxx xxxx xxxx xxx Tenant proves could be reasonably
avoided; and that portion of any leasing commission paid
by Landlord and applicable to the unexpired term of this
Lease. Unpaid installments of rent or other sums shall
xxxxx xxxx xxxxx xx the date due at 18% per annum or the
maximum legal rate if lower or
(b) Maintain Tenant's right to possession, in which case
this Lease shall continue in effect xxxx Tenant shall
have abandoned the Premises. In such event Landlord
shall be entitled to xxxxxxx xxxxx xxx xxxx xxxxxxxx
remedies under this Lease, including the right to
recover the Rent and any other charges as xxxx xxxxx due
hereunder, or
(c) Pursue any other remedy now or hereafter avoidable
to Landlord
(d) In the event Tenant shall fail to make any payment
or perform any act required hereunder to be made or
performed by Tenant, then Landlord may, but shall not be
obligated, to make such payment or perform such act all
at the expense and cost of Tenant. Tenant agrees that
Landlord's right of entry pursuant to Paragraph 22 shall
enable Landlord to enter the Premises when necessary to
perform such acts.
DEFAULT BY 27. Landlord shall not be in default unless Landlord fails
LANDLORD to perform obligations required of Landlord within a reasonable
time, but in no event later than thirty (30) days after written
notice by Tenant to Landlord specifying wherein Landlord has
failed to perform such obligation, provided, however, that is
the nature of Landlord's obligations such that more than thirty
(30) days are required for performance then Landlord shall not
be in default if Landlord commences performance within such
thirty (30) day period and thereafter deligently prosecutes the
same to completion. In no event shall Tenant have the right to
terminate this Lease as a result of Landlord's default and
Tenant's remedies shall be limited to damages and/or an
injunction.
HOLDING 28. If Tenant holds possession of all or a part of the
OVER Premises after the expiration of the term of this Lease with or
without the express or implied consent of Landlord, Tenant shall
become a Tenant from month-to-month only upon the terms,
covenants, conditions, and agreements herein specified, or so
far as applicable. Such holding over shall not constitute an
extension or renewal of this Lease. During such holding over,
the Base Monthly Rental shall be increased fifty (50%) over the
Base Monthly Rental provided in Section 3
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WAIVER 29. No coverxxxxx condition or agreement or the breach
xxxxxxxx shall be deemed waived except by written consent of the
party against whom the waiver is claimed, and any waiver or the
breach of any covenant term condition or agreement shall not be
deemed to be a waiver of any preceding or succeeding breach of the
same or any other covenant term condition or agreement. Acceptance
by Landlord of any performance by Tenant after the time the same
shall have become due shall not constitute a waiver by Landlord of
the breach or default of any covenant, term, condition or
agreement unless otherwise expressly agreed to by Landlord in
writing.
NOTICES 30. Except as otherwise provided in this Lease, all notices
or demands of any kind required or desired to be given by Landlord
or Tenant hereunder shall be in writing and shall be deemed
delivered when hand-delivered or forty-eight (48) hours after
depositing the notice or demand in the United States mail,
certified or registered, postage prepaid addressed to the Tenant
at the Premises, whether or not Tenant has departed from,
abandoned or vacated the Premises. All notices or demands of any
kind by Tenant to Landlord shall be in writing and shall be deemed
delivered when hand-delivered or forty-eight (48) hours after
departing the notice or demand in the United States mail,
certified or registered, postage prepaid addressed to the Landlord
at the following address:
THOMAS KURSCHNER
7319 Beverly Blvd. Ste. #5
Los Angeles, Ca. 90036
SUCCESSORS 31. All the terms, covenants and conditions hereof shall be
binding upon and inure to the benefit of the xxxxx, executors,
administrators, successors and assigns of the parties hereto
ENTIRE 32. This Lease, along with any exhibits and attachments
AGREEMENT hereto, constitutes the entire agreement between Landlord
and Tenant relative to the Premises and this Lease and the
exhibits and attachments may be altered, amended or revoked only
by an instrument in writing signed by both Landlord and Tenant.
Landlord and Tenant hereby agree that all xxxx agreements between
and among themselves and their agents or representatives relative
to the leasing of the Premises are merged in or revoked by this
Lease.
COSTS OF 33. (a) If Tenant or Landlord shall bring any action for any
SUIT relief against the other, declaration or otherwise,arising out of
this Lease, including any suit by Landlord for the recovery of
rent or possession of the Demised Premises, the losing party shall
pay the successful party a reasonable sum for attorneys' fees
which shall be deemed to have accrued on the commencement of such
action and shall be paid whether or not such action is prosecuted
to judgement.
(b) Should Landlord, without fault on Landlord's part be
made a party to any litigation xxxxxxxxxxxxxxxxxxxxxx third party
against Tenant, or by or against any person holding under or using
the Premises by xxxxxxxxxxxxxxxxxxxxxx foreclosure of any lien or
labor or material furnished to or for Tenant or any such other
person or otherwise arising out of or resulting from any act or
transaction of Tenant or of any such other person, Tenant
covenants to save and hold Landlord harmless from any judgement
rendered against Landlord or the Premises or any part thereof and
all costs and expenses including reasonable attorneys' fees
incurred by Landlord in or in connection with such litigation.
SURRENDER 34. Upon the expiration or earlier termination of this
Lease, Tenant shall remove all its signs from the Premises and
surrender the Premises in the same condition as received, ordinary
wear and tear excepted, and in a clean condition with all trash
and garbage removed. Tenant, at its sole cost and expense, agrees
to repair any damage to the Premises caused by or in connection
with the removal of any articles of personal property, business or
trade fixtures, machines, equipment, cabinetwork, furniture,
movable partitions, or permanent improvements or additions of
Tenant including, without limitation thereto, repairing the floor
and patching and painting the walls where required by Landlord to
Landlord's reasonable satisfaction. Tenant shall indemnify
Landlord against any loss or liability resulting from delay by
Tenant upon surrendering the Premises, including, without
limitation, any claims made by any succeeding tenant founded on
such delay.
TAXES ON 35. Tenant shall be responsible for and shall pay before
LEASEHOLD delinquency all municipal, county or state taxes assessed during
the term of this lease against any leasehold interest created
hereby and against personal property of any kind owned by or
placed in upon or about the Premises by the Tenant.
ACCORD AND 36. No payment by Tenant or receipt by Landlord of a lesser
SATISFACTION amount than the rent herein stipulated shall be deemed to be other
than a payment on account of such rent, nor shall any endorsement
or statement on any check or any letter accompanying any check or
payment of rent be deemed an accord and satisfaction and Landlord
may accept such check or payment without prejudice to Landlord's
right to recover the balance or pursue any remedy in this Lease
provided.
NO 37. (a) Landlord does not, in any way or for any purpose,
PARTNERSHIP become a partner of Tenant in the conduct of its business, or
BROKERS otherwise, or joint adventurer or a member of a joint enterprise
with Tenant.
(b) Tenant represents and warrants that it has had no
dealings with any broker or agent in connection with this Lease
other than Landlord's broker and covenants to pay, hold harmless
and indemnify Landlord from and against any and all cost, expense
or liability for any compensation, commissions, and charges
claimed by any other broker or other agent with respect to this
Lease or the negotiation thereof.
CAPTIONS AND 38. The captions, section numbers, article numbers and index
SECTION appearing in this Lease are inserted only as a matter of
NUMBERS convenience and in no way define, limit, construe or describe the
scope or intent of such sections or articles of this Lease nor in
any way affect this Lease.
PARTIAL 39. If any term, covenant or condition of this Lease or the
INVALIDITY application thereof to any person or circumstance shall to any
extent, be invalid or unenforceable, the remainder of this Lease
or the application of such term, covenant or condition to persons
or circumstances other than those as to which it is held invalid
or unenforceable, shall not be affected thereby and each term,
covenant or condition of this lease shall be valid and be enforced
to the fullest extent permitted by law.
NO OPTION 40. The submission of this Lease for examination does not
constitute a reservation of or option for the Premises and this
Lease becomes effective as a lease only upon execution and
delivery thereof by Landlord and Tenant.
RECORDING 41. Tenant shall not record this Lease.
-7-
<PAGE>
EXCUSE OF 42. Anything in this agreement XXXX contrary
LANDLORD'S notwithstanding the Landlord shall not be deemed in default with
PERFORMANCE respect to the performance of any of the terms, covenants and
conditions of this Lease if XXXX shall be due to any strike,
governmental regulations or controls, inability to obtain any
material service, insurance proceeds or financing, Act of God or
any other cause beyond the control of the Landlord.
43. The sum of the third twelve months' rental amount
plus CPI increase in advance upon the first day of each calendar
month, during the period beginning on the first day of the thirty-
seventh month and ending on the last day of the forty-eight month.
The sum of the fourth twelve months rental amount
plus CPI increase in advance upon the first day of each calendar
month, during the period beginning on the first day of the forty-
ninth month and ending on the last day of the sixtieth month.
44. CAM charges subject to CPI increase every twelve
months.
45. Lessees accept Premises in "as is" condition.
46. Lessor herby grants Lessees the right of two (2)
five (5) year renewal option of this Lease. It is further agreed
that such renewal options will be on the same terms and conditions
of this Lease Agreement.
47. Landlord hereby grants Lessees the right of first
refusal, during the term of this Lease, or any extension thereof,
to lease any vacant contiguous and/or adjoining space at market
rate plus full OAM charges.
48. Lessees will be installing additional air
conditioning units, as well as, long distance switching equipment
Lessees have the right to remove their long distance switching
equipment and Lessees will repair all damage to Premises caused by
such removal. Lessees have the option to remove the air
conditioning units that Lessees have installed and repair damages,
both interior and exterior, including roof, to Lessor's
satisfaction; or, to leave air conditioning units, which will
become the property of the Lessor.
49. All work done, improvements made, etc. Premises by
Leesees must be in accordance to all local, county and city codes
and ordinances.
THOMAS KURSCHNER TELCO COMMUNICATIONS GROUP, INC.
- ----------------------------------- -----------------------------------
LESSOR LESSEE
/s/ Thomas Kurscner BY: /s/ Bryan Rachlin
- ----------------------------------- -----------------------------------
12-13-1995
AS: GENERAL COUNSEL OF TELCO
-----------------------------------
COMMUNICATIONS GROUP, INC.
-8-
<PAGE>
TOXIC AND/OR HAZARDOUS MATERIALS ADDENDUM
-----------------------------------------
This addendum affects the lease dated 11-2-1995 between THOMAS KURSCHNER
hereinafter known as Lessor, TELCO COMMUNICATIONS GROUP INC.
hereinafter known as Lessee, for the property located at 4225 E. SAHARA, Las
Vegas, Nevada, Unit #8 and 10/B
Lessee guarantees that neither he nor any of his employees, agents or visitors
to this premises shall use, store or dispose of any hazardous or toxic materials
or chemicals within the subject premises or any other area within the Project
that premises is a part of. Any such use or storage of any hazardous or toxic
materials or chemicals within the subject premises or other parts of the Project
shall constitute a material breach of this lease, and Lessor shall be entitled
to implement all means necessary to recover from this breach (as outlined within
the Lease). In addition, Lessee shall have sole financial and legal
responsibility for the proper and legal clean-up of any spillage or other
contamination caused by any use of toxic or hazardous material within Lessee's
leased premises or the Project in general.
It is further agreed, that if upon written notice from Lessor that Lessee has
violated the above provisions of this Agreement, Lessee does not complete
necessary steps (as outlined in said written notice from Lessor), to achieve
satisfactory clean-up within 72 hours, Lessor shall have the right to complete
the necessary clean-up within 72 hours, Lessor shall have the right to complete
the necessary clean-up and bill entire cost (including any legal costs incurred
by Lessor) of same to Lessee.
Lessee shall also bear the entire cost of any government, clean-up order or any
third-party lawsuit.
Hazardous or toxic material means any substance now, or hereafter, identified by
any government agency as requiring special handling, disposal or control unlike
regular refuse.
THOMAS KURSCHNER TELCO COMMUNICATIONS GROUP
- ------------------------------ ------------------------------
LESSOR LESSEE
/s/ Thomas Kurscner /s/ Bryan Rachlin AS
- ------------------------------ ------------------------------
LEASING DIVISION GENERAL COUNSEL OF TELCO
COMMUNICATIONS GROUP, INC.
12-13-1995 12/6/95
- ------------------------------ ------------------------------
DATE DATE
<PAGE>
DISCLAIMER
----------
All agreements and concessions between LESSOR ant LESSEE for property
located at 4225 E. SAHARA, LAS VEGAS, NEVADA 89104 Unit (s) 8 and 10/B
----------------------------------------- ------------
are contained within this Lease, dated November 2, 1995 ; Addenda or attached
------------------
letters (no verbal agreements). Any modifications, remodels, or maintenance of
leased unit(s), required after Lessor and Lessee have signed this Lease, that
are not specifically described in this Lease, Addenda, attached letters, and
walk-thru will be at no cost to the Lessor. Prior to vacating unit(s), Lessee
agrees to restore unit(s) to the condition in which it was received, except for
normal wear and tear, at Lessee's expense, unless changes to the unit are
approved in writing by Lessor. Discrepancies identified during the initial walk-
thru inspection not repaired by Lessor will be included in the Lease file and
Lessee will not be charged for such repairs.
*SEE BELOW [SIGNATURE APPEARS HERE]
- ------------------------------------- ----------------------------------------
LESSOR LESSEE [TITLE APPEARS HERE]
BY [SIGNATURE APPEARS HERE] For Telco Communications Group, Inc
- ------------------------------------- ----------------------------------------
AGENT:
12-13-1995 12/6/95
- ------------------------------------- ----------------------------------------
DATE DATE
*THOMAS AND KATHERINE KURSCHNER, HUSBAND AND WIFE, AS TENANTS IN COMMON.
<PAGE>
Exhibit 10.22
DEED OF LEASE AGREEMENT
THIS DEED OF LEASE AGREEMENT (hereinafter referred to as "this Lease"),
made this 1st day of March, 1995, by and between Bricks In The Sticks, LTD, a
corporation organized and existing under the laws of Virginia having as address
of 4219 Lafayette Center Drive, Chantilly, Virginia (hereinafter referred to as
the "Landlord"), and Telco Communications Group, Inc., a corporation organized
and existing under the laws of Virginia having an address of 4219 Lafayette
Center Drive, Chantilly, VA 22021 (hereinafter referred at to as the "Tenant").
WITNESSETH, THAT FOR AND IN CONSIDERATION of the mutual entry into
this lease by the parties hereto, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by each party hereto,
the Landlord hereby leases to the Tenant and the Tenant hereby leases from the
Landlord all of that real property, situate and lying in Chattanooga, TN, which
consists of the space (containing 5439 square feet of floor area) outlined and
attached hereto as EXHIBIT A (hereinafter referred to as the "Premises") and
located at 800 East Main Street, Chattanooga, TN (hereinafter referred to as the
"Building"); Hamilton County, TN (the Premises, the remainder of the Building,
such tract of land, other buildings thereon, and any other buildings or
improvements to be constructed thereon being hereinafter referred to
collectively as the "Property"). In addition to the premises, Tenant is granted
the right of nonexclusive use, in common with others, of the automobile parking
areas and other common facilities designated by Landlord.
SUBJECT TO THE OPERATION AND EFFECT of any and all instruments and
matters of record or in fact.
UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:
Section 1. TERM
1.1 Length. This Lease shall be for a term (hereinafter referred to
as the "Term") (a) commencing on the 1st day of March, 1995 when the Landlord
shall tender possession thereof to the Tenant (hereinafter referred to as the
"Commencement Date" except that if the date of such commencement is hereinafter
advanced or postponed pursuant to any provision of this Lease, or by written
agreement of the parties hereto, the date to which it is advanced or postponed
shall thereafter be the "Commencement Date" for all purposes of the provisions
of this Lease), and (b) terminating at 12:01am, local time, on February 1, 2000
hereinafter referred to as the "Termination Date", except that if the date of
such termination is hereafter advanced or postponed pursuant to any provision of
this Lease, or by written agreement of the parties hereto, the date to which it
is advanced or postponed shall thereafter be the Termination Date for all
purposes of the provisions of this Lease as applicable thereafter).
<PAGE>
1.2 Intentionally Omitted.
1.3 Intentionally Omitted.
1.4 Surrender. The Tenant shall at its expense, at the expiration of
the Term or any earlier termination of this Lease, (a) promptly surrender to the
Landlord possessions of the Premises (including any fixtures or other
improvements which, under the provisions of Section 5, are owned by the
Landlord) in good order and repair (ordinary wear and tear excepted) and broom
clean. (b) remove therefrom the Tenant's sign, goods, and effects and any
machinery, trade fixtures and equipment used in conducting the Tenant's trade or
business and not owned by the Landlord, and (c) repair any damage to the
premises or the Building caused by such removal.
1.5 Holding Over.
1.5.1 If the Tenant continues to occupy the premises after the
expiration of the Term or any earlier termination of this Lease after obtaining
the Landlord's express, written consent thereto,
(a) such occupancy shall (unless the Parties hereto otherwise
agree in writing) be deemed to be under a month-to-month tenancy, which shall
continue until either party hereto notifies the other in writing, by at least
thirty (30) days before the end of the calendar month, that the notifying party
elects to terminate such tenancy at the end of such calendar month, in which
event such tenancy shall so terminate;
(b) anything contained in the foregoing provisions of this
Section to the contrary notwithstanding, the rent payable for each such
monthly period shall equal one-twelfth (1/12) of the Base Rent and the
Additional Rent payable under the provisions of subsection 2.2 (calculated in
accordance with such provisions of subsection 2.2 as if this Lease had been
renewed for a period of twelve (12) full calendar months after such expiration
or earlier termination of the Term of such renewal); and
(c) such month-to-month tenancy shall be upon the same terms
and subject to the same conditions as those set forth in the provisions of this
Lease. The monthly rent, however, will be 104% of that payable immediately prior
to the commencement of the month to month tenancy; provided, that if the
Landlord gives the Tenant, by at least thirty (30) days before the end of any
calendar month during such month-to-month tenancy, written notice that such
terms and conditions (including any thereof relating to the amount or payment of
Rent) shall, after such month, be modified in any manner specified in such
notice, then such tenancy shall, after such month, be upon the said terms and
subject to the said conditions, as so modified.
1.5.2 If the Tenant continues to occupy the premises more than ninety
(90) days after the expiration of the Term or any earlier termination of this
Lease without obtaining the Landlord's express, written consent thereto, such
occupancy shall be on the same terms and subject to the same conditions as those
set forth in the provisions of paragraph 1.4.1, except that, anything contained
in the provisions of this Lease to the contrary notwithstanding, (a) the rental
payable during the period of such occupancy shall equal one hundred fifty
percent (150%) of the rent which would be payable
<PAGE>
during such period under the provisions of subparagraph 1.5.1 (b), had the
Tenant obtained the Landlord's express, written consent to such occupancy as
aforesaid, (b) nothing in the provisions of paragraph 1.5.1 or any other
provisions of this Lease shall be deemed in any way to alter or impair the
Landlord's right immediately to evict the Tenant or exercise its other rights
and remedies under the provision of this Lease or applicable law on account of
the Tenant's occupancy of Premises without having obtained such consent.
Section 2. RENT
2.1 Amount. As rent for the premises (all of which is hereinafter
referred to collectively as "Rent"), the Tenant shall pay to the Landlord in
advance, without demand, deduction or set off, for the entire Term hereof, all
of the following:
2.1.1. Base Rent. An annual rent (hereinafter referred to as the
"Base Rent") comprised of the aggregate of the following components:
For the first Lease year during the Term, the sum of $27,195.00
Dollars plus (if the Term commences on a day other than the first (1st) day
of a calendar month) one three hundred sixty-fifth (1/365) of the Base Rent for
each day of such calendar month falling within the Term payable in advance in
equal monthly installments as set forth in EXHIBIT C*.
2.1.2. Additional Rent. Additional rent (hereinafter referred to as
"Additional Rent") in the amount of any payment referred to as such in any
provision of this Lease which accures while this Lease is in effect.
2.1.3. Lease Year. As used in the provisions of this Lease, the
term "Lease Year" means (a) the period commencing on the Commencement Date and
termination on the first (1st) anniversary of the last day of the calendar month
containing the Commencement Date, and (b) each successive period of twelve (12)
calendar months thereafter during the Term.
2.1.4. Adjustment Month. The calendar month of March.
2.2 Annual Operating Costs.
2.2.1. Operating Expense. Tenant will pay all Operating Expenses
with the exception of Real Estate Taxes, during the first year of this lease.
Thereafter Tenant shall pay any increase in the base year real estate taxes.
2.2.2. Operating Expense Definition. For the purposes hereof
the term "Operating Expenses" shall mean all costs and expenses paid or incurred
on an accrual basis by Landlord in connection with the ownership, management,
operation, servicing and maintenance of the building and common grounds
including, but not limited to, employees' wages, salaries and welfare and fringe
benefits; payroll taxes; Real Estate Taxes; electricity, gas oil and other
fuels; utility charges; premiums for fire and casualty, liability, workmen's
compensation and other insurance; repairs and maintenance to the Building;
janitorial and cleaning supplies, uniforms and dry cleaning; window
<PAGE>
cleaning; service contracts for the maintenance of HVAC and other mechanical
equipment; and management fees.
Operating Expenses shall not include capital expenses principal or
interest payments on any Deed of Trust or other financing encumbrances, expenses
incurred in leasing or procuring Tenants including lease commissions,
advertising costs and expenses or renovating space for Tenants, the costs of
special services or utilities separately chargeable to other Tenants in the
building and compensation paid to any executive employee of Landlord.
2.2.3. Computation. After the end of each calendar year during
the Term, the Landlord shall compute the total of the Annual Operating Costs
incurred for all of the Property during such calendar year, and shall allocate
them to the gross rentable space within the Property in proportion to the
respective operating costs percentages assigned to such spaces; provided, that
anything contained in the foregoing provisions of this Subsection 2.2 to the
contrary notwithstanding, wherever the Tenant and/or any other tenant of space
within the Property has agreed in its lease or otherwise to provide any item of
such services partially or entirely at its own expense, or wherever in the
Landlord's judgement any such significant item of expense is not incurred with
respect to or for the benefit of all of the gross rentable space within the
Property, in allocating the Annual Operating Costs pursuant to the foregoing
provisions of this subsection the Landlord shall make an appropriate adjustment,
using generally accepted accounting principles, as aforesaid, so as to avoid
allocating to the Tenant or to such other tenant (as the case may be) those
Annual Operating Costs covering such services already being provided by the
Tenant or by such other tenant at its own expense, or to avoid allocating to all
of the gross rentable space within the Property those Annual Operating Costs
incurred only with respect to a portion thereof, as aforesaid.
2.2.4. Payment as Additional Rent. The Tenant shall, within
thirty (30) days after demand therefore by the Landlord (with respect to each
calendar year during the Term), accompanied by a statement setting forth in
reasonable detail the Annual Operating Costs for such calendar year, pay to the
Landlord as Additional Rent the amount of the Tenants operating costs percentage
of the Annual Operating Costs for such calendar year (as derived and allocated
under the provisions of paragraph 2.2.3.).
2.2.5. Proration. If only part of any calendar year falls within
the Term, the amount computed as Additional Rent for such calendar year under
the foregoing provisions of this subsection shall be prorated in proportion to
the portion of such calendar year falling within the Term (but the expiration of
the term before the end of a calendar year shall not impair the Tenant's
obligation hereunder to pay such prorated proportion of such Additional rent for
that portion of such calendar year falling within the Term, which shall be paid
on demand, as aforesaid).
2.2.6. Landlord's right to estimate. Anything contained in the
foregoing provisions of this subsection to the contrary notwithstanding the
Landlord may, at its discretion, (a) make from time to time during the Term a
reasonable estimate of the Additional Rent which may become due under such
provisions for any calendar year, (b) require the Tenant to pay to the Landlord
for each calendar month during such year one-twelfth (1/12) of such Additional
Rent, at the time and in the manner that the Tenant is required hereunder to pay
the monthly installment of the Base Rent for
<PAGE>
such month, and (c) at the Landlord's reasonable discretion, increase or
decrease form time to time during such calendar year the amount initially so
estimated for such calendar year, all by giving the Tenant written notice
thereof, accompanied by a schedule setting forth in reasonable detail the
expenses comprising the Annual Operating costs, as so estimated. In such event,
the Landlord shall cause the actual amount of such Additional Rent to be
computed and certified to the Tenant within ninety (90) days after the end of
such calendar year, and the Tenant or the Landlord, as the case may be, shall
pay within thirty (30) days to the other the amount of any deficiency or
overpayment therein, as the case may be.
2.2.7. Tenant shall be entitled to a reasonable review and/or
audit of the books and records kept in connection with the calculation of
Operating Expenses for the Building at the office of the Landlord's property
manager during business hours. Tenant shall give Landlord and such manager at
least seven days prior written notice before undertaking any such audit. Any
audit shall be at Tenant's sole cost and expense, except that if such an audit
shall reveal that the amount charged to Tenant as its share of Operating
Expenses in any one year exceeds by more than 10% the amount which is actually
owed by Tenant for such year, then Landlord shall reimburse Tenant the overage
in addition to the reasonable out-of-pocket costs of such audit within 30 days
or, at Tenant's option, credit such amount against the next payment of rent
coming due hereunder. Tenant shall not be entitled to more than one audit in any
12-month period in the Lease Term.
2.3. When due and payable.
2.3.1. the Base Rent for any Lease Year shall be due and payable in
twelve (12) consecutive, equal monthly installments, in advance, on the first
(1st) day of each calendar month during such Lease Year; provided, that the
installment of the Base Rent payable for the first full calendar month of the
term (and, if the Term commences on a day other than the first (1st) day of a
calendar month, that portion of the Base Rent which is payable for such month)
shall be due and payable on the date hereof.
2.3.2. Any Additional Rent accruing to the Landlord under any
provision of this Lease shall, except as is otherwise set forth herein, be due
and payable when the installment of the Base Rent next falling due after such
Additional Rent accrues and becomes due and payable, unless the Landlord makes
written demand upon the Tenant for payment thereof at any earlier time, in which
event such Additional Rent shall be due and payable at such time.
2.3.3. Each such payment shall be made when due, without any
deduction or set off whatsoever, and without demand, failing which the Tenant
shall pay to the Landlord as Additional Rent, on which such payment is due but
unpaid within ten (10) days after written notice from Landlord, a late charge
equalling five percent (5%) of such payment.
2.4 Where payable. The Tenant shall pay the Rent, in lawful currency of
the United States of America, to the Landlord by delivering or mailing it
(postage prepaid) to the Landlord's address which is set forth hereinabove, or
to such other address as the Landlord from time to time specifies by written
notice to the Tenant. Any payment made by the Tenant to the Landlord on account
of Rent may be credited by the Landlord to the payment of any Rent then past due
before being
<PAGE>
credited to Rent currently falling due. Any such payment which is less than the
amount of Rent then due shall constitute a payment made on account thereof, the
parties hereto hereby agreeing that the Landlord's acceptance of such payment
(whether or not with or accompanied by an endorsement or statement that such
lesser amount or the Landlord's acceptance thereof constitutes payment in full
of the rights hereunder to be paid all of such amount then due, or in any other
respect.
2.5 Tax on Lease. If federal, state or local law now or hereafter imposes
any tax, assessment, levy or other charge (other than any income, inheritance or
estate tax) directly or indirectly upon (a) the Landlord with respect to this
Lease or the value thereof, (b) the Tenant's use or occupancy of the Premised,
(c) the Base Rent, Additional Rent or any other sum payable under this Lease, or
(d) this transaction, then (except if and to the extent that such tax,
assessment, levy or other charge is included in the Annual Operating Costs) the
Tenant shall pay the amount thereof as Additional Rent to the Landlord upon
demand, unless the Tenant is prohibited by law from doing so in which event the
Landlord may, at its election, terminate this Lease by giving written notice
thereof to the Tenant.
2.6 Security deposit
2.6.1. Simultaneously with the execution of this lease by Tenant,
the Tenant shall deposit with the Landlord the sum of one months rent
($2,266.25), as security for the Tenant's payment of the Rent and performance of
- -----------
all of its other obligations under the provisions of this Lease.
2.6.2. On the occurrence of an Event of Default, the Landlord shall
be entitled, at its sole discretion;
(a) to apply any or all of such sum in payment of (i) any
rent then due and unpaid, (ii) any expense incurred by the Landlord in curing
any such default, and/or (iii) any damages incurred by the Landlord by reason
of such default (including, by way of example rather than of limitation, that
of reasonable attorney's fees); and/or
(b) to retain any or all of such sum in liquidation of any
or all damages suffered by the Landlord by reason of such default.
2.6.3. On the termination of this Lease, any of such sum which
is not so applied or retained shall be returned to the Tenant within forty-five
(45) days of the Lease termination date.
2.6.4. Such sum shall bear interest while being held by the
Landlord hereunder, at a passbook rate of interest, but shall not be required to
be held in a separate account.
2.6.5. In the event of a transfer of Landlord's interest in
the Lease Premises, Landlord shall have the right to transfer the Security
Deposit to the transferee thereof. In such event, upon the delivery by Landlord
to Tenant of such transferee's written acknowledgement of its receipt of such
Security Deposit, Landlord shall be deemed to have been released by Tenant from
<PAGE>
all liability or obligation for the return of such Security Deposit, and Tenant
agrees to look solely to such transferee for the return of the Security Deposit
and the transferee shall be bound by all provisions of this Lease relating to
the return of the Security Deposit.
Section 3. USE OF PREMISES.
3.1 The Tenant shall, continuously throughout the Term occupy and use
the Premises for and only for corporate office purposes.
3.2 The Tenant shall not violate any applicable law, ordinance or
regulation through its use of the premises or any portion of the property.
3.2.1. The Building has been designated as a non smoking building.
Tenants, its guests and visitors shall refrain from smoking on the premises.
3.3 License.
3.3.1. The Landlord hereby grants to the Tenant a
Non-exclusive license to use (and to permit its officer, directors, agents,
employees and invitees to use in the course of its business at the Premises):
(a) if applicable, any and all elevators, common stairways,
lobbies, common hallways and other portions of the Building which, by their
nature, are manifestly designed and intended for common use by the occupants of
the Building, for pedestrian ingress and egress to and from the Premises and for
any other such manifest purposes; and
(b) any and all proportions of the said tract of land on
which the Building is located (excluding that portion thereof which is improved
by any other building) which, by their nature, are manifestly designed and
intended for common use by the occupants of the Building and of any other
improvements on such tract, for pedestrian ingress and egress to and from the
Premises and for any other such manifest purposes; and
(c) any and all portions of such tract of land as from time
to time are designated (by striping or otherwise) by the Landlord for such
purpose, for the parking of automobiles.
3.3.2. Such license shall be exercised in common with the exercise
thereof by the Landlord, any tenant or owner of the building or any other
building located on such tract, and their respective officers, directors,
agents, employees and invitees, and in accordance with the Rules and Regulations
promulgated from time to time pursuant to the provisions of Section 11.
3.4 Signs. The Tenant shall have the right to erect from time to time
within the premises such signs as it desires, in accordance with applicable law
and Landlord's building standard signage criteria, except that the Tenant shall
not erect any sign within the premises, or elsewhere, in any
<PAGE>
place where such sign is visible primarily from the exterior of the Premises,
unless the Landlord has given its express, written consent thereto.
Section 4. INSURANCE AND INDEMNIFICATION.
4.1 Increase in risk.
4.1.1. The Tenant shall not do or permit to be done any act or
thing as a result of which either (a) any policy of insurance of any kind
covering (i) any or all of the Property or (ii) any liability of the Landlord
in connection therewith may become void or suspended, or (b) the insurance risk
under any such policy would (in the opinion of the insurer thereunder) be made
greater; and
4.1.2. In the event Tenant continues such activity after written
notice by Landlord of such pending increase in premium, then Tenant shall pay as
Additional Rent the amount of any increase in any premium for such insurance
resulting from any breach of such covenant.
4.2 Insurance to be maintained by Tenant.
4.2.1. The tenant shall maintain at its expense, throughout the
Term, insurance against loss or liability in connection with bodily injury,
death, property damage or destruction, occurring within the Premises or arising
out of the use thereof by the Tenant or its agents, employees, officers, or
invitees, visitors and guests, under one or more policies of general public
liability insurance having such limits not less than (a) One Million Dollars
($1,000,000.00) for bodily injury to or death of any one person during any one
occurrence and (b) Five Hundred Thousand Dollars ($500,000.00) for property
damage or destruction during any one occurrence. Each such policy shall
(a) name as the insured thereunder the Landlord and the Tenant, (b) by its
terms, not be cancelable without at least thirty (30) days' prior written notice
to the Landlord, and (c) be issued by an insurer of recognized responsibility
licensed to issue such policy in Virginia.
4.2.2. (a) At least five (5) days after written request by
Landlord, the Tenant shall deliver to the Landlord an original or signed
duplicate copy of each such policy, and (b) at least thirty (30) days before
any such policy expires, the Tenant shall deliver to the Landlord an original
or a signed duplicate copy of a replacement policy therefore; provided, that so
long as such insurance is otherwise in accordance with the provisions of this
Section, the Tenant may carry any such insurance under a blanket policy covering
the premises for the risks and in the minimum amounts specified in paragraph
4.2.1., in which event the Tenant shall deliver to the Landlord two (2)
insurer's certificates therefor in lieu of an original or a copy thereof, as
aforesaid.
4.3 Insurance to be maintained by Landlord
4.3.1. Tenant agrees to pay to Landlord, as Additional Rent, its
building proportional share in subsection 2.2.1 (b) of the cost of fire and
extended coverage insurance, rent insurance, liability insurance and any other
insurances as may be maintained by the Landlord and
<PAGE>
are reasonably required by the holders of any mortgages, deed of trust or ground
leases on the Building.
4.4 Waiver of subrogation. If either party hereto is paid any proceeds
under any policy of insurance naming such party as an insured, on account of any
loss, damage or liability, then such party hereby releases the other party
hereto, to and only to the extent of the amount of such proceeds, from any and
all liability for such loss, damage or liability, notwithstanding that such
loss, damage or liability may arise out of the negligent or intentionally
tortious act or omission of the other party, its agents or employees; provided,
that such release shall be effective only as to a loss damage or liability
occurring while the appropriate policy of insurance of the releasing party
provides that such release shall not impair the effectiveness of such policy or
the insured's ability to recover thereunder. Each party hereto shall use
reasonable efforts to have a clause or clauses to such effect included in its
said policies, and shall promptly notify the other in writing if which clause
cannot be included in any such policy.
4.5 Liability of parties. Except if and to the extent that such party is
released from liability to the other party hereto pursuant to the provision of
subsection 4.4.
4.5.1. the Landlord and Tenant (a) shall be responsible for, and
shall indemnify and hold harmless each other against and from any and all
liability arising out of, any injury to or death of any person or damage to any
property, occurring anywhere upon the Property, if, only and to the extent that
such injury death, or damage is proximately caused by the grossly negligent or
intentionally tortious act or omission of the other or its agents, officers or
employees, but (b) shall not be responsible for or be obligated to indemnify or
hold harmless the Tenant against of from any liability for any such injury,
death or damage occurring anywhere upon the Property (including the Premises),
(i) by reason of the Tenants occupancy or use of the Premises or any other
portion of the property, or (ii) because of fire, windstorm, act of God or other
cause unless solely caused by such gross negligence or intentionally tortious
act or omission of the Landlord, as aforesaid; and
4.5.2. subject to the operation and effect of the foregoing
provisions of this subsection unless damage caused by gross negligence of
willful misconduct of Landlord, the Tenant shall be responsible for, and shall
defend, indemnify and hold harmless the Landlord against and from, any and all
liability or claim of liability arising out of any injury to or death of
any person or damage to any property, occurring within the Premises.
Section 5. IMPROVEMENTS TO PREMISES
5.1 By Landlord.
5.1.1. Intentionally Omitted.
5.1.2. The Landlord shall use its best efforts to complete such
improvements by the date on which the Tenant is entitled to occupy the premises
pursuant to this Lease, but shall have no liability to the Tenant hereunder if
prevented from doing so by reason of any (a) strike, lockout or
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other labor troubles, (b) government restrictions or limitations, (c) failure or
shortage of electrical power, gas, water, fuel, oil, or other utility or
service, (d) riot, war, insurrection or other national or local emergency,
(e) accident, flood, fire or other casualty, (f) adverse weather condition,
(g) other act of God, (h) inability to obtain a building permit, or (i) other
cause similar or dissimilar to any of the foregoing and beyond the Landlord's
reasonable control. In such event, (a) the Commencement Date shall be postponed
for a period equalling the length of such delay, (b) the Termination Date shall
be determined pursuant to the provisions of subsection 1.1 by reference to the
Commencement Date as so postponed, and (c) the Tenant shall accept possession of
the premises within three (3) days after such completion.
5.2 By Tenant. The Tenant shall not make any alteration, addition or
improvement to the Premises without first obtaining the Landlord's written
consent thereto not to be unreasonably withheld, conditioned or delayed. If the
Landlord consents to any such proposed alteration, addition or improvement, it
shall be made at the Tenant's sole expense (and the Tenant shall hold the
Landlord Harmless from any cost incurred on account thereof), and shall not
interfere with the use and enjoyment of the remainder of the Property by any
tenant thereof or other person. Landlord must indicate at time of approval
whether such improvements will be subject to section 5.4.
5.3 Mechanic's Lien. The Tenant shall (a) immediately after it is filed
or claimed, bond or have released any mechanics, materialman's or other lien
filed or claimed against any or all of the Premises, the property, or any other
property owned or leased by the Landlord, by reason of labor or materials
provided for the Tenant or any of its contractors or subcontractors (other than
labor or material provided by Landlord pursuant to the provisions of subsection
5.1), or otherwise arising out of the Tenant's use or occupancy of the Premises
or any other portion of the Property, and (b) defend, indemnify and hold
harmless the Landlord against and from any and all liability, claim of liability
or expense (including, by way of example rather than of limitation, that of
reasonable attorneys' fees) incurred by the Landlord on account of any such lien
or claim.
5.4 Fixtures. Any and all improvements, repairs, alterations and all
other property attached to, used in connection with or otherwise installed
within the Premises by the Landlord or the Tenant shall, immediately on the
completion of their installation, become the Landlord's property without payment
therefor by the Landlord, except that any machinery, equipment or fixtures
installed by the Tenant and used in the conduct of the Tenant's trade or
business (rather than to service the premises or any of the remainder of the
Building or the property generally) shall remain the Tenant's property.
Section 6. UTILITIES AND SERVICES
6.1 Utilities. Landlord agrees to provide at its cost water, electricity
and telephone service connections into the Building and shall pay for all water,
gas, heat, light, power, sewer, sprinkler charges and other utilities, and
services used on or from the Premises, including site utilities, together with
any taxes, penalties, surcharges or the like pertaining thereto and any
maintenance charges for utilities and shall furnish all electric light bulbs and
tubes during normal hours of operation which shall be from 8:00 a.m. to 6:00
p.m. Monday through Friday and from 9:00 a.m.
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to 1:00 p.m. on Saturday. If any such services are not separately metered to
Tenant, Tenant shall pay its proportionate share as determined by Landlord of
all charges jointly metered within the Building.
6.2 Extraordinary services. Tenant shall not without first obtaining the
Landlord's written consent thereto, install within the premises and electrical
machinery, appliances or equipment which in the aggregate utilizes in excess of
500 amperes of electric capacity.
6.3 Interruption. The Landlord shall have no liability to the tenant on
account of any failure, modification or interruption of any such service which
either (a) arises out of any of the causes enumerated in the provisions of
subsection 5.1, or (b) is required by applicable law (including, by way of
example rather than of limitation, any federal law or regulation relating to the
furnishing or consumption of energy or the temperature of buildings).
Section 7. LANDLORD'S RIGHT OF ENTRY
The Landlord and its agents shall be entitled to enter the Premises at
any reasonable time (a) to inspect the premises, (b) to exhibit the premises to
any existing or prospective purchaser tenant or Mortgagee thereof, (c) to make
any alteration, improvement or repair to the Building or the Premises, or
(d) for any other purpose relating to the operation or maintenance of the
Property; provided, that the Landlord shall (a) (unless doing so is impractical
or unreasonable because of emergency) give the Tenant at least twenty-four (24)
hours' prior notice of its intention to enter the Premises, and (b) use
reasonable efforts to avoid thereby interfering more than is reasonably
necessary with the Tenant's use and enjoyment thereof. Notwithstanding the
foregoing, Landlord's right to entry is subject to the requirements of the
Defense Security Regulations except in the case of emergency.
Section 8. FIRE AND OTHER CASUALTIES.
8.1 General. If fifty percent (5O%) or less of the Premises are damaged
by fire or other casualty during the term.
8.1.1. the Landlord shall restore the Premises with reasonable
promptness (taking into account the time required by the Landlord to effect a
settlement with, and to procure any insurance proceeds from, any insurer against
such casualty, but in any event begin restoration within ninety (90) days after
the date of such casualty) to substantially their condition immediately before
such casualty, and may temporarily enter and possess any or all of the Premises
for such purpose (provided, that the Landlord shall not be obligated to repair,
restore or replace any fixture, improvement, alteration, furniture or other
property owned, installed or made by the Tenant), but
8.1.2. the times for commencement and completion of any such
restoration shall be extended for the period of any delay occasioned by the
Landlord in doing so arising out of any of the causes enumerated in the
provisions of subsection 5.1. If the Landlord undertakes to restore the
Premises and such restoration is not accomplished within the said period of one
hundred eighty (180) days plus the period of any extension thereof, as
aforesaid, the Tenant may terminate this
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Lease by giving written notice thereof to the Landlord within thirty (30) days
after the expiration of such period, as so extended; and
8.1.3. so long as the Tenant is deprived of the use of any or
all of the Premises on account of such casualty, the Base Rent and any
Additional Rent payable under the provisions of subsection 2.2 shall be abated
in proportion to the number of square feet of the Premises rendered
substantially unfit for occupancy by such casualty, unless, because of any such
damage, the undamaged portion of the Premises is made materially unsuitable for
use by the Tenant for the purposes set forth in the provisions of Section 3, in
which event the Base Rent and any such Additional Rent shall be abated entirely
during such period of deprivation.
8.2 Substantial destruction. Anything contained in the foregoing
provisions of this Section to the contrary notwithstanding,
8.2.1. if during the Term the Building is so damaged by fire or
other casualty that (a) either in excess of fifty percent (50%) of the premises
or (whether or not the Premises are damaged) the Building are rendered
substantially unfit for occupancy, as reasonably determined by the Landlord, or
(b) the Building is damaged to the extent that the Landlord reasonably elects to
demolish the Building, or if any Mortgage requires that any or all of such
insurance proceeds be used to retire any or all of the debt secured by its
Mortgage, then in any such case the Landlord may elect to terminate this Lease
as of the date of such casualty, by giving written notice thereof to the Tenant
within thirty (30) days after such date; and
8.2.2. in such event, (a) the Tenant shall pay to the Landlord
the Base Rent and any Additional Rent payable by the Tenant hereunder and
accrued through the date of such termination, (b) the Landlord shall repay to
the Tenant any and all prepaid Rent for periods beyond such termination within
thirty (30) days of such date and (c) the Landlord may enter upon and repossess
the premises without further notice.
8.3 Tenant's negligence. Anything contained in any provision of this Lease
to the contrary notwithstanding, if any such damage to the premises, the
Building or both are caused by or result from the negligent or intentionally
tortious act or omission of the Tenant, those claiming under the Tenant or any
of their respective officers, employees, agents or invitees.
8.3.1. The Rent shall not be suspended or apportioned as
aforesaid, and
8.3.2. except if any and to the extent that the Tenant is
released from liability or Tenant has elected to repair, which election shall be
promptly communicated to Landlord, and Tenant is diligently pursuing such repair
therefor pursuant to the provisions of subsection 4.4, the Tenant shall pay to
the Landlord upon demand, as Additional Rent, the cost of (a) any repairs and
restoration made or to be made as a result of such damage, or (b) (if the
Landlord elects not to restore the Building) any damage or loss which the
Landlord incurs as a result of such damage.
Section 9. CONDEMNATION.
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9.1 Right to award.
9.1.1. If any or all of the Premises are taken by the exercise of
any power of eminent domain or are conveyed to or at the direction of any
governmental entity under a threat of any such taking (each of which is
hereinafter referred to as a "Condemnation"), the Landlord shall be entitled to
collect from the condemning authority thereunder the entire amount of any award
made in any such proceeding or as consideration for such conveyance, without
deduction there from for any Leasehold or other estate held by the Tenant under
this Lease.
9.1.2. The Tenant hereby (a) assigns to the Landlord all of the
Tenant's right, title and interest, if any, in and to any such award; (b) waives
any right which it may otherwise have in connection with such Condemnation,
against the Landlord or such condemning authority, to any payment for (1) the
value of the then-unexpired portion of the term, (ii) leasehold damages, and
(iii) any damage to or diminution of the value of the Tenant's leasehold
interest hereunder or any portion of the Premises not covered by such
Condemnation; and (c) agrees to execute any and all further documents which may
be required to facilitate the Landlord's collection of any and all such awards.
9.1.3. Intentionally Omitted.
9.2 Effect of Condemnation.
9.2.1. If (a) all of the Premises are covered by a Condemnation,
or (b) any part of the Premises is covered by a Condemnation and the remainder
thereof is insufficient for the reasonable operation therein of the Tenant's
business, or (c) any of the Building is covered by a Condemnation and, in the
Landlord's reasonable opinion, it would be impractical to restore the remainder
thereof, or (d) any of the rest of the Property is covered by a Condemnation
and, in the Landlord's reasonable opinion, it would be impractical to continue
to operate the remainder of the Property thereafter, then, in any such event,
the Term shall terminate on the date on which possession of so much of the
Premises, the Building or the rest of the Property, as the case may be, as is
covered by such Condemnation is taken by the condemning authority thereunder,
and all Rent (including payable under the provisions of subsection 2.2), taxes
and other charges payable hereunder shall be apportioned and paid to such date.
9.2.2. If there is a condemnation and the Term does not terminate
pursuant to the foregoing provision of this subsection, the operation and effect
of this Lease shall be unaffected by such Condemnation, except that the Base
Rent shall be reduced in proportion to the square footage of floor area, if any,
of the premises covered by such Condemnation.
9.3 If there is a Condemnation, the Landlord shall have no liability to
the Tenant on account of any (a) interruption of the Tenant's business upon the
Premises, (b) diminution in the Tenant's ability to use the Premises, or
(c) other injury or damage sustained by the Tenant as a result of such
Condemnation.
<PAGE>
9.4 The Landlord shall be entitled to conduct any such condemnation
proceeding and any settlement thereof free of interference from the Tenant, and
the Tenant hereby waives any right which it otherwise has to participate
therein.
Section 10. ASSIGNMENT AND SUBLETTING.
10.1 The Tenant hereby acknowledges that the Landlord has entered into
this Lease because of the Tenant's financial strengths, goodwill, ability and
expertise and that, accordingly, this Lease is one which is personal to the
Tenant, and agrees for itself and its successors and assigns in interest
hereunder that it will not (a) assign any of its rights under this Lease, or
(b) make or permit any total or partial sale, lease, sublease, assignment,
conveyance, license, mortgage, pledge, encumbrance or other transfer of any or
all of the Premises or the occupancy of use hereof (each of which is hereinafter
referred to as a ("Transfer"), without first obtaining the Landlord's written
consent not unreasonably withheld or delayed thereto which decision shall be
provided by Landlord within thirty (30) days of written notice by Tenant, (which
consent may be given or withheld in the Landlord's sole discretion and, if
given, shall not constitute a consent to any subsequent such Transfer, whether
by the person hereinabove named as the "Tenant" or by any such transferee). Any
person to whom any Transfer is attempted without such consent shall have no
claim, right, or remedy whatsoever hereunder against the Landlord, and the
Landlord shall have no duty to recognize any person claiming under or through
the same. No such action taken with or without the Landlord's consent shall in
any way relieve or release the Tenant from liability for the timely performance
of all of the Tenant's obligations hereunder.
10.2 In the event of any Transfer, Landlord may, at it's sole option,
have the right to fifty percent (50%) of any profits associated with any
subletting or assignment. Neither Tenant nor any party claiming an interest
under or through Tenant shall interfere with Landlord's exercise of its rights
hereunder. Tenant hereby indemnifies and holds Landlord harmless form and
against any and all liabilities, costs, losses, or damages, including reasonable
attorneys fees and court costs, arising from any breach of the provisions of
this section by Tenant.
Section 11. RULES AND REGULATIONS.
The Landlord shall have the right to prescribe, at its sole discretion,
reasonable rules and regulations (hereinafter referred to as the "Rules and
Regulations") having uniform applicability to all tenants of the Building
(subject to the provisions of their respective leases) and governing their use
and enjoyment of the Building and the remainder of the Property; provided that
the Rules and Regulations shall not materially interfere with the Tenant's use
and enjoyment of the Premises, in accordance with the provisions of this Lease,
for the purposes enumerated in the provisions of Section 3. The Tenant shall
adhere to the Rules and Regulations and shall cause its agents, employees,
invitees, visitors and guests to do so.
Section 12. SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE.
12.1 Subordination. This Lease and Tenant's interest hereunder shall be
subject and subordinate to the lien operation and effect of each and every
Mortgage, to all renewals,
<PAGE>
modifications, replacements and extensions thereof, now or hereafter executed by
Landlord or its successors, assigns, or purchaser at foreclosure, and to any and
all advances made thereunder and interest thereon, provided that the mortgagee
or holder of the indebtness provides Tenant with a non-disturbance agreement
which shall provide that so long as Tenant shall not be in default under the
Lease, no mortgagee, successor in interest, purchaser at foreclosure, ground
lessor or other party shall disturb Tenant's possession pursuant to the terms of
this Lease, and so long as Tenant complies with all of the terms and conditions
of the Lease, Tenant may continue to occupy the Leased Premises and enjoy all of
its rights under this Lease. It is understood and agreed to by Landlord and
Tenant that if the mortgagee or holder of the indebtedness fails to provide
Tenant with the aforementioned non-disturbance agreement with two business days
from such time as this Lease is executed by Tenant, Tenant may at Tenant's
election, choose to terminate this Lease with no liability whatsoever to
Landlord, Tenant or Mortgagee. Subject to Tenant's receipt of a non-disturbance
agreement from the mortgagee as aforesaid, Tenant agrees that, within ten (10)
business days after receipt of written request therefor from Landlord, it will
from time to time execute and deliver any instrument or other document required
by mortgagee or purchaser at foreclosure to subordinate this Lease and its
interest in the Leased Premises to the lien of any such mortgagee, in form and
substance required by such mortgagee, which shall provide interalia that the
---------
mortgagee is not (i) bound by any payment of Base Rent or Additional Rent made
by Tenant more than one (1) month in advance to any prior landlord (including
Landlord), other than the Advance Deposit provided for in Section 2.6;
(ii) liable for any damages or subject to any offset or defense by Tenant to the
payment of Base Rent or Additional Rent by reason of any act or omission of
Landlord prior to the date that mortgagee succeeds to the interest of Landlord;
and (iii) bound by any termination, amendment, modification or surrender of this
Lease made without mortgagee's written consent. Tenant will also upon request
submit current financial statements and financial statements covering the five
(5) immediately preceding years (but the mortgagee's obligations under this
subsection 12.1 shall not be conditioned upon the mortgagee's approval of the
same), and Tenant will, upon request, allow Landlord's mortgagee to record on
behalf of Tenant this Lease or a short form thereof, at mortgagee's expense, if
required by Landlord's mortgagee or other lending institution. Tenant hereby
irrevocably constitutes and appoints Landlord as Tenant's attorney-in-fact to
execute, acknowledge and deliver any and all such instruments for and on behalf
of Tenant, should Tenant fail to do so within ten (10) business days after
receipt of written notice. Tenant agrees that, within ten (10) business days
after written request therefor, from Landlord, it will, from time to time,
execute and deliver any instrument or any other document required by any
mortgagee, transferee, purchaser or other interested person to confirm such
subordination and obligation to attorn pursuant to Section 12.2 hereof.
12.2 Attornment and non disturbance. The Tenant shall, promptly at the
request of the Landlord or the holder of any Mortgage (herein referred to as a
"Mortgagee"), execute enseal, acknowledge and deliver such further instrument or
instruments.
12.2.1. evidencing such subordination as the Landlord or such
Mortgagee deems necessary or desirable, and
12.2.2. (at such Mortgagee's request) attorning to such Mortgagee.
Landlord will use its best efforts to obtain an agreement from the Mortgagee
that such Mortgagee will, in the
<PAGE>
event of a foreclosure of any such mortgage or deed of trust (or termination of
any such ground lease) take no action to interfere with the Tenant's rights
hereunder, except on the occurrence of an Event of Default by Tenant.
12.3 Anything contained in the provisions of this Section to the contrary
notwithstanding, any mortgagee may at any time subordinate the lien of its
Mortgage to the operation and effect of this Lease without obtaining the
Tenant's consent thereto, by giving the Tenant written notice thereof, in which
event this Lease shall be deemed to be senior to such Mortgage without regard to
their respective dates of execution, delivery and/or recordation among the Land
Records of the said County, and thereafter such Mortgagee shall have the same
rights as to this Lease as it would have had, were this Lease executed and
delivered before the execution of such Mortgage.
Section 13. DEFAULT.
13.1 Definition. as used in the provisions of the Lease, each of the
following events shall constitute, and is hereinafter referred to as, an "Event
of Default":
13.1.1. if the Tenant fails to (a) pay any Rent or any other sum
which it is obligated to pay by any provision of this Lease, when and as due and
payable hereunder and without demand therefor, or (b) perform any of its other
obligations under the provisions of this Lease; or
13.1.2. if the Tenant (a) applies for or consents to the
appointment of a receiver, trustee or liquidator of the Tenant or of all or a
substantial part of its assets, (b) files a voluntary petition in bankruptcy or
admits in writing its inability to pay its debts as they come due, (c) makes an
assignment for the benefit of its creditors, (d) files a petition or an answer
seeking a reorganization or an arrangement with creditors, or seeks to take
advantage of any insolvency law, (e) performs any other act of bankruptcy, or
(f) files an answer admitting the material allegations of a petition filed
against the Tenant in any bankruptcy, reorganization or insolvency proceeding;
or
13.1.3. if (a) an order, judgment or decree is entered by any court
of competent jurisdiction adjudicating the Tenant a bankrupt or an insolvent,
approving a petition seeking such a reorganization, or appointing a receiver,
trustee or liquidator of the Tenant or of all or a substantial part of its
assets, or (b) there otherwise commences as to the Tenant or any of its assets
any proceedings under any bankruptcy, reorganization, arrangement, insolvency,
readjustment, receivership or similar law and if such order, judgment, decree or
proceeding continues unstated for more than sixty (60) consecutive days after
any stay thereof expires;
13.2 Notice to Tenant; grace period. Anything contained in the provisions
of this Section to the contrary notwithstanding, on the occurrence of an Event
of Default the Landlord shall not exercise any right or remedy which it holds
under any provision of this Lease or applicable law unless and until
13.2.1. the Landlord has given written notice thereof to the
Tenant, if written notice is required by this Section for the Event of Default
which has occurred, and
<PAGE>
13.2.2. the Tenant has failed, (a) if such Event of Default
consists of a failure to pay money, within five (5) business days of the due
date, and tenant has failed to remedy such monetary default within five (5)
business days of written notice from Landlord, or (b) if such Event of Default
consists of something other than a failure to pay money, within (30) days
thereafter actively, diligently and in good faith to begin to cure such Event of
Default and to continue thereafter to do so until it is fully cured; provided,
that
13.2.3. no such notice shall be required, and the Tenant shall be
entitled to no such grace period, (a) in an emergency situation in which the
Landlord acts to cure such Event of Default pursuant to the provisions of
paragraph 13.3.5; or (b) more than three times during any twelve (12) month
period, or (c) of the Tenant has substantially terminated or is in the process
of substantially terminating its continuous occupancy and use of the premises
for the purpose set forth in the provisions of Section 3, or (d) in the case of
any Event of Default enumerated in the provisions of paragraphs 13.1.l(a),
13.1.2 or 13.1.3,
13.3 Landlord's rights on Event of Default. On the occurrence of any
Event of Default, the Landlord may (subject to the operation and effect of the
provisions of subsection 13.2) take any or all of the following actions:
13.3.1. re-enter and repossess the premises and any and all
improvements thereon and additions thereto;
13.3.2. declare the entire balance of the rent for the remainder of
the Term to be due and payable, and collect such balance in any manner not
inconsistent with applicable law:
13.3.3. terminate this Lease;
13.3.4. relet any or all of the Premises for the Tenant's account
for any or all of the remainder of the term as hereinabove defined, or for a
period exceeding such remainder, in which event the Tenant shall pay to the
Landlord, at the times and in the manner specified by the provisions of Section
2, the Base Rent and any Additional Rent accruing during such remainder, less
any monies received by the Landlord, with respect to such remainder, from such
reletting, as well as the cost to the Landlord of any attorney's fees, brokers
fees or of any repairs or other action (including those taken in exercising the
Landlord's rights under any provisions of this Lease) taken by the Landlord on
account of such Event of Default;
13.3.5. cure such Event of Default in any other manner (after
giving the Tenant written notice of the Landlord intention to do so except as
provided in paragraph 13.2.3.), in which event the Tenant shall reimburse the
Landlord for all reasonable expenses incurred by the Landlord in doing so, plus
interest thereon at the lesser of the rate of fifteen percent (15%) per annum or
the highest rate then permitted on account thereof by applicable law, which
expenses and interest shall be Additional Rent and shall be payable by the
Tenant immediately on demand therefor by the Landlord; and/or
<PAGE>
13.3.6. pursue any combination of such remedies and/or any other
remedy available to the Landlord on account of such Event of Default under
applicable law.
13.4 No waiver. No action taken by the Landlord under the provisions of
this Section shall not operate as a waiver of any right which the Landlord would
otherwise have against the Tenant for the Rent hereby reserved or otherwise, and
the Tenant shall remain responsible to the Landlord for any loss and/or damage
suffered by the Landlord by reason of any Event of Default.
13.5 Intentionally Omitted.
Section 14. ESTOPPEL CERTIFICATE.
The Tenant shall from time to time, within fifteen (15) days after being
requested to do so by the Landlord or any Mortgagee, execute, enseal,
acknowledge, and deliver to the Landlord (or, at the Landlord's request, to any
existing or prospective purchaser, transferee, assignee or Mortgagee of any or
all of the Premises, the property, any interest therein or any of the Landlord's
rights under this Lease) an instrument in recordable form,
14.1 certifying (a) that this Lease is unmodified and in full force and
effect (or, if there has been any modification thereof, that it is in full force
and effect as so modified, stating therein the nature of such modification);
(b) as to the dates to which the Base Rent and any Additional Rent and other
charges arising hereunder have been paid; (c) as to the amount of any prepaid
Rent or any credit due to the Tenant hereunder; (d) that the Tenant has accepted
possession of the Premises, and the date on which the Term commenced; (e) as to
whether, to the best knowledge, information and belief of the signer of such
certificate, the Landlord or the Tenant is then in default in specifying the
nature of each such default); and (f) as to any other fact or condition
reasonably requested by the Landlord or such other addressee; and
14.2 acknowledging and agreeing that any statement contained in such
certificate may be relied upon by the Landlord and any such other addressee.
Section 15. QUIET ENJOYMENT
The Landlord hereby covenants that the Tenant, on paying the Rent and
performing the Covenants set forth herein, shall peaceably and quietly hold and
enjoy, throughout the Term, (a) the Premises, and (b) such rights as the Tenant
may hold hereunder with respect to the remainder of the Property.
Section 16. NOTICES.
Any notice, demand, consent, approval, request or other communication or
document to be provided hereunder to a party hereto shall be (a) given in
writing, and (b) deemed to have been given (i) forty-eight (48) hours after
being sent as certified or registered mail in the United States mails, postage
prepaid, return receipt requested, to the address of such party set forth
hereinabove
<PAGE>
or to such other address from time to time by notice to the other, or
(ii) (if such party's receipt thereof is acknowledged in writing) upon its hand
or other delivery to such party.
Section 17. LANDLORD'S LIEN.
In addition to any statutory lien for Rent in Landlord's favor, Landlord
shall have and Tenant hereby grants to Landlord a continuing security interest
for all Rent and other sums of money becoming due hereunder from Tenant, upon
all goods, equipment, fixtures, furniture, inventory, accounts, chattel paper
and other personal property of Tenant situated on the Premises subject to this
Lease and such property shall not be removed therefrom without the consent of
Landlord until all arrearages in Rent as well as any and all other sums of money
then due to Landlord hereunder shall first have been paid and discharged. In the
event of a default under this Lease, Landlord shall have, in addition to any
other remedies provided herein or by law, all rights and remedies under the
Uniform Commercial Code, including without limitation the right to sell the
property described in this Section at public of or private sale upon five (5)
days notice to Tenant. Tenant hereby agrees to execute such other instruments
necessary or desirable in Landlord's discretion to perfect the security
interests hereby granted. Landlord and Tenant agree that this Lease and Security
Agreement serves as a financing statement and that a copy of photographic or
other reproduction of this portion of the Lease may be filed or record by
Landlord and have the same force and effect as the original. This Security
Agreement and Financing Statement also covers fixtures located at the premises
and may be filed for record in the land records. The record owner of the
Property is Bricks In The Sticks, LTD. Tenant hereby warrants and represents
that the collateral subject to the security interest granted by this Section is
not purchased or used by tenant for personal, family or household purposes.
Section 18. GENERAL.
18.1 Effectiveness. This Lease shall become effective upon and only upon
its execution by each party hereto.
18.2 Complete understanding. This Lease represents the complete
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior written or oral negotiations, representations, warranties,
statements or agreements between the parties hereto as to the same.
18.3 Amendment. This Lease may be amended by and only by an instrument
executed and delivered by each party hereto.
18.4 Applicable law. This Lease shall be given effect and construed by
application of the laws of Virginia, and any action or proceeding arising
hereunder shall be brought in the courts of Virginia; provided, that if such
action or proceeding arises under the Construction, laws or treaties of the
United States of America, or if there is a diversity of citizenship between the
parties thereto so that it is to be brought in a United States District court,
it shall be brought in the United States District Court for the Eastern District
of Virginia.
<PAGE>
18.5 Waiver. Neither Landlord nor Tenant shall be deemed to have waived
the exercise of any right which it holds hereunder unless such waiver is made
expressly and in writing ( and no delay or omission by the Landlord in
exercising any such right shall be deemed to be a waiver of its future
exercise). No such waiver as to any instance involving the exercise of any such
right shall be deemed a waiver as to any other such instance, or any other such
right.
18.6 Time of essence. Time shall be of the essence of this Lease.
18.7 Headings. the headings of the Sections, subsections, paragraphs and
subparagraphs hereof are provided herein for and only for convenience of
reference, and shall not be considered in construing their contents.
18.8 Construction. As use herein,
18.8.1. the term "person" means a natural person, a trustee, a
corporation, a partnership and any other form of legal entity; and
18.8.2. all referenced made (a) in the neuter, masculine or
feminine gender shall be deemed to have been made in all such genders, (b) in
the singular or plural number shall be deemed to have been made, respectively,
in the plural or singular number as well, and (c) to any Section, subsection,
paragraph or subparagraph shall, unless therein expressly indicated to the
contrary, be deemed to have been made to such Section, subsection, paragraph or
subparagraph of this Lease.
18.9 EXHIBITS. Each writing referred to herein as being attached hereto
as an exhibit or otherwise designated herein as an exhibit hereto is hereby made
a part hereof.
18.10 Severability. No determination by any court, governmental body or
otherwise that any provision of this Lease or any amendment thereof is invalid
or unenforceable in any instance shall affect the validity or enforceable
(a) any other such provision, or (b) such provision in any circumstance not
controlled by such determination. Each such provision shall be valid and
enforceable to the fullest extent allowed by, and shall be construed wherever
possible as being consistent with, applicable law.
18.11 Definition of the "Landlord".
18.11.1 As used herein, the term the "Landlord" means the person
hereinabove named as such, and its heirs, personal representatives, successors
and assigns (each of whom shall have the same rights, remedies, powers,
authorities and privileges as it would have had, had it originally signed this
lease as the Landlord).
18.11.2 No person Holding the Landlord's interest hereunder
(whether or not such person is named as the "Landlord" herein) shall have any
liability hereunder after such person ceases to hold such interest, except for
any such liability accruing while such person hold such interest.
<PAGE>
18.11.3. Neither the Landlord nor any principal of the Landlord,
whether disclosed or undisclosed, shall have nay personal liability under any
provision of this Lease.
18.12. Definition of the "Tenant". As used herein, the term the "Tenant"
means each person hereinabove named as such and such person's heirs, personal
representatives, successors and assigns, each of whom shall have the same
obligations, liabilities, rights and privileges as it would have possessed had
it originally executed this Lease as the Tenant; provided that no such right or
privilege shall inure to the benefit of any assignment to such assignee is made
in accordance with the provisions of Section 10. Whenever two or more persons
constitute the Tenant, all such persons shall be jointly and severally liable
for performing the Tenant's obligations hereunder.
18.13. *Commissions. Each party hereto hereby represents and warrants to
the other that, inconnection with the leasing of the Premises hereunder, the
party so representing and warranting has not dealt with any real estate broker,
agent or finder, and there is no other commission, charge or other compensation
due on account thereof. Each party hereto shall indemnify and hold harmless the
other against and from any inaccuracy in such party's representation.
18.14. Recordation. This Lease may not be recorded among the Land
Records of the said County or among any other public records, without the
Landlord's prior express, written consent thereto, and any attempt by the Tenant
to do so without having obtained the landlord's consent thereto shall constitute
an Event of Default hereunder. If this Lease is recorded by either party hereto,
such party shall bear a full expense of any transfer, documentary stamp or other
tax. and any recording fee, assessed in connection with such recordation;
provided, that if under applicable law the recordation of this Lease hereafter
becomes necessary in order for this Lease to be or remain effective, the Tenant
shall bear the full expense of any and all such taxes and fees incurred in
connection therewith.
18.15. Approval by Mortgagees. Anything contained in the provisions of
this Lease to the contrary notwithstanding, the Landlord shall be entitled at
any time hereafter but before the Landlord delivers possession of the premises
to the tenant hereunder, to terminate this Lease by giving written notice
thereof to the tenant, if any Mortgagee fails to approve this Lease for purposes
of the provisions of its Mortgage, and in the manner set forth therein.
IN WITNESS WHEREOF, each party hereto has executed and ensealed this Lease or
caused it to be executed and ensealed on its behalf by its duly authorized
representatives, the day and year first above written.
<PAGE>
The Landlord:
Witness:
/s/ [Signature goes here] /s/ Henry Luken
- ------------------------- -------------------------
Bricks In The Sticks, LTD
Henry Luken
The Tenant:
Witness:
/s/ [Signature goes here] /s/ Don Burns
- ------------------------- -------------------------
Teleco Communications Group, Inc.
Don Burns
STATE OF Virginia
--------
COUNTY OF Fairfax )to-wit:
-------
The foregoing instrument was acknowledged before me this 1st day of March,
1995 by Henry Luken a on behalf of the Landlord.
------------
My commission expires: 6/30/98
-------
STATE OF Virginia
--------
COUNTY OF Fairfax )to-wit:
-------
The foregoing instrument was acknowledged before me this 1st day of March,
1995 by Don Burns a on behalf of the Tenant.
-----------
My commission expires: 6/30/98
-------
<PAGE>
* Exhibit A
---------
<PAGE>
* SCHEDULE C
PAYMENT SCHEDULE
For 5439 sq. ft. @ 800 East Main St., Chattanooga, TN
<TABLE>
<CAPTION>
YEAR 1 YEAR 2
<S> <C>
03/01/95 - $2,226.25 03/01/96 - $2,719.50
04/01/95 - $2,226.25 04/01/96 - $2,719.50
05/01/95 - $2,226.25 05/01/96 - $2,719.50
06/01/95 - $2,226.25 06/01/96 - $2,719.50
07/01/95 - $2,226.25 07/01/96 - $2,719.50
08/01/95 - $2,226.25 08/01/96 - $2,719.50
09/01/95 - $2,226.25 09/01/96 - $2,719.50
10/01/95 - $2,226.25 10/01/96 - $2,719.50
11/01/95 - $2,226.25 11/01/96 - $2,719.50
12/01/95 - $2,226.25 12/01/96 - $2,719.50
01/01/96 - $2,226.25 01/01/97 - $2,719.50
02/01/96 - $2,226.25 02/01/97 - $2,719.50
<CAPTION>
YEAR 3 YEAR 4
<S> <C>
03/01/97 - $3,172.25 03/01/98 - $3,626.00
04/01/97 - $3,172.25 04/01/98 - $3,626.00
05/01/97 - $3,172.25 05/01/98 - $3,626.00
06/01/97 - $3,172.25 06/01/98 - $3,626.00
07/01/97 - $3,172.25 07/01/98 - $3,626.00
08/01/97 - $3,172.25 08/01/98 - $3,626.00
09/01/97 - $3,172.25 09/01/98 - $3,626.00
10/01/97 - $3,172.25 10/01/98 - $3,626.00
11/01/97 - $3,172.25 11/01/98 - $3,626.00
12/01/97 - $3,172.25 12/01/98 - $3,626.00
01/01/97 - $3,172.25 01/01/98 - $3,626.00
02/01/97 - $3,172.25 02/01/98 - $3,626.00
<CAPTION>
YEAR 3
<S>
03/01/98 - $4,079.25 Please make checks payable to:
04/01/98 - $4,079.25
05/01/98 - $4,079.25 Bricks In The Sticks, LTD
06/01/98 - $4,079.25 4219 Lafayette Center Drive
07/01/98 - $4,079.25 Chantilly, VA 22021
08/01/98 - $4,079.25
09/01/98 - $4,079.25
10/01/98 - $4,079.25
11/01/98 - $4,079.25
12/01/98 - $4,079.25
01/01/99 - $4,079.25
02/01/99 - $4,079.25
</TABLE>
<PAGE>
Exhibit 10.23
LEASE AGREEMENT
THE STATE OF TEXAS {
COUNTY OF TRAVIS {
This Lease Agreement is made as of the 22nd day of August , 1994 by and between
---- ------ --
THE UNIVERSITY OF TEXAS SYSTEM (herein referred to as "Landlord"), and TELCO
- ------------------------------ -----
COMMUNICATIONS GROUP, INC. (herein referred to as "Tenant").
- --------------------------
WITNESSETH:
ARTICLE I
DEFINITIONS
-----------
Unless otherwise clearly indicated by the context, the following terms
shall have the meanings specified below when they are used in the Lease
Agreement:
1.1 Building. The Term "Building" shall mean that certain building
locally known as The Colorado Building located at 702 Colorado, consisting of
six (6) floors and a basement and constructed on the tract of land in Travis
County, Texas more particularly described by the metes and bounds description in
Exhibit "A" attached hereto and incorporated herein by reference.
- -----------
1.2 Garage. The term "Garage" shall mean that certain structure for the
parking of cars located adjacent to the Building on the land described in
Exhibit "A" attached hereto. Parking rentals, if applicable, are described in
- -----------
Exhibit E.
- ----------
1.3 "Net Rentable Area. The term "Net Rentable Area," as used herein,
shall refer to (i) in the case of a floor leased to a single tenant, all floor
area measured from the inside surface of the outer glass line of the Building to
the inside surface of the opposite outer glass line, excluding only Service
Areas and General Common Areas (defined below), plus an allocation of the square
footage of the General Common Areas, and (ii) in the case of a floor leased to
more than one tenant, all floor areas within the inside surface of the outer
glass line of the Building enclosing the Leased Premises and measured to the
midpoint of demising walls (i.e., walls separating the Leased Premises from
areas leased to or held for lease to other tenants, from On-Floor Common Areas
(defined below) and from General Common Areas), excluding only Service Areas,
plus an allocation of the square footage of the General Common Areas and an
allocation of the square footage of the On-Floor Common Areas. No projections
necessary to the Building.
"Service Areas" shall mean the areas within (and measured from the midpoint
of the walls enclosing) the Building's stairs, fire towers, elevator shafts,
flues, vents, stacks, pipe shafts and vertical ducts. Areas for the specific use
of Tenant and installed at the
<PAGE>
request of the Tenant, such as special stairs or elevators, are not included
within the definition of Service Areas.
"General Common Areas" shall mean those areas within (and measured from the
midpoint of the walls enclosing) the Building's elevator machine rooms, main
mechanical and electrical rooms, public lobbies, management office, and other
areas not leased or held for lease within the Building, but which are necessary
or desirable for the proper utilization of the Building or to provide customary
services to the Building. The allocation of the square footage of the General
Common Areas shall be equal to the total General Common Areas within the
Building multiplied by a fraction, the numerator of which is the Net Rentable
Area of the Leased Premises (excluding only the allocation of the General Common
Area) and the denominator of which is the Net Rentable Area (excluding only the
General Common Areas) of all office space leased or held for lease in the
Building.
"On-Floor Common Areas" shall mean all areas within (and measured from the
midpoint of the walls enclosing) public corridors, elevator foyers, restrooms,
mechanical rooms, janitor closets, telephone and equipment rooms, and other
similar facilities for the use of all tenants on the floor on which the Leased
Premises are located. In the case of a floor leased to more than one tenant, the
allocation of the square footage of the On-Floor Common Areas on said floor
shall be equal to the total On-Floor Common Areas on said floor multiplied by a
fraction, the numerator of which is the Net Rentable Area of the portion of the
Leased Premises (excluding the allocation of the General Common Areas and
excluding the allocation of the On-Floor Common Areas) and the denominator of
which is the Net Rentable Area (excluding the allocation of the General Common
Areas and excluding the allocation of the On-Floor Common Areas) of all office
space leased or held for lease on said floor.
1.4 Leased Premises. The term "Leased Premises" shall mean that portion of
the Building outlined or colored on the floor plan(s) attached hereto as
Exhibit "B" and incorporated herein by reference for all pertinent purposes.
- -----------
For the purposes of computing rent and other charges under this lease, Landlord
and Tenant stipulate that the amount of Net Rentable Area included within the
leased premises is 3,515 square feet. In the case of a lease covering less than
-----
the total Net Rentable Area of a floor, the Leased Premises shall include a non-
exclusive right of ingress and egress to its Leased Premises through the
Building corridors and hallways on the floor on which the Leased Premises are
located, together with the right to use the restrooms on the floor on which the
Leased Premises are located. Each tenant shall have a right of ingress and
egress to its Leased Premises through the building lobby, stairs and elevators.
2
<PAGE>
ARTICLE II
TERM
----
2.1 Term.
(a) Subject to and upon the terms and conditions set forth herein and
in the exhibits hereto, the term of this Lease shall commence on September
1, 1994, The date that this Lease commences shall be called the
"Commencement Date." This Lease shall expire on the fifth anniversary of
the Commencement Date.
(b) Within ten (10) days after the Commencement Date, Tenant shall
execute and deliver to Landlord a declaration (in the form to be submitted
by Landlord) specifying the date upon which the same occurred.
(c) If for any reason the Leased Premises should not be ready for
occupancy by the estimated Commencement Date stated in Section 2.1(a),
Landlord shall not be liable or responsible for any claims, damages, or
liabilities in connection therewith or by reason thereof.
(d) Tenant, at his election, may exercise the option to extend this
lease for one additional term of five years. To exercise said option Tenant
shall notify Landlord of his election in writing delivered to Landlord more
than ninety (90) days prior to the expiration of the term involved. In the
event the election of this option, rental for the five-year term shall be
at the then-market rate for comparable space.
ARTICLE III
RENT
----
3.1 Base Rental. Tenant hereby agrees to pay without demand, base rental
(herein called "Base Rental") equal to $3,456.42 per month during each year of
---------
this lease.
3
<PAGE>
Such Base Rental, together with the janitorial services fee specified in Section
5.2, and together with any adjustment of rent provided for herein then in
effect, shall be due and payable on the first day of each calendar month during
the initial term of this Lease and any extensions or renewals thereof, and
Tenant hereby agrees to so pay such rent to Landlord at Landlord's address as
provided herein (or such other address as may be designated by Landlord from
time to time) monthly in advance without demand or offset. If the term of this
Lease Agreement as heretofore established commences on other than the first day
of a month or terminates on other than the last day of a month, then the
installments of Base Rental for such month or months shall be prorated and the
installment or installments so prorated shall be paid in advance. All past-due
installments of rent shall bear interest at the maximum lawful rate per annum
until paid. If requested by Landlord, all rental payments shall be made by cash
or cashier's check.
3.2 First Month's Rent and Security Deposit. On the date hereof, Tenant
shall deposit with Landlord the sum of $3,456.42 the sum of which shall be
---------
applied against the first month's rent due hereunder on the Completion Date
hereof. In addition, Tenant shall deposit, on the date hereof, the sum of
$12,000.00 (the "Security Deposit") as security for Tenant's faithful
- ----------
performance of Tenant's obligations herein contained. If Tenant defaults in any
manner (including the payment of any rents or other sums due hereunder) in the
performance of Tenant's obligations herein contained, Landlord may use, apply,
or retain all or any portion of the Security Deposit, or so much thereof as has
not theretofore been applied by Landlord, shall be returned, without payment of
interest or other increment for its use, to Tenant (or, at Tenant's option, the
last assignee, if any, of Tenant's interest hereunder) within thirty (30) days
at the expiration of the term hereto, and after Tenant has vacated the Leased
Premises. Landlord's right to so apply the Security Deposit shall in no manner
limit, impair, or otherwise affect any of Landlord's remedies set forth herein.
ARTICLE IV
TENANT'S DUTIES
---------------
4.1 Use.
(a) The premises are to be used and occupied by Tenant solely for the
purpose of long distance service and for no other purpose without the
---------------------
prior written consent of Landlord, which consent shall not be reasonably
withheld.
(b) Tenant agrees not to commit or suffer to be committed on the
premises any nuisance or other act or thing against public policy or which
violates any law or governmental regulation or which is disreputable or
which may disturb the quiet enjoyment of any other tenant of the Building
or Garage of which the Premises are a part.
4
<PAGE>
(c) Tenant will not use, occupy, or permit the use or occupancy of the
Premises for any unlawful, disreputable, immoral, or hazardous purpose; or
maintain or permit the maintenance of any public or private nuisance; or do
or permit any act or thing which may disturb the quiet enjoyment of any
other tenants of the Building; or keep any substance or carry on or permit
any operation which might emit offensive odors into other portions of the
Building; or permit anything to be done which would increase the fire
insurance rate of the Building or contents or terminate the fire insurance
coverage.
4.2 Leasehold Improvements/Alterations.
(a) Tenant shall install improvements to the Leased Premises as
provided in Exhibit F. Landlord has made no representations as to the
---------
condition of the Leased Premises, and Landlord has made no promises to
remodel, repair or decorate the Leased premises.
(b) All construction work done by Tenant within the Leased Premises
shall be performed in a good and workmanlike manner, in compliance with all
governmental requirements. Tenant agrees to indemnify Landlord and hold it
harmless against any loss, liability or damage resulting from such work,
and Tenant shall, if requested by Landlord, furnish a bond or other
security satisfactory to Landlord against any such loss, liability or
damage.
(c) Tenant will not permit any mechanic's lien or other liens to be
placed upon the Leased Premises, or any portion thereof, caused by or
resulting from any work performed, materials furnished or obligation
incurred by or at the request of Tenant, and in the case of the filing of
any such lien, Tenant will immediately pay, obtain the released of, or bond
around same (such bond to be in the form and amount prescribed by the Texas
property Code). If any lien is not removed (or bonded around) within thirty
(30) days, Landlord shall have the right and privilege at Landlord's option
of paying the same or any portion thereof without inquiry as to the
validity thereof, and any amounts so paid, including expenses and interest,
shall be so much additional rent hereunder due from Tenant to Landlord and
shall be repaid to Landlord (together with interest at the lesser of the
rate of eighteen percent (18%) per annum or the maximum rate permitted by
law from the date paid by Landlord) within ten (10) days after Tenant's
receipt of a statement from Landlord therefor.
4.3 Condition of the Leased Premises. Tenant will not damage the Leased
Premises or the Building and Garage and will maintain the Leased Premises in a
clean, attractive condition and in good repair. Upon termination of this Lease,
Tenant will surrender and deliver up the Leased Premises in good order and
repair and in the same condition as upon the commencement of this Lease, normal
wear and tear excepted.
5
<PAGE>
4.4 Compliance with Laws. Tenant will comply with all Federal, state,
municipal, and other laws, ordinances, rules and regulation applicable to the
Leased Premises and the business conducted therein by Tenant. Tenant shall
forward to Landlord within fourteen (14) days of their receipt, copies of any
notices received from any governmental authorities with respect to compliance
with any such laws or rules.
4.5 Indemnify and Hold Harmless. Tenant agrees to indemnify Landlord for,
and hold Landlord harmless from, all liability and against all fines, suits,
claims, demands, liabilities, and actions (including reasonable costs and
expenses of defending against such claims) resulting or alleged to result from
any breach, violation, or non-performance of any covenant or condition hereof,
or from the use or occupancy of the Leased Premises, by Tenant or Tenant's
agents, employees, licensees, or invitees, for any damage to person or property
resulting from any act or omission or negligence of any co-tenant, visitor, or
other occupancy of the Leased premises except as Landlord's own negligence may
contribute thereto.
4.6 Alterations, Additions and Improvements. Tenant covenants and agrees
not to permit the Leased Premises to be used for any purpose other than that
stated in the Use Clause hereto, or make or allow to be made any alterations or
physical additions in or to the Leased Premises, or place any signs on the
Leased Premises which are visible from outside the Leased Premises, or place any
safes or vaults (whether moveable or not) upon or in the Leased Premises,
without first obtaining the written consent of Landlord. Any and all such
alterations, physical additions, or improvements, when made to the Leased
Premises by Tenant, shall at once become the property of Landlord and shall be
surrendered to Landlord upon the termination of this Lease by lapse of time or
otherwise provided however, this clause shall not apply to movable equipment or
furniture owned by Tenant.
4.7 Assignment and Subletting.
(a) Tenant shall not assign these Leased Premises or any part thereof
or mortgage, pledge or hypothecate its leasehold interest without the prior
express written permission of Landlord, and any attempt to do any of the
foregoing without the prior express written permission of Landlord shall be
void and of no effect. Tenant must furnish to Landlord the terms of any
proposed assignment or sublease and the name and financial record of each
proposed assignee or subtenant. In addition, no space shall be listed or
offered to any Broker for listing or advertisement, nor shall Tenant
advertise for subletting without the prior written approval of Landlord,
nor shall any space be leased for a rent less than the total Base Rental
and Additional Rental provided for herein. Tenant must request Landlord's
permission at least sixty (60) days prior to any such assignment, sublease,
or other transaction.
6
<PAGE>
(b) If Landlord exercises its right (but not the obligation) as of the
requested effective date of such assignment, sublease, or other transaction
to cancel and terminate this Lease (upon payment of no consideration to
Tenant) as to the portion of the Leased Premises and the term of Lease with
respect to which Landlord has been requested to permit such assignment,
sublease, or other transaction; and if Landlord elects to cancel and
terminate this Lease as to the aforesaid portion of the Leased Premises and
for the term proposed to be assigned or subleased, then the rent and other
charges payable hereunder shall thereafter be proportionately reduced.
(c) In any case where Landlord consents to an assignment or sublease,
Tenant will remain liable for the performance of all of the covenants,
duties, and obligations hereunder including, without limitation, the
obligation to pay all rent and other sums herein provided to be paid, and
Landlord shall be permitted to enforce the provisions of this instrument
against the undersigned Tenant and/or any assignee or sublessee without
demand upon or proceeding in any way against any other person. In addition,
if such assignment or sublease provides for the payment of Base Rental,
Additional Rental, and other charges, said rental shall not be less than
the rental described in Section 3.1 of this Lease. If said rental should
exceed the amount stipulated in Section 3.1, Landlord shall be entitled to
any and all profits resulting therefrom.
(d) In any case where Landlord consents to any such assignment,
sublease, or other transaction, Landlord may require that Tenant pay to
Landlord a reasonable sum as attorneys' or other fees arising incident to
such transaction and that the assignee or subtenant pay Landlord a
reasonable sum incurred by Landlord in moving the assignee or subtenant in
and out of the Leased Premises should Landlord provide such assistance;
however, Landlord is under no obligation to provide such service.
(e) Tenant shall give Landlord written notice of the consummation of
any assignment or sublease consented to by Landlord; shall furnish to
Landlord copies of all assignments, transfers, subleases, and other
documents executed in connection with such assignment or sublease; and
shall notify Landlord in writing of the date the assignee or subtenant
takes possession of the Leased Premises or a portion thereof.
4.8 Subordination. Tenant accepts this Lease subject and subordinate to
any mortgage, deed of trust, or other lien presently existing or hereafter
placed upon the Leased Premises. Tenant agrees that any such mortgagee and/or
beneficiary of any deed of trust, or other lien ("Landlord's Mortgagee") and/or
Landlord shalt have the right at any time to subordinate such mortgage, deed of
trust, or other lien to this Lease on such terms and subject to such conditions
as such Landlord's Mortgagee may deem appropriate in its discretion. Tenant
agrees upon demand to execute such further
7
<PAGE>
instruments subordinating this Lease as Landlord may request and such
non-disturbance and attornment agreements as any such Landlord's Mortgagee shall
request. In the event that Tenant shall fail to execute any such instrument
------------------------------------------------------------------
promptly as requested, Tenant hereby irrevocably constitutes Landlord as
- ------------------------------------------------------------------------
attorney-in-fact to execute such instrument in Tenant's name, place, and stead,
- -------------------------------------------------------------------------------
it being stipulated by Landlord and Tenant that such agency is coupled with an
- ------------------------------------------------------------------------------
interest in Landlord and is, accordingly irrevocable.
- -----------------------------------------------------
4.9 Attorney's Fees. In the event that Tenant makes default in the
performance of any of the terms, covenants, agreements or conditions contained
in this Lease or any part thereof, or the payment of any rent due or to become
due hereunder, the Tenant agrees to pay Landlord a reasonable attorney's fee
incurred by Landlord, as well as all other reasonable fees the Landlord may
incur enforcing the Lease.
4.10 Rules and Regulations. Tenant shall perform, observe, and comply with
the Rules and Regulations of the Building, as attached hereto and made part as
Exhibit "D", with respect to the safety, care, and cleanliness of the Leased
- -----------
Premises and the Building, and the preservation of good order thereon, and, upon
written notice thereof to Tenant, any changes, amendments, or additions thereto
as from time to time shall be established and deemed advisable by Landlord for
tenants of the Building. Landlord shall use reasonable efforts to enforce the
Rules and Regulations, but shall not have any liability to Tenant for any
failure of any other tenant or tenants of the Building to comply with such Rules
and Regulations. Tenant will not paint, erect, or display any sign,
advertisement, placard, or lettering which is visible in the corridors or lobby
of the Building or from the exterior of the Building without Landlord's prior
written approval.
4.11 Operation. Tenant shall not place, install, or operate on the Leased
Premises or in any part of the Building any engine, refrigerating, heating, or
air conditioning apparatus, stove, or machinery, or conduct mechanical
operations, or place or use in or about the Leased Premises any inflammable,
explosive, hazardous, or odorous solvents or materials without the prior written
consent of Landlord. No portion of the Leased Premises shall at any time be used
for cooking, sleeping, or lodging quarters.
ARTICLE V
LANDLORD'S DUTIES
-----------------
5.1 Quiet Enjoyment. Tenant, upon paying the Rent, any Additional Rent,
and any other sums required to be paid by the terms of this Lease, and upon
performing and observing the covenants and stipulations set forth herein, shall
peaceably hold and enjoy the Leased Premises during the said term. However,
Landlord shall have the right to enter the Leased Premises at reasonable times
and after giving the Tenant advance notice of such entry, to maintain, repair,
or improve any space adjacent to the Leased Premises. The Landlord will make
reasonable efforts to minimize any inconvenience
8
<PAGE>
caused by the entry and reimburse the Tenant for any expense or damages incurred
by Tenant as a result of the entry.
5.2 Services to be Provided by Landlord. Subject to the Rules and
Regulations hereinafter referred to, Landlord shall furnish Tenant the following
services during the lease term:
(b) Janitorial service in and about the Building and the Leased Premises,
five (5) days per week, and window washing, as determined by Landlord to be
reasonable at a separate rate of $140.05 per month.
-------
(d) Water for drinking, lavatory, and toilet purposes.
(e) Replacement of ballasts and fluorescent lamps in Building Standard
ceiling-mounted fixtures installed by Landlord and incandescent bulb
replacement in all public areas of the Building.
5.3 Interruptions. No interruption or malfunction of any such services
shall constitute an eviction or disturbance of Tenant's use and possession of
the Leased Premises or Building or a breach by Landlord of any of its
obligations hereunder or render Landlord liable for damages or entitle Tenant to
be relieved from any of its obligations hereunder (including the obligation to
pay rent) or grant interruption, however, Landlord shall use reasonable
diligence to restore such service.
5.4 Security Service. Landlord shall provide security service for the
Building during the weekends and after normal working hours during the week;
however, Landlord shall have no responsibility to prevent, nor have liability to
Tenant for losses due to theft
9
<PAGE>
or burglary, or damages done by persons gaining access to the Leased Premises or
the Building.
5.5 Keys. To furnish Tenant with two (2) keys for each corridor door
entering the Leased Premises. Any additional keys will be furnished by Landlord
at Tenant's expense equal to its cost, plus ten percent (10%) upon receipt of an
order signed by Tenant or Tenant's authorized representative. All such keys
shall remain the property of the Landlord. No additional locks shall be allowed
on any door of Leased Premises, and Tenant shall not make, or permit to be made,
any duplicate keys, except those furnished by Landlord. Upon termination of this
Lease, Tenant shall surrender to Landlord all keys to the Leased Premises, and
give to Landlord the explanation of the combination of all locks for safes, safe
cabinets and vault doors, if any, in the Leased Premises.
5.6 Tenant Identification. To provide and install all Tenant
identification on the entry door to the Leased Premises, as set forth in the
Work Letter Agreement (hereinafter defined). All such letters and numerals shall
be in the Building Standard Graphics. Only Building Standard graphics may be
used in any public area or openings to public areas.
5.7 Lobby Directory. Landlord agrees to furnish a Lobby Directory Board
Strip identifying Tenant on the Lobby Directory Board. The cost of any changes
or additions thereafter will be charged to the Tenant.
5.8 Improvements. In preparing the Leased Premises for occupancy by
Tenant, Landlord shall be required to bear the expense of installing the items
(said items being considered as Building Standard items) listed on the certain
Additional Agreement (the "Additional Agreement" attached hereto as Exhibit "G"
-----------
by and between Landlord and Tenant relating to the Leased Premises, only to the
extent that they do not exceed the respective allowances indicated in the
Additional Agreement.
5.9 Changes. Landlord will endeavor to comply with the mutually determined
Tenant improvement schedule set forth in the Additional Agreement. After receipt
of approved price estimate and construction drawings, Landlord will partition
and prepare said Leased Premises in accordance therewith; however, Landlord
shall not be required to install any partitions or improvements which are not in
conformity with the plans and specifications for the Building or which are not
approved by Landlord or Landlord's Architect, and Landlord shall be required to
bear the expense of installing the items in the Additional Agreement only to the
extent that they do not exceed the respective allowance indicated in the
Additional Agreement. All installations in excess thereof shall be for Tenant's
account, and Tenant shall pay, as Additional Rent hereunder, to Landlord, an
amount equal to Landlord's actual cost plus an additional charge of ten percent
(10%) to cover overhead, promptly upon being invoiced therefor. Failure by
Tenant to pay such sum in full within thirty (30) days after its receipt of the
invoice will constitute failure to pay rent when due and an event of default by
Tenant hereunder, giving rise to all remedies
10
<PAGE>
available to Landlord under this Lease and at law for non-payment of rent.
5.10 Repair and Maintenance. Landlord will make necessary repairs of damage
to the Building corridors, lobby, structural members of the Building and Garage,
and equipment used to provide the services referred to in Section 5.2 above,
unless any such damage is caused by negligent acts or omissions of Tenant, its
agents, customers, employees, or invitees, in which event Tenant will bear the
cost of such repair. Tenant will promptly give Landlord written notice of any
damage in the Building or Garage requiring repair by Landlord, as aforesaid.
ARTICLE VI
INSURANCE, DAMAGE, AND CONDEMNATION
-----------------------------------
6.1 Insurance by Landlord. Landlord shall at its sole discretion
maintain fire and extended coverage insurance on the portion of the Building and
Garage constructed by Landlord or its predecessors in title. Said insurance
shall be maintained in any insurance company authorized to do business in the
State of Texas, in amounts desired by Landlord and at the expense of Landlord
and payment for losses thereunder shall be made solely to Landlord. If the
annual premiums to be paid by Landlord shall exceed the standard rates because
Tenant's operations result in extrahazardous exposure, Tenant shall promptly pay
the excess amount of the premium upon the request of the Landlord.
6.2 Insurance by Tenant. Tenant shall, at all times during the term of
this Lease, at its own expense, maintain a policy or policies of insurance with
premiums fully paid in advance, issued by and binding upon some solvent
insurance company approved in writing by Landlord, insuring all of Tenant's
personal property located in the Leased Premises and the improvements placed
upon the Leased Premises by Tenant (including all items covered by Tenant's
plans as approved by Landlord) against loss or damage by fire, explosion, or
other hazards and contingencies for the full insurable value thereof. Copies of
such policies shall be provided to Landlord.
6.3 Liability Insurance. Landlord, at its sole discretion, and Tenant,
each at their respective expense, shall maintain a policy or policies of
comprehensive general liability insurance with the premiums thereon fully paid
in advance issued by and binding upon some solvent insurance company (Tenant's
insurance company to be approved in writing by Landlord), such insurance to
afford minimum protection of not less than $250,000.00 in respect of personal
injury or death to any one person and not less than $500,000.00 in the event of
bodily injury or death to a number of persons in any one occurrence, and with
limits of not less than $300,000.00 for property damage in any one occurrence.
The amounts of such insurance required to be maintained by Tenant may be
increased from time to time by Landlord at its sole discretion. Copies of such
policies shall be provided to Landlord.
11
<PAGE>
6.4 Co-Insurance and Amendment. The policy or policies of insurance to
be maintained by Tenant shall name Tenant and Landlord as co-insured and shall
contain an endorsement that such policies cannot be amended or modified as to
Landlord without fifteen (15) days prior written notice. Tenant shall deliver
duplicate original policies of insurance in form satisfactory to Landlord, not
less than twenty (20) days prior to the expiration of the old policies.
6.5 Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each hereby waives any and all rights of
recovery, claim, action, or cause of action, against the other, its agents,
officers, or employees, for any loss or damage that may occur to the Leased
Premises, or any improvements thereto, or said Building of which the Leased
Premises are a part, or any improvements thereto, or any personal property of
such party therein, by reason of fire, the elements, or any other cause which is
insured against under the terms of standard fire and extended coverage insurance
policies regardless of cause or origin, including negligence of the other party
hereto, its agents, officers, or employees, and covenants that no insurer shall
hold any right of subrogation against such other parties.
6.6 Fire or Other Casualty.
(a) The parties hereto mutually agree that if at any time during the Lease
term, the Leased Premises or any portion of the Building or Garage are
partially or totally destroyed by fire or other casualty covered by the
fire and extended coverage insurance to be carried by Landlord under the
terms hereof, then Landlord may, at its option, upon written notice to
Tenant, delivered within sixty (60) days after such occurrence, elect to
either (i) repair and restore the Leased Premises and Building and Garage
as soon as it is reasonably practicable to substantially the same condition
in which the Leased Premises and the Building and Garage were before such
damage, or (ii) terminate the Lease with such termination to be effective
on the date written notice is delivered to Tenant.
(b) In the event the Leased Premises are completely destroyed or so damaged
by fire or other casualty covered by the fire and extended coverage
insurance to be carried by Landlord under the terms hereof that it cannot
reasonably be used by Tenant for the purposes herein provided and this
Lease is not terminated as above provided, then there shall be a total
abatement of rent until the Leased Premises are made usable. In the event
the Leased Premises are partially destroyed or damaged by fire or other
hazard so that the Leased Premises can only be partially used by Tenant for
the purposes herein provided, then there shall be a partial abatement in
the rent corresponding to the time and extent to which the Leased Premises
cannot be used by Tenant.
(c) If the Leased Premises shall be damaged by fire or other casualty
resulting from the fault or negligence of Tenant, or the agents, employees,
or licensees of
12
<PAGE>
Tenant, and either Landlord's or Tenant's insurance does not pay the full
cost to repair such damages, then such excess damages shall be repaired by
and at the expense of Tenant, under the direction and supervision of
Landlord, and rent shall continue without abatement.
6.7 Condemnation and Loss or Damage. If the Leased Premises or any part
hereof shall be taken or condemned for any public purpose, to such an extent as
to render the remainder of the Leased Premises, in the opinion of Landlord, not
reasonably suitable for Tenant's occupancy, this Lease shall, at the option of
either party, forthwith cease and terminate. All proceeds from any taking or
condemnation of the Leased Premises shall belong to and be paid to Landlord. In
addition, Landlord shall not be liable or responsible to Tenant for any loss or
damage to any property or persons occasioned by theft, fire, act of God, public
enemy, injunction, riot, strike, insurrection, war, court order, requisition, or
order beyond the control of Landlord, or for any damage or inconvenience which
may arise through repair or alteration of any part of the Building or failure to
make such repairs.
ARTICLE VII
GENERAL
-------
7.1 Access by Landlord. Landlord, its agents, and employees shall have
the right to enter any portion of the Leased Premises at all reasonable hours to
examine the condition of said Leased Premises, to make any repairs or
alterations required to be made by Landlord hereunder, to show the Leased
Premises to prospective purchasers or tenants, and for any other purpose deemed
reasonable by Landlord.
7.2 Landlord's Lien. In consideration of the mutual benefits arising under
-----------------------------------------------------
this Lease, Tenant hereby Grants to Landlord a lien and security interest in
- ----------------------------------------------------------------------------
and on all property of Tenant now or hereafter in place or upon the Leased
- --------------------------------------------------------------------------
Premises, and such property shall be and remain subject to such lien and
- ------------------------------------------------------------------------
security interest of Landlord for payment of all rent and other sums agreed to
- ------------------------------------------------------------------------------
be paid by Tenant herein, except for that property described in Exhibit G and
- -----------------------------------------------------------------------------
Addendum 1. Said lien and security interest shall be in addition to and
- ----------
cumulative of the Landlord's liens provided by law. The provisions of this
Paragraph relating to said lien and security interest shall constitute a secured
agreement under the Uniform Commercial Code so that Landlord shall have and may
enforce a security interest on all property of Tenant, except for that property
described in Exhibit G and Addendum 1, now or hereafter placed in or on the
Leased Premises, including but not limited to all fixtures, machinery,
equipment, furnishings, and other articles of personal property now or hereafter
placed in or upon the Leased Premises by Tenant. Tenant agrees to execute as
debtor such financing statement or statements as Landlord may now or hereafter
reasonably request in order that such security interest or interests may be
protected pursuant to said Code. Landlord may, at its election, at any time file
a copy of this Lease as a financing statement. Landlord, as secured party, shall
be entitled to
13
<PAGE>
all of the rights and remedies afforded a secured party under said Uniform
Commercial Code, which rights and remedies shall be in addition to and
cumulative of the Landlord's liens and rights provided by law or by the other
terms and provisions of this Lease.
7.3 Default by Tenant. If default shall be made in the payment of any
sum to be paid by Tenant under this Lease (no notice being required for default
in payment), or default shall be made in the performance of any of the other
such covenants or conditions which Tenant is required to observe and to perform,
and such non-monetary default shall continue for twenty (20) days after written
notice is given to Tenant (said notice to be given pursuant to Paragraph 7.7),
or if the interest of Tenant under this Lease shall be levied on under execution
or other legal process, or if any petition shall be filed by or against Tenant
to declare Tenant a bankrupt or to delay, reduce, or modify Tenant's debts or
obligations, or if any petition shall be filed or other action taken to
reorganize or modify Tenant's capital structure if Tenant be a corporation or
other entity, or if Tenant be declared insolvent according to the law, or if any
assignment of Tenant's property shall be made for the benefit of creditors, or a
receiver or trustee is appointed for Tenant or its property, or if Tenant shall
abandon (which shall mean that Tenant is absent from the Leased Premises for ten
(10) consecutive days during which Tenant is in default in the payment of any
sum to be paid by Tenant hereunder) the Leased Premises during the term of this
Lease or any renewals or extensions thereof, then Landlord may treat the
occurrence of any one or more of the foregoing events as a breach of this Lease
(provided that no such levy, execution, legal process, or petition filed against
Tenant shall constitute a breach of this Lease if Tenant shall vigorously
contest the same by appropriate proceedings and shall remove or vacate the same
within thirty (30) days from the date of its creation, service, or filing) and
thereupon, at its option may have any one or more of the following described
remedies in addition to all other rights and remedies provided at law or in
equity:
(a) Landlord may terminate this Lease and forthwith repossess the Leased
Premises and be entitled to recover forthwith as damages a sum of money
equal to the total of (i) the cost of recovering the Leased Premises, (ii)
the unpaid rent earned at the time of the termination, plus interest
thereon at the maximum lawful rate, (iii) the balance of the rent for the
remainder of the term, and (iv) any other sum of money and damages owed by
Tenant to Landlord.
(b) Landlord may terminate Tenant's right of possession (but not the Lease)
and may repossess the Leased Premises by forcible entry or detainer suit or
otherwise, without demand or notice of any kind to Tenant and without
terminating this Lease, in which event Landlord may, but shall be under no
obligation to do so, relet the same for the account of Tenant for such rent
and upon such terms as shall be satisfactory to Landlord. For the propose
of such reletting, Landlord is authorized to decorate or to make any
repairs, changes, alterations, or additions in or to the Leased Premises
that may be necessary or convenient, and if Landlord shall fail to or
refuse to relet the Leased Premises, or if the same are relet and a
sufficient
14
<PAGE>
sum shall not be realized from such reletting after paying the unpaid Base
and Additional Rent due hereunder earned but unpaid at the time of
reletting plus interest thereon at a maximum lawful rate, the cost of
recovering possession, and all of the costs and expense of such decoration,
repairs, changes, alterations, and additions and the expenses of such
reletting and of the collecting of the rent accruing therefrom to satisfy
the rent provided for in this Lease to be paid, then Tenant shall pay to
Landlord as damages a sum equal to the amount of the rental reserved in
this Lease for such period or periods, or if the Leased Premises have been
relet, the Tenant shall satisfy and pay any such deficiency upon demand
therefor from time to time and Tenant agrees that Landlord may file suit to
recover any sums falling due under the terms of this Paragraph from time to
time, and that no delivery or recovery of any portion due Landlord
hereunder shall be any defense to any subsequent action brought for any
amount not theretofore reduced to judgment in favor of Landlord, nor shall
such reletting be construed as an election on the part of Landlord to
terminate this Lease unless a written notice of such intention be given to
Tenant by Landlord. Notwithstanding any such reletting without termination,
Landlord may at any time thereafter elect to terminate this Lease for such
previous breach.
(c) Landlord may take such action required to cure the breach and bill
Tenant for any expenses incurred by Landlord incurring such breach, and
Tenant shall be obligated to pay such bill immediately upon its receipt by
Tenant.
7.4 Holding Over. In the event of holding over by Tenant after expiration
or termination of this Lease without the written consent of Landlord, Tenant
shall pay as liquidated damages double rent for the entire holdover period. No
holding over by Tenant after the term of this Lease shall operate to extend the
Lease; in the event of any unauthorized holding over, Tenant shall indemnify
Landlord against all claims for damages by any other Tenant to whom Landlord may
have leased all or any part of the premises covered hereby effective upon the
termination of this lease. Any holding over with the consent of Landlord in
writing shall thereafter make this Lease, a lease from month-to-month.
7.5 Non-Waiver. Failure of Landlord to declare any default immediately
upon occupancy thereof, or delay in taking any action in connection therewith
shall not waive such default, but Landlord shall have the right to declare any
such default at any time and take such action as might be lawful or authorized
hereunder, either in law or in equity.
7.6 Estoppel. Tenant will, at such time or times as Landlord may
request, sign a certificate stating whether this Lease is in full force and
effect; whether any amendments or modifications exist; whether there are any
defaults hereunder; and such other information and agreements as may be
reasonably requested.
7.7 Notice. Any notice which may or shall be given under the terms of this
15
<PAGE>
Lease shall, unless otherwise provided herein, be in writing and shall be either
delivered by hand or sent by United States Registered or Certified Mail, postage
prepaid, if for Landlord, to the Building office; or if for Tenant, be sent by
United States Registered or Certified Mail to the below indicated address in
Chantilly, Virginia. Such addresses may be changed from time to time by either
party giving written notice as provided above. Notice shall be deemed given when
delivered (if delivered by hand) or when postmarked (if sent by mail).
LANDLORD:
--------
The University of Texas System
ATTN: Director, Business and Administrative Services
201 W. 7th Street
Austin, Texas 78701
TENANT:
------
Mr. Bryan Rachlin
Telco Communications Group, Inc.
4219 Lafayette Center Drive
Chantilly, Virginia 22021-1214
7.8 Severability. This Lease shall be construed in accordance with the
laws of the State of Texas. If any clause or provision of this Lease is illegal,
invalid, or unenforceable, under present or future laws effective during the
term hereof, then it is the intention of the parties hereto that the remainder
of this Lease shall not be affected thereby, and it is also the intention of
both parties that in lieu of each clause or provision that is illegal, invalid,
or unenforceable, there be added as a part of this Lease a clause or provision
as similar in terms to such illegal, invalid, or unenforceable clause or
provision and enforceable.
7.9 Entire Agreement and Binding Effect. This Lease and any
contemporaneous work letter, addenda, or exhibit constitute the entire agreement
between Landlord and Tenant; no prior written or prior contemporaneous oral
promises or representations shall be binding. Paragraph captions herein are for
convenience only, and neither limit nor amplify the provisions of this Lease.
The provisions of this Lease shall be binding upon and inure to the benefit of
the heirs, executors, administrators, successors, and assigns of the parties,
but this provision shall in no way alter the restriction herein in connection
with assignment and subletting by Tenant.
7.10 Assignment by Landlord. Landlord shall have the right to transfer and
assign, in whole or in part, all its rights and obligations hereunder and in the
Building and property referred to herein, and in such event, no further
liability or obligation shall
16
<PAGE>
thereafter accrue against Landlord hereunder.
7.11 Alterations. This Lease may not be altered, changed, or amended,
except by an instrument in writing signed by both parties.
SUBMISSION OF THIS CONTRACT FOR YOUR REVIEW DOES NOT CONSTITUTE A GUARANTEE
TO CONSUMMATE A LEASE AGREEMENT, NOR IS ANY AGREEMENT FIRM AND BINDING UNTIL
EXECUTED ON BEHALF OF BOTH LANDLORD AND TENANT.
EXECUTED in multiple counterparts, each of which shall have the force and
effect of an original, on this the 29th day of August, 1994.
---- ------ ----
LANDLORD:
THE UNIVERSITY OF TEXAS SYSTEM
By: /S/ R. D. Burck
------------------------------------
R. D. Burck
Executive Vice Chancellor
for Business Affairs
APPROVED AS TO FORM: APPROVED AS TO CONTENT:
By: /S/Florence P. Mayne By: /S/Charles H. Perrone
----------------------- ------------------------------------
Florence P. Mayne Charles H. Perrone
Attorney, Office of Director, Business and
General Counsel Administrative Services
TENANT:
Telco Communications Group, Inc.
By: /S/Henry G. Luken, III
------------------------------------
Henry G. Luken, III
Chairman
17
<PAGE>
STATE OF TEXAS (S)
COUNTY OF TRAVIS (S)
This instrument was acknowledged before me on the 29th day of August , 1994
by R. Dan Burck, Executive Vice Chancellor for Business Affairs, on behalf of
the Board of Regents of The University of Texas System.
/S/Nancy S. McKee
----------------------------------------
Notary Public in and for the
State of Texas
STATE OF TEXAS (S)
COUNTY OF TRAVIS (S)
This instrument was acknowledged before me on the day of ,
---- -------
19 , by Donald A. Burns.
--
----------------------------------------
Notary Public in and for the
State of Texas
18
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
-----------------
A portion of Lot No. Three (3) and Lot No. Four (4) in Block No. Eighty-Two
(82), in the City of Austin, Travis County, Texas according to the map or plat
on file in the General Land Office of the State of Texas, described by metes and
bounds as follows:
USING the center lines of West Seventh Street, Lavaca Street, and Colorado
Street as established by the Engineering Department of the City of Austin,
Texas, On December 1, 1940 as a basis of this survey;
STARTING at the Southwest corner of Lot No. One (1), Block No. Eighty-Two (82),
in the Original City of Austin, Texas, which point is the intersection of the
North boundary line of Lavaca Street and being 40 feet distant from the
established center lines of said streets;
THENCE S. 70(degree) 55' East along the North boundary line of West Seventh
Street and also along the South line of said Block No. Eighty-Two (82) for 92.68
feet to an iron pipe for the point of beginning of this survey, which point is
25 feet East of the Southeast corner of the main church building of the First
Presbyterian Church of Austin, and being also 0.68 feet east of the Southwest
corner of Lot Three (3), Block No. Eighty-Two (82), of the Original City of
Austin, Texas, and being also on the agreed line between the First Presbyterian
Church of Austin and Charles E. Marsh as recorded in Volume 543, Pages 477-480,
of the Travis County Deed Records;
THENCE N. 18(degree) 53' East along the agreed line between the First
Presbyterian Church of Austin and Charles E. Marsh for 127.4 feet to an iron
pipe, which point is 0.90 feet east of the Northeast corner of the Sunday School
Annex now on said church property and continuing North 18(degree) 53' East for
0.60 feet for a total distance of 128 feet to an "X" cut into pavement for the
corner of this property, which point is in the South boundary line of alley and
also from said "X" the Northwest corner of Lot No. One (1), Block No. Eighty-Two
(82), bears North 70(degree) 55' West 92.5 feet and also said "X" is 0.50 feet
East of the Northwest corner of Lot No. Three (3), Block No. Eighty-Two (82), of
the original City of Austin, Texas;
THENCE South 70(degree) 55' East along the boundary line of alley adjoining Lot
No. Four (4), Block No. Eighty-Two (82), for 92.1 feet of the Northwest corner
of the American Publishing Company and the Northeast corner of Charles E. Marsh
property as recorded in Volume 545, Pages 459-460, of the Travis County Deed
Records, and also from said point the center line of Colorado Street as
established by the Engineering Department of The City of Austin on December 1,
1940, bears South 70(degree) 55' East 131.7 feet and also said recorded
instrument agrees that the Northwest corner of Lot No. Five (5) Block No.
Eighty-Two (82), and being also the Northeast corner of Lot No. Four (4), Block
(82) of the Original City of Austin, Texas;
THENCE South 19(degree) 05' West with the West face of the American Publishing
Company Building for 128 feet to the Southwest corner of said building, which
point is in the North line of West Seventh Street and the agreed Southwest
corner of American Publishing Company, and also the Southeast corner of Charles
E. Marsh property as recorded in Volume 545, Pages 459-460 of the Travis County
Deed Records and from said Southwest corner of building the established center
line of Colorado Street as established by the Engineering Department of the City
of Austin, on December 1, 1940, bears South 70(degree) 55' West 132 feet;
<PAGE>
THENCE East 70(degree) 55' West along the South line of said Block No. Eighty-
Two (82) and also along the North Boundary of West Seventh Street for 91.58 feet
to an iron pipe and the point of beginning of this survey;
BEING the same land as that conveyed to Plymouth Life Insurance Company by
Commonwealth Acceptance Corporation by Warranty Deed dated September 11, 1956,
recorded in Volume 1743, Pages 70-73, of the Deed Records of Travis County,
Texas.
SAID PREMISES being the land and building located thereon at the Northwest
corner of the intersection of Seventh and Colorado Streets on a plot
approximately 184 feet by 128 feet and being the Eastern 45.4 feet of Lot Three
(3) plus the entire Lots Four (4), Five (5), and Six (6), Block Eighty-Two (82),
of the Original City of Austin, Travis County, Texas
This Exhibit "A" is attached to and made part of that certain Lease Agreement by
and Between The University of Texas System and Telco Communications Group, Inc.,
--------------------------------
Tenant, said Lease Agreement dated August 22, 1994.
----------------
<PAGE>
EXHIBIT "B"
PLAT OF LEASED PREMISES
-----------------------
[FLOOR PLAN APPEARS HERE]
This Exhibit "B" is attached to and made part of that certain Lease Agreement by
and Between The University of Texas System, Landlord, and Telco Communications
---------------------
Group, Inc., Tenant, said Lease Agreement dated August 22, 1994.
- ----------- ----------------
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
---------------------
1. All tenants will refer all contractor's representatives and installation
technicians who are to perform any work within the Building to Landlord for
Landlord's supervision, approval, and control before the performance of any such
work. This provision shall apply to all work performed in the Building
including, but not limited to, installations of telephones, telegraph equipment,
electrical devices and attachments, any and all installations of every nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment, and any
other physical portion of the Building. The Tenant shall not mark, paint, drill
into, or in any way deface any part of the Building or the Leased Premises,
except with prior written consent of the Landlord, and as the Landlord may
direct.
2. The work of the janitorial or cleaning personnel shall not be hindered by
Tenant after 5:30 PM, and such work may be done at any time when the offices are
vacant. The windows, doors, and fixtures may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles, cabinets, book cases, map
cases, etc., necessary to prevent unreasonable hardship to Landlord in
discharging its obligations regarding cleaning service.
3. Movement of furniture or office equipment in or out of the Building, or
dispatch or receipt by Tenant of any heavy equipment, bulky material, or
merchandise which requires use of elevators or stairways, or movement through
the Building's service dock or lobby entrance shall be restricted to such hours
as Landlord shall designate during normal business hours. All such movement
shall be in a manner to be agreed upon between Tenant and Landlord in advance.
Such prior arrangements shall be initiated by Tenant. The time, method, and
routing of movement and limitations for safety or other concern which may
prohibit any article, equipment, or other item from being brought into the
Building shall be subject to Landlord's discretion and control. Any hand trucks,
carryalls, or similar appliances used for the delivery or receipt of such
merchandise or equipment shall be equipped with rubber tires, side guards, and
such other safeguards as the Building shall require. Although Landlord or its
personnel may participate in or assist in the supervision of such movement,
Tenant assumes final responsibility for all risks as to damage to articles moved
and injury to person or persons engaged in such movement, including equipment,
property and personnel of Landlord if damaged or injured as a result of acts in
connection with carrying out this service for Tenant, from the time of entering
the property to completion of work. Landlord shall not be liable for the acts of
any person engaged in, or any damage or loss to any of said property or persons
resulting from any act in connection with such service performed by Tenant.
4. No signs of any kind or nature, symbol, or identifying mark shall be put on
the Building, in the halls, elevators, staircases, entrances, parking areas or
upon the doors or walls, whether plate glass or otherwise, of the Leased
Premises nor within the Leased Premises so as to be visible from the public
areas or exterior of the Building, without prior written approval of Landlord.
All signs or lettering shall conform in all respects to the sign and/or
lettering criteria established by Landlord.
5. Tenant shall not make or permit any loud or improper noises in the Building
or otherwise interfere in any way with other tenants.
<PAGE>
6. Landlord will not be responsible for any lost or stolen personal property or
equipment from the Leased Premises or public areas, regardless of whether such
loss occurs when the area is locked against entry or not.
7. Tenant, or the employees, agents, servants, visitors, or licensees of Tenant
shall not, at any time or place, leave or discard rubbish, paper, articles, or
objects of any kind whatsoever outside the doors of the Leased Premises or in
the corridors or passageways of the Building. No animals, bicycles, or vehicles
of any description shall be brought into or kept in or about the Building.
8. No additional lock or locks shall be placed by Tenant on any door in the
Building unless written consent of Landlord shall have first been obtained. Two
(2) keys will be furnished by Landlord for the Leased Premise, and any
additional key required must be obtained from Landlord at Tenant's expense. A
reasonable charge will be made for each additional key furnished. All keys shall
be surrendered to Landlord upon termination of tenancy.
9. None of the entries, passages, doors, hallways, or stairways in the Building
shall be blocked or obstructed.
10. Landlord shall have the right to determine and prescribe the weight and
proper position of any unusually heavy equipment, including computers, safes,
large files, etc., that are to be placed in the Building, and only those which
in the exclusive judgment of the Landlord will not do damage to the floors,
structure, and/or elevators, may be moved into the Building. Any damage caused
by installing, moving, or removing such aforementioned articles in the Building
shall be paid by Tenant.
11. All Christmas and other decorations must be constructed of flame retardant
materials.
12. Tenant shall provide Landlord with a list of all personnel authorized to
enter the Building after hours (6:00 p.m. to 6:00 a.m., Monday through Friday,
and 24 hours a day on weekends and holidays).
13. Anyone entering or leaving the Building after hours, as set forth in
Paragraph 12, must sign his name, company name, suite number, and time on the
Building Register and show proper identification if requested.
14. Any furniture or equipment removed from the Building after hours must be
listed on the Building Register. Description and serial numbers should be
included. Pass out orders on Tenant's stationery must be surrendered to the
security officer in the lobby when any articles are being removed from the
Building.
15. The freight elevator shall be used to handle packages and shipments of all
kinds. Passenger elevators shall not be used for this purpose. The freight
elevator is available to handle such deliveries from 9:00 a.m. to 11:00 a.m. and
2:00 p.m. to 3:30 p.m. weekdays. Parcel Post, express, freight, or merchants'
deliveries can be made any time within these hours. No furniture or freight
shall be handled outside the above hours, except by previous arrangement.
Advance notice of arriving or departing shipments will enable the Building
Management to give better assistance.
<PAGE>
16. Names to be placed on or removed from the Directory Board in the lobby of
the Building should be furnished to the Building Manager in writing on Tenant's
letterhead.
17. Any additional services as are routinely provided to tenants, not required
by the Lease to be performed by Landlord, which Tenant requests Landlord to
perform, and which are performed by Landlord, shall be billed to Tenant at
Landlord's cost plus fifteen percent (15%), and Tenant shall pay such bill on
the next maturing date as an installment of Base Rental.
18. All doors leading from public corridors to the Leased Premises are to be
kept closed when not in use.
19. Canvassing, soliciting, or peddling in the Building is prohibited and Tenant
shall cooperate to prevent the same.
20. Tenant shall give immediate notice to the Office of the Building in case of
accidents in the Leased Premises or in the Building or of defects therein or in
any fixtures or equipment, or for any known emergency in the Building.
21. Tenant shall not use the Leased Premises or permit the Leased Premises to be
used for photographic, multilith, or multigraph reproductions, except in
connection with its own business.
22. The requirements of Tenant will be attended to only upon application at the
Office of the Building. Employees of Landlord shall not perform any work or do
anything outside of their regular duties, unless under special instructions from
the Office of the Building.
23. Tenant shall place or have placed solid pads under all rolling chairs such
as may be used at desks or tables. Any damages caused to carpet by not having
same shall be repaired or replaced at the expense of the Tenant.
24. Tenant, or the employees, agents, servants, visitors, or licensees of
Tenant, shall abide by the Rules and Regulations for the Garage.
25. Tenant shall not allow to pass into any sewer, drain, or toilet serving the
Leased Premises or located in the Building any oil, grease, or any other
deleterious effluent or substance which may cause an obstruction in or damage to
such sewer, drain, or toilet.
26. The Colorado Building is a University of Texas facility and as such has been
included in the smoke-free work environment policy established by the U.T. Board
of Regents on June 6, 1991. Smoking is prohibited inside all facilities or
vehicles owned, leased or operated by The University of Texas System
Administration. However, the use of System Administration facilities by outside
parties has been granted a waiver of this prohibition. Tenants in the Colorado
Building are allowed to designate smoking areas in the building but only
-------------------------- --------
within their leased area.
-----------
<PAGE>
27. Landlord reserves the right to rescind any of these Rules and Regulations of
the Building, and to make such other and further Rules and Regulations as in its
judgment shall from time to time be needful for the safety, protection, care,
cleanliness of the Building, the Leased Premises, and the Garage, the operation
thereof, the preservation of good order therein, and the protection and comfort
of the other tenants in the Building and their agents, employees, and invitees,
which Rules and Regulations, when made and written notice thereof is given to
Tenant, shall be binding upon Tenant in like manner as if originally herein
prescribed.
This Exhibit "D" is attached to and made part of that certain Lease Agreement by
and between The University of Texas System, Landlord, and Telco Communications
--------------------
Group, Inc., Tenant, said Lease Agreement dated August 22, 1994.
- ----------- ---------------
<PAGE>
EXHIBIT "F"
TENANT IMPROVEMENTS REQUIRED BY LANDLORD
----------------------------------------
None.
This Exhibit "F" is attached to and made part of that certain Lease Agreement by
and between The University of Texas System, Landlord, and Telco Communications
--------------------
Group, Inc., Tenant, said Lease Agreement dated August 22, 1994.
- ----------- ---------------
<PAGE>
EXHIBIT "G"
ADDITIONAL AGREEMENTS
---------------------
Tenant accepts the Leased Premises in their existing, as is condition. Tenant
acknowledges that MCI, at Tenant's request and with Landlord's concurrence, has
left in the Lease Premises certain modifications to the Leased Premises. Tenant
therefore agrees that, at its sole cost and expense, it shall do the
"Restoration Work" (herein so called) described below to the Leased Premises at
the end of the term of this Lease. The Restoration Work shall be fully completed
to the reasonable satisfaction of Landlord on or before expiration of Lease.
Landlord, at its option and in its sole discretion, may waive Tenant's
obligation to do the Restoration Work. The following comprises the Restoration
Work:
1. Disconnect the HVAC and electrical systems in the Leased Premises from
the Leased Premises' sub-meter and then connect the Leased Premises'
HVAC and electrical systems back to the Building's systems as approved
by Landlord, such approval not to be unreasonably withheld or delayed;
2. Removal of raised flooring, structural steel in leased space, or
surrender of Security Deposit.
3. Landlord's lien provided in Section 7.2 shall not cover the property
described on the attached Addendum 1.
This Exhibit "G" is attached to and made part of that certain Lease Agreement by
and between The University of Texas System, Landlord, and Telco Communications
--------------------
Group, Inc., Tenant, said Lease Agreement dated August 22, 1994.
- ----------- ---------------
<PAGE>
Addendum 1
<TABLE>
<CAPTION>
Qty Part No. Description Qty Part No. Description
- --- -------- ----------- --- -------- -----------
<S> <C> <C> <C> <C> <C>
1 U621SX Used DSC 600SX 0 Ports 1 E972 V.35 Hdw Kit for X.25
-
5 F611U Used Factory ADD DTF Frm
20 F612U.01 Used DIM, MP 8/6 and all other peripheral equipment as
160 F613U Used Factory DTI listed Purchase Order 062094.10, dated
1 E619 FGD Terminating Protocol 6/20/94.
1 E626 X.25 Transport System
1 E645 H/W Answer Forced Disc.
1 E951 2-8 Dig Acct Code Validat Equipment Location:
1 E984 Tandem N00 Service RTU Suite 500-3
1 E986.01 Tandem Calling card RTU 702 Colorado Street
1 U9621 SP Subsystem (Used) Austin, TX 78701
3 E962 Add'l SS7 Link Card V.35
1 S680SX DSC DEX 600SX SP S/W RTU
1 E931.01 DOSS Software RTU
</TABLE>
<PAGE>
SECOND ADDENDUM TO LEASE AGREEMENT
-----------------------------------
This SECOND ADDENDUM TO LEASE AGREEMENT ("Second Addendum") is to be
-----------------
effective for all purposes as of June 1, 1995, by and between the Board of
Regents of The University of Texas System ("Landlord"), and Telco Communications
----------
Group, Inc. ("Tenant").
--------
RECITALS
--------
A. Landlord and Tenant entered into a Lease Agreement dated August 22,
1994, as amended by an Addendum to Lease Agreement dated September 12, 1994
(collectively, the "Lease") covering 3,515 square feet of net rentable area on
-----
the fifth floor of the Colorado building located at 702 Colorado ("Building"),
----------
Suite 503 in Austin, Travis County, Texas.
B. Tenant desires to amend the Lease in order to add 1,236 square feet on
the sixth floor of the Building, Suite 660.
C. Landlord is willing to amend the Lease on the terms and conditions
stated below.
PROVISIONS
----------
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged by the parties, Landlord and Tenant hereby
agree as follows:
1. Defined Terms. Capitalized terms that are not otherwise defined in
-------------
this Second Addendum have the respective meanings assigned to them in the Lease.
2. Addition to Leased Premises. The "Leased Premises" defined in Section
--------------------------- ---------------
1.4 of the Lease Agreement is amended to add the 1,236 square feet described on
the attached Exhibit "A" for a total New Rentable Area of 4,751 square feet.
-----------
3. Increase in Base Rental. Tenant agrees to pay without demand $12.50
-----------------------
per square foot per year for the additional square feet ($1,287.50 per month),
and Section 3.1 of the Lease is amended to state a total Base Rental of
$4,743.92.
4. Performance of and Compliance With the Terms and Conditions of the
------------------------------------------------------------------
Lease. Landlord and Tenant each promise and agree to perform and comply with the
- ------
terms, provisions, and conditions of and the agreements in the Lease, as
modified by this Second Addendum.
1
<PAGE>
5. Ratification and Reaffirmation of Lease. Landlord and Tenant each
----------------------------------------
hereby ratify, affirm, and agree that the Lease, as herein modified, represents
the valid, binding and enforceable obligations of Landlord and Tenant,
respectively.
6. Applicable Law. Landlord and Tenant hereby agree that this Second
--------------
Addendum and the Lease shall be governed and construed according to the laws of
the State of Texas from time to time in effect.
7. Inurement. This Second Addendum shall be binding on and inure to the
---------
benefit of Landlord and Tenant and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
8. Paragraph Headings. The paragraph headings used herein are intended
------------------
for reference purposes only and shall not be considered in the interpretation of
the terms and conditions hereof.
9. Continuation of Lease. Except as expressly stated in this Second
---------------------
Addendum, the terms of the Lease shall remain unchanged and in full force and
effect as originally provided.
In witness whereof, this Second Addendum is executed as of the date first
set forth above.
LANDLORD:
BOARD OF REGENTS OF THE
UNIVERSITY OF TEXAS SYSTEM
By: /S/R.D. Burck
----------------------------------------
R.D. Burck
Executive Vice Chancellor for
Business Affairs
The University of Texas System
Approved as to Form: Approved as to Content:
/S/Florence P. Mayne /S/Charles H. Perrone
- -------------------------------- ----------------------------------------
Florence P. Mayne Charles H. Perrone
Office of General Counsel Director
Business and Administrative Services
2
<PAGE>
EXHIBIT "G"
ADDITIONAL AGREEMENTS
---------------------
Tenant accepts the Leased Premises in their existing, as is condition. Tenant
acknowledges that MCI, at Tenant's request and with Landlord's concurrence, has
left in the Lease Premises certain modifications to the Leased Premises. Tenant
therefore agrees that, at its sole cost and expense, it shall do the
"Restoration Work" (herein so called) described below to the Leased Premises at
the end of the term of this Lease. The Restoration Work shall be fully
completed to the reasonable satisfaction of Landlord on or before expiration of
Lease. Landlord, at its option and in its sole discretion, may waive Tenant's
obligation to do the Restoration Work. The following comprises the Restoration
Work:
1. Disconnect the HVAC and electrical systems in the Leased Premises from
the Leased Premises' sub-meter and then connect the Leased Premises'
HVAC and electrical systems back to the Building's systems as approved
by Landlord, such approval not to be unreasonably withheld or delayed.
2. Removal of raised flooring, structural steel in leased space, or
surrender of Security Deposit.
3. Landlord's lien provided in Section 7.2 shall not cover the property
described on the attached Addendum 1.
This Exhibit "G" is attached to and made part of that certain Lease Agreement by
and between The University of Texas System, Landlord, and Telco Communications
-------------------
Group, Inc., Tenant, said Lease Agreement dated August 22, 1994.
- ------------ ---------------
<PAGE>
<TABLE>
<CAPTION>
ADDENDUM 1
Qty Part No. Description Qty Part No. Description
- --- -------- ----------- --- -------- -----------
<C> <C> <S> <C> <C> <C>
1 U621SX Used DSC 600SX O Ports 1 E972 V. 35 Hdw Kit for X.25
-
5 F611U Used Factory ADD DTF Frm
20 F612U.01 Used DIM, MP 8/6 and all other peripheral equipment as
160 F613U Used Factory DTI listed Purchase Order 062094.10, dated
1 E619 FGD Terminating Protocol 6/20/94.
1 E626 X.25 Transport System
1 E645 H/W Answer Forced Disc.
1 E951 2-8 Dig Acct Code Validat Equipment Location:
1 E984 Tandem NOO Service RTU Suite 500-3
1 E986.01 Tandem Calling card RTU 702 Colorado Street
1 U9621 SP Subsystem (Used) Austin, TX 78701
3 E962 Add'l SS7 Link Card V.35
1 S680SX DSC DEX 600SX SP S/W RTU
1 E931.01 DOSS Software RTU
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SECOND ADDENDUM TO LEASE AGREEMENT
----------------------------------
This SECOND ADDENDUM TO LEASE AGREEMENT ("Second Addendum") is to be
---------------
effective for all purposes as of June 1, 1995, by and between the Board of
Regents of The University of Texas System ("Landlord"), and Telco Communications
--------
Group, Inc.("Tenant").
------
RECITALS
--------
A. Landlord and Tenant entered into a Lease Agreement dated August 22,
1994, as amended by an Addendum to Lease Agreement dated September 12, 1994
(collectively, the "Lease") covering 3,515 square feet of net rentable area on
-----
the fifth floor of the Colorado building located at 702 Colorado ("Building"),
--------
Suite 503 in Austin, Travis County, Texas.
B. Tenant desires to amend the Lease in order to add 1,236 square feet on
the sixth floor of the Building, Suite 660.
C. Landlord is willing to amend the Lease on the terms and conditions
stated below.
PROVISIONS
----------
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged by the parties, Landlord and Tenant hereby
agree as follows:
1. Defined Terms. Capitalized terms that are not otherwise defined in
-------------
this Second Addendum have the respective meanings assigned to them in the Lease.
2. Addition to Leased Premises. The "Leased Premises" defined in
--------------------------- ---------------
Section 1.4 of the Lease Agreement is amended to add the 1,236 square feet
described on the attached Exhibit "A" for a total Net Rentable Area of 4,751
-----------
square feet.
3. Increase in Base Rental. Tenant agrees to pay without demand $12.50 per
-----------------------
square foot per year for the additional 1,236 square feet ($1,287.50 per month),
and Section 3.1 of the Lease is amended to state a total Base Rental of
$4,743.92.
4. Performance of and Compliance With the Terms and Conditions of the
------------------------------------------------------------------
Lease. Landlord and Tenant each promise and agree to perform and comply with
- -----
the terms, provisions, and conditions of and the agreements in the Lease, as
modified by this Second Addendum.
1
<PAGE>
5. Ratification and Reaffirmation of Lease. Landlord and Tenant each hereby
---------------------------------------
ratify, affirm, and agree that the Lease, as herein modified, represents the
valid, binding and enforceable obligations of Landlord and Tenant, respectively.
6. Applicable Law. Landlord and Tenant hereby agree that this Second
--------------
Addendum and the Lease shall be governed and construed according to the laws of
the State of Texas from time to time in effect.
7. Inurement. This Second Addendum shall be binding on and inure to the
---------
benefit of Landlord and Tenant and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
8. Paragraph Headings. The paragraph headings used herein are intended for
------------------
reference purposes only and shall not be considered in the interpretation of the
terms and conditions hereof.
9. Continuation of Lease. Except as expressly stated in this Second
---------------------
Addendum, the terms of the Lease shall remain unchanged and in full force and
effect as originally provided.
In witness whereof, this Second Addendum is executed as of the date first
set forth above.
LANDLORD:
BOARD OF REGENTS OF THE
UNIVERSITY OF TEXAS SYSTEM
By: /s/ R.D. Burck
-------------------------------
R.D. Burck
Executive Vice Chancellor for
Business Affairs
The University of Texas System
Approved as to Form: Approved as to Content:
/s/ Florence P. Mayne /s/ Charles H. Perrone
- ----------------------------- ----------------------------------
Florence P. Mayne Charles H. Perrone
Office of General Counsel Director
Business and Administrative Services
2
<PAGE>
Exhibit 10.24
1220 L STREET, N.W.
OFFICIAL LEASE
<PAGE>
JBG PROPERTIES, INC.
AGREEMENT OF LEASE
FOR
OFFICE SPACE
TABLE OF CONTENTS
ARTICLE PAGE
1. DEFINITIONS................................................................1
2. TERM.......................................................................3
3. WORK AGREEMENT.............................................................4
4. RENT.......................................................................4
5. ADDITIONAL RENT............................................................5
6. USE........................................................................6
7. CARE OF PREMISES...........................................................7
8. ALTERATIONS BY TENANT......................................................7
9. EQUIPMENT..................................................................9
10. OWNERSHIP AND REMOVAL OF PROPERTY..........................................9
11. LANDLORD'S ACCESS TO PREMISES.............................................10
12. SERVICES AND UTILITIES....................................................10
13. RULES AND REGULATIONS.....................................................11
14. REPAIR OF DAMAGE CAUSED BY TENANT: INDEMNIFICATION........................11
15. LIMITATION ON LANDLORD LIABILITY..........................................11
16. FIRE AND OTHER CASUALTY...................................................11
17. TENANT INSURANCE..........................................................12
18. CONDEMNATION..............................................................13
19. DEFAULT...................................................................13
20. NO WAIVER.................................................................16
21. HOLDING OVER..............................................................16
22. SUBORDINATION.............................................................17
23. ASSIGNMENT AND SUBLETTING.................................................17
24. TRANSFER BY LANDLORD......................................................18
25. INABILITY TO PERFORM......................................................18
26. ESTOPPEL CERTIFICATES.....................................................18
27. COVENANT OF QUIET ENJOYMENT...............................................19
28. WAIVER OF JURY TRIAL......................................................19
29. BROKERS...................................................................19
30. CERTAIN RIGHTS RESERVED BY LANDLORD.......................................19
31. NOTICES...................................................................19
32. MISCELLANEOUS PROVISIONS..................................................20
A. Benefit and Burden....................................................20
B. Governing Law.........................................................20
C. No Partnership........................................................20
D. Delegation by Landlord................................................20
E. Tenant Responsibility for Agents......................................20
F. Invalidity of Particular Provisions...................................20
G. Counterparts..........................................................20
H. Entire Agreement......................................................20
I. Amendments............................................................20
J. Mortgagee's Performance...............................................20
K. Limitation on Interest................................................21
L. Remedies Cumulative...................................................21
M. Annual Financial Statements...........................................21
33. LENDER APPROVAL (Intentionally omitted)...................................21
34. PARKING...................................................................21
35. SECURITY DEPOSIT..........................................................21
36. HAZARDOUS MATERIALS.......................................................22
37. NO RECORDATION............................................................22
38. LANDLORD'S RELOCATION OPTION..............................................23
39. AIR CONDITIONING SPACE....................................................23
SIGNATURES................................................................23
<PAGE>
Exhibit A - Premises Plan
Exhibit B - Declaration of Acceptance
[Intentionally omitted.]
Exhibit D - Rules and Regulations
Exhibit E - Method of Measurement
Exhibit F - Parking
[Intentionally omitted.]
2
<PAGE>
1220 L STREET, N.W.
OFFICE LEASE
THIS LEASE AGREEMENT (the "Lease") is made and entered into this 25 day
--
of August 1994 by and between 13TH and L ASSOCIATES, a District of Columbia
------
general partnership ("Landlord") and TELCO COMMUNICATIONS GROUP, INC., a
Virginia corporation ("Tenant"). In consideration of the Rent hereinafter
- --------
reserved and the agreements hereinafter set forth, Landlord and Tenant mutually
agree as follows:
1. DEFINITIONS.
Except as otherwise expressly provided or unless the context otherwise
requires, the following terms shall have the meanings assigned to them in this
Section:
A. Alterations: Any improvements, alterations, fixed decorations or
modifications, structural or otherwise, to the Premises, the Building or the
Land, as defined below, including but not limiter to the installation or
modification of carpeting, partitions, counters, doors, air conditioning ducts,
plumbing, piping, lighting fixtures, wiring, hardware, locks, ceilings and
window and wall coverings.
B. Building: The building located at 1220 L Street, N.W. in Washington,
D.C., in which the Premises are located. Except as expressly indicated
otherwise, the term "Building" shall include all portions of said building
including but not limited to the Premises, the Common Areas and the garage.
C. Common Areas: Those areas of the Building and/or Land, as the case may
be, made available by Landlord for use by Tenant in common with the Landlord,
other tenants of the Building and the employees, agents and invitees of Landlord
and of such other tenants.
D. Consumer Price Index (Regular and Base): [Intentionally omitted.]
E. Default Rate: That rate of interest which is five (5) percentage points
above the annual rate of interest which is publicly announced by NationsBank of
D.C. ("NationsBank") from time to time as its "prime" rate of interest,
irrespective of whether such rate is the lowest rate of interest charged by
NationsBank to commercial borrowers. In the event that NationsBank ceases to
announce such a prime rate of interest, Landlord, in Landlord's reasonable
discretion, shall designate the prime rate of interest by another bank located
in the Washington, D.C. metropolitan area, which shall be the prime rate of
interest used to calculate the default rate.
<PAGE>
F. Fiscal Year. Each consecutive twelve (12) month period during the Term
of this Lease that falls between January 1 and December 31 inclusive.
G. Ground Leases: All ground and other underlying leases from which
Landlord's title to the Land and/or the Building is or may in the future be
derived. "Ground Lessors" shall denote those persons and entities holding such
ground or underlying leases.
H. Holidays: New Year's Day, Washington's Birthday, Martin Luther King,
Jr.'s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veteran's Day, Thanksgiving Day, Christmas Day and any other holidays designated
by an executive order of the President of the United States or by Act of
Congress.
I. Land: The real estate that supports the Building, and all associated
easements.
J. Landlord's Work: [Intentionally omitted.]
K. Lease Commencement Date: The date this Lease commences, as determined
pursuant to Subsection 2.A. below.
L. Lease Year: That period of twelve (12) consecutive calendar months that
commences on the first day of the calendar month in which the Lease
Commencement Date occurs, and each consecutive twelve (12) month period
thereafter. The earliest such twelve (12) month period shall be referred to as
the "first Lease Year," and each of the following Lease Years shall similarly be
numbered for identification purposes.
M. Mortgages: All mortgages, deeds of trust and similar security
instruments which may now or in the future encumber or otherwise affect the
Building or the Land, including mortgages related to both construction and
permanent financing. "Mortgagees" shall denote those persons and entities
holding such mortgages, deeds of trust and similar security instruments.
N. Operating Expenses: All costs and expenses incurred by Landlord during
any Fiscal Year, as defined in Subsection 1.F. above, in managing, operating and
maintaining the Building and the Land, as determined by Landlord in accordance
with an accounting system established and regularly applied by Landlord. Such
costs and expenses shall include, but not be limited to, the cost of water, gas,
sanitary sewer, storm sewer, electricity and other utilities, trash removal,
telephone services, insurance, janitorial and char services and supplies,
security services, labor costs (including social security taxes and
contributions and fringe benefits for Landlord's employees), charges under
maintenance and service contracts (including but not limited to chillers,
boilers, elevators, window and security services), central heating and air
conditioning, management fees, business taxes, license fees, public space and
vault rentals and charges, and the cost of any equipment or services provided by
Landlord in connection with the servicing, operation, maintenance, repair and
protection of the Building and the Land and related exterior appurtenances
(whether or not provided on the Lease Commencement Date). Operating Expenses
shall include the cost of capital improvements made by Landlord to manage,
operate or maintain the Building, together with any financing charges incurred
in connection therewith, provided that such costs shall be amortized over the
useful life of the improvements and only the portion attributable to the Fiscal
Year shall be included in Operating Expenses for the Fiscal Year. Operating
Expenses shall not include: (i) Real Estate Tax Expenses, (ii) payments of
principal and interest on any Mortgages, (iii) leasing commissions, or (iv)
costs of preparing, improving or altering any space in preparation for occupancy
of any new or renewal tenant. In the event that, during any Fiscal Year or
portion thereof during the Term, Landlord shall furnish any utility or service
which is included in the definition of Operating Expenses to less than one
hundred percent (100%) of the rentable area of the Building because (i) less
than all of the rentable area of the Building is occupied, (ii) any such utility
or service is not desired or required by any tenant, or (iii) any tenant is
itself obtaining or providing any such utility or service, then the Operating
Expenses for such Fiscal Year shall be increased to equal the total expenses
that Landlord reasonably estimates it would have incurred if Landlord had
provided all such utilities and services to one hundred percent (100%) of the
rentable area of the Building for the entire Fiscal Year. For example, if the
average occupancy rate of the Building during a Fiscal Year is eighty percent
(80%), the janitorial contractor's charges are $1.00 per occupied rentable
square foot per year, and the Building contains one hundred thousand (100,000)
rentable square feet of space, then it would be reasonable for Landlord to
estimate that, if the Building had been one hundred percent (100%) occupied
during the entire Fiscal Year, janitorial charges for such Fiscal Year would
have been One Hundred Thousand Dollars ($100,000) and to compute the Operating
Expenses for such Fiscal Year accordingly. In no event shall the provisions of
this paragraph be used to enable
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Landlord to collect from the tenants of the Building more than one hundred
percent (100%) of the costs and expenses incurred by Landlord in managing,
operating and maintaining the Building and the Land.
O. Premises: 3,595 square feet of rentable area on the second (2nd)
floor of the Building, known as Suite 210, as shown on the floor plan
attached hereto as Exhibit A. However, the area and plan of the Premises may
change in the event of the exercise of any option to expand or contract the
Premises set forth in this Lease. The rentable area of the Premises has been
determined in accordance with Exhibit E. Landlord shall have the option,
exercisable by written notice to Tenant at any time during the Term, to have the
rentable floor area of the Premises remeasured by Landlord's architect in the
manner provided for in Exhibit E hereto. Upon such remeasurement by the
Landlord's architect, Landlord may, at its option, give Tenant written notice of
the rentable floor area so determined, in which event the rentable floor area as
thus remeasured shall be deemed to be the rentable floor area of the Premises
for all purposes of this Lease, all Rent theretofore paid by Tenant to Landlord
during the Term shall be retroactively adjusted, and any deficiency shall be
paid by Tenant to Landlord within thirty (30) days after Landlord's notice to
Tenant setting forth the rentable floor area of the Premises.
P. Premises' Standard Electrical Capacity: The electrical capacity
sufficient to support Tenant's balanced consumption of two and one-half (2-1/2)
watts per square foot of rentable area.
Q. Real Estate Tax Expenses: All taxes and assessments, general or
special, ordinary or extraordinary, and foreseen or unforeseen, that are
assessed, levied or imposed upon the Building and/or the Land, under any current
or future taxation or assessment system or modification of, or supplement or
substitute for, such system, whether or not based on or measured by the receipts
or revenues from the Building or the Land (including all taxes and assessments
for public improvements or any other purpose and any gross receipts or similar
taxes). Real Estate Tax Expenses also shall include all reasonable expenses
incurred by Landlord in obtaining or attempting to obtain a reduction of any
such taxes, rates or assessments, including but not limited to legal fees in an
amount not to exceed the amount of the reduction in such taxes, but shall not
include any taxes on Tenant's or other Tenants' Personal Property or other
tenants' personal property, which taxes are the sole obligation of each tenant.
R. Rent: All Base Rent and Additional Rent.
(1) Base Rent: The amount payable by Tenant pursuant to Subsection
4.A. below.
(2) Additional Rent: All sums of money payable by Tenant pursuant
to this lease other than Base Rent.
(3) Monthly Rent: A monthly installment of Base Rent and Additional
Rent, if any, which shall equal one-twelfth (1/12th) of Base Rent
and Additional Rent then in effect.
S. Tenant's Personal Property: All equipment, improvements, furnishings
and/or other property now or hereafter installed or placed in or on the Premises
by and at the sole expense of Tenant or with Tenant's permission (other than any
property of Landlord), with respect to which Tenant has not been granted any
credit or allowance by Landlord, and which: (i) is removable without damage to
the Premises, the Building and the Land, and (ii) is not a replacement of any
property of Landlord, whether such replacement is made at Tenant's expense or
otherwise. Notwithstanding any other provision of this Lease, Tenant's Personal
Property shall not include any improvements or other property installed or
placed in or on the Premises as part of Landlord's Work, whether or not any such
property was purchased or installed at Tenant's expense.
T. Unavoidable Delay: Any delays due to strikes, labor disputes, shortages
of material, labor or energy, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or any other causes beyond
the control of Landlord.
U. Work Agreement: [Intentionally omitted.]
2. TERM.
A. Term of Lease: The term of this Lease (the "Term") shall commence on a
date (the "Lease Commencement Date"), which shall be the date on which Landlord
delivers the Premises in a demolished condition, that is, with a concrete slab
and unfinished walls, and shall terminate at midnight on the last day of the
fifth Lease Year, or such earlier date on which this Lease is terminated
pursuant to the provisions hereof (the
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<PAGE>
"Lease Expiration Date"). Landlord hereby leases the Premises to Tenant and
Tenant hereby leases the Premises from Landlord for the Term.
B. Declarations: If requested by Landlord at any time during the Term,
Tenant promptly will execute a declaration in the form attached hereto as
Exhibit B.
C. Effective Date: The rights and obligations set forth in this Lease,
except for the obligation to pay Rent and as otherwise specifically provided
herein to the contrary, shall become effective on the date of final execution of
this Lease.
3. WORK AGREEMENT. [Intentionally omitted.]
4. RENT.
From and after the Lease Commencement Date, Tenant shall pay to Landlord
such Base Rent and Additional Rent as are set forth in this Section 4 and in
Section 5 below.
A. Base Rent: Base Rent shall equal the respective amounts set forth in the
following schedule:
<TABLE>
<CAPTION>
Base Rent
Per Square Base Rent
Lease Year Foot Per Annum Per Annum
---------- -------------- ---------
<S> <C> <C>
1 $23.50 $84,482.50
2 $23.97 $86,172.15
3 $24.45 $87,897.75
4 $24.94 $89,659.30
5 $25.44 $91,456.80
</TABLE>
Tenant shall pay Base Rent to Landlord in equal monthly installments ("Monthly
Base Rent") in advance on the first day of each calendar month during the Term,
without notice, except that the first monthly installment of Base Rent shall be
paid upon execution of this Lease. If the Lease Commencement Date occurs on a
date other than the first day of a calendar month, Tenant shall receive a credit
equal to the Monthly Base Rent multiplied by the number of days in said calendar
month prior to the Lease Commencement Date and divided by the number of days in
such month, which credit shall be applied toward the installment of Monthly Base
Rent next due hereunder.
B. Payment: All Base Rent and Additional Rent due and payable to Landlord
under this Lease shall be made payable to 13th and L Associates and delivered in
care of JBG Properties, Inc., at the address set forth in Section 31. Payments
of Rent (other than in cash), if initially dishonored, shall not be considered
rendered until ultimately honored as cash by Landlord's depository. Except as
expressly set forth otherwise in this Lease, Tenant will pay all Rent to
Landlord without demand, deduction, set-off or counter-claim.
C. Late fee: If Tenant fails to make any payment of Rent on or before the
fourth (4th) day following the date when payment is due, then Tenant also shall
pay to Landlord a late fee equal to five percent (5%) of the amount that is
past due for each month or part thereof until such Rent is fully paid. Said late
fee shall be deemed reimbursement to Landlord for its costs of carrying and
processing Tenant's delinquent account. Acceptance by Landlord of said late fee
shall not waive or release any other rights or remedies to which Landlord may be
entitled on account of such late payment.
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<PAGE>
D. Arbitration: Any statement provided to Tenant by Landlord pursuant to
Section 5 below shall be conclusive and binding upon Tenant unless, within
thirty (30) days after receipt thereof, Tenant notifies Landlord of the respects
in which the statement is claimed to be incorrect. Unless otherwise mutually
agreed, any such dispute shall be determined by arbitration in the jurisdiction
in which the Premises are located, in accordance with the then current
commercial rules of the American Arbitration Association. The costs of the
arbitration shall be divided equally between Landlord and Tenant, except that
each party shall bear the cost of its own legal fees, unless (i) the arbitration
results in a determination that Landlord's statement contained a discrepancy of
less than five percent (5%) in Landlord's favor, in which event Tenant shall
bear all costs incurred in connection with such arbitration, including, without
limitation, legal fees, or (ii) the arbitration results in a determination that
Landlord's statement contained a discrepancy of at least five percent (5%) in
Landlord's favor, in which event Landlord shall bear all costs incurred in
connection with such arbitration, including, without limitation, legal fees.
Pending determination of any dispute, Tenant shall pay all amounts due pursuant
to the disputed statement, but such payments shall be without prejudice to
Tenant's position. Upon at least fifteen (15) days notice to Landlord, Tenant
shall have reasonable access during normal business hours and at Tenant's
expense, to appropriate books and records of Landlord relating to the amount of
expenses covered by the disputed statement, for the purpose of verifying the
statement. Any such review shall be made only by Tenant's employees and/or by
an auditor hired by Tenant who is a Certified Public Accountant and who is
employed on other than a contingent fee basis.
5. ADDITIONAL RENT.
A. To Cover Consumer Price Index Increases: [Intentionally omitted.]
B. To Cover Increased Operating and Real Estate Tax Expenses:
(1) Definitions: As used herein, "Increased Operating Expenses" shall
equal the amount by which Operating Expenses incurred during such Fiscal Year
exceed the Operating Expenses incurred during calendar year 1994, and "Tenant's
Share of Increased Operating Expenses" shall be that percentage of Increased
Operating Expenses which is the equivalent of the number of square feet of
rentable area in the Premises (3,595 on the Lease Commencement Date) divided by
the number of square feet of rentable area of office space in the Building
(246,082 on the Lease Commencement Date). As used herein, "Increased Real Estate
Tax Expenses" shall equal the amount by which Real Estate Tax Expenses incurred
during such Fiscal Year exceed the Real Estate Tax Expenses paid in the calendar
year 1994, and "Tenant's Share of Increased Real Estate Tax Expenses" shall be
that percentage of Increased Real Estate Tax Expenses which is equivalent to the
number of square feet of rentable area in the Premises divided by the number of
square feet of rentable area (both office and retail) in the Building (272,009
on the Lease Commencement Date). However, in no event shall any of the aforesaid
sums be less than zero.
(2) Payment of Tenant's Share: In addition to all other Rent set
forth herein, for each Fiscal Year during the Term, Tenant shall pay to Landlord
as Additional Rent an amount equal to the sum of Tenant's Share of Increased
Operating Expenses and Tenant's Share of Increased Real Estate Tax Expenses;
provided, however, that for the Fiscal Years during which the Term begins and
ends, Tenant's Share of the aforesaid sum shall be prorated based upon the
greater of: (i) the number of days during such Fiscal Year that this Lease is in
effect, or (ii) the number of days that Tenant actually occupies the Premises or
any portion thereof.
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<PAGE>
C. Statements:
(1) [Intentionally omitted.]
(2) Commencing with the Fiscal Year which begins January 1, 1995, for
each Fiscal Year, Landlord shall deliver to Tenant a statement estimating
Tenant's Share of Increased Operating Expenses and Increased Real Estate
Tax Expenses for such Fiscal Year, which Tenant shall pay in equal monthly
installments in advance on the first day of each calendar month during each
Fiscal Year. Tenant shall continue to pay such estimated Increased
Operating and Real Estate Tax Expenses until Tenant receives the next such
statement from Landlord, at which time Tenant shall commence making monthly
payments pursuant to Landlord's new statement. With the first payment of
Additional Rent herein which is due at least fifteen (15) days after
Tenant's receipt of a statement from Landlord specifying Tenant's Share of
estimated Increased Operating and Real Estate Tax Expenses payable during
the Fiscal Year, Tenant shall pay the difference between its monthly share
of such sums for the preceding months of the Fiscal Year and the monthly
installments which Tenant has actually paid for said preceding months.
D. Retroactive Adjustments: Commencing with the Fiscal Year which begins
January 1, 1995, after the end of each Fiscal Year, Landlord shall determine the
actual Increased Operating Expenses and Increased Real Estate Tax Expenses
for such Fiscal Year, Landlord shall calculate the foregoing sums and shall
provide to Tenant a statement of Tenant's Share of Increased Operating Expenses
and Increased Real Estate Tax Expenses for the Fiscal Year. Within thirty (30)
days after delivery of any such statement, Tenant shall pay to Landlord any
deficiency between the amount shown as Tenant's Share of Increased Operating and
Real Estate Tax Expenses for the Fiscal Year and the estimated payments made by
Tenant. Tenant shall be credited with any excess estimated payments toward
subsequent Rent payments by Tenant.
E. Change In or Contest of Taxes: In the event of any change by any taxing
body in the period or manner in which any of the Real Estate Tax Expenses are
levied, assessed or imposed, Landlord shall have the right, in its sole
discretion, to make equitable adjustments with respect to computing increases
in Real Estate Tax Expenses. Real Estate Tax Expenses which are being contested
by Landlord shall be included in computing Tenant's Share of Increased Real
Estate Tax Expenses under this Section, but if Tenant shall have paid Rent on
account of contested Real Estate Tax Expenses and Landlord thereafter receives a
refund of such taxes, Tenant shall receive a credit toward subsequent Rent
payments in an amount equal to Tenant's Share of such refund.
F. Sales, Use or Other Taxes: If during the Term any governmental authority
having jurisdiction over the Building or the Land levies, assesses or imposes
any tax on Landlord, the Premises, the Building or the Land or the rents payable
hereunder, in the nature of a sales tax, use tax or any tax except (i) taxes on
Landlord's income, (ii) estate or inheritance taxes, or (iii) Real Estate Taxes,
then Tenant shall pay its proportionate share to Landlord within fifteen (15)
days after receipt by Tenant of notice of the amount of such tax.
6. USE.
A. Permitted Use: Tenant shall use and occupy the Premises solely for a
telecommunications switching and transmission station and any activities
related thereto in providing long distance telephone services, including
general office activities, and administrative activities directly related
thereto and for no other purpose.
6
<PAGE>
B. Legal and Other Restrictions of Tenant's Use: In its use of the
Premises, Tenant shall comply with all present and future laws, regulations
(including but not limited to fire and zoning regulations) and ordinances of all
other public and quasi-public agencies having jurisdiction over the Land or the
Building. Tenant shall not use the Land, the Building or use or occupy the
Premises for any unlawful, disorderly or hazardous purposes or in a manner which
will interfere with the rights of Landlord, other tenants or their invitees or
in any way injure or annoy any of them.
7. CARE OF PREMISES.
Tenant shall at its expense keep the Premises (including all improvements,
fixtures and other property located therein) in a neat and clean condition and
in good order and repair, and will suffer no waste or injury thereto. Tenant
shall surrender the Premises at the end of the Term in as good order and
condition as they were in on the Lease Commencement Date, ordinary wear and tear
excepted.
8. ALTERATIONS BY TENANT.
A. Making of Alterations; Landlord's Consent: Tenant shall not make or
permit to be made any Alterations without the prior written consent of Landlord
both as to whether the Alterations may be made and as to how and when they will
be made. Any Alterations shall be made at Tenant's expense, by its contractors
and subcontractors and in accordance with complete plans and specifications
approved in advance in writing by Landlord, and only after Tenant: (i) has
obtained all necessary permits from governmental authorities having
jurisdiction and has furnished copies thereof to Landlord, (ii) has submitted
to Landlord an architect's certificate that the Alterations will conform to
all applicable laws and regulations, and (iii) has complied with all other
requirements reasonably imposed by Landlord, including without limitation any
requirements due to the underwriting guidelines of Landlord's insurance
carriers. Landlord's consent to any Alterations and approval of any plans and
specifications constitutes approval of no more than the concept of these
Alterations and not a representation of warranty with respect to the quality or
functioning of such Alterations, plans and specifications. Tenant shall be and
is solely responsible for the Alterations and for the proper integration thereof
with the Building, the Building's systems and existing conditions. Landlord
shall have the right, but not the obligation, to supervise the making of any
Alterations. If any Alterations are made without the prior written consent of
Landlord, or which do not conform to plans and specifications approved by
Landlord or to other conditions imposed by Landlord pursuant to this Section,
Landlord may, in its sole discretion, correct or remove such Alterations at
Tenant's expense. Following completion of any Alterations, at Landlord's
request, Tenant either shall deliver to Landlord a complete set of "as built"
plans showing the Alterations or shall reimburse Landlord for any expense
incurred by Landlord in causing the Building plans to be modified to reflect the
Alterations.
B. No Liens: Tenant shall take all necessary steps to insure that no
mechanic's or materialmen's liens are filed against the Premises, the Building
or the Land as a result of any Alterations made by the Tenant. If any mechanic's
lien is filed, Tenant shall discharge the lien within ten (10) days thereafter,
at Tenant's expense, by paying off or bonding the lien.
C. Tenant's Work: Landlord shall deliver possession of the Premises to
Tenant in its "as-is" condition as of the date of this Lease, and Tenant has
inspected and accepts the Premises in AS-IS condition existing as of the date of
this Lease and without any improvements or other work therein by Landlord.
Tenant shall improve the Premises in accordance with plans and
specifications, which plans and specifications shall be subject to Landlord's
prior written approval (such plans and specifications as approved by Landlord
are hereinafter referred to as "Tenant's Plans" and such work is referred to
herein as "Tenant's Work"). Landlord's approval of Tenant's Plans shall
constitute approval of Tenant's design concept only and approval of Tenant's
Plans shall in no event be deemed a representation or warranty by Landlord as to
whether Tenant's Plans comply with any and all legal requirements applicable to
Tenant's Plans and Tenant's Work. Tenant shall obtain all permits, certificates
and other governmental approvals from all governmental entities
7
<PAGE>
having jurisdiction thereover which are necessary for the prosecution and
completion of Tenant's Work. All Tenant's Work shall be completed using the
highest quality materials and in accordance with the highest quality standards.
Any improvements or modifications which Tenant wishes to make to the Premises in
addition to Tenant's Work shall be deemed to be Alterations and shall be subject
to the provisions of subsection 8.A. of this Lease.
Prior to commencing Tenant's Work, Tenant shall provide to Landlord the
name and address of each contractor and subcontractor which Tenant intends to
employ to perform Tenant's Work, the use of which contractor shall be subject
to Landlord's prior written approval, which shall not be unreasonably withheld,
conditioned or delayed if (i) the contractor is properly licensed and bonded,
(ii) Landlord has had no prior experience with such contractor which was
unsatisfactory to Landlord, and (iii) Landlord knows of no prior unsatisfactory
experience that a third party has had with such contractor; and the contractor
is otherwise acceptable to Landlord, in Landlord's reasonable discretion. Prior
to the commencement of any of Tenant's Work, Tenant shall deliver to Landlord,
with respect to each contractor which Tenant intends to employ to perform any of
Tenant's Work, a certificate of insurance from each such contractor specifying
Landlord as a named insured and evidencing that each such contractor has
obtained the following insurance coverage:
(a) comprehensive commercial general liability insurance, including
contractor's liability coverage, contractual liability coverage, completed
operations coverage, broad form property damage endorsement and
contractor's protective liability coverage, to afford protection, with
limits for each occurrence, of not less than Two Million Dollars
($2,000,000) with respect to bodily injury or death and One Million Dollars
($1,000,000) with respect to property damage or equivalent terms,
conditions and limits under a commercial liability form policy;
(b) comprehensive automobile liability insurance with limits for each
occurrence of not less than One Million Dollars ($1,000,000) with respect
to bodily injury or death and One Million Dollars ($1,000,000) with respect
to property damage; and
(c) worker's compensation or similar insurance in form and amounts required
by law.
Said contractors shall also comply with other reasonable industry requirements
of Landlord.
As an inducement to Tenant, Landlord shall provide to tenant an allowance
(the "Tenant Allowance") of Thirty-Five Thousand Nine Hundred Fifty Dollars
($35,950.00) calculated on the basis of $10.00 per square foot of rentable area)
to offset expenses incurred by Tenant in performing Tenant's Work. Provided that
no Default by Tenant shall have occurred or be continuing, Landlord shall remit
payment of the Tenant Allowance within ten (10) days following Landlord's
receipt from Tenant of (i) invoices reasonably evidencing work or services
performed with respect to Tenant's Work; (ii) receipted bills or other evidence
that the aforesaid invoices have been paid in full; and (iii) waivers or
releases of liens from each of Tenant's contractors,
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<PAGE>
subcontractors, and suppliers in connection with the work performed or materials
supplied as evidenced by the aforesaid invoices. Any costs of performing
Tenant's Work which are in excess of the Tenant Allowance shall be borne by
Tenant at its sole cost and expense.
9. EQUIPMENT.
A. Permitted Equipment: Tenant shall not install or operate in the
Premises any equipment or other machinery that, in the aggregate, will cause
Tenant to use more than the Premises' Standard Electrical Capacity, without: (i)
obtaining the prior written consent of Landlord, who may condition its consent
upon the payment by Tenant of Additional Rent for additional consumption of
utilities, additional wiring or other expenses resulting therefrom, (ii)
securing all necessary permits from governmental authorities and utility
companies and furnishing copies thereof to Landlord, and (iii) complying with
all other requirements reasonably imposed by Landlord. Prior to the Lease
Commencement Date, Tenant shall provide Landlord with a list of all equipment
that Tenant intends to install or operate in the Premises which operate on more
than on hundred twenty (120) volts, and Tenant shall provide Landlord with an
updated list of such equipment prior to the installation or use of any
additional equipment which operates on more than one hundred twenty (120) volts.
Tenant shall not install any equipment or machinery which may necessitate any
changes, replacements or additions to or material changes in the use of water,
heating, plumbing, air conditioning or electrical systems of the Building
without obtaining the prior written consent of Landlord, who may withhold its
consent in its absolute discretion
B. Payment For Excess Utility Usage: If Tenant's equipment shall result
in electrical demand in excess of the Premises' Standard Electrical Capacity,
Landlord shall have the right, in its sole discretion, to install additional
transformers, distribution panels, wiring and other applicable equipment at the
expense of Tenant. None of the equipment so installed shall be deemed to be
Tenant's Personal Property. If at any time during the Term, Tenant's connected
electrical load from its use of equipment and fixtures (including incandescent
lighting and power), as estimated by Landlord, exceeds the Premises' Standard
Electrical Capacity, then Landlord may, at its option: (i) install separate
electrical meter(s) for the Premises, or (ii) cause a survey to be made by an
independent electrical engineer or consulting firm to determine the amount of
electricity consumed by Tenant beyond the Premises' Standard Electrical
Capacity. Tenant shall reimburse Landlord for the cost of the installation of
said meter(s) or completion of said meter(s) or survey, and shall pay as
Additional Rent the cost of any electricity in excess of an average of the
Premises Standard Electrical Capacity, at the rate charged by the utility
company providing such electricity, assuming continuous business hours, within
ten (10) days after receipt of any bill therefor from Landlord.
C. Noise; Vibration; Floor Load: Business machines and equipment belonging
to Tenant, which cause noise or vibration that may be transmitted to any part of
the Building to such a degree as to be objectionable to Landlord or to any
tenant of the Building, shall be installed and maintained by Tenant at Tenant's
expense on devices that eliminate the noise and vibration. Tenant shall not
place any load upon the floor of the Premises which exceeds the per square foot
load the floor was designed to carry (eighty (80) pounds per square foot for
live loads and twenty (20) pounds per square foot for dead loads).
10. OWNERSHIP AND REMOVAL OF PROPERTY.
A. Landlord's Property: Any Alterations and other improvements and any
equipment, machinery, furnishings and other property, installed or located in
the Premises, the Building or the Land by or on behalf of Landlord or Tenant,
except for Tenant's Personal Property: (i) shall immediately become the property
of Landlord, and (ii) shall be surrendered to Landlord with the Premises as a
part thereof at the end of the Term; provided, however, that if Landlord
requests Tenant to remove any Alterations installed by or on behalf of Tenant,
Tenant shall cause the same to be removed at Tenant's expense on or before the
Lease Expiration Date, or shall reimburse Landlord for the cost of such removal,
as elected by Landlord (unless Landlord expressly waives in writing the right to
require such removal at the time Landlord give its consent to the making of
such Alterations).
B. Removal of Property At End of Term: Tenant shall remove all of
Tenant's Personal Property from the Building and the Land on or before the
Lease Expiration Date. Any personal property belonging to Tenant or to any
other person or entity
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<PAGE>
which is left in the Building or on the Land after the date this Lease is
terminated for any reason shall be deemed to have been abandoned. In such event,
Landlord shall have the right to store such property at Tenant's sole cost
and/or to dispose of it in whatever manner Landlord considers appropriate,
without waiving its right to claim from Tenant all expenses and damages caused
by Tenant's failure to remove such property, and Tenant and any other person or
entity shall have no right to compensation from or any other claim against
Landlord as a result.
11. LANDLORD'S ACCESS TO PREMISES.
Landlord may at any reasonable time enter the Premises to examine them, to
make alterations or repairs thereto or for any other purposes which Landlord
considers necessary or advisable; however, in the case of any emergency,
Landlord and its agents may enter the Premises at any time and in any manner.
Tenant shall allow the Premises to be exhibited by Landlord: (i) at any
reasonable time to representatives of lending institutions or to prospective
purchasers of the Building, and (ii) at any reasonable time within six (6)
months prior to the end of the Term to persons who may be interested in leasing
the Premises. Landlord reserves the right and shall be permitted reasonable
access to the Premises to install facilities within and through the Premises and
to install and service any systems deemed advisable by Landlord to provide
services or utilities to any tenant of the Building.
12. SERVICES AND UTILITIES.
A. Services Provided: As long as Tenant is not in Default, as defined
in Subsection 19.A. below, Landlord shall provide the following to Tenant,
without additional charge, except as otherwise provided herein (including, but
not limited to, as provided in Sections 5 and 1.N. hereof):
(1) Elevator service for common use, subject to call at all times,
including Sundays and Holidays.
(2) Central heating and air conditioning from 8:00 a.m. until 6:00
p.m. on weekdays and from 9:00 a.m. until 1:00 p.m. on Saturdays, exclusive
of Holidays, during the seasons of the year and within the temperature
ranges usually furnished in comparable office buildings in the Washington,
D.C. metropolitan area. Landlord shall provide heat and air conditioning at
other times at Tenant's expense, provided that Tenant gives Landlord notice
by 1:00 p.m. on weekdays for after-hour service on the next weekday, two
(2) business days' notice before a Holiday for service on such Holiday and
two (2) business days' notice for after-hour service on Saturday or Sunday.
Landlord shall charge Tenant for such after-hour, Holiday and special
weekend service at the prevailing rates charged by Landlord from time to
time to other tenants of the Building.
(3) Cleaning and char services in Landlord's standard manner.
(4) Electrical facilities to furnish electricity up to the Premises'
Standard Electrical Capacity.
(5) Rest room facilities.
(6) Routine maintenance, painting and electrical lighting service
for all Common Areas of the Building in such manner as Landlord deems
reasonable.
(7) Reasonable access to the Premises at all times, subject to such
security procedures, restrictions and other regulations as Landlord may
promulgate.
B. Failure to Provide Services: Landlord shall have no liability to
Tenant or others based on any failure by Landlord to furnish the foregoing, due
to Unavoidable Delays, repair or maintenance work or any other reason, and such
failure shall neither render Landlord liable for damages to either person or
property, nor be construed as an eviction of Tenant, nor cause a diminution or
abatement of Rent nor relieve Tenant of any of Tenant's obligations hereunder.
C. Conservation: Tenant hereby agrees to comply with all energy
conservation procedures, controls and requirements instituted by Landlord
pursuant to any government regulations or otherwise, including but not limited
to controls on the permitted range of temperatures, the volume of energy
consumption or the hours of operation of the Building. Institution by Landlord
of such controls and requirements shall not entitle Tenant to terminate this
Lease or to an abatement of any Rent payable hereunder.
D. Recycling: Without limiting the foregoing, Tenant covenants and
agrees, at its sole cost and expense, to comply with all present and future
laws, orders, and regulations of the District of Columbia, federal,
municipal, and local governments,
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departments, commissions, agencies and boards to the extent that they or this
Lease impose on Tenant duties and responsibilities regarding the collection,
sorting, separation, and recycling of trash. Tenant shall pay all costs,
expenses, fines, penalties, or damages that may be imposed on Landlord or Tenant
by reason of Tenant's failure to comply with the provisions of this Section 12,
Subsection D, and, at Tenant's sole cost and expense, shall indemnify, defend
and hold Landlord harmless (including legal fees and expenses) from and against
any actions, claims, and suits arising from such noncompliance, using counsel
reasonably satisfactory to Landlord.
13. RULES AND REGULATIONS.
Tenant shall abide by and observe the rules and regulations attached
hereto as Exhibit D and such other rules and regulations as may be made by
Landlord from time to time, provided that such rules and regulations shall not
be materially inconsistent with the provisions of this Lease. Nothing contained
in this Lease or in any rules and regulations shall be interpreted to impose
upon Landlord any obligations to enforce against any tenant its rules and
regulations, or the provisions of any lease with any other Tenant. and Landlord
shall not be liable to Tenant or any other entity for any violation of said
rules, regulations or lease provisions.
14. REPAIR OF DAMAGE CAUSED BY TENANT: INDEMNIFICATION.
A. Repairs: Except as otherwise expressly provided in this Lease, all
injury, breakage and damage to the Land, the Building or the Premises, caused by
any act or omission of Tenant shall be repaired by and at the sole expense of
Tenant, except Landlord shall have the right, at its option, to make such
repairs and to charge Tenant for all costs and expenses incurred in connection
therewith as Additional Rent payable within thirty (30) days after the rendering
of a bill therefor. Tenant shall notify Landlord promptly of any injury,
breakage or damage to the Land, the Building, or the Premises caused by Tenant.
B. Indemnification: Tenant hereby agrees to indemnify and hold Landlord
harmless from and against all costs, damages, claims, liabilities and expenses,
including attorneys' fees, suffered by or claimed against Landlord, directly or
indirectly, based on, arising out of or resulting from: (i) Tenant's use and
occupancy of the Premises or the business conducted by Tenant therein or
Tenant's presence in the Building or on the Land (ii) the making by Tenant of
any Alterations, (iii) any act or omission of Tenant or its employees, agents
or invitees, and (iv) any breach or default by Tenant in the observance or
performance of its covenants and obligations under this Lease.
15. LIMITATION ON LANDLORD LIABILITY.
A. Liability Standard: Landlord shall not be liable to Tenant or any
other individual or entity for any damage, loss or claim whatsoever, except
damages, losses and claims that are the direct result of Landlord's gross
negligence or willful misconduct; however, in no event shall Landlord be liable
for consequential damages.
B. Limitation on Total Liability: Notwithstanding any other provision of
this Lease, it is expressly understood and agreed that the total liability of
Landlord arising out of or in connection with this Lease, the relationship of
Landlord and Tenant hereunder and/or Tenant's use of the Premises, shall be
limited to the estate of Landlord in the Building. No other property or assets
of Landlord or any partner or owner of Landlord shall be subject to levy,
execution, or other enforcement proceedings or other judicial process for the
satisfaction of any judgement or any other right or remedy of Tenant arising out
of or in connection with this Lease, the relationship of Landlord and Tenant
hereunder and/or Tenant's use of the Premises.
16. FIRE AND OTHER CASUALTY.
If the Premises shall be damaged by fire or other casualty, other than as
a result of the negligence or misconduct of Tenant, the Lease shall not
terminate and, upon adjustment of insurance claims, Landlord shall repair the
damage, provided that Landlord shall have no obligation to repair damage to or
replace Tenant's Personal Property. Except as otherwise provided herein, if any
part of the Premises are rendered untenantable by reason of any such damage,
Rent shall abate from the date of the damage to the date the damage is repaired,
as determined by Landlord, in the proportion that the area of the untenantable
part bears from time to time to the total area of the Premises. No compensation
or reduction of Rent shall be
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paid or allowed for inconvenience, annoyance or injury to Tenant or Tenant's
business arising from any damage to or repair of the Premises or the Building.
Notwithstanding the foregoing, if Landlord does not receive sufficient
insurance proceeds to fully repair the damage, or if the Building shall be so
damaged that, as determined by Landlord, substantial reconstruction of the
Premises or the Building is required (whether or not the Premises have been
damaged), then Landlord, at its option, may give Tenant, within sixty (60) days
after the casualty, written notice of termination of this Lease, and this Lease
and the Term shall terminate (whether or not the Term has commenced) upon the
expiration of thirty (30) days from the date of the notice, with the same effect
as if the new expiration date had been the date initially fixed for expiration
of the Term, and all Rent shall be apportioned as of such date.
If the Premises or the Building shall be damaged by fire or other casualty
due to the negligence or misconduct of Tenant: (i) Landlord shall have no
obligation to repair the Premises or the Building, (ii) this Lease shall, at
Landlord's option, not terminate, (iii) Landlord may at Tenant's expense repair
the damage, and (iv) Landlord may pursue any legal and equitable remedies
available to it.
17. TENANT INSURANCE.
A. Types of Insurance Required: Tenant, at its expense, shall obtain and
maintain in effect at all times during the Term an insurance policy providing
the following coverage:
(1) A fire and extended coverage "all risk" insurance policy covering all
of Tenant's Personal Property within, and improvements and alterations to,
the Premises for not less than the full replacement value thereof. All
proceeds of such insurance shall be used to repair or replace the items so
insured.
(2) A commercial general liability policy on an occurrence basis, with the
following limits:
<TABLE>
<S> <C>
Each occurrence limited bodily injury and property damage $1,000,000
General aggregate $2,000,000
Product/completed operations aggregate $2,000,000
Personal and advertising injury liability $1,000,000
Fire damage legal liability $50,000
Medical payments (any one person) $5,000
</TABLE>
Said insurance shall name Landlord, JBG Properties, Inc. and Mortgagee as an
additional insured. The policy shall protect Landlord, JBG Properties, Inc., and
the Mortgagee against any liability for bodily injury, personal injury, death or
property damage occurring upon, in or about the Premises, the Building or the
Land or arising out of or relating to any risks against which Tenant is required
to indemnify Landlord, JBG Properties, Inc. and the Mortgagee. From time to time
during the Term, Landlord may require Tenant to increase said limits of said
insurance to the limits of liability insurance then customarily required of
tenants of other comparable office buildings in the Washington, D.C.
Metropolitan area.
B. Required Provisions of Policies: All insurance policies required to be
maintained by Tenant under this Lease must: (i) be issued by insurance companies
approved by Landlord; (ii) be in form and have content satisfactory to Landlord;
(iii) be written as primary policy coverage and not contributing to or in excess
of any coverage which Landlord or the Mortgagees may carry; (iv) contain an
express waiver of any right of subrogation by the insurance company against
Landlord, the Mortgagees and the Landlord's and the Mortgagees' employees and
agents; and (v) provide that the policy may not be canceled or permitted to
lapse unless Landlord shall have received at least fifteen (15) days prior
written notice of cancellation or non-renewal. Tenant shall deliver to Landlord
certified copies or duplicate originals of each such policy and any renewal
policy, together with evidence of payment of all applicable premiums, at least
ten (10) days before the Lease Commencement Date and at least thirty (30) days
before the renewal of any policies. Any insurance required of Tenant under this
Section may be carried under a blanket policy, provided that said policy shall
specifically set forth the amount of insurance allocated to this Lease.
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C. Effect of Tenant's Activities on Insurance: Tenant shall not conduct
or permit to be conducted any activity, or place any equipment in or about the
Land, the Building or the Premises which will increase the rate of, or make void
or voidable, any fire or other insurance maintained or required to be maintained
by Landlord or any Mortgagee on the Building, the Land or the property kept
thereon or therein, which will conflict with the provisions of any such
insurance policy or which will make it impracticable for Landlord to obtain
insurance covering any risks against which Landlord reasonably deems it
advisable to obtain insurance. In the event any increases in the rates of such
insurance are, in Landlord's reasonable judgement, due to the Tenant's presence
in the Building, to any activity conducted or property installed or placed by
Tenant on or about the Land, the Building or the Premises or to Alterations
installed by Tenant or at Tenant's request (other than Building Standard Work,
as defined in the Work Agreement), Tenant shall reimburse Landlord for the
amount of such increases promptly upon demand therefor. Statements by the
applicable insurance company or insurance rating bureau that such increases are
due to any activity, property or improvements shall be conclusive for the
purposes of determining Tenant's liability hereunder.
D. Termination Right: Landlord shall have the right to terminate this
Lease upon thirty (30) days notice to Tenant in the event Landlord receives
notice from any of Landlord's insurance carriers that such carrier intends to
cancel its insurance on the Building, or to increase the cost of such insurance
by more than one hundred percent (100%) above the premium payable by Landlord
immediately prior to such notice, due to the activities of Tenant or the
presence of Tenant in the Building. However, Landlord shall not terminate this
Lease in the event Landlord is able, with good faith efforts, to obtain
equivalent insurance from an insurance carrier satisfactory to Landlord at a
premium not more than one hundred percent (100%) greater than the premium for
the canceled insurance; provided that Tenant shall reimburse Landlord for all
addition premiums charged to Landlord by such new insurance carrier. It is
expressly understood that Landlord shall not have the right to terminate this
Lease pursuant to this Subsection D, if any cancellation or rate increase is due
to factors generally applicable to the insurance or rental market, rather than
to Tenant's activities or presence in the Building.
E. Waiver: Landlord and Tenant hereby each waive and release each other
from any and all liabilities, claims and losses for which Landlord or Tenant is
or may be held liable, to the extent either party: (i) receives insurance
proceeds on account thereof, or (ii) is required to maintain insurance pursuant
to this Section, whichever is greater.
18. CONDEMNATION.
A. Landlord's Right to Terminate: If a substantial part of the Premises,
the Building or the Land is taken or condemned by any governmental authority for
any purpose or is granted to any authority in lieu of condemnation
(collectively, a "taking"), Landlord shall have the right in its sole discretion
to terminate this Lease by written notice to Tenant, and upon the giving of such
notice, the Term shall terminate as of the date title vests in the authority,
and Rent shall be abated as of that date. For purposes of this Section, a
substantial part of the Premises, the Land or the Building shall be considered
to have been taken if, in the sole opinion of Landlord, the taking shall render
it commercially undesirable for Landlord to permit this Lease to continue or to
continue operating the Building.
B. Adjustment of Rent: If a portion of the Premises is taken and Landlord
does not elect to terminate this Lease pursuant to the preceding paragraph, then
Rent shall be equitably adjusted as of the date title vests in the authority and
this Lease shall otherwise continue in full force and effect.
C. Division of Award: Tenant shall have no claim against Landlord arising
out of or related to any taking, or for any portion of the amount that may be
awarded as a result, and Tenant hereby assigns to Landlord all its rights, title
and interest in and to any such award; provided, however, that Tenant may assert
any claim it may have against the authority for compensation for Tenant's
Personal Property and for any relocation expenses compensable by statute, as
long as such awards shall be made in addition to and stated separately from the
award made for the Land, the Building and the Premises.
19. DEFAULT.
A. Default of Tenant: The following events shall be a default by Tenant
(a "Default") under this Lease:
(1) Failure of Tenant to pay Rent as and when due, if the failure
continues for three (3) days after notice from Landlord specifying the
failure.
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(2) Failure of Tenant to comply with or perform any covenant or
obligation of Tenant under this Lease, other than those concerning the
payment of Rent, if the failure continues for ten (10) days after notice
from Landlord to Tenant specifying the failure.
(3) If, in Landlord's reasonable opinion, Tenant's activities or
presence in the Premises results in a significant, continuing or repeated
threat of physical danger to other tenants and/or users of the Building,
whether or not Tenant is capable of controlling such threat.
(4) If Tenant, any guarantor of Tenant's performance hereunder (a
"Guarantor") or, if Tenant is a partnership, any partner of Tenant
("Partner"), shall file a voluntary petition in bankruptcy or insolvency,
shall be adjudicated bankrupt or insolvent or shall file a petition or
answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
federal, state or other law, or shall make an assignment for the benefit of
creditors, or shall seek or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or of any Guarantor or Partner or of all
or any part of the property of Tenant or of such Guarantor or Partner.
(5) If, within thirty (30) days after the commencement of any
proceeding against Tenant or a Guarantor or Partner, whether by the filing
of a petition or otherwise, seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any present or future applicable federal, state or other law, such
proceeding shall not have been dismissed or if, within thirty (30) days
after the appointment of any trustee, receiver or liquidator of Tenant or
any Guarantor or Partner, or of all or any part of the property of Tenant
or of any Guarantor or Partner, without the acquiescence of such individual
or entity, such appointment shall not have been vacated or otherwise
discharged, or if any execution or attachment shall have been issued
against the property of Tenant or of any Guarantor or Partner, pursuant to
which the Premises shall be taken or occupied or attempted to be taken or
occupied.
(6) If Tenant fails to take possession of the Premises on the Lease
Commencement Date or vacates, or abandons the Premises prior to the Lease
Expiration Date, with or without an intention of paying Rent; provided,
however, that if (i) Tenant gives Landlord at least thirty (30) days prior
written notice that it intends to vacate the Premises, (ii) Tenant pays the
full amount of all Rent due under this Lease while the Premises are vacant,
(iii) the fact that the Building is vacant does not adversely affect the
Building or other tenants therein and does not result in any liability to,
or expenditure of funds by, Landlord, and (iv) Tenant leaves the Premises
in a condition satisfactory to Landlord and continues to maintain the
Premises and the switch therein, if such switch remains in the Premises, in
a condition satisfactory to Landlord throughout the remainder of the Term,
then, and in such event only, Tenant shall not be deemed to be in Default
under this Section 19.A.(6) and Landlord shall have the right, exercisable
by sending written notice to Tenant, to sublet from Tenant for the balance
of the Term of this Lease all or any portion of the Premises, or to
terminate this Lease as to all or any portion of the Premises, which rights
of Landlord as to subletting and termination shall be exercisable by
Landlord in its sole discretion.
B. Remedies Upon Default: Upon the occurrence of a Default, Landlord
shall have the right, then or at any time thereafter:
(1) Without demand or notice, to reenter and take possession of all
or any part of the Premises, to expel Tenant and those claiming through
Tenant and to remove any property therein, either by summary proceedings or
by any other action at law, in equity or otherwise, with or without
terminating this Lease, without being deemed guilty of trespass and without
prejudice to any other remedies of Landlord for breach of this Lease,
and/or
(2) To give Tenant written notice of Landlord's intent to terminate
this Lease, and on the date specified in Landlord's notice, Tenant's right
to possession of the Premises shall cease and this Lease shall terminate.
If Landlord elects to terminate this Lease, everything contained in this
Lease on the part of Landlord to be done shall cease, without prejudice to
Landlord's right to recover from Tenant all Rent, as set forth in Subsections C.
and D. below. If
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Landlord elects to reenter pursuant to Subsection B.(1) above, Landlord may
terminate this Lease, or, from time to time without terminating this Lease, may
relet all or any part of the Premises as the agent of Tenant, for such term, at
such rental and upon such other provisions as Landlord deems acceptable, with
the right to make any alterations and repairs to the Premises that Landlord
deems appropriate, at Tenant's expense. No such reentry or taking of possession
of the Premises shall be construed as an election to terminate this Lease,
unless notice of such intention is given pursuant to Subsection B.(2) above, or
unless termination be decreed by a court of competent jurisdiction at the
instance of Landlord. Landlord shall in no event be under any obligation to
relet any part of the Premises.
C. Liability of Tenant: If Landlord terminates this Lease or reenters the
Premises (with or without terminating this Lease), Tenant shall remain liable
(in addition to all other liabilities of Tenant accrued at the time of the
Default) for the sum of (i) any unpaid Rent accrued prior to the time of
termination and/or reentry, as the case may be, plus interest thereon from the
due date at the Default Rate, (ii) all Base Rent and Additional Rent provided
for in this Lease from the time of termination and/or reentry, as the case may
be, until the date this Lease would have expired had a Default not occurred,
plus interest thereon from the due date at the Default Rate, (iii) any and all
expenses (including but not limited to reasonable attorneys' and brokerage fees)
incurred by Landlord in reentering and repossessing the Premises, in correcting
any default, in painting, altering or repairing the Premises in order to place
the Premises in first-class rentable condition (whether or not the Premises are
relet), in protecting and preserving the Premises and in reletting or attempting
to relet the Premises, and (iv) any other amounts necessary to compensate
Landlord for any other injury or detriment caused by the Default, minus the net
proceeds (after deducting any rental abatements, tenant improvement allowances
and other concessions and inducements) actually received by Landlord, if any,
from any reletting to the extent attributable to the period prior to the date
this Lease would have expired had a Default not occurred, Landlord shall have
the option to recover any damages sustained by Landlord either at the time of
reletting, if any, or in separate actions from time to time as said damages
shall have been made more easily ascertainable by successive relettings or, at
Landlord's option, to defer any such recovery until the date this Lease would
have expired in the absence of a Default, in which event Tenant hereby agrees
that the cause of action shall be deemed to have accrued on the aforesaid date.
The provisions of this Section shall be in addition to, and shall not prevent
the enforcement of, any claim Landlord may have for anticipatory breach of this
Lease.
D. Liquidated Damages: In addition to Landlord's rights pursuant to
Subsection C. above, if Landlord terminates this Lease, Landlord shall have the
right at any time, at its sole option, to require Tenant to pay to Landlord on
demand, as liquidated damages, the sum of (i) the total of the Base Rent,
Additional Rent and all other sums which would have been payable under this
Lease from the date of Landlord's demand for liquidated damages ("Landlord's
Demand") until the date this Lease would have terminated in the absence of the
Default, discounted to present value at the rate of five percent (5%) per annum
(the "Discount Rate"), (ii) all unpaid Rent accrued prior to the time of
Landlord's Demand, plus interest thereon from the due date at the Default Rate,
(iii) any and all expenses (including but not limited to attorneys' and
brokerage fees) incurred by Landlord in reentering and repossessing the
Premises, in correcting any default, in painting, altering or repairing the
Premises in order to place the Premises in first-class rentable condition
(whether or not the Premises are relet), in protecting and preserving the
Premises and in reletting or attempting to relet the Premises, and (iv) any
other amounts necessary to compensate Landlord for any other injury or
detriment caused by the Default; minus the sum of (a) the net fair market
rental value of the Premises for the period referred to in Subsection D.(i)
above, discounted to present value at the Discount Rate, and (b) any sums
actually paid by Tenant to Landlord pursuant to Subsection C. above; provided,
however, that if said damages shall be limited by law to a lesser amount,
Landlord shall be entitled to recover the maximum amount permitted by law. The
"net fair market rental value" referred to in Subsection D.(a) above shall be
the fair market rental value of the Premises at the time of Landlord's Demand,
reduced by any rental abatements, tenant improvement allowances and other
concessions and inducements generally provided by landlords seeking to lease
comparable commercial property in the area of the Premises at the time of
Landlord's Demand. If reletting is accomplished within a reasonable time after
Lease termination, the "net fair market rental value" referred to in Subsection
D.(a) above shall be deemed prima facie to be the net
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rental income (after deducting any rental abatements, tenant improvement
allowances and other concessions and inducements) realized upon such reletting.
E. Waiver: Tenant, on its own behalf and on behalf of all persons and
entities claiming through Tenant, including but not limited to creditors of
Tenant, hereby waives any and all rights and privileges which Tenant and such
other persons and entities might otherwise have under any present or future law:
(i) to redeem the Premises, (ii) to reenter or repossess the Premises or (iii)
to restore the operation of this Lease, with respect to any dispossession of
Tenant by judgment or warrant of any court, any reentry by Landlord or any
expiration or termination of this Lease, whether by operation of law or pursuant
to the provisions of this Lease. Tenant hereby expressly waives receipt of a
Notice to Quit.
F. Lien on Personal Property: [Intentionally omitted.] Landlord shall have
a lien upon Tenant's Personal Property and other Property brought onto the
Premises by Tenant, as and for security for the Rent and other obligations of
Tenant herein provided. Landlord may, at any time after a Default, seize and
take possession of any and all such property, if Tenant fails to redeem the
property so seized by payment of whatever sums may be due Landlord pursuant to
this Lease, then Landlord shall have the right, after twenty (20) days written
notice to Tenant to sell such personal property at public or private sale and
upon such terms and conditions as Landlord may deem advantageous, and after the
payment of all proper charges incident to such sale, apply the proceeds thereof
to the payment of any balance due to Landlord hereunder and pay any remaining
balance to Tenant. The exercise by Landlord of the foregoing remedy shall not
discharge Tenant from any deficiency owed to Landlord, nor shall it preclude the
exercise by Landlord of any rights and remedies. Landlord shall not be liable to
Tenant, or other owners of property seized, for damages, general or special, if
Landlord reasonably believed it was acting lawfully in seizing property located
in the Premises.
G. Right of Distress: [Intentionally omitted.] Landlord shall, to the
extent permitted by law, have a right of distress for Rent.
H. Right of Landlord to Cure: If Tenant defaults in the making of any
payment or in the doing of any act required to be made or done by Tenant under
this Lease, then Landlord may, at its option, make such payment or do such act,
and the expenses thereof, with interest thereon at the Default Rate, from the
date paid by Landlord, shall constitute Additional Rent hereunder due and
payable by Tenant with the next payment of Monthly Base Rent.
I. Attorneys' Fees: In the event of any Default hereunder, Tenant shall pay
to Landlord all attorneys' fees incurred by Landlord in connection with such
Default or the enforcement of Landlord's rights or remedies arising in
connection therewith, whether or not this Lease is terminated and whether or not
Landlord institutes any lawsuit against Tenant as a result of such Default. In
addition to the foregoing, whether or not this Lease is terminated, Tenant shall
pay to Landlord all other costs incurred by Landlord with respect to any lawsuit
instituted or action taken by Landlord to enforce the provisions of this Lease.
J. Survival: Tenant's liability pursuant to this Section 19 shall survive
the termination of this Lease, the institution of summary proceedings and/or the
issuance of a warrant thereunder.
20. NO WAIVER.
No failure or delay by Landlord in enforcing its right to strict
performance by Tenant of every provision of this Lease or in exercising any
right or remedy hereunder, and no acceptance by Landlord of full or partial rent
during the continuance of any Default, shall constitute a waiver of the
provision or the Default, and no provision shall be waived or modified except by
a written instrument executed by Landlord. No payment by Tenant, or receipt by
Landlord of a lesser amount than the full Rent shall be deemed to be other than
a payment on account, notwithstanding any endorsement or statement on any check
or letter accompanying any payment of any Rent. No waiver of any Default or
settlement of any proceeding instituted on account of any claimed Default shall
affect or alter this Lease or constitute a waiver of any of Landlord's rights
hereunder.
21. HOLDING OVER.
If Tenant shall be in possession of the Premises after termination of this
Lease (whether by normal expiration of the Term or otherwise), at Landlord's
option: (i) Landlord may deem Tenant to be occupying the Premises as a tenant
from month-to-month, at double the Monthly Rent in effect for the last full
month of the Term, and subject to all of the other provisions of this
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Lease, as applicable to a month-to-month tenancy, or (ii) Landlord may exercise
any or all remedies for Default and at law and in equity, including but not
limited to an action against Tenant for wrongfully holding over.
22. SUBORDINATION.
A. Lease Subordinate: This Lease shall be subject and subordinate to the
lien of any and all Mortgages and to any Ground Leases, and any and all
renewals, extensions, modifications, recastings and refinancings thereof. This
clause shall be self-operative, without execution of any further instrument; but
if requested by Landlord or any Mortgagee, Tenant shall promptly execute a
certificate or other document evidencing and providing for such subordination.
Landlord shall have the right to execute said document on behalf of Tenant if
Tenant fails to do so within five (5) days after receipt of the request. Tenant
agrees that, if any Mortgage is foreclosed or Ground Lease terminated, upon
request by the purchaser at the foreclosure sale or Ground Lessor, as the case
may be, Tenant shall attorn to and recognize the purchaser or Ground Lessor as
the landlord under this Lease and shall make all payments required hereunder to
such new landlord without any deduction or set-off of any kind whatsoever.
Tenant waives the provisions of any law or regulation, now or hereafter in
effect, which may give or purport to give Tenant any right to terminate or
otherwise affect this Lease or the obligations of Tenant hereunder in the event
that any such foreclosure, termination or other proceeding is filed, prosecuted
or completed. Notwithstanding anything herein to the contrary, any Mortgagee may
at any time subordinate the lien of its Mortgage to the operation and effect of
this Lease without Tenant's consent, by giving Tenant written notice of such
subordination, in which event this Lease shall be deemed to be senior to such
Mortgage, and thereafter such Mortgagee shall have the same rights as it would
have had if this Lease had been executed, delivered and recorded before said
Mortgage.
B. Modifications to Lease: In the event any of Landlord's insurance
carriers or any Mortgagee requests modifications to this Lease, Tenant shall
execute a written amendment incorporating such requested modifications within
thirty (30) days after the same has been submitted to Tenant by Landlord,
provided that such modifications do not materially adversely affect Tenant's use
of the Premises as herein permitted or increase the rentals and other sums
payable by Tenant hereunder. In the event Tenant refuses or fails to execute
such amendment within thirty (30) days, Landlord shall have the right, at its
sole option, in addition to Landlord's other remedies for Default, to terminate
and cancel this Lease by written notice to Tenant specifying the date on which
this Lease will terminate. From and after said termination date, both Landlord
and Tenant shall be relieved of any and all further obligations hereunder,
except liabilities arising prior to the date of termination.
23. ASSIGNMENT AND SUBLETTING.
A. No Transfer Without Consent: Tenant shall not, without the prior
written consent of Landlord in each instance (which consent may be withheld in
Landlord's sole discretion) (i) assign, mortgage or otherwise encumber this
Lease or any of its rights hereunder; (ii) sublet the Premises or any part
thereof or permit the occupancy or use of the Premises or any part thereof by
any persons or entities other than Tenant; or (iii) permit the assignment of
this Lease or any of Tenant's rights hereunder by operation of law. Any
attempted assignment, mortgaging or encumbering of this Lease or any of Tenant's
rights hereunder and any attempted subletting or grant of a right to use or
occupy all or a portion of the Premises in violation of the foregoing sentence
shall be void.
B. Take-Back Rights: In addition, Tenant may not assign this Lease, nor
sublet (or permit occupancy or use of) the Premises, or any part thereof,
without giving Landlord thirty (30) days prior written notice thereof. For
thirty (30) days following receipt of said notice, Landlord shall have the
right, exercisable by sending notice to Tenant, to sublet from Tenant for the
balance of the Term of this Lease (i) all of the Premises in the event Tenant
notified Landlord of its desire to assign this Lease, or (ii) so much of the
Premises as Tenant intends to sublet in the event Tenant notified Landlord of
its desire to sublet the Premises or permit another to make use thereof, at the
same rental Tenant is obligated to pay to Landlord hereunder. In the event
Landlord does not exercise the aforesaid right within said thirty (30) days,
Tenant may attempt to assign, sublet or permit use of this Lease or such space;
provided that Tenant shall obtain the prior written consent of Landlord as set
forth in Subsection A. above. In the event that Tenant defaults hereunder,
Tenant hereby assigns to Landlord the Rent due from any assignee or subtenant
and hereby authorizes each such party to pay said Rent to Landlord.
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C. Transfer of Stock: If Tenant and/or any Guarantor is a corporation,
then the sale, issuance or transfer of any voting capital stock of Tenant or any
Guarantor, by the person, persons or entities owning a controlling interest
therein as of the date of this Lease, which results in a change in the voting
control of Tenant or the Guarantor, shall be deemed an assignment within the
meaning of this Section 23. If Tenant and/or any Guarantor is a partnership, the
sale or transfer of the partnership share, or any portion thereof, of any
general partner shall be deemed an assignment of this Lease.
D. Expenses and Profits; Effect of Consent:
(1) In the event Landlord permits Tenant to assign or sublet all or a
portion of the Premises to a third party, one-half (1/2) of any sums that
are paid by such third party for the right to occupy the Premises, in
excess of the sum of (i) the Rent then in effect and (ii) all reasonable
expenses actually paid by Tenant for brokerage commissions, attorneys'
fees, tenant improvements and marketing expenses in connection with such
subleasing or assignment, shall be paid by Tenant to Landlord on a monthly
basis as Additional Rent.
(2) Tenant shall be responsible for all costs and expenses, including
attorneys' fees, incurred by Landlord in connection with any proposed or
purported assignment or sublease and an administrative fee of One Thousand
Dollars ($1,000.00).
(3) The consent by Landlord to any assignment or subletting shall
neither be construed as a waiver or release of Tenant from any covenant or
obligation of Tenant under this Lease, nor as relieving Tenant from giving
Landlord the aforesaid thirty (30) days notice of, or from obtaining the
consent of Landlord to, any further assignment or subletting. The
collection or acceptance of Rent from any such assignee or subtenant shall
not constitute a waiver or release of Tenant from any covenant or
obligation of Tenant under this Lease, except as expressly agreed by
Landlord in writing.
24. TRANSFER BY LANDLORD.
Landlord (and any successor or affiliate of Landlord) may freely sell,
assign or transfer all or any portion of its interest in this Lease or the
Premises, the Building or the Land and, in the event of any such sale,
assignment or transfer, shall be relieved of any and all obligations under this
Lease from and after the date of the sale, assignment or transfer. From and
after said date, Tenant shall be bound to such purchaser, assignee or other
transferee, as the case may be, as though the latter had been the original
Landlord hereunder, provided that the purchaser, assignee or transferee agrees
to assume the obligations of Landlord hereunder.
25. INABILITY TO PERFORM.
This Lease and Tenant's obligation hereunder shall in no way be affected,
impaired or excused, nor shall Tenant have any claim against Landlord for
damages, because Landlord, due to Unavoidable Delays, is unable to fulfill any
of its obligations under this Lease, including, but not limited to, any
obligations to provide any services, repairs, replacements, alterations or
decorations or to supply any improvements, equipment or fixtures.
26. ESTOPPEL CERTIFICATES.
Tenant shall, without charge, within five (5) days after receipt of any
request therefor, execute and deliver to Landlord a certificate stating: (i)
whether this Lease is unmodified and in full force and effect (or if there have
been modifications, that the Lease is in full force and effect and setting forth
all such modification); (ii) whether there then exist any defenses against the
enforcement of any right of Landlord hereunder (and, if so, specifying the same
in detail); (iii) the dates to which rent and any other charges hereunder have
been paid by Tenant; (iv) that Tenant has no knowledge of any then uncured
defaults under this Lease (or, if Tenant has knowledge of any such defaults,
specifying the same in detail); (v) that Tenant has no knowledge of any event
that will or may result in the termination of this Lease (or if Tenant has such
knowledge, specifying the same in detail); (vi) the address to which notices to
Tenant are to be sent; and (vii) such other information as may be reasonably
requested. It is understood that any such certificate may be relied upon by
Landlord, any Mortgagee, prospective Mortgagee, Ground Lessor, prospective
Ground Lessor, or purchaser or prospective purchaser of the Land or the
Building.
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27. COVENANT OF QUIET ENJOYMENT.
Landlord covenants that it has the right to make this Lease and that, if
Tenant shall pay all Rent and perform all of Tenant's other obligations under
this Lease, Tenant shall have the right, during the Term and subject to the
provisions of this Lease, to quietly occupy and enjoy the Premises without
hindrance by Landlord or its successors and assigns.
28. WAIVER OF JURY TRIAL.
Landlord and Tenant hereby waive trial by jury in any action, proceeding or
counterclaim brought by either of them against the other with respect to any
matter arising out of or connected with this Lease.
29. BROKERS.
Landlord and Tenant each represents and warrants to the other that, except
as hereinafter set forth, neither of them has employed any broker in procuring
or carrying on any negotiations relating to this Lease. Landlord and Tenant
shall indemnify and hold each other harmless from any loss, claim or damage
relating to the breach of the foregoing representation and warranty. Landlord
recognizes only Barnes, Morris, Pardoe & Foster as broker(s) with respect to
this Lease and agrees to be responsible for the payment of any leasing
commissions owed to said broker(s).
30. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord shall have the following rights, exercisable without notice,
without liability for damage or injury to property, person or business and
without effecting an eviction, constructive or actual, or disturbance of
Tenant's use or possession of the Premises or giving rise to any claim for
set-off, abatement of Rent or otherwise:
A. To change the Building's name or street address.
B. To affix, maintain and remove any and all signs on the exterior and
interior of the Building.
C. To designate and approve, prior to installation, all window shades,
blinds, drapes, awnings, window ventilators, lighting and other similar
equipment to be installed by Tenant that may be visible from the exterior of
the Premises or the Building.
D. To decorate and make repairs, alterations, additions and improvements,
whether structural or otherwise, in, to and about the Building and any part
thereof, and for such purposes to enter the Premises, and, during the
continuance of any such work, to close temporarily doors, entry ways, Common
Areas in the Building and to interrupt or temporarily suspend Building services
and facilities, all without affecting Tenant's obligations hereunder, as long as
the Premises remain tenantable.
E. To grant to anyone the exclusive right to conduct any business or
render any service in the Building, provided Tenant is not thereby excluded from
uses expressly permitted herein.
F. To alter, relocate, reconfigure and reduce the Common Areas of the
Building, as long as the Premises remain reasonably accessible.
G. To alter, relocate, reconfigure, reduce and withdraw the Common Areas
located outside the Building, including parking and access roads, as long as the
Premises remain reasonably accessible.
H. To erect, use and maintain pipes and conduits in and through the
Premises.
31. NOTICES.
No notice, request, approval, waiver or other communication which may be
or is required or permitted to be given under this Lease shall be effective
unless the same is in writing and hand-delivered, sent by registered or
certified mail, return receipt requested, first-class postage prepaid, or sent
postage prepaid by a reputable air courier service that provides written notice
of delivery, addressed as follows:
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If to Landlord:
c/o JBG PROPERTIES, INC.
1250 Connecticut Avenue, N.W.
Suite 500
Washington, D.C. 20036
Attention: Director of Commercial Management
If to Tenant:
<TABLE>
<S> <C>
Prior to the Lease Commencement Date: After the Lease Commencement Date:
4206 Technology Court 4219 Lafayette Center Drive
- ------------------------------------- -----------------------------------------
Chantilly, Virginia 22021 Chantilly, Virginia 22021
- ------------------------------------- -----------------------------------------
- ------------------------------------- -----------------------------------------
Attn: Attn:
------------------------------- -----------------------------------
</TABLE>
at any other address of which either party shall notify the other in accordance
with this Section. Such communications, if sent by air courier or registered or
certified mail, shall be deemed to have been given two (2) days after the date
of mailing if any Mortgagee shall notify Tenant that it is the holder of a
Mortgage affecting the Premises, no notice, request or demand thereafter sent by
Tenant to Landlord shall be effective until a copy of same shall be sent to such
Mortgagee in the manner prescribed in this Section at such address as such
Mortgagee shall designate.
32. MISCELLANEOUS PROVISIONS.
A. Benefit and Burden: The provisions of this Lease shall be binding
upon, and shall inure to the benefit of, the parties hereto and each of their
respective successors and permitted assigns.
B. Governing Law: This Lease shall be construed and enforced in
accordance with the laws of the jurisdiction in which the Building is located.
C. No Partnership: Nothing contained in this Lease shall be deemed to
create a partnership or joint venture between Landlord and Tenant, or to
create any other relationship between the parties other than that of Landlord
and Tenant.
D. Delegation by Landlord: Wherever Landlord has the authority to take
any action under this Lease, Landlord shall have the right to delegate such
authority to others, and Landlord shall be responsible for the authorized
actions of such agents, employees and others, to the same extent as if Landlord
had taken such action itself.
E. Tenant Responsibility for Agents: In any case where Tenant is
responsible for performing or refraining from an act or for preventing an action
or result from occurring, Tenant shall also be responsible for any actions taken
or omitted by Tenant's agents, employees, business invitees, licensees,
contractors, subtenants, family members, guests and any other individuals or
entities present in the Building or on the Land at Tenant's invitation.
F. Invalidity of Particular Provisions: If any provision of this Lease or
the application thereof to any person, entity or circumstance shall, to any
extent, be held invalid or unenforceable, the remaining provisions and the
application of such invalid or unenforceable provisions to persons, entities and
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby. Each provision of this Lease shall be valid and
enforced to the fullest extent permitted by law.
G. Counterparts: This Lease may be executed in several counterparts, all
of which shall constitute one and the same document.
H. Entire Agreement: This Lease, and any exhibits and addenda attached
hereto, embody the entire agreement of the parties hereto, and no
representations, inducements or agreements, oral or otherwise, between the
parties not contained in this Lease or in the exhibits or addenda shall be of
any force or effect. No rights, privileges, easements or licenses are granted to
Tenant hereby, except as expressly set forth herein.
I. Amendments: This Lease may not be modified in whole or in part in any
manner other than by an agreement in writing.
J. Mortgagee's Performance: Tenant shall accept performance of any of
Landlord's obligations hereunder by any Mortgagee.
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K. Limitation on Interest: In any case where this Lease provides for a
rate of interest that is higher than the maximum rate permitted by law, the rate
specified herein shall be deemed to equal, and the party designated as recipient
of such interest shall be entitled to receive, the maximum rate of interest
permitted by law.
L. Remedies Cumulative: All rights and remedies of Landlord shall be
cumulative and shall not be exclusive of any other rights or remedies of
Landlord hereunder or now or hereafter existing at law or in equity.
M. Annual Financial Statements: Not later than March 31 of each Fiscal
Year during the Term, Tenant shall submit to Landlord a financial statement
covering the preceding Fiscal Year, which has been prepared in accordance with
generally accepted accounting principles and which has been certified by an
independent certified public accountant to be complete and accurate.
33. LENDER APPROVAL [Intentionally omitted.]
If the Mortgagee fails to give its consent to this Lease, Landlord shall
have the right, at its sole option, to terminate and cancel this Lease. Such
option shall be exercisable by Landlord by written notice to Tenant of such
termination, whereupon this Lease shall be deemed canceled and terminated, and
both Landlord and Tenant shall be relieved of any and all liabilities and
obligations hereunder.
34. PARKING.
Parking will be made available to Tenant pursuant to the provisions of
Exhibit F attached hereto.
35. SECURITY DEPOSIT.
A. Amount and Uses: Landlord acknowledges receipt from Tenant of Seven
Thousand Forty and 21/100 Dollars ($7,040.21), to be held by Landlord as
security for the payment of all Rent payable by Tenant and for the faithful
performance by Tenant of all other obligations of Tenant under this Lease. Said
Security Deposit shall be repaid to Tenant after the termination of this Lease
(or any renewal thereof), provided Tenant shall have made all such payments and
performed all such obligations hereunder. Landlord shall not be required to
maintain the Security Deposit in a separate account. The Security Deposit shall
not be mortgaged, assigned, transferred or encumbered by Tenant without the
prior written consent of Landlord, and any such act shall be void. Landlord may,
at Landlord's option, appropriate and apply the entire Security Deposit or so
much thereof as Landlord believes may be necessary, to compensate Landlord for
the payment of any past-due Rent and for loss or damage sustained by Landlord
due to any Default. In the event Landlord appropriates or applies the Security
Deposit in such a manner, Tenant, within five (5) days after notice thereof,
shall pay to Landlord an amount sufficient to restore the Security Deposit to
the original sum deposited. Tenant's failure to restore any such deficiency
shall constitute a Default hereunder. In the event of bankruptcy or other
debtor-creditor proceedings by or against Tenant, the Security Deposit shall be
applied first to the payment of Rent due Landlord for all periods prior to the
filing of such proceedings.
B. Transferability: In the event of a sale or transfer of Landlord's
interest in the Building or of the interest of any successor or assign of
Landlord, Landlord (or such successor or assign) shall have the right to
transfer the Security Deposit to any vendee or transferee and shall thereupon be
released automatically from any liability therefor. Tenant shall look solely to
the transferee for the return of the Security Deposit. No Mortgagee or purchaser
of any or all of the Building at any foreclosure proceeding shall (regardless of
whether the Lease is at the time subordinated to the lien of said Mortgage) be
liable to Tenant or any other person for any of such Security Deposit, or any
other payment made by Tenant hereunder, unless Landlord has actually delivered
said deposit or other such sum to such Mortgagee or purchaser. In the event of
any rightful and permitted assignment of Tenant's interest in this Lease, the
Security Deposit shall be deemed to be held by Landlord as a deposit made by the
assignee, and Landlord shall have no liability to the assignor with respect to
the return of the Security Deposit.
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36. HAZARDOUS MATERIALS.
A. Definition. As used in this Lease, the term "Hazardous Material" means
any flammable items, explosives, radioactive materials, hazardous or toxic
substances, material or waste or related materials, including any substances
defined as or included in the definition of "hazardous substances", "hazardous
wastes", infectious wastes", hazardous materials, or "toxic substances" now or
subsequently regulated under any federal, state or local laws, regulations or
ordinances including, without limitation, oil, petroleum-based products, paints,
solvents, lead, cyanide, DDT, printing inks, acids, pesticides, ammonia
compounds and other chemical products, asbestos, PCBs and similar compounds, and
including any different products and materials which are subsequently found to
have adverse effects on the environment or the health and safety of persons.
B. General Prohibition. Tenant shall not cause or permit any Hazardous
Material to be generated, produced, brought upon, used, stored, treated,
discharged, released, spilled or disposed of on, in under or about the Premises,
the Building, or the Land (hereinafter referred to collectively as the
"Property") by Tenant, its affiliates, agents, employees, contractors,
subtenants, assignees or invitees. Tenant shall indemnify, defend and hold
Landlord harmless from and against any and all actions (including, without
limitation, remedial or enforcement actions of any kind, administrative or
judicial proceedings, and orders or judgments arising out of or resulting
therefrom), costs, claims, damages (including without limitation, attorneys',
consultants', and experts' fees, court costs and amount paid in settlement of
any claims or actions), fines, forfeitures or other civil, administrative or
criminal penalties, injunctive or other relief (whether or not based upon
personal injury, property damage, or contamination of, or adverse effects upon,
the environment, water tables or natural resources), liabilities or losses
arising from a breach of this prohibition by Tenant, its affiliates, agents,
employees, contractors, subtenants, assignees or invitees.
C. Notice. In the event that Hazardous Materials are discovered upon, in,
or under the Property, and any governmental agency or entity having jurisdiction
over the Property requires the removal of such Hazardous Materials, Tenant shall
be responsible for removing those Hazardous Materials arising out of or related
to the use or occupancy of the Property by Tenant or its affiliates, agents,
employees, contractors, subtenants, assignees or invitees but not those of its
predecessors. Notwithstanding the foregoing, Tenant shall not take any remedial
action in or about the Property or any portion thereof without first notifying
Landlord of Tenant's intention to do so and affording Landlord the
opportunity to protect Landlord's interest with respect thereto. Tenant
immediately shall notify Landlord in writing of: (i) any spill, release,
discharge or disposal of any Hazardous Material in, on or under the Property or
any portion thereof; (ii) any enforcement, cleanup, removal or other
governmental or regulatory action instituted, contemplated, or threatened (if
Tenant has notice thereof) pursuant to any laws respecting Hazardous Materials;
(iii) any claim made or threatened by any person against Tenant or the Property
or any portion thereof relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from or claimed to result from any
Hazardous Materials; and (iv) any reports made to any governmental agency or
entity arising out of or in connection with any Hazardous Materials in, on under
or about or removed from the Property or any portion thereof, including any
complaints, notices, warnings, reports or asserted violations in connection
therewith. Tenant also shall supply to Landlord as promptly as possible, and in
any event within five (5) business days after Tenant first receives or sends the
same, copies of all claims, reports, complaints, notices, warnings or asserted
violations relating in any way to the Premises, the Property or Tenant's use or
occupancy thereof.
D. Survival. The respective rights and obligations of Landlord and
Tenant under this Section 36 shall survive the expiration or earlier
termination of this Lease.
37. NO RECORDATION.
Tenant shall not record or attempt to record this Lease or any memorandum
hereof in any public records without the prior written approval of Landlord,
which may be denied in Landlord's sole and absolute discretion. In the event
that Landlord grants its approval to record this Lease or a memorandum hereof,
Tenant shall pay all recordation fees, taxes and charges in connection with such
recordation.
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38. LANDLORD'S RELOCATION OPTION.
Landlord shall have the right, at any time during the Term at its sole
cost and expense (which shall include the payment of Tenant's reasonable
expenses for (a) moving its furniture, furnishings, equipment, and supplies, (b)
relocation of Tenant's telephone system, (c) reprinting of Tenant's stationery
in an amount equal to the amount then on hand, (d) postage and overtime (if any)
secretarial services relating to notices to Tenant's suppliers and customers of
Tenant's new suite number, (e) conditioning of the relocation space,
(f) heating, ventilating and air conditioning therefor, (g) structural
modifications for switches, (h) a halon system, (i) an emergency generator
back-up system, including all batteries, (j) fiber optic cable, and (k)
placement and reconnectivity of the existing switch with a new switch of the
same make, model, size and software version of the then currently installed
switch), to relocate Tenant to other premises within the Building which are
reasonably comparable to the Premises in terms of location, size, layout and
buildout; provided, however, that if the rentable area of the relocation space
is larger than that of the Premises, the aggregate Base Rent for the
relocation space shall remain the same as the Base Rent for the Premises;
further provided, that Landlord shall reimburse to Tenant the amount of such
reasonable expenses as are actually incurred by Tenant because of such
relocation, except for any lost profits or lost revenues resulting therefrom.
Landlord shall provide written notice to Tenant of the relocation ("Landlord's
Relocation Notice") no less than one hundred eighty (180) days prior to the
relocation, which notice may be given at any time during the Term. Tenant agrees
to execute, upon Landlord's request, an amendment of this Lease documenting the
change in location. All other terms and provisions of the Lease shall remain
in full force and effect. In the event that Tenant refuses to relocate at the
end of the aforesaid 180-day period, Landlord may terminate this Lease by
giving ten (10) days' written notice of such termination to Tenant.
Notwithstanding anything to the contrary set forth in this Section, if
Tenant does not wish to relocate to the other premises in the Building
designated by Landlord and so notifies Landlord in writing within sixty (60)
days following Landlord's Relocation Notice, Tenant shall have the right to
terminate this Lease, by written notice given to Landlord within the aforesaid
60-day period, in which event this Lease shall be terminated effective as of
what would have otherwise been the relocation date specified in Landlord's
Relocation Notice.
39. AIR CONDITIONING SPACE.
In addition to the Premises, Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, approximately 96 square feet of space on the roof
of the Building as designated by Landlord, which shall be used by Tenant for
placement of air conditioning units (the "Air Conditioning Space"); and Tenant
shall have the right to connect such units with related piping to the Premises
(such units and piping being hereinafter collectively referred to as the
"Equipment") subject to the following conditions: (i) the Equipment may be
installed only after approval by Landlord, in Landlord's sole and absolute
discretion, of Tenant's plans and
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specifications for such Equipment and the installation thereof, (ii) all costs
and expenses incurred in installing, operating, maintaining, repairing and
replacing (A) the Equipment in the Air Conditioning Space and (B) any Equipment
connecting same to Premises shall be borne solely by Tenant, (iii) throughout
the period of such installation, and thereafter during any maintenance, repair
or replacement of the Equipment, Tenant shall install and utilize, at Tenant's
sole expense, screening supports, walk boards, and such other materials as may
be reasonably required to protect the roof of the Building, the Building
generally, pedestrians, vehicles on adjacent roadways and any other property or
adjacent property owners, (iv) no Equipment that impairs the structure, value,
rental value or rentability of, or unreasonably and materially detracts from the
appearance of, the Building or any part thereof, shall be installed or operated
by Tenant, (v) no Equipment may be installed or operated that causes a violation
of any mortgage, deed of trust, or other financing instrument now existing or
hereafter recorded with respect to the Building, (vi) no Equipment may be
installed or operated that would interfere with or materially disturb any other
tenant's quiet enjoyment of its space in the Building, (vii) no Equipment may be
installed or operated that interferes with any other equipment in or on the roof
of the Building or any other equipment owned by any other person, irrespective
of whether such person has any interest in the Building, (viii) the Equipment
shall not interfere with the use of the roof of the Building by Landlord or any
tenant of the Building, as such use is otherwise permitted by any lease or other
agreement which has been or is hereafter entered into by Landlord, as the same
may be amended from time to time, (ix) all licenses and inspections required by
all governmental authorities having jurisdiction over the Building, the
Equipment, Tenant, or the business operations in which the Equipment shall be
utilized, for the installation, operation, maintenance, and repair of the
Equipment, shall have been validly issued prior to the installation of the
applicable Equipment, and (x) the installation, operation, use, maintenance,
repair, replacement and removal of the Equipment shall be performed in
accordance with all applicable laws and regulations of the District of Columbia,
as amended from time to time.
As a material inducement to Landlord to enter into this agreement, Tenant
hereby represents and warrants to Landlord that (A) none of the Equipment which
Tenant will initially install, nor any additions thereto nor replacements
thereof, will impair the structure of the Building, or any part thereof, or
impair the continuing existence of the warranty held by Landlord with respect to
the roof, and that none of the Equipment will fail to satisfy the criteria set
forth above and (B) to the extent that any of the Equipment shall fail to
satisfy said criteria or any portion thereof at any time during the term of this
Lease, Tenant shall, upon written notice to it of such circumstance, immediately
cease operation of the Equipment or such portion of the Equipment which is in
violation of said criteria and, following cessation of the operation of such
Equipment, Tenant shall immediately commence to cure the cause of such violation
of said criteria and shall thereafter expeditiously complete said cure.
Unless otherwise directed by Landlord, Tenant shall at its cost remove the
Equipment at the expiration of the Term or sooner termination thereof and
promptly restore Landlord's affected facilities to their original condition, at
Tenant's sole cost and expense.
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Tenant and its contractors shall bear all expenses in connection with the
installation, operation, use, maintenance, repair, replacement, and removal of
the Equipment and the removal of the Equipment, including, but not limited to,
the costs of electricity and all other utilities, if any, used by Tenant, and
all costs of submetering in connection therewith. Tenant shall indemnify,
defend and hold the owner of the Building and its tenants, agents, employees,
guests and invitees harmless against and from any and all loss, cost, liability,
damage and expense (including, but not limited to, reasonable attorneys' fees)
arising out of the installation, operation, use, maintenance, repair,
replacement, and removal (or failure to maintain) of the Equipment installed or
operated in the Air Conditioning Space by Tenant or its contractors, including,
but not limited to, the costs of electricity and all other utilities, if any,
used by Tenant, and all costs of submetering in connection therewith, and all
loss, costs, liability, damage and expense resulting from impairment of the
continuing existence of the warranty held by Landlord with respect to the roof.
Landlord agrees to permit Tenant reasonable, non-exclusive access to the
Air Conditioning Space, following prior written notice by Tenant to Landlord and
provided that Tenant complies with Landlord's applicable rules, regulations and
procedures concerning access to the Air Conditioning Space, so as to facilitate
the installation, use, maintenance, repair and replacement of the Equipment and
the removal of the Equipment.
Landlord shall at all times, without notifying Tenant, have the right to
utilize and permit the utilization of all or portions of the roof of the
Building for the purpose of placing or servicing any equipment deemed necessary
or desirable by Landlord for (i) the operation of the Building, (ii) the
operation of any business of Landlord or any affiliate of Landlord, or (iii) the
use by any third party.
Tenant shall have no right to assign, sublease, license or otherwise allow
the use of the Air Conditioning Space by parties other than Tenant.
Landlord shall deliver possession of the Air Conditioning Space in its
"as-is" condition as of the Lease Commencement Date. All terms and conditions of
this Lease which are applicable to the Premises shall be applicable to the Air
Conditioning Space, except that any provision of this Lease providing for
payment by Landlord to Tenant of any allowance, credit or other sum of money or
for the performance of any work by Landlord in the space leased to Tenant
hereunder, or for the provision by Landlord of any service for such space, shall
not be applicable to the Air Conditioning Space and Tenant shall pay base rent
for the Air Conditioning Space in the following amounts:
<TABLE>
<CAPTION>
Air Conditioning Space
Air Conditioning Space Base Rent
Lease Year Base Rent Per Annum Per Square Foot Per Annum
- --------- ------------------- -------------------------
<S> <C> <C>
1 $2,256.75 $23.50
2 $2,301.12 $23.97
3 $2,347.20 $24.45
4 $2,394.24 $24.94
5 $2,442.24 $25.44
</TABLE>
25
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under seal
as of the day and year first above written.
WITNESS: LANDLORD:
13TH AND L ASSOCIATES, a District of
Columbia general partnership
By: NOR, Inc., a Delaware corporation
General Partner
[SIGNATURE APPEARS HERE] By: /s/ Aziz Rahman
- ---------------------------------- -----------------------------------------
Its: President
-----------------------------------------
ATTEST: TENANT:
[Corporate Seal] TELCO COMMUNICATIONS GROUP, INC.,
a Virginia corporation
-----------------
/s/ Henry G. Luken, III By: /s/ Donald A. Burns
- ---------------------------------- ------------------------------------
Its: Chairman & Treasurer Its: President & Sect.
----------------------------- ------------------------------------
Henry G. Luken, III Donald A. Burns
26
<PAGE>
[FLOOR PLAN OF 1220 L. STREET NW, WASHINGTON, D.C. APPEARS HERE]
<PAGE>
EXHIBIT B
DECLARATION BY LANDLORD AND TENANT
AS TO DATE OF DELIVERY AND ACCEPTANCE OF
POSSESSION, LEASE COMMENCEMENT DATE, ETC.
THIS DECLARATION is hereby attached to and made a part of the Lease dated
the 25 day of August , 1994, entered into by and between 13TH AND L
---- ---------------
ASSOCIATES, a District of Columbia general partnership,
------------------------
, as Landlord and TELCO COMMUNICATIONS
- ----------------------------------------
GROUP, INC., a Virginia corporation as Tenant. All terms used in this
-----------------
Declaration have the same meaning as they have in the Lease.
(i) Landlord and Tenant do hereby declare that possession of the Premises
was accepted by Tenant on the 25 day of August , 1994;
---- -------------
(ii) As of the date hereof, the Lease is in full force and effect, and
Landlord has fulfilled all of its obligations under the Lease required to be
fulfilled by Landlord on or prior to said date;
(iii) The Lease Commencement Date is hereby established to be August 25,
-------------
1994; and
(iv) The Lease Expiration Date is hereby established to be August 24, 1999
---------------
unless the Lease is sooner terminated pursuant to any provision thereof.
WITNESS: LANDLORD:
13TH AND L ASSOCIATES, a District of
Columbia general partnership
By: NOR, Inc., a Delaware corporation
General Partner
By:
- ---------------------------------- -------------------------------------
Its:
-------------------------------------
ATTEST: TENANT:
[Corporate Seal] TELCO COMMUNICATIONS GROUP, INC.,
a Virginia corporation
---------------
By: /s/ Donald A. Burns
- ---------------------------------- -------------------------------------
Its: Its: PRESIDENT
------------------------------ -------------------------------------
B-1
<PAGE>
EXHIBIT C
OFFICE SPACE WORK AGREEMENT
[Intentionally omitted]
B-1
<PAGE>
24. Mats, trash and other objects shall not be placed in the public
corridors.
25. At least once a year, each tenant at its own expense shall clean all
drapes installed by Landlord for the use of the tenant and any drapes installed
by the tenant which are visible from the exterior of the Building.
26. Landlord shall not maintain suite finishes which are non-standard such
as kitchens, bathrooms, wallpaper, special lights, etc. However, should the need
for repairs arise, Landlord shall arrange for the work to be done at tenant's
expense.
27. Landlord's employees are prohibited from receiving articles delivered
to the Building and, if any such employee receives any article for any tenant,
such employee shall be acting as the agent of such tenant for such purposes.
D-3
<PAGE>
EXHIBIT E
METHOD OF BUILDING MEASUREMENT FOR OFFICE SPACE.
I. SINGLE TENANCY FLOORS:
The rentable area of a single tenancy floor shall be the area with the
outside walls computed by measuring from the inside surface of the window glass
to the inside surface of the opposite window glass including columns and
projections necessary to the building aS well as accessory areas within and
exclusively serving only that floor, with their enclosing walls, toilets,
janitors' closets, electrical closets, air-conditioning rooms and fan rooms and
telephone closets, together with a pro rata share of the main lobby and the
enclosing walls only of all shafts or vents penetrating that floor but excluding
penetrations made by the following when serving more than one floor: public
stairs, fire towers, public elevator shafts and all flues, vents, stacks, pipe
shafts and vertical ducts.
II. DIVIDED FLOORS:
The rentable area of an individual office or a portion of a divided floor
shall be the area computed by measuring from the inside surface of the window
glass to the finished surface of the corridor side of corridor partitions and
from center to center of the partitions that separate the Premises from
adjoining rentable areas including columns and projections necessary to the
Building together with a pro-rata share of the accessory areas serving the
divided floor as described above, a pro-rated share of the main lobby, and
the enclosing walls of all shafts or vents penetrating that floor.
E-1
<PAGE>
EXHIBIT 10.25
DEED OF LEASE AGREEMENT
THIS DEED OF LEASE AGREEMENT (hereinafter referred to as "this Lease"),
made this 1st day of July, 1994, by and between Bricks in the Sticks,
Ltd., a corporation organized and existing under the laws of Virginia
having as address of 4219 Lafayette Center Drive , Chantilly, Virginia
(hereinafter referred to as the "Landlord"), and Tel Labs, Inc., a corporation
organized and existing under the laws of Delaware having an address of 4219
Lafayette Center Drive, Chantilly, Virginia 22021 (hereinafter referred at to as
the "Tenant").
WITNESSETH, THAT FOR AND IN CONSIDERATION of the mutual entry into this
lease by the parties hereto, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by each party hereto, the
Landlord hereby leases to the Tenant and the Tenant hereby leases from the
Landlord all of that real property, situate and lying in Fairfax County,
Virginia, which consists of the space (containing 3,000 square feet of floor
area) outlined and attached hereto as EXHIBIT A (hereinafter referred to as the
"Premises") and located in a building (hereinafter referred to as the
"Building") Building C, Fairtech at Lafayette, Lafayette Business Center,
Fairfax County, Virginia (the Premises, the remainder of the Building, such
tract of land, other buildings thereon, and any other buildings or improvements
to be constructed thereon being hereinafter referred to collectively as the
"Property"). In addition to the premises, Tenant is granted the right of
nonexclusive use, in common with others, of the automobile parking areas and
other common facilities designated by Landlord.
SUBJECT TO THE OPERATION AND EFFECT of any and all instruments and matters
of record or in fact.
UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:
Section 1. TERM
1.1 Length. This Lease shall be for a term (hereinafter referred to as the
"Term") (a) commencing on the 15th day of July, 1994 when the Landlord shall
tender possession thereof to the Tenant (hereinafter referred to as the
"Commencement Date" except that if the date of such commencement is hereinafter
advanced or postponed pursuant to any provision of this Lease, or by written
agreement of the parties hereto, the date to which it is advanced or postponed
shall thereafter be the "Commencement Date" for all purposes of the provisions
of this Lease), and (b) terminating at 12:01 A.M., local time, on June 30, 1999
(hereinafter referred to as the "Termination Date", except that if the date of
such
<PAGE>
termination is hereafter advanced or postponed pursuant to any provision of this
Lease, or by written agreement of the parties hereto, the date to which it is
advanced or postponed shall thereafter be the Termination Date for all purposes
of the provisions of this Lease as applicable thereafter).
1.2 Intentionally Omitted.
1.3 Intentionally Omitted.
1.4 Surrender. The Tenant shall at its expense, at the expiration of the
Term or any earlier termination of this Lease, (a) promptly surrender to the
Landlord possessions of the Premises (including any fixtures or other
improvements which, under the provisions of Section 5, are owned by the
Landlord) in good order and repair (ordinary wear and tear excepted) and broom
clean, (b) remove therefrom the Tenant's sign, goods, and effects and any
machinery, trade fixtures and equipment used in conducting the Tenant's trade or
business and not owned by the Landlord, and (c) repair any damage to the
premises or the Building caused by such removal.
1.5 Holding Over.
1.5.1 If the Tenant continues to occupy the premises after the
expiration of the Term or any earlier termination of this Lease after obtaining
the Landlord's express, written consent thereto,
(a) such occupancy shall (unless the Parties hereto otherwise agree
in writing) be deemed to be under a month-to-month tenancy, which shall continue
until either party hereto notifies the other in writing, by at least thirty (30)
days before the end of the calendar month, that the notifying party elects to
terminate such tenancy at the end of such calendar month, in which event such
tenancy shall so terminate;
(b) anything contained in the foregoing provisions of this Section
to the contrary notwithstanding, the rent payable for each such monthly period
shall equal one-twelfth (1/12) of the Base Rent and the Additional Rent payable
under the provisions of subsection 2.2 (calculated in accordance with such
provisions of subsection 2.2 as if this Lease had been renewed for a period of
twelve (12) full calendar months after such expiration or earlier termination of
the Term of such renewal); and
(c) such month-to-month tenancy shall be upon the same terms and
subject to the same conditions as those set forth in the provisions of this
Lease. The monthly rent, however, will be 104% of that payable immediately prior
to the commencement of the month to month tenancy; provided, that if the
Landlord gives the Tenant, by at least thirty (30) days before the end of any
calendar month during such month-to-month tenancy, written notice that such
terms and conditions (including any thereof relating to the amount or payment of
Rent) shall, after such month, be modified in any manner
<PAGE>
specified in such notice, then such tenancy shall, after such month, be upon the
said terms and subject to the said conditions, as so modified.
1.5.2 If the Tenant continues to occupy the premises more than ninety (90)
days after the expiration of the Term or any earlier termination of this Lease
without obtaining the Landlord's express, written consent thereto, such
occupancy shall be on the same terms and subject to the same conditions as those
set forth in the provisions of paragraph 1.4.1, except that, anything contained
in the provisions of this Lease to the contrary notwithstanding, (a) the rental
payable during the period of such occupancy shall equal one hundred fifty
percent (150%) of the rent which would be payable during such period under the
provisions of subparagraph 1.5.1 (b), had the Tenant obtained the Landlord's
express, written consent to such occupancy as aforesaid, (b) nothing in the
provisions of paragraph 1.5.1 or any other provisions of this Lease shall be
deemed in any way to alter or impair the Landlord's right immediately to evict
the Tenant or exercise its other rights and remedies under the provision of this
Lease or applicable law on account of the Tenant's occupancy of Premises without
having obtained such consent.
Section 2. RENT
2.1 Amount. As rent for the premises (all of which is hereinafter
referred to collectively as "Rent"), the Tenant shall pay to the Landlord in
advance, without demand, deduction or set off, for the entire Term hereof, all
of the following:
2.1.1. Base Rent. An annual rent (hereinafter referred to as the
"Base Rent") comprised of the aggregate of the following
components:
For the first Lease year during the Term, the sum of (SEE EXHIBIT
------------
C) Dollars plus (if the Term commences on a day other than the first (1st) day
- --
of a calendar month) one three hundred sixty-fifth (1/365) of the Base Rent for
each day of such calendar month falling within the Term payable in advance in
equal monthly installments as set forth in EXHIBIT C.
2.1.2. Additional Rent. Additional rent (hereinafter referred to
as "Additional Rent") in the amount of any payment referred to as such in any
provision of this Lease which accures while this Lease is in effect.
2.1.3. Lease Year. As used in the provisions of this Lease, the
term "Lease Year" means (a) the period commencing on the Commencement Date and
termination on the first (1st) anniversary of the last day of the calendar month
containing the Commencement Date, and (b) each successive period of twelve (12)
calendar months thereafter during the Term.
2.1.4. Adjustment Month. The calendar month of July.
<PAGE>
2.2 Annual Operating Costs.
2.2.1. Operating Expense Increases. Tenant will pay as additional rent
hereunder Tenant's Proportionate Share of increases in Landlord's Operating
Expenses in excess of the expenses for 1994 ("Base Year").
2.2.2. Operating Expense Definition. For the purposes hereof the term
"Operating Expenses" shall mean all costs and expenses paid or incurred on an
accrual basis by Landlord in connection with the ownership, management,
operation, servicing and maintenance of the building and common grounds
including, but not limited to, employees' wages, salaries and welfare and fringe
benefits payroll taxes; Real Estate Taxes; electricity, gas oil and other fuels;
utility charges; premiums for fire and casualty, liability, workmen's
compensation and other insurance; repairs and maintenance to the Building;
janitorial and cleaning supplies, uniforms and dry cleaning; window cleaning;
service contracts for the maintenance of HVAC and other mechanical equipment;
and management fees shall not exceed four and one half percent (4.5%) of gross
rents). Notwithstanding the foregoing, Tenant shall not be responsible for
annual increases in operating expenses (excluding real estate taxes, utilities
and insurance premiums) which exceed the previous year by ten percent (10%).
Operating Expenses shall not include capital expenses principal or interest
payments on any Deed of Trust or other financing encumbrances, expenses incurred
in leasing or procuring Tenants including lease commissions, advertising costs
and expenses or renovating space for Tenants, the costs of special services or
utilities separately chargeable to other Tenants in the building and
compensation paid to any executive employee of Landlord.
2.2.3. Computation. After the end of each calendar year during the
Term, the Landlord shall compute the total of the Annual Operating Costs
incurred for all of the Property during such calendar year, and shall allocate
them to the gross rentable space within the Property in proportion to the
respective operating costs percentages assigned to such spaces; provided, that
anything contained in the foregoing provisions of this Subsection 2.2 to the
contrary notwithstanding, wherever the Tenant and/or any other tenant of space
within the Property has agreed in its lease or otherwise to provide any item of
such services partially or entirely at its own expense, or wherever in the
Landlord's judgement any such significant item of expense is not incurred with
respect to or for the benefit of all of the gross rentable space within the
Property, in allocating the Annual Operating Costs pursuant to the foregoing
provisions of this subsection the Landlord shall make an appropriate adjustment,
using generally accepted accounting principles, as aforesaid, so as to avoid
allocating to the Tenant or to such other tenant (as the case may be) those
Annual Operating Costs covering such services already being provided by the
Tenant or by such other tenant at its own expense, or to avoid allocating to all
of the gross rentable space
<PAGE>
within the Property those Annual Operating Costs incurred only with respect to a
portion thereof, as aforesaid.
2.2.4. Payment as Additional Rent. The Tenant shall, within thirty
(30) days after demand therefore by the Landlord (with respect to each calendar
year during the Term), accompanied by a statement setting forth in reasonable
detail the Annual Operating Costs for such calendar year, pay to the Landlord as
Additional Rent the amount of the Tenants operating costs percentage of the
Annual Operating Costs for such calendar year (as derived and allocated under
the provisions of paragraph 2.2.3.).
2.2.5. Proration. If only part of any calendar year falls within the
Term, the amount computed as Additional Rent for such calendar year under the
foregoing provisions of this subsection shall be prorated in proportion to the
portion of such calendar year falling within the Term (but the expiration of the
term before the end of a calendar year shall not impair the Tenant's obligation
hereunder to pay such prorated proportion of such Additional rent for that
portion of such calendar year falling within the Term, which shall be paid on
demand, as aforesaid).
2.2.6. Landlord's right to estimate. Anything contained in the
foregoing provisions of this subsection to the contrary notwithstanding the
Landlord may, at its discretion, (a) make from time to time during the Term a
reasonable estimate of the Additional Rent which may become due under such
provisions for any calendar year, (b) require the Tenant to pay to the Landlord
for each calendar month during such year one-twelfth (1/12) of such Additional
Rent, at the time and in the manner that the Tenant is required hereunder to pay
the monthly installment of the Base Rent for such month, and (c) at the
Landlord's reasonable discretion, increase or decrease form time to time during
such calendar year the amount initially so estimated for such calendar year, all
by giving the Tenant written notice thereof, accompanied by a schedule setting
forth in reasonable detail the expenses comprising the Annual Operating costs,
as so estimated. In such event, the Landlord shall cause the actual amount of
such Additional Rent to be computed and certified to the Tenant within ninety
(90) days after the end of such calendar year, and the Tenant or the Landlord,
as the case may be, shall pay within thirty (30) days to the other the amount of
any deficiency or overpayment therein, as the case may be.
2.2.7. Tenant shall be entitled to a reasonable review and/or audit of
the books and records kept in connection with the calculation of Operating
Expenses for the Building at the office of the Landlord's property manager
during business hours. Tenant shall give Landlord and such manager at least
seven days prior written notice before undertaking any such audit. Any audit
shall be at Tenant's sole cost and expense, except that if such an audit shall
reveal that the amount charged to Tenant as its share of Operating Expenses in
any one year exceeds by more than 10% the amount which is actually owed by
Tenant for such year, then
<PAGE>
Landlord shall reimburse Tenant the overage in addition to the reasonable
out-of-pocket costs of such audit within 30 days or, at Tenant's option, credit
such amount against the next payment of rent coming due hereunder. Tenant shall
not be entitled to more than one audit in any 12-month period in the Lease Term.
2.3. When due and payable.
2.3.1. the Base Rent for any Lease Year shall be due and payable in
twelve (12) consecutive, equal monthly installments, in advance, on the first
(1st) day of each calendar month during such Lease Year; provided, that the
installment of the Base Rent payable for the first full calendar month of the
term (and, if the Term commences on a day other than the first (1st) day of a
calendar month, that portion of the Base Rent which is payable for such month)
shall be due and payable on the date hereof.
2.3.2. Any Additional Rent accruing to the Landlord under any
provision of this Lease shall, except as is otherwise set forth herein, be due
and payable when the installment of the Base Rent next falling due after such
Additional Rent accrues and becomes due and payable, unless the Landlord makes
written demand upon the Tenant for payment thereof at any earlier time, in which
event such Additional Rent shall be due and payable at such time.
2.3.3. Each such payment shall be made when due, without any deduction
or set off whatsoever, and without demand, failing which the Tenant shall pay to
the Landlord as Additional Rent, on which such payment is due but unpaid within
ten (10) days after written notice from Landlord, a late charge equalling five
percent (5%) of such payment.
2.4 Where payable. The Tenant shall pay the Rent, in lawful currency of the
United States of America, to the Landlord by delivering or mailing it (postage
prepaid) to the Landlord's address which is set forth hereinabove, or to such
other address as the Landlord from time to time specifies by written notice to
the Tenant. Any payment made by the Tenant to the Landlord on account of Rent
may be credited by the Landlord to the payment of any Rent then past due before
being credited to Rent currently falling due. Any such payment which is less
than the amount of Rent then due shall constitute a payment made on account
thereof, the parties hereto hereby agreeing that the Landlord's acceptance of
such payment (whether or not with or accompanied by an endorsement or statement
that such lesser amount or the Landlord's acceptance thereof constitutes payment
in full of the rights hereunder to be paid all of such amount then due, or in
any other respect.
2.5 Tax on Lease. If federal, state or local law now or hereafter imposes
any tax, assessment, levy or other charge Other than any income, inheritance or
estate tax) directly or indirectly upon (a) the Landlord with respect to this
Lease or the value thereof, (b) the Tenant's use or occupance of the Premised,
(c) the Base Rent, Additional Rent or any other sum payable under this
<PAGE>
Lease, or (d) this transaction, then (except if and to the extent that such tax,
assessment, levy or other charge is included in the Annual Operating Costs) the
Tenant shall pay the amount thereof as Additional Rent to the Landlord upon
demand, unless the Tenant is prohibited by law from doing so in which event the
Landlord may, at its election, terminate this Lease by giving written notice
thereof to the Tenant.
2.6 Security deposit
2.6.1. Simultaneously with the execution of this lease by Tenant, the
Tenant shall deposit with the Landlord the sum of Four Thousand Nine Hundred
Eighty Nine and 17/100 Dollars ($4,989.17), as security for the Tenant's payment
of the Rent and performance of all of its other obligations under the provisions
of this Lease.
2.6.2. On the occurrence of an Event of Default, the Landlord shall be
entitled, at its sole discretion;
(a) to apply any or all of such sum in payment of (i) any rent
then due and unpaid, (ii) any expense incurred by the Landlord in curing any
such default, and/or (iii) any damages incurred by the Landlord by reason of
such default (including, by way of example rather than of limitation, that of
reasonable attorney's fees); and/or
(b) to retain any or all of such sum in liquidation of any or
all damages suffered by the Landlord by reason of such default.
2.6.3. On the termination of this Lease, any of such sum which is not
so applied or retained shall be returned to the Tenant within forty-five (45)
days of the Lease termination date.
2.6.4. Such sum shall bear interest while being held by the Landlord
hereunder, at a passbook rate of interest, but shall not be required to be held
in a separate account.
2.6.5. In the event of a transfer of Landlord's interest in the Lease
Premises, Landlord shall have the right to transfer the Security Deposit to the
transferee thereof. In such event, upon the delivery by Landlord to Tenant of
such transferee's written acknowledgement of its receipt of such Security
Deposit, Landlord shall be deemed to have been released by Tenant from all
liability or obligation for the return of such Security Deposit, and Tenant
agrees to look solely to such transferee for the return of the Security Deposit
and the transferee shall be bound by all provisions of this Lease relating to
the return of the Security Deposit.
Section 3. USE OF PREMISES.
<PAGE>
3.1 The Tenant shall, continuously throughout the Term occupy and use the
Premises for and only for corporate office purposes and assembly, testing and
repair of computer equipment and related electronic components.
3.2 The Tenant shall not violate any applicable law, ordinance or
regulation through its use of the premises or any portion of the property.
3.3 License.
3.3.1. The Landlord hereby grants to the Tenant a Non-exclusive
license to use (and to permit its officer, directors, agents, employees and
invitees to use in the course of its business at the Premises):
(a) if applicable, any and all elevators, common stairways,
lobbies, common hallways and other portions of the Building which, by their
nature, are manifestly designed and intended for common use by the occupants of
the Building, for pedestrian ingress and egress to and from the Premises and for
any other such manifest purposes; and
(b) any and all proportions of the said tract of land on which
the Building is located (excluding that portion thereof which is improved by any
other building) which, by their nature, are manifestly designed and intended for
common use by the occupants of the Building and of any other improvements on
such tract, for pedestrian ingress and egress to and from the Premises and for
any other such manifest purposes; and
(c) any and all portions of such tract of land as from time to
time are designated (by striping or otherwise) by the Landlord for such purpose,
for the parking of automobiles.
3.3.2. Such license shall be exercised in common with the exercise
thereof by the Landlord, any tenant or owner of the building or any other
building located on such tract, and their respective officers, directors,
agents, employees and invitees, and in accordance with the Rules and Regulations
promulgated from time to time pursuant to the provisions of Section 11.
3.4 Signs. The Tenant shall have the right to erect from time to time
within the premises such signs as it desires, in accordance with applicable law
and Landlord's building standard signage criteria, except that the Tenant shall
not erect any sign within the premises, or elsewhere, in any place where such
sign is visible primarily from the exterior of the Premises, unless the Landlord
has given its express, written consent thereto.
<PAGE>
Section 4. INSURANCE AND INDEMNIFICATION.
4.1 Increase in risk.
4.1.1. The Tenant shall not do or permit to be done any act or thing
as a result of which either (a) any policy of insurance of any kind covering (i)
any or all of the Property or (ii) any liability of the Landlord in connection
therewith may become void or suspended, or (b) the insurance risk under any such
policy would (in the opinion of the insurer thereunder) be made greater; and
4.1.2. In the event Tenant continues such activity after written
notice by Landlord of such pending increase in premium, then Tenant shall pay as
Additional Rent the amount of any increase in any premium for such insurance
resulting from any breach of such covenant.
4.2 Insurance to be maintained by Tenant.
4.2.1. The tenant shall maintain at its expense, throughout the Term,
insurance against loss or liability in connection with bodily injury, death,
property damage or destruction, occurring within the Premises or arising out of
the use thereof by the Tenant or its agents, employees, officers, or invitees
visitors and guests, under one or more policies of general public liability
insurance having such limits not less than (a) One Million Dollars
($1,000,000.00) for bodily injury to or death of any one person during any one
occurrence and (b) Five Hundred Thousand Dollars ($500,000.00) for property
damage or destruction during any one occurrence. Each such policy shall (a) name
as the insured thereunder the Landlord and the Tenant, (b) by its terms, not be
cancelable without at least thirty (30) days' prior written notice to the
Landlord, and (c) be issued by an insurer of recognized responsibility licensed
to issue such policy in Virginia.
4.2.2. (a) At least five (5) days after written request by Landlord,
the Tenant shall deliver to the Landlord an original or signed duplicate copy of
each such policy, and (b) at least thirty (30) days before any such policy
expires, the Tenant shall deliver to the Landlord an original or a signed
duplicate copy of a replacement policy therefore; provided, that so long as such
insurance is otherwise in accordance with the provisions of this Section, the
Tenant may carry any such insurance under a blanket policy covering the premises
for the risks and in the minimum amounts specified in paragraph 4.2.1., in which
event the Tenant shall deliver to the Landlord two (2) insurer's certificates
therefor in lieu of an original or a copy thereof, as aforesaid.
4.3 Insurance to be maintained by Landlord
4.3.1. Tenant agrees to pay to Landlord, as Additional Rent, its
building proportional share in subsection 2.2.1 (b) of
<PAGE>
the cost of fire and extended coverage insurance, rent insurance, liability
insurance and any other insurances as may be maintained by the Landlord and are
reasonably required by the holders of any mortgages, deed of trust or ground
leases on the Building.
4.4 Waiver of subrogation. If either party hereto is paid any proceeds
under any policy of insurance naming such party as an insured, on account of any
loss, damage or liability, then such party hereby releases the other party
hereto, to and only to the extent of the amount of such proceeds, from any and
all liability for such loss, damage or liability, notwithstanding that such
loss, damage or liability may arise out of the negligent or intentionally
tortious act or omission of the other party, its agents or employees; provided
that such release shall be effective only as to a loss damage or liability
occurring while the appropriate policy of insurance of the releasing party
provides that such release shall not impair the effectiveness of such policy or
the insured's ability to recover thereunder. Each party hereto shall use
reasonable efforts to have a clause or clauses to such effect included in its
said policies, and shall promptly notify the other in writing if which clause
cannot be included in any such policy.
4.5 Liability of parties. Except if and to the extent that such party is
released from liability to the other party hereto pursuant to the provision of
subsection 4.4.
4.5.1. the Landlord and Tenant (a) shall be responsible for, and shall
indemnify and hold harmless each other against and from any and all liability
arising out of, any injury to or death of any person or damage to any property,
occurring anywhere upon the Property, if, only and to the extent that such
injury death, or damage is proximately caused by the grossly negligent or
intentionally tortious act or omission of the other or its agents, officers or
employees, but (b) shall not be responsible for or be obligated to indemnify or
hold harmless the Tenant against of from any liability for any such injury,
death or damage occurring anywhere upon the Property (including the Premises),
(i) by reason of the Tenants occupancy or use of the Premises or any other
portion of the property, or (ii) because of fire, windstorm, act of God or other
cause unless solely caused by such gross negligence or intentionally tortious
act or omission of the Landlord, as aforesaid; and
4.5.2. subject to the operation and effect of the foregoing provisions
of this subsection unless damage caused by gross negligence of willful
misconduct of Landlord, the Tenant shall be responsible for, and shall defend,
indemnify and hold harmless the Landlord against and from, any and all liability
or claim of liability arising out of any injury to or death of any person or
damage to any property, occurring within the Premises.
<PAGE>
Section 5. IMPROVEMENTS TO PREMISES.
5.1 By Landlord.
5.1.1. Intentionally Omitted.
5.1.2. The Landlord shall use its best efforts to complete such
improvements by the date on which the Tenant is entitled to occupy the premises
pursuant to this Lease, but shall have no liability to the Tenant hereunder if
prevented from doing so by reason of any (a) strike, lockout or other labor
troubles, (b) government restrictions or limitations, (c) failure or shortage of
electrical power, gas, water, fuel, oil, or other utility or service, (d) riot,
war, insurrection or other national or local emergency, (Q) accident, flood,
fire or other casualty, (f) adverse weather condition, (g) other act of God,
(h)inability to obtain a building permit, or (i) other cause similar or
dissimilar to any of the foregoing and beyond the Landlord's reasonable control.
In such event, (a) the Commencement Date shall be postponed for a period
equalling the length of such delay, (b) the Termination Date shall be determined
pursuant to the provisions of subsection 1.1 by reference to the Commencement
Date as so postponed, and (c) the Tenant shall accept possession of the premises
within three (3) days after such completion.
5.2 By Tenant. The Tenant shall not make any alteration, addition or
improvement to the Premises without first obtaining the Landlord's written
consent thereto not to be unreasonably withheld, conditioned or delayed. If the
Landlord consents to any such proposed alteration, addition or improvement, it
shall be made at the Tenant's sole expense (and the Tenant shall hold the
Landlord Harmless from any cost incurred on account thereof), and shall not
interfere with the use and enjoyment of the remainder of the Property by any
tenant thereof or other person. Landlord must indicate at time of approval
whether such improvements will be subject to section 5.4.
5.3 Mechanic's Lien. The Tenant shall (a) immediately after it is filed or
claimed, bond or have released any mechanics, materialman's or other lien filed
or claimed against any or all of the Premises, the property, or any other
property owned or leased by the Landlord, by reason of labor or materials
provided for the Tenant or any of its contractors or subcontractors (other than
labor or material provided by Landlord pursuant to the provisions of subsection
5.1), or otherwise arising out of the Tenant's use or occupancy of the Premises
or any other portion of the Property, and (b) defend, indemnify and hold
harmless the Landlord against and from any and all liability, claim of liability
or expense (including, by way of example rather than of limitation, that of
reasonable attorneys' fees) incurred by the Landlord on account of any such lien
or claim.
5.4 Fixtures. Any and all improvements, repairs, alterations and all other
property attached to, used in connection with or
<PAGE>
otherwise installed within the Premises by the Landlord or the Tenant shall,
immediately on the completion of their installation, become the Landlord's
property without payment therefor by the Landlord, except that any machinery,
equipment or fixtures installed by the Tenant and used in the conduct of the
Tenant's trade or business (rather than to service the premises or any of the
remainder of the Building or the property generally) shall remain the Tenant's
property.
Section 6. UTILITIES AND SERVICES
6.1 Utilities. Landlord agrees to provide at its cost water, electricity
and telephone service connections into the Building and shall pay for all water,
gas, heat, light, power, sewer, sprinkler charges and other utilities, and
services used on or from the Premises, including site utilities, together with
any taxes, penalties, surcharges or the like pertaining thereto and any
maintenance charges for utilities and shall furnish all electric light bulbs and
tubes during normal hours of operation which shall be from 8:00 a.m. to 6:00
p.m. Monday through Friday and from 9:00 a.m. to 1:00 p.m. on Saturday. If any
such services are not separately metered to Tenant, Tenant shall pay its
proportionate share as determined by Landlord of all charges jointly metered
within the Building.
6.2 Extraordinary services. Tenant shall not without first obtaining the
Landlord's written consent thereto, install within the premises and electrical
machinery, appliances or equipment which in the aggregate utilizes in excess of
500 amperes of electric capacity.
6.3 Interruption. The Landlord shall have no liability to the tenant on
account of any failure, modification or interruption of any such service which
either (a) arises out of any of the causes enumerated in the provisions of
subsection 5.1, or (b) is required by applicable law (including, by way of
example rather than of limitation, any federal law or regulation relating to the
furnishing or consumption of energy or the temperature of buildings).
Section 7. LANDLORD'S RIGHT OF ENTRY
The Landlord and its agents shall be entitled to enter the Premises at any
reasonable time (a) to inspect the premises, (b) to exhibit the premises to any
existing or prospective purchaser tenant or Mortgagee thereof, (c) to make any
alteration, improvement or repair to the Building or the Premises, or (d) for
any other purpose relating to the operation or maintenance of the Property;
provided, that the Landlord shall (a) (unless doing so is impractical or
unreasonable because of emergency) give the Tenant at least twenty-four (24)
hours' prior notice of its intention to enter the Premises, and (b) use
reasonable efforts to avoid thereby interfering more than is reasonably
necessary with the Tenant's use and enjoyment thereof. Notwithstanding the
foregoing, Landlord's
<PAGE>
right to entry is subject to the requirements of the Defense Security
Regulations except in the case of emergency.
Section 8. FIRE AND OTHER CASUALTIES.
8.1 General. If fifty percent (50%) or less of the Premises are damaged by
fire or other casualty during the term.
8.1.1. the Landlord shall restore the Premises with reasonable
promptness (taking into account the time required by the Landlord to effect a
settlement with, and to procure any insurance proceeds from, any insurer against
such casualty, but in any event begin restoration within ninety (90) days after
the date of such casualty) to substantially their condition immediately before
such casualty, and may temporarily enter and possess any or all of the Premises
for such purpose (provided, that the Landlord shall not be obligated to repair,
restore or replace any fixture, improvement, alteration, furniture or other
property owned, installed or made by the Tenant), but
8.1.2. the times for commencement and completion of any such
restoration shall be extended for the period of any delay occasioned by the
Landlord in doing so arising out of any of the causes enumerated in the
provisions of subsection 5.1. If the Landlord undertakes to restore the Premises
and such restoration is not accomplished within the said period of one hundred
eighty (180) days plus the period of any extension thereof, as aforesaid, the
Tenant may terminate this Lease by giving written notice thereof to the Landlord
within thirty (30) days after the expiration of such period, as so extended; and
8.1.3. so long as the Tenant is deprived of the use of any or all of
the Premises on account of such casualty, the Base Rent and any Additional Rent
payable under the provisions of subsection 2.2 shall be abated in proportion to
the number of square feet of the Premises rendered substantially unfit for
occupancy by such casualty, unless, because of any such damage, the undamaged
portion of the Premises is made materially unsuitable for use by the Tenant for
the purposes set forth in the provisions of Section 3, in which event the Base
Rent and any such Additional Rent shall be abated entirely during such period of
deprivation.
8.2 Substantial destruction. Anything contained in the foregoing provisions
of this Section to the contrary notwithstanding,
8.2.1. if during the Term the Building is so damaged by fire or other
casualty that (a) either in excess of fifty percent (50% of the premises or
(whether or not the Premises are damaged) the Building are rendered
substantially unfit for occupancy, as reasonably determined by the Landlord, or
(b) the Building is damaged to the extent that the Landlord reasonably elects to
demolish the Building, or if any Mortgage requires that any or all of such
insurance proceeds be used to retire any or all of the debt
<PAGE>
secured by its Mortgage, then in any such case the Landlord may elect to
terminate this Lease as of the date of such casualty, by giving written notice
thereof to the Tenant within thirty (30) days after such date; and
8.2.2. in such event, (a) the Tenant shall pay to the Landlord the
Base Rent and any Additional Rent payable by the Tenant hereunder and accrued
through the date of such termination, (b) the Landlord shall repay to the Tenant
any and all prepaid Rent for periods beyond such termination within thirty (30)
days of such date and (c) the Landlord may enter upon and repossess the premises
without further notice.
8.3 Tenant's negligence. Anything contained in any provision of this Lease
to the contrary notwithstanding, if any such damage to the premises, the
Building or both are caused by or result from the negligent or intentionally
tortious act or omission of the Tenant, those claiming under the Tenant or any
of their respective officers, employees, agents or invitees.
8.3.1. The Rent shall not be suspended or apportioned as aforesaid,
and
8.3.2. except if any and to the extent that the Tenant is released
from liability or Tenant has elected to repair, which election shall be promptly
communicated to Landlord, and Tenant is diligently pursuing such repair therefor
pursuant to the provisions of subsection 4.4, the Tenant shall pay to the
Landlord upon demand, as Additional Rent, the cost of (a) any repairs and
restoration made or to be made as a result of such damage, or (b) (if the
Landlord elects not to restore the Building) any damage or loss which the
Landlord incurs as a result of such damage.
Section 9. CONDEMNATION.
9.1 Right to award.
9.1.1. If any or all of the Premises are taken by the exercise of any
power of eminent domain or are conveyed to or at the direction of any
governmental entity under a threat of any such taking (each of which is
hereinafter referred to as a "Condemnation"), the Landlord shall be entitled to
collect from the condemning authority thereunder the entire amount of any award
made in any such proceeding or as consideration for such conveyance, without
deduction there from for any Leasehold or other estate held by the Tenant under
this Lease.
9.1.2. The Tenant hereby (a) assigns to the Landlord all of the
Tenant's right, title and interest, if any, in and to any such award; (b) waives
any right which it may otherwise have in connection with such Condemnation,
against the Landlord or such condemning authority, to any payment for (1) the
value of the then-
<PAGE>
unexpired portion of the term, (ii) leasehold damages, and (iii) any damage to
or diminution of the value of the Tenant's leasehold interest hereunder or any
portion of the Premises not covered by such Condemnation; and (c) agrees to
execute any and all further documents which may be required to facilitate the
Landlord's collection of any and all such awards.
9.1.3. Intentionally Omitted.
9.2 Effect of Condemnation.
9.2.1. If (a) all of the Premises are covered by a Condemnation, or
(b) any part of the Premises is covered by a Condemnation and the remainder
thereof is insufficient for the reasonable operation therein of the Tenant's
business, or (c) any of the Building is covered by a Condemnation and, in the
Landlord's reasonable opinion, it would be impractical to restore the remainder
thereof, or (d) any of the rest of the Property is covered by a Condemnation
and, in the Landlord's reasonable opinion, it would be impractical to continue
to operate the remainder of the Property thereafter, then, in any such event,
the Term shall terminate on the date on which possession of so much of the
Premises, the Building or the rest of the Property, as the case may be, as is
covered by such Condemnation is taken by the condemning authority thereunder,
and all Rent (including payable under the provisions of subsection 2.2), taxes
and other charges payable hereunder shall be apportioned and paid to such date.
9.2.2. If there is a condemnation and the Term does not terminate
pursuant to the foregoing provision of this subsection, the operation and effect
of this Lease shall be unaffected by such Condemnation, except that the Base
Rent shall be reduced in proportion to the square footage of floor area, if any,
of the premises covered by such Condemnation.
9.3 If there is a Condemnation, the Landlord shall have no liability to the
Tenant on account of any (a) interruption of the Tenant's business upon the
Premises, (b) diminution in the Tenant's ability to use the Premises, or (c)
other injury or damage sustained by the Tenant as a result of such Condemnation.
9.4 The Landlord shall be entitled to conduct any such condemnation
proceeding and any settlement thereof free of interference from the Tenant, and
the Tenant hereby waives any right which it otherwise has to participate
therein.
Section 10. ASSIGNMENT AND SUBLETTING.
10.1 The Tenant hereby acknowledges that the Landlord has entered into this
Lease because of the Tenant's financial strength, goodwill, ability and
expertise and that, accordingly, this Lease is one which is personal to the
Tenant, and agrees for itself and its successors and assigns in interest
hereunder that it will not (a) assign any of its rights under this Lease, or (b)
make or
<PAGE>
permit any total or partial sale, lease, sublease, assignment, conveyance,
license, mortgage, pledge, encumbrance or other transfer of any or all of the
Premises or the occupancy of use hereof (each of which is hereinafter referred
to as a ("Transfer"), without first obtaining the Landlord's written consent not
unreasonably withheld or delayed thereto which decision shall be provided by
Landlord within thirty (30) days of written notice by Tenant, (which consent may
be given or withheld in the Landlord's sole discretion and, if given, shall not
constitute a consent to any subsequent such Transfer, whether by the person
hereinabove named as the "Tenant" or by any such transferee). Any person to whom
any Transfer is attempted without such consent shall have no claim, right, or
remedy whatsoever hereunder against the Landlord, and the Landlord shall have no
duty to recognize any person claiming under or through the same. No such action
taken with or without the Landlord's consent shall in any way relieve or release
the Tenant from liability for the timely performance of all of the Tenant's
obligations hereunder.
10.2 In the event of any Transfer, Landlord may, at it's sole option, have
the right to fifty percent (50%) of any profits associated with any subletting
or assignment. Neither Tenant nor any party claiming an interest under or
through Tenant shall interfere with Landlord's exercise of its rights hereunder.
Tenant hereby indemnifies and holds Landlord harmless from and against any and
all liabilities, costs, losses, or damages, including reasonable attorneys fees
and court costs, arising from any breach of the provisions of this section by
Tenant.
Section 11. RULES AND REGULATIONS.
The Landlord shall have the right to prescribe, at its sole discretion,
reasonable rules and regulations (hereinafter referred to as the "Rules and
Regulations") having uniform applicability to all tenants of the Building
(subject to the provisions of their respective leases) and governing their use
and enjoyment of the Building and the remainder of the Property; provided that
the Rules and Regulations shall not materially interfere with the Tenant's use
and enjoyment of the Premises, in accordance with the provisions of this Lease,
for the purposes enumerated in the provisions of Section 3. The Tenant shall
adhere to the Rules and Regulations and shall cause its agents, employees,
invitees, visitors and guests to do so.
Section 12. SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE.
12.1 Subordination. This Lease and Tenant's interest hereunder shall be
subject and subordinate to the lien operation and effect of each and every
Mortgage, to all renewals, modifications, replacements and extensions thereof,
now or hereafter executed by Landlord or its successors, assigns, or purchaser
at foreclosure, and to any and all advances made thereunder and interest
thereon, provided that the mortgagee or holder of the indebtness provides Tenant
with a non-disturbance
<PAGE>
agreement which shall provide that so long as Tenant shall not be in default
under the Lease, no mortgagee, successor in interest, purchaser at foreclosure,
ground lessor or other party, shall disturb Tenant's possession pursuant to the
terms of this Lease, and so long as Tenant complies with all of the terms and
conditions of the Lease, Tenant may continue to occupy the Leased Premises and
enjoy all of its rights under this Lease. It is understood and agreed to by
Landlord and Tenant that if the mortgagee or holder of the indebtedness fails to
provide Tenant with the aforementioned non-disturbance agreement with two
business days from such time as this Lease is executed by Tenant, Tenant may at
Tenant's election, choose to terminate this Lease with no liability whatsoever
to Landlord, Tenant or Mortgagee. Subject to Tenant's receipt of a
non-disturbance agreement from the mortgagee as aforesaid, Tenant agrees that,
within ten (10) business days after receipt of written request therefor from
Landlord, it will from time to time execute and deliver any instrument or other
document required by mortgagee or purchaser at foreclosure to subordinate this
Lease and its interest in the Leased Premises to the lien of any such mortgagee,
in form and substance required by such mortgagee, which shall provide interalia
---------
that the mortgagee is not (i) bound by any payment of Base Rent or Additional
Rent made by Tenant more than one (1) month in advance to any prior landlord
(including Landlord), other than the Advance Deposit provided for in Section
2.6; (ii) liable for any damages or subject to any offset or defense by Tenant
to the payment of Base Rent or Additional Rent by reason of any act or omission
of Landlord prior to the date that mortgagee succeeds to the interest of
Landlord; and (iii) bound by any termination, amendment, modification or
surrender of this Lease made without mortgagee's written consent. Tenant will
also upon request submit current financial statements and financial statements
covering the five (5) immediately preceding years (but the mortgagee's
obligations under this subsection 12.1 shall not be conditioned upon the
mortgagee's approval of the same), and Tenant will, upon request, allow
Landlord's mortgagee to record on behalf of Tenant this Lease or a short form
thereof, at mortgagee's expense, if required by Landlord's mortgagee or other
lending institution. Tenant hereby irrevocably constitutes and appoints Landlord
as Tenant's attorney-in-fact to execute, acknowledge and deliver any and all
such instruments for and on behalf of Tenant, should Tenant fail to do so within
ten (10) business days after receipt of written notice. Tenant agrees that,
within ten (10) business days after written request therefor, from Landlord, it
will, from time to time, execute and deliver any instrument or any other
document required by any mortgagee, transferee, purchaser or other interested
person to confirm such subordination and obligation to attorn pursuant to
Section 12.2 hereof.
12.2 Attornment and non disturbance. The Tenant shall, promptly at the
request of the Landlord or the holder of any Mortgage (herein referred to as a
"Mortgagee"), execute enseal, acknowledge and deliver such further instrument or
instruments.
12.2.1. evidencing such subordination as the Landlord or
<PAGE>
such Mortgagee deems necessary or desirable, and
12.2.2. (at such Mortgagee's request) attorning to such Mortgagee.
Landlord will use its best efforts to obtain an agreement from the Mortgagee
that such Mortgagee will, in the event of a foreclosure of any such mortgage or
deed of trust (or termination of any such ground lease) take no action to
interfere with the Tenant's rights hereunder, except on the occurrence of an
Event of Default by Tenant.
12.3 Anything contained in the provisions of this Section to the contrary
notwithstanding, any mortgagee may at any time subordinate the lien of its
Mortgage to the operation and effect of this Lease without obtaining the
Tenant's consent thereto, by giving the Tenant written notice thereof, in which
event this Lease shall be deemed to be senior to such Mortgage without regard to
their respective dates of execution, delivery and/or recordation among the Land
Records of the said County, and thereafter such Mortgagee shall have the same
rights as to this Lease as it would have had, were this Lease executed and
delivered before the execution of such Mortgage.
Section 13. DEFAULT.
13.1 Definition. as used in the provisions of the Lease, each of the
following events shall constitute, and is hereinafter referred to as, an "Event
of Default":
13.1.1. if the Tenant fails to (a) pay any Rent or any other sum which
it is obligated to pay by any provision of this Lease, when and as due and
payable hereunder and without demand therefor, or (b) perform any of its other
obligations under the provisions of this Lease; or
13.1.2. if the Tenant (a) applies for or consents to the appointment
of a receiver, trustee or liquidator of the Tenant or of all or a substantial
part of its assets, (b) files a voluntary petition in bankruptcy or admits in
writing its inability to pay its debts as they come due, (c) makes an assignment
for the benefit of its creditors, (d) files a petition or an answer seeking a
reorganization or an arrangement with creditors, or seeks to take advantage of
any insolvency law, (e) performs any other act of bankruptcy, or (f) files an
answer admitting the material allegations of a petition filed against the Tenant
in any bankruptcy, reorganization or insolvency proceeding; or
13.1.3. if (a) an order, judgment or decree is entered by any court of
competent jurisdiction adjudicating the Tenant a bankrupt or an insolvent,
approving a petition seeking such a reorganization, or appointing a receiver,
trustee or liquidator of the Tenant or of all or a substantial part of its
assets, or (b) there otherwise commences as to the Tenant or any of its assets
any proceedings under any bankruptcy, reorganization, arrangement, insolvency,
readjustment, receivership or similar law
<PAGE>
and if such order, judgment, decree or proceeding continues unstated for more
than sixty (60) consecutive days after any stay thereof expires;
13.2 Notice to Tenant; grace period. Anything contained in the provisions
of this Section to the contrary notwithstanding, on the occurrence of an Event
of Default the Landlord shall not exercise any right or remedy which it holds
under any provision of this Lease or applicable law unless and until
13.2.1. the Landlord has given written notice thereof to the Tenant,
if written notice is required by this Section for the Event of Default which has
occurred, and
13.2.2. the Tenant has failed, (a) if such Event of Default consists
of a failure to pay money, within five (5) business days of the due date, and
tenant has failed to remedy such monetary default within five (5) business days
of written notice from Landlord, or (b) if such Event of Default consists of
something other than a failure to pay money, within (30) days thereafter
actively, diligently and in good faith to begin to cure such Event of Default
and to continue thereafter to do so until it is fully cured; provided, that
13.2.3. no such notice shall be required, and the Tenant shall be
entitled to no such grace period, (a) in an emergency situation in which the
Landlord acts to cure such Event of Default pursuant to the provisions of
paragraph 13.3.5; or (b) more than three times during any twelve (12) month
period, or (c) of the Tenant has substantially terminated or is in the process
of substantially terminating its continuous occupancy and use of the premises
for the purpose set forth in the provisions of Section 3, or (d) in the case of
any Event of Default enumerated in the provisions of paragraphs 13.1.1(a),
13.1.2 or 13.1.3,
13.3 Landlord's rights on Event of Default. On the occurrence of any Event
of Default, the Landlord may (subject to the operation and effect of the
provisions of subsection 13.2) take any or all of the following actions:
13.3.1. re-enter and repossess the premises and any and all
improvements thereon and additions thereto;
13.3.2. declare the entire balance of the rent for the remainder of
the Term to be due and payable, and collect such balance in any manner not
inconsistent with applicable law;
13.3.3. terminate this Lease;
13.3.4. relet any or all of the Premises for the Tenant's account for
any or all of the remainder of the term as hereinabove defined, or for a period
exceeding such remainder, in which event the Tenant shall pay to the Landlord,
at the times and in the manner specified by the provisions of Section 2, the
Base
<PAGE>
Rent and any Additional Rent accruing during such remainder, less any monies
received by the Landlord, with respect to such remainder, from such reletting,
as well as the cost to the Landlord of any attorney's fees, brokers fees or of
any repairs or other action (including those taken in exercising the Landlord's
rights under any provisions of this Lease) taken by the Landlord on account of
such Event of Default;
13.3.5. cure such Event of Default in any other manner (after giving
the Tenant written notice of the Landlord intention to do so except as provided
in paragraph 13.2.3.), in which event the Tenant shall reimburse the Landlord
for all reasonable expenses incurred by the Landlord in doing so, plus interest
thereon at the lesser of the rate of fifteen percent (15%) per annum or the
highest rate then permitted on account thereof by applicable law, which expenses
and interest shall be Additional Rent and shall be payable by the Tenant
immediately on demand therefor by the Landlord; and/or
13.3.6. pursue any combination of such remedies and/or any other
remedy available to the Landlord on account of such Event of Default under
applicable law.
13.4 No waiver. No action taken by the Landlord under the provisions of
this Section shall not operate as a waiver of any right which the Landlord would
otherwise have against the Tenant for the Rent hereby reserved or otherwise, and
the Tenant shall remain responsible to the Landlord for any loss and/or damage
suffered by the Landlord by reason of any Event of Default.
13.5 Intentionally Omitted.
Section 14. ESTOPPEL CERTIFICATE.
The Tenant shall from time to time, within fifteen (15) days after being
requested to do so by the Landlord or any Mortgagee, execute, enseal,
acknowledge, and deliver to the Landlord (or, at the Landlord's request, to any
existing or prospective purchaser, transferee, assignee or Mortgagee of any or
all of the Premises, the property, any interest therein or any of the Landlord's
rights under this Lease) an instrument in recordable form,
14.1 certifying (a) that this Lease is unmodified and in full force and
effect (or, if there has been any modification thereof, that it is in full force
and effect as so modified, stating therein the nature of such modification) (b)
as to the dates to which the Base Rent and any Additional Rent and other charges
arising hereunder have been paid; (c) as to the amount of any prepaid Rent or
any credit due to the Tenant hereunder; (d) that the Tenant has accepted
possession of the Premises, and the date on which the Term commenced; (e) as to
whether, to the best knowledge, information and belief of the signer of such
certificate, the Landlord or the Tenant is then in default in specifying the
nature of each such default); and (f) as to any other fact or condition
reasonably
<PAGE>
requested by the Landlord or such other addressee; and
14.2 acknowledging and agreeing that any statement contained in such
certificate may be relied upon by the Landlord and any such other addressee.
Section 15. QUIET ENJOYMENT
The Landlord hereby covenants that the Tenant, on paying the Rent and
performing the Covenants set forth herein, shall peaceably and quietly hold and
enjoy, throughout the Term, (a) the Premises, and (b) such rights as the Tenant
may hold hereunder with respect to the remainder of the Property.
Section 16. NOTICES.
Any notice, demand, consent, approval, request or other communication or
document to be provided hereunder to a party hereto shall be (a) given in
writing, and (b) deemed to have been given (i) forty-eight (48) hours after
being sent as certified or registered mail in the United States mails, postage
prepaid, return receipt requested, to the address of such party set forth
hereinabove or to such other address from time to time by notice to the other,
or (ii) (if such party's receipt thereof is acknowledged in writing) upon its
hand or other delivery to such party.
Section 17. LANDLORD'S LIEN.
In addition to any statutory lien for Rent in Landlord's favor, Landlord
shall have and Tenant hereby grants to Landlord a continuing security interest
for all Rent and other sums of money becoming due hereunder from Tenant, upon
all goods, equipment, fixtures, furniture, inventory, accounts, chattel paper
and other personal property of Tenant situated on the Premises subject to this
Lease and such property shall not be removed therefrom without the consent of
Landlord until all arrearages in Rent as well as any and all other sums of money
then due to Landlord hereunder shall first have been paid and discharged. In the
event of a default under this Lease, Landlord shall have, in addition to any
other remedies provided herein or by law, all rights and remedies under the
Uniform Commercial Code, including without limitation the right to sell the
property described in this Section at public of or private sale upon five (5)
days notice to Tenant. Tenant hereby agrees to execute such other instruments
necessary or desirable in Landlord's discretion to perfect the security
interests hereby granted. Landlord and Tenant agree that this Lease and Security
Agreement serves as a financing statement and that a copy of photographic or
other reproduction of this.portion of the Lease may be filed or record by
Landlord and have the same force and effect as the original. This Security
Agreement and Financing Statement also covers fixtures located at the premises
and may be filed for record in the land records. The record owner of the
Property is TELCO Development Group, Inc. Tenant hereby warrants and represents
that the collateral subject to the security interest
<PAGE>
granted by this Section is not purchased or used by tenant for personal,
family or household purposes.
Section 18. GENERAL.
18.1 Effectiveness. This Lease shall become effective upon and only upon
its execution by each party hereto.
18.2 Complete understanding. This Lease represents the complete
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior written or oral negotiations, representations, warranties,
statements or agreements between the parties hereto as to the same.
18.3 Amendment. This Lease may be amended by and only by an instrument
executed and delivered by each party hereto.
18.4 Applicable law. This Lease shall be given effect and construed by
application of the laws of Virginia, and any action or proceeding arising
hereunder shall be brought in the courts of Virginia; provided, that if such
action or proceeding arises under the Construction, laws or treaties of the
United States of America, or if there is a diversity of citizenship between the
parties thereto so that it is to be brought in a United States District court,
it shall be brought in the United States District Court for the Eastern District
of Virginia.
18.5 Waiver. Neither Landlord nor Tenant shall be deemed to have waived the
exercise of any right which it holds hereunder unless such waiver is made
expressly and in writing ( and no delay or omission by the Landlord in
exercising any such right shall be deemed to be a waiver of its future
exercise). No such waiver as to any instance involving the exercise of any such
right shall be deemed a waiver as to any other such instance, or any other such
right.
18.6 Time of essence. Time shall be of the essence of this lease.
18.7 Headings. the headings of the Sections, subsections, paragraphs and
subparagraphs hereof are provided herein for and only for convenience of
reference, and shall not be considered in construing their contents.
18.8 Construction. As use herein,
18.8.1. the term "person" means a natural person, a trustee, a
corporation, a partnership and any other form of legal entity; and
18.8.2. all referenced made (a) in the neuter, masculine or feminine
gender shall be deemed to have been made in all such genders, (b) in the
singular or plural number shall be deemed to have been made, respectively, in
the plural or singular number as
<PAGE>
well, and (c) to any Section, subsection, paragraph or subparagraph shall,
unless therein expressly indicated to the contrary, be deemed to have been made
to such Section, subsection, paragraph or subparagraph of this Lease.
18.9 EXHIBITS. Each writing referred to herein as being attached hereto as
an exhibit or otherwise designated herein as an exhibit hereto is hereby made a
part hereof.
18.10 Severability. No determination by any court, governmental body or
otherwise that any provision of this Lease or any amendment thereof is invalid
or unenforceable in any instance shall affect the validity or enforceable (a)
any other such provision, or (b) such provision in any circumstance not
controlled by such determination. Each such provision shall be valid and
enforceable to the fullest extent allowed by, and shall be construed wherever
possible as being consistent with, applicable law.
18.11 Definition of the "Landlord".
18.11.1 As used herein, the term the "Landlord" means the person
hereinabove named as such, and its heirs, personal representatives, successors
and assigns (each of whom shall have the same rights, remedies, powers,
authorities and privileges as it would have had, had it originally signed this
lease as the Landlord).
18.11.2 No person Holding the Landlord's interest hereunder (whether
or not such person is named as the "Landlord" herein) shall have any liability
hereunder after such person ceases to hold such interest, except for any such
liability accruing while such person hold such interest.
18.11.3. Neither the Landlord nor any principal of the Landlord,
whether disclosed or undisclosed, shall have any personal liability under any
provision of this Lease.
18.12. Definition of the "Tenant". As used herein, the term the "Tenant"
means each person hereinabove named as such and such person's heirs, personal
representatives, successors and assigns, each of whom shall have the same
obligations, liabilities, rights and privileges as it would have possessed had
it originally executed this Lease as the Tenant; provided that no such right or
privilege shall inure to the benefit of any assignment to such assignee is made
in accordance with the provisions of Section 10. Whenever two or more persons
constitute the Tenant, all such persons shall be jointly and severally liable
for performing the Tenant's obligations hereunder.
18.13. Commissions. Each party hereto hereby represents and warrants to the
other that, inconnection with the leasing of the Premises hereunder, the party
so representing and warranting has not dealt with any real estate broker, agent
or finder, and there
<PAGE>
is no other commission, charge or other compensation due on account thereof.
Each party hereto shall indemnify and hold harmless the other against and from
any inaccuracy in such party's representation.
18.14. Recordation. This Lease may not be recorded among the Land Records
of the said County or among any other public records, without the Landlord's
prior express, written consent thereto, and any attempt by the Tenant to do so
without having obtained the landlord's consent thereto shall constitute an Event
of Default hereunder. If this Lease is recorded by either party hereto, such
party shall bear a full expense of any transfer, documentary stamp or other tax,
and any recording fee, assessed in connection with such recordation; provided,
that if under applicable law the recordation of this Lease hereafter becomes
necessary in order for this Lease to be or remain effective, the Tenant shall
bear the full expense of any and all such taxes and fees incurred in connection
therewith.
18.15. Approval by Mortgagees. Anything contained in the provisions of this
Lease to the contrary notwithstanding, the Landlord shall be entitled at any
time hereafter but before the Landlord delivers possession of the premises to
the tenant hereunder, to terminate this Lease by giving written notice thereof
to the tenant, if any Mortgagee fails to approve this Lease for purposes of the
provisions of its Mortgage, and in the manner set forth therein.
IN WITNESS WHEREOF, each party hereto has executed and unsealed this Lease or
caused it to be executed and ensealed on its behalf by its duly authorized
representatives, the day and year first above written.
The Landlord:
Witness:
/S/ BY /S/
- ----------------------------------- --------------------------------------
Bricks in the Sticks, Ltd
The Tenant:
Witness:
/S/ BY /S/ Bryan Rachlin
- ----------------------------------- --------------------------------------
Tel Labs, Inc.
<PAGE>
STATE OF Virginia
----------------
COUNTY OF Fairfax ) to-wit:
----------------
The foregoing instrument was acknowledged before me this 1st day of
----
July , 1994 by Henry Luken a
- -------------- ---------------------------------------------------
Landlord on behalf of the Company.
- --------------
/S/Robin M. Bennett
---------------------
My commission expires: 6/30/98
STATE OF
----------------
COUNTY OF ) to-wit:
----------------
The foregoing instrument was acknowledged before me this day of
------
, 1994 by a
- -------------- ---------------------------------------------------
on behalf of the .
- -------------- -----------------------
----------------------------
My commission expires:
<PAGE>
Exhibit A
---------
<PAGE>
SCHEDULE C
PAYMENT SCHEDULE
For 3,000 sq. ft. @ 4219 - Lafayette Center Drive
<TABLE>
<CAPTION>
YEAR 1 YEAR 2
<S> <C>
7/1/94 - $2,500.00 7/1/95 - $2,600.00
8/1/94 - $2,500.00 8/1/95 - $2,600.00
9/1/94 - $2,500.00 9/1/95 - $2,600.00
10/1/94 - $2,500.00 10/1/95 - $2,600.00
11/1/94 - $2,500.00 11/1/95 - $2,600.00
12/1/94 - $2,500.00 12/1/95 - $2,600.00
1/1/95 - $2,500.00 1/1/96 - $2,600.00
2/1/95 - $2,500.00 2/1/96 - $2,600.00
3/1/95 - $2,500.00 3/1/96 - $2,600.00
4/1/95 - $2,500.00 4/1/96 - $2,600.00
5/1/95 - $2,500.00 5/1/96 - $2,600.00
6/1/95 - $2,500.00 6/1/96 - $2,600.00
YEAR 3 YEAR 4
7/1/96 - $2,704.00 7/1/97 - $2,812.16
8/1/96 - $2,704.00 8/1/97 - $2,812.16
9/1/96 - $2,704.00 9/1/97 - $2,812.16
10/1/96 - $2,704.00 10/1/97 - $2,812.16
11/1/96 - $2,704.00 11/1/97 - $2,812.16
12/1/96 - $2,704.00 12/1/97 - $2,812.16
1/1/97 - $2,704.00 1/1/98 - $2,812.16
2/1/97 - $2,704.00 2/1/98 - $2,812.16
3/1/97 - $2,704.00 3/1/98 - $2,812.16
4/1/97 - $2,704.00 4/1/98 - $2,812.16
5/1/97 - $2,704.00 5/1/98 - $2,812.16
6/1/97 - $2,704.00 6/30/98 - $2,812.16
YEAR 5
7/1/98 - $2,924.64
8/1/98 - $2,924.64
9/1/98 - $2,924.64 Note: Make checks payable to:
10/1/98 - $2,924.64
11/1/98 - $2,924.64 Bricks in the Sticks, Ltd.
12/1/98 - $2,924.64 4219 Lafayette Center Drive
1/1/99 - $2,924.64 Chantilly, VA 22021-1209
2/1/99 - $2,924.64
3/1/99 - $2,924.64
4/1/99 - $2,924.64
5/1/99 - $2,924.64
6/1/99 - $2,924.64
</TABLE>
<PAGE>
Exhibit 10.26
DEED OF LEASE AGREEMENT
THIS DEED OF LEASE AGREEMENT (hereinafter referred to as "this Lease"),
made this 1 day of March, 1995, by and between Bricks In The Sticks, Ltd.,
a corporation organized and existing under the laws of Virginia having an
address of 4219 Lafayette Center Drive, Chantilly, Virginia (hereinafter
referred to as the "Landlord"), and Telco Communications Group, Inc., a
corporation organized and existing under the laws of Virginia having an address
of 4219 Lafayette Center Drive, Chantilly, Virginia 22021 (hereinafter referred
to as the "Tenant").
WITNESSETH, THAT FOR AND IN CONSIDERATION of the mutual entry into this
lease by the parties hereto, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by each party hereto, the
Landlord hereby leases to the Tenant and the Tenant hereby leases from the
Landlord all of that real property, situate and lying in Fairfax County,
Virginia which consists of the space (containing 6,649 square feet of floor
area) outlined and attached hereto as Exhibit A (hereinafter referred to as the
"Premises") and located in a building commonly referred to as 4219 Lafayette
Center Drive, Chantilly, Virginia (hereinafter referred to as the "Building")
Lot 2, the Park at Lafayette, Lafayette Business Center, Fairfax County,
Virginia (the Premises, the remainder of the Building, such tract of land, other
buildings thereon, and any other buildings or improvements to be constructed
thereon being hereinafter referred to collectively as the "Property"). In
addition to the premises, Tenant is granted the right of nonexclusive use, in
common with others, of the automobile parking areas and other common facilities
designated by Landlord.
SUBJECT TO THE OPERATION AND EFFECT of any and all instruments and matters
of record or in fact.
UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:
Section 1. TERM
1.1 Length
------
This Lease shall be for a term (hereinafter referred to as the "Term")
(a) commencing on the 1st day of March 1995 when the Landlord shall
tender possession thereof to the Tenant (hereinafter referred to as the
"Commencement Date" except that if the date of such commencement is
hereinafter advanced or postponed pursuant to any provision of this Lease,
or by written agreement of the parties hereto, the date to which it is
advanced or postponed shall thereafter be the "Commencement Date" for
all purposes of the provisions of this Lease), and (b) terminating at
12:01 A.M., local time, on July 31, 1999 (hereinafter referred to as the
"Termination Date", except that if the date of such termination is
hereafter advanced or postponed pursuant to any provision of this Lease,
or by written agreement of the parties hereto, the date to which it is
advanced or
1
<PAGE>
postponed shall thereafter be the Termination Date for all purposes of the
provisions of this Lease as applicable thereafter).
1.2 Intentionally Omitted.
---------------------
1.3 Intentionally Omitted.
---------------------
1.4 Surrender
---------
The Tenant shall at its expense, at the expiration of the Term or any
earlier termination of this Lease, (a) promptly surrender to the Landlord
possessions of the Premises (including any fixtures or other improvements
which, under the provisions of Section 5, are owned by the Landlord) in
good order and repair (ordinary wear and tear excepted) and broom clean,
(b) remove therefrom the Tenant's sign, goods, and effects and any
machinery, trade fixtures and equipment used in conducting the Tenant's
trade or business and not owned by the Landlord, and (c) repair any
damage to the premises or the Building caused by such removal.
1.5 Holding Over.
------------
1.5.1 If the Tenant continues to occupy the premises after the expiration
of the Term or any earlier termination of this Lease after obtaining
the Landlord's express, written consent thereto,
(a) such occupancy shall (unless the Parties hereto otherwise agree
in writing) be deemed to be under a month-to-month tenancy,
which shall continue until either party hereto notifies the
other in writing, by at least thirty (30) days before the end
of the calendar month, that the notifying party elects to
terminate such tenancy at the end of such calendar month, in
which event such tenancy shall so terminate;
(b) anything contained in the foregoing provisions of this Section
to the contrary notwithstanding, the rent payable for each
such monthly period shall equal one-twelfth (1/12) of the
Base Rent and the Additional Rent payable under the provisions
of subsection 2.2 (calculated in accordance with such
provisions of subsection 2.2 as if this Lease had been renewed
for a period of twelve (12) full calendar months after such
expiration or earlier termination of the Term of such renewal);
and
(c) such month-to-month tenancy shall be upon the same terms and
subject to the same conditions as those set forth in the
provisions of this Lease. The monthly rent, however, will be
104% of that payable immediately prior to the commencement of
the month to month tenancy; provided, that if the Landlord
gives the Tenant, by at least thirty (30) days before the end
of any calendar month during such month-to-month tenancy,
written notice that such terms and conditions (including any
thereof relating to the amount or payment of Rent) shall,
after such month, be modified in any
2
<PAGE>
manner specified in such notice, then such tenancy shall,
after such month, be upon the said terms and subject to the
said conditions, as so modified.
1.5.2 If the Tenant continues to occupy the premises more than ninety
(90) days after the expiration of the Term or any earlier
termination of this Lease without obtaining the Landlord's
express, written consent thereto, such occupancy shall be on the
same terms and subject to the same conditions as those set forth
in the provisions of this Lease, except that, anything contained
in the provisions of this Lease to the contrary notwithstanding,
(a) the rental payable during the period of such occupancy shall
equal one hundred fifty percent (150%) of the rent which would be
payable during such period under the provisions of subparagraph
1.5.1 (b), had the Tenant obtained the Landlord's express, written
consent to such occupancy as aforesaid, (b) nothing in the
provisions of paragraph 1.5.1 or any other provisions of this
Lease shall be deemed in any way to alter or impair the Landlord's
right immediately to evict the Tenant or exercise its other rights
and remedies under the provision of this Lease or applicable law
on account of the Tenant's occupancy of Premises without having
obtained such consent.
Section 2. RENT
2.1 Amount
------
As rent for the premises (all of which is hereinafter referred to
collectively as "Rent"), the Tenant shall pay to the Landlord in advance,
without demand, deduction or set off, for the entire Term hereof, all of
the following:
2.1.1. Base Rent
---------
An annual rent, (hereinafter referred to as the "Base Rent")
comprised of the aggregate of the following components:
For the first Lease year during the Term, the sum of Sixty-Six
Thousand Four Hundred Ninety Dollars plus the actual cost to have
the premises regularly cleaned by a professional cleaning company
shall be payable in advance in equal monthly installments as set
forth in Exhibit C. If the Term commences on a day other than the
first (1st) day of a calendar month the rent shall be prorated one
three hundred sixty-fifth (1/365) of the Base Rent for each day of
such calendar month.
2.1.2. Additional Rent
---------------
Additional rent (hereinafter referred to as "Additional Rent") in
the amount of any payment referred to as such in any provision of
this Lease which accrues while this Lease is in effect.
2.1.3. Lease Year
----------
As used in the provisions of this Lease, the term "Lease Year"
means (a) the period commencing on the Commencement Date and
termination on the first (1st) anniversary of the last day of the
calendar month containing the Commencement
<PAGE>
Date, and (b) each successive period of twelve (12) calendar
months thereafter during the Term.
2.1.4. Adjustment Month
________________
The calendar month of July.
2.2 Annual Operating Costs
______________________
2.2.1. Operating Expense Increases
___________________________
Tenant will pay as additional rent hereunder Tenant's Proportionate
Share of increases in Landlord's Operating Expenses in excess of
the expenses for 19___ ("Base Year").
2.2.2. Operating Expense Definition
____________________________
For the purposes hereof the term "Operating Expenses" shall mean
all costs and expenses paid or incurred on an accrual basis by
Landlord in connection with the ownership, management, operation,
servicing and maintenance of the building and common grounds
including, but not limited to, employees' wages, salaries and
welfare and fringe benefits; payroll taxes; Real Estate Taxes;
electricity, gas oil and other fuels; utility charges; premiums
for fire and casualty, liability, workmen's compensation and other
insurance; repairs and maintenance to the Building; janitorial
services; cleaning supplies, uniforms and dry cleaning; window
cleaning; service contracts for the maintenance of HVAC and other
mechanical equipment; and management fees. Notwithstanding the
foregoing, Tenant shall not be responsible for annual increases
in operating expenses (excluding real estate taxes, utilities and
insurance premiums) which exceed the previous year by ten percent
(10%).
Operating Expenses shall not include capital expenses principal
or interest payments on any Deed of Trust or other financing
encumbrances, expenses incurred in leasing or procuring Tenants
including lease commissions, advertising costs and expenses or
renovating space for Tenants, the costs of special services or
utilities separately chargeable to other Tenants in the building
and compensation paid to any executive employee of Landlord.
2.2.3. Computation
___________
After the end of each calendar year during the Term, the Landlord
shall compute the total of the Annual Operating Costs incurred for
all of the Property during such calendar year, and shall allocate
them to the gross rentable space within the Property in proportion
to the respective operating costs percentages assigned to such
spaces; provided, that anything contained in the foregoing
provisions of this Subsection 2.2 to the contrary notwithstanding,
wherever the Tenant and/or any other tenant of space within the
Property has agreed in its lease or otherwise to provide any
item of such services partially or entirely at its own expense, or
wherever in the Landlord's judgement any such significant item of
expense is not incurred with respect to or for the benefit of all
the gross rentable space within
4
<PAGE>
the Property, in allocating the Annual Operating Costs pursuant
to the foregoing provisions of this subsection the Landlord
shall make an appropriate adjustment, using generally accepted
accounting principles, as aforesaid, so as to avoid allocating
to the Tenant or to such other tenant (as the case may be) those
Annual Operating Costs covering such services already being
provided by the Tenant or by such other tenant at its own
expense, or to avoid allocating to all of the gross rentable
space within the Property those Annual Operating Costs incurred
only with respect to a portion thereof, as aforesaid.
2.2.4. Payment as Additional Rent
--------------------------
The Tenant shall, within thirty (30) days after demand therefore
by the Landlord (with respect to each calendar year during the
Term), accompanied by a statement setting forth in reasonable
detail the Annual Operating Costs for such calendar year, pay
to the Landlord as Additional Rent the amount of the Tenants
operating costs percentage of the Annual Operating Costs for
such calendar year (as derived and allocated under the
provisions of paragraph 2.2.3.).
2.2.5. Proration
---------
If only part of any calendar year falls within the Term, the
amount computed as Additional Rent for such calendar year under
the foregoing provisions of this subsection shall be prorated in
proportion to the portion of such calendar year falling within
the Term (but the expiration of the term before the end of a
calendar year shall not impair the Tenant's obligation hereunder
to pay such prorated proportion of such Additional Rent for
that portion of such calendar year falling within the Term,
which shall be paid on demand, as aforesaid).
2.2.6. Landlord's right to estimate
----------------------------
Anything contained in the foregoing provisions of this
subsection to the contrary notwithstanding the Landlord may,
at its discretion, (a) make from time to time during the Term
a reasonable estimate of the Additional Rent which may become
due under such provisions for any calendar year, (b) require
the Tenant to pay to the Landlord for each calendar month
during such year one-twelfth (1/12) of such Additional Rent,
at the time and in the manner that the Tenant is required
hereunder to pay the monthly installment of the Base Rent for
such month, and (c) at the Landlord's reasonable discretion,
increase or decrease from time to time during such calendar
year the amount initially so estimated for such calendar year,
all by giving the Tenant written notice thereof, accompanied
by a schedule setting forth in reasonable detail the expenses
comprising the Annual Operating costs, as so estimated. In
such event, the Landlord shall cause the actual amount of
such Additional Rent to be computed and certified to the Tenant
within ninety (90) days after the end of such calendar year,
and the Tenant or the Landlord, as the case may be, shall pay
within thirty (30) days to the other the amount of any
deficiency or overpayment therein, as the case may be.
5
<PAGE>
2.2.7. Tenant shall be entitled to a reasonable review and/or audit
of the books and records kept in connection with the calculation
of Operating Expenses for the Building at the office of the
Landlord's property manager during business hours. Tenant shall
give Landlord and such manager at least seven days prior written
notice before undertaking any such audit. Any audit shall be at
Tenant's sole cost and expense, except that if such an audit
shall reveal that the amount charged to Tenant as its share of
Operating Expenses in any one year exceed by more than 10% the
amount which is actually owed by Tenant for such year, then
Landlord shall reimburse Tenant the overage in addition to the
reasonable out-of-pocket costs of such audit within 30 days or,
at Tenant's option, credit such amount against the next payment
of rent coming due hereunder. Tenant shall not be entitled to
more than one audit in any 12-month period in the Lease Term.
2.3 When due and payable
--------------------
2.3.1. The Base Rent for any Lease Year shall be due and payable in
twelve (12) consecutive, equal monthly installments, in advance,
on the first (1st) day of each calendar month during such Lease
Year; provided, that the installment of the Base Rent payable
for the first full calendar month of the Term (and, if the Term
commences on a day other than the first (1st) day of a calendar
month, that portion of the Base Rent which is payable for such
month) shall be due and payable on the date hereof.
2.3.2. Any Additional Rent accruing to the Landlord under any provision
of this Lease shall, except as is otherwise set forth herein, be
due and payable when the installment of the Base Rent next falling
due after such Additional Rent accrues and becomes due and payable,
unless the Landlord makes written demand upon the Tenant for
payment thereof at any earlier time, in which event such Additional
Rent shall be due and payable at such time.
2.3.3. Each such payment shall be made when due, without any deduction
or set off whatsoever, and without demand, failing which the Tenant
shall pay to the Landlord as Additional Rent, on which such
payment is due but unpaid within ten (10) days after written notice
from Landlord, a late charge equalling five percent (5%) of such
payment.
2.4 Where payable
-------------
The Tenant shall pay the Rent, in lawful currency of the United States of
America, to the Landlord by delivering or mailing it (postage prepaid) to
the Landlord's address which is set forth hereinabove, or to such other
address as the Landlord from time to time specifies by written notice to
the Tenant. Any payment made by the Tenant to the Landlord on account of
Rent may be credited by the Landlord to the payment of any Rent then past
due before being credited to Rent currently falling due. Any such payment
which is less than the amount of Rent then due shall constitute a payment
made on account thereof, the parties hereto hereby agreeing that the
Landlord's acceptance of such
6
<PAGE>
payment (whether or not with or accompanied by an endorsement or statement
that such lesser amount or the Landlord's acceptance thereof constitutes
payment in full of the rights hereunder to be paid all of such amount then
due, or in any other respect.
2.5 Tax on Lease
------------
If federal, state or local law now or thereafter imposes any tax,
assessment, levy or other charge (other than any income, inheritance or
estate tax) directly or indirectly upon (a) the Landlord with respect to
this Lease or the value thereof, (b) the Tenant's use or occupance of the
Premised, (c) the Base Rent, Additional Rent or any other sum payable under
this Lease, or (d) this transaction, then (except if and to the extent that
such tax, assessment, levy or other charge is included in the Annual
Operating Costs) the Tenant shall pay the amount thereof as Additional Rent
to the Landlord upon demand, unless the Tenant is prohibited by law from
doing so in which event the Landlord may, at its election, terminate this
Lease by giving written notice thereof to the Tenant.
2.6 Security deposit - Intentionally Omitted
---------------- ---------------------
Section 3. USE OF PREMISES.
3.1 The Tenant shall, continuously throughout the Term occupy and use the
Premises for and only for corporate office purposes.
3.2 The Tenant shall not violate any applicable law, ordinance or regulation
through its use of the premises or any portion of the property.
3.21 The building has been designated as a non-smoking building. Tenants,
its guests, visitors and invitees shall refrain from smoking on the
premises.
3.3 License
-------
3.3.1. The Landlord hereby grants to the Tenant a Non-exclusive license to
use (and to permit its officer, directors, agents, employees and
invitees to use in the course of its business at the Premises):
(a) if applicable, any and all elevators, common stairways, lobbies,
common hallways and other portions of the Building which, by
their nature, are manifestly designed and intended for common use
by the occupants of the Building, for pedestrian ingress and
egress to and from the Premises and for any other such manifest
purposes; and
(b) any and all proportions of the said tract of land on which the
Building is located (excluding that portion thereof which is
improved by any other building) which, by their nature, are
manifestly designed and intended for common use by the occupants
of the Building and of any other improvements on such tract, for
pedestrian ingress and egress to and from
7
<PAGE>
the Premises and for any other such manifest purposes;
and
(c) any and all portions of such tract of land as from time
to time are designated (by striping or otherwise) by the
Landlord for such purpose, for the parking of
automobiles.
3.3.2. Such license shall be exercised in common with the exercise thereof
by the Landlord, any tenant or owner of the building or any other
building located on such tract, and their respective officers,
directors, agents, employees and invitees, and in accordance with
the Rules and Regulations promulgated from time to time pursuant to
the provisions of Section 11.
3.4 Signs
-----
The Tenant shall have the right to erect from time to time within the
premises such signs as it desires, in accordance with applicable law and
Landlord's building standard signage criteria, except that the Tenant shall
not erect any sign within the premises, or elsewhere, in any place where
such sign is visible primarily from the exterior of the Premises, unless the
Landlord has given its express, written consent thereto.
Section 4. INSURANCE AND INDEMNIFICATION.
4.1 Increase in risk
----------------
4.1.1. The Tenant shall not do or permit to be done any act or thing as a
result of which either (a) any policy of insurance of any kind
covering (i) any or all of the Property or (ii) any liability of the
Landlord in connection therewith may become void or suspended, or (b)
the insurance risk under any such policy would (in the opinion of the
insurer thereunder) be made greater; and
4.1.2. In the event Tenant continues such activity after written notice by
Landlord of such pending increase in premium, then Tenant shall pay
as Additional Rent the amount of any increase in any premium for such
insurance resulting from any breach of such covenant.
4.2 Insurance to be maintained by Tenant
4.2.1. The tenant shall maintain at its expense, throughout the Term,
insurance against loss or liability in connection with bodily injury,
death, property damage or destruction, occurring within the Premises
or arising out of the use thereof by the Tenant or its agents,
employees, officers, or invitees, visitors and guests, under one or
more policies of general public liability insurance having such limits
not less than (a) One Million Dollars ($1,000,000.00) for bodily
injury to or death of any one person during any one occurrence and (b)
Five Hundred Thousand Dollars ($500,000.00) for property damage or
destruction during any one occurrence. Each such policy shall (a) name
as the insured thereunder the
<PAGE>
Landlord and the Tenant, (b) by its terms, not be cancelable without
at least thirty (30) days' prior written notice to the Landlord, and
(c) be issued by an insurer of recognized responsibility licensed
to issue such policy in Virginia.
4.2.2. (a) At least five (5) days after written request by Landlord, the
Tenant shall deliver to the Landlord an original or signed
duplicate copy of each such policy, and
(b) at least thirty (30) days before any such policy expires, the
Tenant shall deliver to the Landlord an original or a signed
duplicate copy of a replacement policy therefore; provided,
that so long as such insurance is otherwise in accordance
with the provisions of this Section, the Tenant may carry any
such insurance under a blanket policy covering the premises
for the risks and in the minimum amounts specified in
paragraph 4.2.1., in which event the Tenant shall deliver to
the Landlord two (2) insurer's certificates therefor in lieu
of an original or a copy thereof, as aforesaid.
4.3 Insurance to be maintained by Landlord
4.3.1. Tenant agrees to pay to Landlord, as Additional Rent, its building
proportional share in subsection 2.2.1 (b) of the cost of fire and
extended coverage insurance, rent insurance, liability insurance
and any other insurances as may be maintained by the Landlord and
are reasonably required by the holders of any mortgages, deed of
trust or ground leases on the Building.
4.4 Waiver of subrogation
---------------------
If either party hereto is paid any proceeds under any policy of insurance
naming such party as an insured, on account of any loss, damage or
liability, then such party hereby releases the other party hereto, to and
only to the extent of the amount of such proceeds from any and all
liability for such loss, damage or liability, notwithstanding that such
loss, damage or liability may arise out of the negligent or intentionally
tortious act or omission of the other party, its agents or employees;
provided, that such release shall be effective only as to a loss damage or
liability occurring while the appropriate policy of insurance of the
releasing party provides that such release shall not impair the
effectiveness of such policy or the insured's ability to recover
thereunder. Each party hereto shall use reasonable efforts to have a clause
or clauses to such effect included in its said policies, and shall promptly
notify the other in writing if which clause cannot be included in any such
policy.
4.5 Liability of parties
------------------
Except if and to the extent that such party is released from liability to
the other party hereto pursuant to the provision of subsection 4.4.
4.5.1. the Landlord and Tenant (a) shall be responsible for, and shall
indemnify and hold harmless each other against and from any and all
liability arising out of, any
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<PAGE>
injury to or death of any person or damage to any property,
occurring anywhere upon the Property, if, only and to the extent
that such injury death, or damage is proximately caused by the
grossly negligent or intentionally tortious act or omission of the
other or its agents, officers or employees, but (b) shall not be
responsible for or be obligated to indemnify or hold harmless the
Tenant against of from any liability for any such injury, death or
damage occurring anywhere upon the Property (including the
Premises), (i) by reason of the Tenants occupancy or use of the
Premises or any other portion of the property, or (ii) because of
fire, windstorm, act of God or other cause unless solely caused by
such gross negligence or intentionally tortious act or omission of
the Landlord, as aforesaid; and
4.5.2. subject to the operation and effect of the foregoing provisions of
this subsection unless damage caused by gross negligence of
willful misconduct of Landlord, the Tenant shall be responsible
for, and shall defend, indemnify and hold harmless the Landlord
against and from, any and all liability or claim of liability
arising out of any injury to or death of any person or damage to
any property, occurring within the Premises.
Section 5. IMPROVEMENTS TO PREMISES.
5.1 By Landlord
-----------
5.1.1. Intentionally Omitted
---------------------
5.1.2. Intentionally Omitted
---------------------
5.2 By Tenant
---------
The Tenant shall not make any alteration, addition or improvement to the
Premises without first obtaining the Landlord's written consent thereto
not to be unreasonably withheld, conditioned or delayed. If the Landlord
consents to any such proposed alteration, addition or improvement, it
shall be made at the Tenant's sole expense (and the Tenant shall hold the
Landlord Harmless form any cost incurred on account thereof), and shall
not interfere with the use and enjoyment of the remainder of the Property
by any tenant thereof or other person. Landlord must indicate at time of
approval whether such improvements will be subject to section 5.4.
5.3 Mechanic's Lien
---------------
The Tenant shall (a) immediately after it is filed or claimed, bond or
have released any mechanics, materialman's or other lien filed or claimed
against any or all of the Premises, the property, or any other property
owned or leased by the Landlord, by reason of labor or materials provided
for the Tenant or any of its contractors or subcontractors (other than
labor or material provided by Landlord pursuant to the provisions of
subsection 5.1), or otherwise arising out of the Tenant's use or occupancy
of the Premises or any other
<PAGE>
portion of the Property, and (b) defend, indemnify and hold harmless the
Landlord against and from any and all liability, claim of liability or
expense (including, by way of example rather than of limitation, that of
reasonable attorneys' fees) incurred by the Landlord on account of any such
lien or claim.
5.4 Fixtures
--------
Any and all improvements, repairs, alterations and all other property
attached to, used in connection with or otherwise installed within the
Premises by the Landlord or the Tenant shall, immediately on the completion
of their installation, become the Landlord's property without payment
therefor by the Landlord, except that any machinery, equipment or fixtures
installed by the Tenant and used in the conduct of the Tenant's trade or
business (rather than to service the premises or any of the remainder of
the Building or the property generally) shall remain the Tenant's property.
Section 6. UTILITIES AND SERVICES
6.1 Utilities
---------
Landlord agrees to provide at its cost water, electricity and telephone
service connections into the Building and shall pay for all water, gas,
heat, light, power, sewer, sprinkler charges and other utilities, and
services used on or from the Premises, including site utilities, together
with any taxes, penalties, surcharges or the like pertaining thereto and
any maintenance charges for utilities and shall furnish all electric light
bulbs and tubes during normal hours of operation which shall be from 8:00
a.m. to 6:00 p.m. Monday through Friday and from 9:00 a.m. to 1:00 p.m. on
Saturday. If any such services are not separately metered to Tenant, Tenant
shall pay its proportionate share as determined by Landlord of all charges
jointly metered within the Building.
6.2 Extraordinary services
----------------------
Tenant shall not without first obtaining the Landlord's written consent
thereto, install within the premises and electrical machinery, appliances
or equipment which in the aggregate utilizes in excess of 500 amperes of
electric capacity.
6.3 Interruption
------------
The Landlord shall have no liability to the tenant on account of any
failure, modification or interruption of any such service which either (a)
arises out of any of the causes enumerated in the provisions of subsection
5.1, or (b) is required by applicable law (including, by way of example
rather than of limitation, any federal law or regulation relating to the
furnishing or consumption of energy or the temperature of buildings).
Section 7. LANDLORD'S RIGHT OF ENTRY
The Landlord and its agents shall be entitled to enter the Premises at any
reasonable time (a) to inspect the premises, (b) to exhibit the premises to
any existing or prospective purchaser tenant or Mortgagee thereof, (c) to
make any alteration, improvement or repair
11
<PAGE>
to the Building or the Premises, or (d) for any other purpose relating to
the operation or maintenance of the Property; provided, that the Landlord
shall (a) (unless doing so is impractical or unreasonable because of
emergency) give the Tenant at least twenty-four (24) hours' prior notice of
its intention to enter the Premises, and (b) use reasonable efforts to
avoid thereby interfering more than is reasonably necessary with the
Tenant's use and enjoyment thereof. Notwithstanding the foregoing,
Landlord's right to entry is subject to the requirements of the Defense
Security Regulations except in the case of emergency.
Section 8. FIRE AND OTHER CASUALTIES.
8.1 General
-------
If fifty percent (50%) or less of the Premises are damaged by fire or
other casualty during the term.
8.1.1. The Landlord shall restore the Premises with reasonable promptness
(taking into account the time required by the Landlord to effect
a settlement with, and to procure any insurance proceeds from, any
insurer against such casualty, but in any event begin restoration
within ninety (90) days after the date of such casualty) to
substantially their condition immediately before such casualty, and
may temporarily enter and possess any or all of the Premises for
such purpose (provided, that the Landlord shall not be obligated to
repair, restore or replace any fixture, improvement, alteration,
furniture or other property owned, installed or made by the Tenant),
but
8.1.2. The times for commencement and completion of any such restoration
shall be extended for the period of any delay occasioned by the
Landlord in doing so arising out of any of the causes enumerated
in the provisions of subsection 5.1. If the Landlord undertakes to
restore the Premises and such restoration is not accomplished
within the said period of one hundred eighty (180) days plus the
period of any extension thereof, as aforesaid, the Tenant may
terminate this Lease by giving written notice thereof to the
Landlord within thirty (30) days after the expiration of such
period, as so extended; and
8.1.3. So long as the Tenant is deprived of the use of any or all of the
Premises on account of such casualty, the Base Rent and any
Additional Rent payable under the provisions of subsection 2.2 shall
be abated in proportion to the number of square feet of the Premises
rendered substantially unfit for occupancy by such casualty, unless,
because of any such damage, the undamaged portion of the Premises is
made materially unsuitable for use by the Tenant for the purposes
set forth in the provisions of Section 3, in which event the Base
Rent and any such Additional Rent shall be abated entirely during
such period of deprivation.
<PAGE>
8.2 Substantial destruction
-----------------------
Anything contained in the foregoing provisions of this Section to the
contrary notwithstanding,
8.2.1. if during the Term the Building is so damaged by fire or other
casualty that (a) either in excess of fifty percent (50%) of the
premises or (whether or not the Premises are damaged) the Building
are rendered substantially unfit for occupancy, as reasonably
determined by the Landlord, or (b) the Building is damaged to the
extent that the Landlord reasonably elects to demolish the Building,
or if any Mortgage requires that any or all of such insurance
proceeds be used to retire nay or all of the debt secured by its
Mortgage, then in any such casualty, by giving written notice
thereof to the Tenant within thirty (30) days after such date; and
8.2.2. in such event, (a) the Tenant shall pay to the Landlord the Base
Rent and any Additional Rent payable by the Tenant hereunder and
accrued through the date of such termination, (b) the Landlord shall
repay to the Tenant any and all prepaid Rent for periods beyond
such termination within thirty (30) days of such date and (c) the
Landlord may enter upon and repossess the premises without further
notice.
8.3 Tenant's negligence
-------------------
Anything contained in any provision of this Lease to the contrary
notwithstanding, if any such damage to the premises, the Building or
both are caused by or result from the negligent or intentionally
tortious act or omission of the Tenant, those claiming under the Tenant
or any of their respective officers, employees, agents or invitees
8.3.1. The Rent shall not be suspended or apportioned as aforesaid, and
8.3.2. except if any and to the extent that the Tenant is released from
liability or Tenant has elected to repair, which election shall
be promptly communicated to Landlord, and Tenant is diligently
pursuing such repair therefor pursuant to the provisions of
subsection 4.4, the Tenant shall pay to the Landlord upon demand,
as Additional Rent, the cost of (a) any repairs and restoration
made or to be made as a result of such damage, or (b) (if the
Landlord elects not to restore the Building) any damage or loss
which the Landlord incurs as a result of such damage.
Section 9. CONDEMNATION
9.1 Right to award
--------------
13
<PAGE>
9.1.1. If any or all of the Premises are taken by the exercise of any
power of eminent domain or are conveyed to or at the direction of
any governmental entity under a threat of any such taking (each of
which is hereinafter referred to as a "Condemnation"), the
Landlord shall be entitled to collect from the condemning authority
thereunder the entire amount of any award made in any such
proceeding or as consideration for such conveyance, without
deduction there from for any Leasehold or other estate held by the
Tenant under this Lease.
9.1.2. The Tenant hereby (a) assigns to the Landlord all of the Tenant's
right, title and interest, if any, in and to any such award; (b)
waives any right which it may otherwise have in connection with
such Condemnation, against the Landlord or such condemning
authority, to any payment for (1) the value of the then-unexpired
portion of the term, (ii) leasehold damages, and (iii) any damage
to or diminution of the value of the Tenant's leasehold interest
hereunder or any portion of the Premises not covered by such
Condemnation; and (c) agrees to execute any and all further
documents which may be required to facilitate the Landlord's
collection of any and all such awards.
9.1.3. Intentionally Omitted
---------------------
9.2 Effect of condemnation
----------------------
9.2.1. If (a) all of the Premises are covered by a Condemnation, or
(b) any part of the Premises is covered by a Condemnation and the
remainder thereof is insufficient for the reasonable operation
therein of the Tenant's business, or (c) any of the Building is
covered by a Condemnation and, in the Landlord's reasonable opinion,
it would be impractical to restore the remainder thereof, or (d) any
of the rest of the Property is covered by a Condemnation and, in the
Landlord's reasonable opinion, it would be impractical to continue
to operate the remainder of the Property thereafter, then, in any
such event, the Term shall terminate on the date on which possession
of so much of the Premises, the Building or the rest of the
Property, as the case may be, as is covered by such Condemnation is
taken by the condemning authority thereunder, and all Rent
(including payable under the provisions of subsection 2.2), taxes
and other charges payable hereunder shall be apportioned and paid to
such date.
9.2.2. If there is a condemnation and the Term does not terminate pursuant
to the foregoing provision of this subsection, the operation and
effect of this Lease shall be unaffected by such Condemnation,
except that the Base Rent shall be reduced in proportion to the
square footage of floor area, if any, of the premises covered by
such Condemnation.
9.3 If there is a Condemnation, the Landlord shall have no liability to the
Tenant on account of any (a) interruption of the Tenant's business upon the
Premises, (b) diminution in the Tenant's ability to use the Premises, or
(c) other injury or damage sustained by the Tenant as a result of such
Condemnation.
14
<PAGE>
15
<PAGE>
9.4 The Landlord shall be entitled to conduct any such condemnation proceeding
and any settlement thereof free of interference from the Tenant, and the
Tenant hereby waives any right which it otherwise has to participate
therein.
Section 10. ASSIGNMENT AND SUBLETTING.
10.1 The Tenant hereby acknowledges that the Landlord has entered into this
Lease because of the Tenant's financial strength, goodwill, ability and
expertise and that, accordingly, this Lease is one which is personal to
the Tenant, and agrees for itself and its successors and assigns in
interest hereunder that it will not (a) assign any of its rights under
this Lease, or (b) make or permit any total or partial sale, lease,
sublease, assignment, conveyance, license, mortgage, pledge, encumbrance
or other transfer of any or all of the Premises or the occupancy of use
hereof (each of which is hereinafter referred to as a ("Transfer"),
without first obtaining the Landlord's written consent not unreasonably
withheld or delayed thereto which decision shall be provided by Landlord
within thirty (30) days of written notice by Tenant, (which consent may be
given or withheld in the Landlord's sole discretion and, if given, shall
not constitute a consent to any subsequent such Transfer, whether by the
person hereinabove named as the "Tenant" or by any such transferee). Any
person to whom any Transfer is attempted without such consent shall have
no claim, right, or remedy whatsoever hereunder against the Landlord, and
the Landlord shall have no duty to recognize any person claiming under or
through the same. No such action taken with or without the Landlord's
consent shall in any way relieve or release the Tenant from liability for
the timely performance of all of the Tenant's obligations hereunder.
10.2 In the event of any Transfer, Landlord may, at it's sole option, have the
right to fifty percent (50%) of any profits associated with any subletting
or assignment. Neither Tenant nor any party claiming an interest under or
through Tenant shall interfere with Landlord's exercise of its rights
hereunder. Tenant hereby indemnifies and holds Landlord harmless from and
against any and all liabilities, costs, losses, or damages, including
reasonable attorneys fees and court costs, arising from any breach of the
provisions of this section by Tenant.
Section 11. RULES AND REGULATIONS
The Landlord shall have the right to prescribe, at its sole discretion,
reasonable rules and regulations (hereinafter referred to as the "Rules
and Regulations") having uniform applicability to all tenants of the
Building (subject to the provisions of their respective leases) and
governing their use and enjoyment of the Building and the remainder of the
Property; provided that the Rules and Regulations shall not materially
interfere with the Tenant's use and enjoyment of the Premises, in
accordance with the provisions of this Lease, for the purposes enumerated
in the provisions of Section 3. The Tenant shall adhere to the Rules and
Regulations and shall cause its agents, employees, invitees,
16
<PAGE>
visitors and guests to do so.
Section 12. SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE.
12.1 Subordination
-------------
This Lease and Tenant's interest hereunder shall be subject and
subordinate to the lien operation and effect of each and every Mortgage,
to all renewals, modifications, replacements and extensions thereof, now
or hereafter executed by Landlord or its successors, assigns, or purchaser
at foreclosure, and to any and all advances made thereunder and interest
thereon, provided that the mortgagee or holder of the indebtedness
provides Tenant with a non-disturbance agreement which shall provide that
so long as Tenant shall not be in default under the Lease, no mortgagee,
successor in interest, purchaser at foreclosure, ground lessor or other
party, shall disturb Tenant's possession pursuant to the terms of this
Lease, and so long as Tenant complies with all of the terms and conditions
of the Lease, Tenant may continue to occupy the Leased Premises and enjoy
all of its rights under this Lease. It is understood and agreed to by
Landlord and Tenant that if the mortgagee or holder of the indebtedness
fails to provide Tenant with the aforementioned non-disturbance agreement
with two business days from such time as this Lease is executed by Tenant,
Tenant may at Tenant's election, choose to terminate this Lease with no
liability whatsoever to Landlord, Tenant or Mortgagee. Subject to
Tenant's receipt of a non-disturbance agreement from the mortgagee as
aforesaid, Tenant agrees that, within ten (10) business days after
receipt of written request therefor from Landlord, it will from time to
time execute and deliver any instrument or other document required by
mortgagee or purchaser at foreclosure to subordinate this Lease and its
interest in the Leased Premises to the lien of any such mortgagee, in
form and substance required by such mortgagee, which shall provide
interalia that the mortgagee is not (i) bound by any payment of Base
---------
Rent or Additional Rent made by Tenant more than one (1) month in advance
to any prior landlord (including Landlord), other than the Advance Deposit
provided for in Section 2.6; (ii) liable for any damages or subject to any
offset or defense by Tenant to the payment of Base Rent or Additional Rent
by reason of any act or omission of Landlord prior to the date that
mortgagee succeeds to the interest of Landlord, and (iii) bound by any
termination, amendment, modification or surrender of this Lease made
without mortgagee's written consent. Tenant will also upon request submit
current financial statements and financial statements covering the five
(5) immediately preceding years (but the mortgagee's obligations under
this subsection 12.1 shall not be conditioned upon the mortgagee's
approval of the same), and Tenant will, upon request, allow Landlord's
mortgagee to record on behalf of Tenant this Lease or a short form
thereof, at mortgagee's expense, if required by Landlord's mortgagee or
other lending institution. Tenant hereby irrevocably constitutes and
appoints Landlord as Tenant's attorney-in-fact to execute, acknowledge and
deliver any and all such instruments for and on behalf of Tenant, should
Tenant fail to do so within ten (10) business days after receipt of
written notice. Tenant agrees that, within ten (10) business days after
written request therefor, from Landlord, it will, from time to time,
execute and deliver any instrument or any other document required by any
mortgagee, transferee,
17
<PAGE>
purchaser or other interested person to confirm such subordination and
obligation to attorn pursuant to Section 12.2 hereof.
12.2 Attornment and non disturbance
______________________________
The Tenant shall, promptly at the request of the Landlord or the holder
of any Mortgage (herein referred to as a "Mortgagee"), execute enseal,
acknowledge and deliver such further instrument or instruments.
12.2.1. Evidencing such subordination as the Landlord or such Mortgagee
deems necessary or desirable, and
12.2.2. (At such Mortgagee's request) attorning to such Mortgagee,
Landlord will use its best efforts to obtain an agreement from
the Mortgagee that such Mortgagee will, in the event of a
foreclosure of any such mortgage or deed of trust (or termination
of any such ground lease) take no action to interfere with the
Tenant's rights hereunder, except on the occurrence of an Event
of Default by Tenant.
12.3 Anything contained in the provisions of this Section to the contrary
notwithstanding, any mortgagee may at any time subordinate the lien of
its Mortgage to the operation and effect of this Lease without obtaining
the Tenant's consent thereto, by giving the Tenant written notice thereof,
in which event this Lease shall be deemed to be senior to such Mortgage
without regard to their respective dates of execution, delivery and/or
recordation among the Land Records of the said County, and thereafter such
Mortgagee shall have the same rights as to this Lease as it would have
had, were this Lease executed and delivered before the execution of such
Mortgage.
Section 13. DEFAULT
13.1 Definition
__________
as used in the provisions of the Lease, each of the following events shall
constitute, and is hereinafter referred to as, an "Event of Default":
13.1.1. if the Tenant fails to (a) pay any Rent or any other sum which it
is obligated to pay by any provision of this Lease, when and as
due and payable hereunder and without demand therefor, or (b)
perform any of its other obligations under the provisions of this
Lease; or
13.1.2. if the Tenant (a) applies for or consents to the appointment of
a receiver, trustee or liquidator of the Tenant or of all or a
substantial part of its assets, (b) files a voluntary petition
in bankruptcy or admits in writing its inability to pay its debts
as they come due, (c) makes an assignment for the benefit of its
creditors, (d) files a petition or an answer seeking a
reorganization or an arrangement with creditors, or seeks to take
advantage of any insolvency law, (e) performs any other act of
bankruptcy, or (f) files an answer admitting the material
allegations
<PAGE>
of a petition filed against the Tenant in any bankruptcy,
reorganization or insolvency proceeding; or
13.1.3. if (a) an order, judgment or decree is entered by any court of
competent jurisdiction adjudicating the Tenant a bankrupt or an
insolvent, approving a petition seeking such a reorganization, or
appointing a receiver, trustee or liquidator of the Tenant or of
all or a substantial part of its assets, or (b) there otherwise
commences as to the Tenant or any of its assets any proceedings
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment, receivership or similar law and if such order,
judgment, decree or proceeding continues unstated for more than
sixty (60) consecutive days after any stay thereof expires;
13.2 Notice to Tenant; grace period
______________________________
Anything contained in the provisions of this Section to the contrary
notwithstanding, on the occurrence of an Event of Default the Landlord
shall not exercise any right or remedy which it holds under any provision
of this Lease or applicable law unless and until
13.2.1. the Landlord has given written notice thereof to the Tenant, if
written notice is required by this Section for the Event of
Default which has occurred, and
13.2.2. the Tenant has failed, (a) if such Event of Default consists of
a failure to pay money, within five (5) business days of the due
date, and tenant has failed to remedy such monetary default
within five (5) business days of written notice from Landlord, or
(b) if such Event of Default consists of something other than
a failure to pay money, within (30) days thereafter actively,
diligently and in good faith to begin to cure such Event of
Default and to continue thereafter to do so until it is fully
cured; provided, that
13.2.3. no such notice shall be required, and the Tenant shall be
entitled to no such grace period, (a) in an emergency situation
in which the Landlord acts to cure such Event of Default pursuant
to the provisions of paragraph 13.3.5.; or (b) more than three
times during any twelve (12) month period, or (c) of the Tenant
has substantially terminated or is in the process of
substantially terminating its continuous occupancy and use of
the premises for the purpose set forth in the provisions of
Section 3, or (d) in the case of any Event of Default enumerated
in the provisions of paragraphs 13.1.1(a), 13.1.2 or 13.1.3.
13.3 Landlord's rights on Event of Default
_____________________________________
On the occurrence of any Event of Default, the Landlord may (subject to
the operation and effect of the provisions of subsection 13.2) take any
or all of the following actions:
13.3.1. re-enter and repossess the premises and any and all improvements
thereon and additions thereto;
<PAGE>
13.3.2. declare the entire balance of the rent for the remainder of the
Term to be due and payable, and collect such balance in any
manner not inconsistent with applicable law;
13.3.3. terminate this Lease;
13.3.4. relet any or all of the Premises for the Tenant's account for
any or all of the remainder of the term as hereinabove defined,
or for a period exceeding such remainder, in which event the
Tenant shall pay to the Landlord, at the times and in the manner
specified by the provisions of Section 2, the Base Rent and any
Additional Rent accruing during such remainder, less any monies
received by the Landlord, with respect to such remainder, from
such reletting, as well as the cost to the Landlord of any
attorney's fees, brokers fees or of any repairs or other action
(including those taken in exercising the Landlord's rights under
any provisions of this Lease) taken by the Landlord on account of
such Event of Default;
13.3.5. cure such Event of Default in any other manner (after giving
the Tenant written notice of the Landlord intention to do so
except as provided in paragraph 13.2.3.), in which event the
Tenant shall reimburse the Landlord for all reasonable expenses
incurred by the Landlord in doing so, plus interest thereon at
the lesser of the rate of fifteen percent (15%) per annum or the
highest rate then permitted on account thereof by applicable law,
which expenses and interest shall be Additional Rent and shall be
payable by the Tenant immediately on demand therefor by the
Landlord; and/or
13.3.6. pursue any combination of such remedies and/or any other remedy
available to the Landlord on account of such Event of Default
under applicable law.
13.4 No waiver
_________
No action taken by the Landlord under the provisions of this Section shall
not operate as a waiver of any right which the Landlord would otherwise
have against the Tenant for the Rent hereby reserved or otherwise, and the
Tenant shall remain responsible to the Landlord for any loss and/or
damage suffered by the Landlord by reason of any Event of Default.
13.5 Intentionally Omitted
______________________
Section 14. ESTOPPEL CERTIFICATE.
The Tenant shall from time to time, within fifteen (15) days after being
requested to do so by the Landlord or any Mortgagee, execute, enseal,
acknowledge, and deliver to the Landlord (or, at the Landlord's request,
to any existing or prospective purchaser, transferee, assignee or
Mortgagee of any or all of the Premises, the property, any interest
<PAGE>
therein or any of the Landlord's rights under this Lease) an instrument in
recordable form,
14.1 certifying (a) that this Lease is unmodified and in full force and effect
(or, if there has been any modification thereof, that it is in full force
and effect as so modified, stating therein the nature of such
modification); (b) as to the dates to which the Base Rent and any
Additional Rent and other charges arising hereunder have been paid; (c) as
to the amount of any prepaid Rent or any credit due to the Tenant
hereunder; (d) that the Tenant has accepted possession of the Premises, and
the date on which the Term commenced; (e) as to whether, to the best
knowledge, information and belief of the signer of such certificate, the
Landlord or the Tenant is then in default in specifying the nature of each
such default); and (f) as to any other fact or condition reasonably
requested by the Landlord or such other addressee; and
14.2 acknowledging and agreeing that any statement contained in such certificate
may be relied upon by the Landlord and any such other addressee.
Section 15. QUIET ENJOYMENT
The Landlord hereby covenants that the Tenant, on paying the Rent and
performing the Covenants set forth herein, shall peaceably and quietly hold
and enjoy, throughout the Term, (a) the Premises, and (b) such rights as
the Tenant may hold hereunder with respect to the remainder of the
Property.
Section 16. NOTICES.
Any notice, demand, consent, approval, request or other communication or
document to be provided hereunder to a party hereto shall be (a) given in
writing, and (b) deemed to have been given (i) forty-eight (48) hours after
being sent as certified or registered mail in the United States mails,
postage prepaid, return receipt requested, to the address of such party set
forth hereinabove or to such other address from time to time by notice to
the other, or (ii) (if such party's receipt thereof is acknowledged in
writing) upon its hand or other delivery to such party.
Section 17. LANDLORD'S LIEN.
In addition to any statutory lien for Rent in Landlord's favor, Landlord
shall have and Tenant hereby grants to Landlord a continuing security
interest for all Rent and other sums of money becoming due hereunder from
Tenant, upon all goods, equipment, fixtures, furniture, inventory,
accounts, chattel paper and other personal property of Tenant situated on
the Premises subject to this Lease and such property shall not be removed
therefrom without the consent of Landlord until all arrearages in Rent as
well
21
<PAGE>
as any and all other sums of money then due to Landlord hereunder shall
first have been paid and discharged. In the event of a default under this
Lease, Landlord shall have, in addition to any other remedies provided
herein or by law, all rights and remedies under the Uniform Commercial
Code, including without limitation the right to sell the property described
in this Section at public of or private sale upon five (5) days notice to
Tenant. Tenant hereby agrees to execute such other instruments necessary or
desirable in Landlord's discretion to perfect the security interests hereby
granted. Landlord and Tenant agree that this Lease and Security Agreement
serves as a financing statement and that a copy of photographic or other
reproduction of this portion of the Lease may be filed or record by
Landlord and have the same force and effect as the original. This Security
Agreement and Financing Statement also covers fixtures located at the
premises and may be filed for record in the land records. The record owner
of the Property is TELCO Development Group, Inc. Tenant hereby warrants and
represents that the collateral subject to the security interest granted by
this Section is not purchased or used by tenant for personal, family or
household purposes.
Section 18. GENERAL.
18.1 Effectiveness
-------------
This Lease shall become effective upon and only upon its execution by each
party hereto.
18.2 Complete understanding
----------------------
This Lease represents the complete understanding between the parties hereto
as to the subject matter hereof, and supersedes all prior written or oral
negotiations, representations, warranties, statements or agreements between
the parties hereto as to the same.
18.3 Amendment
---------
This Lease may be amended by and only by an instrument executed and
delivered by each party hereto.
18.4 Applicable law
--------------
This Lease shall be given effect and construed by application of the laws
of Virginia, and any action or proceeding arising hereunder shall be
brought in the courts of Virginia; provided, that if such action or
proceeding arises under the Construction, laws or treaties of the United
States of America, or if there is a diversity of citizenship between the
parties hereto so that it is to be brought in a United States District
court, it shall be brought in the United States District Court for the
Eastern District of Virginia.
18.5 Waiver
------
Neither Landlord nor Tenant shall be deemed to have waived the exercise of
any right which it holds hereunder unless such waiver is made expressly and
in writing (and no delay or omission by the Landlord in exercising any such
right shall be deemed to be a waiver of its future exercise). No such
waiver as to any instance involving the exercise or any such right shall be
deemed a waiver as to any other such instance, or any other
22
<PAGE>
such right.
18.6 Time of essence
---------------
Time shall be of the essence of this Lease.
18.7 Headings
--------
the headings of the Sections, subsections, paragraphs and subparagraphs
hereof are provided herein for and only for convenience of reference,
and shall not be considered in construing their contents
18.8 Construction
------------
As use herein,
18.8.1. the term "person" means a natural person, a trustee, a
corporation, a partnership and any other form of legal entity;
and
18.8.2. all reference made (a) in the neuter, masculine or feminine
gender shall be deemed to have been made in all such genders,
(b) in the singular or plural number shall be deemed to have
been made, respectively, in the plural or singular number as
well, and (c) to any Section, subsection, paragraph or
subparagraph shall, unless therein expressly indicated to the
contrary, be deemed to have been made to such Section,
subsection, paragraph or subparagraph of this Lease.
18.9 Exhibits
--------
Each writing referred to herein as being attached hereto as an exhibit
or otherwise designated herein as an exhibit hereto is hereby made a
part hereof.
18.10 Severability
------------
No determination by any court, governmental body or otherwise that any
provision of this Lease or any amendment thereof is invalid or
unenforceable in any instance shall affect the validity or enforceable
(a) any other such provision, or (b) such provision in any circumstance
not controlled by such determination. Each such provision shall be valid
and enforceable to the fullest extent allowed by, and shall be construed
wherever possible as being consistent with, applicable law.
18.11 Definition of the "Landlord"
----------------------------
18.11.1 As used herein, the term "Landlord" means the person hereinabove
named as such, and its heirs, personal representatives,
successors and assigns (each of whom shall have the same rights,
remedies, powers, authorities and privileges as it would have
had, had it originally signed this lease as the Landlord).
18.11.2 No person Holding the Landlord's interest hereunder (whether or
not such person is named as the "Landlord" herein) shall have
any liability hereunder after such person ceases to hold such
interest, except for any such liability
23
<PAGE>
accruing while such person hold such interest.
18.11.3 Neither the Landlord nor any principal of the Landlord, whether
disclosed or undisclosed, shall have nay personal liability
under any provision of this Lease.
18.12 Definition of the "Tenant". As used herein, the term the "Tenant" means
each person hereinabove named as such and such person's heirs, personal
representatives, successors and assigns, each of whom shall have the same
obligations, liabilities, rights and privileges as it would have
possessed had it originally executed this Lease as the Tenant; provided
that no such right of privilege shall inure to the benefit of any
assignment to such assignee is made in accordance with the provisions of
Section 10. Whenever two or more persons constitute the Tenant, all such
persons shall be jointly and severally liable for performing the Tenant's
obligations hereunder.
18.13 Commissions
-----------
Each party hereto represents and warrants to the other that, in
connection with the leasing of the Premises hereunder, the party so
representing and warranting has not dealt with any real estate broker,
agent or finder, and there is no other commission, charge or other
compensation due on account thereof. Each party hereto shall indemnify
and hold harmless the other against and from any inaccuracy in such
party's representation.
18.14 Recordation
-----------
This Lease may not be recorded among the Land Records of the said County
or among any other public records, without the Landlord's prior express,
written consent thereto, and any attempt by the Tenant to do so without
having obtained the landlord's consent thereto shall constitute an Event
of Default hereunder. If this Lease is recorded by either party hereto,
such party shall bear a full expense of any transfer, documentary stamp
or other tax, and any recording fee, assessed in connection with such
recordation; provided, that if under applicable law the recordation of
this Lease hereafter becomes necessary in order for this Lease to be or
remain effective, the Tenant shall bear the full expense of any and all
such taxes and fees incurred in connection therewith.
18.15 Approval by Mortgagees
----------------------
Anything contained in the provisions of this Lease to the contrary
notwithstanding, the Landlord shall be entitled at any time hereafter but
before the Landlord delivers possession of the premises to the tenant
hereunder, to terminate this Lease by giving written notice thereof to
the tenant, if any Mortgagee fails to approve this Lease for purposes of
the provisions of its Mortgage, and in the manner set forth therein.
24
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed and ensealed this Lease or
caused it to be executed and ensealed on its behalf by its duly authorized
representatives, the day and year first above written.
The Landlord:
Witness:
/s/ [SIGNATURE TO COME] /s/ Henry G. Luken, III
- ------------------------------------ ------------------------------------
Bricks In the Sticks, Ltd.
By: Henry G. Luken, III
President
The Tenant:
Witness:
/s/ [SIGNATURE TO COME] /s/ Donald A. Burns
- ------------------------------------ ------------------------------------
Telco Communications Group, Inc.
By: Donald A. Burns
President
STATE OF Virginia
(COUNTY OF Fairfax) to-wit:
The foregoing instrument was acknowledged before me this 1st day of March,
1995 by Henry Luken a Landlord on behalf of the Company.
My commission expires: 6/30/95
25
<PAGE>
EXHIBIT A
---------
USABLE RENTABLE
CALL CENTER 5273 5,917
TELCO 5333
DIAL AND SAVE 3422
DIAL AND SAVE EXPANSION 1085
AVAILABLE 2764
AVAILABLE 3,079
CORRIDORS, TOILET ROOMS 2444
STORAGE 118
- ---------------------------------
23518
[FLOOR PLAN APPEARS HERE]
<PAGE>
SCHEDULE C
PAYMENT SCHEDULE
For 6,649 sq. ft. @ 4219 - Lafayette Center Drive
YEAR 1 YEAR 2
03/01/95 $5,540.83 03/01/96 $5,762.47
04/01/95 $5,540.83 04/01/96 $5,762.47
05/01/95 $5,540.83 05/01/96 $5,762.47
06/01/95 $5,540.83 06/01/96 $5,762.47
07/01/95 $5,540.83 07/01/96 $5,762.47
08/01/95 $5,540.83 08/01/96 $5,762.47
09/01/95 $5,540.83 09/01/96 $5,762.47
10/01/95 $5,540.83 10/01/96 $5,762.47
11/01/95 $5,540.83 11/01/96 $5,762.47
12/01/95 $5,540.83 12/01/96 $5,762.47
01/01/96 $5,540.83 01/01/97 $5,762.47
02/01/96 $5,540.83 02/01/97 $5,762.47
YEAR 3 YEAR 4
03/01/97 $5,992.97 03/01/98 $6,232.68
04/01/97 $5,992.97 04/01/98 $6,232.68
05/01/97 $5,992.97 05/01/98 $6,232.68
06/01/97 $5,992.97 06/01/98 $6,232.68
07/01/97 $5,992.97 07/01/98 $6,232.68
08/01/97 $5,992.97 08/01/98 $6,232.68
09/01/97 $5,992.97 09/01/98 $6,232.68
10/01/97 $5,992.97 10/01/98 $6,232.68
11/01/97 $5,992.97 11/01/98 $6,232.68
12/01/97 $5,992.97 12/01/98 $6,232.68
01/01/98 $5,992.97 01/01/99 $6,232.68
02/01/98 $5,992.97 02/01/99 $6,232.68
YEAR 5
03/01/99 $6,481.99
04/01/99 $6,481.99 Please make checks payable:
05/01/99 $6,481.99
06/01/99 $6,481.99 Bricks In The Sticks, Ltd.
07/01/99 $6,481.99 4219 Lafayette Center Drive
Chantilly, Virginia 22021
27
<PAGE>
Exhibit 10.27
[LOGO OF DANA COMMERCIAL CREDIT APPEARS HERE]
MASTER LEASE AGREEMENT
----------------
LESSOR: Dana Commercial Credit LESSEE: TELCO COMMUNICATIONS GROUP, INC.
Corporation, a Delaware ----------------------------------------
Corporation ("Lessor")
----------------------------------------
ADDRESS: 1300 Indian Wood Circle VIRGINIA CORPORATION ("Lessee")
Maumee, Ohio 43537 ----------------------------------------
ADDRESS, PRINCIPAL PLACE OF BUSINESS:
4219 Lafayette Center Drive
----------------------------------------
Chantilly, Va 22021-1209
----------------------------------------
1. LEASE OF EQUIPMENT. Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor, subject to the terms and conditions of this Master Lease
Agreement ("Master Lease") and in any other document(s) which are or become
incorporated by reference, the machinery, equipment and other personal property,
together with all replacement parts, additions and accessories thereto and any
intangibles (collectively, the "Equipment" and individually a "Leased Item")
described in any lease schedules which are executed by Lessor and Lessee and
incorporated herein by reference ("Lease Schedule"). Each Lease Schedule issued
under this Master Lease constitutes a separate agreement distinct from this
Master Lease and any other Lease Schedule. The terms and conditions of this
Master Lease shall govern the lease of all Equipment on each Lease Schedule, as
supplemented by the terms of the Lease Schedule. Whenever reference is made to
"this Lease", or "herein" or "hereunder", it shall be deemed to include this
Master Lease, each Lease Schedule issued under it and each other document which
may by reference be made a part hereof. The parties agree that this Lease is a
"Finance Lease" as defined by (S)2A-103(g) of the Uniform Commercial Code.
2. DELIVERY, ACCEPTANCE AND INSTALLATION. Lessee shall be responsible to
select the type, quantity and vendor or manufacturer ("Supplier") of each Leased
Item, and in reliance thereon, the Equipment will then be ordered by Lessor from
such Supplier, or Lessor may at its option elect to accept an assignment of any
existing purchase order from Lessee. The Equipment is to be delivered and
installed at the location specified on the applicable Lease Schedule. The
Equipment shall be deemed to have been accepted by Lessee for all purposes under
this Lease upon Lessor's receipt of a certificate, in form satisfactory to
Lessor, executed by Lessee certifying Lessee's terms of acceptance ("Acceptance
Certificate"). Lessee will sign the Acceptance Certificate authorizing Lessor to
pay for the Equipment only after Lessee has received and accepted the Equipment
as fully operable for Lessee's purposes. Lessor shall not be liable or
responsible for any loss or damage occasioned by any cause, circumstance or
event of any nature relating to the delivery, installation or operation of any
of the Equipment, including, without limitation, loss or damage arising by
reason of any failure or delay in the delivery of the Equipment to Lessee for
whatever reason or damage in transit. Lessee shall be responsible for all
transportation, packing, installation, testing and other charges in connection
with the delivery, installation and use of the Equipment.
3. TERM. This Master Lease shall commence upon execution by the Lessor and
continue until full performance of all of its terms. The lease term of each
Leased Item ("Lease Term") shall commence upon acknowledgment of the Acceptance
Certificate by Lessor, effective the date of the Acceptance Certificate
("Acceptance Date") with respect to such Leased Item and shall continue for the
number of months, and any proration thereof, specified in the applicable Lease
Schedule. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN OR AS OTHERWISE SET
FORTH IN WRITING AND EXECUTED BY LESSOR AND LESSEE, THIS LEASE IS NONCANCELLABLE
BY LESSEE.
4. RENT AND OTHER CHARGES. (a) Lessee shall pay Lessor rent for the
Equipment, without any deduction or set off and without prior notice or demand,
in the amounts specified in the applicable Lease Schedule. Rent is payable as
and when specified in the Lease Schedule. (b) Lessee agrees to pay, upon demand
for payment by Lessor, all other charges incurred in connection with the
Equipment, and any other charge or payment due hereunder. (c) LESSEE AGREES THAT
TIME IS OF THE ESSENCE TO LESSOR IN THIS AGREEMENT AND TO MAKE THE PAYMENTS WHEN
DUE UNDER THIS LEASE. Without Lessor's prior written consent, any payment to
Lessor of a smaller sum than due at any time under this Lease shall not
constitute a release or an accord or satisfaction for any greater sum due, or to
become due, regardless of any endorsement restriction. If any rent or other
amount payable hereunder shall not be paid when due. Lessee shall pay Lessor:
(i) a one-time late charge in the stipulated and liquidated amount of $.05 per
dollar of the amount not paid or $5.00, if greater; (ii) a finance charge during
every month after the first month in which the sum is late computed daily on the
amounts then due and unpaid at a rate of 1 1/2% per month, or, if less, the
highest applicable rate permitted by law, and (iii) all collection costs and
expenses. (d) All payments shall be made to Lessor at the address shown above,
or at such other place as Lessor shall specify in writing. Each payment received
will be applied first to the oldest charge due under the Lease, including,
without limitation, any charges arising under the provisions of subsection (b)
or (c) above to the extent then due and unpaid. (e) THIS IS A NET LEASE AND
LESSEE SHALL NOT BE ENTITLED TO ANY ABATEMENT OR REDUCTION OF RENTS OR OF ANY
OTHER AMOUNTS PAYABLE HEREUNDER FOR ANY REASON. LESSEE'S OBLIGATION TO PAY ALL
RENT AND ANY OTHER AMOUNTS HEREUNDER SHALL BE ABSOLUTE AND UNCONDITIONAL UNDER
ALL CIRCUMSTANCES. Lessee hereby waives any and all existing or future claims
to any offset against the rent payments due hereunder, and agrees to make the
rent payments regardless of any offset or claim which may be asserted against
the Lessee.
5. RENT ADJUSTMENT:
(a) The rent payments in each Lease Schedule have been calculated on the
assumption (which, as between Lessor and Lessee, is mutual) that the maximum
effective corporate income tax rate (exclusive of any minimum tax rate) for
calendar-year taxpayers ("Effective Rate") will be 34% throughout the lease
term.
(b) If, solely as a result of any new law (including, without
limitation, any modification of, or amendment or addition to, the Internal
Revenue Code of 1986 ("Code")), the Effective Rate is higher than 34% for any
year during the lease term, then Lessee shall pay to Lessor as additional rent a
lump sum equal to the product of (i) the Effective Rate (expressed as a decimal)
for such year less .34 (or, in the event that any adjustment has been made
hereunder for any previous year, the Effective Rate (expressed as a decimal)
used in calculating the next previous adjustment) times (ii) the adjusted
Stipulated Loss Value (where Stipulated Loss Value is defined on the Lease
Schedule). The adjusted Stipulated Loss Value shall be the Stipulated Loss Value
(calculated as of the first rental due in the year for which such adjustment is
being made) less the product of (i) the remaining Tax Benefits for the year for
which such adjustment is being made and all subsequent years of the lease term
and (ii) the Effective Rate (expressed as a decimal) (in the year for which such
adjustment is being made). Lessee shall pay to Lessor the full amount of the
additional rent payment on the later of (i) receipt of notice or (ii) the first
day of the year for which such adjustment is being made.
(c) Lessee's obligations under this Section 5 shall survive any
expiration or termination of this Lease.
6. DISCLAIMER OF WARRANTIES AND LESSEE WAIVERS. LESSEE LEASES THE EQUIPMENT
FROM LESSOR "AS IS/WHERE IS". EXCEPT AS TO QUIET ENJOYMENT, LESSOR MAKES
ABSOLUTELY NO WARRANTIES, EXPRESS OR IMPLIED, AND HEREBY EXPRESSLY DISCLAIMS ANY
WARRANTY OR REPRESENTATION AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT, ITS FITNESS FOR A PARTICULAR
PURPOSE OR USE, ITS DESIGN OR CONDITION, ITS QUALITY, CAPACITY OR WORKMANSHIP,
THE CONFORMITY OF THE EQUIPMENT TO ANY LAW.
DANA COMMERCIAL CREDIT CORPORATION / DIRECT FUNDING GROUP
1300 Indian Wood Circle, Maumee, Ohio 43537 (419) 893-7430
[LOGO OF THE DANA COMPANY APPEARS HERE]
<PAGE>
RULE, REGULATION, SPECIFICATION OR CONTRACT OF PURCHASE ORDER RELATING THERETO,
OR, PATENT INFRINGEMENT, IT BEING ACKNOWLEDGED BY LESSEE THAT ALL RISKS RELATING
TO THE EQUIPMENT AND ITS USE ARE, AS BETWEEN LESSOR AND LESSEE, TO BE BORNE BY
LESSEE AND THAT THE BENEFITS OF ANY AND ALL IMPLIED WARRANTIES AND
REPRESENTATIONS OF LESSOR ARE HEREBY WAIVED BY LESSEE. LESSEE HEREBY WAIVES ANY
CLAIM AGAINST LESSOR. IN CONNECTION WITH OR ARISING OUT OF THE OWNERSHIP,
LEASING, FURNISHING, PERFORMANCE OR USE OF THE EQUIPMENT, AND LESSOR SHALL HAVE
NO LIABILITY FOR ANY LOSS, DAMAGE, OR EXPENSE OF ANY KIND OR NATURE WHATSOEVER
RELATED THERETO, INCLUDING, WITHOUT LIMITATION, ANY SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER, WHERE APPLICABLE, AND TO
THE EXTENT PERMITTED BY LAW, LESSEE EXPRESSLY DISCLAIMS ANY RIGHTS OR REMEDIES
AGAINST LESSOR PROVIDED UNDER THE UNIFORM COMMERCIAL CODE. ALL WARRANTIES FROM
THE SUPPLIED TO LESSOR ARE TO THE EXTENT THEY ARE ASSIGNABLE, HEREBY ASSIGNED TO
LESSEE FOR THE TERM OF THIS LEASE OR UNTIL AN EVENT OF DEFAULT OCCURS, FOR
LESSEE'S EXERCISE AT LESSEE'S EXPENSE. NO REPRESENTATION OR WARRANTY BY THE
SUPPLIER OR SALESPERSON IS BINDING ON LESSOR NOR SHALL BREACH OF SUCH WARRANTY
RELIEVE LESSEE OF LESSEE'S OBLIGATION TO LESSOR HEREUNDER.
7. LESSEE'S WARRANTIES, REPRESENTATIONS AND COVENANTS. Lessee represents,
warrants and covenants to Lessor, and Lessor relies on, the fact that: (a)
Lessee has read and understood this Lease before it was signed; (b) LESSEE HAS
SELECTED AND IS FULLY SATISFIED WITH BOTH THE EQUIPMENT AND THE SUPPLIER OF THE
EQUIPMENT, LESSEE HAS REVIEWED AND APPROVED THE SUPPLIER'S PURCHASE ORDER OR
AGREEMENT COVERING THE EQUIPMENT PURCHASED FOR LEASE TO LESSEE, AND LESSEE HAS
SELECTED THE EQUIPMENT BASED ON ITS OWN JUDGMENT AND IS SATISFIED THAT THE
EQUIPMENT IS SUITABLE FOR LESSEE'S PURPOSES, DISCLAIMS ANY RELIANCE UPON ANY
STATEMENTS OR REPRESENTATIONS MADE BY LESSOR AND ACKNOWLEDGES THAT NEITHER THE
SUPPLIER OF THE EQUIPMENT NOR ANY OF ITS SALESPERSONS ARE, OR HAVE ACTED AS,
LESSOR'S AGENTS OR EMPLOYEES; (c) All financial information and other statements
provided to Lessor are, and will be, accurate and correct, in all material
respects; all such financial statements have been, and will be, prepared in
accordance with generally accepted accounting principles consistently applied.
(d) The Equipment is leased exclusively for Lessee's established business
purposes; (e) Lessee has the form of business organization indicated, and is
duly organized, validly existing and in good standing under the laws of the
state of its incorporation or organization and is duly qualified to do business
wherever necessary to carry on its present business and operations and to own
its property; (f) Lessee has unrestricted power to enter into this Lease, and
this Lease (i) has been duly authorized by all necessary action on the part of
Lessee consistent with its form of organization and duly executed and delivered
by authorized officers or agents of Lessee, whose signatures hereon are, in all
respects, authentic (ii) does not require any further shareholder or partner
approval, (iii) does not require the approval of, or the giving notice to, any
federal, state, local or foreign governmental authority, (iv) does not
contravene any law binding on Lessee or contravene any certificate or articles
of incorporation or bylaws or partnership certificate or agreement, or any
agreement, indenture, or other instruments to which Lessee is a party or by
which it or any of its assets or property may be bound, and (v) constitutes a
legal, valid and binding obligation of Lessee enforceable in accordance with its
terms; (g) Lessee has experienced no material adverse changes in its financial
condition or operations since the date of its financial statements provided to
Lessor nor does there exist any pending or threatened actions or proceedings
before any court or administrative agency which might materially adversely
affect Lessee's financial condition or operations; and the address indicated by
Lessee is the chief place of business and chief executive office of Lessee.
8. TAXES, ASSESSMENTS AND FEES. Lessee shall pay all licensing, filing and
registration fees relating in any manner to the Equipment. SHOW THE EQUIPMENT AS
"LEASED EQUIPMENT" ON TAX RETURNS, FILE, WHEN ALLOWED BY LAW, ALL PERSONAL
PROPERTY TAX RETURNS, AND pay when due all personal property, sales and use
taxes assessed against the equipment and pay when due, and defend, hold harmless
and indemnify Lessor against liability for, all other taxes, fines, assessments,
fees, penalties and other governmental charges which may be levied or assessed,
irrespective of when so levied or assessed, in respect to the Equipment, its use
or any interest therein, or any lease payments, including but not limited to all
federal, state, and local taxes, however designated, levied or assessed, whether
upon Lessee or Lessor or the Equipment or upon the sale, lease, ownership, use,
operation, shipment, transportation or delivery, excepting only income taxes
levied on the rental payments made to Lessor. If any report or return for
personal property tax is required by law to be filed by Lessor. Lessee shall so
notify Lessor prior to the assessment date, and Lessee shall promptly reimburse
Lessor for personal property taxes paid, including any interest, fines or
penalties incurred as a result of late filing if Lessee fails to provide Lessor
with the notice required hereby. Lessee shall promptly provide Lessor with a
copy of any and all filings and tax assessment notices with respect to personal
property tax, and, if Lessee fails to do so, Lessor has the right to charge
Lessee an assessment of an appropriate amount to insure against any tax
liability. The Lessee agrees to comply with all state and local laws requiring
the filing of ad valcrom tax returns relating to each Leased item. Any
statements for taxes received by the Lessor shall be promptly forwarded to the
Lessee. Lessee agrees to reimburse Lessor for reasonable costs incurred in
collecting taxes, assessments, or fees for which Lessee is liable and any
collection charge attributable thereto, including reasonable attorney fees.
9. INDEMNIFICATION.
(a) Lessee assumes liability for, and hereby agrees to indemnify,
protect and hold Lessor harmless from and against any and all liabilities
(including, but not limited to, negligence, tort, and strict liability),
obligations, losses, damages, injuries, claims, demands, penalties, actions,
costs and expenses, including reasonable attorney's fees, of whatsoever kind and
nature (including without limitation, claims of injury, death, or property
damage), arising out of or related to this Master Lease, each Lease Schedule,
and each Leased Item, including, but not limited to, the manufacture, purchase,
financing, installation, use, condition (including, but not limited to, latent
and other defects and whether or not discoverable by Lessee or Lessor),
operation, ownership, selection, delivery, leasing, removal, return, or other
disposition of any Leased Item, or the Lessee's revocation of its acceptance of
any Leased Item (in which instance Lessee shall reimburse Lessor for any payment
made by Lessor to the Supplier of such Leased Item).
(b) Lessee acknowledges that (1) Lessor intends to claim and take the
modified accelerated cost recovery deductions for each item of Equipment, using
the depreciation method provided in section 168(b)(1) of the Internal Revenue
Code of 1986, as amended (the "Code") and the Code section 168(c)(1) "applicable
recovery period" for the Code section 168(e) "property class" as designated by
Lessor for each item of Equipment, with respect to the Lessor's entire purchase
price (such deductions being referred to hereinafter as "Tax Benefits") and (2)
the rent payable hereunder has been computed upon the assumption that such Tax
Benefits shall be available to Lessor. Lessee represents and warrants to Lessor
that Lessor shall be entitled to claim such Tax Benefits, that the Tax Benefits
are available with respect to each item of Equipment, and that all of the
Equipment is, at and after the time of delivery of the Equipment to the location
set forth in the Schedule, new unless designated otherwise on the Schedule.
Lessee further represents and warrants that it has not, and will not, at any
time from such delivery through the term of this Lease take any action or omit
to take any action (whether or not the same is permitted or required hereunder)
which will result in the loss by Lessor of all or any part of the Tax Benefits.
If as a result of any act, omission or misrepresentation of Lessee. Tax Benefits
are lost, disallowed, eliminated, reduced, deferred, recaptured, compromised or
are otherwise unavailable to Lessor (any of the foregoing being a "Tax Loss"),
Lessee shall promptly pay to Lessor on demand, as additional rent, such amount
or amounts which will, after deduction therefrom of all taxes required to be
paid in respect of the receipt thereof, enable Lessor to receive the same actual
net after-tax economic and accounting yields and net after-tax cash flow over
the lease term that Lessor would have realized had such Tax Loss not occurred,
with such computations to be made with the assumption that the Lessor is subject
to tax at the Effective Rate as defined in, and subject to increase as provided
in, Section 5 hereof, together with any interest, penalties or additions to the
tax. Upon payment of such amount by Lessee, such act, omission or
misrepresentation of Lessee which resulted in a Tax Loss shall not be deemed a
default hereunder. Any event which by the terms of this Lease requires payment
by Lessee to Lessor of the Stipulated Loss Value of the Equipment, shall not
constitute the act of Lessee for purposes of the foregoing sentence. Lessor
hereby agrees to exercise in good faith its best efforts (determined in the sole
discretion of Lessor's tax counsel to be reasonable, proper and consistent with
the overall tax interest of Lessor) to avoid requiring Lessee to pay the tax
indemnity referred to in this Section 9; provided, however, Lessor shall have
the sole discretion to determine whether or not to undertake or continue
judicial or administrative proceedings beyond the level of an Internal Revenue
Service auditing agent; and provided, further, that Lessor shall not be required
to take any action pursuant to this sentence unless and until Lessee shall have
agreed to indemnify Lessor for any and all expenses (including attorney's fees),
liabilities or losses which Lessor may incur as a result of taking such action.
For purposes of this Section 9, the term "Lessor" shall include the entity or
entities, if any, with which Lessor consolidates its tax return.
(c) The amount payable pursuant to the preceding paragraphs shall be
payable upon demand of the Lessor accompanied by a statement describing in
reasonable detail such loss, liability, injury, claim, expense or tax and
setting forth the computation of the amount so payable, which computation shall
be binding and conclusive upon Lessee, absent manifest error. The indemnities
and assumptions of liabilities and obligations contained in this section and in
Section 8 shall continue in full force and effect notwithstanding the expiration
or other termination of this Lease.
10. ASSIGNMENT, THIS LEASE SHALL BE ASSIGNABLE BY LESSOR ABSOLUTELY OR AS
SECURITY, WITHOUT NOTICE TO LESSEE, SUBJECT TO THE RIGHTS OF LESSEE HEREUNDER.
Lessee agrees it shall not assert any defense, rights of set-off or
counterclaim against any assignee to which Lessor shall have assigned its
rights and interests hereunder. Lessee acknowledges that any assignment or
transfer by Lessor shall not materially change Lessee's duties or obligations
under this Lease nor materially increase the burdens or risks imposed on Lessee,
and Lessee
<PAGE>
further agrees to an assignment by Lessor regardless of any such effects. LESSEE
SHALL NOT SUBLEASE, ASSIGN, TRANSFER OR DISPOSE OF ANY OF ITS RIGHTS OR
INTERESTS IN THIS LEASE OR ANY OF THE EQUIPMENT WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR, WHICH SHALL NOT BE UNREASONABLY WITHHELD, INCLUDING
WITHOUT LIMITATION, ANY SUCH ASSIGNMENT FOR SECURITY PURPOSES.
11. POSSESSION; INSPECTION; PERSONAL PROPERTY. No right, title or
interest in the Equipment shall pass to Lessee other than, conditioned upon
Lessee's compliance with and fulfilment of the terms and conditions of this
Lease, the right to maintain possession and use of the Equipment for the full
lease term (provided no Event of Default has occurred) free from interference by
any person claiming by, through or, under Lessor. At its option, Lessor may
require Lessee to affix plates, markings or other notice on the Equipment
indicating Lessor is the owner. Lessor may enter the premises where the
Equipment is located during normal business hours for the purpose of inspecting
the Equipment and, during the last six months of the term of this Lease, for the
purpose of showing the Equipment to prospective purchasers or lessees of the
Equipment. The Equipment shall always remain Lessor's personal property even
though the Equipment may hereafter become attached or affixed to real property.
Lessee agrees to give and record such notices, obtain such waivers and take such
other action at its own expense as may be necessary to prevent any third party
(other than an assignee of Lessor) from acquiring or having the right under any
circumstances to acquire any interest in the Equipment or this Lease.
12. OWNERSHIP AND TITLE. Lessor is the sole owner of the Equipment, and
has sole title to it. All additions, attachments and accessories placed on the
Equipment shall become part of the Equipment and Lessor's property. Lessee
agrees to maintain the Equipment so that it may be removed from the property or
building where located without damage. Lessee shall, at its cost and expense,
defend Lessor's title against, and keep all of the Equipment and this Lease free
of, all liens, claims and encumbrances of any kind, affecting or with respect to
the Equipment or this Lease or any of Lessor's interests thereunder.
13. OPERATION AND MAINTENANCE. Lessee shall be solely responsible for the
installation, operation, and maintenance of the Equipment and Lessee, at its own
cost and expense, shall keep the Equipment in good repair, condition and working
order, in accordance with any applicable manufacturer's manual, instructions or
requirements and shall furnish all parts, mechanisms, devices and servicing
required therefor. All such parts, mechanisms and devices shall immediately
become the property of Lessor and part of the Equipment for all purposes hereof.
Lessee shall use and operate the Equipment by competent and duly qualified
personnel only, and for business purposes only, in compliance with applicable
law and in accordance with any applicable manufacturer's manuals, instructions
or requirements and all insurance and warranty requirements. Lessee, at its
expense, shall enter into and maintain in full force and effect throughout the
Lease Term, including any renewals, with the manufacturer or such other party as
may be acceptable to Lessor, a maintenance agreement covering the Equipment, and
the Equipment, upon return to Lessor, shall qualify for the manufacturer's
standard maintenance without additional expense to Lessor. Lessee shall not move
the Equipment from the location specified in the Lease Schedule without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld, and, if granted, without executing financing statements and completing
filings or taking such other actions as Lessor may reasonably request to protect
Lessor's interest in the Equipment. Lessee agrees never to abandon or relinquish
possession of the Equipment except to Lessor or its agent.
14. TERMINATION, RETURN. (a) Lessee shall give Lessor one-hundred twenty
(120) days written notice prior to the expiration of the Lease Term, and sixty
(60) days written notice prior to the expiration of any renewal term, of its
intent to return the Equipment. Upon expiration of the Lease Term or other
termination pursuant to the terms of this Lease, Lessee shall immediately return
the Equipment and all related accessories, to such place within the continental
United States as is designated by Lessor. The Equipment shall, at Lessee's sole
expense, be crated and shipped in accordance with the manufacturer's
specifications, freight prepaid and properly insured. Upon return, if the
Equipment is not in good condition and repair, excepting reasonable wear and
tear, and has not been maintained in accordance with Section 13, and/or is not
eligible for the manufacturer's standard maintenance contract without incurring
any expenses to repair or rehabilitate the Equipment, Lessee shall be liable for
and reimburse Lessor for all reasonable and necessary expenses incurred by
Lessor to place the Equipment in such condition, (b) Automatic Extension. If
Lessee fails to give the notice required by subsection (a), or fails to return
the equipment at the expiration of the Lease term, then the Lease Schedule shall
automatically be extended on a month to month basis, for a period not to exceed
12 months. The extension period may be terminated by either party by giving
thirty days prior written notice. Upon such termination or at the end of the
twelfth month of the extension, Lessee shall return the Equipment as provided
above. In any event, Lessee shall continue to pay rent in an amount equal to the
monthly average rent during the Lease Term, on the same due date set forth in
the Lease Schedule, until the Equipment is returned to Lessor. The Equipment
shall be returned free and clear of all liens, encumbrances and rights of
others.
15. RISK OF LOSS. Lessee hereby assumes all risk of loss, damage or
destruction for whatever reason to the Equipment from and after the earlier of
the date at on which the Equipment is ordered, or (b) Lessor pays the purchase
price of the Equipment, and continuing until such Equipment is returned to, and
accepted by, the Lessor or such other entity designated in writing by Lessor. No
such loss or damage shall impair any obligation of Lessee under this Lease which
shall continue in full force and effect. In the event of damage to or theft,
loss or destruction of, or confiscation, seizure or requisition of the Equipment
or any Leased Item ("Loss"), Lessee shall promptly notify Lessor in writing of
the Loss and all related details, and any action related thereto, and shall,
within thirty (30) days of the Loss, at Lessor's option, (a) repair the
Equipment and restore it to the same good condition and working order as it was
in immediately prior to the Loss; or (b) replace the Equipment affected by the
Loss with like personal property in good repair, condition and working order and
transfer clear title to such replacement property to Lessor whereupon such
property shall be subject to this Lease and be deemed the Equipment for purposes
hereof; or, (c) pay Lessor an amount equal to the sum of (i) all rent accrued
through the next regular payment date following the Loss, plus (ii) the
"Stipulated Loss Value" as of such payment date as set forth in the Schedule,
whereupon this Lease, except for Lessee's duties under Section 8, shall
terminate with respect to the items of Equipment for which such payment is
received by Lessor. Upon payment of the amount set forth in (c), the rent for
such Lease Schedule shall be reduced proportionately. Any insurance proceeds
received with respect to the Loss shall be applied, if option (c) is elected, in
reduction of the then unpaid obligations, including the Stipulated Loss Value,
of Lessee to Lessor, if not already paid by Lessee or, if already paid by
Lessee, to reimburse Lessee for such payment, or, if option (a) or (b) is
elected, to reimburse Lessee for the cost of repairing, restoring or replacing
the Equipment affected by the Loss upon receipt by Lessor of evidence,
satisfactory to Lessor that such repair, restoration or replacement has been
completed, and an invoice therefor.
16. INSURANCE. Lessee shall procure and maintain during the entire term of
this Lease or until Lessee has returned all Equipment, at Lessee's expense, the
following minimum insurance coverages: (a) Workers' compensation as required by
law and Employer's Liability Insurance $1,000,000 limit; (b) Comprehensive
General Liability Insurance including product/completed operations and
contractual liability coverage with minimum limits of $1,000,000.00 each
occurrence and Combined Single Bodily Injury and Property Damage. $1,000,000.00
aggregate where applicable and (c) All Risk Physical Damage Insurance, including
earthquake and flood, on each Leased Item, in an amount not less than the
greater of the replacement cost, new or the Stipulated Loss Value of the
Equipment. Lessor will be included under such policies as an additional insured
and loss payee as its interest may appear, as applicable, and each such policy
shall be endorsed to provide that the coverage afforded to Lessor shall not be
rescinded, impaired or invalidated by any act or the neglect of Lessee. Under
the policies required in clauses (a) and (c) above. Lessee agrees to waive its
right of subrogation and cause its insurance carrier to waive its right of
subrogation, in each instance as such right may exist against Lessor and for any
and all loss and damage. Lessor has the right to require higher limits than
those established in clauses (a), (b) and (c) above for any particular Lease
Schedule or Leased Item where Lessor reasonably deems such higher amounts to be
appropriate. All policies shall contain a clause requiring the insurer to
furnish Lessor with at least 30 days prior written notice of any material
change, cancellation or non-renewal of coverage. Upon execution of this Lease,
Lessee shall furnish Lessor with a certificate of insurance or other evidence
satisfactory to Lessor that such insurance coverages are in effect, provided,
however, that Lessor shall be under no duty either to ascertain the existence of
or to examine such insurance coverage or to advise Lessee in the event such
insurance coverage should not comply with the requirements hereof. Lessee shall
also furnish Lessor with a copy of the certificate of insurance annually
thereafter. If Lessee fails to procure or maintain insurance or to comply with
any other provision of this Leaser. Lessor shall have the right, but shall not
be obligated to effect such insurance or compliance on behalf of Lessee. In that
event, all costs and expenses of Lessor in effecting such insurance or
compliance shall be deemed to be additional rent, and shall be paid by Lessee to
Lessor upon demand. The proceeds of insurance payable as a result of a Loss
shall be applied as set forth in Section 15 Lessee appoints Lessor as attorney-
in-fact to make any claim for, receive payment of, or execute or endorse all
documents, checks or drafts for loss or damage or return of premium under all
such insurance and otherwise in respect of all awards or other compensation
payable in respect of any condemnation, confiscation, seizure or requisition of
any Equipment.
17. DEFAULT. Lessee shall be in default under this Lease upon the
occurrence of any one or more of the following events (an "Event of Default"):
(a) Lessee fails to make any payment, of rent or otherwise, hereunder within ten
(10) days after it first becomes due; or (b) Lessee or any guarantor breaches
any of its warranties, representations or other obligations under this Lease, or
any other agreement with Lessor, and fails to cure such breach within ten (10)
days after Lessor sends Lessee notice of the existence of such breach; or (c)
Lessee shall default on any Lease Schedule or any other indebtedness, obligation
or agreement of any kind with Lessor, or related thereto and shall not have
cured such default within a period of grace provided by such other agreement or
instrument; or (d) any execution or writ of process is issued in any action or
proceeding to seize or detain any of the Equipment; or (e) Lessee fails to
return any Leased item when required under Section 14; or (f) Lessee or any
Guarantor shall commence or take corporate action to authorize, a voluntary case
or other proceeding seeking liquidation.
<PAGE>
reorganization, or other relief with respect to itself or its debts; or seek the
appointment of a trustee, receiver, liquidator, custodian, or other similar
official; or consent, or fail to object, to any such relief or to the
appointment of any such official or to the taking of possession of any of its
property or to the commencement of an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of its
creditors, or shall fail generally to pay its debts as they become due. Lessee
shall promptly notify Lessor of the occurrence of any Event of Default or the
occurrence or existence of any event or condition which, upon the giving of
notice or lapse of time, or both, may become an Event of Default.
18. REMEDIES. Should an Event of Default occur, Lessor shall have the right to
exercise any or all of the following remedies: (a) to cause Lessee, upon written
demand of Lessor and at Lessee's expense, to promptly return any or all
Equipment on any or all of the Lease Schedules, to such location as Lessor may
designate or to immediately retake possession of the Equipment without any court
order or other process of law (and for such purpose Lessor may enter upon any
premises where the Equipment may be and remove the same); and Lessor may dispose
of any or all of the Equipment in good faith and recover from Lessee as damages
all charges, expenses or commissions incurred by Lessor in the transportation,
care, custody or disposition of such Equipment after the occurrence of the Event
of Default or otherwise resulting by reason of such default; and (b) to, without
notice, declare all sums payable under this Lease due and recover damages from
Lessee by requiring Lessee to immediately pay Lessor the sum of the following:
(i) all amounts that are then due; plus (ii) as liquidated damages, the higher
of fair market value or the Stipulated Loss Value of the Equipment; and (c) to
exercise any remedy at law or equity, notice thereof being expressly waived by
Lessee, including any right or remedy which may otherwise be available to it
under the Uniform Commercial Code. Lessee shall pay all collection costs and
reasonable attorney fees as damages and not costs in all proceedings arising
under or connected with this Lease or Lessor's enforcement of any of its terms,
including without limitation, arbitrations, civil actions, bankruptcy
proceedings, mediation, and post-judgment actions or appeals. Lessor's action or
failure to act on one remedy constitutes neither an election to be limited
thereto nor a waiver of any other remedy nor a release of Lessee from the
liability to return the Equipment or for any loss or claim with respect thereto;
and nothing herein shall be deemed to prejudice Lessor's right to recover or
prove damages for unpaid rent accrued prior to default, or bar an action for a
deficiency as herein provided; and the bringing of an action with an entry of
judgment against Lessee shall not bar the Lessor's right to repossess any or all
Leased Items. Lessor's remedies shall be available to Lessor's successors and
assigns, shall be in addition to all other remedies provided by law, and may be
exercised concurrently or consecutively. To the extent permitted by applicable
law, Lessee hereby waives any rights Lessee may otherwise have to: 1) cancel or
repudiate this Lease; 2) revoke acceptance of or reject the Equipment; 3) claim
a security interest in the Equipment; 4) accept partial delivery of the
Equipment; 5) sell or dispose of the Equipment upon rejection or revocation; 6)
seek "cover" in substitution for the Lease from Lessor; and 7) claim an agency
relationship between Supplier and Lessor. LESSEE WAIVES ANY AND ALL RIGHTS TO
NOTICE AND TO JUDICIAL HEARING WITH RESPECT TO THE REPOSSESSION OF THE EQUIPMENT
BY LESSOR IN THE EVENT OF A DEFAULT HEREUNDER BY LESSEE. LESSEE HEREBY WAIVES
ANY RIGHT TO DEMAND A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING
INSTITUTED BY THE LESSOR OR THE LESSEE IN CONNECTION WITH THIS LEASE.
19. DISPUTE RESOLUTION. In furtherance of the resolution of any disputes
hereunder, the parties agree and stipulate that, at Lessor's election, the
parties shall submit any matter arising out of this transaction, including any
claim, counterclaim, setoff, or defense, to binding arbitration by the American
Arbitration Association. The decision and award of the arbitrator(s) shall be
final and binding and may be entered as rendered in any court having
jurisdiction thereof.
20. ADDITIONAL SECURITY. Despite the express intent of the parties, in the event
that this Lease is not deemed to be a true lease, then solely in that event and
for that limited purpose, it shall be deemed a security agreement and, in that
regard, Lessee hereby grants Lessor a purchase money security interest in the
Equipment, and all accessions, substitutions and replacements thereto, and all
interest of Lessee therein, and all proceeds (including insurance proceeds) and
products thereof, to secure Lessee's prompt payment and performance as and when
due of all obligations and indebtedness to Lessor hereunder. Lessee also grants
to Lessor a lien upon and security interest in any and all of Lessee's interest
in other personal or real property (including all proceeds or products thereof)
as Lessee from time to time may lease from Lessor or that may secure any
indebtedness of Lessee to Lessor at any time outstanding, including all deposits
made by Lessee to Lessor under any Lease Schedule hereto.
21. NOTICES. Any notices and demands required or permitted to be given under
this Lease shall be given in writing by regular mail and shall become effective
when deposited in the United States mail with postage prepaid at the address
provided herein or to such other address as the party to receive the notice
hereafter designates in writing.
22. FURTHER ASSURANCES. Lessee shall promptly execute and deliver to Lessor such
further documents and take such further action as Lessor may require in order to
more effectively carry out the intent and purpose of this Lease, including, upon
Lessor's request, executing and delivering any and all financing statements
which may be required to evidence the interest of Lessor in the Equipment or any
other collateral securing Lessee's obligations hereunder. Lessee authorizes
Lessor to file, at Lessor's option, any such financing statements without
Lessee's signature and, if Lessee's signature is required, Lessee agrees Lessor
may execute the same in the name of Lessee as Lessee's attorney-in-fact. In
addition to any other information which Lessor may request to be provided
concerning Lessee's financial condition or operations, Lessee shall provide to
Lessor within 120 days after the close of each of Lessee's fiscal years, and,
upon Lessor's request, within 45 days of the end of each quarter of Lessee's
fiscal year, a copy of its financial statements prepared in accordance with
generally accepted accounting principles, it being understood that all such
financial statements shall be held in confidence by Lessor.
23. MISCELLANEOUS. (a) Any provision of this Lease which is unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such unenforceability without invalidating the remaining provisions hereof, and
any such unenforceability in any jurisdiction shall not render unenforceable
such provisions in any other jurisdiction. To the extent permitted by applicable
law Lessee hereby waives any provisions of law which render any provision hereof
unenforceable in any respect. Any waiver of the terms hereof shall be effective
only in the specific instance and for the specific purpose given. The captions
in this Lease are for convenience only and shall not define or limit any of the
terms hereof. (b) This Lease, together with all Lease Schedules, Acceptance
Certificates and riders attached hereto from time to time, or by reference
hereto made a part hereof, constitute the entire agreement between the parties
with respect to the subject matter hereof and merges any other understanding.
There are no other representations, warranties or agreements except as set forth
herein (including, without limitation, rights to purchase any of the
Equipment). The term "Lessee" as used herein shall mean and include any and
all Lessees who sign hereunder, each of whom shall be jointly and severally
bound thereby. This Lease will not be binding on Lessor until executed by
Lessor. (c) THIS LEASE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF OHIO. THE
LAWS AND DECISIONS OF SAID STATE WILL GOVERN AND CONTROL THE CONSTRUCTION,
ENFORCEABILITY, VALIDITY AND INTERPRETATION OF THIS LEASE, AND OF ALL
AGREEMENTS, INSTRUMENTS AND DOCUMENTS, HERETOFORE, NOW OR HEREAFTER EXECUTED BY
LESSEE AND DELIVERED TO LESSOR PERTAINING OR RELATING TO THIS LEASE OR THE
TRANSACTIONS CONTEMPLATED HEREIN. THE PARTIES AGREE THAT ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS LEASE SHALL BE COMMENCED IN THE
STATE OR FEDERAL COURTS IN OHIO AND LESSEE AGREES THAT, IN ADDITION TO ANY OTHER
MANNER OF SERVICE PRESCRIBED BY LAW OR RULE OF COURT, A SUMMONS AND COMPLAINT
COMMENCING AN ACTION OR PROCEEDING IN EITHER SUCH COURT SHALL BE PROPERLY SERVED
UPON LESSEE AND SHALL CONFER PERSONAL JURISDICTION IF SERVED PERSONALLY OR BY
UNITED STATES REGISTERED MAIL, RETURN RECEIPT REQUESTED, TO THE LESSEE AT THE
ADDRESS INDICATED ON THE FIRST PAGE OF THIS LEASE. (d) This Agreement is subject
to acceptance by Lessor at its offices in Maumee, Ohio and shall only become
effective on the date thereof. (e) Any ambiguity contained herein shall be
interpreted neutrally and not for or against any party regardless of who drafted
the provision.
DATED AS OF: SEPTEMBER 14, 1995
---------------------
By execution hereof, the signer certifies that he/she has read, accepted and
duly execute this Master Lease Agreement on behalf of Lessee.
ACCEPTED:
LESSOR: DANA COMMERICAL CREDIT CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
LESSEE: TELCO COMMUNICATIONS GROUP, INC.
By: /s/ Donald A. Burns
----------------------------------------
Title: President
-------------------------------------
This Lease may not be amended, nor may any rights hereunder be waived, except by
an instrument in writing signed by the party charged with such amendments or
waivers.
LESSEE: TELCO COMMUNICATIONS GROUP, INC.
-----------------------------------
By: X
--------------------------------------
Title:
------------------------------------
<PAGE>
September 19, 1995
Dana Commercial Credit Corporation
1900 Indian Wood Circle
Maumee, Ohio 43537
RE: Master Lease Agreement (the "Lease") between
Telco Communications Group, Inc. ("Lessee")
and Dana Commercial Credit Corporation
Dear Ladies and Gentlemen:
The undersigned certifies that Lessee's entering in the Lease referred to
above and any Lease Schedules in connection therewith, the cost of which shall
not exceed One Million Five Hundred Thirty Six One Hundred Twenty Six and Eight
Nine/100 Dollars ($1,536,126.89), is not prohibited by, nor contravene any terms
and conditions of any agreement the undersigned may have with the Lessee. The
undersigned also certifies that (a) the entering into the Lease will not result
in a violation of the covenants of any agreement the undersigned may have with
Lessee even if the obligations under such Lease are classified as debt and (b)
to its knowledge, there is no event of default by Lessee under any of its
agreements with the undersigned.
Sincerely,
Signet Bank
By:
------------------------------
Title:
<PAGE>
CERTIFIED COPY OF RESOLUTIONS
Lessee/Borrower
I, do hereby certify that:
------------------------------------------------------
1. I am the duly elected, qualified and acting Secretary of TELCO
-----
COMMUNICATIONS GROUP, INC., a VIRGINIA corporation and as such, have custody the
- -------------------------- --------
records of the corporation, including the minutes of the meetings of the Board
of Directors of the corporation;
2. At a meeting of the Board of Directors of said corporation, duly called and
held on October 5, 1995 at which a quorum was present and
--------------------------------
acting throughout or by unanimous written consent of said Board of Directors,
the following resolutions were duly adopted and said resolutions are in full
force and effect as of the date hereof and have not been modified or rescinded:
RESOLVED, that this corporation enter into lease and loan transactions
from time to time with Dana Commercial Credit Corporation ("DCC");
FURTHER RESOLVED, that any officer designated in that last of this series
of resolutions, or any person authorized in writing by any such officer,
acting singly, is hereby authorized and directed in the name and on behalf
of this corporation from time to time to lease from DCC or finance with
DCC personal property under such terms and conditions as shall be approved
by such officer or authorized person;
FURTHER RESOLVED, that any officer of this corporation designated in the
last of this series of resolutions, or any person authorized in writing by
any such officer, acting singly, is hereby authorized to negotiate,
execute and deliver such agreements, documents and instruments, including
leases, lease schedules, acceptance certificates and other lease
documents, and security agreements and promissory notes, in such amount
and with respect to such equipment, and to take all other actions, all as
such officer or authorized person shall deem necessary and desirable for
the purpose of leasing or financing personal property with DCC or
effectuating the intent of these resolutions;
FURTHER RESOLVED, that all previous acts of, and all documents and papers
heretofore executed and/or delivered by, any of said officers or
authorized persons in exercising any of the foregoing powers, are hereby
ratified, confirmed and approved;
FURTHER RESOLVED, that any bill of sale, lease, security agreement,
promissory note, or other agreement, document or instrument purportedly
executed and delivered in accordance with the authorizations contained in
one or more of the foregoing resolutions, shall be deemed conclusively to
have been executed and delivered in accordance with such foregoing
authorizations; and
FURTHER RESOLVED, that the President, Vice President, Treasurer,
Secretary, and of this corporation be,
--------------- -----------------
and each hereby is, designated as an officer of this corporation
authorized to execute and deliver documents, and otherwise take actions,
on behalf of this corporation as set forth in the above resolutions.
3. The President, the Vice President(s), the Treasurer, the Secretary and the
other officers of this corporation referred to in the foregoing resolutions are:
Donald A. Burns /s/ Donald A. Burns President / Sect.
- ------------------------- ------------------------ -------------------
Name Signature Title
Mark Stodter /s/ Mark Stodter C.O.O.
- ------------------------- ------------------------ -------------------
Name Signature Title
- ------------------------- ------------------------ -------------------
Name Signature Title
- ------------------------- ------------------------ -------------------
Name Signature Title
4. The officers designated in the last of the foregoing series of resolutions
have been duly elected and hold the offices set forth opposite their respective
names on the date hereof, and the signatures set forth opposite their respective
names are the true signatures of such officers.
5. This corporation shall furnish written notice to DCC of any revocation,
modification or amendment of any of the foregoing resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
corporation, this 5 day of October , 1995
------- ----------- --
/s/ Donald A. Burns
--------------------------------
Secretary
<PAGE>
LEASE SCHEDULE
LEASE SCHEDULE NO. 001 Dated as of: SEPTEMBER 14, 1995
----------------------- ---------------------
UNDER MASTER LEASE AGREEMENT NO. 5002115 Dated as of: SEPTEMBER 14, 1995
---------- ----------------------
This Lease Schedule is executed pursuant to the subject Master Lease Agreement
("Master Lease"), the terms and conditions of which are incorporated herein by
reference. The equipment described in Schedule A hereto ("the Equipment") is
leased pursuant to the terms and conditions of this Lease Schedule and the
Master Lease.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DANA COMMERCIAL CREDIT CORPORATION
- --------------------------------
4219 LAFAYETTE CENTER DRIVE 1900 Indian Wood Circle
- --------------------------------
CHANTILLY, VA 22021-1209 Maumee, OH 43537
- --------------------------------
Telephone: (703) 631-5600 Telephone: (419) 893-7430
----------------------
_______________________________________________________________________________
Equipment Location and Cost: Stated on Schedule A, attached hereto and
incorporated herein.
Stipulated Loss Value: Stated on Exhibit 1, attached hereto and incorporated
herein.
Acceptance Date: As stipulated on the Acceptance Certificate referring to this
Lease Schedule to be separately executed by Lessee upon delivery and acceptance
of the Equipment and acknowledged by Lessor.
Lease Term: Commences on the Acceptance Date and continues for FORTY-EIGHT (48)
----------------
months after the Basic Rent Commencement Date.
Basic Rent Commencement Date: 15TH day of the month immediately following
----------
the Acceptance Date of the Lease Schedule.
Rent: An amount equal to the sum of:
(i) Interim Rent in an amount equal to 1/30th of the Basic Rent
(defined below) multiplied by the number of days from and
including the Acceptance Date to the Basic Rent Commencement
Date, which amount shall be payable on the Basic Rent Commencement
Date and
(ii) FORTY-EIGHT(48) monthly rental payments each in the amount
---------------------
of $ 1@$208,586.90 followed by 47 @ $18,346.26* or, if
-----------------------------------------------
different, in the amount set forth on the Acceptance Certificate
("Basic Rent") plus any applicable sales/use tax commencing on the
Basic Rent Commencement Date and on the 15TH day of each
----------
month thereafter ("Rent Payment Date") for the entire Lease Term,
In the event that the Basic Rent set forth in the Acceptance Certificate differs
from that set forth herein, the Basic Rent shall be as set forth in the
Acceptance Certificate.
The parties agree that this lease is a "finance lease" as defined by Article
2A-103(g) of the Uniform Commercial Code. Lessee acknowledges that it has either
a) received, reviewed and approved any written supply contract from the
manufacturer or supplier ("Supplier") covering the Equipment purchased from
Supplier by Lessor for Lease to Lessee, or b) has been informed of the identity
of the Supplier, that it may have rights under the supply contract, and that
Lessee may contact Supplier for a description of any such rights.
This Lease Schedule will apply only to Equipment accepted on or before N/A
--------
(the "Commitment Expiration Date").
Dated as of SEPTEMBER 14, 1995 By execution hereof, the signer
------------------------ certifies that he/she has read,
accepted and duly executed this
Lease Schedule to the Master Lease
Agreement on behalf of Lessee.
LESSOR: DANA COMMERCIAL CREDIT CORPORATION LESSEE: TELCO COMMUNICATIONS GROUP,
INC.
By: /s/ By: /s/ Donald A. Burns
--------------------------------------- -------------------------------
Title: Exec. V.P. Title: President
----------------------------------- ----------------------------
*FIRST MONTHLY RENTAL DUE IN ADVANCE.
<PAGE>
CERTIFIED COPY OF RESOLUTIONS
Lessee/Borrower
I, Donald A. Burns do hereby certify that:
-------------------------------------------------
1. I am the duly elected, qualified and acting Secretary of TELCO COMMUNICATIONS
____________________
GROUP, INC. , a VIRGINIA corporation
__________________________ ___________________________________
and as such, have custody the records of the corporation, including the minutes
of the meetings of the Board of Directors of the corporation;
2. At a meeting of the Board of Directors of said corporation, duly called and
held on October 5, 1995 at which a quorum was present and acting
-----------------------
throughout or by unanimous written consent of said Board of Directors, the
following resolutions were duly adopted and said resolutions are in full force
and effect as of the date hereof and have not been modified or rescinded:
RESOLVED, that this corporation enter into lease and loan transactions
from time to time with Dana Commercial Credit Corporation ("DCC");
FURTHER RESOLVED, that any officer designated in the last of this series
of resolutions, or any person authorized in writing by any such officer,
acting singly, is hereby authorized and directed in the name and on
behalf of this corporation from time to time to lease from DCC or finance
with DCC personal property under such terms and conditions as shall be
approved by such officer or authorized person;
FURTHER RESOLVED, that any officer of this corporation designated in the
last of this series of resolutions, or any person authorized in writing
by any such officer, acting singly, is hereby authorized to negotiate,
execute and deliver such agreements, documents and instruments, including
leases, lease schedules, acceptance certificates and other lease
documents, and security agreements and promissory notes, in such amount
and with respect to such equipment, and to take all other actions, all
as such officer or authorized person shall deem necessary and desirable
for the purpose of leasing or financing personal property with DCC or
effectuating the intent of these resolutions;
FURTHER RESOLVED, that all previous acts of, and all documents and papers
heretofore executed and/or delivered by, any of said officers or
authorized persons in exercising any of the foregoing powers, are hereby
ratified, confirmed and approved;
FURTHER RESOLVED, that any bill of sale, lease, security agreement,
promissory note, or other agreement, document or instrument purportedly
executed and delivered in accordance with the authorizations contained
in one or more of the foregoing resolutions, shall be deemed conclusively
to have been executed and delivered in accordance with such foregoing
authorizations; and
FURTHER RESOLVED, that the President, Vice President, Treasurer,
Secretary, and
_____________________ ________________________________
of this corporation be, and each hereby is, designated as an officer of
this corporation authorized to execute and deliver documents, and
otherwise take actions, on behalf of this corporation as set forth in the
above resolutions.
3. The President, the Vice President(s), the Treasurer, the Secretary and the
other officers of this corporation referred to in the foregoing resolutions are:
Donald A. Burns /s/ Donald A. Burns President / Sect.
- ----------------------- -------------------------- --------------------------
Name Signature Title
Mark Stodter /s/ Mark Stodter C.O.O.
- ----------------------- -------------------------- --------------------------
Name Signature Title
_______________________ __________________________ __________________________
Name Signature Title
_______________________ __________________________ __________________________
Name Signature Title
4. The officers designated in the last of the foregoing series of resolutions
have been duly elected and hold the offices set forth opposite their respective
names on the date hereof, and the signatures set forth opposite their respective
names are the true signature of such officers.
5. This corporation shall furnish written notice to DCC of any revocation,
modification or amendment of any of the foregoing resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
corporation, this 5 day of OCTOBER , 19 95
----------------- -------------------- ---------
/s/ Donald A. Burns
----------------------------------------------------------
Secretary
(Corporate Seal) /s/ Mark Stodter
----------------------------------------------------------
C.O.O.
<PAGE>
COMPLETION AUTHORIZATION
TO: Dana Commercial Credit Corporation ("DCC")
1900 Indian Wood Circle
Maumee, OH 43537
FROM: TELCO COMMUNICATIONS GROUP, INC.
--------------------------------------------------------
4219 LAFAYETTE CENTER DRIVE
--------------------------------------------------------
CHANTILLY, VA 22021-1209
--------------------------------------------------------
--------------------------------------------------------
Re Master Lease No.: 5002115
-------------------
Dated as of: SEPTEMBER 14, 1995
--------------------------
The undersigned hereby authorizes DCC to complete the following document(s) by
inserting therein the following information:
Document Authorized Insertion
ANY AND ALL DOCUMENTS SERIAL NUMBERS AND DATE
UNDER MASTER LEASE
The insertions authorized by the undersigned herein shall become a part of and
shall be enforceable as though originally fully set forth in the referenced
Document.
DATED AS OF: SEPTEMBER 14, 1995
----------------------
DANA COMMERCIAL CREDIT CORPORATION TELCO COMMUNICATIONS GROUP, INC.
By: (Signature Appears Here) By: (Signature Appears Here)
-------------------------- --------------------------------------
Title: Executive V.P. Title: President
----------------------- -----------------------------------
The undersigned hereby consents to DCC's completion of the above referenced
document(s) as set forth above and agree that all of their obligations with
respect to such document(s) as evidenced in any guaranty or other agreement
executed by the undersigned in respect thereof shall remain in full force and
effect.
, Guarantor , Guarantor
- ------------------------- ----------------------------
By: By:
------------------------------- -----------------------------------
Title: Title:
---------------------------- --------------------------------
, Guarantor , Guarantor
- ------------------------- -----------------------------
By: By:
------------------------------- -----------------------------------
Title: Title:
---------------------------- --------------------------------
<PAGE>
Exhibit 6.i.10
LEASE SCHEDULE
LEASE SCHEDULE NO. 002 Dated as of: SEPTEMBER 19, 1995
----------------------- ------------------------
UNDER MASTER LEASE AGREEMENT NO. 5002115 Dated as of: SEPTEMBER 14, 1995
--------- ------------------------
This Lease Schedule is executed pursuant to the subject Master Lease Agreement
("Master Lease"), the terms and conditions of which are incorporated herein by
reference. The equipment described in Schedule A hereto ("the Equipment") is
leased pursuant to the terms and conditions of this Lease Schedule and the
Master Lease.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DANA COMMERCIAL CREDIT CORPORATION
- -----------------------------------
4219 LAFAYETTE CENTER DRIVE 1900 Indian Wood Circle
- -----------------------------------
CHANTILLY, VA 22021-1209 Maumee, OH 43537
- -----------------------------------
Telephone: (703) 631-5600 Telephone: (419) 893-7430
-------------------------
_______________________________________________________________________________
Equipment Location and Cost: Stated on Schedule A, attached hereto and
incorporated herein.
Stipulated Loss Value: Stated on Exhibit 1, attached hereto and incorporated
herein.
Acceptance Date: As stipulated on the Acceptance Certificate referring to this
Lease Schedule to be separately executed by Lessee upon delivery and acceptance
of the Equipment and acknowledged by Lessor.
Lease Term: Commences on the Acceptance Date and continues for FORTY-EIGHT (48)
----------------
months after the Basic Rent Commencement Date.
Basic Rent Commencement Date: 15TH day of the month immediately following
--------
the Acceptance Date of the Lease Schedule.
Rent: An amount equal to the sum of:
(i) Interim Rent in an amount equal to 1/30th of the Basic Rent (defined
below) multiplied by the number of days from and including the
Acceptance Date to the Basic Rent Commencement Date, which amount
shall be payable on the Basic Rent Commencement Date and
(ii) FORTY-EIGHT (48) monthly rental payments each in the amount of
-------------------
$ 1 @ 98,638.48 followed by 47 @ $8,675.75* or, if different, in
--------------------------------------------
the amount set forth on the Acceptance Certificate ("Basic Rent")
plus any applicable sales/use tax commencing on the Basic Rent
Commencement Date and on the 15TH day of each month thereafter
--------
("Rent Payment Date") for the entire Lease Term,
In the event that the Basic Rent set forth in the Acceptance Certificate differs
from that set forth herein, the Basic Rent shall be as set forth in the
Acceptance Certificate.
The parties agree that this lease is a "finance lease" as defined by Article
2A-103(g) of the Uniform Commercial Code. Lessee acknowledges that it has either
a) received, reviewed and approved any written supply contract from the
manufacturer or supplier ("Supplier") covering the Equipment purchased from
Supplier by Lessor for Lease to Lessee, or b) has been informed of the identity
of the Supplier, that it may have rights under the supply contract, and that
Lessee may contact Supplier for a description of any such rights.
This Lease Schedule will apply only to Equipment accepted on or before N/A
------
(the "Commitment Expiration Date").
Dated as of SEPTEMBER 19, 1995 By execution hereof, the signer
--------------------
certifies that he/she has read,
accepted and duly executed this
Lease Schedule to the Master
Lease Agreement on behalf of Lessee.
LESSOR: DANA COMMERCIAL CREDIT CORPORATION LESSEE: TELCO COMMUNICATIONS GROUP,
INC.
By: /s/ William E. Riley By: /s/ Donald A. Burns
-------------------------------------- --------------------------------
William E. Riley
Title: Executive Vice President Title: President
----------------------------------- -----------------------------
*FIRST MONTHLY RENTAL DUE IN ADVANCE.
<PAGE>
Addendum dated as of September 18, 1995, to Lease Schedule 5002115-002
(the "Lease Schedule") to the Master Lease Agreement No 5002115 (the "Lease")
between Telco Communications Group, Inc. ("Lessee") and Dana Commercial Credit
Corporation ("Lessor").
WHEREAS, Lessor and Lessee desire to enter into the Lease and the Lease
Schedule;
WHEREAS, Lessor and Lessee desire to amend certain provisions of the
Lease, for the purposes of this Lease Schedule only, as hereinafter provided;
WHEREAS, this Addendum shall be deemed to have been entered into
contemporaneously with and integrated into the terms and conditions of the Lease
Schedule;
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, receipt of which is hereby acknowledged, Lessor and lessee agree
as follows:
1. Amendment of the Lease to Add New Section ("Purchase Option"). The
-------------------------------------------------------------
Lease is hereby amended by adding a new section thereto to read in its entirety
as follows:
"24. PURCHASE OR RENEWAL OPTION.
(a) Lessee shall have the option, at the expiration of the Lease Term as
set forth in the Lease Schedule, to either (i) purchase all, but not less than
all, of the Equipment for the Purchase Option Price (as defined below), or (ii)
renew the term of the Lease, for all but not less than all, of the Equipment for
an additional one year period at the Renewal Option Rent (as defined below),
payable monthly; provided that no Event of Default has occurred under the Lease
--------
and all provisions of the Lease and all other agreements between Lessor and
Lessee have been fully complied with. Lessee shall notify Lessor of its
irrevocable election to exercise its purchase or renewal option in the written
notice required by Section 14(a) of the Lease (referred to herein as the
"Notice"). In the event the Lessee does not provide the Notice, the Lessee shall
comply with the provisions of the Lease, including without limitation, the
return provisions thereof.
(b) For purposes of this section the following capitalized terms shall
have the meaning given:
"Fair Market Value" is defined as the selling price that would be obtained
in an arm's length transaction between an informed and willing buyer and an
informed and willing seller, each under no compulsion to buy or sell, provided,
--------
however, such values shall be determined on the basis that the Equipment
conforms to all conditions specified in the Lease and is installed and/or in
service.
<PAGE>
"Fair Market Rental Value" is defined as the rental that would be obtained
in an arm's length transaction between an informed and willing lessee and an
informed and willing lessor, each under no compulsion to lease; provided,
--------
however, such values shall be determined on the basis that the Equipment
- -------
conforms to all conditions specified in the Lease and is installed and/or in
service.
"Purchase Option Price" is defined as the Fair Market Value of the
Equipment plus all applicable sales, use, property or excise taxes and all
expenses of transfer; provided, however, Fair Market Value shall in no event be
-------- -------
greater that twenty percent (20%) of the cost of the Equipment set forth in the
Lease Schedule.
"Renewal Option Rent" is defined as the Fair Market Rental Value of the
Equipment plus applicable sales and use taxes.
(c) The Notice delivered by Lessee shall contain a reasonable estimate
of the Fair Market Value and/or the Fair Market Rental Value of the Equipment.
If the Lessor and Lessee are unable to agree upon Fair Market Value or Fair
Market Rental Value within sixty days after Lessor's receipt of the Notice, the
Fair Market Value and/or Fair Market Rental Value shall be determined at
Lessee's expense by an independent, qualified appraiser selected by Lessor.
(d) In the event the Lessee exercises the renewal option set forth in
paragraph (a) above, upon the expiration of the renewal term Lessee shall have
the option, by giving Lessor irrevocable, written notice not less than thirty
(30) days prior to the expiration of said renewal term, to either (i) purchase
all, but not less than all, of the Equipment at the Purchase Option Price, or
(ii) renew the term of the Lease for all but not less than all, of the
Equipment, for one additional one-year term at its Renewal Option Rent, payable
monthly. If Lessee fails to exercise either option set forth in the preceding
sentence, the Equipment shall be returned to Lessor pursuant to the terms and
conditions of the Lease, including without limitation, the return provision
thereof.
(e) In the event the Lessee exercises the renewal option set forth in
paragraph (d) above, upon the expiration of such renewal term, Lessee shall have
the option, by giving the Lessor irrevocable, written notice not less than
thirty (30) days prior to the expiration of said renewal term to purchase all,
but not less than all, of the Equipment at the Purchase Option Price. If the
Lessee does not exercise the purchase option set forth in the preceding
sentence, the Equipment shall be returned to Lessor pursuant to the terms and
conditions of the Lease including without limitation the return provisions
thereof.
(f) The Purchase Option Price shall be paid to the Lessor on or before the
last day of the Lease Term or renewal term in immediately available funds and
the sale of the Equipment by Lessor to Lessee shall be on an AS-IS, WHERE-IS
basis, without recourse to, or warranty by Lessor and the LESSOR SHALL NOT BE
DEEMED TO HAVE MADE,
2
<PAGE>
AND THE LESSOR HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY,
EITHER EXPRESSED OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION, THE DESIGN OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS
FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE, THE QUALITY OF THE MATERIAL OR
WORKMANSHIP OF THE EQUIPMENT, ITS VALUE OR CONFORMITY TO ANY SPECIFICATIONS OR
AGREEMENTS RELATING THERETO, NOR SHALL THE LESSOR BE LIABLE FOR INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR FOR STRICT OR ABSOLUTE LIABILITY IN TORT. The Purchase
Option Price shall bear finance charges from the period, if any, for the
expiration date of the Lease to the date of payment, at the rate set forth in
the Lease for payment of overdue rent.
(g) Notwithstanding any election of Lessee to purchase, the provisions of
the Lease shall continue in full force and effect until passage of ownership of
the Equipment upon the date of purchase."
3. Miscellaneous
-------------
(a) Except as otherwise expressly amended by this Addendum, the
Lease is and shall continue to be in full force and effect in accordance with
its terms. In the event of any inconsistency between the provisions of this
Addendum and those in the Lease, the terms of this Addendum shall control.
(b) All terms defined in the Lease shall have such defined meanings
when used herein, unless otherwise defined herein.
(c) This Addendum shall be governed by and construed in accordance
with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum this
18th day of September, 1995.
Dana Commercial Credit Corporation Telco Communications Group, Inc.
("Lessor") ("Lessee")
By: /s/ William L. Riley By: /s/ Donald A. Burns
-------------------------------- ------------------------------
Title: William E. Riley Title: President
Executive Vice President
3
<PAGE>
SCHEDULE A EQUIPMENT
LEASE SCHEDULE NO.: 002 DATED AS OF: SEPTEMBER 19, 1995
----------------- ---------------------
MASTER LEASE AGREEMENT NO.: 5002115 DATED AS OF: SEPTEMBER 14, 1995
--------- ---------------------
WITH TELCO COMMUNICATIONS GROUP, INC. ("LESSEE")
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NEW / MANUFACTURER, MODEL NUMBER AND PURCHASE
USED QTY. DESCRIPTION SERIAL NO. ADDRESS CITY STATE ZIP PRICE
NEW 1 TITAN 5500S DIGITAL CROSS-CONNECT 800 E. MAIN STREET CHATANOOGA TN 37408 493,192.41
SYSTEM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------
TOTAL: $493,192.41
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LESSOR: DANA COMMERCIAL CREDIT LESSEE: TELCO COMMUNICATIONS
CORPORATION GROUP, INC.
By: /s/ William L. Riley By: /s/ Donald A. Burns
--------------------------------- ----------------------------
Title: Exec. V.P. Title: President
--------------------------------- ----------------------------
Page 1 of 1
----------- -----------
<PAGE>
Stipulated Loss Value
Telco Communications Group, Inc.
Exhibit No. 1
#5002115-002
Per % of Cost Per % of Cost
------------- -------------
1 102.7384 25 60.4776
2 100.9768 26 58.7173
3 99.2154 27 56.9570
4 97.4541 28 55.1968
5 95.6928 29 53.4366
6 93.9316 30 51.6765
7 92.1704 31 49.9164
8 90.4093 32 48.1563
9 88.6482 33 46.3963
10 86.8872 34 44.6363
11 85.1262 35 42.8764
12 83.3653 36 41.1164
13 81.6044 37 39.3565
14 79.8436 38 37.5967
15 78.0828 39 35.8369
16 76.3221 40 34.0771
17 74.5615 41 32.3174
18 72.8008 42 30.5577
19 71.0402 43 28.7980
20 69.2797 44 27.0383
21 67.5192 45 25.2787
22 65.7587 46 23.5191
23 63.9983 47 21.7596
24 62.2379 48 20.0000
<PAGE>
ACCEPTANCE CERTIFICATE
TO LEASE SCHEDULE NO. 002 DATED AS OF SEPTEMBER 19, 1995
---- ------------------
("LEASE SCHEDULE") UNDER MASTER LEASE AGREEMENT DATED AS OF SEPTEMBER 14, 1995
------------------
("MASTER LEASE") BETWEEN DANA COMMERCIAL CREDIT CORPORATION ("LESSOR) AND
TELCO COMMUNICATIONS GROUP, INC. ("LESSEE").
- --------------------------------
1. EQUIPMENT. Lessee hereby acknowledges that the Equipment set forth and
described on the Lease Schedule, which description is fully incorporated herein
and made part hereof in its entirety, has been delivered to the location(s)
indicated in such Lease Schedule, where applicable, installed and otherwise
serviced and completed to the Lessee's satisfaction, inspected by Lessee, found
to be in good operating order and condition and in compliance with all
specifications of Lessee, and has been unconditionally accepted by the Lessee
under the Master Lease and Lease Schedule, all on the Acceptance Date set forth
below. Lessee hereby agrees to faithfully perform all of its obligations under
the Master Lease and Lease Schedule and reaffirms, as of the date hereof, its
representations and warranties as set forth in the Master Lease. Lessee further
reaffirms that Lessee has reviewed and approved the purchase order or agreement
with each Supplier covering the Equipment to be purchased by Lessor for lease to
Lessee, or that Lessee knows the identity of each Supplier, that it may have
rights under any Supply contract from the Supplier, and that Lessee may contact
Supplier for a description of any such rights. Lessee hereby authorizes and
directs Lessor to make payments to each Supplier of the Equipment pursuant to
such Supplier's invoice or any purchase order or agreement with such Supplier.
2. LESSEE ACKNOWLEDGMENTS. Lessee hereby acknowledges its agreement to pay
Lessor rental payments, as set forth in the Lease Schedule, plus any applicable
taxes, together with all other taxes, costs, expenses and charges whatsoever
which Lessee is required to pay pursuant to the Master Lease, in each instance
at the times and in the manner set forth in the Master Lease and the Lease
Schedule, respectively. Lessee further acknowledges and agrees that the rental
payments shall be as set forth on the Lease Schedule unless otherwise indicated
below.
Rental Payment Amount of Each Rental
Nos. Payment ("Basic Rent")
-------------- ----------------------
3. ACCEPTANCE DATE
Oct 5 , 1995.
- ------------- --
LESSEE: TELCO COMMUNICATIONS GROUP, INC.
--------------------------------
By: /s/ Donald A. Burns
--------------------------------
Donald A. Burns
--------------------------------
(NAME TYPEWRITTEN OR PRINTED)
Title: President
-------------------------
ACKNOWLEDGE THIS DAY
-----------
OF , 19 .
----------------- ---
DANA COMMERCIAL CREDIT CORPORATION
By: [SIGNATURE APPEARS HERE]
-------------------------------
Title: Executive V.P.
----------------------------
<PAGE>
BILL OF SALE
TELCO COMMUNICATIONS GROUP, INC. ("Seller") of
- ----------------------------------------------------
CHANTILLY VA , in consideration of
- ------------------------------------------------
(city or town) (state)
the sum of FOUR HUNDRED NINETY THREE THOUSAND ONE HUNDRED NINETY TWO AND 41/100
---------------------------------------------------------------------
Dollars ($ 493,192.41 ) and other good and valuable consideration,
---------------------
the receipt of which is hereby acknowledged, does hereby sell, transfer and
assign to DANA COMMERCIAL CREDIT CORPORATION, its successors and assigns
("DCC") a Delaware corporation having a principal office at 1900 Indian Wood
Circle, Maumee, OH 43537, the equipment set forth in Schedule A hereto
(the "Equipment").
Seller hereby covenants with DCC that Seller is the absolute owner of the
Equipment, that the equipment is free and clear of all liens, security interests
and any other encumbrances, and that Seller has the right to sell the Equipment
and make this Bill of Sale. Seller will forever warrant and defend the Equipment
against the claims and demands of all persons.
IN WITNESS WHEREOF, Seller had duly executed this Bill of Sale this 5 day
------
of October , 19 95 .
----------------------- -----
Telco Communications Group, Inc.
-----------------------------------------------------
(Corporation, Partnership, Proprietorship Individual)
By: /s/ Donald A. Burns
--------------------------------------------------
Title: Presidenet
-----------------------------------------------
State of VA
---------------
County of Farifax
--------------
Subscribed and sworn before me this 5th day of October , 19 95 .
------------ ----------- -----
/s/ Robin M Bennet
--------------------------------------------
My Commission expires: 6/30/98
----------------------
(SEAL)
<PAGE>
EXHIBIT 6.I.10
LEASE SCHEDULE
LEASE SCHEDULE NO. 002 Dated as of: SEPTEMBER 19, 1995
---------------------- ----------------------
UNDER MASTER LEASE AGREEMENT NO. 5002115 Dated as of: SEPTEMBER 14, 1995
--------- ----------------------
This Lease Schedule is executed pursuant to the subject Master Lease Agreement
("Master Lease"), the terms and conditions of which are incorporated herein by
reference. The equipment described in Schedule A hereto ("the Equipment") is
leased pursuant to the terms and conditions of this Lease Schedule and the
Master Lease.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DANA COMMERCIAL CREDIT CORPORATION
- ------------------------------------
4219 LAFAYETTE CENTER DRIVE 1900 Indian Wood Circle
- ------------------------------------
CHANTILLY, VA 22021-1209 Maumee, OH 43537
- ------------------------------------
Telephone: (703) 631-5600 Telephone: (419) 893-7430
--------------------------
===============================================================================
Equipment Location and Cost: Stated on Schedule A, attached hereto and
incorporated herein.
Stipulated Loss Value: Stated on Exhibit 1, attached hereto and incorporated
herein.
Acceptance Date: As stipulated on the Acceptance Certificate referring to this
Lease Schedule to be separately executed by Lessee upon delivery and acceptance
of the Equipment and acknowledged by Lessor.
Lease Term: Commences on the Acceptance Date and continues for FORTY-EIGHT (48)
----------------
months after the Basic Rent Commencement Date.
Basic Rent Commencement Date: 15TH day of the month immediately following the
--------
Acceptance Date of the Lease Schedule.
Rent: An amount equal to the sum of:
(i) Interim Rent in an amount equal to 1/30th of the Basic Rent
(defined below) multiplied by the number of days from and
including the Acceptance Date to the Basic Rent Commencement
Date, which amount shall be payable on the Basic Rent Commencement
Date and
(ii) FORTY-EIGHT (48) monthly rental payments each in the amount of
-------------------
$ 1 @ 98,638.48 followed by 47 @ $8,675.75* or, if different, in
------------------------------------------
the amount set forth on the Acceptance Certificate ("Basic Rent")
plus any applicable sales/use tax commencing on the Basic Rent
Commencement Date and on the 15TH day of each month thereafter
-------
("Rent Payment Date") for the entire Lease Term,
In the event that the Basic Rent set forth in the Acceptance Certificate differs
from that set forth herein, the Basic Rent shall be as set forth in the
Acceptance Certificate.
The parties agree that this lease is a "finance lease" as defined by Article
2A-103(g) of the Uniform Commercial Code. Lessee acknowledges that it has either
a) received, reviewed and approved any written supply contract from the
manufacturer or supplier ("Supplier") covering the Equipment purchased from
Supplier by Lessor for Lease to Lessee, or b) has been informed of the identity
of the Supplier, that it may have rights under the supply contract, and that
Lessee may contact Supplier for a description of any such rights.
This Lease Schedule will apply only to Equipment accepted on or before N/A
------
(the "Commitment Expiration Date").
Dated as of SEPTEMBER 19, 1995 By execution hereof, the signer
------------------------
certifies that he/she has read,
accepted and duly executed this
Lease Schedule to the Master
Lease Agreement on behalf of
Lessee.
LESSOR: DANA COMMERCIAL CREDIT CORPORATION LESSEE: TELCO COMMUNICATIONS
GROUP, INC.
By: /s/ William E. Riley By: /s/ Donald A. Burns
-------------------------------------- ----------------------------
Title: Executive Vice President Title: /s/ President
----------------------------------- -------------------------
*FIRST MONTHLY RENTAL DUE IN ADVANCE.
<PAGE>
Addendum dated as of September 18, 1995, to Lease Schedule 5002115-002
(the "Lease Schedule") to the Master Lease Agreement No 5002115 (the "Lease")
between Telco Communications Group, Inc. ("Lessee") and Dana Commercial Credit
Corporation ("Lessor").
WHEREAS, Lessor and Lessee desire to enter into the Lease and the Lease
Schedule;
WHEREAS, Lessor and Lessee desire to amend certain provisions of the
Lease, for the purposes of this Lease Schedule only, as hereinafter provided;
WHEREAS, this Addendum shall be deemed to have been entered into
contemporaneously with and integrated into the terms and conditions of the Lease
Schedule;
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, receipt of which is hereby acknowledged, Lessor and Lessee agree
as follows:
1. Amendment of the Lease to Add New Section ("Purchase Option"). The
_____________________________________________________________
Lease is hereby amended by adding a new section thereto to read in its entirety
as follows:
24. PURCHASE OR RENEWAL OPTION.
(a) Lessee shall have the option, at the expiration of the Lease Term as
set forth in the Lease Schedule, to either (i) purchase all, but not less than
all, of the Equipment for the Purchase Option Price (as defined below), or (ii)
renew the term of the Lease, for all but not less than all, of the Equipment
for an additional one year period at the Renewal Option Rent (as defined
below), payable monthly; provided that no Event of Default has occurred under
________
the Lease and all provisions of the Lease and all other agreements between
Lessor and Lessee have been fully complied with. Lessee shall notify Lessor of
its irrevocable election to exercise its purchase or renewal option in the
written notice required by Section 14(a) of the Lease (referred to herein as
the "Notice"). In the event the Lessee does not provide the Notice, the Lessee
shall comply with the provisions of the Lease, including without limitation,
the return provisions thereof.
(b) For purposes of this section the following capitalized terms shall
have the meaning given:
"Fair Market Value" is defined as the selling price that would be obtained
in an arm's length transaction between an informed and willing buyer and an
informed and willing seller, each under no compulsion to buy or sell, provided,
________
however, such values shall be determined on the basis that the Equipment
_______
conforms to all conditions specified in the Lease and is installed and/or in
service.
<PAGE>
"Fair Market Rental Value" is defined as the rental that would be obtained
in an arm's length transaction between an informed and willing lessee and an
informed and willing lessor, each under no compulsion to lease; provided,
--------
however, such values shall be determined on the basis that the Equipment
- -------
conforms to all conditions specified in the Lease and is installed and/or in
service.
"Purchase Option Price" is defined as the Fair Market Value of the
Equipment plus all applicable sales, use, property or excise taxes and all
expenses of transfer; provided, however, Fair Market Value shall in no event be
-------- -------
greater than twenty percent (20%) of the cost of the Equipment set forth in the
Lease Schedule.
"Renewal Option Rent" is defined as the Fair Market Rental Value of the
Equipment plus applicable sales and use taxes.
(c) The Notice delivered by Lessee shall contain a reasonable estimate of
the Fair Market Value and/or the Fair Market Rental Value of the Equipment. If
the Lessor and Lessee are unable to agree upon Fair Market Value or Fair Market
Rental Value within sixty days after Lessor's receipt of the Notice, the Fair
Market Value and/or Fair Market Rental Value shall be determined at Lessee's
expense by an independent, qualified appraiser selected by Lessor.
(d) In the event the Lessee exercises the renewal option set forth in
paragraph (a) above, upon the expiration of the renewal term Lessee shall have
the option, by giving Lessor irrevocable, written notice not less than thirty
(30) days prior to the expiration of said renewal term, to either (i) purchase
all, but not less than all, of the Equipment at the Purchase Option Price, or
(ii) renew the term of the Lease for all but not less than all, of the
Equipment, for one additional one-year term at its Renewal Option Rent, payable
monthly. If Lessee fails to exercise either option set forth in the preceding
sentence, the Equipment shall be returned to Lessor pursuant to the terms and
conditions of the Lease, including without limitation, the return provision
thereof.
(e) In the event the Lessee exercises the renewal option set forth in
paragraph (d) above, upon the expiration of such renewal term, Lessee shall have
the option, by giving the Lessor irrevocable, written notice not less than
thirty (30) days prior to the expiration of said renewal term to purchase all,
but not less than all, of the Equipment at the Purchase Option Price. If the
Lessee does not exercise the purchase option set forth in the preceding
sentence, the Equipment shall be returned to Lessor pursuant to the terms and
conditions of the Lease including without limitation the return provisions
thereof.
(f) The Purchase Option Price shall be paid to the Lessor on or before the
last day of the Lease Term or renewal term in immediately available funds and
the sale of the Equipment by Lessor to Lessee shall be on an AS-IS, WHERE-IS
basis, without recourse to, or warranty by Lessor and the LESSOR SHALL NOT BE
DEEMED TO HAVE MADE,
2
<PAGE>
AND THE LESSOR HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY,
EITHER EXPRESSED OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION, THE DESIGN OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS
FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE, THE QUALITY OF THE MATERIAL OR
WORKMANSHIP OF THE EQUIPMENT, ITS VALUE OR CONFORMITY TO ANY SPECIFICATIONS OR
AGREEMENTS RELATING THERETO, NOR SHALL THE LESSOR BE LIABLE FOR INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR FOR STRICT OR ABSOLUTE LIABILITY IN TORT. The Purchase
Option Price shall bear finance charges from the period, if any, for the
expiration date of the Lease to the date of payment, at the rate set forth in
the Lease for payment of overdue rent.
(g) Notwithstanding any election of Lessee to purchase, the provisions of
the Lease shall continue in full force and effect until passage of ownership of
the Equipment upon the date of purchase."
3. Miscellaneous
____________
(a) Except as otherwise expressly amended by this Addendum, the Lease
is and shall continue to be in full force and effect in accordance with its
terms. In the event of any inconsistency between the provisions of this
Addendum and those in the Lease, the terms of this Addendum shall control.
(b) All terms defined in the Lease shall have such defined meanings
when used herein, unless otherwise defined herein.
(c) This Addendum shall be governed by and construed in accordance with
the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum this
18th day of September, 1995.
Dana Commercial Credit Corporation Telco Communications Group, Inc.
("Lessor") ("Lessee")
By: /s/ William E. Riley By: /s/ Donald A. Burns
------------------------------ ----------------------------
Title: William E. Riley Title: President
Executive Vice President
3
<PAGE>
SCHEDULE A EQUIPMENT
LEASE SCHEDULE NO.: 002 DATED AS OF: SEPTEMBER 19, 1995
------------------ ------------------------
MASTER LEASE AGREEMENT NO.: 5002115 DATED AS OF: SEPTEMBER 14, 1995
---------- ------------------------
WITH TELCO COMMUNICATIONS GROUP, INC. ("LESSEE")
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NEW / MANUFACTURER, MODEL NUMBER AND PURCHASE
USED QTY. DESCRIPTION SERIAL NO. ADDRESS CITY STATE ZIP PRICE
NEW 1 TITAN 5500S DIGITAL CROSS-CONNECT 800 E. MAIN STREET CHATANOOGA TN 37408 493,192.41
SYSTEM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------
TOTAL: $493,192.41
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LESSOR: DANA COMMERCIAL CREDIT LESSEE: TELCO COMMUNICATIONS
CORPORATION GROUP, INC.
By: [Signature Appears Here] By: [Signature Appears Here]
-------------------------------- -------------------------------
Title: Exec. V.P. Title: President
--------------------------------- --------------------------------
Page 1 of 1
----------- -----------
<PAGE>
Stipulated Loss Value
Telco Communications Group, Inc.
Exhibit No. 1
#5002115-002
Per % of Cost Per % of Cost
------------- -------------
1 102.7384 25 60.4776
2 100.9768 26 58.7173
3 99.2154 27 56.9570
4 97.4541 28 55.1968
5 95.6928 29 53.4366
6 93.9316 30 51.6765
7 92.1704 31 49.9164
8 90.4093 32 48.1563
9 88.6482 33 46.3963
10 86.8872 34 44.6363
11 85.1262 35 42.8764
12 83.3653 36 41.1164
13 81.6044 37 39.3565
14 79.8436 38 37.5967
15 78.0828 39 35.8369
16 76.3221 40 34.0771
17 74.5615 41 32.3174
18 72.8008 42 30.5577
19 71.0402 43 28.7980
20 69.2797 44 27.0383
21 67.5192 45 25.2787
22 65.7587 46 23.5191
23 63.9983 47 21.7596
24 62.2379 48 20.0000
<PAGE>
ACCEPTANCE CERTIFICATE
TO LEASE SCHEDULE NO. 002 DATED AS OF SEPTEMBER 19, 1995
__________ _______________________
("LEASE SCHEDULE") UNDER MASTER LEASE AGREEMENT DATED AS OF SEPTEMBER 14, 1995
____________________
("MASTER LEASE") BETWEEN DANA COMMERCIAL CREDIT CORPORATION ("LESSOR") AND
TELCO COMMUNICATIONS GROUP, INC. ("LESSEE").
_______________________________________________
1. EQUIPMENT. Lessee hereby acknowledges that the Equipment set forth and
described on the Lease Schedule, which description is fully incorporated herein
and made part hereof in its entirety, has been delivered to the location(s)
indicated in such Lease Schedule, where applicable, installed and otherwise
serviced and completed to the Lessee's satisfaction, inspected by Lessee, found
to be in good operating order and condition and in compliance with all
specifications of Lessee, and has been unconditionally accepted by the Lessee
under the Master Lease and Lease Schedule, all on the Acceptance Date set forth
below. Lessee hereby agrees to faithfully perform all of its obligations under
the Master Lease and Lease Schedule and reaffirms, as of the date hereof, its
representations and warranties as set forth in the Master Lease. Lessee further
reaffirms that Lessee has reviewed and approved the purchase order or agreement
with each Supplier covering the Equipment to be purchased by Lessor for lease to
Lessee, or that Lessee knows the identity of each Supplier, that it may have
rights under any Supply contract from the Supplier, and that Lessee may contact
Supplier for a description of any such rights. Lessee hereby authorizes and
directs Lessor to make payments to each Supplier of the Equipment pursuant to
such Supplier's invoice or any purchase order or agreement with such Supplier.
2. LESSEE ACKNOWLEDGMENTS. Lessee hereby acknowledges its agreement to pay
Lessor rental payments, as set forth in the Lease Schedule, plus any applicable
taxes, together with all other taxes, costs, expenses and charges whatsoever
which Lessee is required to pay pursuant to the Master Lease, in each instance
at the times and in the manner set forth in the Master Lease and the Lease
Schedule, respectively. Lessee further acknowledges and agrees that the rental
payments shall be as set forth on the Lease Schedule unless otherwise indicated
below.
Rental Payment Amount of Each Rental
Nos. Payment ("Basic Rent")
___________________ ______________________________
3. ACCEPTANCE DATE
October 5, 1995.
LESSEE: TELCO COMMUNICATIONS GROUP, INC.
By: /s/ Donald A. Burns
_____________________________________
President. Donald A. Burns
(NAME TYPEWRITTEN OR PRINTED)
Title:
------------------------------
ACKNOWLEDGE THIS ________ DAY
OF _____________, 19 _____.
DANA COMMERCIAL CREDIT CORPORATION
By: [SIGNATURE APPEARS HERE]
-----------------------------
Title: Exec. V. P.
--------------------------
<PAGE>
BILL OF SALE
TELCO COMMUNICATIONS GROUP, INC. ("Seller") of
- ------------------------------------------------------------
CHANTILLY VA , in consideration of
- -------------------------------------------------
(city or town) (state)
the sum of FOUR HUNDRED NINETY THREE THOUSAND ONE HUNDRED NINETY TWO AND 41/100
--------------------------------------------------------------------
Dollars
($493,192.41) and other good and valuable consideration, the receipt of which is
- -------------
hereby acknowledged, does hereby sell, transfer and assign to DANA COMMERCIAL
CREDIT CORPORATION, its successors and assigns ("DCC") a Delaware corporation
having a principal office at 1900 Indian Wood Circle, Maumee, OH 43537, the
equipment set forth in Schedule A hereto (the "Equipment").
Seller hereby covenants with DCC that Seller is the absolute owner of the
Equipment, that the equipment is free and clear of all liens, security
interests and any other encumbrances, and that Seller has the right to sell the
Equipment and make this Bill of Sale. Seller will forever warrant and defend the
Equipment against the claims and demands of all persons.
IN WITNESS WHEREOF, Seller had duly executed this Bill of Sale this 5 day of
---
October , 1995.
- ----------------- --
Telco Communications Group, Inc.
-------------------------------------------------------
(Corporation, Partnership, Proprietorship Individual)
By: /s/ Donald A. Burns
---------------------------------------------------
Title: President
------------------------------------------------
State of VA
--------------
County of Fairfax
-------------
Subscribed and sworn before me this 5th day of October , 1995.
------ ------------ --
/s/ Robin M. Bennett
-------------------------------
Notary Public
My Commission expires: 6/30/98
---------
(SEAL)
<PAGE>
Addendum dated as of September 15, 1995, to the Master Lease Agreement No
5002115 (the "Lease") and Lease Schedule 5002115-001 (the "Lease Schedule")
between Telco Communications Group, Inc. ("Lessee") and Dana Commercial Credit
Corporation ("Lessor").
WHEREAS, Lessor and Lessee desire to enter into the Lease and the Lease
Schedule;
WHEREAS, Lessor and Lessee desire to amend certain provisions of the
Lease, and the Lease Schedule, as hereinafter provided;
WHEREAS, this Addendum shall be deemed to have been entered into
contemporaneously with and integrated into the terms and conditions of the Lease
and the Lease Schedule;
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, receipt of which is hereby acknowledged, Lessor and Lessee agree
as follows:
1. Amendment of Section 5 ("Rent Adjustment") of the Lease. Section 5
-------------------------------------------------------
is hereby amended as follows:
(a) by deleting "34%" in each paragraph (a) and (b) and inserting
"35%", and
(b) by deleting in paragraph (b) subsection (i) of the first
sentence thereof after the words "for such year less" ".34" and inserting in
lieu thereof ".35".
2. Amendment of Section 14 ("Termination, Return") of the Lease. Section
------------------------------------------------------------
14 is hereby amended by inserting at the end of the section thereof the
following:
"At the end of the Lease Term, Lessee agrees to pay a
restocking fee of seven and one half percent (7 1/2%)
of the original equipment cost to the Lessor."
3. Amendment of the Lease to Add New Section ("Purchase Option"). The
-------------------------------------------------------------
Lease is hereby amended for purposes of this Lease Schedule only by adding a new
section thereto to read in its entirety as follows:
24. PURCHASE OR RENEWAL OPTION.
(a) Lessee shall have the option, at the expiration of the Lease Term as
set forth in the Lease Schedule, to either (i) purchase all, but not less than
all, of the Equipment for the Purchase Option Price (as defined below), or (ii)
renew the term of the Lease, for all but not less than all, of the Equipment for
an additional one year period at the Renewal
<PAGE>
Option Rent (as defined below), payable monthly; provided that no Event of
--------
Default has occurred under the Lease and all provisions of the Lease and all
other agreements between Lessor and Lessee have been fully complied with. Lessee
shall notify Lessor of its irrevocable election to exercise its purchase or
renewal option in the written notice required by Section 14(a) of the Lease
(referred to herein as the "Notice"). In the event the Lessee does not provide
the Notice, the Lessee shall comply with the provisions of the Lease, including
without limitation, the return provisions thereof.
(b) For purposes of this section the following capitalized terms shall
have the meaning given:
"Fair Market Value" is defined as the selling price that would be obtained
in an arm's length transaction between an informed and willing buyer and an
informed and willing seller, each under no compulsion to buy or sell, provided,
--------
however, such values shall be determined on the basis that the Equipment
- -------
conforms to all conditions specified in the Lease and is installed and/or in
service.
"Fair Market Rental Value" is defined as the rental that would be obtained
in an arm's length transaction between an informed and willing lessee and an
informed and willing lessor, each under no compulsion to lease; provided,
--------
however, such values shall be determined on the basis that the Equipment
- -------
conforms to all conditions specified in the Lease and is installed and/or in
service.
"Purchase Option Price" is defined as the Fair Market Value of the
Equipment plus all applicable sales, use, property or excise taxes and all
expenses of transfer, provided, however, Fair Market Value shall in no event be
-------- -------
greater than percent (20%) of the cost of the Equipment set forth in the Lease
Schedule.
"Renewal Option Rent" is defined as the Fair Market Rental Value of the
Equipment plus applicable sales and use taxes.
(c) The Notice delivered by Lessee shall contain a reasonable estimate
of the Fair Market Value and/or the Fair Market Rental Value of the Equipment.
If the Lessor and Lessee are unable to agree upon Fair Market Value or Fair
Market Rental Value within sixty days after Lessor's receipt of the Notice, the
Fair Market Value and/or Fair Market Rental Value shall be determined at
Lessee's expense by an independent, qualified appraiser selected by Lessor.
(d) In the event the Lessee Exercises the renewal option set forth in
paragraph (a) above, upon the expiration of the renewal term Lessee shall have
the option, by giving Lessor irrevocable, written notice not less than thirty
(30) days prior to the expiration of said renewal term, to either (i) purchase
all, but not less than all, of the Equipment at the Purchase Option Price, or
(ii) renew the term of the Lease for all but not less than all, of
2
<PAGE>
the Equipment, for one additional one-year term at its Renewal Option Rent,
payable monthly. If Lessee fails to exercise either option set forth in the
preceding sentence, the Equipment shall be returned to Lessor pursuant to the
terms and conditions of the Lease, including without limitation, the return
provision thereof.
(e) In the event the Lessee exercises the renewal option set forth in
paragraph (d) above, upon the expiration of such renewal term, Lessee shall have
the option, by giving the Lessor irrevocable, written notice not less than
thirty (30) days prior to the expiration of said renewal term to purchase all,
but not less than all, of the Equipment at the Purchase Option Price. If the
Lessee does not exercise the purchase option set forth in the preceding
sentence, the Equipment shall be returned to Lessor pursuant to the terms and
conditions of the Lease including without limitation the return provisions
thereof.
(f) The Purchase Option Price shall be paid to the Lessor on or before the
last day of the Lease Term or renewal term in immediately available funds and
the sale of the Equipment by Lessor to Lessee shall be on an AS-IS, WHERE-IS
basis, without recourse to, or warranty by Lessor and the LESSOR SHALL NOT BE
DEEMED TO HAVE MADE, AND THE LESSOR HEREBY EXPRESSLY DISCLAIMS, ANY
REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE
EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS FOR USE OR FOR ANY PARTICULAR
PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT, ITS VALUE
OR CONFORMITY TO ANY SPECIFICATIONS OR AGREEMENTS RELATING THERETO, NOR SHALL
THE LESSOR BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR STRICT OR
ABSOLUTE LIABILITY IN TORT. The Purchase Option Price shall bear finance charges
from the period, if any, for the expiration date of the Lease to the date of
payment, at the rate set forth in the Lease for payment of overdue rent.
(g) Notwithstanding any election of Lessee to purchase, the provisions of
the Lease shall continue in full force and effect until passage of ownership of
the Equipment upon the date of purchase."
4. Miscellaneous
-------------
(a) Except as otherwise expressly amended by this Addendum, the Lease
and the Lease Schedule are and shall continue to be in full force and effect in
accordance with its terms. In the event of any inconsistency between the
provisions of this Addendum and those in the Lease or the Lease Schedule, the
terms of this Addendum shall control.
(b) All terms defined in the Lease and the Lease Schedule shall have
such defined meanings when used herein, unless otherwise defined herein.
3
<PAGE>
(c) This Addendum shall be governed by and construed in accordance
with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum this
15th day of September, 1995.
Dana Commercial Credit Corporation Telco Communications Group, Inc.
("Lessor") ("Lessee")
By: [SIGNATURE APPEARS HERE] By: /s/ Donald A. Burns
-------------------------------- ------------------------------
Title: Executive Vice President Title: President
4
<PAGE>
SCHEDULE B
Agreement of Lease No. 941001
------
ACCEPTANCE SUPPLEMENT
---------------------
Commencement Date: October 1, 1994
Expiration Date: September 1, 1997
THIS ACCEPTANCE SUPPLEMENT is executed and delivered by DGI Technologies,
Inc. ("Lessor") and Telco Communications Group, Inc. ("Lessee") pursuant to and
in accordance with Equipment Schedule No. A to Lease agreement dated October 1,
----------
1994 the ("Lease") between Lessor and Lessee. Terms defined in the Lease shall
- ----
have their defined meanings when used herein.
A. The Equipment covered by this Acceptance Supplement consists of the
following items manufactured by DGI Technologies, Inc. as listed in Schedule A
of the Lease.
B. Lessee confirms that said Equipment has been delivered to it, duly
assembled and installed in good working order and condition, at the location
specified in the Lease.
C. Lessee hereby: (a) confirms that said Equipment is of the size, design
capacity and manufacture selected by it; (b) irrevocably accepts said Equipment
as-is, where-is for all purposes of the Lease as of the Commencement Date set
forth above.
D. The term of the lease of said Equipment under the Lease shall commence
as of the Commencement Date set forth above and unless earlier terminated
pursuant to the provisions of the Lease, shall expire on the Expiration Date set
forth above.
E. As rent for said Equipment throughout the term of the Lease, Lessee
shall pay to Lessor in accordance with the terms of the Lease the sum of
$159,696.00 in 36 monthly installments of $4,436.00 per month commencing
- ----------- -- ---------
October 1, 1994 to and including September 1, 1997.
- --------------- -----------------
F. All of the provisions of the Lease are hereby incorporated by
reference in this Acceptance Supplement to the same extent as if fully set forth
herein.
APPROVED AND AGREED TO by the parties hereto as of the Commencement Date
set forth above.
LESSEE: LESSOR:
Telco Communications Group, Inc. DGI Technologies, Inc.
BY: /s/ Donald A. Burns BY:
--------------------------- ------------------------------------
President Lyle B. Coffman/Pres & COO
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE B
Agreement of Lease No. 941001
ACCEPTANCE SUPPLEMENT
Commencement Date: October 1, 1994
Expiration Date: September 1, 1997
This ACCEPTANCE SUPPLEMENT is executed and delivered by DGI Technologies,
Inc. (``Lessor'') and Telco Communications Group, Inc. (``Lessee'') pursuant to
and in accordance with Equipment Schedule No. A to Lease Agreement dated October
1, 1994 (the ``Lease'') between Lessor and Lessee. Terms defined in the Lease
shall have heir defined meanings when used herein.
A. The Equipment covered by this Acceptance Supplement consists of the
following items manufactured by DGI Technologies, Inc. as listed in Schedule A
of the Lease.
B. Lessee confirms that said Equipment has been delivered to it, duly
assembled and installed in good working order and condition, at the location
specified in the Lease.
C. Lessee hereby: (a) confirms that said Equipment is of the size, design
capacity and manufacture selected by it; (b) irrevocably accepts said Equipment
as-is, where-is for all purposes of the Lease as of the Commencement Date set
forth above.
D. The term of the lease of said Equipment under the Lease shall commence
as of the Commencement Date set forth above and unless earlier terminated
pursuant to the provisions of the Lease, shall expire on the Expiration Date set
forth above.
E. As rent for said Equipment throughout the term of the Lease, Lessee
shall pay to Lessor in accordance with the terms of the Lease the sum of
$159,696.00 in 36 monthly installments of $4,436.00 per month commencing October
1, 1994 to and including September 1, 1997.
F. All of the provisions of the Lease are hereby incorporated by reference
in this Acceptance Supplement to the same extent as if fully set forth herein.
APPROVED AND AGREED TO by the parties hereto as of the Commencement Date
set forth above.
LESSEE: LESSOR:
Telco Communications Group, Inc. DGI Technologies, Inc.
BY: /s/ Donald A. Burns BY:
---------------------------- ------------------------------
President Lyle B. Coffman/Pres & COO
- ------------------------------- ------------------------------
<PAGE>
Exhibit 10.29
EQUIPMENT LEASE
---------------
EQUIPMENT LEASE (this "Lease"), made as of the 1st day of January, 1994
by and between DSC FINANCE CORPORATION, a Delaware corporation, with offices at
1000 Coit Road, Plano, Collin County, Texas, 75075 (the "Lessor") and TELCO
COMMUNICATIONS GROUP, INC., a Virginia corporation with a principal place of
business at 4206 Technology Court, Chantilly, Virginia, 22021 (the "Lessee"). In
consideration of the mutual promises herein contained, the parties hereto agree
as follows:
ARTICLE 1 - LEASE
1.01 The Lessor hereby leases and lets to the Lessee and the Lessee
----
hereby leases and hires from the Lessor, property (collectively, the "Equipment"
and, individually, an "Item of Equipment") described in the schedules now or
hereafter executed and delivered by the parties and made a part hereof
(collectively, the "Schedules" and, individually, a "Schedule"). The Items of
Equipment now subject to this Lease are described in Schedules A and A-1
attached hereto and made a part hereof and shall be further described in
Schedules B and B-1 or further consecutive alphabetic identification.
ARTICLE 2 - TERM
2.01 The lease term for each Item of Equipment ("Lease Term") is defined
----
and shall commence upon the First Periodic Rent Payment Date as set forth in the
applicable Schedule and shall expire on the Lease Expiration Date as set forth
in the applicable Schedule unless earlier terminated, renewed, or extended and
such Items of Equipment returned, all according to the terms of this Lease and
the applicable Schedule. The Lessee will signify its receipt of the applicable
Item of Equipment by the execution and delivery to the Lessor of a Certificate
of Acceptance in the form of Schedule A-1 attached to Schedule A made a part
hereof. The Lessee's execution and delivery to the Lessor of the Certificate of
Acceptance with respect to each Item of Equipment shall conclusively establish
as between the Lessor and the Lessee that such Item of Equipment has been
shipped to and received by the Lessee under the Lease, notwithstanding any
defect with respect to design, manufacture, condition or in any other respect.
Lessee shall not unreasonably delay acceptance of the Equipment.
ARTICLE 3 - RENT
3.01 Amount. The rent of any and every Item of Equipment shall be the
-----------
amount designated in the applicable Schedule. The Lessee shall pay said rent
monthly, in the amounts and at the time set forth in the applicable Schedule, to
the Lessor at the address indicated above, or to such other person or at such
other place as the Lessor may from time to time designate.
3.02 Default. If the Lessee with regard to any Item or Items of
------------
Equipment fails to pay any rent or other amount herein provided within five (5)
days after the same is due and payable, or if any execution or any other writ of
process shall be issued in any action or proceeding against the Lessee
<PAGE>
Telco Development Group, Inc. Equipment Lease
Page 2
whereby any Item of Equipment may be seized, taken, or distrained or if a
proceeding in bankruptcy, receivership, or insolvency shall be instituted by or
against the Lessee, any guarantor of Lessee's obligations hereunder
("Guarantor") or their respective property, or if the Lessee or any Guarantor
shall enter into any arrangement or composition with their respective creditors,
or if Lessee, with regard to any Item or Items of Equipment, fails to observe,
keep, or perform any other provisions of this Lease required to be observed,
kept, or performed by the Lessee, or if any Guarantor fails to observe, keep, or
perform any provision of its Guaranty required to be observed, kept, or
performed by said Guarantor, the Lessor shall, if such default shall continue
for five (5) days after written notice thereof, have the right to exercise any
one or more of the following remedies:
(1) To declare the entire amount of rent hereunder immediately due and
payable as to any or all Items of Equipment shipped to and received
by Lessee, without notice or demand to the Lessee;
(2) To sue for and recover all rents and other payments then accrued or
thereafter accruing, with respect to any or all Items of Equipment;
(3) To take possession of any or all Items of Equipment, after notice to
Lessee, wherever the same may be located, without any court order or
other process of law. After having taken possession of any such Item
of Equipment, the Lessor, at its option, shall have the right to,
and may retain, sell, lease, or otherwise dispose of any such Item
of Equipment. The Lessee hereby waives any and all damages
occasioned by such taking of possession or other actions which the
Lessor is allowed hereunder. Any said taking of possession shall not
constitute a termination of this Lease as to any or all Items of
Equipment unless the Lessor expressly so notifies the Lessee in
writing;
(4) To terminate this Lease as to any or all items of Equipment; or
(5) To pursue any other remedy at law or in equity.
Notwithstanding any said repossession, or any other action which the
Lessor may take, the Lessee shall be and remain liable for the full performance
of all obligations to be performed by the Lessee under this Lease.
All such remedies are cumulative, and may be exercised concurrently or
separately.
3.03 Interest. If the Lessee fails to pay any part of the rent
-------------
herein reserved or any other sum required by the Lessee to be paid to the Lessor
within five (5) days after the due date thereof, the Lessee shall pay to the
Lessor interest on such delinquent payment from the due date thereof until paid
at the rate of eighteen percent (18%) per annum or the highest rate allowed by
applicable law, whichever is less.
<PAGE>
Telco Development Group, Inc. Equipment Lease
Page 3
3.04 Offset. This Lease is a net lease. The Lessee's obligations to pay
-----------
rent and all other amounts payable by it hereunder, as well as its obligations
to perform or observe, as the case may be, its other agreements hereunder are
absolute and unconditional and are not and shall not be subject to any
abatement, reduction, offset, setoff, counterclaim, recoupment, defense,
deferment, or interruption for any reason whatsoever. Except as expressly
provided herein, this Lease shall not terminate, nor shall the Lessee's
obligations hereunder be affected, by reason of any defect in, damage to, or
loss of any Item of Equipment, the failure of the manufacturer of any Item of
Equipment to perform on its warranties or any one of them, the prohibition of or
interference with the Lessee's use thereof by any person, corporation, or
governmental authority, the invalidity or unenforceability or lack of due
authorization of this Lease, or for any other cause whether similar or
dissimilar to the foregoing, it being the express intention of the Lessor and
the Lessee that all rent payable by the Lessee hereunder shall be, and continue
to be payable in all events unless the obligation to pay the same shall be
terminated pursuant to the express provisions of this Lease.
ARTICLE 4 - USE
4.01 Manner of Use. The Lessee shall at all times use the Equipment in a
------------------
careful and proper manner in conformity with the manufacturer's specifications
thereof and shall comply with all laws, ordinances, and regulations and all
conditions of insurance required hereby which relate in any way to the
possession, use, or maintenance of the Equipment. Nothing herein contained shall
be construed to deny the fact that the Equipment is, and shall at all times be
and remain the sole and exclusive property of the Lessor as agreed in Article
11.01 hereof.
4.02 Markings. If at any time during the term of this Lease, the Lessor
-------------
supplies the Lessee with labels, plates, or other markings stating that the
Equipment is owned by the Lessor, the Lessee shall affix and keep the same in a
prominent place on the Equipment.
ARTICLE 5 - INSPECTION
5.01 The Lessor shall, at any and all times during business hours,
----
have the right to enter into and on the premises where the Item of Equipment may
be located for the purpose of inspecting the same; observing its use or for any
other purpose including the enforcement of Lessor's rights hereunder in the
event of a default by Lessee or any Guarantor. The Lessee shall give the Lessor
immediate notice of any attachment or other judicial process affecting any Item
of Equipment and shall, whenever requested by the Lessor, advise the Lessor of
the exact location of each Item of Equipment. Notwithstanding the foregoing,
Lessee shall not remove any Item of Equipment from its original installation
site without the prior written approval of Lessor, which may be withheld or
granted by Lessor in its sole discretion.
ARTICLE 6 - ALTERATIONS AND REPAIRS
6.01 Alterations. Without the prior written consent of the Lessor, the
----------------
Lessee shall not make any alterations, additions, or improvements to the
Equipment. All additions and improvements of
<PAGE>
Telco Development Group, Inc. Equipment Lease
Page 4
whatsoever kind of nature made to the Equipment shall belong to and become the
property of the Lessor on the termination of the Lease.
6.02 Repairs. Lessee, at its own cost and expense, shall keep the Item
------------
of Equipment in good repair, condition, and working order and shall furnish any
and all parts, mechanisms and devices and services required to keep the Item of
Equipment in good repair, condition, and working order.
ARTICLE 7 - LOSS AND DAMAGE
7.01 Risk of Loss and Damage. The Lessee hereby assumes and shall bear
----------------------------
the entire risk of loss and damage, and destruction to each Item of Equipment
from any and every cause from and after date of shipment of the Equipment to its
final location and thereafter until such Item of Equipment has been returned to
Lessor, as herein provided. No loss, damage, or destruction to any Item of
Equipment or any part thereof shall impair any obligation of the Lessee under
this lease which shall continue in full force and effect, including, but not
limited to, the obligation to pay the monthly rental hereunder.
7.02 Duties of Lessee. In the event of loss or damage of any kind (but
---------------------
not beyond economical repair) to any Item of Equipment during the Lease Term and
thereafter until such Item of Equipment has been returned to Lessor, as herein
provided, the Lessee, at the option of the Lessor but at the sole cost and
expense of Lessee, shall:
(1) Place the same in good repair, condition, and working order; or,
(2) Replace the same with like Item of Equipment in good repair,
condition, and working order.
7.03 Stipulated Loss Value. If any Item of Equipment is lost, stolen,
--------------------------
destroyed, requisitioned by any governmental authority, or damaged beyond
repair, the Lessee shall pay the Lessor therefor in cash the Stipulated Loss
Value for such Item of Equipment as set forth in the applicable Schedule hereto.
On such payment, this Lease shall terminate with respect to such Item of
Equipment so paid for and the Lessee thereupon shall receive title to such Item
of Equipment "as-is", "where-is", and "with all faults" without warranty,
express or implied, with respect to any matter whatsoever. Notwithstanding the
manner in which the Stipulated Loss Value is to be calculated or otherwise, no
such loss, theft, destruction, requisition by any governmental authority, or
damage beyond economical repair of any Item of Equipment shall impair any
obligation of Lessee under this Lease, all of which shall continue in full force
and effect including, but not limited to, the obligation to pay the monthly
rental hereunder.
ARTICLE 8 - INSURANCE AND TAXES
8.01 Insurance. The Lessee shall keep each Item of Equipment insured
--------------
against all risk of loss or damage from every cause whatsoever by public
liability and property damage insurance policies covering each Item of Equipment
in form and amount and with companies approved by the Lessor and shall name
Lessor, Lessee, and Lessor's assignees as loss payees, as their interests may
appear. The Lessee shall pay the premiums therefor, at its sole cost and
expense, and shall deliver to the Lessor
<PAGE>
Telco Development Group, Inc. Equipment Lease
Page 5
evidence of such policies satisfactory to the Lessor. Each insurer shall agree,
by endorsement on the policy issued by it or by independent instrument furnished
to the Lessor, that it will give the Lessor thirty (30) days notice before the
policy in question shall be altered or canceled. The proceeds of such insurance,
at the option of the Lessor, shall be applied:
(1) Toward the replacement, restoration, or repair of such Item of
Equipment; or
(2) Toward payment of the Lessee's obligations hereunder.
The Lessee hereby appoints the Lessor as the Lessee's attorney in fact
to make claim for, receive payment of, and execute and endorse all documents,
checks, or drafts for loss or damage under any said insurance policy. At the
Lessor's request, the Lessee shall furnish the Lessor with evidence reasonably
satisfactory to the Lessor that the insurance coverage required hereby is in
effect.
8.02 Taxes. The Lessee shall keep the Equipment free and clear of all
----------
levies, liens, and encumbrances and shall pay all license fees, registration
fees, assessments, charges, and taxes which may now or hereafter be imposed on
the ownership, leasing, renting, sale, possession, or use of the Equipment,
excluding, however, all taxes on or measured by the Lessor's income. When
requested by Lessor, Lessee shall provide to Lessor evidence of any payment
required to be made by Lessee hereunder.
8.03 Lessor's Payment. In case of failure of the Lessee to procure or
---------------------
maintain said insurance or to pay said fees, assessments, charges and taxes, as
herein before specified, the Lessor shall have the right, but shall not be
obligated, to effect such insurance, or pay said fees, assessments, charges, and
taxes, as the case may be. In that event, the cost thereof shall be repayable to
the Lessor with the next installation of rent, and failure to repay the same
shall carry with it the same consequences, including interest at eighteen
percent (18%) per annum (or the highest rate allowed by applicable law,
whichever is less) as failure to pay any installment of rent.
ARTICLE 9 - WARRANTIES
9.01 LESSOR SHALL HAVE NO LIABILITY TO LESSEE FOR ANY CLAIM, LOSS, OR
----
DAMAGE (INCLUDING, BUT NOT LIMITED TO, LOST REVENUES OR LOST PROFITS) CAUSED OR
ALLEGED TO BE CAUSED DIRECTLY, INDIRECTLY, INCIDENTALLY, OR CONSEQUENTLY BY THE
EQUIPMENT OR ANY ITEM OF EQUIPMENT, BY ANY INADEQUACY THEREOF OR DEFICIENCY OR
DEFECT THEREIN, OR BY ANY INCIDENT, WHATSOEVER IN CONNECTION THEREWITH, ARISING
IN STRICT LIABILITY, NEGLIGENCE OR OTHERWISE, OR IN ANY WAY RELATED TO OR
ARISING OUT OF THIS LEASE. THE LESSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES OF
ANY KIND, INCLUDING THOSE OF MERCHANTABILITY, DURABILITY, CONDITION, AND FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE EQUIPMENT AND EXPRESSLY
DISCLAIMS THE SAME. FURTHER, THE LESSEE CONFIRMS THAT IT DECIDED TO LEASE THE
EQUIPMENT ON THE BASIS OF ITS OWN JUDGMENT AND
<PAGE>
Telco Development Group, Inc. Equipment Lease
Page 6
EXPRESSLY DISCLAIMS RELIANCE UPON ANY STATEMENTS, REPRESENTATIVES, OR WARRANTIES
MADE BY THE LESSOR AND THE LESSEE ACKNOWLEDGES THAT THE LESSOR IS NOT A
MANUFACTURER OR VENDOR OF ANY PART OF THE EQUIPMENT. As to each Item of
Equipment, Lessor hereby assigns to Lessee, without recourse, during the term
hereof all applicable manufacturer's warranties which by their terms are so
assignable. The Lessee shall take all reasonable action to enforce such
warranties to the extent so assigned. All claims or actions on any warranty so
assigned shall be made and prosecuted by the Lessee at its sole expense, and the
Lessor shall have no obligation to claim any warranty. The Lessee shall keep the
Lessor informed of any such claim or action by the Lessee, and any recovery
under such warranty shall be payable jointly to the Lessor and the Lessee, as
their interests may appear. All proceeds of such recovery shall be used to
repair or replace the Equipment.
ARTICLE 10 - PERSONAL PROPERTY
10.01 The Equipment is, and shall at all times be and remain, personal
-----
property, notwithstanding that the Equipment or any part thereof may be, or
hereafter become, in any manner affixed or attached to, or embedded in, or
permanently resting on, real property or any building thereon, or attached in
any manner to that which is permanent as by means of cement, plaster, nails,
screws, or otherwise. If requested by the Lessor, the Lessee shall obtain, prior
to delivery of any Item of Equipment, a certificate in form satisfactory to the
Lessor from each party having an interest in the real property where any Item of
Equipment may be located, waiving any claim with respect to such Item of
Equipment. Lessee agrees to execute and file Uniform Commercial Code financing
statements and any and all other instruments necessary to perfect the Lessor's
or such other person's interest in any or all of this Lease, any Schedule, the
payments due hereunder and the Equipment. Lessor may file a copy of this Lease,
as well as any Schedule, as a financing statement.
ARTICLE 11 - OWNERSHIP AND ASSIGNMENT
11.01 Ownership. The Equipment is, and shall at all times be and remain,
---------------
the sole and exclusive property of the Lessor. The Lessee shall have no right,
title, or interest therein, except as expressly set forth in this Lease. Lessee
will execute and deliver to Lessor documentation reasonably requested by Lessor
confirming Lessor's ownership interest in the Equipment.
11.02 Assignment. Without the prior written consent of the Lessor, the
----------------
Lessee shall not:
(1) Assign, transfer, pledge, or hypothecate this Lease, the
Equipment or any Item of Equipment, or any interest in it; or,
(2) Sublet or lend the Equipment or any Item of Equipment, or permit the
Equipment or any Item of Equipment to be used by anyone other than
the Lessee or the Lessee's employees.
11.03 Lessor's Assignment. It is understood that the Lessor contemplates
-------------------------
assigning this Lease or mortgaging the Equipment or any Item of Equipment, and
that any assignee of Lessor may assign it.
<PAGE>
Telco Development Group, Inc. Equipment Lease
Page 7
All rights of the Lessor under this Lease may be assigned, pledged, mortgaged,
transferred, or otherwise disposed of, either in whole or in part, with written
notice to the Lessee. If the Lessor assigns this Lease or the rentals due or to
become due hereunder or any other interest herein, whether as security for any
of its indebtedness or otherwise, no breach or default by the Lessor hereunder
or pursuant to any other agreement between the Lessor or Lessee, should there be
one, shall excuse performance by the Lessee of any provision hereunder. No such
assignee shall be obligated to perform any duty, covenant, or condition required
to be performed by the Lessor under the terms of this Lease; provided, however,
that no such assignment shall impair or diminish Lessor's obligations hereunder.
The Lessee hereby consents to any such documentation as the Lessor or any such
assignee may require and to furnish to any such assignee copies of any notices
given by the Lessee under this Lease or any Schedule.
ARTICLE 12 - INDEMNlTY
12.01 The Lessee shall indemnify the Lessor against, and shall hold the
-----
Lessor harmless from, any and all claims, actions, suits, proceedings, costs,
expenses, damages, and liabilities, including attorney's fees, arising out of,
connected with, or resulting from the Equipment, any Item of Equipment, or this
Lease, including without limitation, the selection, delivery, possession, use,
operation, or return of the Equipment and any Item of Equipment. The indemnities
and assumptions of liability provided in this Lease, including this Article 12,
shall continue in full force and effect notwithstanding the termination of this
Lease or any Schedule, whether by expiration of time, by operation of law, or
otherwise. If Lessor advised Lessee in good faith that an important general
interest of Lessor is involved in any claim, Lessor may control any defense or
settlement without diminution of Lessee's obligations hereunder.
ARTICLE 13 - PURCHASE OPTION
13.01 On the Lease Expiration Date as to each and every Item of
-----
Equipment, all rents theretofore due and payable have been paid in full and
Lessee having performed all of its other obligations hereunder, the Lessee shall
have the option to purchase such Item of the Equipment on "AS-IS", "WHERE-IS"
and "WITH ALL FAULTS" basis without warranty by Lessor, for ONE DOLLAR ($1.00).
In connection with any sale of any such Item of Equipment and the bill of sale
corresponding thereto shall expressly state, that such Item of Equipment is sold
"as-is", "where-is" and "with all faults", and Lessor shall make no express or
implied warranties of any kind, including those of merchantability, durability,
condition, and fitness for a particular purpose or use and the bill of sale
shall expressly disclaim the same. Upon this purchase, the Lessor will duly
execute and deliver to the Lessee all documents necessary and proper to effect
transfer of ownership of such Item of Equipment to the Lessee, free and clear of
all encumbrances, security interest, and liens (other than encumbrances,
security interests, or liens suffered or permitted by the Lessee to become
effective thereon), upon payment by the Lessee of the purchase price and
thereupon this Lease shall terminate as to such Equipment, and no further rents
shall become due in respect to such Item of Equipment so purchased by Lessee.
<PAGE>
Telco Development Group, Inc. Equipment Lease
Page 8
ARTICLE 14 - RETURN OF EQUIPMENT
14.01 Upon termination of this Lease with respect to any Item of
-----
Equipment, the Lessee shall return such Item of Equipment to such location in
the continental United States as the Lessor shall specify, unless the Lessee
shall have purchased such Item of Equipment and shall have paid all amounts due
in connection therewith as provided herein. Upon such return, such Item of
Equipment shall be in good order and condition, ordinary wear and tear expected,
shall be certified for manufacturer's maintenance and shall be free and clear of
all liens and encumbrances. Notwithstanding any other provision contained
herein, until such Item of Equipment is placed on board the carrier destined for
the location specified by the Lessor all of the provisions of this Lease with
respect thereto shall continue in full force and effect. The Lessee shall pay
all costs and expenses in connection with or incidental to the return of each
Item of Equipment, including, without limitation, the cost of removing,
assembling, packing, insuring, and transporting the same.
ARTICLE 15 - LESSEE'S REPRESENTATIONS AND WARRANTIES
15.01 The Lessee represents and warrants to and agrees with Lessor that:
-----
(1) the Lessee is and (except as expressly permitted hereinbelow) shall continue
to be a corporation duly organized and validly existing in good standing under
the laws of the state of its incorporation, is duly qualified and in good
standing in all other jurisdictions in which Equipment may be located, and is
not exempt from United States income taxation; (2) the Lessee's execution,
delivery, and performance of this Lease, each Schedule, and the other documents
herein contemplated have been (or if the same should be not yet executed and
delivered, at the time of such execution and delivery, will have been) duly
authorized by all necessary corporation action, will not result in any breach,
default or violation of or under the Lessee's certificate of incorporation or
bylaws or any agreement, order, or law by which the Lessee is or may be bound or
its property is or may be affected; (3) this Lease as well as each Schedule and
the other documents contemplated herein constitute (or if the same should be not
yet executed and delivered, at the time of such execution and delivery, will
constitute) the legal valid, and binding obligations of the Lessee enforceable
against the Lessee in accordance with their respective terms; (4) all financial
statements and other information heretofore furnished by the Lessee and the
Lessor were when so furnished (or if the same shall be furnished hereafter, when
so furnished shall be) true and complete; and (5) upon any consolidation or
merger of the Lessee with or into any other corporation(s) or upon any sale or
conveyance of substantially all of the property of the Lessee to any other
person or entity, the Lessee will cause the due and punctual performance and
observance of all covenants and obligations of the Lessee hereunder to be
assumed by the surviving corporation or by the person or entity which shall have
acquired such property. The foregoing representations, warranties, and
agreements shall remain in effect throughout the term of this Lease.
ARTICLE 16 - GENERAL PROVISIONS
16.01 Lessor's Expenses. In the event of litigation by either party against the
other to enforce its rights hereunder, the prevailing party shall be entitled to
all reasonable costs and expenses including reasonable attorney's fees.
<PAGE>
Telco Development Group, Inc. Equipment Lease
Page 9
16.02 Information. Lessee agrees to furnish to the Lessor: (i) copies of
-----------------
annual financial statements, including a copy of the balance sheet and profit
and loss statement of the Lessee certified to by an authorized financial of
officer of the Lessee; and (ii) such additional information as the Lessor or any
assignee may reasonably request concerning the Lease in order to enable the
Lessor or assignee to determine whether the covenants, terms, and provisions of
the Lease have been complied with by the Lessee.
16.03 Concurrent Remedies. No right or remedy herein conferred on or
-------------------------
reserved to the Lessor is exclusive of any right or remedy herein or by law
or equity provided or permitted; but each shall be cumulative of every
other right or remedy given hereunder or now or hereafter existing at law
or in equity or by statute or otherwise, any may be enforced concurrently
therewith or from time to time.
16.04 Nonwaiver. No covenant or condition of this Lease may be waived
---------------
except by the written consent of the Lessor. Forbearance or indulgence by the
Lessor in any regard whatsoever shall not constitute a waiver of the covenant or
condition to be performed by the Lessee to which the same may apply, and, until
complete performance by the Lessee of any covenant or condition, the Lessor
shall be entitled to invoke any remedy available to the Lessor under this Lease
or by law or in equity despite any forbearance or indulgence.
16.05 Entire Agreement. This Lease constitutes the entire agreement
----------------------
between the Lessor and the Lessee and supersedes any prior understanding or
written or oral agreements between the parties respecting the within subject
matter. It shall not be amended, altered, or changed except by a written
agreement signed by the parties hereto.
16.06 Notices. Service of all notices under this Lease shall be
-------------
sufficient if given personally or mailed to the party involved at its respective
address hereinabove set forth, or at such address as such part may provide in
writing from time to time. Any such notice mailed to such address shall be
effective when deposited in the United States mail, duly addressed, and with
postage prepaid.
16.07 Time. Time is of the essence with reference to payment in this
----------
Lease, and in each and all of its provisions.
16.08 Parties Bound. This Lease shall be binding upon and inure to the
-------------------
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where permitted
by this Lease. As used herein, the term "Lessor" shall include all assignees of
the Lessor.
16.09 Legal Construction. If any one or more of the provisions contained
------------------------
in this Lease shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality,or unenforceability
shall not affect any other provision hereof and this Lease shall be construed as
if such invalid, illegal, or unenforceable provision had never been contained
herein. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE
<PAGE>
Telco Development Group, Inc. Equipment Lease
Page 10
STATE OF TEXAS. Lessee hereby expressly and irrevocably agrees that Lessor may
bring any action or claim to enforce the provisions of this Lease in the State
of Texas, and the Lessee hereby irrevocably consents to personal jurisdiction in
the appropriate State of Texas or Federal District Court therein. Lessee hereby
further irrevocably consents to service of process in accordance with the
provisions of the laws of the State of Texas.
16.10 Power of Attorney. The Lessee hereby irrevocably constitutes and
-----------------------
appoints to Lessor and any officer of agent thereof, with full power of
substitution and resubstitution, as its true and lawful Attorney-in-fact with
full irrevocable power and authority in the place and stead of the
Lessee and in the name of Lessee or in its own name, from time to time in
the Lessor's discretion, for the purpose of carrying out the terms of this
Lease, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish
the purposes of this Lease. The powers conferred on the Lessor under this
paragraph are solely to protect its interest in the Equipment or any Item
of Equipment and shall not impose any duty upon and to exercise any such
powers. The Lessor shall be accountable only for its acts and for amounts
that it actually receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees, or agents shall
be responsible to the Lessee for any act or failure to act.
16.11 Further Assurances. The Lessee will, at its own expense, promptly
------------------------
and duly execute and deliver to the Lessor such further documents and assurances
and take such further action as the Lessor may from time to time request in
order to more effectively carry out the intent and purpose of this Lease and to
establish and protect the rights, interests, and remedies created or intended to
be created in favor of the Lessor hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X /s/ Timothy E. Montgomery
------------------------------- ---------------------------
By: Donald A. Burns By: Timothy E. Montgomery
------------------------------- ---------------------------
Its: President Its: Director
------------------------------- ---------------------------
<PAGE>
SCHEDULE B
This Schedule B is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION, as
Lessor; and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
------------
hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
One (1) Refurbished DSC DEX 600SX Switching System wired and equipped with
7,680 digital ports, One (1) Refurbished Signaling Point (SP) Subsystem plus
peripheral equipment and software licenses as listed on Lessee's Purchase Order
Number 031894.01 dated March 18, 1994.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $1,580,000.00
Less: 20% Down Payment $ 316,000.00
-------------
Net Manufacturer's Invoice Cost: $1,264,000.00
Periodic Lease Payment (Monthly Rent): $ 26,634.3l
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: October 1, 1994, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: September 1, 1999.
Lease Expiration Date: The Lease Expiration Date shall be September 30, 1999.
<PAGE>
TELCO COMMUNICATIONS GROUP, INC. SCHEDULE B
PV = $1,264,000.00 PMT = $26,634.31 10 1 94 START DATE
INT = 10.00%
N = 60
<TABLE>
<CAPTION>
PAYMENT DATE
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 10 1 94 $0.00 $26,634.31 $1,237,365.69
2 11 1 94 $10,311.38 $16,322.93 $1,221,042.76
3 12 1 94 $10,175.35 $16,458.96 $1,204,583.80
4 1 1 95 $10,038.20 $16,596.11 $1,187,987.69
5 2 1 95 $9,899.89 $16,734.42 $1,171,253.27
6 3 1 95 $9,760.44 $16,873.87 $1,154,379.40
7 4 1 95 $9,619.83 $17,014.48 $1,137,364.92
8 5 1 95 $9,478.04 $17,156.27 $1,120,208.64
9 5 1 95 $9,335.07 $17,299.24 $1,102,909.40
10 7 1 95 $9,190.91 $17,443.40 $1,085,466.00
11 8 1 95 $9,045.55 $17,588.76 $1,067,377.24
12 9 1 95 $8,898.97 $17,735.34 $1,050,141.90
----------------------------------
$105,753.62 $213,858.10
13 10 1 95 $8,751.18 $17,883.13 $1,032,258.77
14 11 1 95 $8,602.15 $18,032.16 $1,014,226.62
15 12 1 95 $8,451.89 $18,182.42 $996,044.19
16 1 1 96 $8,300.37 $18,333.94 $977,710.25
17 2 1 96 $8,147.58 $18,486.73 $959,223.52
18 3 1 96 $7,993.53 $18,640.78 $940,582.74
19 4 1 96 $7,838.19 $18,796.12 $921,786.61
20 5 1 96 $7,681.55 $18,952.76 $902,833.86
21 6 1 96 $7,523.61 $19,110.70 $883,723.16
22 7 1 96 $7,364.36 $19,269.95 $864,453.21
23 8 1 96 $7,203.77 $19,430.54 $845,022.67
24 9 1 96 $7,041.85 $19,592.46 $825,430.21
----------------------------------
$94,900.03 $224,711.69
25 10 1 96 $6,878.58 $19,755.73 $805,674.49
26 11 1 96 $6,713.95 $19,920.36 $785,754.13
27 12 1 96 $6,547.95 $20,086.36 $765,667.77
28 1 1 97 $6,380.56 $20,253.75 $745,414.02
29 2 1 97 $6,211.78 $20,422.53 $724,991.49
30 3 1 97 $6,041.59 $20,592.72 $704,398.78
31 4 1 97 $5,869.99 $20,764.32 $683,634.45
32 5 1 97 $5,696.95 $20,937.36 $662,697.10
33 6 1 97 $5,522.47 $21,111.84 $641,585.26
34 7 1 97 $5,346.54 $21,287.77 $620,297.49
35 8 1 97 $5,169.14 $21,465.17 $598,832.23
36 9 1 97 $4,990.27 $21,644.04 $577,188.28
----------------------------------
$71,369.79 $248,241.93
37 10 1 97 $4,809.90 $21,824.41 $555,363.87
38 11 1 97 $4,628.03 $22,006.28 $533,357.60
39 12 1 97 $4,444.65 $22,189.66 $511,167.93
40 1 1 98 $4,259.73 $22,374.58 $488,793.35
41 2 1 98 $4,073.28 $22,561.03 $466,232.32
42 3 1 98 $3,885.27 $22,749.04 $443,483.28
43 4 1 98 $3,695.69 $22,938.62 $420,544.66
44 5 1 98 $3,504.54 $23,129.77 $397,414.89
45 6 1 98 $3,311.79 $23,322.52 $374,092.37
46 7 1 98 $3,117.44 $23,516.87 $350,575.49
47 8 1 98 $2,921.46 $23,712.85 $326,862.64
48 9 1 98 $2,723.85 $23,910.46 $302,952.19
----------------------------------
$45,375.62 $274,236.10
49 10 1 98 $2,524.60 $24,109.71 $278,842.48
50 11 1 98 $2,323.69 $24,310.62 $254,531.86
51 12 1 98 $2,121.10 $24,513.21 $230,018.64
52 1 1 99 $1,916.82 $24,717.49 $205,301.16
53 2 1 99 $1,710.84 $24,923.47 $180,377.69
54 3 1 99 $1,503.15 $25,131.16 $155,246.52
55 4 1 99 $1,293.72 $25,340.59 $129,905.94
56 5 1 99 $1,082.55 $25,551.76 $104,354.17
57 6 1 99 $869.62 $25,764.69 $78,589.48
58 7 1 99 $654.91 $25,979.40 $52,610.08
59 8 1 99 $438.42 $26,195.89 $26,414.19
60 9 1 99 $220.12 $26,414.19 ($0.00)
----------------------------------
$16,659.53 $302,952.19
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
----------------------------------
$0.00 $0.00
GRAND TOTALS $334,058.60 $1,264,000.00
</TABLE>
<PAGE>
SCHEDULE C
This Schedule C is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION, as
Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
-------------
hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
One (1) Refurbished DSC DEX 600SX Switching System wired and equipped with
7,680 digital ports, One (1) Refurbished Signaling Point (SP) Subsystem plus
peripheral equipment and software licenses as listed on Lessee's Purchase Order
Number 062094.10 dated June 20, 1994, and One (1) Refurbished Second Matrix (DSC
DEX 600SX to DSC DEX 600U Upgrade) plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 092294.00 dated September
22, 1994.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
------------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
<TABLE>
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $l,685,000.00
Less: 20% Down Payment $ 337,000.00
-------------
Net Manufacturer's Invoice Cost: $1,348,000.00
Periodic Lease Payment (Monthly Rent): $28,404.31
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: December 1, 1994, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
<PAGE>
SCHEDULE C-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE C
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, _____________ a duly authorized inspector and authorized representative of
TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby certify that I have
accepted delivery on behalf of the Lessee pursuant to the Equipment Lease dated
as of January 1, 1994, between Lessor and Lessee, the Equipment described in
Schedule C attached to such Equipment Lease. Such Equipment is described as
follows:
Items of Equipment
------------------
One (1) Refurbished DSC DEX 600SX Switching System wired and equipped with 7,680
digital ports, One (1) Refurbished Signaling Point (SP) Subsystem plus
peripheral equipment and software licenses as Listed on Lessee's Purchase Order
Number 062094.10 dated June 20, 1994, and One (1) Refurbished Second Matrix
(DSC DEX 600SX to DSC DEX 600U Upgrade) plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 092294.00 dated September
22, 1994.
- INSTALLATION SITE (Address): 702 Colorado Street
Suite 500-3
Austin, TX 78701
- PLACE ACCEPTED (Address): Same
- DATE ACCEPTED: ______________________________
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
________________________ ______________________________
Date Inspector and Authorized
Representative of Lessee
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
The equipment (the "Equipment") leased by Telco Communications Group, Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
702 Colorado Street
Suite 500-3
Austin, TX 78701
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title
purposes by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE:
TELCO COMMUNICATIONS GROUP, INC. __________________________________
X ____________________ X ___________________________
By: ____________________ By: ___________________________
Title: ____________________ Title: ___________________________
Date: ____________________ Date: ___________________________
MORTGAGEE OF REAL ESTATE:
___________________________
X _______________________
By: ______________________
Title: ___________________
Date: ___________________
<PAGE>
EXHIBIT A
Items of Equipment
------------------
One (1) Refurbished DSC DEX 600SX Switching System wired and equipped with 7,680
digital ports, One (1) Refurbished Signaling Point (SP) Subsystem plus
peripheral equipment and software licenses as listed on Lessee's Purchase Order
Number 062094.10 dated June 20, 1994, and One (1) Refurbished Second Matrix
(DSC DEX 600SX to DSC DEX 600U Upgrade) plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 092294.00 dated September
22, 1994.
- INSTALLATION SITE (Address): 702 Colorado Street
Suite 500-3
Austin TX 78701
<PAGE>
SCHEDULE B
This Schedule B is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION, as
Lesssor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
--------------
hereby leases and hires from Lessor, the Items of Equipment described below:
Items of Equipment
------------------
One (1) Refurbished DSC DEX 600SX Switching System wired and equipped with
7,680 digital ports, One (1) Refurbished Signaling Point (SP) Subsystem plus
peripheral equipment and software licenses as listed on Lessee's Purchase Order
Number 031894.01 dated March 18, 1994.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-------------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate 10.00%
Manufacturer's Invoice Cost: $1,580,000.00
Less:20% Down Payment $ 316,000.00
-------------
Net Manufacturer's Invoice Cost $1,264,000.00
Periodic Lease Payment (Monthly Rent) $26,634.31
Relevent Dates
--------------
First Periodic Rent Payment Date: October 1, 1994, in advance.
Periodic Rent Payment Date: The first day of each month consecutively
following the First Periodic Rent Payment Date
Last Periodic Rent Payment Date: September 1, 1999.
Lease Expiration Date: The Lease Expiration Date shall be September 30,
1999.
<PAGE>
TELCO COMMUNICATIONS GROUP, INC. - SCHEDULE B
PV = $1,264,000.00 PMT = $26,634.31 10 1 94 START DATE
INT = 10.00%
N = 60
<TABLE>
<CAPTION>
PAYMENT DATE
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 10 1 94 $0.00 $26,634.31 $1,237,365.69
2 11 1 94 $10,311.38 $16,322.93 $1,221,042.76
3 12 1 94 $10,175.35 $16,458.96 $1,204,583.80
4 1 1 95 $10,038.20 $16,596.11 $1,187,987.69
5 2 1 95 $9,899.89 $16,734.42 $1,171,253.27
6 3 1 95 $9,760.44 $16,873.87 $1,154,379.40
7 4 1 95 $9,619.83 $17,014.48 $1,137,364.92
8 5 1 95 $9,478.04 $17,156.27 $1,120,208.64
9 6 1 95 $9,335.07 $17,299.24 $1,102,909.40
10 7 1 95 $9,190.91 $17,443.40 $1,085,466.00
11 8 1 95 $9,045.55 $17,588.76 $1,067,877.24
12 9 1 95 $8,898.97 $17,735.34 $1,050,141.90
----------------------------------
$105,753.62 $213,858.10
13 10 1 95 $8,751.18 $17,883.13 $1,032,258.77
14 11 1 95 $8,602.15 $18,032.16 $1,014,226.62
15 12 1 95 $8,451.89 $18,182.42 $996,044.19
16 1 1 96 $8,300.37 $18,333.94 $977,710.25
17 2 1 96 $8,147.58 $18,486.73 $959,223.52
18 3 1 96 $7,993.53 $18,640.78 $940,582.74
19 4 1 96 $7,838.19 $18,796.12 $921,786.61
20 5 1 96 $7,681.55 $18,952.76 $902,833.86
21 6 1 96 $7,523.61 $19,110.70 $883,723.16
22 7 1 96 $7,364.36 $19,269.95 $864,453.21
23 8 1 96 $7,203.77 $19,430.54 $845,022.67
24 9 1 96 $7,041.85 $19,592.46 $825,430.21
----------------------------------
$94,990.03 $224,711.69
25 10 1 96 $6,878.58 $19,755.73 $805,674.49
26 11 1 96 $6,713.95 $19,920.36 $785,754.13
27 12 1 96 $6,547.95 $20,086.36 $765,667.77
28 1 1 97 $6,380.56 $20,253.75 $745,414.02
29 2 1 97 $6,211.78 $20,422.53 $724,991.49
30 3 1 97 $6,041.59 $20,592.72 $704,398.78
31 4 1 97 $5,869.99 $20,764.32 $683,634.45
32 5 1 97 $5,696.95 $20,937.36 $662,697.10
33 6 1 97 $5,522.47 $21,111.84 $641,585.26
34 7 1 97 $5,346.54 $21,287.77 $620,297.49
35 8 1 97 $5,169.14 $21,465.17 $598,832.33
36 9 1 97 $4,990.27 $21,644.04 $577,188.28
----------------------------------
$71,369.79 $248,241.93
</TABLE>
<TABLE>
<CAPTION>
PAYMENT DATE
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 10 1 97 $4,809.90 $21,824.41 $555,363.87
38 11 1 97 $4,628.03 $22,006.28 $533,357.60
39 12 1 97 $4,444.65 $22,189.66 $511,167.93
40 1 1 98 $4,259.73 $22,374.58 $488,793.35
41 2 1 98 $4,073.28 $22,561.03 $466,232.32
42 3 1 98 $3,885.27 $22,749.04 $443,483.28
43 4 1 98 $3,695.69 $22,938.62 $420,544.66
44 5 1 98 $3,504.54 $23,129.77 $397,414.89
45 6 1 98 $3,311.79 $23,322.52 $374,092.37
46 7 1 98 $3,117.44 $23,516.87 $350,575.49
47 8 1 98 $2,921.46 $23,712.85 $326,862.64
48 9 1 98 $2,723.85 $23,910.46 $302,952.19
----------------------------------
$45,375.62 $274,236.10
49 10 1 98 $2,524.60 $24,109.71 $278,842.48
50 11 1 98 $2,323.69 $24,310.62 $254,531.86
51 12 1 98 $2,121.10 $24,513.21 $230,018.64
52 1 1 99 $1,916.82 $24,717.49 $205,301.16
53 2 1 99 $1,710.84 $24,923.47 $180,377.69
54 3 1 99 $1,503.15 $25,131.16 $155,246.52
55 4 1 99 $1,293.72 $25,340.59 $129,905.94
56 5 1 99 $1,082.55 $25,551.76 $104,354.17
57 6 1 99 $869.62 $25,764.69 $78,589.48
58 7 1 99 $654.91 $25,979.40 $52,610.08
59 8 1 99 $438.42 $26,195.89 $26,414.19
60 9 1 99 $220.12 $26,414.19 ($0.00)
----------------------------------
$16,659.53 $302,952.19
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
----------------------------------
$0.00 $0.00
GRAND TOTALS $334,058.60 $1,264,000.00
==================================
</TABLE>
<PAGE>
SCHEDULE C
This Schedule C is attached to and made a part of the Equipment Lease
(the "Lease") dated the 1st day of January, 1994, between DSC FINANCE
CORPORATION, as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and
-------------
Lessee hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
One (1) Refurbished DSC DEX 600SX Switching System wired and equipped
with 7,680 digital ports, One (1) Refurbished Signaling Point (SP) Subsystem
plus peripheral equipment and software licenses as listed on Lessee's Purchase
Order Number 062094.10 dated June 20, 1994, and One (1) Refurbished Second
Matrix (DSC DEX 600SX to DSC DEX 600U Upgrade) plus peripheral equipment and
software licenses as listed on Lessee's Purchase Order Number 092294.00 dated
September 22, 1994.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
------------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $1,685,000.00
Less: 20% Down Payment $ 337,000.00
-------------
Net Manufacturer's Invoice Cost: $1,348,000.00
Periodic Lease Payment (Monthly Rent): $28,404.31
Relevant Dates
--------------
First Periodic Rent Payment Date: December 1, 1994, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
<PAGE>
SCHEDULE C-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE C
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, ____________________________ a duly authorized inspector and authorized
representative of TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby
certify that I have accepted delivery on behalf of the Lessee pursuant to the
Equipment Lease dated as of January 1, 1994, between Lessor and Lessee, the
Equipment described in Schedule C attached to such Equipment Lease. Such
Equipment is described as follows:
Items of Equipment
------------------
One (1) Refurbished DSC DEX 600SX Switching System wired and equipped with 7,680
digital ports, One (1) Refurbished Signaling Point (SP) Subsystem plus
peripheral equipment and software licenses as listed on Lessee's Purchase Order
Number 062094.10 dated June 20, 1994, and One (1) Refurbished Second Matrix (DSC
DEX 600SX to DSC DEX 600U Upgrade) plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 092294.00 dated September
22, 1994.
-INSTALLATION SITE (Address): 702 Colorado Street
Suite 500-3
Austin, TX 78701
-PLACE ACCEPTED (Address): Same
-DATE ACCEPTED:
-------------------------------
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
---------------------- -----------------------------
Date Inspector and Authorized
Representative of Lessee
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco COmmunications Group, Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
702 Colorado Street
Suite 500-3
Austin, TX 78701
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE:
TELCO COMMUNICATIONS GROUP, INC. ______________________________
X _________________________ X _______________________
By: _________________________ By: _______________________
Title: _________________________ Title: _______________________
Date: _________________________ Date: _______________________
MORTGAGEE OF REAL ESTATE:
________________________________
X _________________________
By: _________________________
Title: _________________________
Date: _________________________
<PAGE>
EXHIBIT A
Items of Equipment
------------------
One (1) Refurbished DSC DEX 600SX Switching System wired and equipped with 7,680
digital ports, One (1) Refurbished Signaling Point (SP) Subsystem plus
peripheral equipment and software licenses as listed on Lessee's Purchase Order
Number 062094.10 dated June 20, 1994, and One (1) Refurbished Second Matrix (DSC
DEX 600SX to DSC DEX 600U Upgrade) plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 092294.00 dated September
22, 1994.
-INSTALLATION SITE (Address): 702 Colorado Street
Suite 500-3
Austin, TX 78701
<PAGE>
SCHEDULE D
This Schedule D is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1 st day of January, 1994, between DSC FINANCE CORPORATION,
as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
------------
hereby leases and hires From Lessor, the Items of Equipment described below:
Items of Equipment
------------------
One (1) DSC DEX 600 -30 Hardware Upgrade and Software RTU plus peripheral
equipment and software licenses as listed on Lessee's Purchase Order Number
031894.01 dated March 18, 1994.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacture Invoice Cost of such
equipment, as set forth below; the first of which monthly rent payments shall
be due and payable on the First Periodic Rent Payment Date, as set forth below,
and continuously thereafter such monthly rent payments shall be due and payable
on each Periodic Rent Payment Date, as set forth below, until the Last Periodic
Rent Payment Date, as set forth below. The Lease Expiration Date shall be as set
forth below.
Lease Rate Factor and Related Information
-----------------------------------------
<TABLE>
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $l61,000.00
Less: 20% Down Payment $ 32,200.00
-----------
Net Manufacturer's Invoice Cost: $l28,800.00
Periodic Lease Payment (Monthly Rent): $2,714.00
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: February l, 1995, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: January l, 2000.
Lease Expiration Date: The Lease Expiration Date shall be January 31, 2000.
<PAGE>
3 Stipulated Lose Value. At any date, the Stipulated Loss Value of each
-----------------------
Item of Equipment shall be defined as one hundred percent (l00%) of the
present value (as the term is used in financial calculations) of the remaining
monthly lease rental payments as to such Item of Equipment on the last Periodic
Lease Payment Date on which rent was paid calculated at a rate of ten percent
(10.0%) per annum. Any dispute over mechanics of calculation of present value
shall be resolved by use of the present value functions of a Hewlett-Packard HP-
17BII calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment by
-------------
the execution and delivery to the Lessor of a Certificate of Acceptance in the
form of Schedule D-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed, on this 16 day of December, 1994.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X /s/ Timothy E. Montgomery
--------------------------- ---------------------------
By: Donald A. Burns By: Timothy E. Montgomery
--------------------------- ---------------------------
Its: President Its: Senior Director
--------------------------- ---------------------------
<PAGE>
SCHEDULE D-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE D
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75015
I, Donald A. Burns duly authorized inspector and authorized representative of
---------------
TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby certify that I
have accepted delivery on behalf of the Lessee pursuant to the Equipment Lease
dated as of January 1, 1994, between Lessor and Lessee, the Equipment described
in Schedule D attached to such Equipment Lease. Such Equipment is described as
follows:
Items of Equipment
------------------
One (1) DSC DEX 600 -30 Hardware Upgrade and Software RTU plus peripheral
equipment and software licenses as listed on Lessee's Purchase Order Number
031894.01 dated March 18, 1994
- INSTALLATION SITE (Address): 1522 N.W. 23rd Avenue
Fort Lauderdale, FL 33311
- PLACE ACCEPTED (Address): Same
- DATE ACCEPTED: January 1, 1995
----------------------------
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
ally thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
/s/ Donald A. Burns
-------------------------------- ----------------------------
Date Inspector and Authorized
Representative of Lessee
<PAGE>
SCHEDULE E
This Schedule E is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION, as
Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
-------------
hereby leases and hires from Lessor, the Items of Equipment described below:
Items of Equipment
------------------
One (1) Refurbished Digital Trunk Frame (DTF) wired and equipped with 1,536
digital parts plus peripheral equipment and software liceses as listed on
Lessee's Purchase Order Number 062094.20 dated June 20, 1994, and One (1)
Refurbished Second Matrix (DSC DEX 600SX to DSC DEX 600U Upgrade) plus
peripheral equipment and software licenses as listed on Lessee's Purchase Order
Number 092294.00 dated September 22, 1994.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forh below.
Lease Rate Factor and Related Information
-----------------------------------------
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost $365,000.00
Less 20% Down Payment $ 73,000.00
-----------
Net Manufacturer's Invoice Cost: $292,000.00
Periodic Lease Payment (Monthly Rent) $6,152.86
Relevant Dates
--------------
First Periodic Rent Payment Date February 1, 1995 in advance.
Periodic Rent Payment Date The first day of each month consecutively following
the First Periodic Rent Payment Date
Last Periodic Rent Payment Date January 1, 2000
<PAGE>
TELCO COMMUNICATIONS GROUP, INC. SCHEDULE E
PV = $292,000.00 PMT = $6,152.86 2 1 95 START DATE
INT = 10.00%
N = 60
<TABLE>
<CAPTION>
PAYMENT DATE
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 2 1 95 $0.00 $6,152.86 $285,847.14
2 3 1 95 $2,382.05 $3,770.81 $282,076.33
3 4 1 95 $2,350.63 $3,802.23 $278,274.10
4 5 1 95 $2,318.95 $3,833.91 $274,440.19
5 6 1 95 $2,287.00 $3,865.86 $270,574.33
6 7 1 95 $2,254.78 $3,898.08 $266,676.25
7 8 1 95 $2,222.30 $3,930.56 $262,745.68
8 9 1 95 $2,189.54 $3,963.32 $258,782.37
9 10 1 95 $2,156.51 $3,996.35 $254,786.02
10 11 1 95 $2,123.21 $4,029.65 $250,756.37
11 12 1 95 $2,089.63 $4,065.23 $246,693.14
12 1 1 96 $2,055.77 $4,097.09 $242,596.06
----------------------------------
$24,430.38 $49,403.94
13 2 1 96 $2,021.63 $4,131.23 $238,464.83
14 3 1 96 $1,987.20 $4,165.66 $234,299.17
15 4 1 96 $1,932.49 $4,200.37 $230,098.80
16 5 1 96 $1,917.49 $4,235.37 $225,863.42
17 6 1 96 $1,882.19 $4,270.67 $221,592.75
18 7 1 96 $1,846.60 $4,306.26 $217,286.49
19 8 1 96 $1,810.72 $4,342.14 $212,944.35
20 9 1 96 $1,774.53 $4,378.33 $208,566.02
21 10 1 96 $1,738.05 $4,414.81 $204,151.21
22 11 1 96 $1,701.26 $4,451.60 $199,099.61
23 12 1 96 $1,664.16 $4,488.70 $195,210.90
24 1 1 97 $1,626.75 $4,526.11 $190,684.80
----------------------------------
$23,923.06 $51,911.26
25 2 1 97 $1,589.04 $4,563.82 $186,120.97
26 3 1 97 $1,551.00 $4,601.86 $181,519.12
27 4 1 97 $1,512.66 $4,640.20 $176,878.92
28 5 1 97 $1,473.99 $4,678.87 $172,200.04
29 6 1 97 $1,435.00 $4,717.86 $167,482.18
30 7 1 97 $1,395.68 $4,737.18 $162,725.00
31 8 1 97 $1,354.04 $4,796.82 $157,928.18
32 9 1 97 $1,316.07 $4,836.79 $153,091.39
33 10 1 97 $1,275.76 $4,877.10 $148,214.28
34 11 1 97 $1,235.12 $4,917.74 $143,296.54
35 12 1 97 $1,194.14 $4,958.72 $138,337.81
36 1 1 98 $1,152.81 $5,000.05 $133,337.77
----------------------------------
$18,487.29 $57,347.03
37 2 1 98 $1,111.15 $5,041.71 $128,296.05
38 3 1 98 $1,069.13 $5,083.73 $123,212.32
39 4 1 98 $1,026.77 $5,126.09 $118,086.23
40 5 1 98 $984.05 $5,168.81 $112,917.42
41 6 1 98 $940.98 $5,211.88 $107,705.54
42 7 1 98 $897.54 $5,255.32 $102,450.22
43 8 1 98 $853.75 $5,299.11 $97,151.11
44 9 1 98 $809.59 $5,343.27 $91,807.84
45 10 1 98 $765.06 $5,387.80 $86,420.05
46 11 1 98 $720.17 $5,432.69 $80,987.35
47 12 1 98 $674.89 $5,477.97 $75,509.38
48 1 1 99 $629.24 $5,523.62 $49,985.77
----------------------------------
$10,482.32 $63,352.00
49 2 1 99 $583.21 $5,569.63 $64,416.12
50 3 1 99 $536.80 $5,616.06 $58,800.06
51 4 1 99 $490.00 $5,662.86 $53,137.20
52 5 1 99 $442.81 $5,710.05 $47,427.15
53 6 1 99 $395.23 $5,757.43 $41,649.51
54 7 1 99 $347.25 $5,805.61 $35,863.90
55 8 1 99 $298.87 $5,853.99 $30,009.90
56 9 1 99 $250.08 $5,902.78 $24,107.13
57 10 1 99 $200.89 $5,951.97 $18,158.16
58 11 1 99 $151.29 $6,001.57 $12,153.59
59 12 1 99 $101.28 $6,051.58 $6,102.01
60 1 1 100 $50.85 $6,102.01 ($0.00)
----------------------------------
$3,848.35 $49,985.77
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
----------------------------------
$0.00 $0.00
GRAND TOTALS $77,171.60 $292,000.00
==================================
</TABLE>
<PAGE>
This Schedule F is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE
CORPORATION, as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and
------------
Lessee hereby leases and hires from Lessor, the Items of Equipment
described below:
Items of Equipment
------------------
Two (2) Refurbished Digital Trunk Frames (DTFS) wired and equipped with
3,072 digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 031894.01 dated March 18, 1994.
2. Lease Payments, the Lessee agrees to pay the Lessor monthly rent,
-----------------
in advance and otherwise in accordance with the Lease and as this schedule, for
the Items of Equipment described above, an amount equal to the Periodic Lease
Rate Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost
of such equipment, as set forth below, the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
<TABLE>
<CAPTION>
Lease Rate Factor and Related Information
-----------------------------------------
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $480,000.00
Less 20% Down Payment $ 96,000.00
-----------
Net Manufacturers Invoice Cost: $384,000.00
Periodic Lease Payment (Monthly Rent): $8,091.00
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: March 1, 1995, in advance.
Periodic Rent Payment Date The first day of each month consecutively
following the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: February 1, 2000.
Lease Expiration Date: The Lease Expiration Date shall be February 29, 2000.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the
present value (as the term is used in financial calculations) of the remaining
monthly lease rental payments as to such Item of Equipment on the last Periodic
Lease Payment Date on which rent was paid, calculated at a rate of ten percent
(10.0%) per annum. Any dispute over mechanics of calculation of present value
shall be resolved by use of the present value functions of a Hewlett-Packard HP-
17BII calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment
-------------
by the execution and delivery to the Lessor of a Certificate of Acceptance in
the form of Schedule F- l hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this
instrument to be duly executed, on this 16th day of December, 1994.
---- -------- -
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A Burns X /s/ Timothy E. Montgomery
------------------------------- -------------------------
By: Donald A. Burns By: Timothy E. Montgomery
------------------------------- -------------------------
Its: President Its: Senior Director
------------------------------- -------------------------
<PAGE>
SCHEDULE F-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE F
To: DSC Finance Corporation (the Lessor")
1000 Coit Road
Plano, Texas 75075
I, Donald A. Burns, a duly authorized inspector and authorized representative of
----------------
TELCO COMMUNICATIONS GROUP, INC., ("the Lessee"), do hereby, certify, that I
have accepted delivery on behalf of the Lessee pursuant to the Equipment Lease
dated as of January 1, 1994, between Lessor and Lessee, the Equipment described
in Schedule F attached to such Equipment Lease. Such Equipment is described as
follows:
Items of Equipment
------------------
Two (2) Refurbished Digital Trunk Frames (DTFs) wired and equipped with 3,072
digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 031894.01 dated March 18, 1994.
- INSTALLATION SITE (Address): Suite 500-3
702 Colorado street
Austin,TX 78701
- PLACE ACCEPTED (Address): Same
- DATE ACCEPTED: January 1, 1995
-------------------------
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the
manufacturer, distributor, or seller of such Equipment directly therewith and
will not set up any thereof against you, that its obligation to you is
absolute, and that you are neither the manufacturer, distributor, nor seller of
such Equipment and have no knowledge or familiarity with it.
/s/ Donald A. Burns
-------------------------- ----------------------------
Date Inspector and Authorized
Representative of Lessee
<PAGE>
TENANT:
TELCO COMMUNICATIONS GROUP, INC.
By: /s/ Bryan Rachlin
-------------------------------
Bryan Rachlin
General Counsel
3
<PAGE>
SCHEDULE G
This Schedule G is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION,
as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and
------------
Lessee hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
Eight (8) Refurbished Digital Trunk Frames (DTFS) each wired and
equipped with 1,536 digital ports plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 092294.00 dated September
22, 1994.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
------------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $1,600,000.00
Less: 20% Down Payment 320,000.00
---------------
Net Manufacturer's Invoice Cost: $l,280,000.00
Periodic Lease Payment (Monthly Rent): $26,971.46
</TABLE>
Relevant Dates
--------------
.
First Periodic Rent Payment Date: June 1, 1995, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: May 1, 2000.
<PAGE>
Lease Expiration Date: The Lease Expiration Date shall be May 31, 2000.
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of
--------------------------
each Item of Equipment shall be defined as one hundred percent (100%) of the
present value (as the term is used in financial calculations) of the remaining
monthly lease rental payments as to such Item of Equipment on the last Periodic
Lease Payment Date on which rent was paid, calculated at a rate of ten percent
(10.0%) per annum. Any dispute over mechanics of calculation of present value
shall be resolved by use of the present value functions of a Hewlett-Packard
HP-17BII calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment
-------------
by the execution and delivery to the Lessor of a Certificate of Acceptance in
the form of Schedule G- l hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed, on this 14th day of March, 1995.
---- ----- -
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A Burns X
------------------------------- -------------------------
By: Donald A. Burns By:
------------------------------- -------------------------
Its: President Its:
------------------------------- -------------------------
<PAGE>
<TABLE>
<CAPTION>
PMT DATE ,
--------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 6 1 1995 $0.00 $26,971.46 $1,253,028.54
2 7 1 1995 $10,441.91 $16,529.55 $1,236,498.99
3 8 1 1995 $10,304.17 $16,667.29 $1,219,831.70
4 9 1 1995 $10,165.27 $16,806.19 $1,203,025.51
5 10 1 1995 $10,025.22 $16,946.24 $1,186,079.27
6 11 1 1995 $9,884.00 $17,087,46 $1,168,991.81
7 12 1 1995 $9,741.61 $17,229.85 $1,151,761.96
8 1 1 1996 $9,598.02 $17,373.44 $1,134,388.53
9 2 1 1996 $9,432.25 $17,518.21 $1,116,870.31
10 3 1 1996 $9,307.26 $17,664.20 $1,099,206.11
11 4 1 1996 $9,160.06 $17,811.40 $1,081,394.71
12 5 1 1996 $9,011.63 $17,959.83 $1,063,434.88
-------------------------------
$107,092.40 $216,565.12
13 6 1 1996 $8,861.96 $18,109.50 $1,045,325.38
14 7 1 1996 $8,711.05 $18,260.41 $1,027,064.98
15 8 1 1996 $8,558.88 $18,412.58 $1,008,652.40
16 9 1 1996 $8,405.44 $18,566.02 $990,086.38
17 10 1 1996 $8,250.73 $18,720,73 $971,365.65
18 11 1 1996 $8,094.72 $18,876.74 $952,488.91
19 12 1 1996 $7,937.41 $19,034.05 $933,454.86
20 1 1 1997 $7,778.80 $19,192.66 $914,262.20
21 2 1 1997 $7,618.86 $19,352.60 $894,909.60
22 3 1 1997 $7,457.59 $19,513.87 $875,395.72
23 4 1 1997 $7,294.97 $19,676.49 $855,719.23
24 5 1 1997 $7,131.00 $19,840.46 $835,878.77
-------------------------------
$96,101.41 $227,556.11
25 6 1 1997 $6,965.66 $20,005.80 $815,872.97
26 7 1 1997 $6,798.95 $20,172.51 $795,700.46
27 8 1 1997 $6,630.84 $20,340.62 $775,359.84
28 9 1 1997 $6,461.34 $20,510.12 $754,849.72
29 10 1 1997 $6,290.42 $20,681.04 $734,168.68
30 11 1 1997 $6,118.08 $20,853.38 $713,315.30
31 12 1 1997 $5,944.30 $21,027.16 $692,288.14
32 1 1 1998 $5,769.07 $21,202.39 $671,085.75
33 2 1 1998 $5,592.39 $21,379.07 $649,706.67
34 3 1 1998 $5,414.23 $21,557.23 $628,149.44
35 4 1 1998 $5,234.58 $21,736.88 $606,412.56
36 5 1 1998 $5,053.44 $21,918.02 $584,494.55
-------------------------------
$72,273.29 $251,384.23
<CAPTION>
PMT DATE ,
--------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 6 1 1998 $4,870.79 $22,100.67 $562,393.88
38 7 1 1998 $4,686.62 $22,284.84 $540,109.04
39 8 1 1998 $4,500.91 $22,470.55 $517,638.49
40 9 1 1998 $4,313.66 $22,657.80 $494,980.69
41 10 1 1998 $4,124.84 $22,846.62 $472,134.07
42 11 1 1998 $3,934.45 $23,037.01 $449,097.06
43 12 1 1998 $3,742.48 $23,228.98 $425,868.08
44 1 1 1999 $3,548.90 $23,422.56 $402,445.53
45 2 1 1999 $3,353.72 $23,617.74 $378,827.78
46 3 1 1999 $3,156.90 $23,814.56 $355,013.22
47 4 1 1999 $2,958.45 $24,013.01 $331,000.21
48 5 1 1999 $2,758.34 $24,213.12 $306,787.09
-------------------------------
$45,950.06 $277,707.46
49 6 1 1999 $2,556.56 $24,414.90 $282,372.19
50 7 1 1999 $2,353.10 $24,618.36 $257,753.83
51 8 1 1999 $2,147.95 $24,823.51 $232,930.32
52 9 1 1999 $1,941.09 $25,030.37 $207,899.95
53 10 1 1999 $1,732.50 $25,238.96 $182,660.99
54 11 1 1999 $1,522.18 $25,449.28 $157,211.71
55 12 1 1999 $1,310.10 $25,661.36 $131,550.34
56 1 1 2000 $1,096.25 $25,875.21 $105,675.14
57 2 1 2000 $880.63 $26,090.83 $79,584.30
58 3 1 2000 $663.20 $26,308.26 $53,276.05
59 4 1 2000 $443.97 $26,527.49 $26,748.56
60 5 1 2000 $222.90 $26,748.56 0.00
-------------------------------
$16,870.43 $306,787.09
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
-------------------------------
$0.00 $0.00
$338,287.60 $1,280,000.00
===============================
</TABLE>
<PAGE>
EXHIBIT A
Items of Equipment
------------------
Eight (8) Refurbished Digital Trunk Frames (DTFs) each wired and equipped with
1,536 digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 092294.00 dated September 22, 1994.
INSTALLATION SITE (Address): Suite 210
1220 L Street N.W.
Washington, DC 20005
<PAGE>
[LOGO OF DSC COMMUNICATIONS CORPORATION APPEARS HERE]
- --------------------------------------------------------------------------
March 8, 1995 VIA OVERNIGHT DELIVERY
----------------------
Mr. Donald A. Burns
President
Telco Communications Group, Inc.
4219 Lafayette Center Drive
Chantilly, VA 22021
Re: Equipment Lease dated January 1, 1994 by and between DSC Finance
Corporation and Telco Communications Group, Inc.
Don
DSC Finance Corporation ("DSC") and Telco Communications Group, Inc. ("TCG")
entered into agreements to finance TCG's purchase of DSC Communications
Corporation equipment including hardware, software licenses and services.
Please find enclosed the following documents, incorporating the above
referenced agreements, to complete the documentation process:
- Schedules G, G-1, H and H-1 to the Equipment Lease
- Certificate and Disclaimer of Record Owner and any Mortgagee of Real
Estate (Landlord Waiver) for the Equipment covered under each Schedule
Please have the documents executed by the appropriate parties and returned to my
attention as soon as possible. With regard to the Landlord Waivers, please
forward them to the appropriate parties for execution and return to my attention
at your earliest convenience.
If you have any questions or require any additional documentation, please
contact me at (214) 519-4293. Thank you in advance for your prompt attention to
this matter.
Sincerely,
/s/ Timothy E. Montgomery
Timothy E. Montgomery
Senior Director
enclosures
<PAGE>
SCHEDULE H
This Schedule H is attached to and made a part of the Equipment Lease
(the "Lease") dated the 1st day of January, 1994, between DSC FINANCE
CORPORATION, as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and
------------
Lessee hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
Three (3) Refurbished Digital Trunk Frames (DTFs) each wired and
equipped with 1,536 digital ports plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 092294.00 dated September
22, 1994.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
<TABLE>
<CAPTION>
Lease Rate Factor and Related Information
-----------------------------------------
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $600,000.00
Less: 20% Down Payments 120.000.00
-----------
Net Manufacturer's Invoice Cost: $480,000.00
Periodic Lease Payment (Monthly Rent): $ 10,114.30
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: May 1, 1995, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: April 1, 2000.
Lease Expiration Date: The Lease Expiration Date shall be April 30, 2000.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate of ten percent (10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Hewlett-Packard HP-17BII
calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment
-------------
by the execution and delivery to the Lessor of a Certificate of Acceptance in
the form of Schedule H-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed on this 13th day of March 1995.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X
------------------------------- -------------------------
By: Donald A. Burns By:
------------------------------- -------------------------
Its: President Its:
------------------------------- --------------------------
<PAGE>
TELCO COMMUNICATIONS GROUP, INC. - SCHEDULE H
PV = $480,000.00 PMT = $10,114.30 5 1 1995 START DATE
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
DATE
PMT ----------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 5 1 1995 $0.00 $10,114.30 $469,885.70
2 6 1 1995 $3,915.72 $6,198.58 $463,687.12
3 7 1 1995 $3,864.07 $6,250.23 $457,436.89
4 8 1 1995 $3,811.98 $6,302.32 $451,134.57
5 9 1 1995 $3,759.46 $6,354.84 $444,779.73
6 10 1 1995 $3,706.50 $6,407.80 $438,371.94
7 11 1 1995 $3,653.11 $6,461.19 $431,910.74
8 12 1 1995 $3,599.26 $6,515.04 $425,395.71
9 1 1 1996 $3,544.97 $6,569.33 $418,826.38
10 2 1 1996 $3,490.23 $6,624.07 $412,202.30
11 3 1 1996 $3,435.03 $6,679.27 $405,523.03
12 4 1 1996 $3,379.36 $6,734.93 $398,788.09
------------------------------
$40,159.69 $81,211.91
13 5 1 1996 $3,323.24 $6,791.06 $391,997.03
14 6 1 1996 $3,266.65 $6,847.65 $385,149.38
15 7 1 1996 $3,209.58 $6,904.72 $378,244.67
16 8 1 1996 $3,152.04 $6,962.26 $371,282.41
17 9 1 1996 $3,094.03 $7,020.27 $364,262.14
18 10 1 1996 $3,035.52 $7,078.78 $357,183.36
19 11 1 1996 $2,976.53 $7,137.77 $350,045.60
20 12 1 1996 $2,917.05 $7,197.25 $342,848.35
21 1 1 1997 $2,857.07 $7,257.22 $335,591.12
22 2 1 1997 $2,796.60 $7,317.70 $328,273.42
23 3 1 1997 $2,735.62 $7,378.68 $320,894.74
24 4 1 1997 $2,674.13 $7,440.17 $313,454.57
------------------------------
$36,038.07 $85,333.53
25 5 1 1997 $2,612.13 $7,502.17 $305,952.39
26 6 1 1997 $2,549.61 $7,564.69 $298,387.70
27 7 1 1997 $2,486.57 $7,627.73 $290,759.97
28 8 1 1997 $2,423.00 $7,691.30 $283,068.67
29 9 1 1997 $2,358.91 $7,755.39 $275,313.28
30 10 1 1997 $2,294.28 $7,820.02 $267,493.27
31 11 1 1997 $2,229.11 $7,885.19 $259,608.08
32 12 1 1997 $2,163.40 $7,950.90 $251,657.19
33 1 1 1998 $2,097.15 $8,017.15 $243,640.03
34 2 1 1998 $2,030.34 $8,083.96 $235,556.07
35 3 1 1998 $1,962.97 $8,151.33 $227,404.74
36 4 1 1998 $1,895.04 $8,219.26 $219,185.48
------------------------------
$27,102.52 $94,269.08
</TABLE>
<TABLE>
<CAPTION>
DATE
PMT ----------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 5 1 1998 $1,826.55 $8,287.75 $210,897.73
38 6 1 1998 $1,757.48 $8,356.82 $202,540.92
39 7 1 1998 $1,687.84 $8,426.46 $194,114.46
40 8 1 1998 $1,617.62 $8,496.68 $185,617.79
41 9 1 1998 $1,546.82 $8,567.48 $177,050.30
42 10 1 1998 $1,475.42 $8,638.88 $168,411.43
43 11 1 1998 $1,403.43 $8,710.87 $159,700.56
44 12 1 1998 $1,330.84 $8,783.46 $150,917.10
45 1 1 1999 $1,257.64 $8,856.66 $142,060.44
46 2 1 1999 $1,183.84 $8,930.46 $133,129.98
47 3 1 1999 $1,109.42 $9,004.88 $124,125.10
48 4 1 1999 $1,034.38 $9,079.92 $115,045.18
------------------------------
$17,231.29 $104,140.31
49 5 1 1999 $958.71 $9,155.59 $105,889.59
50 6 1 1999 $882.41 $9,231.89 $96,657.71
51 7 1 1999 $805.48 $9,308.82 $87,348.89
52 8 1 1999 $727.91 $9,386.39 $77,962.50
53 9 1 1999 $649.69 $9,464.61 $68,497.89
54 10 1 1999 $570.82 $9,543.48 $58,954.40
55 11 1 1999 $491.29 $9,623.01 $49,331.39
56 12 1 1999 $411.10 $9,703.20 $39,628.19
57 1 1 2000 $330.24 $9,784.06 $29,844.12
58 2 1 2000 $248.70 $9,865.60 $19,978.52
59 3 1 2000 $166.49 $9,947.81 $10,030.71
60 4 1 2000 $83.59 $10,030.71 ($0.00)
------------------------------
$6,326.42 $115,045.18
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
------------------------------
$0.00 $0.00
GRAND TOTALS $126,858.00 $480,000.00
==============================
</TABLE>
<PAGE>
SCHEDULE H-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE H
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, Donald A. Burns duly authorized inspector and authorized representative
---------------
TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby certify that I have
accepted delivery on behalf of the Lessee pursuant to the Equipment Lease dated
as of January 1, 1994, between Lessor and Lessee, the Equipment described in
Schedule H attached to such Equipment Lease. Such Equipment is described as
follows:
Items of Equipment
------------------
Three (3) Refurbished Digital Trunk Frames (DTFs) each wired and equipped with
1,536 digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 092294.00 dated September 22, 1994.
- INSTALLATION SITE (Address): 1522 N.W. 23rd Avenue
Ft. Lauderdale, FL 33311
- PLACE ACCEPTED (Address): Same
- DATE ACCEPTED: March 14, 1995
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
3/14/95 /s/ Donald A. Burns
---------------------------- ---------------------------
Date Inspector and Authorized
Representative of Lessee
<PAGE>
EXHIBIT A
Items of Equipment
------------------
Three (3) Refurbished Digital Trunk Frames (DTFs) each wired and equipped with
1,536 digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 092294.00 dated September 22, 1994.
- INSTALLATION SITE (Address): 1522 N.W. 23rd Avenue
Ft. Lauderdale, FL 33311
<PAGE>
SCHEDULE I
This Schedule I is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION,
as Lessor, and TELCO CONVOCATIONS GROW, SC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and
-------------
Lessee hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
One (1) DSC DEX 600E Switching System wired and equipped with LJ,360
digital ports, One (1) Signaling Point (SP) Subsystem, plus peripheral equipment
and software licenses as listed on Lessee's Purchase Order Number 121994.00
dated December 21, 1994.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent,
-----------------
in advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the
Last Periodic Rent Payment Date, as set forth below. The Lease Expiration
Date shall be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $2,956,392.00
Less: 20% Down Payment 591.278.40
------------------------------------- -------------
Net Manufacturer's Invoice Cost: $2,365,113.60
Periodic Lease Payment (Monthly Rent): $49,836.37
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: July 1, 1995, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: June 1, 2000.
Lease Expiration Date: The Lease Expiration Date shall be June 30, 2000.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate of ten percent(10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by the use of the present value functions of a Hewlett-Packard HP-17BII
calculator.
4. Acceptance. The Lessee will signify its acceptance of the equipment by
--------------
the execution and delivery to the Lessor of a Certificate of Acceptance in the
form of Schedule I-1 hereto.
IN WITNESS WHEREOF. the Lessor and the Lessee have caused this instrument
to be duly executed. on this 22 day of June, 1995
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/Donald A. Burns X
--------------------- ------------------------
By: Donald A. Burns By:
--------------------- ------------------------
Its: President & CEO Its:
--------------------- ------------------------
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group, Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
800 E Main Street
Chattanooga, TN 37403
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE:
TELCO COMMUNICATIONS GROUP, INC. Bricks in the Sticks Ltd.
-----------------------------------
X /s/ Donald A. Burns X /s/ Henry G. Luken
------------------------- ----------------------------
By: Donald A. Burns By: Henry G. Luken
------------------------- ----------------------------
Title: President & COO Title: Director
------------------------- ----------------------------
Date: Date:
------------------------- ----------------------------
<PAGE>
PV = $2,365,113.60 PMT = $49,836.37 7 1 1995 START DATE
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
DATE
PMT ------------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 7 1 1995 $0.00 $49,836.37 $2,315,277.23
2 8 1 1995 $19,293.97 $30,542.40 $2,284,734.83
3 9 1 1995 $19,039.45 $30,796.92 $2,253,937.92
4 10 1 1995 $18,782.81 $31,053.56 $2,222,884.36
5 11 1 1995 $18,524.03 $31,312.34 $2,191,572.03
6 12 1 1995 $18,263.10 $31,573.27 $2,159,998.76
7 1 1 1996 $17,999.99 $31,836.38 $2,128,162.37
8 2 1 1996 $17,734.68 $32,101.69 $2,096,060.69
9 3 1 1996 $17,467.17 $32,369.20 $2,063,691.49
10 4 1 1996 $17,197.43 $32,638.94 $2,031,052.54
11 5 1 1996 $16,925.44 $32,910.93 $1,998,141.61
12 6 1 1996 $16,651.18 $33,185.19 $1,964,956.42
----------------------------------
$197,879.26 $400,157.18
13 7 1 1996 $16,374.63 $33,461.74 $1,931,494.68
14 8 1 1996 $16,095.79 $33,740.58 $1,897,754.10
15 9 1 1996 $15,314.62 $34,021.75 $1,863,732.35
16 10 1 1996 $15,531.10 $34,305.27 $1,829,427.08
17 11 1 1996 $15,245.22 $34,591.15 $1,794,835.93
18 12 1 1996 $14,956.96 $34,879.41 $1,759,956.53
19 1 1 1997 $14,666.30 $35,170.07 $1,724,786.46
20 2 1 1997 $14,373.22 $35,463.15 $1,689,323.31
21 3 1 1997 $14,077.69 $35,758.68 $1,653,564.63
22 4 1 1997 $13,779.70 $36,056.67 $1,617,507.96
23 5 1 1997 $13,479.23 $36,357.14 $1,581,150.82
24 6 1 1997 $13,176.26 $36,660.11 $1,544,490.71
----------------------------------
$177,070.72 $420,465.71
25 7 1 1997 $12,870.75 $36,965.62 $1,507,525.09
26 8 1 1997 $12,562.71 $37,273.66 $1,470,251.43
27 9 1 1997 $12,252.09 $37,584.28 $1,432,667.16
28 10 1 1997 $11,938.89 $37,897.48 $1,394,769.68
29 11 1 1997 $11,623.08 $38,213.29 $1,356,556.39
30 12 1 1997 $11,304.64 $38,531.73 $1,318,024.65
31 1 1 1998 $10,983.54 $38,852.83 $1,279,171.82
32 2 1 1998 $10,659.76 $39,176.61 $1,239,995.21
33 3 1 1998 $10,333.29 $39,503.08 $1,200,492.14
34 4 1 1998 $10,004.10 $39,832.27 $1,160,659.87
35 5 1 1998 $9,672.16 $40,164.21 $1,120,495.66
36 6 1 1998 $9,337.46 $40,498.91 $1,079,996.75
----------------------------------
$133,542.48 $461,493.96
37 7 1 1998 $8,999.97 $40,836.40 $1,039,160.35
38 8 1 1998 $8,659.67 $41,176.70 $997,983.65
39 9 1 1998 $8,316.53 $41,519.84 $956,463.81
40 10 1 1998 $7,970.53 $41,865.84 $914,597.97
41 11 1 1998 $7,621.65 $42,214.72 $872,383.25
42 12 1 1998 $7,269.86 $42,566.51 $829,816.74
43 1 1 1999 $6,915.14 $42,921.23 $786,895.51
44 2 1 1999 $6,557.46 $43,278.91 $743,616.60
45 3 1 1999 $6,196.80 $43,639.57 $699,977.04
46 4 1 1999 $5,833.14 $44,003.23 $655,973.81
47 5 1 1999 $5,466.45 $44,369.92 $611,603.89
48 6 1 1999 $5,096.70 $44,739.67 $566,864.21
----------------------------------
$84,903.90 $513,132.54
49 7 1 1999 $4,723.87 $45,112.50 $521,751.71
50 8 1 1999 $4,347.93 $45,488.44 $476,263.27
51 9 1 1999 $3,968.86 $45,367.51 $430,395.76
52 10 1 1999 $3,586.63 $46,249.74 $384,146.02
53 11 1 1999 $3,201.22 $46,635.15 $337,510.87
54 12 1 1999 $2,812.59 $47,023.78 $290,487.09
55 1 1 2000 $2,420.73 $47,415.64 $243,071.45
56 2 1 2000 $2,025.60 $47,810.77 $195,260.67
57 3 1 2000 $1,627.17 $48,209.60 $147,051.47
58 4 1 2000 $1,225.43 $48,610.94 $98,440.53
59 5 1 2000 $820.34 $49,016.03 $49,424.50
60 6 1 2000 $411.87 $49,424.50 $0.00
----------------------------------
$31,172.23 $566,864.21
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
----------------------------------
$0.00 $0.00
GRAND TOTALS $625,068.60 $2,365,113.60
==================================
</TABLE>
<PAGE>
EXHIBIT A
Items of Equipment
------------------
One (1) ESC DEX 600E Switching System wired and equipped with 15,360 digital
ports, One (1) Signaling Point (SP) Subsystem, Plus peripheral equipment and
software licenses as listed on Lessee's Purchase Order Number 121994.00 dated
December 21, 1994.
- INSTALLATION SITE (Address): 800 E Main Street
Chattanooga, TN 37403
<PAGE>
SCHEDULE J
This Schedule J is attached to and made a part of the Equipment Lease
(the "Lease") dated the 1st day of January, 1994, between DSC FINANCE
CORPORATION, as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and
-------------
Lessee hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
Six (6) refurbished Digital Trunk Frames (DTFs) each wired and equipped
with 1,536 digital ports, plus peripheral equipment and software licenses as
listed on Lessee's Purchase Order Numbers 020795.10 and 020795.20, each dated
February 7, 1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
------------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $1,238,608.00
Less: 20% Down Payment 247,721.60
-------------
Net Manufacturer's Invoice Cost: $ 990,886,40
Periodic Lease Payment (Monthly Rent): $20,879.41
Relevant Dates
--------------
First Periodic Rent Payment Date: July 1, 1995, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: June 1, 2000.
Lease Expiration Date: The Lease Expiration Date shall be June 30, 2000.
<PAGE>
PV = $990,886.40 PMT - 20,879.41 7 1 1995 START DATE
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
PMT DATE
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 7 1 1995 $0.00 $20,879.41 $970,006.99
2 8 1 1995 $8,083.39 $12,796.02 $957,210.97
3 9 1 1995 $7,976.75 $12,902.66 $944,308.31
4 10 1 1995 $7,869.23 $13,010.18 $931,298.13
5 11 1 1995 $7,760.81 $13,118.60 $918,179.54
6 12 1 1995 $7,651.49 $13,227.92 $904,951.62
7 1 1 1996 $7,541.26 $13,338.15 $891,613.47
8 2 1 1996 $7,430.11 $13,449.30 $878,164.17
9 3 1 1996 $7,318.03 $13,561.38 $864,602.79
10 4 1 1996 $7,205.02 $13,674.39 $850,928.40
11 5 1 1996 $7,091.07 $13,788.34 $837,140.05
12 6 1 1996 $6,976.16 $13,903.25 $823,236.81
---------------------------------------
$82,903.33 $167,649.59
13 7 1 1996 $6,860.30 $14,019.11 $809,217.70
14 8 1 1996 $6,743.48 $14,135.93 $795,081.77
15 9 1 1996 $6,625.68 $14,253.73 $780,828.03
16 10 1 1996 $6,506.90 $14,372.51 $766,455.52
17 11 1 1996 $6,387.13 $14,492.28 $751,963.24
18 12 1 1996 $6,266.36 $14,613.05 $737,350.18
19 1 1 1997 $6,144.58 $14,734.83 $722,615.35
20 2 1 1997 $6,021.79 $14,857.62 $707,757.74
21 3 1 1997 $5,897.98 $14,981.43 $692,776.30
22 4 1 1997 $5,773.13 $15,106.28 $677,670.03
23 5 1 1997 $5,647.25 $15,232.16 $662,437.86
24 6 1 1997 $5,520.31 $15,359.10 $647,078.77
---------------------------------------
$74,394.38 $176,158.04
25 7 1 1997 $5,392.32 $15,487.09 $631,591.68
26 8 1 1997 $5,263.26 $15,616.15 $615,975.53
27 9 1 1997 $5,133.13 $15,746.28 $600,229.34
28 10 1 1997 $5,001.91 $15,877.50 $584,351.74
29 11 1 1997 $4,869.60 $16,009.81 $568,341.93
30 12 1 1997 $4,736.18 $16,143.23 $552,198.70
31 1 1 1998 $4,601.65 $16,277.76 $535,920.94
32 2 1 1998 $4,466.01 $16,413.40 $519,507.54
33 3 1 1998 $4,329.23 $16,550.18 $502,957.35
34 4 1 1998 $4,191.31 $16,688.10 $486,269.25
35 5 1 1998 $4,052.24 $16,827.17 $469,442.08
26 6 1 1998 $3,912.02 $16,967.39 $452,474.69
---------------------------------------
$55,948.84 $194,604.08
<CAPTION>
PMT DATE
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 7 1 1998 $3,770.62 $17,108.79 $435,365.90
38 8 1 1998 $3,628.05 $17,251.36 $418,114.54
39 9 1 1998 $3,484.29 $17,395.12 $400,719.41
40 10 1 1998 $3,339.33 $17,540.08 $383,179.33
41 11 1 1998 $3,193.16 $17,686.25 $365,493.08
42 12 1 1998 $3,045.77 $17,833.64 $347,659.44
43 1 1 1999 $2,897.16 $17,982.25 $329,677.19
44 2 1 1999 $2,747.31 $18,132.10 $311,545.09
45 3 1 1999 $2,596.21 $18,283.20 $293,261.89
46 4 1 1999 $2,443.85 $18,435.56 $274,826.33
47 5 1 1999 $2,290.22 $18,589.19 $256,237.13
48 6 1 1999 $2,135.31 $18,744.10 $237,493.03
---------------------------------------
$35,571.26 $214,981.66
49 7 1 1999 $1,979.11 $18,900.30 $218,592.73
50 8 1 1999 $1,821.61 $19,057.80 $199,534.92
51 9 1 1999 $1,662.79 $19,216.62 $180,318,30
52 10 1 1999 $1,502.65 $19,376.76 $160,041.55
53 11 1 1999 $1,341.18 $19,538.23 $141,403.32
54 12 1 1999 $1,178.36 $19,701.05 $121,702.27
55 1 1 2000 $1,014.18 $19,865.23 $101,337.04
56 2 1 2000 $848.64 $20,030.77 $81,806.27
57 3 1 2000 $681.72 $20,197.69 $61,608.58
58 4 1 2000 $513.40 $20,366.01 $41,242.58
59 5 1 2000 $343.69 $20,535.72 $20,706.85
60 6 1 2000 $172.56 $20,706.85 $0.00
---------------------------------------
$13,059.89 $237,493.03
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
---------------------------------------
$0.00 $0.00
GRAND TOTALS $261,378.20 $990,886.40
=======================================
</TABLE>
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate of ten percent (10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Hewlett-Packard HP-17BII
calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment
-------------
by the execution and delivery to the Lessor of a Certificate of Acceptance in
the form of Schedule H-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed on this 22nd day of June 1995.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X
------------------------------- -------------------------
By: Donald A. Burns By:
------------------------------- -------------------------
Its: President & CEO Its:
------------------------------- --------------------------
<PAGE>
EXHIBIT A
Items of Equipment
------------------
Six (6) refurbished Digital Trunk Frames (DTFs) each wired and equipped with
1,536 digital ports, plus peripheral equipment and software licenses as listed
on Lessee's Purchase Order Numbers 020795.10 and 020795.20, each dated
February 7, 1995.
-INSTALLATION SITE (Address): Suite 210
1220 L Street NW
Washington, DC 20005
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group, Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
Suite 210
1220 L Street NW
Washington, DC 2005
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE:
TELCO COMMUNICATIONS GROUP, INC. Backs in the Sticks Ltd.
-------------------------------
X [Signature appears here] X [Signature appears here]
------------------------- ------------------------
By: [Signature appears here] By: [Signature appears here]
------------------------- ------------------------
Title: President Title: Director
------------------------- ------------------------
Date: June 22, 1995 Date: [ ]
------------------------- ------------------------
MORTGAGEE OF REAL ESTATE:
<PAGE>
SCHEDULE K
This Schedule K is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION,
as Lessor, and DELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and
------------
Lessee hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
One (1) DSC DEX 600E Switching System wired and equipped with 10,752
digital ports, One (1) Refurbished Signaling Point (SP) Subsystem, plus
peripheral equipment and software licenses as listed on Lessee's Purchase Order
Numbers 062094.30, dated June 20, 1994 and 062094.31, dated February 7, 1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $2,355,000.00
Less: 20% Down Payment 471,000.00
-------------
Net Manufacturer's Invoice Cost: $1,884,000.00
Periodic Lease Payment (Monthly Rent): $39,698.61
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: September 1, 1995, in advance.
Periodic Rent Payment Date: The first day of each month consecutively
following the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: August 1, 2000.
Lease Expiration Date: The Lease Expiration Date shall be August 31,
2000.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated-Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to Such Item of Equipment on the last Periodic Lease
Payment Date on Which rent was paid, calculated at a rate of ten percent
(10.0|~~10%) per annum. Any dispute over mechanics of calculation of present
value shall be resolved by use of the present value functions of a Hewlett-
Packard HP-17BU calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment
-------------
by the execution and delivery to the Lessor of a Certificate of Acceptance in
the form of Schedule K-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed on this 22nd day of June 1995.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X
------------------------------- -------------------------
By: Donald A. Burns By:
------------------------------- -------------------------
Its: President & CEO Its:
------------------------------- --------------------------
<PAGE>
TELCO COMMUNICATIONS GROUP, INC. SCHEDULE B
PV = $1,884,000.00 PMT = $39,698.61 9 1 1995 START DATE
INT = 10.00%
N = 60
<TABLE>
<CAPTION>
DATE
PAYMENT ------------------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 9 1 1995 $0.00 $39,698.61 $1,844,301.39
2 10 1 1995 $15,369.18 $24,329.43 $1,819,971.96
3 11 1 1995 $15,166.43 $24,532.18 $1,795,439.78
4 12 1 1995 $14,962.00 $24,736.61 $1,770,703.17
5 1 1 1996 $14,755.86 $24,942.75 $1,745,760.42
6 2 1 1996 $14,548.00 $25,150.61 $1,720,609.81
7 3 1 1996 $14,338.41 $25,360.20 $1,695,249.61
8 4 1 1996 $14,127.08 $25,571.53 $1,669,678.08
9 5 1 1996 $13,913.98 $25,784.63 $1,643,893.46
10 6 1 1996 $13,699.11 $25,999.50 $1,617,893.96
11 7 1 1996 $13,482.45 $26,216.16 $1,591,677.80
12 8 1 1996 $13,263.98 $26,434.63 $1,565,243.17
----------------------------------
$157,626.49 $318,756.83
13 9 1 1996 $13,043.69 $26,654.92 $1,538,588.25
14 10 1 1996 $12,821.57 $26,877.04 $1,511,711.21
15 11 1 1996 $12,597.59 $27,101.02 $1,484,610.19
16 12 1 1996 $12,371.75 $27,326.86 $1,457,283.33
17 1 1 1997 $12,144.03 $27,554.58 $1,429,728.75
18 2 1 1997 $11,914.41 $27,784.20 $1,401,944.54
19 3 1 1997 $11,682.87 $28,015.74 $1,373,928.80
20 4 1 1997 $11,449.41 $28,249.20 $1,345,679.60
21 5 1 1997 $11,214.00 $28,484.61 $1,317,194.99
22 6 1 1997 $10,976.62 $28,721.99 $1,288,473.00
23 7 1 1997 $10,737.27 $28,961.34 $1,259,511.66
24 8 1 1997 $10,495.93 $29,202.68 $1,230,308.98
----------------------------------
$141,449.14 $334,934.18
25 9 1 1997 $10,252.57 $29,446.04 $1,200,862.95
26 10 1 1997 $10,007.19 $29,691.42 $1,171,171.53
27 11 1 1997 $9,759.76 $29,938.85 $1,141,232.68
28 12 1 1997 $9,510.27 $30,188.34 $1,111,044.34
29 1 1 1998 $9,258.70 $30,349.91 $1,080,604.44
30 2 1 1998 $9,005.04 $30,693.57 $1,049,910.86
31 3 1 1998 $8,749.26 $30,949.35 $1,018,961.51
32 4 1 1998 $8,491.35 $31,207.26 $987,754.24
33 5 1 1998 $8,231.28 $31,467.33 $956,286.92
34 6 1 1998 $7,969.06 $31,729.55 $924,557.37
35 7 1 1998 $7,704.64 $31,993.97 $892,563.40
36 8 1 1998 $7,438.03 $32,260.58 $860,302.82
----------------------------------
$106,377.15 $370,006.17
37 9 1 1998 $7,169.19 $32,529.42 $827,773.40
38 10 1 1998 $6,898.11 $32,800.50 $794,972.90
39 11 1 1998 $6,624.77 $33,073.84 $761,899.06
40 12 1 1998 $6,349.16 $33,349.45 $728,549.61
41 1 1 1999 $6,071.25 $33,627.36 $694,922.25
42 2 1 1999 $5,791.02 $33,907.59 $661,014.66
43 3 1 1999 $5,508.46 $34,190.15 $626,824.50
44 4 1 1999 $5,223.54 $34,475.07 $592,349.43
45 5 1 1999 $4,936.24 $34,762.37 $557,587.06
46 6 1 1999 $4,646.56 $35,052.05 $522,535.01
47 7 1 1999 $4,354.46 $35,344.15 $487,190.86
48 8 1 1999 $4,059.92 $35,638.69 $451,552.17
----------------------------------
$67,632.68 $408,750.64
49 9 1 1999 $3,762.93 $35,935.68 $415,616.50
50 10 1 1999 $3,463.47 $36,235.14 $379,381.36
51 11 1 1999 $3,161.51 $36,537.10 $342,844.26
52 12 1 1999 $2,857.04 $36,841.57 $306,002.69
53 1 1 2000 $2,550.02 $37,148.59 $268,854.10
54 2 1 2000 $2,240.45 $37,458.16 $231,395.94
55 3 1 2000 $1,928.30 $37,770.31 $193,625.63
56 4 1 2000 $1,613.55 $38,085.06 $155,540.57
57 5 1 2000 $1,296.17 $38,402.44 $117,138.13
58 6 1 2000 $976.15 $38,722.46 $78,415.67
59 7 1 2000 $653.46 $39,045.15 $39,370.52
60 8 1 2000 $328.09 $39,370.52 (50.00)
----------------------------------
$24,831.14 $451,552.17
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
----------------------------------
$0.00 $0.00
GRAND TOTALS $497,916.60 $1,884,000.00
==================================
</TABLE>
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group,
Inc. (the "Lessee") from DSC Finance Corporation (the "Lessor") is described
more fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
Suite 500
101 West Second Street
Davenport, IA 52801
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title
purposes by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee")
(if no Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE:
TELCO COMMUNICATIONS GROUP, INC. Bricks in the Sticks, Ltd.
X /s/ Donald A. Burns X /s/ Henry G. Luken III
------------------------------- -------------------------
By: Donald A. Burns By: Henry G. Luken III
------------------------------- -------------------------
Title: President & CEO Title: Director
--------------------------- ----------------------
Date: June 22, 1995 Date:
--------------------------- ----------------------
<PAGE>
EXHIBIT A
Items of Equipment
------------------
One (1) DSC DEX 600E Switching System wired and equipped with 10,752 digital
ports, One (1) Refurbished Signaling Point (SP) Subsystem, plus peripheral
equipment and software licenses as listed on Lessee's Purchase Order Numbers
062094.30, dated June 20, 1994 and 062094.31, dated February 7, 1995.
-INSTALLATION SITE (Address): Suite 500
101 West Second Street
Davenport, IA 52801
<PAGE>
PV = $2,340,000.00 PMT = $49,307.19 9 1 1995 START DATE
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
DATE
PMT ----------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 9 1 1995 $0.00 $49,307.19 $2,290,692.81
2 10 1 1995 $19,089.10 $30,218.09 $2,260,474.72
3 11 1 1995 $18,837.29 $30,469.90 $2,230,004.82
4 12 1 1995 $18,583.37 $30,723.82 $2,199,281.00
5 1 1 1996 $18,327.34 $30,979.85 $2,168,301.15
6 2 1 1996 $18,069.17 $31,238.02 $2,137,063.14
7 3 1 1996 $17,808.86 $31,498.33 $2,105,564.80
8 4 1 1996 $17,546.37 $31,760.82 $2,073,803.98
9 5 1 1996 $17,281.70 $32,025.49 $2,041,778.49
10 6 1 1996 $17,014.82 $32,292.37 $2,009,486.12
11 7 1 1996 $16,745.72 $32,561.47 $1,976,924.65
12 8 1 1996 $16,474.37 $32,832.82 $1,944,091.83
------------------------------
$195,778.11 $395,908.17
13 9 1 1996 $16,200.76 $33,106.43 $1,910,985.40
14 10 1 1996 $15,924.88 $33,382.31 $1,877,603.09
15 11 1 1996 $15,646.69 $33,660.50 $1,843,942.59
16 12 1 1996 $15,366.19 $33,941.00 $1,810,001.58
17 1 1 1997 $15,083.34 $34,223.85 $1,775,777.74
18 2 1 1997 $14,798.15 $34,509.04 $1,741,268.69
19 3 1 1997 $14,510.57 $34,796.62 $1,706,472.07
20 4 1 1997 $14,220.60 $35,086.59 $1,671,385.48
21 5 1 1997 $13,928.21 $35,378.98 $1,636,006.50
22 6 1 1997 $13,633.39 $35,673.80 $1,600,332.70
23 7 1 1997 $13,336.10 $35,971.09 $1,564,361.61
24 8 1 1997 $13,036.35 $36,270.84 $1,528,090.77
------------------------------
$175,685.22 $416,001.06
25 9 1 1997 $12,734.09 $36,573.10 $1,491,517.67
26 10 1 1997 $12,429.31 $36,877.88 $1,454,639.79
27 11 1 1997 $12,122.00 $37,185.19 $1,417,454.60
28 12 1 1997 $11,812.12 $37,495.07 $1,379,959.53
29 1 1 1998 $11,499.66 $37,807.53 $1,342,152.00
30 2 1 1998 $11,184.60 $38,122.59 $1,304,029.41
31 3 1 1998 $10,866.91 $38,440.28 $1,265,589.13
32 4 1 1998 $10,546.57 $38,760.62 $1,226,828.51
33 5 1 1998 $10,223.57 $39,083.62 $1,187,744.89
34 6 1 1998 $9,897.87 $39,409.32 $1,148,335.57
35 7 1 1998 $9,569.46 $39,737.73 $1,108,597.85
36 8 1 1998 $9,238.31 $40,068.88 $1,068,528.97
------------------------------
$132,124.48 $459,561.80
</TABLE>
<TABLE>
<CAPTION>
DATE
PMT ----------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 9 1 1998 $8,904.41 $40,402.78 $1,028,126.19
38 10 1 1998 $8,567.72 $40,739.47 $987,386.71
39 11 1 1998 $8,228.22 $41,078.97 $946,307.75
40 12 1 1998 $7,885.90 $41,421.29 $904,886.45
41 1 1 1999 $7,540.72 $41,766.47 $863,119.98
42 2 1 1999 $7,192.67 $42,114.52 $821,005.46
43 3 1 1999 $6,841.71 $42,465.48 $778,539.98
44 4 1 1999 $6,487.83 $42,819.36 $735,720.62
45 5 1 1999 $6,131.00 $43,176.19 $692,544.44
46 6 1 1999 $5,771.20 $43,535.99 $649,008.45
47 7 1 1999 $5,408.40 $43,898.79 $605,109.66
48 8 1 1999 $5,042.58 $44,264.61 $560,845.05
------------------------------
$84,002.36 $507,683.92
49 9 1 1999 $4,673.71 $44,633.48 $516,211.57
50 10 1 1999 $4,301.76 $45,005.43 $471,206.14
51 11 1 1999 $3,926.72 $45,380.47 $425,825.67
52 12 1 1999 $3,548.55 $45,758.64 $380,067.03
53 1 1 2000 $3,167.22 $46,139.97 $333,927.06
54 2 1 2000 $2,782.73 $46,524.46 $287,402.60
55 3 1 2000 $2,395.02 $46,912.17 $240,490.43
56 4 1 2000 $2,004.09 $47,303.10 $193,187.32
57 5 1 2000 $1,609.89 $47,697.30 $145,490.03
58 6 1 2000 $1,212.42 $48,094.77 $97,395.26
59 7 1 2000 $811.63 $48,495.56 $48,899.69
60 8 1 2000 $407.50 $48,899.69 $0.00
------------------------------
$30,841.23 $560,845.05
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
------------------------------
$0.00 $0.00
GRAND TOTALS $618,431.40 $2,340,000.00
==============================
</TABLE>
<PAGE>
SCHEDULE L
This Schedule L is attached to and made a part of the Equipment Lease (the
"Lease") dated the I st day of January, 1994, between DSC FINANCE CORPORATION,
as Lessor, and DELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
------------
hereby leases and hires from Lessor, the Items of Equipment described below:
Items of Equipment
-------------------
One (1) DSC DEX 600E Switching System wired and equipped with 15,360
digital ports, One (1) Refurbished Signaling Point (SP) Subsystems plus
peripheral equipment and software licenses as listed on Lessee's Purchase Order
Numbers 062094.iO dated June 20, 1994, 092294.00 dated September 22, 1994 and
062094.3 1 dated February 7, 1995.
2. Lease Payments. The Lessee agrees to paV the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
<TABLE>
<CAPTION>
Lease Rate Factor and Related Information
-----------------------------------------
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $2,925,000.00
Less: 20% Down Payment $585,000.00
-------------
Net Manufacturer's Invoice Cost: S2,340,000.00
Periodic Lease Payment (Monthly Rent): $49,307. 19
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: September 1, 1995, in advance.
Periodic Rent Payment Date: The first day of each month consecutively
following the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: August 1, 2000.
Lease Expiration Date: The Lease Expiration Date shall be August 31, 2000.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on Which rent was paid, calculated at a rate of ten percent
(10.0%) per annum. Any dispute over mechanics of calculation of present value
shall be resolved by use of the present value functions of a Hewlett Packard HPI
17BII calculator.
4. Acceptance. The Lessee Will signify its acceptance of the Equipment
-------------
by the execution and delivery to the Lessor of a Certificate of Acceptance in
the form of Schedule Ll hereto.
IN WITNESS HEREOF, the Lessor and the Lessee have caused this instrument to
be duly executed, on this 22nd day of June, 1995.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X
------------------------------- -----------------------------
By: /s/ Donald A. Burns By:
------------------------------- -----------------------------
Its: President Its:
------------------------------- -----------------------------
<PAGE>
SCHEDULE M
This Schedule M is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st (day of January, 1994, between DSC FINANCE CORPORATION,
as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and
------------
Lessee hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
Two (2) Refurbished Digital Trunk Frames (DTFs) each wired and equipped
with 1,536 digital ports plus peripheral equipment and software licenses as
listed on Lessee's Purchase Order Number 020795.10 dated February 7, 1995. One
(1) Control Point (CP) Subsystem plus peripheral equipment and software licenses
as listed on Lessee's Purchase Order Number 092294.00 dated September 22, 1994.
One (1) Power Upgrade plus peripheral equipment and software licenses as listed
on Lessee's Purchase Order Number 062895.30 dated June 28, 1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
<TABLE>
<CAPTION>
Lease Rate Factor and Related Information
-----------------------------------------
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $479,765.00
Less: 20% Down Payment 95.953.00
------------
Net Manufacturer's Invoice Cost: $383,812.00
Periodic Lease Payment (Monthly Rent): $8,087.48
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: October 1, 1995, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: September 1, 2000.
<PAGE>
Lease Expiration Date: The Lease Expiration Date shall be September 30, 2000.
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate of ten percent (10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Hewlett Packard HP1 7BII
calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment
-------------
by the execution and delivery to the Lessor of a Certificate of Acceptance in
the form of Schedule M-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed, on this ______ day of ____________, 199 __.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X
------------------------------- -----------------------------
By: By:
------------------------------- -----------------------------
Its: Its:
------------------------------- -----------------------------
<PAGE>
383,812.00 PMT = $8,087.48 10 1 1995 START DATE
10.0%
60
<TABLE>
<CAPTION>
PMT DATE
--------------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 10 1 1995 $0.00 $8,087.48 $375,724.52
2 11 1 1995 $3,131.05 $4,956.43 $370,768.09
3 12 1 1995 $3,089.74 $4,997.74 $365,770.35
4 1 1 1996 $3,048.09 $5,039.39 $360,730.96
5 2 1 1996 $3.006.10 $5,081.38 $355,649.58
6 3 1 1996 $2,963.75 $5,123.73 $350,525.86
7 4 1 1996 $2,921.06 $5,166.42 $345,359.43
8 5 1 1996 $2,878.00 $5,209.48 $340,149.96
9 6 1 1996 $2,834.59 $5,252.89 $334,897.07
10 7 1 1996 $2,790.82 $5,296.66 $329,600.40
11 8 1 1996 $2,746.68 $5,340.80 $324,259.60
12 9 1 1996 $2,702.17 $5,385.31 $318,874.29
--------------------------------
$32,112.05 $64,937.71
13 10 1 1996 $2,657.29 $5,430.19 $313,444.11
14 11 1 1996 $2,612.04 $5,475.44 $307,968.67
15 12 1 1996 $2,566.41 $5,521.07 $302,447.60
16 1 1 1997 $2,520.40 $5,567.08 $296,880.52
17 2 1 1997 $2,474.01 $5,613.47 $291,267.05
18 3 1 1997 $2,427.23 $5,660.25 $285,606.81
19 4 1 1997 $2,380.06 $5,707.42 $279,899.39
20 5 1 1997 $2,332.50 $5,754.98 $274,144.41
21 6 1 1997 $2,284.54 $5,802.94 $268,341.47
22 7 1 1997 $2,236.18 $5,851.29 $262,490.18
23 8 1 1997 $2,187.42 $5,900.06 $256,590.12
24 9 1 1997 $2,138.26 $5,949.22 $250,640.90
-------------------------------
$28,816.37 $68,233.39
25 10 1 1997 $2,088.68 $5,998.80 $244,642.10
26 11 1 1997 $2,038.69 $6,048.79 $238,593.31
27 12 1 1997 $1,988.28 $6,099.20 $232,494.11
28 1 1 1998 $1,937.46 $6,150.02 $226,344.09
29 2 1 1998 $1,886.21 $6,201.27 $220,142.81
30 3 1 1998 $1,834.53 $6,252.95 $213,889.86
31 4 1 1998 $1,782.42 $6,305.06 $207,584.80
32 5 1 1998 $1,729.88 $6,357.60 $201,227.20
33 6 1 1998 $1,676.90 $6,410.58 $194,816.62
34 7 1 1998 $1,623.48 $6,464.00 $188,352.61
35 8 1 1998 $1,569.61 $6,517.87 $181,834.74
36 9 1 1998 $1,515.29 $6,572.19 $175,262.56
------------------------------
$21,671.42 $75,378.34
37 10 1 1998 $1,460.53 $6,626.95 $168,635.60
38 11 1 1998 $1,405.30 $6,682.18 $161,953.42
39 12 1 1998 $1,349.62 $6,737.86 $155,215.56
40 1 1 1999 $1,293.47 $6,794.01 $148,421.55
41 2 1 1999 $1,236.85 $6,850.63 $141,570.91
42 3 1 1999 $1,179.76 $6,907.72 $134,663.20
43 4 1 1999 $1,122.20 $6,965.28 $127,697.91
44 5 1 1999 $1,064.15 $7,023.33 $120,674.58
45 6 1 1999 $1,005.62 $7,081.86 $113,592.73
46 7 1 1999 $946.61 $7,140.87 $106,451.86
47 8 1 1999 $887.10 $7,200.38 $99,251.48
48 9 1 1999 $827.10 $7,260.38 $91,991.10
------------------------------
$13,778.30 $83,271.46
49 10 1 1999 $766.59 $7,320.89 $84,670.21
50 11 1 1999 $705.59 $7,381.89 $77,288.32
51 12 1 1999 $644.07 $7,443.41 $69,844.91
52 1 1 2000 $582.04 $7,505.44 $62,339.47
53 2 1 2000 $519.50 $7,567.98 $54,771.49
54 3 1 2000 $456.43 $7,631.05 $47,140.44
55 4 1 2000 $392.84 $7,694.64 $39,445.80
56 5 1 2000 $328.72 $7,758.76 $31,687.03
57 6 1 2000 $264.06 $7,823.42 $23,863.61
58 7 1 2000 $198.86 $7,888.62 $15,975.00
59 8 1 2000 $133.13 $7,954.35 $8,020.64
60 9 1 2000 $66.84 $8,020.64 $0.00
------------------------------
$5,058.66 $91,991.10
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
------------------------------
$0.00 $0.00
GRAND TOTALS $101,436.80 $383,812.00
==============================
</TABLE>
<PAGE>
SCHEDULE M-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE M
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, ___________________________ a duly authorized inspector and
authorized representative of TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"),
do hereby certify that I have accepted delivery on behalf of the Lessee pursuant
to the Equipment Lease dated as of January I, 1994, between Lessor and Lessee,
the Equipment described in Schedule M attached to such Equipment Lease. Such
Equipment is described as follows:
Items of Equipment
------------------
Two (2) Refurbished Digital Trunk Frames (DTFS) each wired and equipped with
1,536 digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 020795.10, dated February 7, 1995. One (1)
Control Point (CP) Subsystem plus peripheral equipment and software licenses as
listed on Lessee's Purchase Order Number 092294.00 dated September 22, 1994. One
(I) Power Upgrade plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 062895.30 dated June 2S, 1995.
-INSTALLATION SITE (Address): Suite 500-3
702 Colorado Street
Austin, TX 78701
-PLACE ACCEPTED (Address): Same
-DATE ACCEPTED: ____________________________________
The execution of this Certificate Will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims. defenses, setoffs, and counterclaims it may have With the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
- -------------------------- --------------------------------
Date Inspector and Authorized
Representative of Lessee
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group. Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto. or if no enclosure is attached. such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment Will be in or on the property
("Premises") located at:
Suite 500-3
702 Colorado Street
Austin, TX 78701
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE
TELCO COMMUNICATIONS GROUP, INC. ------------------------
X X
------------------------------- -----------------------------
By: By:
------------------------------- -----------------------------
Title: TITLE:
----------------------------- --------------------------
Date: Date:
------------------------------ ---------------------------
MORTGAGEE OF REAL ESTATE:
- ---------------------------------
X
-------------------------------
By:
-------------------------------
Title:
-------------------------------
Date:
-------------------------------
<PAGE>
EXHIBIT A
Items of Equipment
------------------
Two (2) Refurbished Digital Trunk Frames (DTFs) each wired and equipped with
1,536 digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 020795.10 dated February 7, 1995. One (1) Control
Point (CP) Subsystem plus peripheral equipment and software licenses as listed
on Lessee's Purchase Order Number 092294.00 dated September 22, 1994. One (1)
Power Upgrade plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 062895.30 dated June 28, 1995.
- INSTALLATION SITE (Address): Suite 500-3
702 Colorado Street
Austin, TX 78701
<PAGE>
SCHEDULE N
This Schedule N is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1 st day of January, 1994, between DSC FINANCE CORPORATION,
as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessees and
------------
Lessee hereby leases and hires from Lessor, the Items of Equipment described
below:
Items of Equipment
------------------
Three (3) Digital Span Interfaces (DSIs) each wired and equipped with
1,920 digital ports and Two (2) Digital Span Interfaces (DSIs) each wired with
1,920 digital ports and equipped with O digital ports plus peripheral equipment
and software licenses as listed on Lessee's Purchase Order Number 062895.20
dated June 28, 1995. One (1) DSC DEX 600E Switching System wired 9,216 digital
ports and equipped with O digital ports plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 020795.20 dated February 7,
1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
<TABLE>
<CAPTION>
Lease Rate Factor and Related Information
-----------------------------------------
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $2,063,000.00
Less: 20% Down Payment 412.600.00
-------------
Net Manufacturer's Invoice Cost: $1,60O,400.00
Periodic Lease Payment (Monthly Rent): $ 34,776.32
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: October 1, 1995, in advance.
Periodic Rent Payment Date: The first day of each month consecutively
following the First Periodic Rent Payment
Date.
Last Periodic Rent Payment Date: September 1, 2000.
<PAGE>
Lease Expiration Date: The Lease Expiration Date shall be September 30,
2000.
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate of ten percent (10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Hewlett Packard HP 1 7BII
calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment
-------------
by the execution and delivery to the Lessor of a Certificate of Acceptance in
the form of Schedule N-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed, on this ______day of___________, 199__.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X X
------------------------------- --------------------------
By: By:
------------------------------- --------------------------
Its: Its:
------------------------------- --------------------------
<PAGE>
PV = $1,650,400.00 PMT = $34,776.32 10 1 1995 START DATE
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
DATE
PMT ----------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 10 1 1995 $0.00 $34,776.32 $1,615,623.68
2 11 1 1995 $13,463.53 $21,312.79 $1,594,310.89
3 12 1 1995 $13,285.92 $21,490.40 $1,572,820.50
4 1 1 1996 $13,106.84 $21,669.48 $1,551,151.01
5 2 1 1996 $12,926.26 $21,850.06 $1,529,300.95
6 3 1 1996 $12,744.17 $22,032.15 $1,507,268.81
7 4 1 1996 $12,560.57 $22,215.75 $1,485,053.06
8 5 1 1996 $12,375.44 $22,400.88 $1,462,652.18
9 6 1 1996 $12,188.77 $22,587.55 $1,440,064.63
10 7 1 1996 $12,000.54 $22,775.78 $1,417,288.85
11 8 1 1996 $11,810.74 $22,965.58 $1,394,323.27
12 9 1 1996 $11,619.36 $23,156.96 $1,371,166.31
------------------------------
$138,082.15 $279,233.69
13 10 1 1996 $11,426.39 $23,349.93 $1,347,816.38
14 11 1 1996 $11,231.80 $23,544.52 $1,324,271.86
15 12 1 1996 $11,035.60 $23,740.72 $1,300,531.14
16 1 1 1997 $10,837.76 $23,938.56 $1,276,592.58
17 2 1 1997 $10,638.27 $24,138.05 $1,252,454.53
18 3 1 1997 $10,437.12 $24,339.20 $1,228,115.33
19 4 1 1997 $10,234.29 $24,542.03 $1,203,573.30
20 5 1 1997 $10,029.78 $24,746.54 $1,178,826.76
21 6 1 1997 $9,823.56 $24,952.76 $1,153,874.00
22 7 1 1997 $9,615.62 $25,160.70 $1,128,713.30
23 8 1 1997 $9,405.94 $25,370.38 $1,103,342.92
24 9 1 1997 $9,194.52 $25,581.80 $1,077,761.12
------------------------------
$123,910.65 $293,405.19
25 10 1 1997 $8,981.34 $25,794.98 $1,051,966.15
26 11 1 1997 $8,766.38 $26,009.94 $1,025,956.21
27 12 1 1997 $8,549.64 $26,226.68 $999,729.53
28 1 1 1998 $8,331.08 $26,445.24 $973,284.29
29 2 1 1998 $8,110.70 $26,665.62 $946,618.67
30 3 1 1998 $7,888.49 $26,887.83 $919,730.84
31 4 1 1998 $7,664.42 $27,111.90 $892,618.94
32 5 1 1998 $7,438.49 $27,337.83 $865,281.11
33 6 1 1998 $7,210.68 $27,565.64 $837,715.47
34 7 1 1998 $6,980.96 $27,795.36 $809,920.11
35 8 1 1998 $6,749.33 $28,026.99 $781,893.13
36 9 1 1998 $6,515.78 $28,260.54 $753,632.58
------------------------------
$93,187.30 $324,128.54
</TABLE>
<TABLE>
<CAPTION>
DATE
PMT ----------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 10 1 1998 $6,280.27 $28,496.05 $725,136.53
38 11 1 1998 $6,042.80 $28,733.52 $696,403.02
39 12 1 1998 $5,803.36 $28,972.96 $667,430.06
40 1 1 1999 $5,561.92 $29,214.40 $638,215.65
41 2 1 1999 $5,318.46 $29,457.86 $608,757.80
42 3 1 1999 $5,072.98 $29,703.34 $579,054.46
43 4 1 1999 $4,825.45 $29,950.87 $549,103.59
44 5 1 1999 $4,575.86 $30,200.46 $518,903.14
45 6 1 1999 $4,324.19 $30,452.13 $488,451.01
46 7 1 1999 $4,070.43 $30,705.89 $457,745.11
47 8 1 1999 $3,814.54 $30,961.78 $426,783.34
48 9 1 1999 $3,556.53 $31,219.79 $395,563.54
------------------------------
$59,246.80 $358,069.04
49 10 1 1999 $3,296.36 $31,479.96 $364,083.59
50 11 1 1999 $3,034.03 $31,742.29 $332,341.30
51 12 1 1999 $2,769.51 $32,006.81 $300,334.49
52 1 1 2000 $2,502.79 $32,273.53 $268,060.96
53 2 1 2000 $2,233.84 $32,542.48 $235,518.48
54 3 1 2000 $1,962.65 $32,813.67 $202,704.81
55 4 1 2000 $1,689.21 $33,087.11 $169,617.70
56 5 1 2000 $1,413.48 $33,362.84 $136,254.86
57 6 1 2000 $1,135.46 $33,640.86 $102,614.00
58 7 1 2000 $855.12 $33,921.20 $68,692.79
59 8 1 2000 $572.44 $34,203.88 $34,488.91
60 9 1 2000 $287.41 $34,488.91 ($0.00)
------------------------------
$21,752.30 $395,563.54
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
------------------------------
$0.00 $0.00
GRAND TOTALS $436,179.20 $1,650,400.00
==============================
</TABLE>
<PAGE>
SCHEDULE N-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE N
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Piano, Texas 75075
I,__________________________ a duly authorized inspector and authorized
representative of TELCOCOMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby
certify that I have accepted delivery on behalf of the Lessee pursuant to the
Equipment Lease dated as of January 1, 1994, between Lessor and Lessee, the
Equipment described in Schedule N attached to such Equipment Lease. Such
Equipment is described as follows:
Items of Equipment
------------------
Three (3) Digital Span Interfaces (DSIs) each wired and equipped with 1,920
digital ports and Two (2) Digital Span Interfaces (DSIS) each wired with 1,920
digital ports and equipped with digital ports plus peripheral equipment and
software licenses as listed on Lessee's Purchase Order Number 062895.20 dated
June 28, 1995. One (1) DSC DEX 600E Switching System wired 9,216 digital ports
and equipped with O digital ports plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 020795.20 dated February 7,
1995.
-INSTALLATION SITE (Address): Suite 201
1220 L Street NW
Washington, DC 20005
_PLACE ACCEPTED (Address): Same
_ DATE ACCEPTED:
------------------------------
The execution of this Certificate Will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
- ------------------------------------- --------------------------------------
Date Inspector and Authorized
Representative of Lessee
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group. Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached. such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
Suite 201
1220 L Street NW
Washington, DC 20005
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City. State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and
disclaims any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if
no Mortgage. write "None" below):
Name:
Address:
City State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE
TELCO COMMUNICATIONS GROUP, INC. -------------------------------
X
------------------------------- -----------------------------
By: By:
------------------------------ ----------------------------
Title: Title:
--------------------------- -------------------------
Date: Date:
--------------------------- -------------------------
MORTGAGEE OF REAL ESTATE:
- ---------------------------------
X
-------------------------------
By:
------------------------------
Title:
--------------------------
Date:
----------------------------
<PAGE>
EXHIBIT A
Items of Equipment
------------------
Three (3) Digital Span Interfaces (DSIS) each wired and equipped with 1,920
digital ports and Two (2) Digital Span Interfaces (DSIS) each wired With 1,920
digital ports and equipped with O digital ports plus peripheral equipment and
software licenses as listed on Lessee's Purchase Order Number 062895.20 dated
June 28, 1995. One (1) DSC DEX 600E Switching System wired 9,216 digital ports
and equipped with O digital ports plus peripheral equipment and software
licenses as listed on Lessee's Purchase Order Number 020795.20 dated February 7,
1995.
-INSTALLATION SITE (Address): Suite 201
1220 L Street NW
Washington, DC 20005
<PAGE>
SCHEDULE O
This Schedule O is attached to and made a part of the Equipment Lease
(the "Lease") dated the 1st day of January, 1994, between DSC FINANCE
CORPORATION, as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
------------
hereby leases and hires from Lessor, the Items of Equipment described below:
Items of Equipment
------------------
Five (S) Digital Trunk Frames (DTFs) each wired and equipped with 1,536
digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Letters dated February 7, 1995 and June 28, 1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Net Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
<TABLE>
<CAPTION>
Lease Rate Factor and Related Information
-----------------------------------------
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $975,000.00
Less: 7.5% Down Payment 73,125.00
----------
Net Manufacturer's Invoice Cost: $901,875.00
Periodic Lease Payment (Monthly Rent): $19,003.81
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: January 1, 1996, in advance.
Periodic Rent Payment Date: The first day of each month consecutively
following the First Periodic Rent Payment
Date.
Last Periodic Rent Payment Date: December 1, 2000.
Lease Expiration Date: The Lease Expiration Date shall be December
31, 2000.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate at ten percent (10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Sharp EL-5102 financial
calculator.
4. Acceptance. The Lessee Will signify its acceptance of the Equipment
-------------
by the execution and delivery to the Lessor of a Certificate of Acceptance in
the form of Schedule O-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this
instrument to be duly executed, on this 17, day of October, 1995.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X
-------------------------------- ------------------------------
By: Donald A. Burns By:
------------------------------- -----------------------------
Its: President Its:
------------------------------- -----------------------------
<PAGE>
TELCO COMMUNICATIONS GROUP, INC. SCHEDULE B
PV = $901,375.00 PMT = $19,003.81 1 1 1996 START DATE
INT = 10.00%
N = 60
<TABLE>
<CAPTION>
DATE
PMT ------------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 1 1 1996 $0.00 $19,003.31 $882,871.19
2 2 1 1996 $7,357.25 $11,646.56 $871,224.63
3 3 1 1996 $7,260.20 $11,743.61 $859,481.02
4 4 1 1996 $7,162.34 $11,841.47 $847,639.55
5 5 1 1996 $7,063.66 $11,940.15 $835,699.40
6 6 1 1996 $6,964.16 $12,039.65 $823,659.74
7 7 1 1996 $6,863.83 $12,139.98 $811,519.76
8 8 1 1996 $6,762.66 $12,241.15 $799,278.61
9 9 1 1996 $6,660.65 $12,343.16 $786,935.45
10 10 1 1996 $6,557.79 $12,446.02 $774,489.43
11 11 1 1996 $6,454.07 $12,549.74 $761,939.69
12 12 1 1996 $6,349.49 $12,654.32 $749,285.37
----------------------------------
$75,456.10 $152,589.63
13 1 1 1997 $6,244.04 $12,759.77 $736,525.60
14 2 1 1997 $6,137.71 $12,866.10 $723,659.50
15 3 1 1997 $6,030.49 $12,973.32 $710,686.18
16 4 1 1997 $5,922.38 $13,081.43 $697,604.75
17 5 1 1997 $5,813.37 $13,190.44 $684,414.31
18 6 1 1997 $5,703.45 $13,300.36 $671,113.95
19 7 1 1997 $5,592.61 $13,411.20 $657,702.75
20 8 1 1997 $5,480.85 $13,522.96 $644,179.79
21 9 1 1997 $5,368.16 $13,635.65 $630,544.15
22 10 1 1997 $5,254.53 $13,749.28 $616,794.87
23 11 1 1997 $5,139.95 $13,863.86 $602,931.01
24 12 1 1997 $5,024.42 $13,979.39 $588,951.62
----------------------------------
$67,711.97 $160,333.75
25 1 1 1998 $4,907.93 $14,095.88 $574,855.74
26 2 1 1998 $4,790.46 $14,213.35 $560,642.39
27 3 1 1998 $4,672.02 $14,331.79 $546,310.59
28 4 1 1998 $4,552.58 $14,451.23 $531,859.37
29 5 1 1998 $4,432.16 $14,571.65 $517,287.72
30 6 1 1998 $4,310.73 $14,693.38 $502,594.63
31 7 1 1998 $4,188.29 $14,815.52 $487,779.11
32 8 1 1998 $4,064.82 $14,938.99 $472,840.12
33 9 1 1998 $3,940.33 $15,063.48 $457,776.64
34 10 1 1998 $3,814.80 $15,189.01 $442,587.64
35 11 1 1998 $3,688.23 $15,315.58 $427,272.05
36 12 1 1998 $3,560.60 $15,443.21 $411,828.84
----------------------------------
$50,922.94 $177,122.78
37 1 1 1999 $3,431.90 $15,571.91 $396,256.93
38 2 1 1999 $3,302.14 $15,701.67 $380,555.26
39 3 1 1999 $3,171.29 $15,332.52 $364.722.74
40 4 1 1999 $3,039.35 $15,964.46 $348,758.29
41 5 1 1999 $2,906.32 $16,097.49 $332,660.80
42 6 1 1999 $2,772.17 $16,231.64 $316,429.16
43 7 1 1999 $2,636.91 $16,366.90 $300,062.25
44 8 1 1999 $2,500.52 $16,503.29 $283,558.96
45 9 1 1999 $2,362.99 $16,640.82 $266,918.14
46 10 1 1999 $2,224.32 $16,779.49 $250,138.65
47 11 1 1999 $2,084.49 $16,919.32 $233,219.32
48 12 1 1999 $1,943.49 $17,060.32 $216,159.01
----------------------------------
$32,375.89 $195,669.83
49 1 1 2000 $1,801.32 $17,202.49 $198,956.52
50 2 1 2000 $1,657.97 $17,345.84 $181,610.68
51 3 1 2000 $1,513.42 $17,490.39 $164,120.29
52 4 1 2000 $1,367.67 $17,636.14 $146,484.15
53 5 1 2000 $1,220.70 $17,783.11 $128,701.04
54 6 1 2000 $1,072.51 $17,931.30 $110,769.74
55 7 1 2000 $923.08 $18,080.73 $92,689.01
56 8 1 2000 $772.41 $18,231.40 $74,457.60
57 9 1 2000 $620.48 $18,383.33 $56,074.27
58 10 1 2000 $467.29 $18,536.52 $37,537.75
59 11 1 2000 $312.81 $18,691.00 $18,846.75
60 12 1 2000 $157.06 $18,846.75 $0.00
----------------------------------
$11,886.71 $216,159.01
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
----------------------------------
$0.00 $0.00
GRAND TOTALS $238,353.60 $901,375.00
==================================
</TABLE>
<PAGE>
SCHEDULE O-1
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, Donald A. Burns a duly authorized inspector and authorized representative of
----------------
TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby certify that I have
accepted delivery on behalf of the Lessee pursuant to the Equipment Lease dated
as of January 1, 1994, between Lessor and Lessee, the Equipment described in
Schedule N attached to such Equipment Lease. Such Equipment is described as
follows:
Items of Equipment
------------------
Five (5) Digital Trunk Frames (DTFs) each wired an equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Letters dated February 7, 1995 and June 28, 1995.
- INSTALLATION SITE (Address): Suite 500
101 West Second Street
Davenport, IA 52801
- PLACE ACCEPTED (Address): Same
- DATE ACCEPTED: October 17, 1995
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
Date: October 17, 1995 /s/ Donald A. Burns
------------------------- ----------------------------
Inspector and Authorized
Representative of Lessee
<PAGE>
SCHEDULE P
This Schedule P is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION,
as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee hereby
- ------------
leases and hires from Lessor, the Items of Equipment described below:
Items of Equipment
------------------
Two (2) Digital Trunk Frames (DTFs) each wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Letter dated June 28, 1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in advance
- -----------------
and otherwise in accordance with the Lease and this schedule, for the Items of
Equipment described above, an amount equal to the Periodic Lease Rate Factor, as
set forth below, multiplied by the Net Manufacturer's Invoice Cost of such
equipment, as set forth below; the first of which monthly rent payments shall be
due and payable on the First Periodic Rent Payment Date, as set forth below, and
continuously thereafter such monthly rent payments shall be due and payable on
each Periodic Rent Payment Date, as set forth below, until the Last Periodic
Rent Payment Date, as set forth below. The Lease Expiration Date shall be as set
forth below.
<TABLE>
<CAPTION>
Lease Rate Factor and Related Information
-----------------------------------------
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $390,000.00
Less: 7.5% Down Payment 29,250.00
----------
Net Manufacturer's Invoice Cost: $360,750.00
Periodic Lease Payment (Monthly Rent): $7,601.53
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: January 1, 1996, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: December 1, 2000.
Lease Expiration Date: The Lease Expiration Date shall be December 31, 2000.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each Item
------------------------
of Equipment shall be defined as one hundred percent (100%) of the present value
(as the term is used in Financial calculations) of the remaining monthly lease
rental payments as to such Item of Equipment on the last Periodic Lease Payment
Date on which rent was paid, calculated at a rate of ten percent (10.0%) per
annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Sharp EL-5102 financial
calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment by the
-------------
execution and delivery to the Lessor of a Certificate of Acceptance in the form
of Schedule P-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument to
be duly executed, on this 17 day of October, 1995.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X
------------------------------- ---------------------------
By: /s/ Donald A. Burns By:
----------------------------- --------------------------
Its: President Its:
---------------------------- -------------------------
<PAGE>
TELCO COMMUNICATIONS GROUP, INC. SCHEDULE P
PV = $360,750.00 PMT = $7,601.53 1 1 1996 START DATE
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
DATE
PMT ------------------
NO MO DAY YR INTEREST PRINCIPAL BALANCE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 1 1 1996 $0.00 $7,601.53 $353,148.47
2 2 1 1996 $2,942.91 $4,658.62 $348,489.85
3 3 1 1996 $2,904.09 $4,697.44 $343,792.41
4 4 1 1996 $2,864.94 $4,736.59 $339,055.83
5 5 1 1996 $2,825.47 $4,776.06 $334,279.77
6 6 1 1996 $2,785.67 $4,815.86 $329,463.91
7 7 1 1996 $2,745.54 $4,855.99 $324,607.92
8 8 1 1996 $2,705.07 $4,396.46 $319,711.47
9 9 1 1996 $2,664.27 $4,937.26 $314,774.21
10 10 1 1996 $2,623.13 $4,978.40 $309,795.80
11 11 1 1996 $2,581.64 $5,019.39 $304,775.91
12 12 1 1996 $2,539.81 $5,061.72 $299,714.19
----------------------------------
$30,182.54 $61,035.81
13 1 1 1997 $2,497.63 $5,103.90 $294,610.28
14 2 1 1997 $2,455.09 $5,146.44 $289,463.84
15 3 1 1997 $2,412.21 $5,189.32 $284,274.52
16 4 1 1997 $2,368.96 $5,232.57 $279,041.95
17 5 1 1997 $2,325.36 $5,276.17 $273,765.78
18 6 1 1997 $2,281.39 $5,320.14 $268,445.63
19 7 1 1997 $2,237.05 $5,364.48 $263,081.16
20 8 1 1997 $2,192.35 $5,409.18 $257,671.97
21 9 1 1997 $2,147.27 $5,454.26 $252,217.72
22 10 1 1997 $2,101.82 $5,499.71 $246,718.01
23 11 1 1997 $2,055.99 $5,545.54 $241,172.47
24 12 1 1997 $2,009.78 $5,591.75 $235,580.71
----------------------------------
$27,084.89 $64,133.47
25 1 1 1998 $1,963.18 $5,638.35 $229,942.36
26 2 1 1998 $1,916.19 $5,685.34 $224,257.02
27 3 1 1998 $1,868.81 $5,732.72 $218,524.31
28 4 1 1998 $1,821.04 $5,780.49 $212,743.82
29 5 1 1998 $1,772.87 $5,328.66 $206,915.16
30 6 1 1998 $1,724.30 $5,877.23 $201,037.92
31 7 1 1998 $1,675.32 $5,926.21 $195,111.71
32 8 1 1998 $1,625.94 $5,975.59 $189,136.12
33 9 1 1998 $1,576.14 $6,025.39 $183,110.73
34 10 1 1998 $1,525.93 $6,075.60 $177,035.13
35 11 1 1998 $1,475.30 $6,126.23 $170,908.89
36 12 1 1998 $1,424.24 $6,177.29 $164,731.61
----------------------------------
$20,369.25 $70,849.11
37 1 1 1999 $1,327.77 $6,228.76 $158,502.84
38 2 1 1999 $1,320.86 $6,280.67 $152,222.18
39 3 1 1999 $1,268.52 $6,333.01 $145,389.17
40 4 1 1999 $1,215.75 $6,385.78 $139,503.38
41 5 1 1999 $1,162.53 $6,439.00 $133,064.38
42 6 1 1999 $1,108.87 $6,492.66 $126,571.73
43 7 1 1999 $1,054.77 $6,546.76 $120,024.96
44 8 1 1999 $1,000.21 $6,601.32 $113,423.65
45 9 1 1999 $945.20 $6,656.33 $106,767.32
46 10 1 1999 $889.73 $6,711.30 $100,055.52
47 11 1 1999 $833.30 $6,767.73 $93,287.78
48 12 1 1999 $777.40 $6,824.13 $86,463.65
----------------------------------
$12,950.41 $78,267.95
49 1 1 2000 $720.53 $6,381.00 $79,582.66
50 2 1 2000 $663.19 $6,938.34 $72,644.32
51 3 1 2000 $605.37 $6,996.16 $65,648.16
52 4 1 2000 $547.07 $7,054.46 $58,593.70
53 5 1 2000 $488.28 $7,113.25 $51,480.45
54 6 1 2000 $429.00 $7,172.53 $44,307.92
55 7 1 2000 $369.23 $7,232.30 $37,075.63
56 8 1 2000 $308.96 $7,292.57 $29,783.06
57 9 1 2000 $248.19 $7,353.34 $22,429.73
58 10 1 2000 $186.91 $7,414.62 $15,015.11
59 11 1 2000 $125.13 $7,476.40 $7,538.71
60 12 1 2000 $62.82 $7,538.71 $0.00
----------------------------------
$4,754.71 $86,463.65
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
----------------------------------
$0.00 $0.00
GRAND TOTALS $95,341.30 $360,750.00
==================================
</TABLE>
<PAGE>
SCHEDULE P-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE P
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, Donald A. Burns a duly authorized inspector and authorized representative of
TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby certify that I have
accepted delivery on behalf of the Lessee pursuant to the Equipment Lease dated
as of January 1, 1994, between Lessor and Lessee, the Equipment described in
Schedule P attached to such Equipment Lease. Such Equipment is described as
follows:
Items of Equipment
------------------
Two (2) Digital Trunk Frames (DTFs) each wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Letter dated June 28, 1995.
-INSTALLATION SITE (Address): 800 E Main Street
Chattanooga, TN 37403
-PLACE ACCEPTED (Address): Same
-DATE ACCEPTED October 17, 1995
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the
manufacturer, distributor, or seller of such Equipment directly therewith and
will not set up any thereof against you, that its obligation to you is absolute,
and that you are neither the manufacturer, distributor, nor seller of such
Equipment and have no knowledge or familiarity with it.
October 17, 1995, Donald A. Burns
- ---------------------------- ---------------------------
Date Inspector and Authorized
Representative of Lessee
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group. Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
800 E. Main Street
Chattanooga, TN 37403
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE
TELCO COMMUNICATIONS GROUP, INC ------------------------------
X /s/ Donald A. Burns X
----------------------------- -----------------------------
By: /s/ Donald A. Burns By:
---------------------------- ---------------------------
Title: President Title
------------------------ -------------------------
Date: October 17, 1995 Date:
------------------------- -------------------------
MORTGAGEE OF REAL ESTATE
-------------------------------
X
-----------------------------
By:
---------------------------
Title:
------------------------
Date:
-------------------------
<PAGE>
EXHIBIT A
Items of Equipment
------------------
Two (2) Digital Trunk Frames (DTFs) each wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Letter dated June 28, 1995.
-INSTALLATION SITE (Address): 800 E Main Street
Chattanooga, TN 37403
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group, Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
Suite 500
101 West Second Street
Davenport, IA 52801
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies hat the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE
TELCO COMMUNICATIONS GROUP, INC. -------------------------------
X /s/ Donald A. Burns X
------------------------- --------------------------------
By: /s/ Donald A. Burns By:
------------------------ ------------------------------
Title: President Title:
-------------------- ---------------------------
Date: October 17, 1995 Date:
-------------------- ---------------------------
MORTGAGEE OF REAL ESTATE:
--------------------------
X
-----------------------
By:
-----------------------
Title:
--------------------
Date:
---------------------
<PAGE>
EXHIBIT A
Items of Equipment
-------------------
Five (5) Digital Trunk Frames (DTFs) each wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Letters dated February 7, 1995 and June 28, 1995.
- INSTALLATION SITE (Address): Suite 500
101 West Second Street
Davenport, IA 52801
<PAGE>
[LETTERHEAD OF DSC COMMUNICATIONS APPEARS HERE]
September 26, 1995 VIA OVERNIGHT DELIVERY AND
--------------------------
FACSIMILE (703) 803-3430
------------------------
Mr. Donald A. Burns
President
Telco COMMUNICATIONS Group. Inc.
4219 Lafayette Center Drive
Chantilly, VA 22021
Re: Equipment Lease dated January 1, 1994 by and between DSC Finance
Corporation and Telco Communications Group, Inc.
Mr. Burns
DSC Finance Corporation ("DSCFC") proposes to finance Telco Communications
Group. Inc.'s ("TCG") purchase of DSC Communications Corporation ("DSC")
equipment under the following terms and conditions:
LESSOR: DSC FINANCE CORPORATION;
LESSEE: TELCO COMMUNICATIONS GROUP, INC.;
GUARANATOR(S): Joint and several personal guaranties of Henry G.
Luken, an individual, and Donald A. Burns, an
individual, each to guarantee with,v percent
(50%) of the amount of indebtedness;
EQUIPMENT: Davenport: Five (5) Digital Trunk Frames (DTFs)
each wired and equipped with 1,536 digital ports,
plus peripheral equipment and software licenses
as listed on Lessee's Purchase Order Letters
dated June 28, 1995 and February 7, 1995;
Chattanooga: Two (2) Digital Trunk Frames (DTFs)
each wired and equipped with 1,536 digital ports,
plus peripheral equipment and software licenses
as listed on Lessee's Purchase Order Letter dated
June 28, 1995;
<PAGE>
Telco Communications Group, Inc. Proposal Letter
September 26, 1995
Page 2
SALE PRICE: $1,365,000.00, Freight and Sales Tax due net
thirty (30) days from shipment;
DOWN PAYMENT: $102.375.00, representing seven and one-half
percent (7.5%) of the Sale Price, Down Payment
due prior to shipment;
AMOUNT FINANCED: $1,262,625.00, representing ninety-two and one-
half percent (92.5%) of the Sale Price;
SHIPMENT: Per Purchase Order;
PAYMENT COMMENCEMENT: Ninety (90) days after shipment;
TERM/PAYMENTS: Sixty (60) consecutive monthly payments equal to
0.02107145 times the Amount Financed, payable in
advance;
IMPLICIT INTEREST RATE: Ten percent (10.0%) per annum;
PURCHASE OPTION: At the expiration of this lease, Lessee may
purchase the equipment financed for ONE DOLLAR
($1.00); or return the equipment to the Lessor in
good operating order, repair, and condition;
MAINTENANCE: Lessee at its sole cost and expense, will keep
and maintain the equipment in good operating
order, repair, and condition;
TYPE OF TRANSACTION: This is a net transaction, whereby freight.
property taxes, sales taxes, all documentation
costs, all legal fees, and all other items of a
similar nature will be for Lessee's account.
Lessee will comply with all laws and regulations
in the use of the equipment;
INSURANCE: Lessee, at its own expense, will provide all
inclusive insurance including, but not limited to
Public Liability and Property Damage, and
Casualty Coverage with DSC Finance Corporation
named as Loss Payee and Additional Insured and
for an amount not less than 100% of the amount
financed; and,
<PAGE>
Telco Communications Group, Inc. Proposal Letter
September 26, 1995
Page 3
SECURITY INTEREST: Leasee hereby grants DSCFC a security interest in
the Equipment and agrees to execute and furnish to
DSCFC any and all documentation necessary for the
perfection of such security interest.
This proposal is subject to DSCFC management approval and the execution of all
documentation, prior to and after shipment, which DSCFC may reasonably require.
TCG and DSCF agree this proposal is the final agreement with respect to
financing, the parties agree this proposal will prevail over any conflicts of
terms and conditions with respect to any previous financing offers or
agreements. This proposal will expire, if not accepted and delivered, on
September 28, 1995. Please execute this letter and return to my attention as
soon as possible. Thank you
Sincerely,
/s/ Jeff Partenheimer
Jeff Partenheimer
Director
AGREED and ACCEPTED this
28 day of September, 1995
LESSEE: TELCO COMMUNICATIONS GROUP, INC.
X /s/ Donald A. Burns
-------------------------------
Name: Donald A. Burns
---------------------------
Title: President
--------------------------
AGREED and ACCEPTED this
29 day of September, 1995
GUARANTOR: X /s/ Henry G. Luken
-------------------------------
<PAGE>
Telco Communications Group, Inc. Proposal Letter
September 26, 1995
Page 4
AGREED and ACCEPTED this
28 day of December, 1995
GUARANTOR: X /s/ Donald A. Burns
----------------------------
<PAGE>
- --------------------------------------------------------------------------------
--------------------------------
CHECK NO. CHECK DATE VENDOR NO. CHECK NO. 12200
- ---------------------------------- TELCO COMMUNICATIONS GROUP INC
12200 09/28/95 DSCFIN 4219 LAFAYETTE CENTER DRIVE
- ---------------------------------- CHANTILLY, VA 22012-1209
(703) 631-5600
SIGNET BANK
MARYLAND
BALTIMORE, MD 21202
7-1/521
-----------------
CHECK AMOUNT
--------------------
ONE HUNDRED TWO THOUSAND THREE HUNDRED SEVENTY-FIVE AND $**102,375.00
00/100 DOLLARS --------------------
PAY DSC FINANCE
TO THE 1000 COIT RD Signature
ORDER OF PLANO TX 75075 --------------------------
--------------------------
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
"'012200"' /:052000016/: "'440"'0334688"'
<PAGE>
TO A FILING OFFICER FOR FILING PURSUANT
TO THE UNIFORM COMMERCIAL CODE.
SOAs 175702 & 194559
<TABLE>
<S> <C> <C> <C>
------------------------------------------
11. [] CHECK TO REQUEST SAME DEBTOR
SEARCH CERTIFICATE. (INSTRUCTION B.11)
- ------------------------------------------------------------------------------------------------------------------------------------
1. DEBTOR (IF PERSONAL) LAST NAME FIRST NAME M.I. 1A. PREFIX 1B. SUFFIX
Telco Communications Group, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
1C. MAILING ADDRESS 1D. CITY, STATE 1E. ZIP CODE
4219 Lafayette Center Drive Chantilly, VA 22021
- ------------------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF PERSONAL) LAST NAME FIRST NAME M.I. 2A. PREFIX 2B. SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
2C. MAILING ADDRESS 2D. CITY, STATE 2E. ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------------------
3. ADDITIONAL DEBTOR (IF PERSONAL) LAST NAME FIRST NAME M.I. 3A. PREFIX 3B. SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
3C. MAILING ADDRESS 3D. CITY, STATE 3E. ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY (IF PERSONAL) LAST NAME FIRST NAME M.I.
DSC Finance Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
4A. MAILING ADDRESS 4B. CITY, STATE 4C. ZIP CODE
1000 Coit Road Plano, TX 75075
- ------------------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
5A. MAILING ADDRESS 5B. CITY, STATE 5C. ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property. (If collateral is crops, fixtures, timber or minerals,
read instruction B. 6-7.)
</TABLE>
Qty. Part No. Description
---- -------- -----------
5 X611U DTF Frame
20 X612U.01 DIM, MP 8/6
160 X613U DTI Card
Location of Equipment: 101 West 2nd St.
Suite 500
Davenport, IA 52801
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
7. CHECK ONLY 7A. PRODUCTS OF 7B. THIS FINANCING STATEMENT IS NUMBER OF ADDITIONAL
IF COLLATERAL ARE TO BE FILED FOR RECORD IN SHEETS
APPLICABLE [] ALSO COVERED [] THE REAL ESTATE RECORDS. PRESENTED_________
- ------------------------------------------------------------------------------------------------------------------------------------
8. CHECK 8A. THIS FINANCING STATEMENT IS SIGNED BY THE SECURED PARTY
APPROPRIATE INSTEAD OF THE DEBTOR TO PERFECT A SECURITY INTEREST IN
BOX COLLATERAL IN ACCORDANCE WITH INSTRUCTION B.8 ITEM: [](1) [](2) [](3) [](4) [](5)
- ------------------------------------------------------------------------------------------------------------------------------------
9. SIGNATURE(S) THIS SPACE FOR USE OF FILING OFFICER
OF (DATE, TIME, NUMBER, FILING OFFICER)
DEBTOR(S)
- --------------------------------------------------------------------------------------------
Telco Communications Group, Inc.
- --------------------------------------------------------------------------------------------
SIGNATURE(S)
OF
SECURED PARTY(IES)
- --------------------------------------------------------------------------------------------
DSC Finance Corporation
- --------------------------------------------------------------------------------------------
10. Return copy to:
NAME Jeff Partenheimer
ADDRESS DSC Finance Corporation
CITY 1000 Coit Road
STATE Plano, TX 75075
ZIP
- ------------------------------------------------------------------------------------------------------------------------------------
STANDARD FORM - FORM UCC-1 (REV. 9/1/92) (C) 1992 OFFICE OF THE SECRETARY OF STATE OF TEXAS
THE ODEE COMPANY, P.O. BOX 550488, DALLAS, TEXAS 75355
(1) FILING OFFICER COPY - NUMERICAL
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THIS FINANCING STATEMENT IS PRESENTED
TO A FILING OFFICER FOR FILING PURSUANT
TO THE UNIFORM COMMERCIAL CODE
SOA 194560
-------------------------------------------
11. [_] CHECK TO REQUEST SAME DEBTOR
SEARCH CERTIFICATE (INSTRUCTION B.11)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. DEBTOR (IF PERSONAL) LAST NAME FIRST NAME M.I. 1A. PREFIX 1B. SUFFIX
Telco Communications Group, Inc.
- -------------------------------------------------------------------------------------------------------------------
1C. MAILING ADDRESS 1D. CITY, STATE 1E. ZIP CODE
4219 Lafayette Center Drive Chantilly, VA 22021
- -------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF PERSONAL) LAST NAME FIRST NAME M.I. 2A. PREFIX 2B. SUFFIX
- -------------------------------------------------------------------------------------------------------------------
2C. MAILING ADDRESS 2D. CITY, STATE 2E. ZIP CODE
- -------------------------------------------------------------------------------------------------------------------
3. ADDITIONAL DEBTOR (IF PERSONAL) LAST NAME FIRST NAME M.I. 3A. PREFIX 3B. SUFFIX
- -------------------------------------------------------------------------------------------------------------------
3C. MAILING ADDRESS 3D. CITY, STATE 3E. ZIP CODE
- -------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY (IF PERSONAL) LAST NAME FIRST NAME M.I.
DSC Finance Corporation
- -------------------------------------------------------------------------------------------------------------------
4A. MAILING ADDRESS 4B. CITY, STATE 4C. ZIP CODE
1000 Coit Road Plano, TX 75075
- -------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY)
- -------------------------------------------------------------------------------------------------------------------
5A. MAILING ADDRESS 5B. CITY, STATE 5C. ZIP CODE
- -------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property. (If collateral is crops, fixtures,
timber or minerals, read instruction B.6-7.)
</TABLE>
<TABLE>
<CAPTION>
Qty. Part No. Description
---- -------- -----------
<S> <C> <C>
2 X611U DTF FRAME
8 X612U.01 DIM, MP 8/6
64 X613U DTI Card
</TABLE>
Location of Equipment: 800 E. Main St.
Chattanooga, TN 37403
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7. CHECK ONLY 7A. PRODUCTS OF 7B. THIS FINANCING STATEMENT IS NUMBER OF ADDITIONAL
IF COLLATERAL ARE TO BE FILED FOR RECORD IN SHEETS
APPLICABLE [_] ALSO COVERED [_] THE REAL ESTATE RECORDS. PRESENTED __________
- -------------------------------------------------------------------------------------------------------------------
8. CHECK 8A. THIS FINANCING STATEMENT IS SIGNED BY THE SECURED PARTY
APPROPRIATE INSTEAD OF THE DEBTOR TO PERFECT A SECURITY INTEREST IN
BOX COLLATERAL IN ACCORDANCE WITH INSTRUCTION B. 8 ITEM: [_](1) [_](2) [_](3) [_](4) [_](5)
- -------------------------------------------------------------------------------------------------------------------
9. SIGNATURE(S) THIS SPACE FOR USE OF FILING OFFICER
OF (DATE, TIME, NUMBER, FILING OFFICER.)
DEBTOR(S) /S/ Donald A. Burns
- --------------------------------------------------------------------------------
Telco Communications Group, Inc.
- --------------------------------------------------------------------------------
SIGNATURE(S)
OF
SECURED PARTY(IES)
- --------------------------------------------------------------------------------
DSC Finance Corporation
- --------------------------------------------------------------------------------
</TABLE>
10. Return copy to:
NAME Jeff Partenheimer
ADDRESS DSC Finance Corporation
CITY 1000 Coit Road
STATE Plano, TX 75075
ZIP
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE B
Agreement of Lease No. 941001
------
ACCEPTANCE SUPPLEMENT
---------------------
Commencement Date: October 1, 1994
Expiration Date: September 1, 1997
THIS ACCEPTANCE SUPPLEMENT is executed and delivered to DGI Technologies,
Inc. ("Lessor") and Telco Communications Group, Inc. ("Lessee") pursuant to and
in accordance with Equipment Schedule No. A to Lease Agreement dated October 1,
----------
1994 (the "Lease") between Lessor and Lessee. Terms defined in the Lease shall
- ----
have heir defined meanings when used herein.
A. The Equipment covered by this Acceptance Supplement consists of the
following items manufactured by DGI Technologies, Inc. as listed in Schedule A
of the Lease.
B. Lessee confirms that said Equipment has been delivered to it, duly
assembled and installed in good working order and condition, at the location
specified in the Lease.
C. Lessee hereby: (a) confirms that said Equipment is of the size, design
capacity and manufacture selected by it; (b) irrevocably accepts said Equipment
as-is, where-is for all purposes of the Lease as of the Commencement Date set
forth above.
D. The term of the lease of said Equipment under the Lease shall commence
as of the Commencement Date set forth above and unless earlier terminated
pursuant to the provisions of the Lease, shall expire on the Expiration Date set
forth above.
E. As rent for said Equipment throughout the term of the Lease, Lessee
shall pay to Lessor in accordance with the terms of the Lease the sum of
$159,696.00 in 36 monthly installments of $4,436.00 per month commencing October
- ----------- -- --------- -------
1, 1994 to and including September 1, 1997.
- ------- -----------------
F. All of the provisions of the Lease are hereby incorporated by reference
in this Acceptance Supplement to the same extent as if fully set forth herein.
APPROVED AND AGREED TO by the parties hereto as of the Commencement Date
set forth above.
LESSEE: LESSOR:
Telco Communications Group, Inc. DGI Technologies, Inc.
BY: /s/ Donald A. Burns BY:
--------------------------------- --------------------------------
President Lyle B. Coffman/Pres & COO
- -----------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF DSC COMMUNICATIONS CORPORATION APPEARS HERE]
January 23, 1996
Mr. Donald A. Burns
President
Telco Communications Group, Inc.
4219 Lafayette Center Drive
Chantilly, VA 22021
Re: Equipment Lease dated January 1, 1994 by and between DSC Finance
Corporation and Telco Communications Group, Inc.
Dear Don,
Thanks for the very enjoyable lunch yesterday with Richard and Butch. As we
discussed, I am writing to confirm our agreement regarding the Echo Canceller
orders for Davenport, Austin, and Las Vegas referred to in my proposal letter to
you dated December 29, 1995.
You mentioned that you now had in place a $65 million loan facility through
Signet and NationsBank which had in the range of $30 million to $35 million
undrawn. You also stated that you were looking for a lender to both 1) pay off
your existing equipment leases provided by DSC Finance, and 2) provide funds for
future equipment purchases from DSC. The main impetus for the search is the goal
of removing you and Henry Luken as personal guarantors, given the lower
ownership level you and Henry expect after the merger, and after subsequent
exercise of some convertible debt issuances into equity.
You also asked me to supply a list of possible lenders that would not expect
personal guarantees. I have included a list of companies that have called us
recently looking for business. I'd also contact Heller, Fleet Financial,
Ameritech Leasing (Kevin Collins 1-800-323-7311), El Camino (Mike Moore
1-214-980-1000), Comdisco (Dan Bailey 1-817-530-4019), and Meridian Leasing
(Michael Young 1-214-422-7720). I'm sorry I don't have the numbers for Heller or
Fleet. They shouldn't be too difficult to find. Again, I feel personal
guarantees will be necessary for any future business Telco does with DSC
Finance.
I agreed to waive personal guarantees from you and Henry on the above-mentioned
echo canceller orders for a period of only 90 days from the date of shipment. I
also agreed to release the Davenport and Las Vegas orders for shipment (Austin
had shipped at year-end).
In consideration for these concessions, you agreed to pay cash for the full sale
price of these orders ($939,120.00) within 90 days from shipment.
Finally, should these orders not be paid within 90 days from shipment as you had
expected, then the proposal letter dated December 29, 1995 will become
effective, as will your personal guarantees. The down payments on the Austin
order will become due and payable since it will have been 90 days since
shipment, and lease payments would then begin 90 days hence. Down
<PAGE>
TCG Letter
December 23, 1993
Page 2
payments on the Davenport and Las Vegas equipment will be due 90 days from
shipment, which I agreed to do on December 29.
Don, please sign along with Henry to acknowledge your agreement. I will release
the Davenport and Las Vegas orders (much to Richard Steven's delight), once I
receive this acknowledgment back.
Thanks very much and we'll talk to you soon.
Sincerely,
/s/ Jeff Partenheimer
Jeff Partenheimer
Director
AGREED AND ACCEPTED this
29 day of January, 1996
/s/ Donald A. Burns for
Henry G. Luken
--------------------------------
Henry G. Luken
/s/ Donald A. Burns
--------------------------------
Donald A. Burns
<PAGE>
[LETTERHEAD OF DSC COMMUNICATIONS CORPORATION APPEARS HERE]
January 22, 1996 VIA OVERNIGHT DELIVERY
----------------------
Mr. Donald A. Burns
President
Telco Communications Group, Inc.
4219 Lafayette Center Drive
Chantilly, VA 22021
Re: Equipment Lease dated January 1, 1994 by and between DSC Finance
Corporation and Telco Communications Group, Inc.
Don
DSC Finance Corporation and Telco Communications Group, Inc. ("TCG") entered
into agreements to finance TCG's purchase of DSC Communications Corporation
equipment including hardware, software licenses and services. Please find
enclosed the following documents, incorporating the above referenced agreements,
to complete the documentation process:
-Schedules Q, Q-1, R, R-1, S, S-1, T and T-1 to the Equipment Lease
-Certificate and Disclaimer of Record Owner and any Mortgagee of Real
Estate (Landlord Waiver) for the Equipment covered under each Schedule
Please have the documents executed by the appropriate parties and returned to my
attention as soon as possible. With regard to the Landlord Waivers, please
forward them to the appropriate parties for execution and return to my attention
at your earliest convenience. Also attached are examples of the insurance
coverages required under your lease. Please have your insurance agent forward
updated certificates to my attention.
If you have any questions or require any additional documentation, Please
contact me at (214) 519-4459. Thank you in advance for your prompt attention to
this matter.
Sincerely,
/s/ Lieschen C. Bibby
Lieschen C. Bibby
Manager
enclosures
<PAGE>
- --------------------------------------------------------------------------------
ACORD CERTIFICATE OF LIABILTIY INSURANCE DATE (MM/DD/YY)
- ----- -------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION
ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR
ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
-------------------------------------------------------
COMPANIES AFFORDING COVERAGE
(Also provide phone number) COMPANY
A
-------------------------------------------------------
INSURED COMPANY
B
-------------------------------------------------------
COMPANY
(LESSEE AS NAMED IN C
EQUIPMENT LEASE) -------------------------------------------------------
COMPANY
D
- --------------------------------------------------------------------------------
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED.
NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER
DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN.
THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE
TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN
REDUCED BY PAID CLAIMS.
<TABLE>
<CAPTION>
CO POLICY EFFECTIVE POLICY EXPIRATION LIMITS
LTR TYPE OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GENERAL LIABILITY GENERAL AGGREGATE $
X
COMMERCIAL GENERALIBILITY PRODUCTS COMP CP AGG $
CLAIMS MADE X OCCUR PERSONAL & ADV INJURY $
1,000,000
OWNER'S & CONTRACTOR'S PROT EACH OCCURENCE $
FIRE DAMAGE (Any one fire) $
MED EXP (Any one person) $
- ---------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY
COMBINED SINGLE LIMIT $
ANY AUTO ---------------------------------------------
BODILY INJURY $
ALL OWNED AUTOS (Per Person)
---------------------------------------------
SCHEDULED AUTOS BODILY INJURY $
(Per accident)
HIRED AUTOS ---------------------------------------------
PROPERTY DAMAGE $
NON-OWNED AUTOS
- ---------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY EA ACCIDENT $
---------------------------------------------
ANY AUTO OTHER THAN AUTO ONLY
---------------------------------------------
EACH ACCIDENT $
---------------------------------------------
AGGREGATE $
- ---------------------------------------------------------------------------------------------------------------------------------
EXCESS LIABILITY
EACH OCCURENCE $
UMBRELLA FORM ---------------------------------------------
AGGREGATE $
---------------------------------------------
OTHER THAN UMBRELLA FORM $
- ---------------------------------------------------------------------------------------------------------------------------------
WORKERS COMPENSATION AND X WC STATU- OTH-
EMPLOYERS' LIABILITY TORY LIMITS ER
---------------------------------------------
EL EACH ACCIDENT $
THE PROPRIETOR/ INCL EL DISEASE POLICY LIMIT $
PARTNERS/EXECUTIVE EL DISEASE EA EMPLOYEE $
OFFICERS ARE EXCL
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
Certificate Holder is additional insured as listed on the Equipment Lease
dated ___________________ and related Schedules _________________.
- --------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
DSC Finance Corporation SHOULD ANY OF THE ABOVE DESCRIBED POLICIES
1000 Coit Road, MS TREA1 BE CANCELLED BEFORE THE EXPIRATION DATE
Plano, TX 75075 THEREOF, THE ISSUING COMPANY WILL ENDEAVOR
TO MAIL 30 DAYS WRITTEN NOTICE TO THE
--
CERTIFICATE HOLDER NAMED TO THE LEFT, BUT
FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO
OBLIGATION OR LIABILITY OF ANY KIND UPON THE
COMPANY, ITS AGENTS OR REPRESENTATIVES.
---------------------------------------------
AUTHORIZED REPRESENTATIVE
ACORD 25-S (1/95) (c) ACORD CORPORATION 1988
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ACORD CERTIFICATE OF PROPERTY INSURANCE DATE(MM/DD/YY)
- -----
----------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER
OF INFORMATION ONLY AND CONFERS NO
RIGHTS UPON THE CERTIFICATE HOLDER. THIS
CERTIFICATE DOES NOT AMEND, EXTEND OR
ALTER THE COVERAGE AFFORDED BY THE
POLICIES BELOW.
----------------------------------------
COMPANIES AFFORDING COVERAGE
----------------------------------------
(also provide phone number) COMPANY
A
- --------------------------------------------------------------------------------
INSURED
COMPANY
B
----------------------------------------
COMPANY
(Lessee as named in Equipment Lease) C
----------------------------------------
COMPANY
D
- --------------------------------------------------------------------------------
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED BELOW FOR THE POLICY PERIOD INDICATED,
NOTWITHSTANDING ANY REQUIREMENTS, TERM OR CONDITION OF ANY CONTRACT OR OTHER
DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN.
THE INSURANCE AFFORDED BY THE POLICIES DISCRIBED HEREIN IS SUBJECT TO ALL THE
TERMS EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN
REDUCED BY PAID CLAIMS.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
00 POLICY EFFECTIVE POLICY EXPIRATION
LTR TYPE OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) COVERED PROPERYT LIMITS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
X PROPERTY BUILDING $
--- --- ------------
CAUSES OF LOSS PERSONAL PROPERTY $
--- --- ------------
BASIC BUSINESS INCOME $
--- --- ------------
BROAD EXTRA EXPENSE $
--- --- ------------
SPECIAL BLANKET BUILDING $
--- --- ------------
EARTHQUAKE BLANKET PERS PROP $
--- --- ------------
FLOOD BLANKET BLDG & PR $
--- --- ------------
$
--- --- ------------
$
- ------------------------------------------------------------------------------------------------------------------------------------
PROPERTY $
--- --- ------------
TYPE OF POLICY $
--- --- ------------
$
--- --- ------------
CAUSES OF LOSS $
--- --- ------------
NAMED PERILS $
--- --- ------------
OTHER $
--- --- ------------
- ------------------------------------------------------------------------------------------------------------------------------------
CRIME $
--- --- ------------
TYPE OF POLICY $
--- --- ------------
$
- ------------------------------------------------------------------------------------------------------------------------------------
BOILER & MACHINERY $
--- --- ------------
$
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
OTHER
---
- --------------------------------------------------------------------------------
LOCATION OF PREMISES/DESCRIPTION OF PROPERTY
(Attach additional schedule if necessary)
- --------------------------------------------------------------------------------
SPECIAL CONDITIONS/OTHER COVERAGES
Certificate Holder is loss payee with respect to business personal property as
listed on the Equipment Lease dated and related Schedules .
------------ ---------
- --------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
SHOULD ANY OF THE ABOVE DESCRIBED
DSC Finance Corporation POLICIES BE CANCELLED BEFORE THE
1000 Coit Road, MS TREA1 EXPIRATION DATE THEREOF, THE ISSUING
Plano, TX 75075 COMPANY WILL ENDEAVOR TO MAIL 30 DAYS
WRITTEN NOTICE TO THE CERTIFICATE
HOLDER NAMED TO THE LEFT. BUT FAILURE
TO MAIL SUCH NOTICE SHALL IMPOSE NO
OBLIGATION OR LIABILITY OF ANY KIND
UPON THE COMPANY, ITS AGENTS OR
REPRESENTATIVES.
----------------------------------------
AUTHORIZED REPRESENTATIVE
ACORD 24 (1/95) @ACORD CORPORATION 1995
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE Q
This Schedule Q is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION, as
Lessor, and TELCO COMMUNICATIONS GROUP, as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
------------
hereby leases and hires form Lessor, the Items of Equipment described below.
Items of Equipment
------------------
One (1) Digital Trunk Frame (DTF) wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Number 062895.10 dated June 28, 1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Net Manufacturer's Invoice
Cost of such equipment, as set forth below; the first of which monthly rent
payments shall be due and payable on the First Periodic Rent Payment Date, as
set forth below, and continuously thereafter such monthly rent payments shall
be due and payable on each Periodic Rent Payment Date, as set forth below, until
the Last Periodic Rent Payment Date, as set forth below. The Lease Expiration
Date shall be as set forth below.
<TABLE>
<CAPTION>
Lease Rate Factor and Related Information
-----------------------------------------
<S> <C>
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $195,000.00
Less: 7.5% Down Payment 14,625.00
-----------
Net Manufacturer's Invoice Cost: $180,375.00
Periodic Lease Payment (Monthly Rent) $3,800.76
</TABLE>
Relevant Dates
--------------
First Periodic Rent Payment Date: July 1, 1996, in advance
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: June 1, 2001
Lease Expiration Date: The Lease Expiration Date shall be June 30, 2001.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate of ten percent (10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Sharp EL-5102 financial
calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment by
-------------
the execution and delivery to the Lessor of a Certificate of Acceptance in the
form of Schedule Q-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed, on the 29 day of January, 1996.
-- ------- -
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X
-------------------------------- -------------------------------
By: /s/ Donald A. Burns By:
------------------------------- -----------------------------
Its: President Its:
------------------------------ ----------------------------
<PAGE>
PV = $180.375.00 PMT = $3.800.76
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
PMT DATE
------------
NO MO DA YR INTEREST PRINCIPAL BALANCE
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 7 1 1996 $0.00 $3,800.76 $176,574.24
2 8 1 1996 $1,471.45 $2,329.31 $174,244.93
3 9 1 1996 $1,452.04 $2,348.72 $171,896.20
4 10 1 1996 $1,432.46 $2,368.30 $169,527.91
5 11 1 1996 $1,412.73 $2,388.03 $167,139.88
6 12 1 1996 $1,392.83 $2,407.93 $164,731.94
7 1 1 1997 $1,372.76 $2,428.00 $162,303.95
8 2 1 1997 $1,352.53 $2,448.23 $159,855.71
9 3 1 1997 $1,332.13 $2,468.63 $157,387.08
10 4 1 1997 $1,311.55 $2,489.21 $154,897.88
11 5 1 1997 $1,290.81 $2,509.95 $152,387.93
12 6 1 1997 $1,269.90 $2,530.86 $149,857.06
--------------------------
$15,091.18 $30,517.94
13 7 1 1997 $1,248.80 $2,551.96 $147,305.11
14 8 1 1997 $1,227.54 $2,573.22 $144,731.89
15 9 1 1997 $1,206.10 $2,594.66 $142,137.22
16 10 1 1997 $1,184.47 $2,616.29 $139.520.94
17 11 1 1997 $1,162.67 $2,638.09 $136.882.85
18 12 1 1997 $1,140.69 $2,660.07 $134,222.77
19 1 1 1998 $1,118.52 $2,682.24 $131,540.53
20 2 1 1998 $1,096.17 $2,704.59 $128,835.94
21 3 1 1998 $1,073.63 $2,727.13 $126,108.81
22 4 1 1998 $1,050.90 $2,749.86 $123,358.95
23 5 1 1998 $1,027.99 $2,772.77 $120,586.18
24 6 1 1998 $1,004.88 $2,795.88 $117,790.30
--------------------------
$13,542.36 $32,066.76
25 7 1 1998 $981.58 $2,819.18 $114,971.13
26 8 1 1998 $958.09 $2,842.67 $112,128.46
27 9 1 1998 $934.40 $2,866.36 $109,262.10
28 10 1 1998 $910.51 $2,890.25 $106,371.85
29 11 1 1998 $886.43 $2,914.33 $103,457.52
30 12 1 1998 $862.14 $2,938.62 $100,518.90
31 1 1 1999 $837.65 $2,963.11 $97,555.80
32 2 1 1999 $812.96 $2,987.80 $94,568.00
33 3 1 1999 $788.06 $3,012.70 $91,555.30
34 4 1 1999 $762.96 $3,037.80 $88,517.50
35 5 1 1999 $737.64 $3,063.12 $85,454.39
36 6 1 1999 $712.12 $3,088.64 $82,365.74
--------------------------
$10,184.56 $35,424.56
</TABLE>
7 1 1996 START DATE
<TABLE>
<CAPTION>
PMT DATE
------------
NO MO DA YR INTEREST PRINCIPAL BALANCE
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 7 1 1999 $686.38 $3,114.38 $79,251.36
38 8 1 1999 $660.43 $3,140.33 $76,111.03
39 9 1 1999 $634.26 $3,166.50 $72,944.53
40 10 1 1999 $607.87 $3,192.89 $69,751.64
41 11 1 1999 $581.26 $3,219.50 $66,532.14
42 12 1 1999 $554.43 $3,246.33 $63,285.81
43 1 1 2000 $527.38 $3,273.38 $60,012.43
44 2 1 2000 $500.10 $3,300.66 $56,711.77
45 3 1 2000 $472.60 $3,328.16 $53,383.61
46 4 1 2000 $444.86 $3,355.90 $50,027.71
47 5 1 2000 $416.90 $3,383.86 $46,643.85
48 6 1 2000 $388.70 $3,412.06 $43,231.78
--------------------------
$6,475.16 $39,133.96
49 7 1 2000 $360.26 $3,440.50 $39,791.29
50 8 1 2000 $331.59 $3,469.17 $36,322.12
51 9 1 2000 $302.68 $3,498.08 $32,824.04
52 10 1 2000 $273.53 $3,527.23 $29,296.82
53 11 1 2000 $244.14 $3,556.62 $25,740.20
54 12 1 2000 $214.50 $3,586.26 $22,153,94
55 1 1 2001 $184.62 $3,616.14 $18,537.79
56 2 1 2001 $154.48 $3,646.28 $14,891.51
57 3 1 2001 $124.10 $3,676.66 $11,214.85
58 4 1 2001 $93.46 $3,707.30 $7,507.55
59 5 1 2001 $62.56 $3,738.20 $3,769.35
60 6 1 2001 $31.41 $3,769.35 $0.00
--------------------------
$2,377.34 $43,231.78
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
--------------------------
$0.00 $0.00
GRAND TOTALS $46,670.60 $180,375.00
==========================
</TABLE>
<PAGE>
SCHEDULE Q-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE Q
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, ______________________________ a duly authorized inspector and authorized
representative of TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby
certify that I have accepted delivery on behalf of the Lessee pursuant to the
Equipment Lease dated as of January 1, 1994, between Lessor and Lessee, the
Equipment described in Schedule Q attached to such Equipment Lease. Such
Equipment is described as follows:
Items of Equipment
------------------
One (1) Digital Trunk Frame (DTF) wired and equipped with 1,536 digital ports
plus peripheral equipment and software licenses as listed on Lessee's Purchase
Order Number 062895.10 dated June 28, 1995.
- INSTALLATION SITE (Address): 1522 NW 23rd Avenue
Ft. Lauderdale, FL 33311
- PLACE ACCEPTED (Address): Same
- DATE ACCEPTED: _____________________________________
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
_______________________________ ____________________________
Date Inspector and Authorized
Representative of Lessee
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group, Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
1522 NW 23rd Avenue
Ft. Lauderdale, Fl 33311
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE:
TELCO COMMUNICATIONS GROUP, INC. ______________________________
X Donald A. Burns X
------------------------- -------------------------
By: Donald A. Burns By:
------------------------- -------------------------
Title: President Title:
------------------------- -------------------------
Date: January 26, 1996 Date:
------------------------- -------------------------
MORTGAGEE OF REAL ESTATE:
--------------------------------
X -------------------------
By: -------------------------
Title: -------------------------
Date: -------------------------
<PAGE>
EXHIBIT A
Items of Equipment
------------------
One (1) Digital Trunk Frame (DTF) wired and equipped with 1,536 digital ports
plus peripheral equipment and software licenses as listed on Lessee's Purchase
Order Number 062895.10 dated June 28, 1995.
-INSTALLATION SITE (Address): 1522 NW 23rd Avenue
Ft. Lauderdale, FL 33311
<PAGE>
SCHEDULE R
This Schedule R is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION, as
Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
------------
hereby leases and hires from Lessor, the Items of Equipment described below:
Items of Equipment
------------------
Two (2) Digital Trunk Frames (DTFs) each wired and equipped with 1,536
digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 062895.10 dated June 28, 1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the New Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $390,000.00
Less: 7.5% Down Payment 29,250.00
-----------
Net Manufacturer's Invoice Cost: $360,750.00
Periodic Lease Payment (Monthly Rent): $7,601.53
Relevant Dates
--------------
First Periodic Rent Payment Date: July 1, 1996, in advance.
Periodic Rent Payment Date: The first day of each month consecutively
following the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: June 1, 2001.
Lease Expiration Date: The Lease Expiration Date shall be June 30, 2001.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate of ten percent (10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Sharp EL-5102 financial
calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment by
-------------
the execution and delivery to the Lessor of a Certificate of Acceptance in the
form of Schedule R-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed, on this 26 day of January, 1996.
LESSEE: LESSOR:
TELECO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X
-------------------------------- ---------------------------------
By: Donald A. Burns By:
------------------------------ -------------------------------
Its: President Its:
----------------------------- ------------------------------
<PAGE>
PV = $360,750.00 PMT = $7,601.53 7 1 1996 START DATE
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
DATE DATE
PMT -------------- PMT --------------
NO MO DA YR INTEREST PRINCIPAL BALANCE NO MO DA YR INTEREST PRINCIPAL BALANCE
- --------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7 1 1996 $0.00 $7,601.53 $353,148.47 37 7 1 1999 $1,372.77 $6,228.76 $158,502.84
2 8 1 1996 $2,942.91 $4,658.62 $348,489.85 38 8 1 1999 $1,320.86 $6,280.67 $152,222.18
3 9 1 1996 $2,904.09 $4,697.44 $343,792.41 39 9 1 1999 $1,268.52 $6,333.01 $145,889.17
4 10 1 1996 $2,864.94 $4,736.59 $339,055.83 40 10 1 1999 $1,215.75 $6,385.78 $139,503.38
5 11 1 1996 $2,825.47 $4,776.06 $334,279.77 41 11 1 1999 $1,162.53 $6,439.00 $133,064.38
6 12 1 1996 $2,785.67 $4,815.86 $329,463.91 42 12 1 1999 $1,108.87 $6,492.66 $126,571.73
7 1 1 1997 $2,745.54 $4,855.99 $324,607.92 43 1 1 2000 $1,054.77 $6,546.76 $120,024.96
8 2 1 1997 $2,705.07 $4,896.46 $319,711.47 44 2 1 2000 $1,000.21 $6,601.32 $113,423.65
9 3 1 1997 $2,664.27 $4,937.26 $314,774.21 45 3 1 2000 $945.20 $6,656.33 $106,767.32
10 4 1 1997 $2,623.13 $4,978.40 $309,795.80 46 4 1 2000 $889.73 $6,711.80 $100,055.52
11 5 1 1997 $2,581.64 $5,019.89 $304,775.91 47 5 1 2000 $833.80 $6,767.73 $93,287.78
12 6 1 1997 $2,539.81 $5,061.72 $299,714.19 48 6 1 2000 $777.40 $6,824.13 $86,463.65
---------------------- ----------------------
$30,182.54 $61,035.81 $12,950.41 $78,267.95
13 7 1 1997 $2,497.63 $5,103.90 $294,610.28 49 7 1 2000 $720.53 $6,881.00 $79,582.66
14 8 1 1997 $2,455.09 $5,146.44 $289,463.84 50 8 1 2000 $663.19 $6,938.34 $72,644.32
15 9 1 1997 $2,412.21 $5,189.32 $284,274.52 51 9 1 2000 $605.37 $6,996.16 $65,648.16
16 10 1 1997 $2,363.96 $5,232.57 $279,041.95 52 10 1 2000 $547.07 $7,054.46 $58,593.70
17 11 1 1997 $2,325.36 $5,276.17 $273,765.78 53 11 1 2000 $488.28 $7,113.25 $51,480.45
18 12 1 1997 $2,281.39 $5,320.14 $268,445.63 54 12 1 2000 $429.00 $7,172.53 $44,307.92
19 1 1 1998 $2,237.05 $5,364.48 $263,081.16 55 1 1 2001 $369.23 $7,232.30 $37,075.63
20 2 1 1998 $2,192.35 $5,409.18 $257,671.97 56 2 1 2001 $308.96 $7,292.57 $29,783.06
21 3 1 1998 $2,147.27 $5,454.26 $252,217.72 57 3 1 2001 $248.19 $7,353.34 $22,429.73
22 4 1 1998 $2,101.82 $5,499.71 $246,718.01 58 4 1 2001 $186.91 $7,414.62 $15,015.11
23 5 1 1998 $2,055.99 $5,545.54 $241,172.47 59 5 1 2001 $125.13 $7,476.40 $7,538.71
24 6 1 1998 $2,009.78 $5,591.75 $235,580.71 60 6 1 2001 $62.82 $7,538.71 $0.00
---------------------- ----------------------
$27,084.89 $64,133.47 $4,754.71 $86,463.65
25 7 1 1998 $1,963.18 $5,638.35 $229,942.36 0 0 0 0 $0.00 $0.00 $0.00
26 8 1 1998 $1,916.19 $5,685.34 $224,257.02 0 0 0 0 $0.00 $0.00 $0.00
27 9 1 1998 $1,868.81 $5,732.72 $218,524.31 0 0 0 0 $0.00 $0.00 $0.00
28 10 1 1998 $1,821.04 $5,780.49 $212,743.82 0 0 0 0 $0.00 $0.00 $0.00
29 11 1 1998 $1,772.87 $5,828.66 $206,915.16 0 0 0 0 $0.00 $0.00 $0.00
30 12 1 1998 $1,724.30 $5,877.23 $201,037.92 0 0 0 0 $0.00 $0.00 $0.00
31 1 1 1999 $1,675.32 $5,926.21 $195,111.71 0 0 0 0 $0.00 $0.00 $0.00
32 2 1 1999 $1,625.94 $5,975.59 $189,136.12 0 0 0 0 $0.00 $0.00 $0.00
33 3 1 1999 $1,576.14 $6,025.39 $183,110.73 0 0 0 0 $0.00 $0.00 $0.00
34 4 1 1999 $1,525.93 $6,075.60 $177,035.13 0 0 0 0 $0.00 $0.00 $0.00
35 5 1 1999 $1,475.30 $6,126.23 $170,908.89 0 0 0 0 $0.00 $0.00 $0.00
36 6 1 1999 $1,424.24 $6,177.29 $164,731.61 0 0 0 0 $0.00 $0.00 $0.06
---------------------- ----------------------
$20,369.25 $70,849.11 $0.00 $0.00
GRAND TOTALS $95,341.80 $360,750.00
======================
</TABLE>
<PAGE>
SCHEDULE R-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE R
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, ____________________ a duly authorized inspector and authorized
representative of TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby
certify that I have accepted delivery on behalf of the Lessee pursuant to the
Equipment Lease dated as of January 1, 1994, between Lessor and Lessee, the
Equipment described in Schedule R attached to such Equipment Lease. Such
Equipment is described as follows:
Items of Equipment
------------------
Two (2) Digital Trunk Frames (DTFs) each wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Number 062895.10 dated June 28, 1995.
- INSTALLATION SITE (Address): Suite 500-3
702 Colorado Street
Austin, TX 78701
- PLACE ACCEPTED (Address): Same
- DATE ACCEPTED: _____________________________________
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
________________________ ____________________________
Date Inspector and Authorized
Representative of Lessee
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group, Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
Suite 500-3
702 Colorado Street
Austin, TX 78701
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE:
TELCO COMMUNICATIONS GROUP, INC. ______________________________
X Donald A. Burns X
------------------------- -------------------------
By: Donald A. Burns By:
------------------------- -------------------------
Title: President Title:
------------------------- -------------------------
Date: January 29, 1996 Date:
------------------------- -------------------------
MORTGAGEE OF REAL ESTATE:
--------------------------------
X -------------------------
By: -------------------------
Title: -------------------------
Date: -------------------------
<PAGE>
EXHIBIT A
Items of Equipment
------------------
Two (2) Digital Trunk Frames (DTFs) each wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Number 062895.10 dated June 28, 1995.
- INSTALLATION SITE (Address): Suite 500-3
702 Colorado Street
Austin, TX 78701
<PAGE>
SCHEDULE S
This Schedule S is attached to and made a part of the Equipment Lease (the
"Lease") dated the 1st day of January, 1994, between DSC FINANCE CORPORATION, as
Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
------------
hereby leases and hires from Lessor, the Items of Equipment described below:
Items of Equipment
------------------
Two (2) Digital Trunk Frames (DTFs) each wired and equipped with 1,536
digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 062895.10 dated June 28, 1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
-----------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Net Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the Last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
-----------------------------------------
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $390,000.00
Less: 7.5% Down Payment 29,250.00
-----------
Net Manufacturer's Invoice Cost: $360,750.00
Periodic Lease Payment (Monthly Rent): $7,601.53
Relevant Dates
--------------
First Periodic Rent Payment Date: July 1, 1996, in advance.
Periodic Rent Payment Date: The first day of each month consecutively
following the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: June 1, 2001.
Lease Expiration Date: The Lease Expiration Date shall be June 30, 2001.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
------------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate of ten percent (10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Sharp EL-5102 financial
calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment by
-------------
the execution and delivery to the Lessor of a Certificate of Acceptance in the
form of Schedule S-1 hereto.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this instrument
to be duly executed, on this 26 day of January, 1996.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X /s/ Donald A. Burns X
------------------------------ --------------------------------
By: Donald A. Burns By:
---------------------------- ------------------------------
Its: President Its:
--------------------------- -----------------------------
<PAGE>
PV = $360,750.00 PMT = $7,601.53
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
PMT DATE
------------
NO MO DA YR INTEREST PRINCIPAL BALANCE
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 7 1 1996 $0.00 $7,601.53 $353,148.47
2 8 1 1996 $2,942.91 $4,658.62 $348,489.85
3 9 1 1996 $2,904.09 $4,697.44 $343,792.41
4 10 1 1996 $2,864.94 $4,736.59 $339,055.83
5 11 1 1996 $2,825.47 $4,776.06 $334,279.77
6 12 1 1996 $2,785.67 $4,815.86 $329,463.91
7 1 1 1997 $2,745.54 $4,855.99 $324,607.92
8 2 1 1997 $2,705.07 $4,896.46 $319,711.47
9 3 1 1997 $2,664.27 $4,937.26 $314,774.21
10 4 1 1997 $2,623.13 $4,978.40 $309,795.80
11 5 1 1997 $2,581.64 $5,019.89 $304,775.91
12 6 1 1997 $2,539.81 $5,061.72 $299,714.19
--------------------------
$30,182.54 $61,035.81
13 7 1 1997 $2,497.63 $5,103.90 $294,610.28
14 8 1 1997 $2,455.09 $5,146.44 $289,463.84
15 9 1 1997 $2,412.21 $5,189.32 $284,274.52
16 10 1 1997 $2,368.96 $5,232.57 $279,041.95
17 11 1 1997 $2,325.36 $5,276.17 $273,765.78
18 12 1 1997 $2,281.39 $5,320.14 $268,445.63
19 1 1 1998 $2,237.05 $5,364.48 $263,081.16
20 2 1 1998 $2,192.35 $5,409.18 $257,671.97
21 3 1 1998 $2,147.27 $5,454.26 $252,217.72
22 4 1 1998 $2,101.82 $5,499.71 $246,718.01
23 5 1 1998 $2,055.99 $5,545.54 $241,172.47
24 6 1 1998 $2,009.78 $5,591.75 $235,580.71
--------------------------
$27,084.89 $64,133.47
25 7 1 1998 $1,963.18 $5,638.35 $229,942.36
26 8 1 1998 $1,916.19 $5,685.34 $224,257.02
27 9 1 1998 $1,868.81 $5,732.72 $218,524.31
28 10 1 1998 $1,821.04 $5,780.49 $212,743.82
29 11 1 1998 $1,772.87 $5,828.66 $206,915.16
30 12 1 1998 $1,724.30 $5,877.23 $201,037.92
31 1 1 1999 $1,675.32 $5,926.21 $195,111.71
32 2 1 1999 $1,625.94 $5,975.59 $189,136.12
33 3 1 1999 $1,576.14 $6,025.39 $183,110.73
34 4 1 1999 $1,525.93 $6,075.60 $177,035.13
35 5 1 1999 $1,475.30 $6,126.23 $170,908.89
36 6 1 1999 $1,424.24 $6,177.29 $164,731.61
--------------------------
$20,369.25 $70,849.11
</TABLE>
7 1 1996 START DATE
<TABLE>
<CAPTION>
PMT DATE
------------
NO MO DA YR INTEREST PRINCIPAL BALANCE
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 7 1 1999 $1,372.77 $6,228.76 $158,502.84
38 8 1 1999 $1,320.86 $6,280.67 $152,222.18
39 9 1 1999 $1,268.52 $6,333.01 $145,889.17
40 10 1 1999 $1,215.75 $6,385.78 $139,503.38
41 11 1 1999 $1,162.53 $6,439.00 $133,064.38
42 12 1 1999 $1,108.87 $6,492.66 $126,571.73
43 1 1 2000 $1,054.77 $6,546.76 $120,024.96
44 2 1 2000 $1,000.21 $6,601.32 $113,423.65
45 3 1 2000 $945.20 $6,656.33 $106,767.32
46 4 1 2000 $889.73 $6,711.80 $100,055.52
47 5 1 2000 $833.80 $6,767.73 $93,287.78
48 6 1 2000 $777.40 $6,824.13 $86,463.65
--------------------------
$12,950.41 $78,267.95
49 7 1 2000 $720.53 $6,881.00 $79,582.66
50 8 1 2000 $663.19 $6,938.34 $72,644.32
51 9 1 2000 $605.37 $6,996.16 $65,648.16
52 10 1 2000 $547.07 $7,054.46 $58,593.70
53 11 1 2000 $488.28 $7,113.25 $51,480.45
54 12 1 2000 $429.00 $7,172.53 $44,307,92
55 1 1 2001 $369.23 $7,232.30 $37,075.63
56 2 1 2001 $308.96 $7,292.57 $29,783.06
57 3 1 2001 $248.19 $7,353.34 $22,429.73
58 4 1 2001 $186.91 $7,414.62 $15,015.11
59 5 1 2001 $125.13 $7,476.40 $7,538.71
60 6 1 2001 $62.82 $7,538.71 $0.00
--------------------------
$4,754.71 $86,463.65
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
0 0 0 0 $0.00 $0.00 $0.00
--------------------------
$0.00 $0.00 $0.00
GRAND TOTALS $95,341.80 $360,750.00
==========================
</TABLE>
<PAGE>
SCHEDULE S-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULES
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, [name appears here] a duly authorized inspector and authorized representative
-------------------
of TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby certify that I
have accepted delivery on behalf of the Lessee pursuant to the Equipment Lease
dated as of January 1, 1994, between Lessor and Lessee, the Equipment described
in Schedule S attached to such Equipment Lease. Such Equipment is described as
follows:
Items of Equipment
------------------
Two (2) Digital Trunk Frames (DTFs) each wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Number 062895.10 dated June 28, 1995.
- -INSTALLATION SITE (Address): Suite 500
101 West Second Street
Davenport, IA 52801
- -PLACE ACCEPTED (Address): Same
- -DATE ACCEPTED: [Date appears here]
-------------------
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
[insert date here] [insert name here]
- ------------------ ------------------------
Date Inspector and Authorized
Representative of Lessee
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group, Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
Suite 500
101 West Second Street
Davenport, IA 52801
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgage") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE:
TELCO COMMUNICATIONS GROUP, INC. -----------------------
X [Signature appears here] X [ ]
------------------------ ---------------------
By: [Signature appears here] By: [ ]
------------------------ ---------------------
Title: President Title: [ ]
------------------------ ---------------------
Date: January 29, 1996 Date: [ ]
------------------------ ---------------------
MORTGAGEE OF REAL ESTATE
[ ]
- ------------------------
X [ ]
-----------------
By: [ ]
-----------------
Title: [ ]
-----------------
Date: [ ]
-----------------
<PAGE>
EXHIBIT A
Items of Equipment
Two (2) Digital Trunk Frames (DTFs) each wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Number 062895.10 dated June 28, 1995.
- -INSTALLATION SITE (Address): Suite 500
101 West Second Street
Davenport, IA 52801
<PAGE>
SCHEDULE T
This Schedule T is attached to and made a part of the Equipment Lease
(the "Lease") dated the 1st day of January, 1994, between DSC FINANCE
CORPORATION, as Lessor, and TELCO COMMUNICATIONS GROUP, INC., as Lessee.
1. Equipment. The Lessor hereby leases and lets to the Lessee, and Lessee
-------------
hereby leases and hires from Lessor, the Items of Equipment described below:
Items of Equipment
------------------
Four (4) Digital Trunk Frames (DTFs) each wired and equipped with 1,536
digital ports plus peripheral equipment and software licenses as listed on
Lessee's Purchase Order Number 122195 dated December 21, 1995. One (1) Digital
Trunk Frame (DTF) wired and equipped with 1,536 digital ports plus peripheral
equipment and software licenses as listed on Lessee's Purchase Order Number
062895.10 dated June 28, 1995.
2. Lease Payments. The Lessee agrees to pay the Lessor monthly rent, in
------------------
advance and otherwise in accordance with the Lease and this schedule, for the
Items of Equipment described above, an amount equal to the Periodic Lease Rate
Factor, as set forth below, multiplied by the Net Manufacturer's Invoice Cost of
such equipment, as set forth below; the first of which monthly rent payments
shall be due and payable on the First Periodic Rent Payment Date, as set forth
below, and continuously thereafter such monthly rent payments shall be due and
payable on each Periodic Rent Payment Date, as set forth below, until the last
Periodic Rent Payment Date, as set forth below. The Lease Expiration Date shall
be as set forth below.
Lease Rate Factor and Related Information
Periodic Lease Rate Factor: 0.02107145
Implicit Interest Rate: 10.00%
Manufacturer's Invoice Cost: $975,000.00
Less: 7.5% Down Payment 73,125.00
-----------
Net Manufacturer's Invoice Cost: $901,875.00
Periodic Lease Payment (Monthly Rent): $19,003.81
Relevant Dates
--------------
First Periodic Rent Payment Date: July 1, 1996, in advance.
Periodic Rent Payment Date: The first day of each month consecutively following
the First Periodic Rent Payment Date.
Last Periodic Rent Payment Date: June 1, 2001.
Lease Expiration Date: The Lease Expiration Date shall be June 30, 2001.
<PAGE>
3. Stipulated Loss Value. At any date, the Stipulated Loss Value of each
---------------------
Item of Equipment shall be defined as one hundred percent (100%) of the present
value (as the term is used in financial calculations) of the remaining monthly
lease rental payments as to such Item of Equipment on the last Periodic Lease
Payment Date on which rent was paid, calculated at a rate of ten percent (10.0%)
per annum. Any dispute over mechanics of calculation of present value shall be
resolved by use of the present value functions of a Sharp EL-5102 financial
calculator.
4. Acceptance. The Lessee will signify its acceptance of the Equipment by
----------
the execution and delivery to the Lessor of a Certificate of Acceptance in the
form of Schedule T-1 hereto.
IN WITNESS WHEREOF the Lessor and the Lessee have caused this instrument
to be duly executed, on this 21 day of January, 1996.
LESSEE: LESSOR:
TELCO COMMUNICATIONS GROUP, INC. DSC FINANCE CORPORATION
X [Signature appears here] X [ ]
----------------------- -----------------
By: [Signature appears here] By: [ ]
----------------------- -----------------
Its: President Its: [ ]
----------------------- -----------------
<PAGE>
PV = $901,875.00 PMT = $19,003.81 7 1 1996 START DATE
INT = 10.0%
N = 60
<TABLE>
<CAPTION>
DATE DATE
PMT -------------- PMT --------------
NO MO DA YR INTEREST PRINCIPAL BALANCE NO MO DA YR INTEREST PRINCIPAL BALANCE
- --------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7 1 1996 $0.00 $19,003.81 $882,871.19 37 7 1 1999 $3,431.90 $15,571.91 $396,256.93
2 8 1 1996 $7,357.25 $11,646.56 $871,224.63 38 8 1 1999 $3,302.14 $15,701.67 $380,555.26
3 9 1 1996 $7,260.20 $11,743.61 $859,481.02 39 9 1 1999 $3,171.29 $15,832.52 $364,722.74
4 10 1 1996 $7,162.34 $11,841.47 $847,639.55 40 10 1 1999 $3,039.35 $15,964.46 $348,758.29
5 11 1 1996 $7,063.66 $11,940.15 $835,699.40 41 11 1 1999 $2,906.32 $16,097.49 $332,660.80
6 12 1 1996 $6,964.16 $12,039.65 $823,659.74 42 12 1 1999 $2,772.17 $16,231.64 $316,429.16
7 1 1 1997 $6,863.83 $12,139.98 $811,519.76 43 1 1 2000 $2,636.91 $16,366.90 $300,062.25
8 2 1 1997 $6,762.66 $12,241.15 $799,278.61 44 2 1 2000 $2,500.52 $16,503.29 $283,558.96
9 3 1 1997 $6,660.65 $12,343.16 $786,935.45 45 3 1 2000 $2,362.99 $16,640.82 $266,918.14
10 4 1 1997 $6,557.79 $12,446.02 $774,489.43 46 4 1 2000 $2,224.32 $16,779.49 $250,138.65
11 5 1 1997 $6,454.07 $12,549.74 $761,939.69 47 5 1 2000 $2,084.49 $16,919.32 $233,219.32
12 6 1 1997 $6,349.49 $12,654.32 $749,285.37 48 6 1 2000 $1,943.49 $17,060.32 $216,159.01
---------------------- ----------------------
$75,456.10 $152,589.63 $32,375.89 $195,669.83
13 7 1 1997 $6,244.04 $12,759.77 $736,525.60 49 7 1 2000 $1,801.32 $17,202.49 $198,956.52
14 8 1 1997 $6,137.71 $12,866.10 $723,659.50 50 8 1 2000 $1,657.97 $17,345.84 $181,610.68
15 9 1 1997 $6,030.49 $12,973.32 $710,686.18 51 9 1 2000 $1,513.42 $17,490.39 $164,120.29
16 10 1 1997 $5,922.38 $13,081.43 $697,604.75 52 10 1 2000 $1,367.67 $17,636.14 $146,484.15
17 11 1 1997 $5,813.37 $13,190.44 $684,414.31 53 11 1 2000 $1,220.70 $17,783.11 $128,701.04
18 12 1 1997 $5,703.45 $13,300.36 $671,113.95 54 12 1 2000 $1,072.51 $17,931.30 $110,769.74
19 1 1 1998 $5,592.61 $13,411.20 $657,702.75 55 1 1 2001 $923.08 $18,080.73 $92,689.01
20 2 1 1998 $5,480.85 $13,522.96 $644,179.79 56 2 1 2001 $772.41 $18,231.40 $74,457.60
21 3 1 1998 $5,368.16 $13,635.65 $630,544.15 57 3 1 2001 $620.48 $18,383.33 $56,074.27
22 4 1 1998 $5,254.53 $13,749.28 $616,794.87 58 4 1 2001 $467.29 $18,536.52 $37,537.75
5 1 1998 $5,139.95 $13,863.86 $602,931.01 59 5 1 2001 $312.81 $18,691.00 $18,846.75
6 1 1998 $5,024.42 $13,979.39 $588,951.62 60 6 1 2001 $157.06 $18,846.75 $0.00
---------------------- ----------------------
$67,711.97 $160,333.75 $11,886.71 $216,159.01
25 7 1 1998 $4,907.93 $14,095.88 $574,855.74 0 0 0 0 $0.OO $0.00 $0.00
26 8 1 1998 $4,790.46 $14,213.35 $560,642.39 0 0 0 0 $0.OO $0.00 $0.00
27 9 1 1998 $4,672.02 $14,331.79 $546,310.59 0 0 0 0 $0.OO $0.00 $0.00
28 10 1 1998 $4,552.58 $14,451.23 $531,859.37 0 0 0 0 $0.OO $0.00 $0.00
29 11 1 1998 $4,432.16 $14,571.65 $517,287.72 0 0 0 0 $0.OO $0.00 $0.00
30 12 1 1998 $4,310.73 $14,693.08 $502,594.63 0 0 0 0 $0.OO $0.00 $0.00
31 1 1 1999 $4,188.29 $14,815.52 $487,779.11 0 0 0 0 $0.OO $0.00 $0.00
32 2 1 1999 $4,064.82 $14,938.99 $472,840.12 0 0 0 0 $0.OO $0.00 $0.00
33 3 1 1999 $3,940.33 $15,063.48 $457,776.64 0 0 0 0 $0.OO $0.00 $0.00
34 4 1 1999 $3,814.80 $15,189.01 $442,587.64 0 0 0 0 $0.OO $0.00 $0.00
35 5 1 1999 $3,688.23 $15,315.58 $427,272.05 0 0 0 0 $0.OO $0.00 $0.00
36 6 1 1999 $3,560.60 $15,443.21 $411,828.84 0 0 0 0 $0.OO $0.00 $0.00
---------------------- -----------------------
$50,922.94 $177,122.78 $0.00 $0.00
GRAND TOTALS $238,353.60 $901,875.00
=======================
</TABLE>
<PAGE>
SCHEDULE T-1
CERTIFICATE OF ACCEPTANCE OF EQUIPMENT UNDER SCHEDULE T
To: DSC Finance Corporation (the "Lessor")
1000 Coit Road
Plano, Texas 75075
I, _____________________________, a duly authorized inspector and authorized
representative of TELCO COMMUNICATIONS GROUP, INC., (the "Lessee"), do hereby
certify that I have accepted delivery on behalf of the Lessee pursuant to the
Equipment Lease dated as of January 1, 1994, between Lessor and Lessee, the
Equipment described in Schedule T attached to such Equipment Lease. Such
Equipment is described as follows:
Items of Equipment
------------------
Four (4) Digit Trunk Frames (DTFs) each wired and equipped with 1,536 digit
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Number 122195 dated December 21, 1995. One (1) Digital Trunk
Frame (DTF) wired and equipped with 1,536 digital ports plus peripheral
equipment and software licenses as listed on Lessee's Purchase Order Number
062895.10 dated June 28, 1995.
- INSTALLATION SITE (Address): Suite 10B
4225 E. Sahara Ave
Las Vegas, NV 89101
- PLACE ACCEPTED (Address): Same
- DATE ACCEPTED: ______________________________
The execution of this Certificate will in no way relieve or decrease the
responsibility of the manufacturer of the Equipment for any warranties it has
made with respect to the Equipment. The undersigned understands that you are
relying on the foregoing certification in your purchase of such Equipment, and
to induce you to purchase such Equipment, the undersigned agrees to settle all
claims, defenses, setoffs, and counterclaims it may have with the manufacturer,
distributor, or seller of such Equipment directly therewith and will not set up
any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor, nor seller of such Equipment and have
no knowledge or familiarity with it.
_________________________ __________________________
Date Inspector and Authorized
Representative of Lessee
<PAGE>
CERTIFICATE AND DISCLAIMER OF RECORD OWNER
AND ANY MORTGAGE OF REAL ESTATE
1. The equipment (the "Equipment") leased by Telco Communications Group, Inc.
(the "Lessee") from DSC Finance Corporation (the "Lessor") is described more
fully in Exhibit "A" attached hereto, or if no enclosure is attached, such
Equipment is communication equipment described in an Equipment Lease between
Lessee and Lessor.
2. The original location of said Equipment will be in or on the property
("Premises") located at:
Suite 10B
4225 E. Sahara Ave
Las Vegas, NV 89101
3. Lessee certifies that it has no interest in the Equipment other than as
Lessee and also certifies that the Premises are owned for record title purposes
by the below party (the "Owner"):
Name:
Street Address:
City, State, Zip:
4. Owner certifies that it/he is the record owner of the Premises and disclaims
any interest in the above Equipment.
5. Owner further certifies that said premises are mortgaged to or given as
security/collateral for loans from the below named party ("Mortgagee") (if no
Mortgage, write "None" below):
Name:
Address:
City, State, Zip:
6. Mortgagee disclaims any interest in the above Equipment.
LESSEE: OWNER OF REAL ESTATE:
TELCO COMMUNICATIONS GROUP, INC. ______________________________
X Donald A. Burns X
------------------------- -------------------------
By: Donald A. Burns By:
------------------------- -------------------------
Title: President Title:
------------------------- -------------------------
Date: January 29, 1996 Date:
------------------------- -------------------------
MORTGAGEE OF REAL ESTATE:
--------------------------------
X -------------------------
By: -------------------------
Title: -------------------------
Date: -------------------------
<PAGE>
EXHIBIT A
Items of Equipment
------------------
Four (4) Digital Trunk Frames (DTFs) each wired and equipped with 1,536 digital
ports plus peripheral equipment and software licenses as listed on Lessee's
Purchase Order Number 122195 dated December 21, 1995. One (1) Digital Trunk
Frame (DTF) wired and equipped with 1,536 digital ports plus peripheral
equipment and software licenses as listed on Lessee's Purchase Order Number
062895.10 dated June 28, 1995.
- INSTALLATION SITE (Address): Suite 10B
4225 E. Sahara Ave
Las Vegas, NV 89101
<PAGE>
EXHIBIT 6.1.7
[LETTERHEAD OF DSC COMMUNICATIONS APPEARS HERE]
VIA OVERNIGHT DELIVERY
----------------------
December 29, 1995
Mr. Donald A. Burns
President
Telco Communications Group, Inc.
4219 lafayette Center Drive
Chantilly, Va 22021
Re: Equipment Lease dated January 1, 1994 by and between DSC Finance
Corporation and Telco Communications Group, Inc.
Mr. Burns
DSC Finance Corporation ("DSCFC") proposes to finance Telco Communications
Group, Inc.'s ("TCG") purchase of DSC Communications Corporation ("DSC")
equipment under the following terms and conditions:
LESSOR: DSC FINANCE CORPORATION;
LESSEE: TELCO COMMUNICATIONS GROUP, INC.;
EQUIPMENT: DAVENPORT (SOA #202845 for $144,480.00): One
---------
hundred forty (140) Echo Cancellors with Ten (10)
shelves, plus software rights and peripheral
equipment as listed on Lessee's Purchase Order
Letter dated December 29, 1995;
AUSTIN (SOA #202846 for $268,464.00): Two hundred
sixty (260) Echo Cancellors with Nineteen (19)
shelves, plus software rights and peripheral
equipment as listed on Lessee's Purchase Order
Letter dated December 29, 1995;
<PAGE>
Telco Communications Group, Inc. Proposal Letter
December 29, 1995
Page 2
LAS VEGAS (SOA #202847 for $526,176.00): Five
---------
hundred ten (510) Echo Cancellors with Thirty
six (36) shelves, plus software rights and
peripheral equipment as listed on Lessee's
Purchase Order Letter dated December 29, 1995;
SALE PRICE: $939,120.00, Freight and Sales Tax due net
thirty (30) days from shipment;
DOWN PAYMENT: $70,434.00, representing seven and one-half
percent (7.5%) of the Sale Price, Down
Payment due 90 days after Shipment;
AMOUNT FINANCED: $868,686.00, representing ninety-two and
one-half percent (92.5%) of the Sale Price;
SHIPMENT: Per Purchase Order;
PAYMENT COMMENCEMENT: One hundred eighty (180) days after shipment;
TERM/PAYMENTS: Sixty (60) consecutive monthly payments equal
to 0.02107145 times the Amount Financed,
payable in advance;
IMPLICIT INTEREST RATE: Ten percent (10.0%) per annum;
PURCHASE OPTION: If Lessee has paid all amounts owing under the
Lease, at the expiration of the Lease, Lessee
may purchase the equipment financed for ONE
DOLLAR ($1.00); or return the equipment to the
Lessor in good operating order, repair, and
condition;
MAINTENANCE: Lessee at its sole cost and expense, will keep
and maintain the equipment in good operating
order, repair, and condition;
TYPE OF TRANSACTION: This is a net transaction, whereby freight,
property taxes, sales taxes, all documentation
costs, all legal fees, and all other items of
a similar nature will be for Lessee's account.
Lessee will comply with all laws and
regulations in the use of the equipment;
<PAGE>
Telco Communications Group, Inc. Proposal Letter
December 29, 1995
Page 3
INSURANCE: Lessee, at its own expense, will provide all
inclusive insurance including, but not limited
to Public Liability and Property Damage, and
Casualty Coverage with DSC Finance Corporation
named as Loss Payee and Additional Insured and
for an amount not less than 100% of the amount
financed; and,
SECURITY INTEREST: Lessee hereby grants DSCFC a security interest
in the Equipment and agrees to execute and
furnish to DSCFC any and all documentation
necessary for the perfection of such security
interest.
This proposal is subject to DSCFC management approval and the execution of all
documentation, prior to and after shipment, which DSCFC may reasonably require.
TCG and DSCFC agree this proposal is a final agreement with respect to
financing, the parties agree this proposal will prevail over any conflicts of
terms and conditions with respect to any previous financing offer or agreements.
This proposal will expire, if not accepted and delivered, by January 2, 1996.
Please execute this letter and return to my attention as soon as possible. Thank
you.
Sincerely
/s/ Jeff Partenheimer
Jeff Partenheimer
Director
AGREED and ACCEPTED this
31 day of December, 1995
LESSEE: TELCO COMMUNICATIONS GROUP, INC.
X /s/ Donald A. Burns
---------------------
Name: Donald A. Burns
-----------------
Title: President
----------------
<PAGE>
Telco Communications Group, Inc. Proposal Letter
December 29, 1995
Page 4
<PAGE>
Exhibit 6.i.8
SCHEDULE B
Agreement of Lease No. 941001
-------
ACCEPTANCE SUPPLEMENT
---------------------
Commencement Date: October 1, 1994
Expiration Date: September 1, 1997
THIS ACCEPTANCE SUPPLEMENT is executed and delivered by DGI Technologies,
Inc. ("Lessor") and Telco Communications Group, Inc. ("Lessee") pursuant to and
in accordance with Equipment Schedule No. A to Lease Agreement dated
October 1, 1994 (the "Lease") between Lessor and Lessee. Terms defined in the
- ---------------
Lease shall have their defined meanings when used herein.
A. The Equipment covered by this Acceptance Supplement consists of the
following items manufactured by DGI Technologies, Inc. as listed in Schedule A
of the Lease.
B. Lessee confirms that said Equipment has been delivered to it, duly
assembled and installed in good working order and condition, at the location
specified in the Lease.
C. Lessee hereby: (a) confirms that said Equipment is of the size, design
capacity and manufacture selected by it; (b) irrevocably accepts said Equipment
as-is, where-is for all purposes of the Lease as of the Commencement Date set
forth above.
D. The term of the lease of said Equipment under the Lease shall commence
as of the Commencement Date set forth above and unless earlier terminated
pursuant to the provisions of the Lease, shall expire on the Expiration Date set
forth above.
E. As rent for said Equipment throughout the term of the Lease, Lessee
shall pay to Lessor in accordance with the terms of the Lease the sum of
$ 159,696.00 in 36 monthly installments of $4,436.00 per month commencing
- ------------ -- ---------
October 1, 1994 to and including September 1, 1997.
- --------------- -----------------
F. All of the provisions of the Lease are hereby incorporated by reference
in this Acceptance Supplement to the same extent as if fully set forth herein.
APPROVED AND AGREED TO by the parties hereto as of the Commencement Date
set forth above.
LESSEE: LESSOR:
Telco Communications Group, Inc. DGI Technologies, Inc.
BY: /s/ Donald A. Burns BY:
-------------------------------- ---------------------------
President Lyle B. Coffman/Pres & COO
-----------------------------------------------------------------------------
<PAGE>
[EXECUTION COPY]
Exhibit 10.30
CREDIT AGREEMENT
dated as of January 24, 1996
among
TELCO COMMUNICATIONS GROUP, INCORPORATED,
THE BANKS LISTED HEREIN
and
SIGNET BANK,
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Accounting Terms and Determinations . . . . . . . . . 17
Section 1.3. Types of Loans . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
THE CREDIT
Section 2.1. Commitments to Lend . . . . . . . . . . . . . . . . . 18
Section 2.2. Method of Borrowing . . . . . . . . . . . . . . . . . 19
Section 2.3. Extensions of the Availability Period . . . . . . . . 22
Section 2.4. Notes . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.5. Interest Rates . . . . . . . . . . . . . . . . . . . 24
Section 2.6. Method of Electing Interest Rates . . . . . . . . . . 25
Section 2.7. Fees . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.8. Increases in Commitments . . . . . . . . . . . . . . 27
Section 2.9. Mandatory Termination or Reduction of
Commitments . . . . . . . . . . . . . . . . . . . . 29
Section 2.10. Mandatory Repayments . . . . . . . . . . . . . . . . 29
Section 2.11. Optional Prepayments . . . . . . . . . . . . . . . . 30
Section 2.12. General Provisions as to Payments . . . . . . . . . . 30
Section 2.13. Funding Losses . . . . . . . . . . . . . . . . . . . 31
Section 2.14. Computation of Interest . . . . . . . . . . . . . . . 31
ARTICLE III
CONDITIONS
Section 3.1. Conditions to Closing . . . . . . . . . . . . . . . . 31
Section 3.2. Borrowings . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Corporate Existence and Power . . . . . . . . . . . . 36
Section 4.2. Corporate and Governmental Authorization;
No Contravention . . . . . . . . . . . . . . . . . 36
Section 4.3. Binding Effect . . . . . . . . . . . . . . . . . . . 37
Section 4.4. Financial Information . . . . . . . . . . . . . . . . 37
Section 4.5. Solvency . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.6. Litigation . . . . . . . . . . . . . . . . . . . . . 38
Section 4.7. Ownership of Property, Liens . . . . . . . . . . . . 38
Section 4.8. Filings . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.9. Regulation U; Use of Proceeds . . . . . . . . . . . . 38
Section 4.10. Regulatory Restrictions on Borrowing . . . . . . . . 38
- --------------------
The Table of Contents is not a part of the Credit Agreement.
<PAGE>
Section 4.11. Subsidiaries . . . . . . . . . . . . . . . . . . . . 39
Section 4.12. Full Disclosure . . . . . . . . . . . . . . . . . . . 39
Section 4.13. Tax Returns and Payments . . . . . . . . . . . . . . 39
Section 4.14. Compliance with ERISA . . . . . . . . . . . . . . . . 40
Section 4.15. Intellectual Property . . . . . . . . . . . . . . . . 40
Section 4.16. No Burdensome Restrictions . . . . . . . . . . . . . 40
Section 4.17. Environmental Compliance . . . . . . . . . . . . . . 40
Section 4.18. Representations in Loan Documents True
and Correct.. . . . . . . . . . . . . . . . . . . . 41
Section 4.19. Labor Matters . . . . . . . . . . . . . . . . . . . . 41
Section 4.20. Capitalization . . . . . . . . . . . . . . . . . . . 42
Section 4.21. Communications Act . . . . . . . . . . . . . . . . . 42
Section 4.22. No Defaults . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE V
COVENANTS
Section 5.1. Information . . . . . . . . . . . . . . . . . . . . . 42
Section 5.2. Payment of Obligations . . . . . . . . . . . . . . . 46
Section 5.3. Maintenance of Property . . . . . . . . . . . . . . . 47
Section 5.4. Conduct of Business and Maintenance of
Existence . . . . . . . . . . . . . . . . . . . . . 47
Section 5.5. Compliance with Laws . . . . . . . . . . . . . . . . 47
Section 5.6. Accounting; Inspection of Property, Books
and Records . . . . . . . . . . . . . . . . . . . . 47
Section 5.7. FCC Approvals . . . . . . . . . . . . . . . . . . . . 48
Section 5.8. Maximum Leverage . . . . . . . . . . . . . . . . . . 48
Section 5.9. Interest Coverage Ratio . . . . . . . . . . . . . . . 48
Section 5.10. Restrictions on Debt . . . . . . . . . . . . . . . . 48
Section 5.11. Restriction on Liens . . . . . . . . . . . . . . . . 49
Section 5.12. Transactions with Affiliates . . . . . . . . . . . . 50
Section 5.13. Consolidations, Mergers and Sales of
Assets . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.14. Transactions with Other Persons . . . . . . . . . . . 50
Section 5.15. New Subsidiaries . . . . . . . . . . . . . . . . . . 51
Section 5.16. Restrictions with Respect to
Subsidiaries . . . . . . . . . . . . . . . . . . . 51
Section 5.17. Compensation . . . . . . . . . . . . . . . . . . . . 51
Section 5.18. Prohibited ERISA Transactions . . . . . . . . . . . . 52
Section 5.19. Use of Proceeds . . . . . . . . . . . . . . . . . . . 52
Section 5.20. Independence of Covenants . . . . . . . . . . . . . . 52
Section 5.21. Restricted Payments . . . . . . . . . . . . . . . . . 52
Section 5.22. Payment by Account Debtors . . . . . . . . . . . . . 52
Section 5.23. Restrictions on Investments . . . . . . . . . . . . . 54
ARTICLE VI
DEFAULTS
Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . 54
Section 6.2. Notice of Default . . . . . . . . . . . . . . . . . . 57
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ARTICLE VII
THE ADMINISTRATIVE AGENT
Section 7.1. Appointment and Authorization . . . . . . . . . . . . 58
Section 7.2. Individual Capacity . . . . . . . . . . . . . . . . . 58
Section 7.3. Delegation of Duties . . . . . . . . . . . . . . . . 58
Section 7.4. Reliance by Administrative Agent . . . . . . . . . . 58
Section 7.5. Notice of Default . . . . . . . . . . . . . . . . . . 59
Section 7.6. Non-Reliance on Administrative Agent and
Other Banks . . . . . . . . . . . . . . . . . . . . 59
Section 7.7. Exculpatory Provisions . . . . . . . . . . . . . . . 60
Section 7.8. Indemnification . . . . . . . . . . . . . . . . . . . 61
Section 7.9. Resignation; Successors . . . . . . . . . . . . . . . 61
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.1. Basis for Determining Interest Rate
Inadequate or Unfair . . . . . . . . . . . . . . . 62
Section 8.2. Illegality . . . . . . . . . . . . . . . . . . . . . 62
Section 8.3. Increased Cost and Reduced Return . . . . . . . . . . 63
Section 8.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 8.5. Base Rate Loans Substituted for Affected
Euro-Dollar Loans . . . . . . . . . . . . . . . . . 65
Section 8.6. Substitution of Bank . . . . . . . . . . . . . . . . 66
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.2. No Waivers . . . . . . . . . . . . . . . . . . . . . 67
Section 9.3. Expenses; Indemnification . . . . . . . . . . . . . . 68
Section 9.4. Sharing of Set-Offs . . . . . . . . . . . . . . . . . 71
Section 9.5. Amendments and Waivers; Release of
Collateral . . . . . . . . . . . . . . . . . . . . 71
Section 9.6. Successors and Assigns . . . . . . . . . . . . . . . 72
Section 9.7. Collateral . . . . . . . . . . . . . . . . . . . . . 73
Section 9.8. Governing Law . . . . . . . . . . . . . . . . . . . . 73
Section 9.9. Counterparts; Effectiveness . . . . . . . . . . . . . 73
Section 9.10. SUBMISSION TO JURISDICTION . . . . . . . . . . . . . 74
EXHIBIT A - Form of Revolving Note
EXHIBIT B - Form of Swingline Note
EXHIBIT C - Form of Opinion of Counsel for the Borrower
EXHIBIT D - Form of Security Agreement
EXHIBIT E - Form of Stock Pledge Agreement
EXHIBIT F - Form of Subsidiary Guaranty
EXHIBIT G - Form of Shareholder Pledge Agreement
EXHIBIT H - Form of Assignment and Assumption Agreement
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<PAGE>
CREDIT AGREEMENT
This Credit Agreement is dated as of January 24, 1996 and is among
TELCO COMMUNICATIONS GROUP, INCORPORATED, a Virginia corporation (the
"Borrower"), the BANKS listed on the signature pages hereof and the other
financial institutions party hereto from time to time (each a "Bank" and
collectively the "Banks") and SIGNET BANK, a Virginia banking corporation, as
administrative agent for the Banks (the "Administrative Agent").
The Borrower has requested the Banks to provide it with a committed
revolving credit facility pursuant to which the Borrower may borrow loans in an
aggregate principal amount not exceeding $45,000,000 at any one time
outstanding, as such amount may be increased or decreased pursuant to the terms
hereof. The Banks are severally, and not jointly, willing to extend credit to
the Borrower on the terms and conditions set forth in this Agreement.
Accordingly, the Borrower, the Banks and the Administrative Agent agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following terms, as used herein, have
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the following meanings:
"Adjusted London Interbank Offered Rate" means, with respect to any
Interest Period, a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
"Administrative Agent" means Signet Bank in its capacity as agent for
the Banks hereunder, and its successors in such capacity.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Bank.
"Affiliate" means, as to any Person, any other Person (excluding, with
respect to the Borrower, a Subsidiary) which, directly or indirectly, controls,
or is controlled by, or is under common control with, such Person and, if such
Person is an individual, any member of the immediate family (including parents,
brothers, sisters, spouse and children) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is
<PAGE>
controlled by such member or trust. As used in this definition, "control"
(including with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise); provided that in any event, any Person which owns, directly or
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indirectly, 20% or more of the securities having ordinary voting power for the
election of directors or other governing body of a corporation or 20% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person.
"Agents" means the Administrative Agent and the Collateral Agent, and
"Agent" means either one of them.
"Asset Sale" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation) by the Borrower or
any of its Subsidiaries of any asset, including, without limitation, any sale-
leaseback transaction, whether or not involving a capital lease, but excluding
dispositions of inventory, cash, cash equivalents and other cash management
investments and obsolete, worn-out or surplus equipment, in each case in the
ordinary course of business.
"Assignee" has the meaning set forth in Section 9.6(c).
"Availability Period" means the period commencing on the Effective
Date and ending on the Commitment Termination Date.
"Available Funds" means the gross balance in the Operating Account at
the close of business on any date less the aggregate amount of all deposited
Items as to which the Swingline Lender has not been credited with collected
funds as of such time.
"Bank" means each bank or other financial institution listed on the
signature pages hereof, each Additional Bank which becomes a Bank pursuant to
Section 2.3, each New Bank which becomes a Bank pursuant to Section 2.8(a), each
Replacement Bank which becomes a Bank pursuant to Section 8.6, and each Assignee
which becomes a Bank pursuant to Section 9.6(c), and their respective
successors, but shall not include any Terminating Bank under Section 2.3 from
and after the applicable Commitment Termination Date or any Replaced Bank from
and after it ceases to be a Bank pursuant to the provisions of Section 8.6, and
"Banks" means all of them, collectively.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the rate of interest publicly announced for
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such day by Signet Bank in Richmond, Virginia as its prime rate and (ii) the sum
of 1/2 of 1% plus the Federal Funds Rate for such day.
"Base Rate Loan" means (i) a Loan which bears interest at the Base
Rate pursuant to the applicable Notice of Borrowing, a Notice of Mandatory
Borrowing or Notice of Interest Rate Election or the provisions of Article VIII
or (ii) a Swingline Loan.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Billing Agents" means any Person (whether or not acting pursuant to
an agreement) who, directly or indirectly, submits billing information with
respect to Borrower or other Obliger rated calls to any LEC or any other Person.
"Borrower" means Telco Communications Group, Incorporated, a Virginia
corporation, and its successors.
"Borrowing" has the meaning set forth in Section 1.3.
"Borrowing Base" means, at any date, an amount equal to 85% of the
amount of all Eligible Accounts. The amount of Eligible Accounts shall be
determined by reference to the most recent Borrowing Base Certificate delivered
to the Administrative Agent.
"Borrowing Base Certificates" means a certificate of the chief
financial officer or the chief accounting officer of Borrower delivered to the
Administrative Agent pursuant to Section 5.1.
"Capital Lease" means a lease that should be capitalized on the
balance sheet of the lessee prepared in accordance with GAAP.
"Cash Flow Leverage Ratio" means, at any date, the ratio of (i)
Consolidated Debt at such date to (ii) Consolidated Adjusted Cash Flow for the
four consecutive fiscal quarters of the Borrower and its Consolidated
Subsidiaries ending on such date.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, or any successor
statute, and regulations promulgated thereunder.
"Change of Control Event" means (i) the direct or indirect
acquisition by any Person or group (as such term is
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<PAGE>
defined in Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act")) of the beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of, or power to vote, more than 40% of
the outstanding shares of voting stock of the Borrower, (ii) at any time during
any fiscal year of the Borrower, a majority of the members of the full Board of
Directors of the Borrower shall have resigned or been removed or replaced,
provided that a director who has resigned or is replaced during any year shall
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not be included in any determination of whether a Change of Control Event has
occurred pursuant to this clause (ii) to the extent such director is replaced by
a successor director elected by a majority of those directors who are directors
at the commencement of such year or (iii) at any time during any fiscal year of
the Borrower, the number of directors of the Borrower shall have been increased
such that the number of newly created positions constitutes a majority of the
Board of Directors of the Borrower.
"Class" has the meaning set forth in Section 1.3.
"Closing Date" means the date on or after the Effective Date on which
the Administrative Agent determines that the conditions specified in or pursuant
to Section 3.1 have been satisfied.
"Collateral" means all of the property which is subject or is to be
subject to the Liens granted by the Loan Documents.
"Collateral Agent" means Signet Bank in its capacity as collateral
agent for the Banks under the Loan Documents, and its successors in such
capacity.
"Commitment Increase Date" has the meaning set forth in Section
2.8(b).
"Commitment Termination Date" means January 24, 1998 (or if such date
is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in which
case the Commitment Termination Date shall be the next preceding EuroDollar
Business Day), as such date may be extended from time to time pursuant to
Section 2.3 of this Agreement.
"Commitments" means the Revolving Commitments and the Swingline
Commitment, or any combination of the foregoing, as the context may require.
"Communications Act" means the Communications Act of 1934, as amended
from time to time, or any successor statute, and the regulations promulgated
thereunder.
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<PAGE>
"Consolidated Adjusted Cash Flow" means for any fiscal quarter ending
on or before December 31, 1996 the sum of (i) Consolidated EBITDA for such
quarter plus (ii) funded direct mail promotion expense of the Borrower and its
Consolidated Subsidiaries for such quarter, and thereafter means Consolidated
EBITDA for such quarter.
"Consolidated Debt" means, at any date, the Debt of the Borrower and
its Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"Consolidated EBIT" means, for any period, the sum of Consolidated Net
Income for such period plus, to the extent deducted in determining Consolidated
Net Income for such period, the aggregate amount of (i) Consolidated Interest
Expense and (ii) all provisions for federal, state and other taxes based on
income of the Borrower and its Consolidated Subsidiaries.
"Consolidated EBITDA" means, for any period, the sum of Consolidated
EBIT for such period plus, to the extent deducted in determining Consolidated
Net Income for such period, the aggregate amount of depreciation and
amortization expense determined in accordance with GAAP on a consolidated basis
for such period.
"Consolidated Interest Expense" means, for any period, the aggregate
interest expense of the Borrower and its Consolidated Subsidiaries determined in
accordance with GAAP on a consolidated basis for such period, including, without
limitation, the portion of any obligation under Capital Leases and any
commitment or similar fee allocable to interest expense in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income (or
loss) of the Borrower and its Consolidated Subsidiaries for such period;
provided, that there shall be excluded (i) the income of any Person in which any
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Person other than the Borrower or any of its Consolidated Subsidiaries has a
joint interest, except to the extent of the amount of dividends or other
distributions actually paid to the Borrower or a Consolidated Subsidiary by such
Person during such period, (ii) the income (or loss) of any Person accrued prior
to the date it becomes a Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or any of its Subsidiaries or that Person's
assets are acquired by the Borrower or any of its Subsidiaries or (iii) the
income of any Subsidiary of the Borrower to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary.
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<PAGE>
"Consolidated Subsidiary" means, with respect to any Person at any
date, any Subsidiary of such Person or other entity the accounts of which would
be consolidated with those of such Person in its consolidated financial
statements as of such date in accordance with GAAP.
"Debt" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable arising in the ordinary course of
business), (iv) all obligations of such Person as lessee under Capital Leases,
(v) all obligations of such Person to purchase securities or other property
which arise out of or in connection with the sale of the same or substantially
similar securities or property, (vi) all non-contingent obligations (and, for
purposes of Section 5.11 and the definitions of Material Debt and Material
Financial Obligations, all contingent obligations) of such Person to reimburse
any bank or other person in respect of amounts paid under a letter of credit or
similar instrument, (vii) all obligations of others secured by a Lien on any
asset of such Person, whether or not such obligation is assumed by such Person
and (viii) all obligations of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Fairfax, Virginia are required or
authorized by law to close.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 9.9.
"Eligible Accounts" means, at any date, all billed accounts receivable
due to the Borrower from all LECs, other than
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<PAGE>
(i) accounts more than 90 days past the date on which the related billing
information for Borrower rated calls is transmitted to such LEC, (ii) accounts
the liability for which has been disputed by the LEC or the LEC has claimed set
off rights or other defenses, (iii) accounts owing from any LEC that shall take
or be the subject of any action or proceeding of the type described in Section
6.1(viii) or (ix) hereof and (iv) accounts, the full and timely collection of
which the Administrative Agent, in its good faith judgment, believes to be
doubtful.
"Eligible Transferee" means a commercial bank, financial institution
or other "requalified institutional buyer" (as defined in Rule 144A under the
Securities Act of 1933, as amended) that is either a bank organized or licensed
under the laws of the United States of America or any State thereof or that has
agreed to provide the information listed in Section 8.4 to the extent it may
lawfully do so.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, chemicals or industrial,
toxic or other hazardous substances or wastes into the environment including,
without limitation, ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, chemicals
or industrial, toxic or other hazardous substances or wastes or the clean-up or
other remediation thereof.
"Environmental Liabilities" means all liabilities (including
anticipated compliance costs) in connection with or relating to the business,
assets presently or previously owned, leased or operated property, activities
(including, without limitation, off-site disposal) or operations of the Borrower
or any Subsidiary, whether vested or unvested, contingent or fixed, actual or
potential, known or unknown, which arise under or relate to matters covered by
Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute, and the regulations
promulgated thereunder.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated
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<PAGE>
as a single employer under Section 414 of the Internal Revenue Code.
"ERISA Plan" means any employee benefit plan subject to Section 406
of ERISA or any plan or individual retirement account subject to Section 4975 of
the Internal Revenue Code, or any trust (if any) maintained in connection with
such a plan or account.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) such other office, branch or affiliate of such Bank as it may hereafter
designate as its Euro-Dollar Lending Office by notice the Borrower and the
Administrative Agent.
"Euro-Dollar Loan" means a Loan which bears interest at a Euro-Dollar
Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election.
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.5(c) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
"Event of Default" has the meaning set forth in Section 6.1.
"Excess Funds" means at any time the amount by which Available Funds
exceed the Target Balance.
"FCC" means the Federal Communications Commission or any entity
succeeding to the functions and powers thereof.
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<PAGE>
"FCC License" means, with respect to any Obligor, all FCC licenses,
permits and approvals necessary for the lawful operation of such Obligor.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/lOOth of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers-on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
--------
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Signet Bank on such day on such
transactions as shall be determined by the Administrative Agent.
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Authority" means any federal, state or local government,
authority, agency, central bank, quasigovernmental authority, court or other
body or entity, and any arbitrator with authority to bind a party at law,
including, without limitation, the FCC.
"Group of Loans" means, at any time, a group of Loans of any Class
consisting of (i) all Loans of such Class which are Base Rate Loans at such time
or (ii) all Loans of such Class which are Euro-Dollar Loans having the same
Interest Period at such time; provided that, if a Loan of any particular Bank is
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converted to or made as a Base Rate Loan pursuant to Section 8.2 or 8.5, such
Loan shall be included in the same Group or Groups of Loans from time to time as
it would have been in if it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or
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to protect such obligee against loss in respect thereof (in whole or in part);
provided that the term Guarantee shall not include endorsements for collection
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or deposit in the ordinary course of business. The term guarantee used as a verb
has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"Interest Coverage Ratio" means, at any date, the ratio of (i)
Consolidated Adjusted Cash Flow for the four consecutive fiscal quarters of the
Borrower and its Consolidated Subsidiaries ending on such date to (ii)
Consolidated Interest Expense for such period.
"Interest Period" means, with respect to each EuroDollar Loan, the
period commencing on the date of Borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending three or six months thereafter, as the Borrower may elect in
the applicable notice; provided that:
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(i) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (iii) below, be
extended to the next succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar Business Day;
(ii) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (iii) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(iii) any Interest Period which would otherwise end after the Commitment
Termination Date with respect to the Loans comprising such Borrowing shall
end on such Commitment Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute, and the regulations
promulgated thereunder.
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<PAGE>
"Investment" means any investment in any Person whether by means of
share purchase, capital contribution, loan, Guarantee of Debt or other
obligation of such Person, time deposit or otherwise (but not including any
demand deposit).
"Item" means any check, draft or other item for the payment of money
drawn upon, or other charge against the Operating Account.
"LEC" means a local exchange carrier.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loans" means the Revolving Loans or the Swingline Loans, or any
combination of the foregoing, as the context may require; provided that, if any
--------
such Loan or Loans of any Class (or portions thereof) are combined or subdivided
pursuant to a Notice of Interest Rate Election, the term Loaner of such Class
shall refer to the combined principal amount resulting from such combination or
to each of the separate principal amounts resulting from such subdivision, as
the case may be.
"Loan Documents" means this Agreement, the Notes, the Security
Agreement, the Patent and Trademark Assignments (as defined in the Security
Agreement), the Copyright Assignment (as defined in the Security Agreement), the
Pledge Agreement, the Subsidiary Guaranty and the Shareholder Pledge Agreements,
collectively.
"London Interbank Offered Rate" means, with respect to each Interest
Period for a Euro-Dollar Borrowing, the rate per annum designated as the British
Bankers Association settlement rate as of 11:00 A.M. (London time) two Euro-
Dollar Business Days prior to the first day of such Interest Period as the rate
per annum for deposits in United States dollars in the London interbank market
for a period comparable to such Interest Period that appears on the display on
page 3750 (under the caption "USD" of the Telerate Services, Incorporated screen
(the "Telerate Screen") (or on such other display as may replace such page on
the Telerate Screen) at such time); provided that if no offered quotations
--------
appear on the Telerate Screen or if quotations are not given on the Telerate
Screen for interest periods comparable to such Interest Period, then the London
Interbank Offered Rate applicable to such Interest Period shall mean the rate
per annum at which deposits in United States dollars are offered to Signet
-11-
<PAGE>
Bank in the London interbank market at approximately 11:00 A.M. (London time)
two Euro-Dollar Business Days before the first day of such Interest Period in an
amount approximately equal to the average principal amount of the Euro-Dollar
Loans to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
"Mandatory Borrowing" has the meaning set forth in Section 2.1(c).
"Material Adverse Effect" means (i) any material adverse effect upon
the condition (financial or otherwise), results of operations, properties,
assets, business or prospects of the Borrower or of the Borrower and its
Consolidated Subsidiaries, taken as a whole; (ii) a material adverse effect on
the ability of any Obligor or Shareholder to consummate the transactions
contemplated hereby to occur on the Closing Date; (iii) a material adverse
effect on the ability of any Obliger or Shareholder to perform its obligations
under this Agreement, the Notes and the other Loan Documents or (iv) a material
adverse effect on the rights and remedies of the Administrative Agent, the
Collateral Agent and the Banks under this Agreement, the Notes and the other
Loan Documents.
"Material Debt" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal or face amount exceeding
$1,000,000.
"Material Financial Obligations" means a principal or face amount of
Debt and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, exceeding in the aggregate
$1,000,000.
"Multiemployer Plan" means, at any time, an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Net Cash Proceeds" means, with respect to any Asset Sale, an amount
equal to the cash proceeds received by the Borrower or any of its Subsidiaries
from or in respect of such Asset Sale, less (i) any expenses reasonably incurred
by such Person in respect of such Asset Sale, (ii) the amount of secured by a
Lien on any asset disposed of in such Asset discharged from the proceeds thereof
and (iii) any taxes actually
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<PAGE>
paid or to be payable by such Person (as estimated by a senior financial or
accounting officer of the Borrower, giving effect to the overall tax position of
the Borrower and its Subsidiaries) in respect of such Asset Sale.
"Notes" means the Revolving Notes and the Swingline Note, and "Note"
means any one of such Notes.
"Notice of Borrowing" has the meaning set forth in Section 2.2.
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.6(a).
"Notice of Mandatory Borrowing" means the notice given by the
Swingline Lender to the Banks in accordance with Section 2.1(c).
"Obliger" means the Borrower or any Subsidiary (excluding TDD) or any
combination of the foregoing, as the context may require.
"Operating Account" means the Borrower's central operating checking
account at the Swingline Lender.
"Participant" has the meaning set forth in Section 9.6(b)
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means the Liens referred to in clauses (i) through
(vi) of Section 5.11 of this Agreement.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means, at any time, an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
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<PAGE>
"Pledge Agreement" means the Stock Pledge Agreement dated as of the
date hereof among the Borrower, the Subsidiaries and the Collateral Agent,
substantially in the form of Exhibit E hereto, as the same may be amended,
supplemented or modified from time to time.
"Release" means any discharge, emission or release, including a
Release as defined in CERCLA at 42 U.S.C. Section 9601(22). The term "Released"
has a corresponding meaning.
"Required Banks" means (i) so long as Signet Bank and The Riggs
National Bank are the only Banks, Signet Bank and The Riggs National Bank,
collectively, and (ii) at any other time, Banks having at least 66 2/3% of the
aggregate unpaid principal amount of the outstanding Loans or, if there are no
Loans outstanding at such time, Banks having at least 66 2/3% of the aggregate
amount of the Revolving Commitments.
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on any shares of that Person's capital stock
(except dividends payable solely in shares of its capital stock), (ii) any
payment on account of the purchase, redemption, retirement or acquisition of (A)
any shares of that Person's capital stock (except shares acquired upon
conversion thereof into other shares of its capital stock) or (B) any option,
warrant or other right to acquire shares of that Person's capital stock or (iii)
any payment of any Debt which is now or hereafter subordinated to prior payment
of the principal of, or interest on, the Loans.
"Revolving Commitment" means, with respect to each Bank, the amount
set forth opposite the name of such Bank under the heading "Revolving
Commitment" in Appendix I hereto, as such amount may be reduced or increased
from time to time pursuant to Section 2.3, 2.8 or 2.9 of this Agreement or by
reason of an assignment to or by such Bank in accordance with Section 9.6(c
"Revolving Loan" means a loan made by a Bank pursuant to Section
2.1(a).
"Revolving Note" has the meaning set forth in Section 2.4(a).
"Security Agreement" means the Security Agreement dated as of the date
hereof among the Borrower, the Subsidiaries and the Collateral Agent,
substantially in the form of Exhibit D hereto, as the same may be amended,
supplemented or modified from time to time.
"Shareholder" means Donald A. Burns or Henry G. Luken, III, and
"Shareholders" means both of them, collectively.
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<PAGE>
"Shareholder Pledge Agreement" means a Stock Pledge Agreement dated as
of the date hereof between a Shareholder and the Collateral Agent, substantially
in the form of Exhibit G hereto, as the same may be amended, supplemented or
modified from time to time, and "Shareholder Pledge Agreements" means both of
them, collectively.
"Solvent" means, with respect to any Person at any date, that on
such date (i) the fair salable value of the property of such Person is greater
than the total amount of the liabilities (including contingent liabilities) of
such Person, (ii) such Person is able to pay all liabilities of such Person as
they mature and (iii) such Person does not have an unreasonably small capital.
In computing the amount of contingent liabilities at any time, it is intended
that they be computed at the amount that, in light of all the facts and
circumstances existing at the time, represents an amount that can reasonably be
expected to become an actual or matured liability.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Subsidiary Guaranty" means the Guaranty dated as of the date hereof
among the Subsidiaries, the Banks and the Administrative Agent, substantially in
the form of Exhibit F hereto, as the same may be amended, supplemented or
modified from time to time.
"Swingline Commitment" means the agreement of the Swingline Lender
pursuant to Section 2.1(b) to make Swingline Loans to the Borrower from time to
time during the Availability Period in the aggregate principal amount not
exceeding $5,000,000 at any one time outstanding.
"Swingline Lender" means Signet Bank and its successors.
"Swingline Loan" means a Loan made by the Swingline Lender pursuant
to Section 2.1(b).
"Swingline Note" has the meaning set forth in Section 2.4(b).
"Target Balance" means, initially, $75,000 in Available Funds in the
Operating Account, or such other positive amount as may be specified from time
to time by the Borrower to the Swingline Lender.
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<PAGE>
"TDD" means Telco Development Group of Delaware, Inc., a Delaware
corporation 80% of the capital stock of which is owned by the Borrower, and its
successors.
"TDD Billing Agreement" means the Billing and Information Management
Service Agreement dated as of January 2, 1996 between TDD and the Borrower (as
the same may be amended, supplemented, modified or replaced from time to time
and including any similar agreements entered into between TDD and the Borrower
during the term of this Agreement) pursuant to which TDD will, upon submission
to it of billing information for Borrower rated calls and in exchange for
certain processing and other fees therein specified, process such billing
information and act as the Borrower's agent to collect accounts receivable due
to the Borrower from one or more LECs.
"TBM Program" has the meaning set forth in Section 2.2(d).
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or by any agency thereof, (ii) commercial paper
rated at least A-l by Standard and Poor's Rating Group and P-1 by Moody's
Investors Service, Inc., (iii) time deposits with, including certificates of
deposit issued by, any office located in the United States of any bank or trust
company which is organized under the laws of the United States or any state
thereof and has capital, surplus and undivided profits aggregating at least
$500,000,000 or (iv) repurchase agreements with respect to securities described
in clause (i) above entered into with an office of a bank or trust company
meeting the criteria specified in clause (iii) above, provided in each case that
--------
such Investment matures within one year of the date of acquisition thereof by
the Borrower or any Subsidiary.
"Type" has the meaning set forth in Section 1.3.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or
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<PAGE>
other ownership interests of which (except directors' qualifying shares) are at
the time directly or indirectly owned by the Borrower.
Section 1.2. Accounting Terms and Determinations. Except as otherwise
-----------------------------------
expressly provided herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP as
in effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with those used
in the preparation of the audited consolidated financial statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 4.4(a) hereof;
provided that, if the Borrower notifies the Administrative Agent that the
- --------
Borrower wishes to amend any covenant in Article V to eliminate the effect of
any change in generally accepted accounting principles on the operation of such
covenant (or if the Administrative Agent notifies the Borrower that the Required
Banks wish to amend Article V for such purpose), then the Borrower's compliance
with such covenant shall be determined on the basis of generally accepted
accounting principles in effect immediately before the relevant change in
generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Banks.
Section 1.3. Types of Loans. The term "Borrowing" denotes an
--------------
aggregation of Loans of the Banks to be made pursuant to Article II on the same
date or a single Swingline Loan of the Swingline Lender to be made pursuant to
Article II, all of which are of the same Type (subject to Article VIII) and,
except in the case of Base Rate Loans, have the same Interest Period. Loans
hereunder are distinguished by "Class" and by "Type". The "Class" of a Loan
(or of a Commitment to make such a Loan or of a Borrowing comprised of such
Loans) refers to the determination whether such Loan is a Revolving Loan or a
Swingline Loan. The "Type" of a Loan refers to the determination whether such
Loan is a Base Rate Loan or a Euro-Dollar Loan. Identification of a Loan (or a
Borrowing) by both Class and Type (e.g. a "Revolving EuroDollar Loan") indicates
that such Loan is both a Revolving Loan and a Euro-Dollar Loan (or that such
Borrowing is comprised of such Loans).
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<PAGE>
ARTICLE II
THE CREDIT
Section 2.1. Commitments to Lend.
-------------------
(a) Revolving Loans. Subject to the terms and conditions set forth in
---------------
this Agreement, each Bank severally agrees to make loans (each a Revolving
Loaner and, collectively, the "Revolving Loans") to the Borrower from time to
time during the Availability Period in an aggregate principal amount at any one
time outstanding not to exceed for any Bank that aggregate principal amount
which, when added to such Bank's ratable share (based on such Bank's pro rata
share of the aggregate Revolving Commitments) of the aggregate principal amount
of all Swingline Loans (exclusive of Swingline Loans which are repaid with the
proceeds of, and simultaneously with the incurrence of, Revolving Loans) then
outstanding, equals the Revolving Commitment of such Bank at such time. Subject
to the foregoing, the Borrower may borrow, repay and reborrow Revolving Loans at
any time during the Availability Period.
(b) Swingline Loans. Subject to the terms and conditions set forth in
---------------
this Agreement, the Swingline Lender in its individual capacity agrees to make
loans (each a "Swingline Loan" and, collectively, the "Swingline Loans") to the
Borrower from time to time during the Availability Period in an aggregate
principal amount at any one time outstanding not to exceed the Swingline
Commitment; Provided, that the sum of all Swingline Loans plus all Revolving
---------
Loans at any one time outstanding shall not exceed the aggregate amount of the
Revolving Commitments. Subject to the foregoing, the Borrower may borrow, repay
and reborrow Swingline Loans at any time during the Availability Period.
(c) Mandatory Loans . The Swingline Lender may, in its sole
---------------
discretion give notice to the Banks on any Domestic Business Day that the
outstanding Swingline Loans shall be refunded with a Borrowing of Revolving
Loans (provided that such notice shall be deemed to have been automatically
--------
given upon the exercise of any of the remedies provided in the last paragraph of
Section 6.1 or upon the occurrence of a Default or an Event of Default under
Section 6.1), in which case a Borrowing of Revolving Loans (each such Borrowing
being herein referred to as a "Mandatory Borrowing") shall be made on the
immediately succeeding Domestic Business Day from all Banks pro rata based on
each Bank's pro rata share of the aggregate Revolving Commitments (determined
before giving effect to any termination of the Revolving Commitments pursuant to
the last paragraph of Section 6.1), and the proceeds of such Revolving Loans
shall be applied directly to repay outstanding Swingline Loans. Each Bank hereby
irrevocably agrees to make a Revolving Loan upon one Domestic Business Day's
notice
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<PAGE>
pursuant to each Mandatory Borrowing in the amount and in the manner specified
in the preceding sentence and on the date specified in writing by the Swingline
Lender notwithstanding (i) that the amount of the Mandatory Borrowing may not
comply with any minimum amount for Borrowings otherwise required hereunder, (ii)
whether any conditions specified in Article III are then satisfied, (iii)
whether a Default or an Event of Default then exists, (iv) the date of such
Mandatory Borrowing and (v) the aggregate amount of the Revolving-Commitments at
such time.
If any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code with respect to the
Borrower), each Bank hereby agrees that it shall forthwith purchase (as of the
date on which the Mandatory Borrowing would otherwise have occurred, but
adjusted for any payments received from the Borrower on or after such date and
prior to such purchase) from the Swingline Lender such participations in the
outstanding Swingline Loans as shall be necessary to cause the Banks to share in
such Swingline Loans ratably based upon their pro rata shares of the aggregate
Revolving Commitments (determined before giving effect to any termination of the
Revolving Commitments pursuant to the last paragraph of Section 6.1); provided
--------
that (i) all interest payable on the Swingline Loans shall be for the account of
the Swingline Lender until the date as of which the respective participation is
required to be purchased and, to the extent attributable to the purchased
participation, shall be payable to the participating Bank from and after such
date and (ii) at the time any purchase of participations pursuant to this
sentence is actually made, the purchasing Bank shall be required to pay the
Swingline Lender interest on the principal amount of the participation purchased
for each day from and including the day upon which the Mandatory Borrowing would
otherwise have occurred to but excluding the date of payment for such
participation, at the overnight Federal Funds Rate for the first three days and
at the rate otherwise applicable to Revolving Loans hereunder for each day
thereafter.
(d) Minimum Amount of Each Revolving Borrowing. Each Revolving
-------------------------------------------
Borrowing under Section 2.1(a) shall be in an aggregate principal amount of
$5,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing
may be in the aggregate amount equal to the unused Revolving Commitments) and
shall be made from the several Banks ratably in proportion to their respective
Revolving Commitments.
Section 2.2. Method of Borrowing
-------------------
(a) Notice of Revolving or Swingline Borrowings. The Borrower shall
-------------------------------------------
give the Administrative Agent notice (a "Notice of Borrowing") not later than
10:00 A.M. (local time in Fairfax,
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<PAGE>
Virginia) on (i) the date of each Base Rate Borrowing and (ii) the third Euro-
Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the
case of Euro-Dollar Borrowing;
(ii) the Class and initial Type of the Loans comprising such Borrowing;
(iii) the aggregate amount of such Borrowing; and
(iv) in the case of Euro-Dollar Borrowing, the duration of the initial
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
Notwithstanding the foregoing, no more than 10 Groups of EuroDollar Loans shall
be outstanding at any one time, and any Loans which would exceed such limitation
shall be made as Base Rate Loans.
(b) Notice of Mandatory Borrowinqs. Mandatory Borrowings shall be made
-------------------------------
upon the notice specified in Section 2.1(c), with the Borrower irrevocably
agreeing, by its borrowing of any Swingline Loan, to the making of Mandatory
Borrowings as set forth in Section 2.1(c).
(c) Notice to Banks. Upon receipt of a Notice of Borrowing, the
---------------
Administrative Agent shall promptly notify each Bank participating therein of
the contents thereof and of such Bank's ratable share of such Borrowing, and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(d) TBM Program. If the Borrower elects by notice to the
------------
Administrative Agent and the Swingline Lender of its desire to utilize the
Swingline Lender's Target Balance Maintenance Program (the "TBM Program"), the
Swingline Lender will monitor the Operating Account on each Domestic Business
Day to determine the amount of Available Funds therein. If the Swingline Lender
determines that the amount of Available Funds is less than the Target Balance
for any reason (including, without limitation, the Swingline Lender's
determination in its sole discretion to honor one or more Items presented on the
Operating Account at a time when Excess Funds are not sufficient to cover such
Item), the Swingline Lender shall, subject to the terms and conditions set forth
in this Agreement, thereupon make a Swingline Loan to the
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<PAGE>
Borrower in an amount necessary to cause Available Funds to be not less than the
Target Balance.
(e) Funding of Borrowings. Not later than (i) 12:00 Noon (local time
----------------------
in Fairfax, Virginia) on the date of each Borrowing (other than a Swingline
Borrowing funded under the TBM Program), or (ii) 2:00 P.M. (local time in
Fairfax, Virginia) on the date of each Swingline Borrowing funded under the TBM
Program, each Bank participating in such Borrowing shall make available its
ratable share of such Borrowing in Federal or other funds immediately available
in Fairfax, Virginia), to the Administrative Agent at its address specified in
or pursuant to Section 9.1. Unless the Administrative Agent determines that any
applicable condition set forth in this Agreement has not been satisfied, the
Administrative Agent will (i) in the case of Revolving Borrowings and Swingline
Borrowings, make the funds so received from the Banks available to the Borrower
at the Administrative Agent's aforesaid address, (ii) in the case of Mandatory
Borrowings, make the funds received from the Banks available to the Swingline
Lender at the Administrative Agent's aforesaid address or (iii) if such
Borrowing shall not occur because any condition set forth in this Agreement has
not been satisfied, return promptly the amount so received to the respective
Banks.
(f) Advances by the Administrative Agent. Unless the Administrative
-------------------------------------
Agent shall have received notice from a Bank prior to the date of any Borrowing
that such Bank will not make available to the Administrative Agent its portion
of such Borrowing, the Administrative Agent may assume that such Bank has made
such amount available to the Administrative Agent in accordance with paragraph
(e) above, and the Administrative Agent may, in reliance upon such assumption
(in its sole discretion and without any obligation to do so), make available to
the Borrower a corresponding amount. If and to the extent that such
corresponding amount is not in fact made available to the Administrative Agent
by such Bank, such Bank and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Administrative Agent,
at (i) in the case of the Borrower, a rate per annum equal to the interest rate
applicable thereto pursuant to Section 2.5 and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall constitute such Bank's
Loan included in such Borrowing for purposes of this Agreement.
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<PAGE>
Section 2.3. Extensions of the Availability Period.
-------------------------------------
(a) If the Borrower shall request by notice to the Administrative
Agent not less than 60 days and not more than 150 days prior to the Commitment
Termination Date then in effect that the Availability Period be extended until
the first anniversary of such Commitment Termination Date, then the
Administrative Agent shall promptly notify each Bank of such request, and each
Bank shall notify the Borrower and the Administrative Agent not more than ten
Domestic Business Days after the date on which the Administrative Agent shall
have received the Borrower's request (which date shall be set forth in the
notice of such request given by the Administrative Agent) of its election so to
extend or not extend the Availability Period. Any Bank which shall not timely
notify the Administrative Agent of such election shall be deemed to have elected
not to extend the Availability Period.
(b) If one or more Banks shall timely notify the Administrative Agent
pursuant to paragraph (a) of this Section of their election not to extend the
Availability Period or shall be deemed to have elected not to extend the
Availability Period by virtue of having not timely notified the Administrative
Agent of their election to extend the Availability Period (such Banks being
called "Terminating Banks"), then the Administrative Agent shall so advise the
Borrower and the remaining Banks ("the Continuing Banks"), and the Continuing
Banks or any of them shall have the right (but not the obligation), upon notice
to the Administrative Agent not later than the Domestic Business Day preceding
the applicable Commitment Termination Date, to increase their respective
Revolving Commitments, each by an amount specified by such Continuing Bank in
its notice to the Administrative Agent but by an amount which does not exceed
for any Continuing Bank the product of (i) the quotient of (A) such Continuing
Bank's Revolving Commitment divided by (B) the aggregate Revolving Commitments
of all the Continuing Banks (in each case determined before giving effect to any
increase in the Revolving Commitments of the Continuing Banks pursuant to this
Section 2.3) multiplied by (ii) the aggregate Revolving Commitments of the
Terminating Banks, by an amount equal in the aggregate to the Revolving
Commitments of the Terminating Banks. Each increase in the Revolving Commitment
of a Continuing Bank shall be evidenced by a written instrument executed by such
Continuing Bank and the Administrative Agent, and shall take effect on the
Commitment Termination Date in effect for the Terminating Banks.
(c) If the aggregate Revolving Commitments of the Terminating Banks
shall exceed the aggregate amount by which the Continuing Banks have agreed to
increase their Revolving Commitments pursuant to paragraph (b) of this Section,
the Borrower may, with the approval of the Administrative Agent (which approval
shall not be unreasonably withheld), designate one or
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<PAGE>
more Banks or other banking institutions willing to extend Revolving Commitments
until the first anniversary of the Commitment Termination Date in effect for the
Terminating Banks in an aggregate amount not greater than such excess. Any such
banking institution (an "Additional Bank") shall, on or prior to the Commitment
Termination Date in effect for the Terminating Banks, execute and deliver to the
Borrower, the Administrative Agent and each Continuing Bank an instrument,
satisfactory to the Borrower and the Administrative Agent, setting forth the
amount of its Revolving Commitment and containing its agreement to become, and
to perform all the obligations of, a Bank hereunder, and the Revolving
Commitment of such Additional Bank shall become effective on such date.
(d) The Borrower shall deliver to each Continuing Bank and each
Additional Bank, on the Commitment Termination Date in effect for the
Terminating Banks (and, in the case of each Continuing Bank, in exchange for a
Revolving Note of the Borrower held by such Continuing Bank), a Revolving Note
maturing on the first anniversary of the Commitment Termination Date in effect
for the Terminating Banks in the principal amount of each such Bank's Commitment
after giving effect to the adjustments made pursuant to this Section 2.3.
(e) If some or all of the Banks shall have elected to extend the
Availability Period with respect to their Revolving Commitments as provided in
this Section 2.3, then (i) the Availability Periods for the Revolving
Commitments of the Continuing Banks and any Additional Banks shall continue
until the first anniversary of the Commitment Termination Date in effect prior
to such election and, as to such Banks, the term "Commitment Termination Date",
as used herein, shall mean such first anniversary; (ii) the Revolving
Commitments of the Terminating Banks shall continue in effect until the
Commitment Termination Date in effect prior to such extension and shall then
terminate and as to the Terminating Banks, the term "Commitment Termination
Date", as used herein, shall continue to mean such Commitment Termination Date;
and (iii) from and after the Commitment Termination Date in effect prior to such
extension, the term "Banks", as used herein, shall include any Additional Banks.
Section 2.4. Notes. (a) The Revolving Loans of each Bank shall be
-----
evidenced by, and repayable with interest in accordance with, a single
promissory note of the Borrower payable to the order of such Bank substantially
in the form of Exhibit A hereto and appropriately completed, as amended,
supplemented or modified from time to time (each a "Revolving Note").
(b) The Swingline Loans shall be evidenced by, and repayable with
interest in accordance with, a single promissory note of the Borrower payable to
the order of the Swingline Lender
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<PAGE>
substantially in the form of Exhibit B hereto and appropriately completed, as
amended, supplemented or modified from time to time (the "Swingline Note").
(c) Each Bank may, by notice to the Borrower and the Administrative
Agent, request that its Base Rate Loans and EuroDollar Loans be evidenced by
separate Revolving Notes. Each such Revolving Note shall be in substantially the
form of Exhibit A hereto with appropriate modifications to reflect the fact that
it evidences solely Base Rate Loans or EuroDollar Loans, as the case may be.
Each reference in this Agreement to the "Revolving Note" of such Bank shall be
deemed to refer to and include either or both of such Revolving Notes, as the
context may require.
(d) Upon receipt of each Bank's Note pursuant to Section 3.1(a), the
Administrative Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount, Class and Type of each Loan made by it and the date and
amount of each payment of principal made by the Borrower with respect thereto,
and may, if such Bank so elects in connection with any transfer or enforcement
of its Note, endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing information with respect to each such Loan
then outstanding; Provided that the failure of any Bank to make any such
--------
retardation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Note or Notes and to attach to and make a part of its
Note or Notes a continuation of any such schedule as and when required.
Section 2.5. Interest Rates.
--------------
(a) Interest Rate Options . The Revolving Loans shall, at the
---------------------
option of the Borrower and except as otherwise provided herein, be incurred and
maintained as, or converted into, one or more Base Rate Loans or Euro-Dollar
Loans. The Swingline Loans shall be incurred and maintained as Base Rate Loans.
(b) Base Rate . Each Base Rate Loan shall bear interest on the
---------
outstanding principal amount thereof, for each day from the date such Loan is
made until it becomes due, at a rate per annum equal to the Base Rate. Such
interest shall be payable (i) quarterly in arrears on each March 31, June 30,
September 30 and December 31, (ii) with respect to the principal amount of any
Base Rate Loan converted to a EuroDollar Loan, on the date such Base Rate Loan
is so converted and (iii) for the account of each Bank on the last day of the
applicable Availability Period. Any overdue principal of and (to the extent
permitted by law) interest on any Base Rate Loan of any Class shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the
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<PAGE>
sum of 26 plus the rate otherwise applicable to Base Rate Loans of such Class
for such day.
(c) Euro-Dollar Rate. Each Euro-Dollar Loan shall bear interest on the
----------------
outstanding principal amount thereof, for each Interest Period applicable
thereto, at a rate per annum equal to 2% plus the applicable Adjusted London
Interbank Offered Rate. Such interest shall be payable for each Interest Period
applicable to such Loan on the last day thereof and, if such Interest Period is
longer than three months, at intervals of three months after the first day
thereof. Any overdue principal of and (to the extent permitted by law) interest
on any Euro-Dollar Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the higher of (i) the sum of 4% plus the
Adjusted London Interbank Offered Rate applicable to the Interest Period for
such Loan and (ii) the sum of 4% plus the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per
annum at which one day (or, if such amount due remains unpaid more than three
EuroDollar Business Days, then for such other period of time not longer than
three months as the Administrative Agent may select) deposits in dollars in an
amount approximately equal to such overdue payment due to the Administrative
Agent are offered to the Administrative Agent in the London interbank market for
the applicable period determined as provided above by (y) 1.00 minus the Euro-
Dollar Reserve Percentage.
(d) Default Rate. Upon the occurrence and during the continuance of a
------------
Default or an Event of Default, the principal amount of and, to the extent
permitted by law, overdue interest on any Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the rate which is
2% in excess of the rate of interest otherwise applicable to such Loan (such
otherwise applicable rate to be determined before the application of the last
sentence of Section 2.5(b) or the last sentence of Section 2.5(c)), with such
interest to be payable on demand.
Section 2.6. Method of Electing Interest Rates. (a) The Loans included
---------------------------------
in each Borrowing shall bear interest initially at the type of rate specified by
the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the type of interest rate borne by
each Group of Loans (subject in each case to the provisions of Article VIII), as
follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day;
and
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<PAGE>
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, in each case effective
on the last day of the then current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent at least three Euro-Dollar Business
Days before the conversion or continuation selected in such notice is to be
effective. A Notice of Interest Rate Election may, if it is so specified, apply
to only a portion of the aggregate principal amount of the relevant Group of
Loans; provided that (i) such portion is allocated ratably among the Loans
--------
comprising such Group and (ii) the portion to which such Notice applies, and the
remaining portion to which it does not apply, are each $5,000,000 or any larger
multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable clause
of paragraph (a) above;
(iii) if the Loans comprising such Group are to be converted, the
new Type of Loans and, if such new Loans are Euro-Dollar Loans, the duration
of the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to paragraph (a) above, the Administrative Agent shall
promptly notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Borrower. If the Borrower fails to deliver a
timely Notice of Interest Rate Election to the Administrative Agent for any
Group of Euro-Dollar Loans, such Loans shall be converted into
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<PAGE>
Base Rate Loans on the last day of the then current Interest Period applicable
thereto.
(d) Determination of Interest Rate. The Administrative Agent shall
------------------------------
determine each interest rate applicable to the Loans hereunder. The
Administrative Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
Section 2.7. Fees.
----
(a) Facility Fee. The Borrower shall pay to the Agent for the account
------------
of the Banks party hereto on the Closing Date in proportion to their respective
Revolving Commitments facility fees equal to (i) 1/2 of 1% of the aggregate
amount of the Revolving Commitments in effect on the Effective Date, which fees
shall be due and payable on the Closing Date and (ii) 1/4 of 1% of the aggregate
amount of the Revolving Commitments in effect on the Effective Date, which fees
shall be due and payable on the date numerically corresponding to the Closing
Date in the sixth calendar month following the calendar month in which the
Closing Date occurs.
(b) Commitment Fee. During the Availability Period, the Borrower shall
--------------
pay to the Administrative Agent for the account of the Banks ratably in
proportion to their Revolving Commitments a commitment fee at the rate of 25
basis points per annum on the average daily unused portion of the Revolving
Commitments. Such commitment fee shall accrue from and including the Effective
Date to but excluding the last day of the applicable Availability Period and
shall be payable quarterly in arrears on each March 31, June 30, September 30
and December 31 during the Availability Period and on the last day of the
applicable Availability Period with respect to any Bank.
Section 2.8. Increases in Commitments. (a) The Borrower shall have the
------------------------
right at any time on or after the Closing Date to increase the Revolving
Commitments hereunder to an amount not to exceed $60,000,000 by causing one or
more banks or other financial institutions, which may include any Bank already
party to this Agreement (an "Existing Bank"), to become a Bank under this
Agreement or, in the case of any Existing Bank to increase the amount of such
Bank's Revolving Commitment; provided that the Revolving Commitment of any bank
--------
or other financial institution that is not already a Bank (a "New Bank") and
any increase in the amount of the Revolving Commitment of each Existing Bank,
shall be in an amount equal to $5,000,000 or any larger multiple of $1,000,000.
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<PAGE>
(b) Any increase in the aggregate Revolving Commitments pursuant to
Section 2.8(a) hereof shall be effective only upon the execution and delivery by
each New Bank and/or each Existing Bank, as the case may be, to the Borrower
and the Administrative Agent at least five Domestic Business Days before any
such increase is to become effective of an instrument satisfactory to the
Borrower and the Administrative Agent:
(i) in the case of a New Bank, setting forth the amount of its
Revolving Commitment and the date upon which it is to become effective (the
"Commitment Increase Date") and containing its agreement to become, and to
perform all the obligations of, a Bank hereunder; and
(ii) in the case of an Existing Bank, setting forth the amount by
which its Revolving Commitment hereunder is to be increased and the
Commitment Increase Date applicable thereto.
(c) Any increase in the aggregate amount of the Revolving Commitments
pursuant to this Section 2.8 shall not be effective unless:
(i) no Default or Event of Default shall have occurred and be
continuing on the Commitment Increase Date;
(ii) each of the representations and warranties made by each
Obligor and each Shareholder in the Loan Documents shall be true and correct
in all material respects on and as of the Commitment Increase Date with the
same force and effect as if made on and as of such date;
(iii) immediately after giving effect to such increase, the aggregate
Revolving Commitments shall not exceed $60,000,000; and
(iv) each Bank (including New Banks) shall have received a
certificate of the corporate secretary or assistant secretary of the Borrower
as to the taking of any corporate action necessary in connection with such
increase.
(d) From and after the effective date of an increase of the Revolving
Commitment pursuant to this Section 2.8, the term "Banks", as used herein, shall
include New Banks.
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<PAGE>
(e) No Bank shall at any time be required to agree to a request of the
Borrower to increase its Revolving Commitment or obligations hereunder.
Section 2.9. Mandatory Termination or Reduction of Commitments.
-------------------------------------------------
(a) Scheduled Termination. The Commitment(s) of each Bank hereunder
---------------------
shall terminate on the Commitment Termination Date in effect for such Bank (as
such date may be extended from time to time pursuant to Section 2.3), and all
Loans of such Bank then outstanding (together with accrued interest thereon)
shall be due and payable on such date.
(b) Mandatory Reduction of Revolving Cornrnitments. In the event that
----------------------------------------------
the Borrower or any of its Subsidiaries shall at any time, or from time to time,
after the date hereof receive any Net Cash Proceeds of any Asset Sale, the
Revolving Commitments shall be reduced by an amount equal to 100% of such Net
Cash Proceeds. The reduction required by this section shall be effective
forthwith upon receipt by the Borrower or any of its Subsidiaries, as the case
may be, of such Net Cash Proceeds; provided that if the amount of Net Cash
--------
Proceeds in respect of any Asset Sale is less than $250,000, such reduction
shall be effective upon receipt of proceeds such that, together will all other
such amounts not previously applied, the total of Net Cash Proceeds is equal to
at least $250,000. Each reduction of the aggregate Revolving Commitments
pursuant to this Section 2.9(b) shall be applied ratably to the respective
Revolving Commitments of all the Banks.
Section 2.10. Mandatory Repayments. (a) The outstanding principal
---------------------
amount of all Loans of each Bank shall mature, and shall become due and payable
(together with all interest thereon), on the last day of the Availability Period
for Loans from such Bank.
(b) If on any day (A) the aggregate outstanding principal amount of
all Loans of each Class exceeds the lesser of (x) the aggregate amount of the
Commitments of such Class and (y) the Borrowing Base or (B) the aggregate
outstanding principal amount of all Loans of all Classes exceeds the Borrowing
Base, the Borrower shall prepay, and there shall become due and payable, on such
date the principal amount of Swingline Loans, and, after the Swingline Loans
have been paid in full, Revolving Loans equal to such excess, together with
accrued interest thereon to the date of repayment.
(c) Each payment of principal of the Loans of any Class shall be made
together with interest accrued on the amount repaid to the date of payment.
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<PAGE>
(d) Each payment of Loans of any Class shall be applied to such Group
or Group of Loans of such Class as the Borrower may designate (or, failing such
designation, as determined by the Administrative Agent)
Section 2.11. Optional Prepayments. (a) Subject in the case of any
--------------------
Euro-Dollar Borrowing to Section 2.13, the Borrower may, upon at least one
Domestic Business Day's notice to the Administrative Agent, prepay any Base Rate
Borrowing or upon at least three Euro-Dollar Business Days' notice to the
Administrative Agent, prepay any Euro-Dollar Borrowing, in each case in whole at
any time, or from time to time in part in amounts aggregating $5,000,000 or any
larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Loans of the several
Banks included in such Borrowing.
(b) Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Bank of the contents thereof
and of such Bank's ratable share (if any) of such prepayment and such notice
shall not thereafter be revocable by the Borrower.
Section 2.12. General Provisions as to Payments. (a) The Borrower
----------------------------------
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder not later than 11:00 A.M. (local time in Fairfax, Virginia) on the
date when due, in Federal or other funds immediately available in Fairfax,
Virginia, to the Administrative Agent at its address specified in or pursuant to
Section 9.1. The Administrative Agent will promptly distribute to each Bank its
ratable share of each such payment received by the Administrative Agent for the
account of the Banks. Whenever any payment of principal of, or interest on, the
Base Rate Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-
Dollar Business Day, the date for payment thereof shall be extended to the next
succeeding EuroDollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case the date for payment thereat shall be the
next preceding EuroDollar Business Day. If the date for any payment of principal
is extended by operation of law or otherwise, interest thereon shall be payable
for such extended time.
(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the
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<PAGE>
Borrower has made such payment in full to the Administrative Agent on such date
and the Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent that the Borrower shall not have so made such
payment, each Bank shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative Agent, at the Federal Funds Rate.
Section 2.13. Funding Losses. If the Borrower makes any payment of
--------------
principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is
converted to a Base Rate Loan (pursuant to Article II, VI or VIII or otherwise),
but excluding any prepayment required pursuant to Section 2.2(f) or any
conversion required pursuant to Section 8.2), on any day other than the last day
of the Interest Period applicable thereto, or if the Borrower fails to borrow,
convert or prepay any Euro-Dollar Loan after notice has been given to any Bank
in accordance with Section 2.2(a), Section 2.6 or Section 2.11, the Borrower
shall reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it, including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or conversion or failure to
borrow, prepay or convert, provided that such Bank shall have delivered to the
--------
Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
Section 2.14. Computation of Interest. Interest shall be computed on
-----------------------
the basis of a year of 360 days and paid for the actual number of days elapsed.
ARTICLE III
CONDITIONS
Section 3.1. Conditions to Closing. The obligation of each Bank to
---------------------
make a Loan on the occasion of the first Borrowing hereunder is subject to the
satisfaction of the following conditions:
(a) Notes. On or prior to the Closing Date, (i) the Administrative
-----
Agent shall have received a duly executed Revolving Note for the account of each
Bank, each dated on or before the Closing Date, complying with the provisions of
Section 2.4(a); and (ii) the Administrative Agent shall have received a duly
executed Swingline Note for the account of the Swingline Lender, dated on or
before the Closing Date, complying with the provisions of Section 2.4(b).
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<PAGE>
(b) Adverse Chance, etc. On the Closing Date, nothing shall have
-------------------
occurred (and neither the Administrative Agent nor any Bank shall have become
aware of any facts or conditions not previously known) which the Administrative
Agent or any Bank shall determine has, or could reasonably be expected to have,
a Material Adverse Effect.
(c) Officer's Certificates.
----------------------
(i) The Administrative Agent shall have received a certificate
dated the Closing Date signed on behalf of the Borrower by the Chairman of
the Board, the President, any Vice President or the Treasurer of the Borrower
stating that (x) on the Closing Date and after giving effect to the Loan
being made on the Closing Date, no Default or Event of Default shall have
occurred and be continuing and (y) to the best knowledge and belief of such
officer, the representations and warranties of the Borrower contained in the
Loan Documents are true and correct on and as of the Closing Date.
(ii) The Administrative Agent shall have received a certificate
from each Subsidiary (excluding TDD) dated the Closing Date signed on behalf
of such Subsidiary by the Chairman of the Board, the President, any Vice
President or the Treasurer of the Subsidiary stating that, to the best
knowledge and belief of such officer, the representations and warranties of
such Subsidiary contained in the Loan Documents are true and correct as of
the Closing Date.
(d) Borrowing Base Certificate. On the Closing Date, the
--------------------------
Administrative Agent shall have received a Borrowing Base Certificate signed on
behalf of the Borrower by the Chairman of the Board, the President, any Vice
President or the Treasurer of the Borrower.
(e) Opinion of Counsel. On the Closing Date, the Administrative Agent
------------------
shall have received from counsel to the Borrower an opinion addressed to the
Administrative Agent and each Bank and dated the Closing Date substantially in
the form of Exhibit C hereto and covering such additional matters relating to
the transactions contemplated hereby as the Administrative Agent or any Bank may
reasonably request.
(f) Repayment of Existing Indebtedness. On the Closing Date, the
----------------------------------
Administrative Agent shall have received evidence that the principal of and
interest on all loans outstanding under, and all other amounts owing under or in
respect of, the Credit Agreement dated as of June 27, 1994 between the Borrower
and
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<PAGE>
Signet Bank/Maryland, as amended by Amendment No. 1 dated as of November 18,
1994 and Amendment No. 2 dated as of December 31, 1994, each between the
Borrower and Signet/Bank Maryland, shall have been (or shall be simultaneously)
paid in full and that any commitments to extend credit thereunder shall have
been cancelled or terminated.
(g) Other Loan Documents. On the Closing Date, the Administrative
--------------------
Agent shall have received executed copies of the Security Agreement, the Pledge
Agreement, the Subsidiary Guaranty, and the Shareholder Pledge Agreements and
the other Loan Documents.
(h) Stock Certificates. On the Closing Date, the Collateral Agent
------------------
shall have received all certificates representing the shares of stock pledged
under the Pledge Agreement and the Shareholder Pledge Agreements, duly endorsed
in blank or accompanied by stock powers duly executed in blank. Such
certificates shall evidence 100% of the shares of stock of the respective
issuers thereof owned by any Obligor or Shareholder. With respect to the
Subsidiaries (other than Long Distance Wholesale Club and TDD) such certificates
shall evidence 100% of the issued and outstanding shares of capital stock of the
respective issuers thereof.
(i) UCC Filings. On or prior to the Closing Date, each document
------------
(including, without limitation, each Uniform Commercial Code financing
statement) required by law or reasonably requested by the Collateral Agent to be
filed, registered or recorded in order to create in favor of the Collateral
Agent, for the benefit of the Banks, a perfected first priority security
interest in the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or recordation
thereof is so required or requested, and the Collateral Agent shall have
received an acknowledgment copy, or other evidence satisfactory to it, of each
such filing registration or recordation.
(j) Search Reports. The Collateral Agent shall have received UCC, tax
--------------
and judgment reports from Prentice-Hall Financial Services or other independent
search service satisfactory to the Collateral Agent, listing all effective
financing statements that name the Borrower or any Subsidiary of the Borrower
(excluding TDD) (under its present name and any previous names and under the
name Dial & Save) as debtor, seller, delinquent taxpayer or defendant and that
are filed in the jurisdictions referred to in paragraph (i) above and any other
jurisdiction reasonably requested by the Collateral Agent, together with copies
of such financing statements (none of which shall cover the Collateral, except
to the extent evidencing Permitted Liens or for which the Collateral Agent shall
have
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<PAGE>
received termination statements (Form UCC-3), or such other termination
statements as shall be required by local law, fully executed for filing).
(k) Borrower Corporate Documents. On the Closing Date, the
----------------------------
Administrative Agent shall have received (i) a copy of the Borrower's articles
of incorporation, as amended, certified by the Clerk of the State Corporation
Commission of Virginia; (ii) a certificate of the Clerk of the State
Corporation Commission of Virginia, dated as of a recent date, as to the good
standing and charter documents of the Borrower on file; and (iii) a certificate
of the Secretary or an Assistant Secretary of the Borrower dated the Closing
Date and certifying (A) that the articles of incorporation of the Borrower have
not been amended since the date of the last amendment thereto indicated on the
certificate furnished pursuant to clause (ii) above, (B) as to the absence of
dissolution or liquidation proceedings by or against the Borrower, (C) that
attached thereto is a true and complete copy of the bylaws of the Borrower as in
effect on the date of such certification and all other times relevant to the
transactions contemplated hereby, (D) that attached thereto is a true, correct
and complete copy of resolutions adopted by the board of directors of the
Borrower authorizing the execution, delivery and performance of the Loan
Documents and each other document delivered in connection herewith or therewith
and that said resolutions have not been amended and are in full force and effect
on the date of such certificate, (E) as to the incumbency and specimen
signatures of each officer of the Borrower executing the Loan Documents or any
other document delivered in connection herewith or therewith and (F) certifying
that as to the names and respective jurisdictions of incorporation of all
Subsidiaries of the Borrower existing on the Closing Date. The certificate
referred to in clause (iii) of this Section shall be substantially in the form
of such certificate as attached to the Closing Agenda furnished by counsel for
the Administrative Agent.
(l) Subsidiary Corporate Documents. On the Closing Date, the
------------------------------
Administrative Agent shall have received (i) a copy of the Subsidiary's articles
or certificate of incorporation of each Subsidiary (other than TDD) as amended,
certified by the Secretary of State or comparable primary state regulator of the
jurisdiction in which such Subsidiary is incorporated; (ii) a certificate of the
officer referred to in clause (i) above, dated as of a recent date, as to the
good standing and charter documents of such Subsidiary on file; and (iii) a
certificate of the Secretary or an Assistant Secretary of such Subsidiary dated
the Closing Date and certifying (A) that its articles of incorporation have not
been amended since the date of the last amendment thereto indicated on the
certificate furnished pursuant to clause (ii) above, (B) as to the absence of
dissolution or liquidation proceedings by or against it, (C) that attached
thereto is a true and complete copy
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<PAGE>
of its by-laws as in effect on the date of such certification and all other
times relevant to the transactions contemplated hereby, (D) that attached
thereto is a true, correct and complete copy of resolutions adopted by its board
of directors authorizing the execution, delivery and performance of the Loan
Documents to which such Subsidiary is a party and each other document delivered
in connection herewith or therewith and that said resolutions have not been
amended and are in full force and effect on the date of such certificate and (E)
as to the incumbency and specimen signatures of each officer of such Subsidiary
executing the Loan Documents to which it is a party or any other document
delivered in connection herewith or therewith. The certificate referred to in
clause (iii) of this Section shall be substantially in the form of such
certificate as attached to the Closing Agenda furnished by counsel for the
Administrative Agent.
(m) Facility Fee. The Administrative Agent shall have received from
------------
the Borrower for the account of each Bank an amount computed in accordance with
Section 2.7(a)(i) in full payment of the facility fee required under Section
2.7(a)(i).
(n) Counsel Fees. The Administrative Agent shall have received payment
------------
from the Borrower of full payment of the fees and expenses of McGuire, Woods,
Battle & Boothe, L.L.P. described in Section 9.3 which are billed through the
Closing Date.
All documents and opinions referred to in this Article shall be in form and
substance satisfactory to the Administrative Agent and its counsel. The
Administrative Agent shall promptly notify the Borrower and the Banks of the
Closing Date, and such notice shall be conclusive and binding on all parties
hereto. The certificates and opinions referred to in this Section shall be dated
the Closing Date.
Section 3.2. Borrowings. The obligation of any Bank to make a Loan on
----------
the occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(i) except in the case of a Swingline Loan funded under the TBM
Program, receipt by the Administrative Agent of Notice of such Borrowing as
required by Section 2.2;
(ii) the fact that, immediately after such Borrowing, (A) the
aggregate outstanding principal amount of all Loans of each Class shall not
exceed the lesser of (x) the aggregate amount of the Commitments of such
Class and (y) the Borrowing Base and (B) the aggregate outstanding principal
amount of all Loans of all Classes shall not exceed the Borrowing Base;
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(iii) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(iv) the fact that the representations and warranties of the
Borrower and each of its Subsidiaries contained in the Loan Documents shall
be true and correct on and as of the date of such Borrowing as though made on
such date.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date thereof that the facts hereinabove set forth in clauses
(ii), (iii) and (iv) of this Section 3.2 are true as of such date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 4.l. Corporate Existence and Power. The Borrower and each
-----------------------------
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted. The
Borrower and each Subsidiary is duly qualified as a foreign corporation,
licensed and in good standing in each jurisdiction where qualification or
licensing is required by the nature of its business or the character and
location of its property, business or customers and in which the failure to so
qualify or be licensed, as the case may be, in the aggregate, could have a
Material Adverse Effect.
Section 4.2. Corporate and Governmental Authorization; No
--------------------------------------------
Contravention. The execution, delivery and performance by the Borrower and its
- -------------
Subsidiaries of the Loan Documents to which each is a party are within the
corporate powers of each, have been duly authorized by all necessary corporate
action, require no action by or in respect of, or filing with, any governmental
body, agency or official (except for any such action or filing as shall have
been taken or made and that is in full force and effect from and after the
Closing Date) and do not contravene, or constitute (with or without the giving
of notice or lapse of time or both) a default under, any provision of applicable
law or of the articles or certificate of incorporation or by-laws of the
Borrower or any Subsidiary or of any agreement, judgment, injunction, order,
decree or other instrument binding upon or affecting the Borrower or any
Subsidiary or result in the creation or imposition of any
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<PAGE>
Lien (other than the Lien of the Loan Documents) on any asset of the Borrower or
any of its Subsidiaries.
Section 4.3. Binding Effect. Each Loan Document (other than the Notes)
--------------
constitutes a valid and binding agreement of the Borrower and each of its
Subsidiaries which is a party thereto and the Notes, when executed and delivered
in accordance with this Agreement, will constitute valid and binding obligations
of the Borrower, in each case enforceable against the Borrower or Subsidiary as
the case may be, in accordance with its terms except in each case as such
enforceability may be limited by (i) bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
Section 4.4. Financial Information. (a) The consolidated balance sheet
---------------------
of the Borrower and its Consolidated Subsidiaries as of December 31, 1994 and
the related consolidated statements of income and cash flows for the fiscal year
then ended, reported on by Deloitte & Touche, L.L.P., copies of which have been
delivered to each of the Banks, fairly present, in conformity with GAAP, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such fiscal year. As of the date of such financial statements,
the Borrower and its Consolidated Subsidiaries did not have any material
contingent obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment, which is not reflected in any
of such financial statements or notes thereto.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of September 30, 1995 and the related unaudited
consolidated income statements for the nine months then ended, copies of which
have been delivered to each of the Banks, fairly present, in conformity with
GAAP applied on a basis consistent with the financial statements referred to in
subsection (a) of this Section, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and changes in financial position for such
nine-month period (subject to normal year-end adjustments).
(c) Since December 31, 1994 there has been no material adverse change
in condition (financial or otherwise), results of operations, properties,
assets, business or prospects of the Borrower or of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
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<PAGE>
Section 4.5. Solvency. After giving effect to the transactions
--------
contemplated hereby, the Borrower and each of its Subsidiaries is and will be
Solvent.
Section 4.6. Litigation. There is no action, suit, proceeding or
-----------
investigation pending against, or to the knowledge of the Borrower or any of its
Consolidated Subsidiaries threatened against, contemplated or affecting, the
Borrower or any of its Subsidiaries before any court, arbitrator or any
Governmental Authority, agency or official which has, or, if adversely
determined, could reasonably be expected to have, a Material Adverse Effect, or
which in any manner draws into question the validity or enforceability of any
Loan Document, and there is no basis known to the Borrower or any of its
Subsidiaries for any such action, suit, proceeding or investigation.
Section 4.7. Ownership of Property, Liens. The Borrower and each of
----------------------------
its Subsidiaries has good and marketable title to or has valid leasehold or
license interests in, and is in lawful possession of, all its properties and
other assets (real or personal, tangible, intangible or mixed), and none of
such properties and assets is subject to any Liens, except Liens permitted by
Section 5.11 hereof. All of such properties and other assets are in good working
order and condition, ordinary wear and tear excepted. The Borrower and its
Subsidiaries have received all deeds, assignments, bills of sale and other
documents and duly effected all recordings, filings and other actions necessary
or appropriate to establish, protect and perfect its right, title and interest
in and to all such properties and assets.
Section 4.8. Filings. All actions by or in respect of, and all filings
--------
with, any Governmental Authority required in connection with the execution,
delivery and performance of this Agreement or the other Loan Documents, or
necessary for the validity or enforceability thereof or for the protection or
perfection of the rights and interests of the Administrative Agent, the
Collateral Agent or the Banks hereunder or thereunder, have been duly taken or
made, as the case may be, and will at all times hereafter remain in full force
and effect.
Section 4.9. Regulation U; Use of Proceeds. The Borrower and its
-----------------------------
Subsidiaries do not own any "margin stock" as such term is defined in Regulation
U of the Board of Governors of the Federal Reserve System. The proceeds of the
Loans will be used by the Borrower only for the purposes set forth in Section
5.19 hereof.
Section 4.10. Regulatory Restrictions on Borrowing. Neither the
-------------------------------------
Borrower nor any of its Subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940,
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<PAGE>
as amended, a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or otherwise subject to any regulatory
scheme which restricts its ability to incur debt.
Section 4.11. Subsidiaries. Each of the Borrower's Subsidiaries is and
------------
will be, at each time that this representation is made or deemed to be made, a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted. Schedule 4.11 sets forth a complete
list of all Subsidiaries of the Borrower at the Closing Date, including their
respective jurisdictions of incorporation and the percentage of their
outstanding shares of capital stock owned by the Borrower. Each of Long Distance
Wholesale Club and TDD is a Consolidated Subsidiary of the Borrower.
Section 4.12. Full Disclosure. All factual information (taken as a
---------------
whole) furnished by or on behalf of the Borrower or any of its Subsidiaries in
writing to the Administrative Agent or to any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is true
and accurate in all material respects on the date as of which such information
is dated or certified and is not incomplete by omitting to state any material
fact necessary to make such information (taken as a whole) not misleading at
such time in light of the circumstances under which such information was
provided. There is no fact known to the Borrower or any of its Subsidiaries
which materially and adversely affects the condition (financial or otherwise),
results of operations, properties, assets, business or prospects of the Borrower
and its Consolidated Subsidiaries, considered as a whole, which has not been
disclosed herein or any other documents, certificates and statements furnished
to the Administrative Agent or to any Bank for use in connection with the
transactions contemplated hereby.
Section 4.13. Tax Returns and Payments. The Borrower and each of its
-------------------------
Subsidiaries has filed all United States Federal income tax returns and all
other material tax returns, domestic and foreign, required to be filed by it and
has paid all taxes and assessments payable by it which have become due pursuant
to such returns or pursuant to any assessment received by the Borrower or any
Subsidiary, other than those not yet delinquent and except for those contested
in good faith. The Borrower and each of its Subsidiaries has paid, or has
provided adequate reserves (in good faith judgment of the management of the
Borrower) for the payment of, all federal, state and foreign income taxes
applicable for all prior fiscal years and for the current fiscal year to the
date hereof.
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<PAGE>
Section 4.14. Compliance with ERISA. Each member of the ERISA Group
---------------------
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
Section 4.15. Intellectual Property. The Borrower and each of its
---------------------
Subsidiaries owns or possesses or holds under valid non-cancelable licenses all
patents, trademarks, service marks, trade names, copyrights, licenses and other
intellectual property rights that are necessary for the operation of their
respective properties and businesses, and neither the Borrower nor any of its
Subsidiaries is in violation of any provision thereof. The Borrower and its
Subsidiaries conduct their business without infringement or claim of
infringement of any material license, patent, trademark, trade name, service
mark, copyright, trade secret or any other intellectual property right of others
and there is no infringement or claim of infringement by others of any material
license, patent, trademark, trade name, service mark, copyright, trade secret or
other intellectual property right of the Borrower and its Subsidiaries.
Section 4.16. No Burdensome Restrictions. No contract, lease,
--------------------------
agreement or other instrument to which the Borrower or any of its Subsidiaries
is a party or by which any of its property is bound or affected, no charge,
corporate restriction, judgment, decree or order and no provision of applicable
law or governmental regulation has had or is reasonably expected to have a
Material Adverse Effect.
Section 4.17. Environmental Compliance. (a) Except to the extent that
-------------------------
the liabilities of the Borrower and its Subsidiaries, taken as a whole, that
relate to or could result from the matters referred to in clauses (i) through
(iii), inclusive, would not reasonably be expected to result in a Material
Adverse Effect:
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has been
filed, no penalty
-40-
<PAGE>
has been assessed nor, to the Borrower's or any of its Subsidiaries,
knowledge, is any investigation or review pending or threatened by any
governmental or other entity with respect to any (A) alleged violation by the
Borrower or any Subsidiary of any Environmental Law, (B) alleged failure by
the Borrower or any Subsidiary to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with
the conduct of its business or (C) generation, storage, treatment, disposal,
transportation or Release of Hazardous Substances;
(ii) no Hazardous Substance has been Released (and no written
notification of such Release has been filed) or is present (whether or not in
a reportable or threshold planning quantity) at, on or under any property now
or previously owned, leased or operated by the Borrower or any Subsidiary;
and
(iii) no property now or previously owned, leased or operated by
the Borrower or any Subsidiary or any property to which the Borrower or any
Subsidiary has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances, is listed or, to the Borrower's
of any of its Subsidiaries' knowledge, proposed for listing, on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in
CERCLA) or on any similar federal, state or foreign list of sites requiring
investigation or clean-up.
(b) There are no Environmental Liabilities that have resulted or could
reasonably be expected to result in a Material Adverse Effect.
(c) For purposes of this Section, the terms "Borrower" and
"Subsidiar" shall include any business or business entity (including a
corporation) which is a predecessor, in whole or in part, of the Borrower or any
Subsidiary.
Section 4.18. Representations in Loan Documents True and Correct. Each
--------------------------------------------------
of the representations and warranties of each Obligor and each Shareholder
contained in the Loan Documents is true and correct in all material respects.
Section 4.19. Labor Matters. There are no strikes or other labor
-------------
disputes pending or, to the knowledge of the Borrower, threatened, against the
Borrower or any of its Subsidiaries which have, or could reasonably be expected
to have, a Material Adverse Effect. The Borrower and its Subsidiaries have not
been in violation of the Fair Labor Standards Act or any other applicable
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<PAGE>
law dealing with such matters, except for violations which in the aggregate
could not reasonably be expected to have a Material Adverse Effect.
Section 4.20. Capitalization. On the Closing Date and after giving
---------------
effect hereto, the authorized capital stock of the Borrower consists of 100,000
Common Shares, of which 49,092 shares were outstanding on the Closing Date. All
of such outstanding shares have been duly and validly issued, are fully paid and
nonassessable and are free of preemptive rights.
Section 4.21. Communications Act. Neither any Bank nor any Affiliate
------------------
of any Bank will become, solely by reason of entering into this Agreement or the
other Loan Documents or the consummation of any of the transactions contemplated
hereby or thereby, subject to regulation under (i) the Communications Act of
1934, as amended, or the rules, regulations and polices of the FCC thereunder
(except for direct or derivative obligations to furnish nonburdensome
information routinely required of similarly situated Persons) or (ii) any other
present Federal or state laws relating to communications services or the use or
operation of apparatus for the transmission of energy, communications or signals
by radio.
Section 4.22. No Defaults. Neither the Borrower nor any Subsidiary is
-----------
in default in the payment of the principal of or interest on any indebtedness
nor in default under any instrument or agreement material to its condition
(financial or otherwise), results of operations, properties, assets, business or
prospects, under and subject to which any such indebtedness has been incurred,
and no event has occurred and is continuing under the provisions of any such
agreement which, with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder or permit the acceleration of the
indebtedness represented thereby.
ARTICLE V
COVENANTS
The Borrower agrees that so long as any Bank has any Commitment
hereunder or any amount payable hereunder or under any Note or any Loan Document
remains unpaid the Borrower shall (and, where applicable, shall cause each of
its Subsidiaries to):
Section 5.1. Information. The Borrower will deliver or cause to be
-----------
delivered to each of the Banks:
(i) as soon as available and in any event within 120 days after
the end of each fiscal year of the Borrower, a consolidated balance sheet of
the Borrower
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<PAGE>
and its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of income and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and accompanied by an opinion thereon by
Deloitte & Touche, L.L.P. or other independent public accountants satisfactory
to the Administrative Agent, which opinion shall not be qualified as to the
scope of the audit and which shall state that such consolidated financial
statements present fairly the consolidated financial position of the Borrower
and its Consolidated Subsidiaries as of the date of such financial statements
and the results of their operations for the period covered by such financial
statements in conformity with GAAP applied on a consistent basis (except for
changes in the application of which such accountants concur) and shall not
contain any "going concern" or other qualification;
(ii) as soon as available and in any event within 30 days after the
end of each quarter of each fiscal year of the Borrower a consolidated balance
sheet of the Borrower and consolidated income statements of the Borrower and its
Consolidated Subsidiaries for such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter of the Borrower's
previous fiscal year, all certified (subject to normal year-end audit
adjustments) as complete and correct by the chief financial officer or chief
accounting officer of the Borrower;
(iii) not later that 12:00 (local time in Fairfax, Virginia) on the
fifteenth day of each month (or such other time and date in each month as may be
agreed by the Administrative Agent and the Borrower), a Borrowing Base
Certificate in form satisfactory to the Administrative Agent, together with
accounts receivable agings, purchase of accounts receivable statements and
direct mail response rate information in form satisfactory to the Administrative
Agent;
(iv) not more than 60 days after the commencement of each fiscal year
of the Borrower, and within 15 days of any material revisions thereto, a budget
prepared by the Borrower in accordance with past practices, in form reasonably
satisfactory to the Administrative Agent and to the Required Banks (including
budgeted statements of income and sources and uses of cash and balance sheets)
prepared by the Borrower for each of the twelve months of such fiscal
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<PAGE>
year, in reasonable detail and setting forth, with appropriate discussion, the
principal assumptions upon which such budgets are based and a statement by the
chief financial officer or chief accounting officer of the Borrower to the
effect that, to the best of such officer's knowledge, the budget is a reasonable
estimate for the period covered thereby;
(v) simultaneously with the delivery of each set of financial
statements referred to in clause (i) and (ii) above, a certificate of the chief
financial officer or chief accounting officer of the Borrower, (A) setting forth
in reasonable detail the calculations required to establish whether the Borrower
was in compliance with the requirements of Sections 5.8 and 5.9, on the date of
such financial statements, (B) stating whether there exists on the date of such
certificate any Default and, if any Default then exists, setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto and (C) stating whether, since the date of the most recent
previous delivery of financial statements pursuant to clause (i) or (ii) of this
Section, there has been any material adverse change in the condition (financial
or otherwise), results of operations, properties, assets, business or prospects
of the Borrower or of the Borrower and its Consolidated Subsidiaries, considered
as a whole, and, if so, the nature of such material adverse change;
(vi) simultaneously with the delivery of each set of financial
statements referred to in clause (i) above, a statement of the firm of
independent public accountants that reported on such statements (A) stating that
their audit examination has included a review of this Agreement and the Notes as
they relate to financial or accounting matters and (B) whether anything has come
to their attention to cause them to believe that there existed on the date of
such statements any Default;
(vii) forthwith upon the occurrence of any Default, a certificate of the
chief financial officer or chief accounting officer of the Borrower setting
forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(viii) as soon as reasonably practicable after obtaining knowledge of the
commencement of, or of a material threat of the commencement of, an action,
suit, proceeding or investigation against the Borrower or any of its
Subsidiaries which could materially adversely
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<PAGE>
affect the condition (financial or otherwise), results of operations,
properties, assets, business or prospects of the Borrower and its Consolidated
Subsidiaries, considered as a whole, or could otherwise have a Material Adverse
Effect or which in any manner questions the validity of any Loan Document or any
of the other transactions contemplated hereby or thereby, an explanation of the
nature of such pending or threatened action, suit, proceeding or investigation
and such additional information as may be reasonably requested by any Bank;
(ix) promptly upon transmission thereof, copies of all press releases
and other statements made available generally by the Borrower or its
Subsidiaries to the public concerning material developments in the condition
(financial or otherwise), results of operations, properties, assets, business or
prospects of the Borrower or its Subsidiaries;
(x) promptly upon their becoming available; copies of all registration
statements (excluding exhibits to such registration statements, and other than
registration statements filed on Form S-8 or any successor form) and regular
periodic reports filed on Form 10-K, Form 10-Q or Form 8-K (or any successor
form), if any, that the Borrower or any Consolidated Subsidiary shall have filed
with the Securities Excnange Commission or any national securities exchange or
the NASDAQ;
(xi) promptly upon receipt thereof, copies of each report submitted to
the Borrower or any of its Consolidated Subsidiaries by independent public
accountants in connection with any annual, interim or special audit made by them
of the books of the Borrower or any of its Consolidated Subsidiaries including
without limitation, each report submitted to the Borrower or any of its
Consolidated Subsidiaries concerning its accounting practices and systems and
any final comment letter submitted by such accountants to management in
connection with the annual audit of the Borrower and its Consolidated
Subsidiaries;
(xii) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable events (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
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<PAGE>
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of
such notice; (iii) receives notice from the P8GC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to administer any
Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code, a copy of such
application; (v) gives notice of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063
of ERISA, a copy of such notice; or (vii) fails to make any payment-or
contribution to any Plan or Multiemployer Plan or in respect of any Benefit
Arrangement or makes any amendment to any Plan or Benefit Arrangement which
has resulted or could reasonably be expected to result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the chief
financial officer or the chief accounting officer of the Borrower setting
forth details as to such occurrence and action, if any, which the Borrower or
applicable member of the ERISA Group is required or proposes to take;
(xiii) copies of all renewal applications with respect to FCC
licenses and other material filings with the FCC; and
(xiv) from time to time such additional financial, FCC or other
information regarding the condition (financial or otherwise), results of
operations, properties, assets, business or prospects of the Borrower or of
any of its Subsidiaries as any Bank may reasonably request.
Section 5.2. Payment of Obligations. The Borrower will pay and
-----------------------
discharge, and will cause each of its Subsidiaries to pay and discharge, as the
same shall become due and payable, (i) all their respective obligations and
liabilities, including all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons which, in any such
case, if unpaid, might by law give rise to a Lien upon any of their properties
or assets and (ii) all lawful taxes, assessments and charges or levies made upon
their properties or assets, by any governmental body, agency or official, except
where any of the items in clause (i) or (ii) of this Section 5.2 may be
diligently
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<PAGE>
contested in good faith by appropriate proceedings and the Borrower or such
Subsidiary shall have set aside on its books, if required under GAAP,
appropriate reserves for the accrual of any such items.
Section 5.3. Maintenance of Property. The Borrower will keep, and will
------------------------
cause each of its Subsidiaries to keep, all property useful and necessary in
their respective businesses in good working order and condition, subject to
ordinary wear and tear; will maintain (either in the name of the Borrower or in
such Subsidiary's own name or in the name of the Collateral Agent if required by
any Loan Document) with financially sound and reputable insurance companies,
insurance on all their respective properties in at least such amounts and
against at least such risks (and with such risk retentions) as are usually
insured against by companies engaged in the same or a similar business; and will
furnish to the Administrative Agent upon request full information as to the
insurance carried.
Section 5.4. Conduct of Business and Maintenance of Existence. The
------------------------------------------------
Borrower will continue, and will cause each of its Subsidiaries to continue, to
engage in business of the same general type as now conducted by the Borrower and
its Subsidiaries, and will preserve, renew and keep in full force and effect,
and will cause each of its Subsidiaries to preserve, renew and keep in full
force and effect, their respective corporate existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business. The Borrower will not permit any Subsidiary (i) to conduct any
business conducted by the Borrower on or after the Closing Date or (ii) to
conduct any business not conducted by such Subsidiary on the Closing Date.
Section 5.5. Compliance with Laws. The Borrower will comply, and will
--------------------
cause each of its Subsidiaries to comply, with all applicable laws, ordinances,
rules, regulations, and requirements of governmental authorities (including,
without limitation, Environmental Laws, ERISA and the Communications Act and the
rules and regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
Section 5.6. Accounting; Inspection of Property Books and Records. The
---------------------------------------------------
Borrower will keep, and will cause each of its Subsidiaries to keep, proper
books of record and account in which full, true and correct entries in
conformity with GASP shall be made of all dealings and transactions in relation
to their respective businesses and activities, will maintain, and will cause
each of its Subsidiaries to maintain, their respective fiscal reporting periods
on the present basis and will permit, and will cause each of its Subsidiaries to
permit, representatives of
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<PAGE>
the Administrative Agent and each of the Banks to visit and inspect any of their
respective properties, to examine and make copies from any of their respective
books and records and to discuss their respective affairs, finances and accounts
with their officers, employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
Section 5.7. FCC Approvals. The Borrower shall take, and shall cause
--------------
each of its Subsidiaries to take, any action that the Administrative Agent, the
Collateral Agent or any Bank may reasonably request to enable the Administrative
Agent, the Collateral Agent or such Bank to exercise and enjoy the full rights
and benefits granted to the Administrative Agent, the Collateral Agent or the
Banks by the Loan Documents and each other agreement, instrument and document
delivered to the Banks, the Collateral Agent and/or the Administrative Agent in
connection therewith, including specifically, at the Borrower's expense, the use
of the Borrower's and each Subsidiary's best efforts to assist in obtaining
approvals required of the FCC for any action or transaction contemplated by the
Loan Documents for which such approval is or shall be required by law, and
specifically, without limitation, upon request, to prepare, sign and file with
the FCC the assignor's or transferor's portion of any application or
applications for consent to the assignment of any license or transfer of control
necessary or appropriate under the FCC's rules and regulations for approval of
any sale or sales of any of the Collateral provided or purported to be provided
by the Loan Documents by or on behalf of the Collateral Agent and/or the Banks
or any assumption by the Collateral Agent and/or the Banks of voting rights
relating thereto effected in accordance with the Loan Documents.
Section 5.8. Maximum Leverage. As of the last day of each fiscal
-----------------
quarter of the Borrower, the Cash Flow Leverage Ratio will not exceed (i) 2.0 to
1.0 for any fiscal quarter ending on or before December 31, 1996 or (ii) 3.50 to
1.0 for any fiscal quarter ending after December 31, 1996.
Section 5.9. Interest Coverage Ratio. As of the last day of each
-----------------------
fiscal quarter of the Borrower, the Borrower's Interest Coverage Ratio will not
be less than 2.5 to 1.0.
Section 5.10. Restrictions on Debt. The Borrower will not, and will
--------------------
not permit any of its Subsidiaries to, incur or at any time be liable with
respect to any Debt except (i) Debt outstanding under this Agreement and the
Notes, (ii) Debt of the Borrower secured by a Lien permitted pursuant to Section
5.11(i) and (iii) hereof and (iii) with respect to the Subsidiaries all
obligations of the Subsidiaries to the Banks under the Loan Documents.
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Section 5.11. Restriction on Liens. The Borrower will not, and will
--------------------
not permit any of its Subsidiaries to, create, assume or suffer to exist any
Lien on any property or asset now owned or hereafter acquired by the Borrower or
any of its Subsidiaries or assign or subordinate any present or future right to
receive assets except:
(i) Liens described in Schedule 5.11 securing Debt of the Borrower
in an aggregate principal amount not exceeding $18,500,000;
(ii) any Liens created by the Loan Documents;
(iii) any purchase money security interest on any capital asset of
the Borrower if such purchase money security interest attaches to such
capital asset concurrently with the acquisition thereof and if the Debt
secured by such purchase money security interest does not exceed the lesser
of the cost or fair market value as of the time of acquisition of the asset
covered thereby to the Borrower; provided, that the aggregate amount of Debt
--------
incurred after the Effective Date and secured by all such Liens other than
Liens created by the Loan Documents does not exceed $800,000 in the aggregate
at any one time outstanding and provided that no such purchase money security
--------
interest shall extend to or cover any property or asset of the Borrower other
than the related asset;
(iv) Liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons; provided (A) with respect to
--------
Liens securing state and local Taxes, such Taxes are not yet payable, (B)
with respect to Liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and the like, such Liens are unfiled and no
other action has been taken to enforce the same, or (C) with respect to
taxes, assessments or Governmental charges or levies or claims or demands
secured by such Liens, payment thereof is not at the time required by Section
5.2;
(v) Liens not securing Debt which are incurred in the ordinary
course of business in connection with workmen's compensation, unemployment
insurance, social security and other like laws; and
(vi) any Lien arising pursuant to any order of attachment,
distraint or similar legal process arising in connection with court
proceedings so long as the
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execution or other enforcement thereof is effectively stayed and the claims
secured thereby are being contested in good faith by appropriate proceedings.
Section 5.12. Transactions with Affiliates. The Borrower will not, and
----------------------------
will not permit any Subsidiary to, directly or indirectly, pay any funds to or
for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except (A) as expressly contemplated by the Loan Documents or (B)
otherwise on an arm's length basis on terms at least as favorable to the
Borrower or such Subsidiary as could have been obtained from a third party who
was not an Affiliate; provided that the foregoing provisions of this Section
--------
shall not prohibit any such Person from declaring or paying any lawful dividend
or other payment ratably in respect of all of its capital stock of the relevant
class so long as, after giving effect thereto, no Default shall have occurred
and be continuing.
Section 5.13. Consolidations, Mergers and Sales of Assets. The
-------------------------------------------
Borrower will not, and will not permit any of its Subsidiaries to either (i)
consolidate, merge with or into or acquire all or substantially all of the
assets or capital stock of any other Person or (ii) participate in any Asset
Sale to any other Person, the Net Cash Proceeds of which exceed $250,000,
without (A) applying the Net Cash Proceeds of such Asset Sale as required by
Sections 2.9(b) and 2.10(b) and (B) the consent of all of the Banks, whose such
consent shall not be unreasonably withheld; provided that nothing in this
--------
Section 5.13 shall prohibit (A) the merger of a Solvent Subsidiary into the
Borrower or the merger or consolidation of a Subsidiary with of into another
Person if the corporation surviving such consolidation or merger is a Wholly-
Owned Consolidated Subsidiary of the Borrower and is Solvent both before and
after giving effect to such transaction and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing or (B) the
transfer of all or substantially all of the assets of a Subsidiary to the
Borrower or a Wholly-Owned Consolidated Subsidiary.
Section 5.14. Transactions with Other Persons. The Borrower will not,
-------------------------------
and will not permit any of its Subsidiaries to, enter into any agreement with
any Person whereby any of them shall agree to any restriction on the right of
the Borrower or any of its Subsidiaries to amend or waive any of the provisions
of this Agreement or any other Loan Document.
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Section 5.15. New Subsidiaries. The Borrower shall cause each
----------------
Subsidiary (excluding TDD) to become a party to the Subsidiary Guaranty, the
Security Agreement and the Pledge Agreement and, in the case of Persons which
are not Subsidiaries on the Closing Date, shall cause to be satisfied the
conditions set forth in Section 3.1(c)(ii), 3.1(e), 3.1(h), 3.1(i), 3.1(j) and
3.1(1) as of the date each such Person becomes a Subsidiary and shall cause all
of the shares of stock of such Subsidiary to be listed on Schedule I to the
Pledge Agreement and included in the Pledged Shares pledged therein.
Section 5.16. Restrictions with Respect to Subsidiaries. (a) The
-----------------------------------------
Borrower will not, and will not permit any of its Subsidiaries to, sell, assign,
transfer or otherwise dispose of (except to the Borrower or to a Wholly-Owned
Consolidated Subsidiary and except to directors for the purpose of qualifying
them as directors, if required, and except pursuant to presently outstanding
warrants, options or other rights) any shares of stock of any class of such
Subsidiary unless all of the capital stock and the entire Debt of such
Subsidiary at the time owing to the Borrower and to all other Subsidiaries shall
be sold, assigned, transferred or otherwise disposed of at the same time. No
such sale, assignment, transfer or disposition shall be effected without the
consent of the Required Banks.
(b) The Borrower will not permit any of its Subsidiaries (i) to issue
or sell any shares of preferred stock except to the Borrower or to a Wholly-
Owned Consolidated Subsidiary or (ii) to issue or sell any shares of its common
stock (except to directors for the purpose of qualifying them as directors, if
required) unless, after such issue or sale, the Borrower and its Subsidiaries,
taken together, shall retain the same proportionate interest in such Subsidiary.
Section 5.17. Compensation. (a) The Borrower will not pay, and will
------------
not permit any Subsidiary to pay, compensation (whether in the form of salary,
bonus, stock appreciation rights, dividends or otherwise) to Donald A. Burns or
Henry G. Luken, III individually or collectively exceeding $2,000,000 for any
fiscal year.
(b) The Borrower and its Consolidated Subsidiaries will not accrue
during any fiscal year for their profit sharing plans an amount which in the
aggregate exceeds 20k of Consolidated Net Income for such year. No profit
sharing distributions shall be made for any fiscal year by the Borrower or any
Consolidated Subsidiary prior to the fifteenth day of the last calendar month of
such fiscal year. No profit sharing plan distribution shall be made unless at
least five Domestic Business Days prior thereto, the Administrative Agent shall
have received a certificate of the chief financial officer or the chief
accounting officer of the
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Borrower certifying the date and amount of the proposed profit sharing
distribution and setting forth the financial information, estimates and
calculations upon which such amount is based.
Section 5.18. Prohibited ERISA Transactions. The Borrower will not at
-----------------------------
any time permit any Plan to:
(i) engage in any "prohibited transaction", as such term is
defined in Section 4975 of the Internal Revenue Code or in Section 406 of
ERISA;
(ii) incur any "accumulated funding deficiency", as such term is
defined in Section 302 of ERISA, whether or not waived; or
(iii) be terminated in a manner which could result in the imposition
of a Lien on the property of the Borrower pursuant to Section 4068 of ERISA.
Section 5.19. Use of Proceeds. The proceeds of the Loans will be used
---------------
by the Borrower to refinance existing indebtedness and for its working capital
requirements, including expenses associated with direct mail marketing, and to
fund expenses associated with the closing of the Loans. None of the proceeds of
the Loans will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any "margin stock"
or for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry margin stock or for any other purpose which might
cause the Loan to constitute "purpose credit" within the meaning of Regulation X
or U of the Board of Governors of the Federal Reserve System.
Section 5.20. Independence of Covenants. All covenants contained
-------------------------
herein shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that such action
or condition would be permitted by an exception to, or otherwise be within the
limitations of another covenant shall not avoid the occurrence of a Default if
such action is taken or condition exists.
Section 5.21. Restricted Payments. The Borrower will not, and will not
-------------------
permit any Subsidiary to, declare or make any Restricted Payment, except that
any Subsidiary may make a Restricted Payment to the Borrower.
Section 5.22. Payment by Account Debtors. (a) The Borrower will and
--------------------------
will cause each Subsidiary to: (i) ensure that all rights to payment in respect
of services rendered by any Obligor (in connection with direct-dialed or
operator-assisted telephone calls or otherwise) are billed to the user of such
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services by a LEC; (ii) perform all processing and take all other actions
(either itself or through one or more Billing Agents) as are necessary to
transmit such records and other billing information to each LEC in a format
compatible with each LEC's internal billing systems; (iii) take such actions
(either itself or through one or more Billing Agents) as are necessary to cause
each LEC to purchase, in accordance with its usual and customary practices
generally and consistent with its past practice, from the Borrower all records
and other billing information related to all services rendered by any Obligor to
any Person such LEC is authorized to bill and (iv) cause each Billing Agent to
remit or cause each LEC to whom billing information has been submitted on behalf
of any Obligor to remit all payments in respect of such billing information
directly to TDD or, if TDD is not acting as a Billing Agent, to the Collateral
Agent or its designee via direct wire transfer in accordance with the provisions
of Section 3.3 of the Security Agreement.
(b) In addition, but not in limitation of paragraph (a), the Borrower
will not, and will not permit any Subsidiary to, sell, transfer, assign, dispose
of, or otherwise permit any other Person to acquire any interest in any records
or billing information evidencing any Obligor's right to receive payment for
services rendered in connection with direct-dialed or operator assisted
telephone calls billable by any LEC to any Person, except that the Borrower may
sell such records and billing information to one or more LECs provided payment
--------
therefor (after deduction of processing and bill rendering fees due to the
purchasing LEC) is remitted to TDD or the Collateral Agent or its designee as
provided in Section 5.22(a)(iv).
(c) The Borrower shall cause TDD to (i) promptly upon receipt of each
payment by any LEC or other Person, notify the Borrower and the Administrative
Agent of the amount of such payment allocable to billing information submitted
to such LEC or other Person on behalf of the Borrower or any other Obligor and
(ii) transfer that amount, less such fees, charges, charge backs, credits and
adjustments as are withheld in accordance with the TDD Billing Agreement, via
direct wire transfer to the Collateral Agent or its designee in accordance with
the provisions of Section 3.3 of the Security Agreement.
(d) Except with prior written consent of the Required Banks (which
consent shall not be unreasonably withheld), neither the Borrower nor any
Subsidiary will enter into any agreement (other than the TDD Billing Agreement)
with any Person (other than TDD) whereby such Person agrees to act as a Billing
Agent. Neither the Borrower nor any Subsidiary shall amend, waive, extend,
supplement or modify any material provision of the TDD Billing Agreement without
the prior written consent of the Required Banks (which consent shall not be
unreasonably withheld).
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Section 5.23. Restrictions on Investments. (a) Neither the Borrower
----------------------------
nor any Subsidiary will hold, make or acquire any Investment in any Person other
than:
(i) Investments existing on the date hereof in Persons which are
Subsidiaries on the date hereof;
(ii) Temporary Cash Investments; and
(iii) instruments received as consideration for Asset Sales, subject
to the limitations of Section 5.13.
(b) The Borrower will not, and will not permit any of its Subsidiaries
to, make any acquisition of assets outside the ordinary course of business.
(c) Except for Subsidiaries acquired pursuant to Section 5.13, the
Borrower will have no Subsidiaries other than the Subsidiaries listed on
Schedule 4.11 to this Agreement.
(d) The Borrower will at all times maintain direct ownership of the
percentage of the capital stock of each of its Subsidiaries specified in
Schedule 4.11 as the percentage so owned on the date hereof.
ARTICLE VI
DEFAULTS
Section 6.1. Events of Default. If one or more of the following events
-----------------
("Events of Default") shall have occurred and be continuing:
(i) the Borrower shall fail to pay any principal of the Loans when
due or shall fail to pay any interest on the Loans, any fee or any other
amount payable hereunder or under the Notes for five days following the date
such payment becomes due hereunder;
(ii) the Borrower shall fail to observe or perform any covenant
contained in Section 5.7, 5.10, 5.11, 5.15 or 5.18 for 10 days after notice
thereof has been given to the Borrower by the Administrative Agent;
(iii) the Borrower shall fail to observe or perform any covenant
contained in Section 5.8, 5.9, 5.13, 5.16 or 5.19;
(iv) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clauses
(i), (ii)
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or (iii) above) for 30 days after notice thereof has been given to the Borrower
by the Administrative Agent at the request of any Bank;
(v) any representation, warranty, certification or statement made by
the Borrower, any Subsidiary or any Shareholder in any Loan Document or in any
certificate, financial statement or other document delivered pursuant hereto or
thereto shall prove to have been incorrect in any material respect when made;
(vi) the Borrower, any Subsidiary of the Borrower or any Shareholder
shall fail to make any payment or perform any collateralization obligation in
respect of any Material Financial Obligations when due or within any applicable
grace period;
(vii) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt of the Borrower, any
Subsidiary of the Borrower or any Shareholder or enables (or, with the giving of
notice or lapse of time or both, would enable) the holder of such Material Debt
or any Person acting on such holder's behalf to accelerate the maturity thereof;
(viii) the Borrower, any Subsidiary of the Borrower or any Shareholder
shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(ix) an involuntary case or other proceeding shall be commenced against
the Borrower, any Subsidiary of the Borrower or any Shareholder seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and such
involuntary
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case or other proceeding shall remain undismissed and unstayed for a period
of 60 days; or an order for relief shall be entered against the Borrower, any
Subsidiary of the Borrower or any Shareholder under the federal bankruptcy
laws as now or hereafter in effect;
(x) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $100,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to be appointed to administer any Material
Plan; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or
default, within the meaning of Section 4219(c)(5) of ERISA, with respect to,
one or more Multiemployer Plans which could reasonably be expected to cause
one or more members of the ERISA Group to incur a current payment obligation
in excess of $100,000;
(xi) judgments or orders for the payment of money in excess of
$250,000 in the aggregate shall be rendered against the Borrower, any
Subsidiary of the Borrower or any Shareholder and such judgments or orders
shall continue unsatisfied and unstayed for a period of 21 days;
(xii) (A) any Loan Document shall fail for any reason to be in full
force and effect or shall cease to be effective to grant a perfected security
interest in the Collateral with the priority stated to be created thereby or
such security interest shall at any time fail to constitute a valid and (to
the extent required by the Loan Documents) perfected Lien with the priority
stated to be created by the Loan Documents, or any Loan Document shall be
contested by the Borrower, any Subsidiary of the Borrower or any Shareholder
or any Subsidiary of the Borrower or Shareholder shall deny that it has any
further liability or obligation under a Loan Document to which it is a party,
or the Borrower, any Subsidiary of the Borrower or any Shareholder shall fail
to perform any of its obligations under the Loan Documents, or (B) any
creditor of the Borrower, any Subsidiary of the Borrower or any Shareholder
(other
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than a creditor having a purchase money security interest permitted by
Section 5.11(iii) and then solely with respect to the related asset) shall
obtain possession of any of the Collateral by any means, including, without
limitation, levy, distraint, replevin or self-help, or any such creditor
shall establish or obtain any right in the Collateral which is equal to or
senior to the security interests of the Collateral Agent, for the benefit of
the Banks, in such Collateral;
(xiii) after the execution and delivery thereof, the Subsidiary Guaranty
or any provision thereof shall cease to be in full force and effect, or any
Subsidiary or any Person acting by or on behalf of any Subsidiary shall deny
or disaffirm such Subsidiary's obligations under the Subsidiary Guaranty or
any such Subsidiary shall default in the due performance or observance of any
material term, covenant or agreement on its part to be performed or observed
pursuant to such Guaranty; or
(xiv) a Change of Control Event shall have occurred;
then, and in every such event, the Administrative Agent shall (A) if requested
by the Required Banks, by notice to the Borrower terminate the Revolving
Commitments and they shall thereupon terminate, and (B) if requested by the
Required Banks, by notice to the Borrower declare the Loans (together with
accrued interest thereon) to be, and the Loans shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind (except as set forth in clause (A) above), all of which are hereby
waived by the Borrower; provided that in the case of any Default or any Event of
--------
Default specified in clause 6.1(viii) or 6.1(ix) above with respect to the
Borrower without any notice to the Borrower or any other act by the
Administrative Agent or the Banks, the Commitments shall thereupon terminate and
the Loans (together with accrued interest and accrued and unpaid fees thereon)
shall become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
Section 6.2. Notice of Default. The Administrative Agent shall give
-----------------
notice to the Borrower under Section 6.1 promptly upon being requested to do so
by any Bank or the Required Banks, as applicable, and shall thereupon notify all
Banks thereof.
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ARTICLE VII
TEE ADMINISTRATIVE AGENT
Section 7.1. Appointment and Authorization. Each Bank hereby
-----------------------------
irrevocably designates and appoints Signet Bank as Administrative Agent of such
Bank to act as specified herein and in the other Loan Documents, and each such
Bank hereby irrevocably authorizes Signet Bank, as the Administrative Agent for
such Bank, to take such action on its behalf under the provisions of this
Agreement and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent agrees to act as such upon the express conditions
contained in this Article VII. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Administrative Agent shall not have any duties
or responsibilities, except those expressly set forth herein or in the other
Loan Documents, or any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Administrative Agent.
The provisions of this Article VII are solely for the benefit of the
Administrative Agent and the Banks, and the Borrower shall not have any rights
as a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, the Administrative Agent shall act
solely as agent of the Banks, and the Administrative Agent does not assume and
shall not be deemed to have assumed any obligation or relationship of agency or
trust with or for the Borrower.
Section 7.2. Individual Capacity. The Administrative Agent and its
-------------------
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower as though the Administrative Agent were not
the Administrative Agent hereunder. With respect to the Loans made by it and all
obligations owing to it, the Administrative Agent shall have the same rights and
powers under this Agreement as any Bank and may exercise the same as though it
were not the Administrative Agent, and the terms "Required Banks", "Bank" and
"Banks" shall include the Administrative Agent in its individual capacity.
Section 7.3. Delegation of Duties. The Administrative Agent may
--------------------
execute any of its duties under this Agreement or any other Loan Document by or
through agents or attorneys-in-fact. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care except to the extent otherwise required by
Section 7.7.
Section 7.4. Reliance by Administrative Agent. The Administrative
--------------------------------
Agent shall be entitled to rely, and shall be fully
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protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy or other electronic facsimile
transmission, telex, telegram, cable, teletype, electronic transmission by
modem, computer disk or any other message, statement, order or other writing or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
or it shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of the Required Banks,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Banks.
Section 7.5. Notice of Default. The Administrative Agent shall not be
-----------------
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Bank or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default. If the
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Banks. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Banks, provided that, unless and until the
--------
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Banks.
Section 7.6. Non-Reliance on Administrative Agent and Other Banks.
----------------------------------------------------
Each Bank expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
have made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Bank. Each Bank
represents to the Administrative Agent that it has, independently and without
reliance upon the Administrative Agent or any other Bank, and
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based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations,
property, financial and other condition, prospects and creditworthiness of the
Borrower and made its own decision to make its Loans hereunder and to enter into
this Agreement. Each Bank also represents that it will, independently and
without reliance upon the Administrative Agent or any other Bank, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement, and to make such investigation as it
deems necessary to inform itself as to the business, assets, operations,
property, financial and other condition, prospects and creditworthiness of the
Borrower. The Administrative Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other condition, prospects or
creditworthiness of the Borrower which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
Section 7.7. Exculpatory Provisions. Neither the Administrative Agent,
----------------------
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates, shall (i) be liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement (except
for its or such Person's own gross negligence, willful misconduct or bad faith)
or (ii) be responsible in any manner to any of the Banks for any recitals,
statements, representations or warranties made by the Borrower or any of its
officers contained in this Agreement, any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for any failure of the Borrower or any
of its officers to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Bank to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Borrower. The Administrative
Agent shall not be responsible to any Bank for the effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
Loan Document or for any representations, warranties, recitals or statements
made by any other Person herein or therein or made by any other Person in any
written or oral statement or in any financial or other statements, instruments,
reports, certificates or any other documents in connection herewith or therewith
furnished or made by the Administrative Agent to the Banks or by or on behalf of
the Borrower to the Administrative Agent or any Bank or be required to ascertain
or inquire as to the performance
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or observance of any of the terms, conditions, provisions, covenants or
agreements contained herein or therein or as to the use of the proceeds of the
Loans or of the existence or possible existence of any Default or Event of
Default.
Section 7.8. Indemnification. The Banks agree to indemnify the
----------------
Administrative Agent in its capacity as such ratably according to their
respective "percentages" as used in determining the Required Banks at such time
(or if the Revolving Commitments have been terminated and all Loans have been
repaid, their respective "percentages used in determining the Required Banks
immediately prior to such termination and repayment), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, reasonable expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the obligations of the Borrower hereunder) be imposed on, incurred by
or asserted against the Administrative Agent in its capacity as such in any way
relating to or arising out of this Agreement or any other Loan Document, or any
documents contemplated by or referred to herein or the transactions contemplated
hereby or any action taken or omitted to be taken by the Administrative Agent
under or in connection with any of the foregoing, but only to the extent that
any of the foregoing is not paid by the Borrower; provided that no Bank shall be
--------
liable to the Administrative Agent for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the gross negligence,
willful misconduct or bad faith of the Administrative Agent. If any indemnity
furnished to the Administrative Agent for any purpose shall, in the opinion of
the Administrative Agent be insufficient or become impaired, the Administrative
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
agreement in this Section 7.8 shall survive the payment of all Loans, fees and
other obligations of the Borrower arising hereunder.
Section 7.9. Resignation; Successors. The Administrative Agent may
-----------------------
resign as the Administrative Agent upon 20 days' notice to the Banks. Upon the
resignation of the Administrative Agent, the Required Banks shall appoint from
among the Banks a successor Administrative Agent for the Banks, subject to prior
approval by the Borrower and the consent of each Bank (such approval or consent,
as the case may be, not to be unreasonably withheld), whereupon such successor
agent shall succeed to the rights, powers and duties of the Administrative
Agent, and the term "Administrative Agent" shall include such successor agent
effective upon its appointment, and the resigning Administrative Agent's rights,
powers and duties as the Administrative Agent shall be terminated, without any
other or
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further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement. After the retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of this
Article VII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
ARTICLS VIII
CHANGE IN CIRCUMSTANCES
Section 8.1. Basis for Determining Interest Rate Inadequate or Unfair.
----------------------------------- --------------------
If on or prior to the first day of any Interest Period for any Euro-Dollar Loan:
(i) the Administrative Agent is advised by the Required Banks that
deposits in dollars (in the applicable amounts) are not being offered to the
Required Banks in the London interbank market for such Interest Period, or
(ii) the Required Banks advise the Administrative Agent that the
Adjusted London Interbank Offered Rate as determined by the Administrative
Agent will not adequately and fairly reflect the cost to such Banks of
funding their Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Banks to make Euro-Dollar Loans or to convert outstanding
Loans into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-
Dollar Loan shall be converted into a Base Rate Loan on the last day of the then
current Interest Period applicable thereto. Unless the Borrower notifies the
Administrative Agent at least two Domestic Business Days before the date of any
Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, such Borrowing shall instead be made
as a Base Rate Borrowing.
Section 8.2. Illegality. If, on or after the date of this Agreement,
----------
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency shall make it
unlawful or impossible for
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any Bank to make, maintain or fund its Euro-Dollar Loans and such Bank shall so
notify the Administrative Agent, the Administrative Agent shall forthwith give
notice thereof to the other Banks and the Borrower, whereupon until such Bank
notifies the Borrower and the Administrative Agent that the circumstances giving
rise to such suspension no longer exist, the obligation of such Bank to make
Euro-Dollar Loans or to convert outstanding Base Rate Loans into Euro-Dollar
Loans shall be suspended. Before giving any notice to the Administrative Agent
pursuant to this Section, such Bank shall designate a different EuroDollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. If such notice is given each EuroDollar Loan of such Bank then outstanding
shall be converted to a Base Rate Loan either (a) on the last day of the then
current Interest Period applicable to such Euro-Dollar Loan if such Bank may
lawfully continue to maintain and fund such Loan to such day or (b) immediately
if such Bank shall determine that it may not lawfully continue to maintain and
fund such Loan to such day.
Section 8.3. Increased Cost and Reduced Return. (a) If on or after the
---------------------------------
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any such requirement included in an
applicable Euro-Dollar Reserve Percentage), special deposit, insurance
assessment or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Bank or shall impose on any Bank or the
London interbank market any other condition affecting its Euro-Dollar Loans, its
Note or its obligation to make Euro-Dollar Loans and the result of-any of the
foregoing is to increase the cost to such Bank of making or maintaining any
Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by
such Bank under this Agreement or under its Revolving Note with respect thereto,
by an amount deemed by such Bank to be material, then, within 15 days after
demand by such Bank (with a copy to the Administrative Agent), the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or
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administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Bank as a consequence
of such Bank's obligations hereunder to a level below that which such Bank could
have achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Administrative Agent), the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank for
such reduction.
(c) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section and will
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate
of any Bank claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
Section 8.4. Taxes. (a) The Borrower agrees to pay to each Bank that
-----
is not a U.S. Person such additional amounts as are necessary in order that the
net payment of any amount due from the Borrower to such non-U.S. Person
hereunder after deduction for or withholding in respect of any U.S. Taxes
imposed with respect to such payment (or in lieu thereof, payment of such U.S.
Taxes by such non-U.S. Person), will not be less than the amount stated herein
to be then due and payable, provided that the foregoing obligation to pay such
--------
additional amounts shall not apply:
(i) to any payment to any Bank hereunder unless such Bank is, on
the date hereof (or on the date it becomes a Bank hereunder), either entitled
to submit a Form 1001 (relating to such Bank and entitling it to a complete
exemption from withholding on all interest to be received by it hereunder in
respect to the Loans) or Form 4224 (relating to all interest to be received
by such Bank hereunder in respect of the Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person to comply with applicable certification, information,
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documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of such
non-U.S. Person if such compliance is required by statute or regulation of
the United States of America as a precondition to relief or exemption from
such U.S. Taxes. For the purposes of this Section 8.4(a), (A) "U.S. Personas
shall mean a citizen, national or resident of the United States of America, a
corporation, partnership or other entity created or organized in or under any
laws of the United States of America or any State thereof, or any estate or
trust that is subject to Federal income taxation regardless of the source of
its income, (B) "U.S. Taxes" shall mean any present or future tax, assessment
or other charge or levy imposed by or on behalf of the United States of
America or any taxing authority thereof or therein, (C) Form 1001" shall
mean Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the
Department of the Treasury of the United States of America and (D) Inform
4224" shall mean Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States of America (or
in relation to either such Form such successor and related forms as may from
time to time be adopted by the relevant taxing authorities of the United
States of America to document a claim to which such Form related).
(b) Within 30 days after paying any amount to the Administrative Agent
or any Bank from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the Borrower
shall deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
Section 8.5. Base Rate Loans Substituted for Affected Euro-Dollar
----------------------------------------------------
Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans
- -----
has been suspended pursuant to Section 8.2 or (ii) any Bank has demanded
compensation under Section 8.3 or 8.4 with respect to its Euro-Dollar Loans and
the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to
such Bank through the Administrative Agent, have elected that the provisions of
this Section shall apply to such Bank, then, unless and until such Bank notifies
the Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
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(i) all Loans which would otherwise be made (or continued as or
converted into) by such Bank as Euro-Dollar Loans shall instead be made as
Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks); and
(ii) after each of its Euro-Dollar Loans has been repaid (or converted
into a Base Rate Loan), all payments of principal which would otherwise be
applied to repay such Euro-Dollar Loans shall be applied to repay its Base
Rate Loans instead.
Section 8.6. Substitution of Bank. If (i) the obligation of any Bank
---------------------
to make or maintain Euro-Dollar Loans has been suspended pursuant to Section
8.2, (ii) any Bank has demanded compensation under Section 8.3 or 8.4, (iii) any
Bank shall fail to consent to a merger, consolidation, acquisition or Asset Sale
which, pursuant to the terms of Section 5.13, requires the consent of all Banks
and with respect to which the Required Banks shall have granted their consent or
(iv) any Bank shall fail to consent to amendment or waiver which pursuant to the
terms of Section 9.5 or any other provision of any Loan Document requires the
consent of all Banks and with respect to which the Required Banks shall have
granted their consent, the Borrower shall have the right, if no Default or Event
of Default then exists, to replace such Bank (the "Replaced Bank") with one or
more other Eligible Transferee(s) (collectively, the Replacement Bank")
acceptable to the Administrative Agent and the other Banks, provided that (i) at
--------
the time of any replacement pursuant to this Section 8.6, the Replacement Bank
shall enter into one or more Assignment and Assumption Agreements, substantially
in the form of Exhibit H hereto, pursuant to which the Replacement Bank shall
acquire the Commitments and outstanding Loans of the Replaced Bank and, in
connection therewith, shall pay to the Replaced Bank in respect thereof an
amount equal to the sum of (A) an amount equal to the principal of, and all
accrued interest on, all outstanding Loans of the Replaced Bank, (B) an amount
equal to all accrued, but theretofore unpaid, fees under Section 2.7 owing to
the Replaced Bank and (C) an amount equal to the amount which would be payable
by the Borrower to the Replaced Bank pursuant to Section 2.13 if the Borrower
prepaid at the time of such replacement all of the Loans of such Replaced Bank
outstanding at such time and (ii) all obligations of the Borrower owing to the
Replaced Bank (other than those specifically described in clause (i) above in
respect of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full to such Replaced Bank concurrently with such
replacement. Upon the execution of the respective Assignment and Assumption
Agreements, the payment of amounts referred to in clauses (i) and (ii) above
and, if so requested by the Replacement Bank, delivery to the Replacement
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Bank of the appropriate Note or Notes executed by the Borrower, the Replacement
Bank shall become a Bank hereunder and the Replaced Bank shall cease to
constitute a Bank hereunder. The provisions of this Agreement (including without
limitation Sections 2.13, 8.3, 8.4 and 9.3) shall continue to govern the rights
and obligations of a Replaced Bank with respect to any Loans made or any other
actions taken by such Bank while it was a Bank.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notices. Unless otherwise specified herein, all notices,
-------
requests and other communications to a party hereunder shall be in writing
(including bank wire, telex, facsimile transmission or similar writing) and
shall be given to such party: (a) in the case of the Borrower or the
Administrative Agent, at its address, facsimile number or telex number set forth
on the signature pages hereof, (b) in the case of any Bank,- at its address,
facsimile number or telex number set forth in its Administrative Questionnaire,
(c) as to any Subsidiary, as specified in or pursuant to the Loan Documents, or
(d) in the case of any party, at such other address, facsimile number or telex
number as such party may hereafter specify for the purpose of communication
hereunder by notice to the Administrative Agent and the Borrower. Each such
notice, request or other communication shall be effective (i) if given by telex,
when such telex is transmitted to the telex number specified in this Section and
the appropriate answer back is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (iii) if given by mail, 48 hours after
such communication is deposited in the mails, certified mail, return receipt
requested, with appropriate first class postage prepaid, addressed as specified
in this Section or (iv) if given by any other means, when delivered at the
address specified in this Section 9.1; provided that notices to the
--------
Administrative Agent under Article II or Article VIII shall not be effective
until received. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given shall not affect the
validity of notice given in accordance with this Section.
Section 9.2. No Waivers. No failure by the Administrative Agent, the
----------
Collateral Agent or any Bank to exercise, no course of dealing with respect to,
and no delay in exercising any right, power or privilege hereunder or under any
Note or other Loan Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided herein and in the
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other Loan Documents shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 9.3. Expenses Indemnification. (a) The Borrower shall pay to
-------------------------
the Administrative Agent (i) all of the fees and disbursements of counsel for
the Administrative Agent and the Collateral Agent and any amounts payable by the
Administrative Agent or the Collateral Agent to any of the respective agents,
whether on account of fees, indemnities or otherwise, arising in connection with
the preparation and administration of this Agreement and the other Loan
Documents, any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder and (ii) if an Event of Default occurs, all
reasonable out-of-pocket expenses incurred by the Administrative Agent, the
Collateral Agent and each Bank, including the reasonable (without duplication)
fees and disbursements of counsel, in connection with such Event of Default and
collection and other enforcement proceedings resulting therefrom. The Borrower
shall indemnify the Administrative Agent, the Collateral Agent and each Bank
against any transfer taxes, documentary taxes, assessments or charges made by
any governmental authority by reason of the execution and delivery of this
Agreement, the Notes or the other Loan Documents or any document entered into in
connection herewith or therewith.
(b) The Borrower shall and hereby agrees to indemnify, defend and hold
harmless the Administrative Agent, the Collateral Agent, any Affiliate of the
Administrative Agent or the Collateral Agent and each of the Banks and their
respective directors, officers, trustees, shareholders, agents, employees and
counsel (each referred to herein as an Unindemnified PartyW') from and against
any and all losses, claims, damages, liabilities, deficiencies, judgments or
expenses of every kind and nature (including, without limitation, amounts paid
in settlement, court costs and the reasonable fees and disbursements of counsel
incurred in connection with any litigation, investigation, claim or proceeding
or any advice rendered in connection therewith) (the foregoing items referred to
herein as "Claims and Expenses") incurred by an Indemnified Party arising out of
or by reason of any suit, cause of action, claim, arbitration, investigation or
settlement, consent decree or other proceeding (the foregoing referred to herein
as an "Indemnity Proceeding") which arise out of, or are in any way related
directly or indirectly to: (i) this Agreement or any other Loan Document or the
transactions contemplated hereby or thereby; (ii) the making of any Loans
hereunder; (iii) any actual or proposed use by the Borrower or any of its
Subsidiaries of the proceeds of the Loans; (iv) the Administrative Agent's, the
Collateral Agent's or any Bank's entering into this Agreement or any other Loan
Document; (v) the fact that the Administrative Agents the Collateral Agent and
the Banks have established the credit facility evidenced hereby in
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favor of the Borrower and the Subsidiaries; (vi) the fact that the
Administrative Agent, the Collateral Agent and the Banks are creditors of the
Borrower; (vii) the fact that the Administrative Agent, the Collateral Agent and
the Banks have or are alleged to have information regarding the financial
condition, strategic plans or business operations of the Borrower and the
Subsidiaries; (viii) the fact that the Administrative Agent, the Collateral
Agent and the Banks, as creditors of the Borrower, are alleged to influence
directly or indirectly the business decisions or affairs of the Borrower and the
Subsidiaries or their financial condition; (ix) the exercise of any right or
remedy the Administrative Agent, the Collateral Agent or the Banks may have
under this Agreement or the other Loan Documents including, but not limited to,
the foreclosure upon, or seizure of, any Collateral or the exercise of any other
rights of a secured party; provided, however, that the Borrower shall not be
--------- -------
obligated to indemnify any Indemnified Party for any acts or omissions of such
Indemnified Party in connection with matters described in this subparagraph (ix)
that constitute gross negligence or willful misconduct; or (x) any violation or
non-compliance by the Borrower with the provisions of Section 5.5 including, but
not limited to, any Indemnity Proceeding commenced by the Internal Revenue
Service or state taxing authority or any Indemnity Proceeding commenced by any
Governmental Authority or other Person under any Environmental Law including any
Indemnity Proceeding commenced by a Governmental Authority or other Person
seeking remedial or other action to cause the Borrower or its Subsidiaries (or
their respective properties) (or the Administrative Agent, the Collateral Agent
and/or the Banks as successors to the Borrower) to be in compliance with such
Environmental Laws.
(c) This indemnification shall apply to all Indemnity Proceedings
arising out of, or related to, the foregoing whether or not an Indemnified Party
is a named party in such Indemnity Proceeding. In this connection, this
indemnification shall cover all reasonable costs and expenses of any Indemnified
Party in connection with any deposition of any Indemnified Party or compliance
with any subpoena (including any subpoena requesting the production of
documents). This indemnification shall, among other things, apply to any
Indemnity Proceeding commenced by other creditors of the Borrower or any
Subsidiary, any shareholder of the Borrower or any Subsidiary (whether such
shareholder(s) are prosecuting such Indemnity Proceeding in their individual
capacity or derivatively on behalf of the Borrower), any account debtor of the
Borrower or any Subsidiary or by any Governmental Authority.
(d) This indemnification shall apply to any Indemnity Proceeding
arising during the pendency of any bankruptcy proceeding filed by or against the
Borrower and/or any Subsidiary.
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(e) All out-of-pocket fees and expenses of, and all amounts paid to
thirdpersons by, an Indemnified Party shall be advanced by the Borrower at the
request of such Indemnified Party notwithstanding any claim or assertion by the
Borrower that such Indemnified Party is not entitled to indemnification
hereunder upon receipt of an undertaking by such Indemnified Party that such
Indemnified Party will reimburse the Borrower if it is actually and finally
determined by a court of competent jurisdiction in a non-appealable order that
such Indemnified Party is not so entitled to indemnification hereunder.
(f) An Indemnified Party may conduct its own investigation and defense
of, and may formulate its own strategy with respect to, any Indemnified
Proceeding covered by this Section and, as provided above, all costs and
expenses incurred by the Indemnified Party shall be reimbursed by the Borrower.
No action taken by legal counsel chosen by an Indemnified Party in investigating
or defending against any such Indemnified Proceeding shall vitiate or in any way
impair the obligations and duties of the Borrower hereunder to indemnify and
hold harmless each.such Indemnified Party; provided, however, that (i) if the
-------- -------
Borrower has acknowledged in writing to the Indemnified Party that the Borrower
is so obligated to indemnify the Indemnified Party with respect to such
Indemnified Proceeding and (ii) the Borrower has provided evidence reasonably
satisfactory to such Indemnified Party that the Borrower has the financial
wherewithal to reimburse such Indemnified Party for any amount paid by such
Indemnified Party with respect to such Indemnified Proceeding, such Indemnified
Party shall not settle or compromise any such Indemnified Proceeding without the
prior written consent of the Borrower (which consent shall not be unreasonably
withheld or delayed).
(g) The Borrower hereby indemnifies each Indemnified Party from and
against and agrees to hold each of them harmless from any and all liabilities,
losses, damages, costs and expenses of any kind (including without limitation
reasonable expenses of investigation by engineers, environmental consultants and
similar technical personnel and reasonable fees and disbursements of counsel) of
any Indemnified Party arising out of, in respect of or in connection with any
and all Environmental Liabilities. Without limiting the generality of the
foregoing, the Borrower and each of its Subsidiaries hereby waives all rights
for contribution or any other rights of recovery with respect to liabilities,
losses, damages, costs and expenses arising under or related to Environmental
Laws that it might have by statute or otherwise against any Indemnified Party.
(h) The Borrower's obligations under Section 9.3 shall survive the
termination of this Agreement and the other Loan Documents and the payment in
full of the obligations of the Borrower hereunder and under the Notes.
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Section 9.4. Sharing of Set-Offs. Each Bank agrees that if it shall,
-------------------
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest due with
respect to any Note held by it or of any.fees payable to it hereunder which is
greater than the proportion received by any other Bank in respect of the
aggregate amount of principal and interest due with respect to any Note held by
such other Bank or of the fees payable to such other Bank hereunder, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks and with respect to the
fees payable to the Banks hereunder shall be shared by the Banks pro rata;
provided that nothing in this Section shall impair the right of any Bank to
- --------
exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the Borrower
other than its indebtedness hereunder. The Borrower agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Borrower in the amount of such participation.
Section 9.5. Amendments and Waivers; Release of Collateral. Any
---------------------------------------------
provision of this Agreement or of any Note may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the Borrower, the
Administrative Agent and the Required Banks (and, if the rights or duties of the
Collateral Agent or the Swingline Lender are affected thereby, by the Collateral
Agent or the Swingline Lender, as relevant); provided that no such amendment or
--------
waiver shall, unless signed by all the Banks, (i) increase or decrease the
Revolving Commitment of any Bank (except for a ratable decrease in the Revolving
Commitments of all Banks) or subject any Bank to any additional obligation, (ii)
reduce the principal of or rate of interest on any Loan or any interest thereon
or any fees hereunder, (iii) postpone the date fixed for any payment of interest
on any Loan or any interest thereon or any fees hereunder or (except as provided
in Section 2.3) for any scheduled final termination of any Revolving Commitment,
or (iv) amend or waive any provision of Section 5.13 or (v) change the
percentage of the Revolving Commitments or of the outstanding Revolving Loans
which shall be required for the Banks or any of them to take any action under
this Section or any other provision of this Agreement. Any provision of the Loan
Documents other than this Agreement or any Note may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Borrower
and the
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Collateral Agent or the Administrative Agent, as applicable, with the consent of
the Required Banks or all of the Banks, as applicable; provided that no such
--------
amendment or waiver shall, unless signed by all the Banks, effect or permit a
release of all or any substantial part of the Collateral or any other direct or
indirect security for the Loans. Notwithstanding the foregoing, Collateral shall
be released from the Lien of the Loan Document from time to time as necessary to
effect any sale or pledge of assets permitted by the Loan Documents, and the
Collateral Agent shall execute and deliver all release documents reasonably
requested to evidence such release.
Section 9.6. Successors and Assigns. (a) The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all the Banks.
(b) Any Bank may at any time grant to one or more Affiliates of such
Bank (each a Participant") participating interests in the Loans or the Notes. In
the event of any such grant by any Bank of a participating interest to a
Participant, whether or not upon notice to the Borrower, such Bank shall remain
responsible for the performance of its obligations hereunder, and such Bank
shall continue to deal solely and directly with the Borrower in connection with
its rights and obligations under this Agreement. Any agreement pursuant to which
any Bank may grant such a participating interest shall provide that such Bank
shall retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement and the
Loan Documents; provided that such participation agreement may provide that the
--------
Bank will not agree to any modification, amendment or waiver of this Agreement
or the Loan Documents which would have the effect of (i) reducing the principal
of or rate of interest on the Loans, (ii) postponing the date fixed for any
payment of principal of or interest on the Loans or fees hereunder or under the
Notes or (iii) releasing any substantial part of the Collateral or other direct
or indirect security for the Loans without the consent of the Participant. An
assignment or other transfer which is not permitted by subsection (c) below
shall be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more Affiliates of such
Bank (each an Assignee") all, or a proportionate part of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an instrument executed by such
-72-
<PAGE>
Assignee and the Bank. Upon execution and delivery of an Assignment and
Assumption Agreement, substantially in the form of Exhibit H hereto, and payment
by such Assignee to such Bank of an amount equal to the purchase price agreed
between such Bank and such Assignee, such Assignee shall become a Bank party to
this Agreement and shall have all the rights and obligations of a Bank as set
forth in such instrument of assumptions and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection (c), the transferor Bank and the
Borrower shall make appropriate arrangements so that, if required, a new Note is
issued to the Assignee. If the Assignee is not incorporated under the laws of
the United States of America or a state thereof, it shall, prior to the first
date on which interest or fees are payable hereunder for its account deliver to
the Borrower certification as to exemption from deduction or withholding of any
United States federal income taxes.
(d) Any Bank may furnish any information concerning the Borrower in
its possession from time to time to permitted Assignees and Participants
(including prospective Assignees and Participants) and may furnish such
information in response to credit inquiries consistent with general banking
practice.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.3 or 8.4 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or at a time when the circumstances giving rise to such greater payment
did not exist.
Section 9.7. Collateral. Each of the Banks represents to the
----------
Administrative Agent and each of the other Banks that it in good faith is not
relying upon any "margin stock" (as defined in Regulation U) as collateral in
the extension or maintenance of the credit provided for in this Agreement.
Section 9.8. Governing Law. This Agreement and the Notes shall be
-------------
governed by and construed in accordance with the laws of the Commonwealth of
Virginia, except as otherwise required by mandatory provisions of law and except
to the extent that remedies provided by the law of any other jurisdictions other
than Virginia and governed by the laws of such jurisdiction.
Section 9.9. Counterparts: Effectiveness: Entire Agreement. This
---------------------------------------------
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement and the other Loan Documents
-73-
<PAGE>
constitute the entire agreement and understanding among the parties hereto and
supersedes any and all prior agreements and understandings, oral or written, and
any contemporaneous oral agreements and understandings relating to the subject
matter hereof. This Agreement shall become effective upon receipt by the
Administrative Agent of counterparts hereof signed by each of the parties hereto
(or, in the case of any party other than the Borrower as to which an executed
counterpart shall not have been received, receipt by the Administrative Agent in
form satisfactory to it of telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart hereof by such
party).
Section 9.10. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR
---------------------------
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE COMMONWEALTH OF VIRGINIA OR OF THE UNITED STATES
FOR THE EASTERN DISTRICT OF VIRGINIA, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS.
THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN THE PRECEDING PARAGRAPH AND
HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
TELCO COMMUNICATIONS GROUP, INCORPORATED
By: /s/ [SIGNATURE ILLEGABLE]
-------------------------------------
Name:
Title:
Address: 4219 Lafayette Center Drive
Chantilly, Virginia 22021
Attention: President
Facsimile: (703) 803-3430
-74-
<PAGE>
SIGNET BANK, as
Administrative Agent
By: [signature appears here]
--------------------------------------
Name: name appears here
Title: title appears here
Address: 7799 Leesburg Pike
Falls Church, VA 22043
Facsimile: 703-520-9702
With a copy to:
Brian D. Murphy, Esq.
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
901 East Cary Street
Richmond, Virginia 23219
SIGNET BANK
By: [signature appears here]
--------------------------------------
THE RIGGS NATIONAL BANK
By: [signature appears here]
--------------------------------------
-75-
<PAGE>
APPENDIX I
----------
REVOLVING COMMITMENTS
---------------------
BANKS REVOLVING COMMITMENT
- ----- --------------------
Signet Bank $25,000,000
The Riggs National Bank $20,000,000
<PAGE>
<TABLE>
<CAPTION>
Schedule 4.11
SUBSIDIARIES OF TELCO COMMUNICATIONS GROUP, INC.
------------------------------------------------
State of Percentage owned
Corporation/Subsidiary Incorporation Qualifications Date by the Borrower
====================================================================================================================================
<S> <C> <C> <C> <C>
Dial & Save of Alabama, Inc. Delaware Albama 12/16/94 100%
Delaware 12/1/94
Dial & Save of Arizona, Inc. Delaware Arizona 7/12/95 100%
Delaware 6/20/95
Dial & Save of Arkansas, Inc. Delaware Arkansas 10/21/94 100%
Delaware 10/5/94
Dial & Save of California, Inc. Delaware California 6/28/94 100%
Delaware 5/25/94
Dial & Save of Colorado, Inc. Delaware Colorado 12/16/94 100%
Delaware 12/1/94
Dial & Save of Connecticut, Inc. Delaware Connecticut 10/26/94 100%
Delaware 10/4/94
Dial & Save of Delaware, Inc. Delaware Delaware 4/8/94 100%
Dial & Save of Florida, Inc. Delaware Florida 5/3/94 100%
Delaware 4/8/94
Dial & Save of Florida, Alpha, Inc. Delaware Florida 3/29/95 100%
Delaware 3/27/95
Dial & Save of Florida, Beta, Inc. Delaware Florida 3/29/95 100%
Delaware 3/27/95
Dial & Save of Florida, Gamma, Inc. Delaware Florida 3/29/95 100%
Delaware 3/27/95
Dial & Save of Florida, Delta, Inc. Delaware Florida 3/29/95 100%
Delaware 3/27/95
Dial & Save of Georgia, Inc. Delaware Georgia 4/28/94 100%
Delaware 4/8/94
Dial & Save of Idaho, Inc. Delaware Idaho 12/16/94 100%
Delaware 12/1/94
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
State of Percentage owned
Corporation/Subsidiary Incorporation Qualifications Date by the Borrower
====================================================================================================================================
<S> <C> <C> <C> <C>
Dial & Save of Illinois, Inc. Delaware Illinois 12/16/94 100%
Delaware 12/1/94
Dial & Save of Indiana, Inc. Delaware Indiana 12/15/94 100%
Delaware 12/1/94
Dial & Save of Iowa, Inc. Delaware Iowa 12/14/94 100%
Delaware 12/1/94
Dial & Save of Kansas, Inc. Delaware Kansas 12/16/94 100%
Delaware 12/1/94
Dial & Save of Kentucky, Inc. Delaware Kentucky 12/16/94 100%
Delaware 12/1/94
Dial & Save of Louisiana, Inc. Delaware Louisiana 5/26/94 100%
Delaware 4/8/94
Dial & Save of Maine, Inc. Delaware Maine 12/16/94 100%
Delaware 12/1/94
Dial & Save of Maryland, Inc. Delaware Maryland 4/29/94 100%
Delaware 4/8/94
Dial & Save of Massachusetts, Inc. Delaware Massachusetts 10/26/94 100%
Delaware 10/4/94
Dial & Save of Michigan, Inc. Delaware Michigan 12/15/94 100%
Delaware 12/1/94
Dial & Save of Minnesota, Inc. Delaware Minnesota 12/16/94 100%
Delaware 12/1/94
Dial & Save of Mississippi, Inc. Delaware Mississippi 12/16/94 100%
Delaware 12/1/94
Dial & Save of Missouri, Inc. Delaware Missouri 12/16/94 100%
12/1/94
Dial & Save of Montana, Inc. Delaware Montana 12/14/94 100%
Delaware 12/1/94
Dial & Save of Nebraska, Inc. Delaware Nebraska 12/23/94 100%
Delaware 12/1/94
-2-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
State of Percentage owned
Corporation/Subsidiary Incorporation Qualifications Date by the Borrower
====================================================================================================================================
<S> <C> <C> <C> <C>
Dial & Save of Nevada, Inc. Delaware Nevada 7/20/94 100%
Delaware 5/25/94
Dial & Save of New Hampshire, Inc. New Hampshire New Hampshire 2/23/95 100%
Dial & Save of New Jersey, Inc. Delaware New Jersey 4/19/94 100%
Delaware 4/8/94
Dial & Save of New Mexico, Inc. Delaware New Mexico 12/16/94 100%
Delaware 12/1/94
Dial & Save of New York, Inc. Delaware New York 10/21/94 100%
Delaware 10/4/94
Dial & Save of North Carolina, Inc. Delaware North Carolina 5/5/94 100%
Delaware 4/8/94
Dial & Save of North Dakota, Inc. Delaware North Dakota 12/19/94 100%
Delaware 12/1/94
Dial & Save of Ohio Inc. Delaware Ohio 6/15/94 100%
Delaware 6/3/94
Dial & Save of Oklahoma, Inc. Delaware Oklahoma 11/18/94 100%
Delaware 10/18/94
Dial & Save of Oregon, Inc. Delaware Oregon 10/21/94 100%
Delaware 10/5/94
Dial & Save of Pennsylvania, Inc. Virginia Pennsylvania 2/4/94 100%
1/26/94
Dial & Save of Rhode Island, Inc. Delaware Rhode Island 12/15/94 100%
Delaware 12/1/94
Dial & Save of South Carolina Delaware South Carolina 12/16/94 100%
Delaware 12/1/94
Dial & Save of South Dakota, Inc. Delaware South Dakota 12/16/94 100%
Delaware 12/1/94
-3-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
State of Percentage owned
Corporation/Subsidiary Incorporation Qualifications Date by the Borrower
====================================================================================================================================
<S> <C> <C> <C> <C>
Dial & Save of Tennessee, Inc. Delaware Tennessee 12/15/94 100%
Delaware 12/1/94
Dial & Save of Texas, Inc. Delaware Texas 10/21/94 100%
Delaware 10/5/94
Dial & Save of Utah, Inc. Delaware Utah 12/15/94 100%
Delaware 12/1/94
Dial & Save of Vermont, Inc. Delaware Vermont 12/15/94 100%
Delaware 12/1/94
Dial & Save of Virginia, Inc. Delaware Virginia 5/2/94 100%
Delaware 4/8/94
Dial & Save of Washington, Inc. Delaware Washington 10/24/94 100%
Delaware 10/18/94
Dial & Save of Washington, D.C., Inc. Delaware District of 4/27/94 100%
Columbia 4/12/94
Delaware
Dial & Save of West Virginia, Inc. Delaware West Virginia 5/23/94 100%
Delaware 4/8/94
Dial & Save of Wisconsin, Inc. Delaware Wisconsin 12/16/94 100%
Delaware 12/1/94
Dial & Save of Wyoming, Inc. Delaware Wyoming 12/15/94 100%
Delaware 12/1/94
Long Distance Wholesale Club Delaware Delaware 7/7/93 55%
Alabama 9/30/95
Arizona 7/20/95
Arkansas 4/24/95
California 6/21/95
Colorado 6/15/94
Connecticut 6/19/95
District of
Columbia 6/15/94
Florida 6/15/94
-4-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
State of Percentage owned
Corporation/Subsidiary Incorporation Qualifications Date by the Borrower
====================================================================================================================================
<S> <C> <C> <C> <C>
Idaho 7/19/95
Illinois 5/9/95
Indiana 5/30/95
Kansas 9/7/95
Kentucky 7/5/95
Loulslana 7/12/95
Maine 7/7/95
Maryland 1/3/94
Massachusetts 10/11/94
Michigan 4/17/95
Montana 6/23/95
Nebraska 7/10/95
New Hampshire 6/21/95
New Jersey 3/20/95
New Mexico 7/20/95
New York 10/26/94
North Carolina 9/27/95
Ohio 5/2/95
Oklahoma 7/7/95
Oregon 6/26/95
Pennsylvania 1/19/94
Rhode Island 6/16/95
South Carolina 6/21/95
Tennessee 7/7/95
Texas 7/7/95
Utah 11/6/95
Vermont 7/7/95
Virginia 6/15/94
Washington, DC 6/15/94
Wisconsin
Telco Development Group of Delaware Delaware 8/16/94 80%
Delaware, Inc.
-5-
</TABLE>
<PAGE>
Schedule 5.11
Existing Liens
--------------
1. Capital Lease on D.C. switch (18 frames) securing Debt not exceeding
$4,925,167.
2. Capital Lease on Fort Lauderdale switch (3 frames and upgrade) securing
Debt not exceeding $1,010,346.
3. Capital Lease on Iowa switch securing Debt not exceeding $1,795,439.
4. Capital Lease on Nevada switch securing Debt not exceeding $2,230,004.
5. Capital Lease on Tennessee switch securing Debt not exceeding $2,191,571.
6. Capital Lease on Texas switch (4 frames) securing Debt no. exceeding
$1,844,670.
7. Capital Lease on Fort Lauderdale DGI securing Debt not exceeding $94,299.
Total Debt secured by existing Liens: $14,091,496.00
Pending Capital Leases
----------------------
1. Capital Lease on Tennessee DSC (2 frames) securing Debt not exceeding
$360,750.
2. Capital Lease on D.C. Dana Corporation (Titan 5500s) securing Debt not
exceeding $1,000,000.
3. Capital Lease on Iowa DSC (5 frames) securing Debt not exceeding $901,875.
4. Capital Lease on Iowa (Titan 5500) securing Debt not exceeding $500,000.
5. Capital Lease on Tennessee Dana Corporation (Titan 5500) securing Debt not
exceeding $493,192.41.
6. Capital Lease on Texas (Titan 5500) securing Debt not exceeding $500,000.
7. Capital Lease on Florida (Titan 5500) securing Debt not exceeding $500,000.
Total Debt secured by pending Capital Leases: $4,255,817.41
<PAGE>
EXHIBIT A
TO CREDIT AGREEMENT
REVOLVING NOTE
Fairfax, Virginia
January __, 1996
For value received, Telco Communications Group, Inc., a Virginia
corporation (the "Borrower"), promises to pay to the order of _______________
(the "Bank") the unpaid principal amount of each Loan made by the Bank to the
Borrower pursuant to the Credit Agreement referred to below on the last day of
the Availability Period relating to such Loan or on such other dates as are
provided in the Credit Agreement. The Borrower promises to pay interest on the
unpaid principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of the Administrative Agent at the
address specified in or pursuant to Section 9.1 of the Credit Agreement.
All Loans made by the Bank, the respective Types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if the
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such retardation or
--------
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Revolving Notes referred to the Credit
Agreement dated as of January 24, 1996 among Telco Communications Group, Inc.,
the banks listed on the signature pages thereof and Signet Bank as
Administrative Agent (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof.
The payment in full of the principal and interest on this note has,
pursuant to the provisions of the Guaranty among the Subsidiaries (as defined in
the Credit Agreement) the Banks listed on the signature pages thereof and Signet
Bank, as Administrative Agent, been unconditionally guaranteed by the
Subsidiaries.
<PAGE>
TELCO COMMUNICATIONS GROUP, INC.
By:___________________________
Name:
Title:
-2-
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
================================================================================
Amount of Unpaid
Amount of Type of Principal Principal Notation
Date Loan Loan Repaid Balance Made By
================================================================================
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<PAGE>
EXHIBIT B
TO CREDIT AGREEMENT
SWINGLINE NOTE
Fairfax, Virginia
January __, 1996
For value received, Telco Communications Group, Inc., a Virginia
corporation (the "Borrower"), promises to pay to the order of Signet Bank (the
nSwingline Lender") the unpaid principal amount of each Loan made by the
Swingline Lender to the Borrower pursuant to the Credit Agreement referred to
below. The Borrower promises to pay interest on the unpaid principal amount of
each such Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of Administrative Agent at the address specified in or pursuant to
Section 9.1 of the Credit Agreement.
All Loans made by the Swingline Lender and all repayments of the
principal thereof shall be recorded by the Swingline Lender and, if the
Swingline Lender so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding may be endorsed by the Swingline Lender on
the schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that the failure of the Swingline Lender to
--------
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This note is the Swingline Note referred to in the Credit Agreement
dated as of January 24, 1996 among Telco Communications Group, Inc., the banks
listed on the signature pages thereof and Signet Bank as Administrative Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
The payment in full of the principal and interest on this note has,
pursuant to the provisions of the Guaranty among the Subsidiaries (as defined in
the Credit Agreement) the Banks listed on the signature pages thereof and Signet
Bank, as
<PAGE>
Administrative Agent, been unconditionally guaranteed by the Subsidiaries.
TELCO COMMUNICATIONS GROUP, INC.
By:___________________________
Name:
Title:
-2-
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
================================================================================
Amount of Unpaid
Amount of Principal Principal Notation
Date Loan Repaid Balance Made By
================================================================================
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<PAGE>
EXHIBIT C
TO CREDIT AGREEMENT
FORM OF OPINION OF COUNSEL FOR THE BORROWER
THE SUBSIDIARIES
January __, 1996
Signet Bank
as Administrative Agent
7799 Leesburg Pike
Falls Church, Virginia 22043
The Banks party to the Credit Agreement
dated as of January 24, 1996
Ladies and Gentlemen:
I have acted as counsel for Telco Communications Group, Inc., a
Virginia corporation (the "Borrower"), in connection with the $45,000,000 Credit
Agreement dated as of January __, 1996 (the "Credit Agreement") among the
Borrower, the Banks listed on the signature pages thereto (the "Banks") and
Signet Bank, a Virginia banking corporation, as Administrative Agent (the
"Administrative Agent"). I have also acted as counsel for the Subsidiaries in
connection with the respective Loan Documents to which each is a party. Terms
defined in the Credit Agreement and not defined herein are used herein as
therein defined.
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of this
opinion.
Based upon the foregoing, I am of the opinion that:
1. Each Obligor is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has all corporate powers required to carry on its business as now conducted and
is duly qualified as a foreign corporation in each jurisdiction where
qualification or licensing is required by the nature of its business or the
character and location of its property, business or customers.
2. The execution, delivery and performance by each Obliger of the Loan
Documents to which it is a party are within each Obligor's respective corporate
powers, have been duly authorized by all necessary corporate action required of
each Obligor, require no action by or in respect of, or filing with, any
governmental or regulatory body, agency or official (other
<PAGE>
Signet Bank
January 24, 1996
Page 2
than the filing of the Financing Statements referred to in paragraph 10) and do
not contravene, or constitute a breach of or default under, any provision of
applicable law or regulation or of the articles of incorporation or by-laws of
any Obliger, or, to my knowledge after due inquiry, of any agreement, judgment,
injunction, order, decree or other instrument binding upon any Obligor or result
in the creation or imposition of any Lien (other than the Liens created by the
Loan Documents) on any revenues or assets of the Obligers.
3. Each Shareholder Pledge Agreement has been duly executed and
delivered by the respective Shareholder party thereto and constitutes a legal,
valid and binding agreement of such Shareholder, enforceable in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, or other similar laws relating to the enforcement of creditors'
rights generally and by general equitable principles.
4. Each Loan Document to which the Borrower is a party constitutes a
legal, valid and binding agreement of the Borrower, and each Loan Document to
which each Subsidiary is a party constitutes a legal, valid and binding
agreement of each Subsidiary party thereto, in each case enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency or other similar laws relating to the enforcement of
creditors rights generally and by general equitable principles, and except that
certain of the remedial provisions in the Security Agreement may be limited by
applicable, law, although such limitations do not in my opinion make the
remedies provided for therein inadequate for the practical realization of the
principal benefits intended to be afforded thereby.
5. To the best of my knowledge, there is no action, suit, proceeding,
arbitration or investigation pending, threatened or contemplated against any
Obligor before any court or arbitrator or any Governmental Authority or official
in which there is a reasonable possibility of an adverse decision which would
have a Material Adverse Effect or which in any manner questions the validity or
enforceability of any Loan Document or the creation, perfection or priority of
any lien intended to be created thereunder.
6. The authorized capital stock of the Borrower consists of 100,000
Common Shares, of which 49,092 Common Shares are outstanding on the date hereof.
All of the outstanding Common Shares of the Borrower have been validly issued
and are fully paid and non-assessable and are not subject to any preemptive or
similar rights. To the best of my knowledge, each of the Pledged Shares listed
in Schedule 1 to each Shareholder's Pledge
<PAGE>
Signet Bank
January 24, 1996
Page 3
Agreement is free of any adverse claim, any lien in favor of any Obligor and any
restrictions on transfer imposed by any Obligor.
7. Schedule 7.1 attached hereto and incorporated herein by reference
in full accurately states the number of authorized shares of capital stock of
each Subsidiary and the amount of such stock which is outstanding on the date
hereof. All of the outstanding Common Shares of each Subsidiary have been
validly issued and are fully paid and nonassessable and are not subject to any
preemptive or similar rights.
8. The Security Agreement creates a valid security interest (the
"Article 9 Security Interest") for the benefit of the secured parties named
therein in all right, title and interest in all Collateral purported to be
covered thereby extent that Article 9 of the UCC is applicable thereto and,
the extent provided in Section 9-306 of the UCC, all proceeds thereof.
9. Upon delivery to the Collateral Agent of all certificates
representing the Pledged Shares Has defined in the Pledge Agreement and the
Shareholder Pledge Agreements) owned by an Obligor or Shareholder on the date
hereof, and all such certificates and other property constituting "certificated
securities" under Article 8 of the UCC or "instruments" under Article 9 of the
UCC acquired by any Obligor or Shareholder aftethe date hereof, for so long as
the Collateral Agent retains possession thereof in the manner required by
Sections 8-313 or 9305 of the UCC, as applicable, the security interest of the
Collateral Agent in all right, title and interest of each Obligor or Shareholder
in and to such certificates and other instruments will be perfected under
Articles 8 or 9 of the UCC, as applicable. I express no opinion as to any
Obligor's or Shareholder's right, title or interest in or to any Pledged Shares
and, unless the Collateral Agent is a "bona fide purchaser" within the meaning
of Section 8-302 of the UCC, the security interest of the Collateral Agent under
such Pledge Agreement or shareholders Pledge Agreements in such Pledged Shares
is limited to the rights therein granted which each Obligor or Shareholder had
or had actual authority to convey.
10. (a) UCC financing statements and amendments thereto (collectively,
the "financing Statements") have been filed with respect to each Obligor in the
filing offices (the "Filing Offices") in each jurisdiction listed in Schedule 7
to its Perfection Certificate (the "Filing Jurisdictions"). No further filing or
recording of any document or instrument or other action will be required so to
perfect the Article 9 Security Interest, except that (i) continuation statements
with respect to each Financing Statement must be filed within the respective
time periods provided by McGuire, Wood, Battle &
<PAGE>
Signet Bank
January 24, 1996
Page 4
Boothe and set forth on Schedule 7 to the Perfection Certificate; (ii)
additional filings may be necessary if any Obliger changes its name, identity or
corporate structure or the jurisdiction in which its chief executive.office or
the Collateral are located; (iii) possession of the Pledged Shares and other
Collateral in which a security interest cannot be perfected by filing of a
financing statement under Article 9 of the UCC may be requited; and (iv) I
express no opinion on the perfection of, or need for further filing or recording
to perfect, the Article 9 Security Interest in goods now or hereafter located in
any jurisdiction other than the Filing Jurisdictions or in motor vehicles,
trailers, semitrailers or other mobile goods, watercraft, railroad cars,
locomotives or other rolling stock or vessels, consumer goods, goods which are
or become accessions, farm products, livestock, crops, grain, timber to be cut,
equipment used in farming operations or accounts or general intangibles
resulting from the sale thereof, beneficial interests in a trust or decedent's
estate or letters of credit.
(b) To the best of my knowledge, as of each of the dates specified in
the Search Report, other than those specified in the Search Report, there were
no
(i) UCC financing statements naming any Obliger as debtor or
seller and covering any of the Collateral,
(ii) notices of the filing of any federal tax lien (filed pursuant
to Section 6323 of the Code) or any lien of the PBGG (filed pursuant to
Section 4068 of ERISA) covering any of the Collateral, or
(iii) judgment liens docketed against any Obligor or Shareholder.
In rendering my opinion in the first sentence of pa~agrach 10(a) of this
paragraph 10 regarding the due filing of the Financing Statements in all Filing
Offices and the payment of fees and other charges thereon, I have relied as to
the time, manner and location of the filing and as to the payment of fees and
other charges thereon, upon information received from McGuire, Woods, Battle &
Boothe. The conclusions expressed in paragraph 10(b) are subject to the accuracy
of the personnel in the filing offices referred to above with regard to the
filing, indexing and recording of financing statements and notices of liens, and
to correctness of reports to us by McGuire, Woods, Battle & Boothe who arranged
for the searches of all such records.
11. None of the transactions that are contemplated by the Credit
Agreement or the Notes to occur on the date hereof
<PAGE>
Signet Bank
January 24, 1996
Page 5
(including, without limitation, any direct or indirect use of the proceeds of
the Loans being made on the date hereof) violates Regulation U of the Board of
Governors of the Federal Reserve System, as in effect on the date hereof.
I express no opinions with respect to governmental licenses or
approvals except to the extent that the interests of any Obliger thereunder
constitute~assignable general intangibles under the UCC. In addition, I express
no opinion as to (i) the perfection of the Article 9 Security Interests in any
property subject to Section 9-302 (3) of the UCC (except as to motor vehicles
referred to in clause (ii) of the first paragraph of this opinion 9), (ii) the
effect of non-compliance with the Federal Assignment of Claims Act or (iii) the
rank or priority of the Article 9 Security Interests.
The Collateral Agent will have the power, without naming all the
Banks, to exercise remedies under the Security Agreement, the Pledge Agreement
and the Shareholder Pledge Agreements for the realization of the Collateral in
its own name as Collateral Agent.
I understand that you have considered the applicability to the
obligations of the Subsidiaries under the Loan Documents to which they are
parties of federal and state fraudulent transfer laws, as to which I express no
opinion.
The opinions herein expressed are limited in all respects solely to
the matters governed by the internal laws of the state of incorporation of each
Obligor, the internal laws of the Commonwealth of Virginia and the federal laws
of the United States of America. Insofar as the matters covered by this opinion
are governed by the laws of any State other than Virginia, I have assumed
without independent investigation that the laws of each such State are in all
relevant aspects identical to the laws of the Commonwealth of Virginia.
This opinion is solely for the Administrative Agent, the Collateral
Agent and the Banks, and is not to be relied upon by any other entity.
Very truly yours,
Bryan K. Rachlin
<PAGE>
Schedule 7.1
of Opinion to Counsel
================================================================================
Number of Authorized Number of
Name of Subsidiary Shares Outstanding Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT D
TO CREDIT AGREEMENT
SECURITY AGREEMENT
------------------
<PAGE>
EXHIBIT D
TO CREDIT AGREEMENT
SECURITY AGREEMENT
------------------
<PAGE>
EXHIBIT E
TO CREDIT AGREEMENT
PLEDGE AGREEMENT
----------------
<PAGE>
EXHIBIT F
TO CREDIT AGREEMENT
SUBSIDIARY GUARANTY
-------------------
<PAGE>
EXHIBIT G
TO CREDIT AGREEMENT
FORM OF SHAREHOLDER PLEDGE AGREEMENT
------------------------------------
<PAGE>
EXHIBIT H
TO CREDIT AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement is dated as of _____, 19__
among (NAME OF ASSIGNOR) (the "Assignor"), (NAME OF ASSIGNEE) (the "Assignee")
and SIGNET BANK, as Administrative Agent (the "Administrative Agent").
TELCO COMMUNICATIONS GROUP, INCORPORATED (the "Borrower"), the
Assignor and the Administrative Agent are parties to a Credit Agreement dated as
of January 24, 1996 among the Borrower, the Assignor and the other Banks party
thereto and the Administrative Agent (as the same may be amended, modified or
supplemented from time to time, the "Credit Agreement"). Pursuant to the Credit
Agreement, the Assignor has a [Revolving] [Swingline] Commitment to make Loans
to the Borrower in an aggregate principal amount outstanding not to exceed
$________ , of which an aggregate principal amount of $________________ is
outstanding on the date hereof. The Assignor proposes to assign to the Assignee
all of the rights of the Assignor under the Credit Agreement in respect of a
portion of its Commitment thereunder in an amount equal to $___________ (the
"Assigned Amount"), and the Assignee proposes to accept assignment of such
rights and assume the corresponding obligations from the Assignor on such terms.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions. All terms defined in the Credit Agreement and
-----------
not otherwise defined herein have, as used herein, the respective meanings
provided for therein.
Section 2. Assignment. The Assignor hereby assigns and sells to the
-----------
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Loans made by the Assignor outstanding at the date hereof. Upon the execution
and delivery hereof by the Assignor, the Assignee and the Administrative Agent
and the payment of the amounts specified in Section 3 required to be paid on the
date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights
and be obligated to perform the obligations of a Bank under the Credit Agreement
with a [Revolving] [Swingline] Commitment in an amount equal to the Assigned
Amount, and (ii) the [Revolving] [Swingline] Commitment of the Assignor shall,
as of the date hereof, be reduced by a like amount and the Assignor released
from its obligations under the Credit Agreement to the extent such obligations
have been assumed by the Assignee.
<PAGE>
The assignment provided for herein shall be without recourse to the Assignor.
Section 3. Payments. As consideration for the assignment and sale
---------
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them. It is
understood that commitment and/or facility fees accrued to the date hereof in
respect of the Assigned Amount are for the account of the Assignor and such fees
accruing from and including the date hereof are for the account of the Assignee.
Each of the Assignor and the Assignee hereby agrees that if it receives any
amount under the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party to the
extent of such other party's interest therein and shall promptly pay the same to
such other party.
Section 4. Non-Reliance on Assignor. The Assignor makes no
-------------------------
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition or statements of any Obligor,
or with respect to the validity and enforceability of the obligations of any
Obligor in respect of the Credit Agreement, any Note or any other Loan Document.
The Assignee acknowledges that it has, independently and without reliance on the
Assignor, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its own independent
appraisal of the business, affairs, financial condition and credit-worthiness of
the Obligors.
Section 5. Assignee's Representations. The Assignee hereby confirms as
---------------------------
to itself the accuracy of the representations and warranties set forth in
Sections 9.7 of the Credit Agreement.
Section 6. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the Commonwealth of Virginia.
Section 7. Counterparts. This Agreement may be signed in any number of
-------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
NAME OF ASSIGNOR
By:____________________________
Name:
Title:
NAME OF ASSIGNEE
By:____________________________
Name:
Title:
SIGNET BANK,
as Administrative Agent
By:____________________________
Name:
Title:
-3-
<PAGE>
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into as of the 1st
---
day of April, 1996 by and between Telco Communications Group, Incorporated,
-----
a Virginia corporation (the "COMPANY"), and Thomas J. Cirrito (the "EXECUTIVE").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. EMPLOYMENT.
----------
(a) The Company hereby employs the Executive as President of its
Consumer Division, or an equivalent or higher position, and the Executive
hereby accepts such employment, on terms and subject to the conditions
hereinafter set forth.
(b) Executive shall be employed by the Company in a senior executive
position. Such position shall (i) report directly to the Company's President and
Chief Executive Officer, unless the Company's Board of Directors (the "Board")
directs otherwise, but not with lower reporting responsibilities, and (ii) shall
be a part of the Company's management committee. Executive agrees to perform
such other or further duties consistent with his position as President of the
Consumer Division pursuant to the direction of the President and Chief Executive
Officer or the Board; however, Executive shall not be required to relocate his
residence by either direction of management or the Board, or through the nature
of any of his duties required hereunder.
(c) Attention and Effort. The Executive shall be required to devote
--------------------
his full business time, attention and effort to the Company's business and
affairs and perform diligently such duties as are customarily performed by
executives in similar positions with companies similar in character or size to
the Company, all subject to the direction of the President and Chief Executive
Officer and the Board, together with such other duties as may be reasonably
requested from time to time by the Board, which duties shall be consistent with
Section 1(a) and (b) as set forth above. The Executive agrees to use all of his
skills and business judgment and render services to the best of his ability to
serve the interests of the Company. Subject to the terms of Section 6, this
shall not preclude Executive from serving on community and civic boards,
participating in industry associations, or otherwise engaging in other
activities which in the Company's judgement, do not unreasonably interfere with
his duties to the Company.
<PAGE>
(d) Support Services. The Executive shall be entitled to all of the
----------------
administrative, operational and facility support customary for a similarly
situated executive. This support shall include, without limitation, a suitably
appointed private office, a secretary or administrative assistant, and payment
of or reimbursement for reasonable cellular telephone expenses, business
entertainment expenses, expenses of the Executive maintaining his professional
license and standing and any and all other business reasonably incurred on
behalf of or in the course of performing duties for the Company, all in
accordance with the expense reimbursement policies established from time to time
by the Company. The Executive agrees to provide such documentation of these
expenses as may be reasonably required.
2. TERM. Subject to the provisions for termination hereinafter provided,
----
the term of this Agreement (the "Term") shall begin on the date hereof, shall
continue through the third anniversary of the date hereof (the "Initial Term"),
and shall automatically extend each year until the fifth anniversary hereof
unless notice of termination is given by either party hereto at lease ninety
(90) days prior to the end of the Initial Term or of the first annual extension.
3. COMPENSATION.
------------
Throughout the Term the Company shall pay or provide, as the case may
be, to the Executive the compensation and other benefits and rights set forth
in this Section 3. If anything in this Agreement is in conflict with any plan
or governing document of the Company, the terms of this Agreement shall have
precedence.
(a) The Company shall pay to the Executive a minimum "Base Salary,"
payable in accordance with the Company's usual pay practices (and in any event
no less frequently than monthly), of $375,000 per annum, which Base Salary shall
be subject to increase upon review annually by the Company's Board of Directors.
(b) The Company at the discretion of the Board, shall pay to the
Executive bonus compensation for each fiscal year, or part thereof that he is
employed by the Company.
(c) The Company shall (a) in addition to life insurance available to
Executive pursuant to Section 3(d) of this Agreement, reimburse Executive for
the cost,, in the amount up to Two Thousand Dollars ($2,000.00) per year, of
life insurance having a death benefit payment of, in the aggregate with the
above-referenced Company life insurance, not more than Two Million Dollars
($2,000,000), (ii) reimburse Executive for the costs, in the amount of up to Two
Thousand Dollars ($2,000.00) per year, of disability insurance for the
Executive if not otherwise provided to Executive pursuant to Section 3(d) of
this Agreement, and (iii) provide medical, hospitalization and dental insurance
for Executive, his spouse and eligible family members, subject to and in
accordance with the Company's policy, the proportion of the cost thereof to be
borne by the Company and the Executive in accordance with such policy.
-2-
<PAGE>
(d) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to employees
of the Company and for which the Executive qualifies under the terms thereof
(and nothing in this Agreement shall, or shall be deemed to, in any way affect
the Executive's right and benefits thereunder except as expressly provided
herein).
(e) The Executive shall be entitled to such periods of vacation and
sick leace allowance each year as provided under the Company's vacation and sick
leave policy and as otherwise provided for executive officers. For calendar
year 1996, Executive is entitled to twenty (20) vacation days and ten (10) days
------ -- --- --
of such leave allowance, and Executive shall be provided not less than such
respective days for each subsequent year for the remainder of the Term.
(f) The Executive shall be entitled to participate in any equity or
other employee benefit plan that is generally available to senior executive
officers, as distinguished from general management, of the Company. The
Executive's participation in and benefits under any such plan shall be on the
terms and subject to the conditions specified in the governing document of the
particular plan.
4. PERMANENT DISABILITY
--------------------
(a) For purposes of this Agreement, the Executives's "Permanent
Disability" shall be deemed to have occurred one day after one hundred twenty
(120) days in the aggregate during any consecutive (12) month period, or one day
after ninety (90) consecutive days, during which one hundred twenty (120) or
ninety (90) days, as the case may be, the Executive, by reason of his physical
or mental disability or illness, shall have been unable to discharge fully his
duties under this Agreement.
(b) If either the Company or the Executive, after receipt of notice
of the Executive's Permanent Disability form the other, disputes that the
Executive's Permanent Disability shall have occurred, the Executive shall
promptly submit to a physical examination by the chief of medicine of any major
accredited hospital in the metropolitan Washington, D.C. area and, unless such
physician shall issue his written statement to the effect that, in his opinion,
based on his diagnosis, the Executive is capable of resuming his employment and
devoting his full time and en to discharging fully is duties hereunder
within thirty (30) days after the date of such statement, such Permanent
Disability shall be deemed to have occurred on the day above specified.
5. TERMINATION.
-----------
(a) The Executive's employment under this Agreement and the Term
shall be terminated immediately on the death of the Executive and may be
terminated by the Company:
- 3 -
<PAGE>
(i) at any time after the Permanent Disability of the
Executive;
(ii) at any time for "Cause" (as defined below) by action of
the Board; or
(iii) at any time without Cause by action of the Board.
For purposes hereof, Cause shall mean:
(A) Active participation by the Executive in fraudulent conduct,
a felony, an act or series of deliberate acts which, in the reasonable
judgment of the Board, results or would likely result in material
injury to the business, operations or business reputation of the
Company, or an act or series of acts of dishonesty, recklessness or
gross negligence or the Executive's willful failure to perform any of
his duties under this Agreement.
(B) The Executive's breach of any provision of this Agreement,
which breach has not been cured (if it is of a nature that can be
cured) to the Board's reasonable satisfaction within ten (10) days
after the Company gives written notice thereof to the Executive;
(C) Excessive absenteeism by the Executive; provided that
absenteeism (i) related to illness or otherwise covered by Section
4(a) hereof, (ii) required to be permitted under applicable federal or
state laws, or (iii) permitted under Company policy, shall not be
deemed to be excessive; or
(D) The voluntary resignation of the Executive without the prior
consent of the Board.
(b) TERMINATION BY DEATH. If the Executive's employment is terminated
--------------------
by death, the Executive's estate shall be entitled to receive (i) life insurance
benefits pursuant to any life insurance purchases by the Company, (ii) a pro
rata portion of the bonus applicable to the calendar year in which such
termination occurs, payable when and as such bonus is determined under Section 3
(b), and (iii) other benefits, payable within ninety (90) days after the date of
death, accrued by him hereunder up to and including the date of Executive's
death.
(c) TERMINATION FOR CAUSE. If the Executive's employment is
---------------------
terminated by the Company for Cause, the Company shall not have any other or
further obligations to the Executive under this Agreement (except (i) as may be
provided in accordance with the terms of retirement and other benefit plans
pursuant to Section 3(d), (ii) as to that portion of any unpaid Base Salary and
other benefits accrued and earned under this Agreement through the date of such
termination, and (iii) as to benefits, if any, provided by any insurance
policies in accordance with their terms). In addition, if the Executive's
employment is terminated by the Company for Cause at any time during the Term,
the Executive shall immediately forfeit any and all other unexercised
- 4 -
<PAGE>
stock rights and stock options and other such unexercised incentives or awards
previously granted to him by the Company. The foregoing sentence shall be in
addition to, and not in lieu of, any and all other rights and remedies which may
be available to the Company under the circumstances, whether at law or in
equity.
(D) TERMINATION WITHOUT CAUSE. If the Executive's employment is
-------------------------
terminated by the Company without Cause, the Executive shall be entitled to
receive (i) severance compensation equal to what would have been his Base Salary
under Section 3(a), payable at such times as his Base Salary would have been
paid if his employment had not been terminated, for the longer of one (1) year
or the remainder of what would have been the Term, as well as a pro rata portion
of the bonus applicable to the calendar year in which such termination occurs,
payable when and as such bonus is determined under Section 3(b), salary and
other benefits, payable within ninety (90) days after the date of such
termination, accrued by him hereunder up to and including the date of such
termination, and (iii) the benefits set forth in Section 3(c) and (d) for the
longer of one (1) year or the remainder of what would have been the Term (and
subsequent to which Executive will be entitled to any COBRA benefits).
(E) TERMINATION FOR PERMANENT DISABILITY. If the Executive's
------------------------------------
employment is terminated by the Company for Permanent Disability, the Executive
shall be entitled to receive (i) severance compensation equal to what would have
been his Base Salary under Section 3(a) for the longer of one (1) year or the
remainder of what would have been the Term, payable at such times as his Base
Salary would have been paid if his employment had not been terminated, less any
disability insurance benefits pursuant to any disability insurance provided by
the Company or purchased by Executive, the cost of which is reimbursed by the
Company, which are payable in respect of the period after such termination, as
well as a pro rata portion of the bonus applicable to the calendar year in which
such termination occurs, payable when and as such bonus is determined under
Section 3(b), and (ii) salary and other benefits, payable within ninety (90)
days after termination for Permanent Disability, accrued by him hereunder up to
and including the date of termination for Permanent Disability.
6. COVENANTS AND CONFIDENTIAL INFORMATION
--------------------------------------
(a) The Executive acknowledges the Company's reliance on and
expectation of the Executive's continued commitment to performance of his
duties and responsibilities during the Term. In light of such reliance and
expectation on the part of the Company, during the periods hereafter specified
in Section 6(b), the Executive shall not, directly or indirectly, do or suffer
either of the following:
(i) Own, manage, control or participate in the ownership,
management or control of, or be employed or engaged by or otherwise
affiliated or associated as a consultant, independent contractor or
otherwise with, any other corporation, partnership, proprietorship, firm,
association or other business entity directly or indirectly engaged in the
business of, or otherwise directly or indirectly engage in the business of,
marketing
- 5 -
<PAGE>
or providing telecommunication services within the United States; provided,
however, that the beneficial and/or record ownership of not more than two
and one-half percent (2.5%) of any class of publicly traded securities of
any entity shall not be deemed a violation of this covenant; or
(ii) Disclose, divulge, discuss, copy or otherwise use or suffer
to be used in any manner, other than in accordance with the Executive's
duties hereunder, any confidential or proprietary information relating to
the Company's business, prospects, finances, operations, properties or
otherwise to its particular business or other trade secrets of the Company,
it being acknowledged by the Executive that all such information regarding
the business of the Company compiled or obtained by, or furnished to, the
Executive while the Executive shall have been employed by or associated
with the Company is confidential and/or proprietary information and the
Company's exclusive property; provided, however, that the foregoing
restrictions shall not apply to the extent that such information:
(A) is clearly obtainable in the public domain;
(B) becomes obtainable in the public domain, except by reason of
the breach by the Executive of the terms hereof; or
(C) is required to be disclosed by rule of law or by order of a
court or governmental body or agency.
(b) The applicable periods shall be: as to clause (i) of Section 6(a)
so long as the Executive is an employee of the Company and for a period of one
year after termination of employment; and as to clause (ii) of Section 6(a),
during the Term and at any time after the Executive is no longer an employee of
the Company.
As additional consideration for Executive's non-competition
obligation pursuant to Section 6(a)(i) during the one year period after
termination of employment, for Cause, without Cause, for Permanent Disability,
or because of the expiration of the Term, the Company shall make an additional
payment of $1,000,000 to Executive within ninety (90) days after such
termination.
(c) The Executive agrees and understands that the remedy at law for
any breach by him of this Section 6 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that the Company shall be
entitled to immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach. Nothing in this Section 6 shall be
deemed to limit the Company's remedies at law or in equity for any breach by the
Executive of any of the provisions of this Section 6 which may be pursued or
availed of by the Company.
- 6 -
<PAGE>
(d) THE EXECUTIVE HAS CAREFULLY CONSIDERED THE NATURE AND EXTENT OF
THE RESTRICTIONS UPON HIM AND THE RIGHTS AND REMEDIES CONFERRED UPON THE COMPANY
UNDER THIS SECTION 6, AND HEREBY ACKNOWLEDGES AND AGREES THAT THE SAME ARE
REASONABLE IN TIME AND TERRITORY, ARE DESIGNED TO ELIMINATE COMPETITION WHICH
OTHERWISE WOULD BE UNFAIR TO THE COMPANY, DO NOT STIFLE THE INHERENT SKILL AND
EXPERIENCE OF THE EXECUTIVE, WOULD NOT OPERATE AS A BAR TO THE EXECUTIVE'S SOLE
MEANS OF SUPPORT, ARE FULLY REQUIRED TO PROTECT THE LEGITIMATE INTERESTS OF THE
COMPANY AND DO NOT CONFER A BENEFIT UPON THE COMPANY DISPROPORTIONATE TO THE
DETRIMENT TO THE EXECUTIVE.
(e) The Executive acknowledges that the Executive's obligations under
this Section 6 shall survive regardless of whether the Executive's employment by
the Company is terminated, voluntarily or involuntarily, by the Company or the
Executive, with Cause or without Cause.
7. MISCELLANEOUS.
-------------
(a) The Executive represents and warrants that he is not a party to
any agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
(b) The provisions of this Agreement are severable and if any one
or more provisions may be determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction nevertheless shall be
binding and enforceable.
(c) The rights and obligations of the Company under this Agreement
shall inure to the benefit of, and shall be binding on, the Company and its
successors and assigns, and the rights and obligations (other than obligations
to perform services) of the Executive under this Agreement shall inure to the
benefit of, and shall be binding upon, the Executive and his heirs, personal
representatives and assigns.
(d) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association then pertaining in the
metropolitan Washington, D.C. area, and judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. The arbitrator or arbitrators shall be deemed to possess the powers to
issue mandatory orders and restraining orders in connection with such
arbitration; provided, however, that nothing in this Section 7(d) shall be
construed so as to deny the Company the right and power
- 7 -
<PAGE>
to seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of is covenants contained in this
Agreement.
(e) All notices and other communications required or permitted under
this Agreement shall be in writing, and shall be deemed properly given if
delivered personally, mailed by registered or certified mail in the United
States mail, postage prepaid, return receipt requested, sent by facsimile, or
sent by Express Mail, Federal Express or other nationally recognized express
delivery service, as follows:
If to the Company or the Board:
Telco Communications Group, Inc.
4219 Lafayette Center Drive
Chantilly, VA 22021-1209
Attention: President and Chief Executive Officer
Fax Number: (703) 803-3430
With a copy to:
Swidler & Berlin, Chartered
3000 K Street, N.W.
Suite 300
Washington, D.C. 2007
Attn: John J. Klusaritz, Esq.
Fax Number: (202) 424-7643
If to the Executive:
Thomas J. Cirrito
_____________________
_____________________
Notice given by hand, certified or registered mail, or by Express Mail, Federal
Express or other such express delivery service, shall be effective upon actual
receipt. Notice given by facsimile transmission shall effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices by facsimile
transmission shall be confirmed promptly after transmission in writing by
certified mail or personal delivery.
Any party may change any address to which notice is to be given to it by
giving notice as provided above of such change of address.
- 8 -
<PAGE>
(f) The failure of either party to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions as to any future violations thereof, nor
prevent that party thereafter from enforcing each and every other provision of
this Agreement. The rights granted the parties herein are cumulative and the
waiver of any single remedy shall not constitute a waiver of such party's right
to assert all other legal remedies available to it under the circumstances.
(g) This Agreement supersedes all prior or contemporaneous agreements
and understandings between the parties and may not be modified or terminated
orally. No modification or attempted waiver shall be valid unless in writing
and signed by the party against whom the same is sought to be enforced.
(h) This Agreement shall be governed by, and construed in accordance
with the provisions of, the law of the Commonwealth of Virginia, without
reference to provisions that refer a matter to the law of any other
jurisdiction. Each party hereto hereby irrevocably submits itself to the non-
exclusive personal jurisdiction of the federal and state courts sitting in
Virginia; accordingly, subject to the provisions for arbitration provided in
Section 7(d), any justiciable matters involving the Company and the Executive
with respect to this Agreement may be adjudicated only in a federal or state
court sitting in Virginia.
(i) All payments required to be made by the Company hereunder to the
Executive shall be subject to the withholding of such amounts relating to taxes
and other government assessments as the Company may reasonably determine it
should withhold pursuant to any applicable law, rule or regulation.
(j) Captions and section headings used herein are for convenience and
are not a part of this Agreement and shall not be used in construing it.
(k) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first set forth above.
TELCO COMMUNICATIONS GROUP,
INCORPORATED, a Virginia corporation
By: /s/ Donald A. Burns
-----------------------------
Name: Donald A. Burns
------------------------
Title: President
-----------------------
/s/ Thomas J. Cirrito
----------------------------------
THOMAS J. CIRRITO
- 10 -
<PAGE>
EXHIBIT 10.33
EMPLOYMENT AND STOCK OPTION AGREEMENT
This Employment and Stock Option Agreement ("Agreement") is entered into as of
the 4th day of April, 1996 between Telco Communications Group, Incorporated, a
Virginia corporation with principal offices at 4219 Lafayette Center Drive,
Chantilly, VA 22021-1209 (the "Company") and Stephen G. Canton, an individual
residing at 5017 Upton Street, Washington, D.C. 20016 (the "Executive").
Whereas, the Company desires to employ the Executive and the Executive desires
to be employed by the Company, on the terms and subject to the conditions set
forth herein.
WITNESSETH:
Now, Therefore, in consideration of the mutual promises herein contained, the
parties agree as follows:
1. Employment
(a) The Company hereby employs the Executive as the President of its
Commercial Sales Division, an equivalent or a higher position, and the Executive
hereby accepts such employment, on the terms and subject to the conditions
hereinafter set forth.
(b) Executive shall be employed by the Company in a senior executive
position. Such position shall (i) report directly to the Company's President and
Chief Executive Officer, unless the Company's Board of Directors (the "Board")
directs otherwise, but not with lower reporting responsibilities, and (ii) shall
be a part of the Company's management committee. Executive agrees to perform
such other or further duties consistent with his position as President of the
Commercial Sales Division pursuant to the direction of the President and Chief
Executive Officer or the Board; however, Executive shall not be required to
relocate his residence by either direction of management or the Board, or
through the nature of any of his duties required hereunder.
(c) Attention and Effort. The Executive shall be required to devote his
full business time, attention and effort to the Company's business and affairs
and perform diligently such duties as are customarily performed by executives in
similar positions with companies similar in character or size to the Company,
all subject to the direction of the President and Chief Executive Officer and
the Board, together with such other duties as may be reasonably requested from
time to time by the Board, which duties shall be consistent with Section 1(a)
and (b) as set forth above. The Executive agrees to use all of his skills and
business judgment and render services to the best of his ability to serve the
interests of the Company. Subject to the terms of Section 8, this shall not
preclude Executive from serving on community and civic boards, participating in
industry associations, or otherwise engaging in other activities which, in the
Company's judgment, do not unreasonably interfere with his duties to the
Company. Company specifically agrees that Executive is not precluded from equity
ownership of privately held companies that do not compete with the Company.
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(d) Support Services. The Executive shall be entitled to all of the
administrative, operational and facility support customary for a similarly
situated executive. This support shall include, without limitation, a suitably
appointed private office, a secretary or administrative assistant and payment
of or reimbursement for reasonable cellular telephone expenses, business
entertainment expenses, expenses of the Executive maintaining his professional
license and standing and any and all other business expenses reasonably
incurred on behalf of or in the course of performing duties for the Company,
all in accordance with the expense reimbursement policies established generally
from time to time by the Company. The Executive agrees to provide such
documentation of these expenses as reasonably required.
2. Term. Subject to the provisions for termination hereinafter provided, the
term of this Agreement (the "Term") shall begin on the date hereof and shall
continue through the fifth anniversary of the date hereof.
3. Compensation. Throughout the Term the Company shall pay or provide, as the
case may be, to the Executive the compensation and other benefits and rights set
forth in this Section 3. If anything in this Agreement is in conflict with any
plan or governing document of the Company, the terms of this Agreement shall
have precedence.
(a) The Company shall pay to the Executive at minimum. A "Base Salary,"
payable in accordance with the Company's usual pay practice (and in any event no
less frequently than monthly), of $300,00 per annum, which Base Salary shall be
subject to increase upon review annually by the Company's Board of Directors.
(b) The Company at the discretion of the Board, shall pay to the Executive
bonus compensation for each fiscal year, or part thereof that he is employed by
the Company, in a manner generally available to senior executive officers of the
Company. Nevertheless, the performance objective specified in Section 6. of this
Agreement shall not be in any manner made a part of Executive's bonus objectives
for any period during the Term.
(c)(i) The Company has adopted for its employees an incentive and non-
qualified stock option plan, a copy of which is attached as Exhibit 3-1. (the
"Stock Option Plan"). Conditioned upon the execution of this Agreement by
Executive, the Company hereby grants to Executive the right and option, as of
the date of this Agreement, pursuant to the Stock Option Plan, to purchase up to
Two Thousand and Five Hundred (2,500) Common Shares of the Company's Stock (the
"Initial Option"); the right to purchase Ninety (90) Common Shares of the
Initial Option is intended to qualify as an incentive stock option ("ISO") for
purposes of Section 422 of the Internal Revenue Code of 1986, as amended, and
the right to purchase the remaining Two Thousand Four-Hundred and Ten
(2,410)Common Shares is issued as a Non-Qualified Stock Option ("NQSO").
The Company and Executive acknowledge that the Company may, in connection with a
proposed initial public offering of shares of the Company's Common Stock (the
"IPO"), declare a stock split or other recapitalization with respect to the
Company's Common Stock. In the event of such a stock split or other
recapitalization, the Exercise Price (as defined below) and the number of shares
subject to the Initial Option shall be adjusted to reflect such stock split or
recapitalization.
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As an example of the application of this paragraph, if the Company does a 1 for
400 stock split in connection with the IPO, the number of shares subject to the
Initial Option--2,500--will be increase to 1,000,000. All of which are included
in the Initial Option (with only 36,000 shares of the 1,000,000 shares regarded
as ISO Options), and the Exercise Price --$3,200-- will be reduced to $8.
The number and kind of shares subject to the Initial Option and the purchase
price or exercise for such shares, shall be appropriately adjusted to reflect
any stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization or other transactions with a
similar substantive effect upon the Initial Option. Although no anti-dilutive
rights are granted to the Executive, should any such rights subsequently be
granted to any others in senior executive position, such rights will be
similarly extended to Executive.
(ii) Company represents that the Committee, as such term is defined in the
Stock Option Plan, has duly authorized and issued this Initial Option as set
forth in Exhibit 3.2 which is a duly certified copy of the resolution. Subject
to vesting as set forth in Section 4 hereof, the Initial Options may be
exercised at any time or from time to time during the 10-year period following
the date the Initial Options are granted (which is the date of this Agreement).
The Exercise Price of the Initial Option Shares is Three Thousand and Two
Hundred Dollars ($3,200.00) per share which Company (1) represents is the
equivalent to the exercise price per share of similar options granted to
officers of the Company within the preceding three months from the month in
which this Agreement is executed (if any were in fact granted), and (2)
represents the determination by the Board as the current fair market value of
the stock. The Initial Options are in addition to any other rights and options
which, at the Company's sole election and in its sole discretion, may be granted
to the Executive under any qualified, non-qualified, incentive, bonus and other
stock or stock option plans which may be adopted by the Company.
(iii) Further, at the time of exercise by Executive of any of the Initial
Options or any other options granted to Executive by Company, (a) the Company's
stock is not registered or listed or otherwise publicly traded so as to have a
readily discernable "market value" and be otherwise freely transferable to third
parties, and (b) the Company has agreed to repurchase or has otherwise
repurchased stock for any other option holder of the Company's stock, Company
agrees to buy the stock owned by Executive as a result of Executive's exercise
of any Initial Option or other option at such shares' net fair market value as
of the date of exercise of the applicable option as determined by the mutual
agreement of the Executive and the Company. If the Company and the Executive
cannot agree on the value of the shares within fifteen (15) days of such
exercise date, then the fair market value of the shares shall be determined by
appraisal as follows :
Executive shall select a minimum of three acceptable appraisal
companies, whose names and addresses shall be listed on Schedule
I attached to this Agreement. If the appraisal is necessary, the
President and Chief Executive Officer of the Company shall select
one of them on a random draw basis and the determination of the
value of the shares in question by the entity so chosen shall be
conclusive
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and binding. If that entity is unable or unwilling to make the appraisal,
then an alternative entity from among those listed on Schedule I shall be
selected in the same manner to undertake the appraisal. The cost of the
appraisal shall be borne by the Company. No discounts may be considered in
the evaluation of the fair market value such as for issues regarding
marketability or minority interest if such factors were not taken into
account or would not be taken into account for any other option holder in
repurchase of stock.
(iv) Notwithstanding any acceleration in the vesting of any stock
option, Executive has the right to elect not to have such vesting accelerate but
rather continue to vest according to the applicable vesting schedule of the
stock option grant, including the Initial Option, and the longest period
available to Executive from any stock plan, stock option agreement or this
Agreement within which to exercise the options, irrespective of Executive's
employment status during the time of such vesting.
(d) The Company shall (i) in addition to life insurance available to
Executive by Company pursuant to Section 3 of this Agreement, reimburse
Executive for the cost, in the amount up to Two Thousand, Two-hundred and Fifty
Dollars ($2,250) per year, of life insurance having a death benefit payment of,
in the aggregate with the aforesaid Company life insurance, not more than Two
Million Dollars ($2,000.000), (ii) reimburse Executive for the cost, in the
amount up to Two Thousand Dollars ($2,000) per year, of disability insurance for
the Executive if not otherwise provided to Executive by Company pursuant to
Section 3 of this Agreement, (iii) provide medical, hospitalization and dental
insurance for Executive, his spouse and eligible family members, subject to and
in accordance with the Company's policy, the proportion of the cost thereof to
be borne by the Company and the Executive in accordance with such policy, and
(iv) reimburse Execution up to $50,000 for the expenses incurred in connection
with formulating the business plan for Network Services, Inc., payable by
Company to Executive within five days of execution by Executive of this
Agreement.
(e) The Executive shall participate in all retirement and other benefit
plans of the Company generally available from time to time to employees of the
Company and for which the Executive qualifies under the terms thereof (and
nothing in this Agreement shall, or shall be deemed to, in any way affect the
Executive's right and benefits thereunder except as expressly provided herein).
(f) The Executive shall be entitled to such periods of vacation and sick
leave allowance each year as provided under the Company's vacation and sick
leave policy and as otherwise provided for senior executive officers. For
calendar year 1996. Executive is entitled to ten (10) vacation days and six (6)
sick leave allowance effective with the first day of his employment hereunder,
and Executive shall be provided not less than such respective days for each
subsequent year for the remainder of the Term.
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(g) The Executive shall be entitled to participate in any equity or other
employee benefit plan that is generally available to senior executive officers,
as distinguished from general management, of the Company. The Executive's
participation in and benefits under any such plan shall be on the terms and
subject to the conditions specified in the governing document of the particular
plan.
4. VESTING.
(a) Options. Subject to the provisions of Section 6 and the last sentence
of this Section 4(a), the Options shall vest in one-third increments on each of
the first three anniversaries of the date each such Initial Option is granted
(which shall be the date of this Agreement). If Executive is an employee of the
Company upon the occurrence of a "change in control" as defined in Section 4(c),
all unvested Initial Options shall immediately vest.
(b) The Executive shall not have any of the rights of the common
shareholder of the Company with respect to any non-exercised Initial Options.
(c) The term "change in control" means: (i) a successful tender offer for
greater than fifty (50%) of the outstanding capital stock of the Company, (ii) a
sale of all or substantially all of the assets of the Company, (iii) a merger or
consolidation of the Company with any other corporation in which the
stockholders of the Company immediately preceding such merger or consolidation
will not hold a majority of the outstanding capital stock of the surviving
corporation (whether or not the Company is the surviving corporation)
immediately after such merger or consolidation.
5. PERMANENT DISABILITY.
(a) For purposes of this Agreement, the Executive's "Permanent Disability"
shall be deemed to have occurred the day after one hundred twenty (120) days in
the aggregate during any consecutive twelve (12) month period, or one day after
ninety (90) consecutive days, during which one hundred twenty (120) or ninety
(90) days, as the case may be, the Executive, by reason of his physical or
mental disability or illness, shall have been unable to discharge fully his
duties under this Agreement.
(b) If either the Company or the Executive, after receipt of notice of the
Executive's Permanent Disability from the other, disputes that the Executive's
Permanent Disability shall have occurred, the Executive shall promptly submit
to a physical examination by the chief of medicine of any major accredited
hospital in the metropolitan Washington, D.C. area and, unless such physician
shall issue his written statement to the effect that, in his opinion, based on
his diagnosis, the Executive is capable of resuming his employment and devoting
his full time and energy to discharging fully his duties hereunder within thirty
(30) days after the date of such statement, such Permanent Disability shall be
deemed to have occurred on the day above specified.
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6. Termination
(a) The Executive's employment under this Agreement and the Term shall be
terminated immediately on the death of the Executive. Executive's employment
under this Agreement may be terminated by the Company:
(i) at any time after the Permanent Disability of the Executive;
(ii) at any time for "Cause" (as defined below) by action of the
Board; or
(iii) at any time without Cause by action of the Board.
For purposes hereof, Cause shall mean:
(A) Active participation by the Executive in fraudulent conduct, a
felony, a malicious act or series of such acts which in the reasonable judgment
of the Board, results or would likely result in material injury to the business,
operations or business reputation of the Company, or an act or series of acts of
dishonesty, recklessness or gross negligence in the Executive's performance of
any of his duties under this Agreement; or
(B) The Executive's breach of any material provison of this
Agreement, which breach has not been cured (if it is of a nature that can be
cured) to the Board's reasonable satisfaction within thirty (30) days (a
diligent pursuit by Executive of the cure of the breach even though not capable
of being resolved within said thirty (30) day period, as long as Executive
continues to diligently pursue such resolution, would, for the purposes of this
paragraph, be regarded as having met the standard and thus not be a reason to
terminate for Cause) after the Company gives written notice thereof to the
Executive; or
(C) Excessive absenteeism by the Executive; provided that
absenteeism (i) related to illness or otherwise covered by Section 5(a) hereof,
(ii) required to be permitted under applicable federal or state laws, or (iii)
permitted under Company policy, shall not be deemed to be excessive; or
(D) In the reasonable judgment of Donald Burns (i) acting in his
capacity as President and Chief Executive Officer of the Company, and (ii)
applying the same standards to Executive as Burns would utilize with respect to
such a decision regarding any other senior executive officer. Executive is found
to have not met the minimum performance objectives at any time after the date
that is one (1) year from the date of this Agreement.
(b) Upon the termination of Executive's employment for any reason, the
Executive shall be deemed to have resigned from all offices and directorships
held by the Executive in the Company.
Further, with respect to any termination of Executive's employment and
where the termination provisions allow for ninety days within which to exercise
options, such ninety day period shall be the latter of the period set forth in
such subparagraph herein or after the time wherein Executive is no longer
prohibited from selling shares of the Company stock due to his position as a
senior executive officer, affiliate, an insider, through a prohibition in an
agreement or any similar such situation.
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(c) Termination by Death. If the Executive's employment is terminated by
death, the Executive's estate shall be entitled to receive (i) life insurance
benefits pursuant to any life insurance under the Company's plan as well as life
insurance purchased by Executive, the cost of which is reimbursed by the
Company, (ii) a pro rata portion of the bonus applicable to the calendar year in
which such termination occurs, payable when and as such bonus is determined
under Section 3(b), and (iii) salary and other benefits, payable within ninety
(90) days after the date of death, accrued by him hereunder up to and including
the date of Executive's death. In addition, any options (including the Initial
Option) granted to the Executive prior to the date of Executive's death shall
vest immediately if not otherwise vested and be exercisable by Executive's
estate for twelve (12) months following the month of death.
(d) Termination for Cause. If the Executive's employment is terminated by
the Company for Cause, the Company shall not have any other or further
obligations to the Executive under this Agreement (except (i) as may be provided
in accordance with the terms of retirement and other benefit plans pursuant to
Section 3, (ii) as to that portion of any unpaid salary and other benefits
accrued and earned under this Agreement through the date of such termination,
and (iii) as to benefits, if any, provided by any insurance policies in
accordance with their terms). Any rights to Initial Options under Section 3(c)
that, pursuant to Section 4, shall not have vested within thirty (30) days
following such termination shall terminate (for termination for Cause due to
Section 6 (a)(D) the first increment of the Initial Option, if not then vested,
shall vest automatically upon the date of termination; and severance equal to
what would have been his salary under Section 3(a), for twelve (12) months,
payable at such times as would have been paid if employment had continued).
Executive shall have the later of ninety days following the date of termination
or the date of vesting within which to exercise any options then having been
previously granted to Executive, including the Initial Option.
(e) Termination without Cause. If the Executive's employment is terminated
by the Company without Cause, the Executive shall be entitled to receive (i)
severance compensation equal to what would have been his salary under Section
3(a), payable at such times as his salary would have been paid if his employment
had not been terminated, for the longer of twelve (12) months or the remainder
of what would have been the Term as well as a pro rata portion of the bonus
applicable to the calendar year in which such termination occurs, payable when
and as such bonus is determined under Section 3(b), (ii) salary and other
benefits, payable within ninety (90) days after the date of such termination,
accrued by him hereunder up to and including the date of such termination, and
(iii) the benefits set forth in Section 3.(d) and (c) for the longer of twelve
(12) months or the remainder of what would have been the Term (and subsequent to
which Executive will be entitled to any COBRA benefits). In addition, if the
Executive is terminated without Cause, the Initial Options and any other options
granted to the Executive prior to the date of such termination shall vest
immediately and Executive shall have ninety days following the date of
termination within which to exercise any options.
(f) Termination for Permanent Disability. If the Executive's employment
is terminated by the Company for Permanent Disability, the Executive shall be
entitled to receive (i) severance compensation equal to what would have been
his salary under Section 3(a) for twelve (12) months after the date of such
termination, payable at such times as his salary would have been paid if his
employment had not been terminated, less any disability insurance benefits
<PAGE>
pursuant to any disability insurance provided by the Company or purchased by
Executive, the cost of which is reimbursed by the Company, which are payable in
respect of the period after such termination, as well as a pro rata portion of
the bonus applicable to the calender year in which such termination occurs,
payable when and as such bonus is determined under Section 3(b), and (ii) salary
and other benefits, payable within ninety (90) days after termination for
Permanent Disability, accrued by him hereunder up to and including the date of
termination for Permanent Disability. Notwithstanding such termination, the
Initial Options granted to the Executive prior to the date of such termination
shall vest in accordance with the schedule contained in Section 4, irrespective
of Executive's employment relationship with the Company. Executive shall have
the later of ninety days following the date of termination or the date of
vesting within which to exercise any such options as well as any other options
which were vested at the time of such termination.
(g) In the event Executive terminates the Agreement without cause prior to
the term, Executive shall be entitled to exercise those options, including the
Initial Options, which have vested prior to the date of termination within
ninety days after the date of termination and Executive shall be further
entitled to any other benefits as would be granted to any other employee at the
time of a voluntary termination.
(h) In the event Executive terminates the Agreement due to breach of the
Company of the Agreement. Executive shall be entitled to receive exactly those
benefits which he would otherwise have entitled to receive had he been
terminated without Cause by the Company.
7. Additional Options. The Company shall provide for additional options (the
"Additional Options") to purchase up to an additional 1,000,000 shares (the
"Additional Option Shares") to be granted by the Executive to employees of the
Commercial Sales Division (other than Executive) in accordance with the matrix
attached hereto as Exhibit B. The purchase price of the Additional Option Shares
shall be the price of the Company's Common Stock in the IPO (a registration
statement on Form S-1 filed by the Company with and declared effective by the
Securities and Exchange Commission) or the market value at the time of issuance,
if issued after the IPO. Subject to the provisions of the Stock Option Plan, the
Additional Options shall vest in one-third increments on each of the first three
anniversaries of the date each such Additional Option is granted and may be
exercised at any time or from time to time during the 10-year period following
the date the Additional Options are granted.
8. Covenants and Confidential Information.
(a) The Executive acknowledges the Company's reliance on and expectation
of the Executive's continued commitment to performance of his duties and
responsibilities during the Term. In light of such reliance and expectation on
the part of the Company, during the periods hereafter specified in Section 8(b),
the Executive shall not, directly or indirectly, do or suffer either of the
following:
(i) During the Term own, manage, control or participate in
the ownership, management or control of, or be employed or
engaged by or otherwise affiliated or associated as a
consultant, independent contractor or otherwise with, any
other corporation,
<PAGE>
partnership, proprietorship, firm, association or other
business entity directly or indirectly engaged in the
business of, or otherwise directly or indirectly engaged in
the business of, marketing or providing telecommunication
services within the United States; provided, however, (1)
that the beneficial and/or record ownership of not more than
five percent (5%) of any class of publicly traded securities
of any entity shall not be deemed a violation of this
covenant, and (2) equity ownership of privately held
companies that do not compete with the Company shall not be
deemed a violation of this covenant; or
(ii) Disclose, divulge, discuss, copy or otherwise use or
suffer to be used in any manner, other than in accordance
with the Executive's duties hereunder, any confidential or
proprietary information relating to the Company's business,
prospects, finances, operations, properties or otherwise to
its particular business or other trade secrets of the
Company, it being acknowledged by the Executive that all
such information regarding the business of the Company
compiled or obtained by, or furnished to, the Executive
while the Executive shall have been employed by or
associated with the Company is confidential and/or
proprietary information and the Company's exclusive
property; provided, however, that the foregoing restrictions
shall not apply to the extent that such information:
(A) is clearly obtainable in the public domain;
(B) becomes obtainable in the public domain, except by
reason of the breach by the Executive of the terms hereof;
or
(C) is required to be disclosed by rule of law or by
order of a court or governmental body or agency.
(b) The applicable periods shall be: as to clause (i) of Section 8(a) so
long as the Executive is an employee of the Company; as to clause (ii) of
Section 8(a), at any time after the Executive is no longer an employee of the
Company; and again, as to clause (i) of Section 8(a), for a period of one year
after termination of employment by Company for Cause or for Permanent
Disability.
(c) The Executive agrees and understands that the remedy at law for any
breach by him of this Section 8 will be inadequate and that the damages flowing
from such breach are not readily susceptible to being measured in monetary
terms. Accordingly, it is acknowledged that the Company shall be entitled to
immediate injunctive relief and may obtain a temporary order restraining any
threatened or further breach. Nothing in this Section 8 shall be deemed to limit
the Company's remedies at law or in equity for any breach by the Executive of
any of the provisions of this Section 8 which may be pursued or availed of by
the Company.
(d) THE EXECUTIVE HAS CAREFULLY CONSIDERED THE NATURE AND EXTENT OF THE
RESTRICTIONS UPON HIM AND THE RIGHTS AND REMEDIES
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CONFERRED UPON THE COMPANY UNDER THIS SECTION 8, INCLUDING WITHOUT LIMITATION,
THE REMEDIES SET FORTH IN SECTION 8(C), AND HEREBY ACKNOWLEDGES AND AGREES
THAT THE SAME ARE REASONABLE IN TIME AND TERRITORY, ARE DESIGNED TO ELIMINATE
COMPETITION WHICH OTHERWISE WOULD BE UNFAIR TO THE COMPANY, DO NOT STIFLE THE
INHERENT SKILL AND EXPERIENCE OF THE EXECUTIVE, WOULD NOT OPERATE AS A BAR TO
THE EXECUTIVE'S SOLE MEANS OF SUPPORT, ARE FULLY REQUIRED TO PROTECT THE
LEGITIMATE INTEREST OF THE COMPANY AND DO NOT CONFER A BENEFIT UPON THE COMPANY
DISPROPORTIONATE TO THE DETRIMENT TO THE EXECUTIVE.
(e) The Executive acknowledges that the Executive's obligations under this
Section 8 shall survive regardless of whether the Executive's employment by the
Company is terminated, voluntarily or involuntarily by the Company or the
Executive, with Cause or without Cause.
9. Miscellaneous.
(a) The Executive represents and warrants that he is not a party to any
agreement contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
(b) The provisions of this Agreement are severable and if any one or more
provisions may be determined to be illegal or otherwise unenforceable, in whole
or in part, the remaining provisions and any partially unenforceable provision
to the extent enforceable in any jurisdiction nevertheless shall be binding and
enforceable.
(c) The rights and obligations of the Company under this Agreement shall
inure to the benefit of, and shall be binding on, the Company and its successors
and assigns, and the rights and obligations (other than obligations to perform
services) of the Executive under this Agreement shall inure to the benefit of,
and shall be binding upon, the Executive and his heirs, personal representatives
and assigns.
(d) Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in accordance with the
Rules of the American Arbitration Association then pertaining in the
metropolitan Washington, D.C. area, and judgment upon the award rendered
by the arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. The arbitrator or arbitrators shall be deemed to possess the powers to
issue mandatory orders and restraining orders in connection with such
arbitration; provided, however, that nothing in this Section 9(d) shall be
construed so as to deny the parties hereto the right and power to seek and
obtain injunctive relief in a court of equity for any breach or threatened
breach by the other party of any of their respective covenants contained in this
Agreement. Any decision or award as a result of any such arbitration proceeding
shall include the assessment of cost, expenses and reasonable attorneys' fees in
favor of the prevailing party.
(e) All notices and other communications required or permitted under this
Agreement shall be in writing, and shall be deemed properly given if delivered
personally, mailed by
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registered or certified mail in the United States mail, postage prepaid, return
receipt requested, sent by facsimile, or sent by Express Mail, Federal Express
or other nationally recognized express delivery service, as follows:
If to the Company or the Board:
Telco Communications Group, Incorporated
4219 Lafayette Centre Drive
Chantilly, VA 22021-1209
Attention: President and Chief Executive Officer
Fax Number: (703) 803-3430
With a copy to: Swidler & Berlin, Chartered
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
Attn: John J. Klusaritz, esq.
Fax Number: (202) 424-7643
If to the Executive:
Stephen G. Canton
5017 Upton Street
Washington, D.C. 20016
With a copy to: Raymond & Prokop, P.C.
2000 Town Center, Suite 2400
Southfield, Michigan 48075
Attention: R. Peter Prokop, esq.
Fax Number: (810) 357-2720
Notice given by hand, certified to registered mail, or by Express Mail, Federal
Express or other such express delivery service, shall be effective upon actual
receipt. Notice given by facsimile transmission shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices by facsimile
transmission shall be confirmed promptly after transmission in writing by
certified mail or personal delivery.
Any party may change any address to which notice is to be given to it by giving
notice as provided above of such change of address.
(f) The failure of either party to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any provision or
provisions as to any future violations thereof, nor prevent that party
thereafter from enforcing each and every other provision of this Agreement. The
rights granted the parties herein are cumulative and the waiver of any single
remedy shall not constitute a waiver of such party's right to assert all other
legal remedies available to it under the circumstances.
(g) This Agreement supersedes all prior agreement and understandings
between the
<PAGE>
parties and may not be modified or terminated orally. No modification or
attempted waiver shall be valid unless in writing and signed by the party
against whom the same is sought to be enforced.
(h) This Agreement shall be governed by, and construed in accordance with
the provisions of, the law of the State of Virginia, without reference to
provisions that refer a matter to the law of any other jurisdiction. Each party
hereto hereby irrevocably submits itself to the non-exclusive personal
jurisdiction of the federal and state courts sitting in Virginia; accordingly,
subject to the provisions for arbitration provided in Section 9(d), any
justiciable matters involving the Company and the Executive with respect to this
Agreement may be adjudicated only in a federal or state court sitting in
Virginia.
(i) All payments required to be made by the Company hereunder to the
Executive shall be subject to the withholding or such amounts relating to taxes
and other government assessments as the Company may reasonably determine it
should withhold pursant in any applicable law, rule or regulation.
(j) Captions and section headings used herein are for convenience and are
not a part of this Agreement and shall not be used in construing it.
(k) Where necessary or appropriate to the meaning hereof, the singular
and plural shall he deemed to include each other, and the masculine, feminine
and neuter shall be deemed to include each other.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first set forth above.
TELCO COMMUNICATIONS GROUP,
INCORPORATED, a Virginia corporation
By: /s/ Henry G. Luken
----------------------------
NAME: Henry Luken
TITLE: Chairman
Witness \s\ Stephen G. Canton
----------------------------------
/s/ Bryan Rachlin Stephen G. Canton, "Executive"
<PAGE>
MINUTES OF THE TELCO COMMUNICATIONS GROUP, INCORPORATED
BOARD OF DIRECTORS' MEETING
APRIL 1, 1996
TIME AND PLACE OF MEETING:
The Board of Directors' Meeting of Telco Communications Group, Inc., was
held at 2:00pm EST, April, 1996 at 4219 Lafayette Center Drive, Chantilly,
Virginia.
NEW BUSINESS:
1. The Board of Directors approved the proposed Employment
Contracts and Stock Option Agreements for both Nicholas
Merrick and Stephen G. Canton and directed the officers, or
any one of them, to enter into said Agreements on behalf of
the Company on substantially the same terms.
2. The Board of Directors agreed to amend and modify its
existing and previously approved Stock Option Plan.
3. The Board of Directors discussed directing the Stock Option
Committee to approve and issue 2,500 option shares to the
Sales Division for now sales personnel.
4. The Board of Directors agreed to hire Nicholas Merrick as
Vice President and Chief Financial Officer and Stephen G.
Canton as President of the Commercial Sales Division. The
Board of Directors also approved the granting of Stock
Options for both officers as specified in their Agreements:
Stephen G. Canton 2,500 shares
Nicholas Merrick 1,000 shares
ADJOURNMENT:
There being no further business, the meeting adjourned at 4:00pm EST.
Witness: Telco Communications Corp., Inc.
/s/ Bryan Rachlin By: /s/ Henry G. Luken
- ----------------------- -----------------------
Henry Luken Chairman
<PAGE>
Approved by Committee, Stock Option Plan
Member Signatures this 1st day of April, 1996:
/s/ Henry G. Luken
- -------------------------------------------------------
<PAGE>
TELCO COMMUNICATIONS GROUP, INCORPORATED
----------------------------------------
STOCK PLAN
----------
ARTICLE I
---------
NAME AND PURPOSE
1.1 NAME. The name of the plan shall be the Telco Communications Group,
----
Incorporated Stock Plan ("Plan").
1.2 PURPOSE. The purpose of the Plan is to enable Employees to share in
-------
the growth and prosperity of the Company by encouraging stock
ownership by Employees and to assist the Company to obtain and retain
skilled personnel. Incentive Stock Options, Nonqualified Stock Options
and other types of stock awards and cash may be granted under this
plan, with respect to a maximum of 10,000 thousand shares of Company
------
Stock.
ARTICLE II
----------
DEFINITION
2.1 "Board" means the Board of Directors of the Company.
2.2 "Code" means the Internal Revenue Code of 1986, as amended.
2.3 "Committee" shall mean the Compensation Committee of the Board.
2.4 "Company" means Telco Communications Group, Incorporated, a Virginia
corporation.
2.5 "Company Stock" means shares of common stock issued by the Company.
2.6 "Director" means any person who is a member of the Board.
2.7 "Employee" means any person employed on a full-time basis by the
Employer or a Subsidiary.
2.8 "Employer" means the Company.
2.9 "Incentive Stock Option" means any option granted to a Participant
under the Plan, which the Committee intends
<PAGE>
at the time it is granted to be an incentive stock option within the
meaning of Section 422 of the Code.
2.10 "Nonqualified Stock Option" means any stock option granted under the
Plan which is not an Incentive Stock Option.
2.11 "Optionee" is any Employee who is granted options under the Plan.
2.12 "Participant" shall mean any Employee who meets the requirements for
participation in the Plan as described in Article III.
2.13 "Subsidiary" means a corporation which is a "subsidiary corporation"
of the Company as defined in Section 425 of the Code.
ARTICLE III
-----------
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. Every Employee during the term of this Plan shall be eligible
-----------
to become a Participant in the Plan. The Committee, in its discretion, may
require a waiting period and/or waive any such waiting period requirement on a
case-by-case basis.
3.2 PARTICIPATION. The Employees who shall participate in the Plan and thereby
-------------
be eligible to receive awards shall be such Employees as the Committee shall
select from time to time. The Committee shall determine the number of and the
combination of stock options, Restricted Shares and other stock awards granted
to Employees.
ARTICLE IV
----------
TYPE OF BENEFITS
Benefits under the Plan ("Benefits") may be granted in any one or any
combination of: (a) Incentive Stock Options; (b) Nonqualified Stock Options, (c)
restricted stock awards; (d) bargain purchases of Company Stock; and (e) any
other form of stock benefit.
Without limiting the Committee's authority, the Committee may: (a) make the
grant of Benefits conditional upon an electior by a Participant to defer payment
of a portion of his salary; (b) give a Participant a choice between two Benefits
or combination of Benefits; (c) award Benefits in the alternative so that
acceptance or exercise of one Benefit cancels the right of a Participant to
another; (d) award Benefits in any combination or
- 2 -
<PAGE>
combinations and the Plan that the Committee in its sole discretion may
determine; (e) provide any vesting schedule (including immediate vesting); and
(f) restrict the ability of a Participant to transfer the Award and/or require
the Award to be transferred back to the Company at the time of employment
termination, as the Committee deems appropriate. Further, any Participant
ultimately acquiring Company stock shall be required to executive any
shareholder agreements required by the Committee.
ARTICLE V
---------
SHARES SUBJECT TO PLAN
The total number of shares for which options and other Company Stock awards
may be granted under this Plan shall not exceed in the aggregate 10,000 shares
------
of Company Stock. This number shall be appropriately adjusted if the number of
issued shares of Company Stock shall be increased or reduced by change in par
value, combination, split-up, reclassification, distribution of a dividend
payable in stock, or the like. The shares issued under the Plan may be
authorized and unissued shares or treasury shares.
In the event that any outstanding option or other benefit issued pursuant
to the Plan shall expire or terminate, the shares allocable to the unexercised
or forfeited portion of such Benefit may again be subject to an award under the
Plan.
ARTICLE VI
----------
OPTIONS
The Committee may from time to time at its discretion, subject to the
provisions of the Plan, determine when options shall be granted and at the time
of each grant determine those eligible employees to whom options shall be
granted, the number of shares subject to such options, the date or dates on
which the options become exercisable, either wholly or in part, and the
expiration date of the options. Each such option shall be evidenced by a written
agreement containing terms and conditions established by the Committee
consistent with the provisions of the Plan. Option agreements need not be
identical.
The terms of Incentive Stock Options granted shall include the following:
(a) The option price shall be fixed by the Committee in good faith, but in
no event be less than 100% of the fair market value of the shares
subject to the option on the date the option is granted.
- 3 -
<PAGE>
(b) The Committee shall fix the term or duration of all Incentive Stock
Options issued under this Plan, provided that such term shall not
--------
exceed 10 years after the date on which the option was granted. The
Committee shall also set the date or dates on or after which each
option may be exercised.
(c) The aggregate fair market value, determined as of the time the
Incentive Stock Option is granted, of the stock which may become
exercisable for the first time by any Employee during any calendar
year shall not exceed $100,000.
(d) Each Incentive Stock Option agreement (and amendments) shall contain
such terms and provisions, consistent with the requirements of this
Plan, as the Committee in its discretion shall determine, including
without limitation such terms and provisions as shall be requisite to
cause the options to qualify as Incentive Stock Options.
Notwithstanding any other provisions of the Plan, no Incentive Stock Option
shall be granted to an Employee who, at the time the option is granted, owns
stock representing more than 10% of the total combined voting power of all
classes of stock of the Company. This stock ownership limitation will not apply
if the option price is at least 110% of the fair market value (at the time the
option is granted) of the stock subject to the option, and the option by its
terms is not exercisable more than five years from the date it is granted.
Options shall not be transferable otherwise than by will or the laws or
descent and distribution, and during the Participant's lifetime, such a Benefit
shall be exercisable only by the Participant.
The Committee may, in its sole discretion, at any time during the term of
the Plan, grant new options to an Optionee under the Plan who is also a holder
of one or more unexercised outstanding options previously granted under the
Plan or any other stock option plan of the Company on the condition that such
Optionee shall surrender for cancellation one or more outstanding options which
represent the right to purchase (after giving effect to any previous partial
exercise thereof) a number of shares, in relation to the number of shares to be
covered by the new conditional grant hereunder, determined by the Committee. If
the Committee shall have so determined to grant such new options on such a
conditional basis ("New Conditional Options"), no such New Conditional Options
shall become exercisable in the absence of such Optionee's consent to the
condition and surrender and cancellation as appropriate. New Conditional Options
shall be treated in all respects under the Plan as newly granted options.
- 4 -
<PAGE>
Options may be granted under the Plan from time to time in substitution for
similar rights held by employees of other corporations who are about to become
employees of the Company or a Subsidiary as a result of a merger or
consolidation of the employing corporation with the Company or a Subsidiary, or
the acquisition by the Company or a Subsidiary of stock of the employing
corporation as the result of which it becomes a Subsidiary.
ARTICLE VII
-----------
RESTRICTED SHARES
The Committee from time to time may award restricted shares ("Restricted
Shares") to any Participant in the Plan. Each Participant who is awarded
Restricted Shares shall enter into an agreement with the Company in a form
specified by the Committee agreeing to the terms and conditions of the award
and such other matters consistent with the Plan as the Committee in its sole
discretion shall determine.
Restricted Shares awarded to Participate may not be sold, transferred,
pledged or otherwise encumbered during the restricted period commencing on the
date of the award and ending at such later date as the Committee may designate
at the time of the award. The Participant shall have the entire beneficial
ownership and all rights and privileges of a shareholder with respect to
Restricted Shares awarded to him, including the right to receive dividends and
the right to vote such Restricted Shares.
The Committee may provide any other terms or conditions with regard to
Restricted Shares that it deems appropriate. Restricted Shares and agreements
related thereto need not be identical.
ARTICLE VIII
------------
OTHER AWARDS
The Committee may grant any other cash, stock or stock-related awards to a
Participant under this Plan that the Committee deems appropriate, including, but
not limited to, the bargain purchase of Company Stock. Any such benefits and any
related agreements shall contain such terms and conditions as the Committee
deems appropriate. Such awards and agreements need not be identical. With
respect to any Benefit under which shares of Company Stock are or may in the
future be issued (other than shares issued from the Company's treasury) for
consideration other than prior services, the amount of such consideration shall
be equal to the amount (such as the par value of such shares)
- 5 -
<PAGE>
required to be received by the Company in order to comply with applicable state
law.
ARTICLE IX
----------
ADMINISTRATION
The Plan shall be administered by the Committee. A majority vote of the
Committee at which a quorum is present, or acts reduced to or approved in
writing by a majority of the members of the Committee, shall be the valid acts
of the Committee for the purposes of the Plan.
The Committee shall have plenary authority in its discretion, but subject
to the express provisions of the Plan, to determine the terms of all Benefits
granted under the Plan including, without limitation, the purchase price, if
any, the Employees to whom, and the time or times at which, Benefits shall be
granted, when an option can be exercised, or Restricted Shares, and other
Benefits become forfeitable, and whether in whole or in installments, and the
number of shares covered by a Benefit, and to interpret the Plan and to make all
other determinations deemed advisable for the administration of the Plan. The
Committee may designate Employees of the Company to assist the Committee in the
administration of the Plan. The Committee may designate Employees of the Company
to assist the Committee in the administration of the Plan and may grant
authority to such persons to execute option agreements or other documents on
behalf of the Committee.
Payments in full for the number of shares purchased under any Benefit,
including an option, shall be made to the Company at the time of such exercise.
An Optionee to whom an option is granted shall not be deemed the holder of any
shares subject to the option until the shares are fully paid and issued to him
upon exercise of such option. The Committee, in its discretion, may provide that
any Benefit by its terms may permit a Participant elect, subject to Committee
approval, any of the following alternative settlement methods: (a) cash equal to
the excess of the value of one share over the option or purchase price times the
number of shares as to which the award is exercised; (b) the number of full
shares having an aggregate value not greater than the cash amount calculated
under alternative (a); or (c) any combination of cash and stock having an
aggregate value not greater than the cash amount calculated under alternative
(a). For purposes of determining an alternative settlement, the value per share
shall be determined under the same method as used to determine the option price
in the case of stock options.
The exercise price for shares purchased shall be paid in full at the time
of exercise and no shares shall be issued until full payment therefor is made.
Such payment may be made either
- 6 -
<PAGE>
(1) in cash, or (2) by delivering shares of Qualifying Stock or in combination
of cash and Qualifying Stock. Qualifying Stock shall be valued at its Fair
Market Value determined as of the date of exercise of the option.
The Committee may make such rules and regulations and establish such
procedures as it deems appropriate for the administration of the Plan. In the
event of a disagreement as to the interpretation of the Plan or any amendment
hereto or any rule, regulation or procedure thereunder or as to any right or
obligation arising from or related to the Plan, the decision of the Committee
shall be final and binding. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Benefit granted under it.
ARTICLE X
---------
ADJUSTMENT UPON CHANGES OF STOCK
If any change is made to the shares of Company Stock by reason of any
merger, consolidation, reorganization, recapitalization, stock dividend,
split-up, combination of shares, exchange of shares, change in corporate
structure, or otherwise, appropriate adjustments shall be made by the Committee
to the kind and maximum number of shares subject to the Plan and the kind and
number of shares and price per share of stock subject to each outstanding
Benefit. No fractional shares of stock shall be issued under the Plan on
account of any such adjustment, and rights to shares always shall be limited
after such an adjustment to the lower full share.
ARTICLE XI
----------
MISCELLANEOUS
11.1 CONTINUATION OF EMPLOYMENT. Neither this Plan nor any Benefit granted
--------------------------
hereunder shall confer upon any Employee any right to continue in the
employment of the Company or limit in any respect the right of the
Company to terminate an Employee's at any time.
11.2 WITHHOLDING. With respect to any payments made to Participants under
-----------
the Plan, the Company shall have the right to withhold any taxes
required by law to be withheld because of such payments. With respect
to such withholding.
(a) Each Participant shall take whatever action that the Committee
deems appropriate to comply with the law regarding withholding of
Federal, state and locak taxes.
- 7 -
<PAGE>
(b) When a Participant is obligated to pay to the Company an amount
required to be withheld under applicable income tax laws in
connection with a Benefit, the Committee may, in its discretion
and subject to such rules as it may adopt, permit the Participant
to satisfy this obligation, in whole or in part, either (i) by
having the Company withhold from the shares to be issued upon the
exercise of an option or upon the receipt of a Benefit, shares
having a Fair Market Value that would satisfy the withholding
amount due or (ii) by delivering to the Company already-owned
shares to satisfy the withholding amount.
11.4 EFFECTIVE DATE. This Plan is effective as of July 1, 1994. Benefits
--------------
hereunder may be granted at any time subject to the limitations
contained within the Plan.
11.5 LIABILITY. No member of the Board of Directors, the Committee or
----------
officers or employees of the Company or its Subsidiaries shall be
personally liable for any action, omission or determination made in
good faith in connection with the Plan.
ARTICLE XII
-----------
AMENDMENT AND TERMINATION
12.1 AMENDMENT. The Board may amend the Plan from time to time as it
---------
deems desirable and shall make any amendments which may be required so
that options intended to be Incentive Stock Options shall at all times
continue to be Incentive Stock Options for the purposes of the Code,
provided, however, the Plan may not be amended to change the number of
-------- -------
shares subject to the Plan or decrease the price at which Incentive
Stock Options may be granted.
12.2 TERMINATION OF PLAN. The Board may in its discretion terminate the
-------------------
Plan at any time, but no such termination shall deprive Participants
of their rights under outstanding Benefits. Notwithstanding the
preceding sentence, no Incentive Stock Options may be granted pursuant
to the Plan later than 10 years after the date
- 8 -
<PAGE>
the Plan is adopted or the date the Plan is approved by the
shareholders of the Company, whichever is earlier.
TELCO COMMUNICATIONS GROUP, INCORPORATED
By: /s/ Donald A. Burns
----------------------------------
Donald A. Burns
Title: PRESIDENT
-------------
- 9 -
<PAGE>
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the 10
day of July, 1996, between Telco Communications Group, Incorporated, a Virginia
corporation (the "Company"), and Bryan K. Rachlin (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. EMPLOYMENT.
----------
(a) The Company hereby employs the Executive as General Counsel and
Chief Operating Officer and the Executive hereby accepts such employment, on the
terms and subject to the conditions hereinafter set forth.
(b) Executive shall report directly to the Company's President and
Chief Executive Officer unless the Company's Board of Directors (the "Board")
instructs him otherwise, and shall perform such other or further duties
consistent with his positions as General Counsel and Chief Operating Officer
pursuant to the direction of the President and Chief Executive Officer or the
Board.
(c) Attention and Effort. The Executive shall be required to devote
--------------------
his full business time, attention and effort to the Company's business and
affairs and perform diligently such duties as are customarily performed by
executives in similar positions with companies similar in character or size to
the Company, all subject to the direction of the President and Chief Executive
Officer and the Board, together with such other duties as may be reasonably
requested from time to time by the Board, which duties shall be consistent with
his positions as set forth above. The Executive agrees to use all of his skills
and business judgment and render services to the best of his ability to serve
the interests of the Company. Subject to the terms of Section 8, this shall not
preclude Executive from serving on community and civic boards, participating in
industry associations, or otherwise engaging in other activities which, in the
Company's judgment, do not unreasonably interfere with his duties to the
Company.
(d) Support Services. The Executive shall be entitled to all of the
----------------
administrative, operational and facility support customary for a similarly
situated executive. The support shall include, without limitation, a suitably
appointed private office, a secretary or
<PAGE>
administrative assistant, and payment of or reimbursement for reasonable
cellular telephone expenses, business entertainment expenses, expenses of the
Executive maintaining his professional license and standing and any and all
other business expenses reasonably incurred on behalf of or in the course of
performing duties for the Company, all in accordance with the expense
reimbursement policies established from time to time by the Company. The
Executive agrees to provide such documentation of these expenses as may be
reasonably required.
2. TERM AND POSITIONS. Subject to the provisions for termination
------------------
hereinafter provided, the Term (the "Term") shall begin on the date hereof,
shall continue through the third anniversary of the date hereof, and shall
automatically renew each year until the fifth anniversary hereof unless notice
of termination is given by either party hereto at least three hundred sixty
(360) days prior to the end of each annual term.
3. COMPENSATION.
------------
Throughout the Term the Company shall pay or provide, as the case may
be, to the Executive the compensation and other benefits and rights set forth in
this Section 3.
(a) The Company shall pay to the Executive a "Base Salary," payable
in accordance with the Company's usual pay practices (and in any event no less
frequently than monthly), of a minimum of $375,000 per annum, which shall be
reviewed annually, provided that there shall be no reduction in the amount of
the total cash compensation paid to the Executive in the previous year. The
Company, at the discretion of the Board, shall pay to the Executive bonus
compensation for each year, or part thereof that he is employed by the Company,
in a manner generally available to senior executive officers of the Company.
(b) The Company shall provide the Executive its standard medical
hospitalization and dental insurance for Executive, his spouse and eligible
family members, subject to and in accordance with the Company's policy, the
proportion of the cost thereof to be borne by the Company and the Executive in
accordance with such policy. The Company shall reimburse Executive for the cost,
in the amount of Two Thousand Two Hundred Fifty Dollars per year, of life
insurance and Two Thousand Dollars a year, of disability insurance.
(e) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to employees
of the Company and for which the Executive qualifies under the terms thereof
(and nothing in this Agreement shall, or shall be deemed to, in any way affect
the Executive's right and benefits thereunder except as expressly provided
herein).
- 2 -
<PAGE>
(f) The Executive shall be entitled to such periods of vacation and
sick leave allowance each year as provided under the Company's vacation and sick
leave policy for executive officers.
(g) The Executive shall be entitled to participate in any equity or
other employee benefit plan and other fringe benefits that are generally
available to executive officers, as distinguished from general management, of
the Company. The Executive's participation in and benefits under any such plan
shall be on the terms and subject to the conditions specified in the governing
document of the particular plan.
4. PERMANENT DISABILITY.
--------------------
(a) For purposes of this Agreement, the Executive's "Permanent
Disability" shall be deemed to have occurred one day after one hundred twenty
(120) days in the aggregate during any consecutive twelve (12) month period, or
one day after ninety (90) consecutive days, during which one hundred twenty
(120) or ninety (90) days, as the case may be, the Executive, by reason of his
physical or mental disability or illness, shall have been unable to perform the
essential functions under this Agreement with or without reasonable
accommodation.
(b) If either the Company or the Executive, after receipt of notice
of the Executive's Permanent Disability from the other, disputes that the
Executive's Permanent Disability shall have occurred, the Executive shall
promptly submit to a physical examination by the chief of medicine of any major
accredited hospital in the metropolitan Washington, D.C. area and, unless such
physician shall issue his written statement to the effect that, in his opinion,
based on his diagnosis, the Executive is capable of resuming his employment and
devoting his full time and energy to perform his essential functions thereunder,
with or without reasonable accommodation, such Permanent Disability shall be
deemed to have occurred on the day above specified.
5. TERMINATION.
-----------
(a) The Executive's employment under this Agreement and the Term
shall be terminated immediately on the death of the Executive and may be
terminated by the Company:
(i) at any time after the Permanent Disability of the
Executive;
(ii) at any time for "Cause" (as defined below) by action of
the Board; or
(iii) at any time without Cause by action of the Board.
For purposes hereof, Cause shall mean:
- 3 -
<PAGE>
Active participation by the Executive in fraudulent conduct, a
felony, or an act or series of acts of dishonesty, recklessness or
gross negligence or the Executive's willful failure to perform any of
his duties under this Agreement. The Executive's breach of any
provision of this Agreement, which breach has not been cured (if it is
of a nature that can be cured) to the Board's reasonable satisfaction
within ten (10) days after the Company gives written notice thereof to
the Executive;
The voluntary resignation of the Executive without the prior
consent of the Board.
(B) Upon any termination of this Agreement, the Executive shall be
deemed to have resigned from all offices and directorships held by the Executive
in the Company.
(C) TERMINATION BY DEATH. If the Executive's employment is terminated
--------------------
by death, the Executive's estate shall be entitled to receive (i) life insurance
benefits pursuant to any life insurance purchased by the Company, (ii) a pro
rata portion of the bonus applicable to the calendar year in which such
termination occurs, payable when and as such bonus is determined under Section
3(a), and (iii) other benefits, payable within ninety (90) days after the date
of death, accrued by him hereunder up to and including the date of Executive's
death. In addition, if Executive's employment is terminated by death, any stock
options granted to the Executive prior to the date of such termination shall
immediately vest and be exercisable by Executive's estate for a period of at
least 90 days.
(D) TERMINATION FOR CAUSE. If the Executive's employment is
---------------------
terminated by the Company for Cause, the Company shall not have any other or
further obligations to the Executive under this Agreement (except (i) as may be
provided in accordance with the terms of retirement and other benefit plans
pursuant to Section 3(c) and (e), (ii) as to that portion of any unpaid Base
Salary and other benefits accrued and earned under this Agreement through the
date of such termination, and (iii) as to benefits, if any, provided by any
insurance policies in accordance with their terms), and any rights to stock
options that shall not have vested within ninety (90) days following such
termination shall terminate. The foregoing sentence shall be in addition to, and
not in lieu of, any and all other rights and remedies which may be available to
the Company under the circumstances, whether at law or in equity.
(E) TERMINATION WITHOUT CAUSE. If the Executive's employment is
-------------------------
terminated by the Company without Cause, the Executive shall be entitled to
receive (i) severance compensation equal to the greater of (x) the total balance
of compensation due under this agreement or (y) what would have been his Base
Salary under Section 3(a), payable at such times as his Base Salary would have
been paid if his employment had not been terminated, for a period of one year
from the date of his termination, and (ii) other benefits, payable within ninety
(90) days after the
- 4 -
<PAGE>
date of such termination, accrued by him hereunder up to and including the date
of such termination. In addition, if the Executive is terminated without Cause,
any stock options granted to the Executive prior to the date of such termination
shall vest immediately.
(F) TERMINATION FOR PERMANENT DISABILITY. If the Executive's
------------------------------------
employment is terminated by the Company for Permanent Disability, the Executive
shall be entitled to receive (i) severance compensation equal to what would have
been his Base Salary under Section 3(a) for one year after the date of such
termination, payable at such times as his Base Salary would have been paid if
his employment had not been terminated, less any disability insurance benefits
pursuant to any disability insurance provided by the Company or purchased by
Executive, the cost of which is reimbursed by the Company, which are payable in
respect of the period after such termination, and (ii) other benefits, payable
within ninety (90) days after termination for Permanent Disability, accrued by
him hereunder up to and including the date of termination for Permanent
Disability. Notwithstanding such termination, any stock options granted to the
Executive prior to the date of such termination shall vest immediately.
(G) TERMINATION WITH GOOD REASON. Executive may terminate this
----------------------------
Agreement, upon 30 days prior written notice to the Company (the "Notice
Period"), in the event (i) there is a material diminution in Executive's duties
and responsibilities, or such duties and responsibilities are otherwise
diminished such that they no longer reflect the duties and responsibilities
customary for a General Counsel and Chief Operating Officer, (ii) the Company
hires or appoints a person, other than Executive, to the position (or functional
equivalent, regardless of actual title) of General Counsel and Chief Operating
Officer or (iii) Executive is required to relocate to an office that is more
than 50 miles from the Executive's current office located at 4219 Lafayette
Center Drive, Chantilly, Virginia (each of (i), (ii) and (iii) being referred
to as a "Responsibilities Breach") and the Company fails to cure said
Responsibilities Breach, to the reasonable satisfaction of Executive, within the
Notice Period. If the Executive terminates his employment for Responsibilities
Breach, the Executive shall be entitled to receive (i) severance compensation
equal to the greater of the total compensation due under this Agreement or what
would have been his Base Salary under Section 3(a), payable at such times as his
Base Salary would have been paid if his employment had not been terminated, for
a period of one year after such termination and (ii) other benefits, payable
within 90 days after the date of such termination, accrued by him hereunder up
to and including the date of such termination. In addition, any stock options
granted to the Executive prior to the date of such termination shall vest
immediately.
6. COVENANTS AND CONFIDENTIAL INFORMATION.
--------------------------------------
(a) The Executive acknowledges the Company's reliance on and
expectation of the Executive's continued commitment to performance of his duties
and responsibilities during the Term. In light of such reliance and expectation
on the part of the Company, during the periods
- 5 -
<PAGE>
hereafter specified in Section 6(b), the Executive shall not, directly or
indirectly, do or suffer either of the following:
(i) Be employed by any other corporation, partnership,
proprietorship, firm, association or other business entity directly or
indirectly engaged in the business of local or long distance telephone
network services within the United States; or
(ii) Disclose, divulge, discuss, copy or otherwise use or suffer
to be used in any manner, other than in accordance with the
Executive's duties hereunder, any confidential or proprietary
information relating to the Company's business, prospects, finances,
operations, properties or otherwise to its particular business or
other trade secrets of the Company, it being acknowledged by the
Executive that all such information regarding the business of the
Company compiled or obtained by, or furnished to, the Executive while
the Executive shall have been employed by or associated with the
Company is confidential and/or proprietary information and the
Company's exclusive property; provided, however, that the foregoing
restrictions shall not apply to the extent that such information:
(A) is clearly obtainable in the public domain;
(B) becomes obtainable in the public domain, except by reason of
the breach by the Executive of the terms hereof; or
(C) is required to be disclosed by rule of law or by order of a
court or governmental body or agency.
(b) The applicable periods shall be: (i) so long as the Executive is
an employee of the Company; (ii) as to trade secrets described in clause (ii) at
any time after the Executive is no longer an employee of the Company; (iii) as
to confidential information described in clause (ii), for a period of one (1)
year after termination of employment; and (iv) for a period of one year after
termination of employment for Cause or for Permanent Disability.
(c) The Executive agrees and understands that the remedy at law for
any breach by him of this Section 6 will be inadequate and that damages flowing
from such breach are not readily susceptible to being measured in monetary
terms. Accordingly, it is acknowledged that the Company shall be entitled to
immediate injunctive relief. Nothing in this Section 6 shall be deemed to limit
the Company's remedies at law or in equity for any breach by the Executive of
any of the provisions of this Section 6 which may be pursued or availed of by
the Company.
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<PAGE>
(d) THE EXECUTIVE HAS CAREFULLY CONSIDERED THE NATURE AND EXTENT OF
THE RESTRICTIONS UPON HIM AND THE RIGHTS AND REMEDIES CONFERRED UPON THE COMPANY
UNDER THIS SECTION 6 AND HEREBY ACKNOWLEDGES AND AGREES THAT THE SAME ARE
REASONABLE IN TIME AND TERRITORY, ARE DESIGNED TO ELIMINATE COMPETITION WHICH
OTHERWISE WOULD BE UNFAIR TO THE COMPANY, DO NOT STIFLE THE INHERENT SKILL AND
EXPERIENCE OF THE EXECUTIVE, WOULD NOT OPERATE AS A BAR TO THE EXECUTIVES'S SOLE
MEANS OF SUPPORT, ARE FULLY REQUIRED TO PROTECT THE LEGITIMATE INTERESTS OF THE
COMPANY AND DO NOT CONFER A BENEFIT UPON THE COMPANY DISPROPORTIONATE TO THE
DETRIMENT TO THE EXECUTIVE.
(e) The Executive acknowledges that the Executive's obligations under
this Section 6 shall survive regardless of whether the Executive's employment by
the Company is terminated, voluntarily or involuntarily, by the Company or the
Executive, with Cause or without Cause.
7. MISCELLANEOUS.
-------------
(a) The Executive represents and warrants that he is not a party to
any agreement, contract or understanding, whether employment or otherwise,
which would restrict or prohibit him from undertaking or performing employment
in accordance with the terms and conditions of this Agreement.
(b) The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provisions to the extent enforceable in any jurisdiction nevertheless shall be
binding and enforceable.
(c) At all times during and after Executive's employment and the
effectiveness of this Agreement, the Company shall indemnify Executive (as a
director, officer, employee and otherwise) to the fullest extent permitted by
law and shall at all times maintain appropriate provisions in its articles of
incorporation and bylaws which mandate that the Company provide such
indemnification.
If any claim is asserted hereunder with respect to which Executive reasonably
believes in good faith he is entitle to indemnification, the Company shall pay
Executive's legal expenses on a monthly basis, provided that Executive shall
reimburse the Company for such amounts if Executive shall be found by a court of
competent jurisdiction not to have been entitled to indemnification.
(d) The rights and obligations of the Company under this Agreement
shall inure to the benefit of, and shall be binding on, the Company and if in
connection with the transfer of substantially all of its assets or business its
successors and assigns, and the rights and obligations
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<PAGE>
(other than obligations to perform services) of the Executive under this
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.
(e) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then pertaining in the metropolitan Washington, D.C. area, and judgment upon the
award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. The arbitrator or arbitrators shall be deemed to
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration; provided, however, that nothing in this
Section 7(d) shall be construed so as to deny the Company the right and power to
seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of his covenants contained in this
Agreement.
(f) All notices and other communications required or permitted under
this Agreement shall be in writing, and shall be deemed properly given if
delivered personally, mailed by registered or certified mail in the United
States mail, postage prepaid, return receipt requested, sent by facsimile, or
sent by Express Mail, Federal Express or other nationally recognized express
delivery service, as follows:
If to the Company or the Board:
Telco Communications Group, Incorporated
4219 Lafayette Center Drive
Chantilly, VA 22021-1209
Attention: President and Chief Executive Officer
Fax Number: (703)803-3430
With a copy to:
Swidler & Berlin, Chartered
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
Attn: John J. Klusaritz, Esq.
Fax Number: (202)424-7643
If to the Executive:
Bryan K. Rachlin
2646 Woodley Place, N.W.
Washington, D.C. 20008
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<PAGE>
Notice given by hand, certified or registered mail, or by Express Mail, Federal
Express or other such express delivery service, shall be effective upon actual
receipt. Notice given by facsimile transmission shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices by facsimile
transmission shall be confirmed promptly after transmission in writing by
certified mail or personal delivery.
Any party may change any address to which notice is to be given to it by
giving notice as provided above of such change of address.
(g) The failure of either party to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions as to any future violations thereof, nor
prevent that party thereafter from enforcing each and every other provision of
this Agreement. The rights granted the parties herein are cumulative and the
waiver of any single remedy shall not constitute a waiver of such party's right
to assert all other legal remedies available to it under the circumstances.
(h) This Agreement supersedes all prior agreements and understandings
between the parties and may not be modified or terminated orally. No
modification or attempted waiver shall be valid unless in writing and signed by
the party against whom the same is sought to be enforced.
(i) This Agreement shall be governed by, and construed in accordance
with the provisions of, the law of the State of Virginia, without reference to
provisions that refer a matter to the law of any other jurisdiction. Each party
hereto hereby irrevocably submits itself to the non-exclusive personal
jurisdiction of the federal and state courts sitting in Virginia; accordingly,
subject to the provisions for arbitration provided in Section 9(d), any
justiciable matters involving the Company and the Executive with respect to this
Agreement may be adjudicated only in a federal or state court sitting in
Virginia.
(j) All payments required to be made by the Company hereunder to the
Executive shall be subject to the withholding of such amounts relating to taxes
and other government assessments as the Company may reasonably determine it
should withhold pursuant to any applicable law, rule or regulation.
(k) Captions and section headings used herein are for convenience and
are not a part of this Agreement and shall not be used in construing it.
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<PAGE>
(l) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first set forth above.
TELCO COMMUNICATIONS GROUP,
INCORPORATED, a Virginia corporation
By: /s/ Donald A. Burns
---------------------------------------
Name: Donald A. Burns
---------------------------------------
Title: President & CEO
---------------------------------------
_______________________________________
Bryan K. Rachlin
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<PAGE>
EXHIBIT 10.35
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the 19th
day of March, 1996, between Telco Communications Group, Incorporated, a Virginia
corporation (the "Company"), and Nicholas A. Merrick (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
considerations set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. EMPLOYMENT.
----------
(a) The Company hereby employs the Executive as Chief Financial
Officer and Vice President of Finance and Investor Relations and the Executive
hereby accepts such employment, on the terms and subject to the conditions
hereinafter set forth.
(b) Executive shall report directly to the Company's President and
Chief Executive Officer unless the Company's Board of Directors (the "Board")
instructs him otherwise, and shall perform such other or further duties
consistent with his positions as Chief Financial Officer and Vice President of
Finance and Investor Relations pursuant to the direction of the President and
Chief Executive Officer or the Board.
(c) Attention and Effort. The Executive shall be required to devote
--------------------
his full business time, attention and effort to the Company's business and
affairs and perform diligently such duties as are customarily performed by
executives in similar positions with companies similar in character or size to
the Company, all subject to the direction of the President and Chief Executive
Officer and the Board, together with such other duties as may be reasonably
requested from time to time by the Board, which duties shall be consistent with
his positions as set forth above. The Executive agrees to use all of his skills
and business judgment and render services to the best of his ability to serve
the interests of the Company. Subject to the terms of Section 8, this shall not
preclude Executive from serving on community and civic boards, participating in
industry associations, or otherwise engaging in other activities which, in the
Company's judgment, do not unreasonably interfere with his duties to the
Company.
(d) Support Services. The Executive shall be entitled to all of the
----------------
administrative, operational and facility support customary for a similarly
situated executive. This support shall include, without limitation, a suitably
appointed private office, a secretary or
<PAGE>
administrative assistant, and payment of or reimbursement for reasonable
cellular telephone expenses, expenses of the Executive maintaining his
professional license and standing and any and all other business expenses
reasonably incurred on behalf of or in the course of performing duties for the
Company, all in accordance with the expense reimbursement policies established
from time to time by the Company. The Executive agrees to provide such
documentation of these expenses as may be reasonably required.
2. TERM AND POSITIONS. Subject to the provisions for termination
------------------
hereinafter provided, the Term (the "Term") shall begin on the date hereof,
shall continue through the third anniversary of the date hereof, and shall
automatically renew each year until the fifth anniversary hereof unless notice
of termination is given by either party hereto at least ninety(90) days prior to
the end of each annual term.
3. COMPENSATION.
------------
Throughout the Term the Company shall pay or provide, as the case may
be, to the Executive the compensation and other benefits and rights set forth in
this Section 3, and the additional compensation and benefits set forth in
Section 7, as applicable.
(a) The Company shall pay to the Executive a "Base Salary," payable
in accordance with the Company's usual pay practices (and in any event no less
frequently than monthly), of a minimum of $130,000 per annum, which shall be
reviewed annually.
(b) The Company shall pay to the Executive a cash bonus for each
fiscal year, or part thereof that he is employed by the Company, at the
discretion of the Board, provided, however, that Executive's bonus for the years
ended December 31, 1996, December 31, 1997, and December 31, 1998, respectively,
shall be a minimum of $78,000 and shall be payable in January of the following
year.
(c) The Company has adopted for its employees an incentive and non-
qualified stock option plan (the "Stock Option Plan"). Concurrently with the
execution of this Agreement, the Executive shall be granted the right and option
("the Options") pursuant to the Stock Option Plan to purchase up to 1,000 Common
Shares. Subject to vesting as set forth in Section 4 hereof, the Options may be
exercised at any time or from time to time, in whole or in part, during the 10
year period following the date the Initial Options are granted. The purchase
price of the 1,000 shares of Common Stock subject to the Options shall be $3,200
per share. The Options are in addition to any other rights and options which, at
the Company's sole election and in its sole discretion, may be granted to the
Executive under any qualified, non-qualified, incentive, bonus and other stock
or stock option plans which may be adopted by the Company.
- 2 -
<PAGE>
(d) The Company shall provide the Executive its standard medical
hospitalization and dental insurance for Executive, his spouse and eligible
family members, subject to and in accordance with the Company's policy, the
proportion of the cost thereof to be borne by the Company and the Executive in
accordance with such policy.
(e) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to employees
of the Company and for which the Executive qualifies under the terms thereof
(and nothing in this Agreement shall, or shall be deemed to, in any way affect
the Executive's right and benefits thereunder except as expressly provided
herein).
(f) The Executive shall be entitled to such periods of vacation and
sick leave allowance each year as provided under the Company's vacation and sick
leave policy for executive officers.
(g) The Executive shall be entitled to participate in any equity or
other employee benefit plan and other fringe benefits that are generally
available to executive officers, as distinguished from general management, of
the Company. The Executive's participation in and benefits under any such plan
shall be on the terms and subject to the conditions specified in the governing
document of the particular plan.
4. VESTING.
-------
(a) Subject to the provisions of Section 6 and the last sentence of
this Section 4(a), the shares of Common Stock purchasable upon the exercise of
the Options shall vest in one-third increments on each of the first three
anniversaries of the date the Options are granted (which shall be dated 3/19 -
1st day of employment). In the event of a change in control as defined in
Section 4(c), all unvested Options shall immediately vest.
(b) The Executive shall not have any of the rights of a common
shareholder of the Company with respect to any non-exercised portion of the
Options, except that in the event of any change in the outstanding Common Stock
by reason of a stock divided or distribution, recapitalization, merger,
consolidation, split, split-up, combination or exchange of shares, the number of
shares purchasable upon the exercise of the Options and the purchase price of
the Common Stock subject to the Options shall be appropriately adjusted.
(c) "Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes
the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of voting representing more than 25% of the total voting stock of the
Company outstanding on a fully diluted basis; or (ii) individuals who on the
date of this Agreement constitute the Board of Directors (Henry Luken, Don
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<PAGE>
Burns and Tom Cirrito together with any new directors whose election by the
Board of Directors or whose nomination for election by the Company's
stockholders was approved by vote of at least a majority of the members of the
Board of Directors then in office who either were members of the Board of
Directors on the date of this Agreement or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office; or (iii) Don
Burns and Henry Luken cease to beneficially own at any time an aggregate of at
least 25% of the total voting power of the total voting stock of the Company
outstanding on a fully diluted basis.
5. PERMANENT DISABILITY.
--------------------
(a) For purposes of this Agreement, the Executive's "Permanent
Disability" shall be deemed to have occurred one day after one hundred twenty
(120) days in the aggregate during any consecutive twelve (12) month period, or
one day after ninety (90) consecutive days, during which one hundred twenty
(120) or ninety (90) days, as the case may be, the Executive, by reason
of his physical or mental disability or illness, shall have been unable to
perform the essential functions under this Agreement with or without reasonable
accommodation.
(b) If either the Company or the Executive, after receipt of notice
of the Executive's Permanent Disability from the other, disputes that the
Executive's Permanent Disability shall have occurred, the Executive shall
promptly submit to a physical examination by the chief of medicine of any major
accredited hospital in the metropolitan Washington, D.C. area and, unless such
physician shall issue his written statement to the effect that, in his opinion,
based on his diagnosis, the Executive is capable of resuming his employment and
devoting his full time and energy to perform his essential functions hereunder,
with or without reasonable accommodation, such Permanent Disability shall be
deemed to have occurred on the day above specified.
6. TERMINATION.
-----------
(a) The Executive's employment under this Agreement and the Term
shall be terminated immediately on the death of the Executive and may be
terminated by the Company:
(i) at any time after the Permanent Disability of the
Executive;
(ii) at any time for "Cause" (as defined below) by action of the
Board; or
(iii) at any time without Cause by action of the Board.
For purposes hereof, Cause shall mean:
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<PAGE>
Active participation by the Executive in fraudulent conduct, a
felony, or an act or series of acts of dishonesty, recklessness or
gross negligence or the Executive's willful failure to perform any of
his duties under this Agreement. The Executive's breach of any
provision of this Agreement, which breach has not been cured (if it is
of a nature that can be cured) to the Board's reasonable satisfaction
within ten (10) days after the Company gives written notice thereof to
the Executive;
The voluntary resignation of the Executive without the prior
consent of the Board.
(b) Upon any termination of this Agreement, the Executive shall be
deemed to have resigned from all offices and directorships held by the Executive
in the Company.
(c) TERMINATION BY DEATH. If the Executive's employment is terminated
--------------------
by death, the Executive's estate shall be entitled to receive (i) life insurance
benefits pursuant to any life insurance purchased by the Company, (ii) a pro
rata portion of the bonus applicable to the calendar year in which such
termination occurs, payable when and as such bonus is determined under Section
3(b), and (iii) other benefits, payable within ninety (90) days after the date
of death, accrued by him hereunder up to and including the date of Executive's
death. In addition, if Executive's employment is terminated by death, the
Options granted to the Executive pursuant to Section 3(c) prior to the date of
such termination shall immediately vest and be exercisable by Executive's estate
for a period of at least 90 days.
(d) TERMINATION FOR CAUSE. If the Executive's employment is
---------------------
terminated by the Company for Cause, the Company shall not have any other or
further obligations to the Executive under this Agreement (except (i) as may be
provided in accordance with the terms of retirement and other benefit plans
pursuant to Section 3(d), (e) and (g), (ii) as to that portion of any unpaid
Base Salary and other benefits accrued and earned under this Agreement through
the date of such termination, and (iii) as to benefits, if any, provided by any
insurance policies in accordance with their terms), and any rights to Options
under Section 3(c) or Section 7 that shall not have vested within ninety (90)
days following such termination shall terminate. The foregoing sentence shall be
in addition to, and not in lieu of, any and all other rights and remedies which
may be available to the Company under the circumstances, whether at law or in
equity.
(e) TERMINATION WITHOUT CAUSE. If the Executive's employment is
-------------------------
terminated by the Company without Cause, the Executive shall be entitled to
receive (i) severance compensation equal to what would have been his Base Salary
under Section 3(a), payable at such times as his Base Salary would have been
paid if his employment had not been terminated, for a period of one year from
the date of his termination, and (ii) other benefits, payable within ninety (90)
days after the date of such termination, accrued by him hereunder up to and
including the date
- 5 -
<PAGE>
of such termination. In addition, if the Executive is terminated without Cause,
the Options granted to the Executive pursuant to Section 3(c) prior to the date
of such termination shall vest immediately.
(F) TERMINATION FOR PERMANENT DISABILITY. If the Executive's
------------------------------------
employment is terminated by the Company for Permanent Disability, the Executive
shall be entitled to receive (i) severance compensation equal to what would have
been his Base Salary under Section 3(a) for six (6) months after the date of
such termination, payable at such times as his Base Salary would have been paid
if his employment had not been terminated, less any disability insurance
benefits pursuant to any disability insurance provided by the Company or
purchased by Executive, the cost of which is reimbursed by the Company, which
are payable in respect of the period after such termination, and (ii) other
benefits, payable within ninety (90) days after termination for Permanent
Disability, accrued by him hereunder up to and including the date of termination
for Permanent Disability. Notwithstanding such termination, the Options granted
to the Executive prior to the date of such termination shall vest in accordance
with the schedule contained in Section 4.
(G) TERMINATION WITH GOOD REASON. Executive may terminate this Agreement,
----------------------------
upon 30 days prior written notice to the Company (the "Notice Period"), in the
event (i) there is a material diminution in Executive's duties and
responsibilities or such duties and responsibilities are otherwise diminished
such that they no longer reflect the duties and responsibilities customary for a
chief financial officer, (ii) the Company hires or appoints a person, other than
Executive, to the position (or functional equivalent, regardless of actual
title) of chief financial officer or (iii) Executive is required to relocate to
an office that is more than 50 miles from the Executive's current office located
at 4219 Lafayette Center Drive, Chantilly, Virginia (each of (i), (ii) and (iii)
being referred to as a "Responsibilities Breach") and the Company fails to cure
said Responsibilities Breach, to the reasonable satisfaction of Executive,
within the Notice Period. If the Executive terminates his employment for
Responsibilities Breach, the Executive shall be entitled to receive (i)
severance compensation equal to what would have been his Base Salary under
Section 3(a), payable at such times as his Base Salary would have been paid if
his employment had not been terminated, for a period of one year after such
termination and (ii) other benefits, payable within 90 days after the date of
such termination, accrued by him hereunder up to and including the date of such
termination. In addition, the Options granted to the Executive pursuant to
Section 3(c) prior to the date of such termination shall vest immediately.
7. ADDITIONAL COMPENSATION AND BENEFITS.
------------------------------------
(A) In additional to any other compensation awarded hereunder,
Executive shall also be entitled to reimbursement of $35,000 as a one-time
relocation expenses associated with the commencement of Executive's employment
hereunder.
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<PAGE>
8. COVENANTS AND CONFIDENTIAL INFORMATION.
--------------------------------------
(a) The Executive acknowledges the Company's reliance on and
expectation of the Executive's continued commitment to performance of his duties
and responsibilities during the Term. In light of such reliance and expectation
on the part of the Company, during the periods hereafter specified in Section
8(b), the Executive shall not, directly or indirectly, do or suffer either of
the following:
(i) Be employed by any other corporation, partnership,
proprietorship, firm, association or other business entity directly or
indirectly engaged in the business of local or long distance telephone
network services within the United States; or
(ii) Disclose, divulge, discuss, copy or otherwise use or suffer
to be used in any manner, other than in accordance with the Executive's
duties hereunder, any confidential or proprietary information relating to
the Company's business, prospects, finances, operations, properties or
otherwise to its particular business or other trade secrets of the Company,
it being acknowledged by the Executive that all such information regarding
the business of the Company compiled or obtained by, or furnished to, the
Executive while the Executve shall have been employed by or associated with
the Company is confidential and/or proprietary information and the
Company's exclusive property; provided, however, that the foregoing
restrictions shall not apply to the extent that such information:
(A) is clearly obtainable in the public domain;
(B) becomes obtainable in the public domain, except by reason of
the breach by the Executive of the terms hereof; of
(C) is required to be disclosed by rule of law or by order of a
court or governmental body or agency.
(b) The applicable periods shall be: (i) so long as the Executive is
an employee of the Company; (ii) as to trade secrets described in clause (ii) at
any time after the Executive is no longer an employee of the Company; (iii) as
to confidential information described in clause (ii), for a period of one (1)
year after termination of employment; and (iv) for a period of one year after
termination of employment without Cause or for Permanent Disability.
(c) The Executive agrees and understands that the remedy at law for
any breach by him of this Section 8 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that the Company shall be
entitled to immediate injunctive relief. Nothing in this Section 8 shall be
- 7 -
<PAGE>
deemed to limit the Company's remedies at law or in equity for any breach by the
Executive of any of the provisions of this Section 8 which may be pursued or
availed of by the Company.
(d) THE EXECUTIVE HAS CAREFULLY CONSIDERED THE NATURE AND EXTENT OF
THE RESTRICTION UPON HIM AND THE RIGHTS AND REMEDIES CONFERRED UPON THE COMPANY
UNDER THIS SECTION 8 AND HEREBY ACKNOWLEDGES AND AGREES THAT THE SAME ARE
REASONABLE IN TIME AND TERRITORY, ARE DESIGNED TO ELIMINATE COMPETITION WHICH
OTHERWISE WOULD BE UNFAIR TO THE COMPANY, DO NOT STIFLE THE INHERENT SKILL AND
EXPERIENCE OF THE EXECUTIVE, WOULD NOT OPERATE AS A BAR TO THE EXECUTIVE'S SOLE
MEANS OF SUPPORT, ARE FULLY REQUIRED TO PROTECT THE LEGITIMATE INTERESTS OF THE
COMPANY DISPROPORTIONATE TO THE DETRIMENT TO THE EXECUTIVE.
(e) The Executive acknowledges that the Executive's obligations under
this Section 8 shall survive regardless of whether the Executive's employment by
the Company is terminated, voluntarily or involuntarily, by the Company or the
Executive, with Cause or without Cause.
9. MISCELLANEOUS
-------------
(a) The Executive represents and warrants that he is not a party to
any agreement, contract or understanding, whether employment or otherwise,
which would restrict or prohibit him from undertaken or performing employment
in accordance with the terms and conditions of this Agreement.
(b) The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction nevertheless shall be
binding and enforceable.
(c) At all times during and after Executive's employment and the
effectiveness of this Agreement, the Company shall indemnify Executive (as a
director, officer, employee and otherwise) to the fullest extent permitted by
law and shall at all times maintain appropriate provisions in its articles of
incorporation and bylaws which mandate that the Company provide such
indemnification.
(d) The Company shall reimburse Executive for reasonable fees and
expenses incurred in connection with the negotiation and execution of this
Agreement, including, without limitation, the reasonable fees and expenses of
his attorneys.
- 8 -
<PAGE>
(e) The rights and obligations of the Company under this Agreement
shall inure to the benefit of, and shall be binding on, the Company and its
successors and assigns, and the rights and obligations (other than obligations
to perform services) of the Executive under his Agreement shall inure to the
benefit of, and shall be binding upon, the Executive and his heirs, personal
representatives and assigns.
(f) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then pertaining in the metropolitan Washington, D.C. area, and judgment upon the
award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. The arbitrator or arbitrators shall be deemed to
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration; provided, however, that nothing in this
Section 9(d) shall be construed so as to deny the Company the right and power to
seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of his covenants contained in this
Agreement.
(g) All notices and other communications required or permitted under
this Agreement shall be in writing, and shall be deemed properly given if
delivered personally, mailed by registered or certified mail in the United
States mail, postage prepaid, return receipt requested, sent by facsimile, or
sent by Express Mail, Federal Express or nationally recognized express delivery
service, as follows:
If to the Company or the Board:
Telco Communications Group, Incorporated
4219 Lafayette Center Drive
Chantilly, VA 22021-1209
Attention: President and Chief Executive Officer
Fax Number: (703)803-3430
With a copy to:
Swidler & Berlin, Chartered
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
Attn: John J. Klusaritz, Esq.
Fax Number: (202)424-7643
If to the Executive:
- 9 -
<PAGE>
Nicholas A. Merrick
5803-E Post Corners Trail
-------------------------
Centreville, VA 22020
-------------------------
With a copy to:
-------------------
-------------------
Notice given by hand, certified or registered mail, or by Express Mail, Federal
Express or other such express delivery service, shall be effective upon actual
receipt. Notice given by facsimile transmission shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices by facsimile
transmission shall be confirmed promptly after transmission in writing by
certified mail or personal delivery.
Any party may change any address to which notice is to be given to it by
giving notice as provided above of such change of address.
(h) The failure of either party to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions as to any future violations thereof, nor
prevent that party thereafter from enforcing each and every other provision of
this Agreement. The rights granted the parties herein are cumulative and the
waiver of any single remedy shall constitute a waiver of such party's right to
assert all other legal remedies available to it under the circumstances.
(i) This Agreement supersedes all prior agreements and understandings
between the parties and may not be modified or terminated orally. No
modification or attempted waiver shall be valid unless in writing and signed by
the party against whom the same is sought to be enforced.
(j) This Agreement shall be governed by, and construed in accordance
with the provisions of, the law of the State of Virginia, without reference to
provisions that refer a matter to the law of any other jurisdiction. Each party
hereto hereby irrevocably submits itself to the non-exclusive personal
jurisdiction of the federal and state courts sitting in Virginia; accordingly,
subject to the provisions for arbitration provided in Section 9(d), any
justiciable matters involving the Company and the Executive with respect to this
Agreement may be adjudicated only in a federal or state court sitting in
Virginia.
(k) All payments required to be made by the Company hereunder to the
Executive shall be subject to the withholding of such amounts relating to taxes
and other
- 10 -
<PAGE>
government assessments as the Company may reasonably determine it should
withhold pursuant to any applicable law, rule or regulation.
(l) Captions and section headings used herein are for convenience and
are not a part of this Agreement and shall not be used in construing it.
(m) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first set forth above.
TELCO COMMUNICATIONS GROUP,
INCORPORATED, a Virginia corporation
By: \s\Donald A. Burns
---------------------------------------
Name: Donald A. Burns
---------------------------------------
Title: President
---------------------------------------
\s\Nicholas A. Merrick
---------------------------------------
NICHOLAS A. MERRICK
- 11 -
<PAGE>
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the 2nd
day of May, 1996, between Telco Communications Group, Incorporated, a Virginia
corporation (the "Company"), and Janet Anastasi (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. EMPLOYMENT.
----------
(a) The Company hereby employs the Executive as Vice President and
Corporate Controller and the Executive hereby accepts such employment, on the
terms and subject to the conditions hereinafter set forth.
(b) Executive shall report directly to the Company's Chief Financial
Officer unless the Company's President (President) instructs him otherwise, and
shall perform such other or further duties consistent with her position as Vice
President and Corporte Controller pursuant to the direction of the Chief
Financial Officer or the President.
(c) Attention and Effort. The Executive shall be required to devote
--------------------
her full business time, attention and effort to the Company's business and
affairs and perform diligently such duties as are customarily performed by
executives in similar positions with companies similar in character or size to
the Company, all subject to the direction of the Chief Financial Officer which
duties shall be consistent with her positions as set forth above. The Executive
agrees to use all of her skills and business judgment and render services to the
best of her ability to serve the interests of the Company. Subject to the terms
of Section 6, this shall not preclude Executive from serving on community and
civic boards, participating in industry associations, or otherwise engaging in
other activities which, in the Company's judgment, do not unreasonably interfere
with her duties to the Company.
2. TERM AND POSITIONS. Subject to the provisions for termination
------------------
hereinafter provided, the Term (the "Term") shall begin on the date hereof,
shall continue for one year from the date hereof, and shall automatically renew
each year until the fifth anniversary hereof unless notice of termination is
given by either party hereto at least ninety (90) days prior to the end of each
annual term.
<PAGE>
3. COMPENSATION.
------------
Throughout the Term the Company shall pay or provide, as the case may
be, to the Executive the compensation and other benefits and rights set forth in
this Section 3.
(a) The Company shall pay to the Executive a "Base Salary," payable
in accordance with the Company's usual pay practices (and in any event no less
frequently than monthly), of a minimum of $110,000.00 per annum, which shall be
reviewed annually.
(b) The Company shall provide the Executive its standard medical
hospitalization and dental insurance for Executive, her spouse and eligible
family members, subject to and in accordance with the Company's policy, the
proportion of the cost thereof to be borne by the Company and the Executive in
accordance with such policy.
(c) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to employees
of the Company and for which the Executive qualifies under the terms thereof
(and nothing in this Agreement shall, or shall be deemed to, in any way affect
the Executive's right and benefits thereunder except as expressly provided
herein).
(d) The Executive shall be entitled to such periods of vacation and
sick leave allowance each year as provided under the Company's vacation and sick
leave policy for executive officers.
4. PERMANENT DISABILITY.
--------------------
(a) For purposes of this Agreement, the Executive's "Permanent
Disability" shall be deemed to have occurred one day after one hundred twenty
(120) days in the aggregate during any consecutive twelve (12) month period, or
one day after ninety (90) consecutive days, during which one hundred twenty
(120) or ninety (90) days, as the case may be, the Executive, by reason of her
physical or mental disability or illness, shall have been unable to perform the
essential functions under this Agreement with or without reasonable
accommodation.
(b) If either the Company or the Executive, after receipt of notice
of the Executive's Permanent Disability from the other, disputes that the
Executive's Permanent Disability shall have occurred, the Executive shall
promptly submit to a physical examination by the chief of medicine of any major
accredited hospital in the metropolitan Washington, D.C. area and, unless such
physician shall issue his written statement to the effect that, in his opinion,
based on his diagnosis, the Executive is capable of resuming her employment and
devoting her full time and
- 2 -
<PAGE>
Executive under this Agreement (except (i) as may be provided in accordance with
the terms of retirement and other benefit plans pursuant to Section 3(c), (ii)
as to that portion of any unpaid Base Salary and other benefits accrued and
earned under this Agreement through the date of such termination, and (iii) as
to benefits, if any, provided by any insurance policies in accordance with their
terms), and any stock options that shall not have vested within ninety (90) days
following such termination shall terminate. The foregoing sentence shall be in
addition to, and not in lieu of, any and all other rights and remedies which may
be available to the Company under the circumstances, whether at law or in
equity.
(E) TERMINATION WITHOUT CAUSE. If the Executive's employment is
-------------------------
terminated by the Company without Cause, the Executive shall be entitled to
receive (i) severance compensation equal to what would have been her Base Salary
under Section 3(a), payable at such times as her Base Salary would have been
paid if her employment had not been terminated, for a period of six (6) months
from the date of her termination, and (ii) other benefits, payable within ninety
(90) days after the date of such termination, accrued by her hereunder up to and
including the date of such termination.
(F) TERMINATION FOR PERMANENT DISABILITY. If the Executive's
------------------------------------
employment is terminated by the Company for Permanent Disability, the Executive
shall be entitled to received (i) severance compensation equal to what would
have been her Base Salary under Section 3(a) for six (6) months after the date
of such termination, payable at such times as her Base Salary would have been
paid if her employment had not been terminated, less any disability insurance
payments received by the Executive, and (ii) other benefits, payable within
ninety (90) days after termination for Permanent Disability, accrued by her
hereunder up to and including the date of termination for Permanent Disability.
6. COVENANTS AND CONFIDENTIAL INFORMATION.
--------------------------------------
(a) The Executive acknowledges the Company's reliance on and
expectation of the Executive's continued commitment to performance of her duties
and responsibilities during the Term. In light of such reliance and expectation
on the part of the Company, during the periods hereafter specified in Section
6(b), the Executive shall not, directly or indirectly, do or suffer either of
the following:
(i) Be employed by any other corporation, partnership,
proprietorship, firm, association or other business entity directly or
indirectly engaged in the business of local or long distance telephone
network services within the United States; or
(ii) Disclose, divulge, discuss, copy or otherwise use or suffer
to be used in any manner, other than in accordance with the Executive's
duties hereunder, any
- 4 -
<PAGE>
confidential or proprietary information relating to the Company's business,
prospects, finances, operations, properties or otherwise to its particular
business or other trade secrets of the Company, it being acknowledged by
the Executive that all such information regarding the business of the
Company compiled or obtained by, or furnished to, the Executive while the
Executive shall have been employed by or associated with the Company is
confidential and/or proprietary information and the Company's exclusive
property; provided, however, that the foregoing restrictions shall not
apply to the extent that such information:
(A) is clearly obtainable in the public domain;
(B) becomes obtainable in the public domain, except by reason of
the breach by the Executive of the terms hereof; or
(C) is required to be disclosed by rule of law or by order of a
court or governmental body or agency.
(b) The applicable period shall be six months for all items described
herein.
(c) The Executive agrees and understands that the remedy at law for
any breach by her of this Section 6 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that the Company shall be
entitled to immediate injunctive relief. Nothing in this Section 6 shall be
deemed to limit the Company's remedies at law or in equity for any breach by the
Executive of any of the provisions of this Section 6 which may be pursued or
availed of by the Company.
(d) THE EXECUTIVE HAS CAREFULLY CONSIDERED THE NATURE AND EXTENT OF
THE RESTRICTIONS UPON HER AND THE RIGHTS AND REMEDIES CONFERRED UPON THE COMPANY
UNDER THIS SECTION 6 AND HEREBY ACKNOWLEDGES AND AGREES THAT THE SAME ARE
REASONABLE IN TIME AND TERRITORY, ARE DESIGNED TO ELIMINATE COMPETITION WHICH
OTHERWISE WOULD BE UNFAIR TO THE COMPANY, DO NOT STIFLE THE INHERENT SKILL AND
EXPERIENCE OF THE EXECUTIVE, WOULD NOT OPERATE AS A BAR TO THE EXECUITVE'S SOLE
MEANS OR SUPPORT, ARE FULLY REQUIRED TO PROTECT THE LEGITIMATE INTERESTS OF THE
COMPANY AND DO NOT CONFER A BENEFIT UPON THE COMPANY DISPROPORTIONATE TO THE
DETRIMENT TO THE EXECUTIVE.
(e) The Executive acknowledges that the Executive's obligations under
this Section 6 shall survive regardless of whether the Executive's employment by
the Company is
- 5 -
<PAGE>
terminated, voluntarily or involuntarily, by the Company or the Executive, with
Cause or without Cause.
7. MISCELLANEOUS.
-------------
(a) The Executive represents and warrants that she is not a party to
any agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit her from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
(b) The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction nevertheless shall be
binding and enforceable.
(c) At all times during and after the Executive's employment and the
effectiveness of this Agreement, the Company shall indemnify Executive (as a
director, officer, employee and otherwise) to the fullest extent permitted by
law and shall at all times maintain appropriate provisions in its articles of
incorporation and bylaws which mandate that the Company provide such
indemnification.
(d) The rights and obligations of the Company under this Agreement
shall inure to the benefit of, and shall be binding on, the Company and its
successors and assigns, and the rights and obligations (other than obligations
to perform services) of the Executive under this Agreement shall inure to the
benefit of, and shall be binding upon, the Executive and his heirs, personal
representatives and assigns.
(e) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then pertaining in the metropolitan Washington, D.C. area, and judgment upon the
award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. The arbitrator or arbitrators shall be deemed to
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration; provided, however, that nothing in this
Section 7(e) shall be construed so as to deny the Company the right and power to
seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of his covenants contained in this
Agreement.
(f) All notices and other communications required or permitted under
this Agreement shall be in writing, and shall be deemed properly given if
delivered personally, mailed by registered or certified mail in the United
States mail, postage prepaid, return receipt requested,
- 6 -
<PAGE>
sent by facsimile, or sent by Express Mail, Federal Express or other nationally
recognized express service, as follows:
If to the Company or the Board:
Telco Communications Group, Incorporated
4219 Lafayette Center Drive
Chantilly, VA 22021-1209
Attention: President and Chief Executive Officer
Fax Number: (703) 803-3430
With a Copy to:
Swidler & Berlin, Chartered
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
Attn: John J. Klusaritz, Esq.
Fax Number: (202) 424-7643
If to the Executive:
Janet Anastasi
______________________
______________________
With a copy to:
______________________
______________________
Notice given by hand, certified or registered mail, or by Express Mail, Federal
Express or other such express delivery service, shall be effective upon actual
receipt. Notice given by facsimile transmission shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices by facsimile
transmission shall be confirmed promptly after transmission in writing by
certified mail or personal delivery.
Any party may change any address to which notice is to be given by giving
notice as provided above of such change of address.
- 7 -
<PAGE>
(g) The failure of either party to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions as to any future violation thereof, nor prevent
that party thereafter from enforcing each and every other provision of this
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy shall not constitute a waiver of such party's right to
assert all other legal remedies available to it under the circumstances.
(h) This Agreement supersedes all prior agreements and understandings
between the parties and may not be modified or terminated orally. No
modification or attempted waiver shall be valid unless in writing and signed by
the party against whom the same is sought to be enforced.
(i) This Agreement shall be governed by, and construed in accordance
with the provisions of, the law of the State of Virginia, without reference to
provisions that refer a matter to the law of any other jurisdiction. Each party
hereto hereby irrevocably submits itself to the non-exclusive personal
jurisdiction of the federal and state courts sitting in Virginia; accordingly
subject to the provisions for arbitration provided in Section 9(d), any
justiciable matters involving the Company and the Executive with respect to this
Agreement may be adjudicated only in a federal or state court sitting in
Virginia.
(j) All payments required to be made by the Company hereunder to the
Executive shall be subject to the withholding of such amounts relating to taxes
and other government assessments as the Company may reasonably determine it
should withhold pursuant to any applicable law, rule or regulation.
(k) Captions and section headings used herein are for convenience and
are not a part of this Agreement and shall not be used in construing it.
(l) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first set forth above.
TELCO COMMUNICATIONS GROUP,
INCORPORATED, a Virginia corporation
By: \s\ Donald A. Burns
---------------------------------------------
Name: Donald A. Burns
---------------------------------------------
Title: President & CEO
---------------------------------------------
\s\ Janet Anastasi
---------------------------------------------
Janet Anastasi
- 9 -
<PAGE>
EXHIBIT 10.37
EMPLOYMENT CONTRACT
BETWEEN TELCO COMMUNICATIONS GROUP, INC.
AND
NATALIE MARINE-STREET
WHEREAS, Telco Communications Group, Inc. (the "Company") desires that
Natalie Marine-Street ("Marine-Street") continue her employment with the Company
as Executive Vice President, and Marine-Street desires to continue such
employment, the parties freely enter into this Agreement this 3 day of May,
1996 under the following terms and conditions:
ITEM ONE - DUTIES OF Marine-Street
- -------- -----------------------
Marine-Street pledges to put all her strength, knowledge, and know-how into
the Service of the Company. She shall work solely for the Company and she shall
not engage in any activity which conflicts in any way with the business
interests of the Company. Marine-Street hereby expressly acknowledges the
Company's right to assign her different or additional duties. Marine-Street
agrees to continue to devote her time, energy and skill to the services of the
Company despite any change in position or title, provided that said change
involves duties which are equally substantive, challenging, rewarding and that
Marine-Street is equipped with the proper skills and training in order to
effectively manage said change.
ITEM TWO - CONFIDENTIALITY
- -------- ---------------
All confidential business procedures and other confidential information of
the Company shall be kept confidential both during and after Marine-Street's
termination of employment with the Company. Marine-Street will not at any time,
either during or after her employment by the Company, directly or indirectly,
disclose to others any confidential information of the company. While engaged as
an employee of the Company, Marine-Street may only use confidential information
of the Company for a purpose which is necessary to the carrying out of her
duties as an employee of the Company, and Marine-Street may not make use of any
confidential information of the Company after she is no longer an employee of
the Company. All information, whether written or otherwise, regarding the
Company's business, including information regarding customers, customer lists,
costs, prices, earnings, products, machines, apparatus, systems, procedures,
prospective and executed contracts and other business arrangements, and sources
of supply are presumed to be confidential information of the Company except to
the extent that such information may be otherwise lawfully and readily available
to the general public.
1
<PAGE>
All business documents; for example, computer programs, source codes,
marketing material, marketing strategies, drawings, plans, forms, and
correspondence, are the property of the Company and as such are to be saved and
returned to the Company by the latest at the time of termination of employment.
ITEM THREE - COMPENSATION
- ---------- ------------
Marine-Street's salary for the term of this agreement shall be at least
$390,000.00. ($130,000.00 per year) Said salary shall be split equally over the
term of her agreement She will receive her salary every month in bimonthly
payments. Marine-Street's salary will be reviewed at least once annually. This
amount shall not include any performance or other bonuses paid to Marine-Street.
ITEM FOUR - SICK LEAVE
- --------- ----------
In case of absence from work because of illness, the Company will pay
Marine-Street's regular full salary for a period of up to four weeks. After such
four week period, she will be eligible for regular disability benefits per
Company policy.
ITEM FIVE - VACATION
- --------- --------
Marine-Street's annual vacation entitlement will be four (4) weeks or
twenty (20) days during each full year of employment. Timing of vacation is to
be in accordance with executive management approval.
ITEM SIX - BUSINESS EXPENSE
- -------- ----------------
Business expenses associated with the performance of Marine-Street's duties
on behalf of the Company will be reimbursed by the Company following submission
of suitably prepared expense forms.
ITEM SEVEN - SOCIAL SECURITY AND PENSION BENEFITS
- ---------- ------------------------------------
Social security eligibility and participation will be in accordance with
applicatable U.S. statutes. Company provided retirement benefits and eligibility
will be in accordance with the Company's Pension Plan.
ITEM EIGHT - CALCULATION OF BENEFITS
- ---------- -----------------------
2
<PAGE>
For purposes of determining all Company provided benefits related to length
of service, Marine-Street's employment with the Company shall be considered to
have commenced on July 23, 1993 and will be considered continuous from that date
until her date of termination.
ITEM NINE - TERM OF AGREEMENT
- --------- -----------------
This Agreement shall expire on the third anniversary hereof unless
terminated earlier. If Marine-Street decides not to execute this contract, her
employment shall be on an "at-will" basis. That is, Marine-Street may resign
from employment at any time and for any reason, and likewise the Company may
terminate Marine-Street's employment at any time and for any reason. In such a
case, the Company will compensate Marine-Street at her current rate of pay
subject to potential increases at the discretion of the Company.
ITEM TEN - TERMINATION OF AGREEMENT
- -------- ------------------------
Termination of this Agreement shall occur automatically on the third
anniversary of this Agreement. This Agreement shall not rollover for another
term even though Marine-Street continues to perform the duties of her position
and the Company takes no steps to terminate Marine-Street's employment. Absent a
new written agreement, the employment of Marine-Street shall be "at-will" as
defined above. This Agreement can be terminated prior to the third anniversary
only for the following reasons:
(a) Death, total disability or resignation of Marine-Street;
(b) A partial disability of Marine-Street which significantly affects her
ability to exercise or perform the duties of her assigned position;
(c) For "cause". For purposes of this Agreement, "cause" means fraud,
misappropriation, or the intentional material damage of the property or business
of the Company by Marine-Street, the commission of a felony by Marine-Street,
gross negligence by Marine-Street in the performance of her duties or a severe
financial downturn of the Company's sales and/or profits which, in the Company's
judgment, requires the elimination of the position then held by Marine-Street.
(d) If Marine-Street is terminated at anytime, for any reason, during the
term of this agreement she shall be paid the greater of (a) the balance due
under this employment agreement, or (b) Ninety Seven Thousand Five Hundred
Dollars ($97,500.00).
ITEM ELEVEN - STOCK OPTION LOAN
- ----------- -----------------
3
<PAGE>
The Company has granted Marine-Street a number of stock options. The
Company hereby agrees to provide Marine-Street with a stock loan (the "Loan") in
an amount sufficient to exercise all of Marine-Street's options and to pay
related Federal and State income taxes. Marine-Street shall be required to repay
the Loan within 3 days of the sales of the stock purchased with the Loan.
Collateral for the Loan shall be Telco common stock or other mutually agreed
upon collateral. The Loan shall bear interest at the lowest rate permitted by
law. Marine-Street shall not be obligated to exercise all of her options at
once. The repayment of the Loan can be with cash or with shares of the Company
stock at fair market value at the time Marine-Street elects to repay the Loan.
ITEM TWELVE - REVIEW PROCEDURE
- ----------- ----------------
Marine-Street shall have the right to appeal a discharge for cause decision
by the Company's management to the President, and, if the President concurs in
the discharge decision, to the Board of Directors.
ITEM THIRTEEN - AMENDMENT
- ------------- ---------
This Agreement may be modified or canceled only by the mutual written
agreement of Marine-Street and the Company.
ITEM FOURTEEN - GOVERNING LAW
- ------------- -------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Virginia.
ITEM FIFTEEN - SEVERABILITY
- ------------ ------------
In the event that any provision or portion of the Agreement shall be
determined to invalid or unenforceable for any reason, the remaining provisions
of the Agreement shall be unaffected thereby and shall remain in full force and
effect.
ITEM SIXTEEN - INTEGRATION
- ------------ -----------
The terms of this Agreement as described above constitute the entire
agreement between the Company and Marine-Street and supersede all prior
agreements and understandings, whether written or oral, between them.
ITEM SEVENTEEN - EDUCATION
- -------------- ---------
4
<PAGE>
The Company agrees to pay for any job related training and/or continuing
education courses that they and Marine-Street mutually agree are necessary for
the successful performance of her duties.
ITEM EIGHTEEN - SUCCESSORS AND ASSIGNS
- ------------- ----------------------
The right and obligations of Company under this agreement shall inrue to
the benefit of, and shall be binding on, the Company and its successors and
assigns.
IN WITNESS WHEREOF, the parties to this Agreement, having read the
foregoing provisions of this Agreement, and having agreed to the foregoing
provisions with full understanding of their consequences; hereby execute this
Agreement as of the effective date set forth below.
Telco Communications Group, Inc.
/s/ Donald A. Burns /s/ Natalie Marine-Street
- ----------------------------- ---------------------------------
Donald A. Burns, President Natalie Marine-Street
Date May 3, 1996
------------------------- Date May 2, 1996
-----------------------------
5
<PAGE>
EXHIBIT 10.38
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the 2nd
day of May, 1996, between Telco Communications Group, Incorporated, a Virginia
corporation (the "Company"), and Mark J. Stodter (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. EMPLOYMENT.
----------
(a) The Company hereby employs the Executive as Vice President -
Electronic Data Processing and the Executive hereby accepts such employment, on
the terms and subject to the conditions hereinafter set forth.
(b) Executive shall report directly to the Company's Chief Operating
Officer unless the Company's President (President) instructs him otherwise, and
shall perform such other or further duties consistent with his positions as Vice
President - Electronic Data Processing pursuant to the direction of the Chief
Operating Officer or the President.
(c) Attention and Effort. The Executive shall be required to devote
--------------------
his full business time, attention and effort to the Company's business and
affairs and perform diligently such duties as are customarily performed by
executives in similar positions with companies similar in character or size to
the Company, all subject to the direction of the Chief Operating Officer which
duties shall be consistent with his positions as set forth above. The Executive
agrees to use all of his skills and business judgment and render services to the
best of his ability to serve the interests of the Company. Subject to the terms
of Section 6, this shall not preclude Executive from serving on community and
civic boards, participating in industry associations, or otherwise engaging in
other activities which, in the Company's judgment, do not unreasonably interfere
with his duties to the Company.
2. TERM AND POSITIONS. Subject to the provisions for termination
------------------
hereinafter provided, the Term (the "Term") shall begin on the date hereof,
shall continue for one year from the date hereof, and shall automatically renew
each year until the fifth anniversary hereof unless notice of termination is
given by either party hereto at least ninety (90) days prior to the end of each
annual term.
<PAGE>
3. COMPENSATION.
------------
Throughout the Term the Company shall pay or provide, as the case may
be, to the Executive the compensation and other benefits and rights set forth in
this Section 3.
(a) The Company shall pay to the Executive a "Base Salary," payable
in accordance with the Company's usual pay practices (and in any event no less
frequently than monthly), of a minimum of $76,125.00 per annum, which shall be
reviewed annually.
(b) The Company shall provide the Executive its standard medical
hospitalization and dental insurance for Executive, his spouse and eligible
family members, subject to and in accordance with the Company's policy, the
proportion of the cost thereof to be borne by the Company and the Executive in
accordance with such policy.
(c) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to employees
of the Company and for which the Executive qualifies under the terms (and
nothing in this Agreement shall, or shall be deemed to, in any way affect the
Executive's right and benefits thereunder except as expressly provided herein).
(d) The Executive shall be entitled to such periods of vacation and
sick leave allowance each year as provided under the Company's vacation and sick
leave policy for executive officers.
4. PERMANENT DISABILITY.
--------------------
(a) For purposes of this Agreement, the Executive's "Permanent
Disability" shall be deemed to have occurred one day after hundred twenty (120)
days in the aggregate during any consecutive twelve (12) month period, or one
day after ninety (90) consecutive days, during which one hundred twenty (120) or
ninety (90) days, as the case may be, the Executive, by reason of his physical
or mental disability or illness, shall have been unable to perform the essential
functions under this Agreement with or without reasonable accommodation.
(b) If either the Company or the Executive, after receipt of notice
of the Executive's Permanent Disability from the other, disputes that the
Executive's Permanent Disability shall have occurred, the Executive shall
promptly submit to a physical examination by the chief of medicine of any major
accredited hospital in the metropolitan Washington, D.C. area and, unless such
physician shall issue his written statement to the effect that, in his opinion,
based on his diagnosis, the Executive is capable of resuming his employment and
devoting his full time and
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energy to perform his essential functions hereunder, with or without reasonable
accommodation, such Permanent Disability shall be deemed to have occurred on the
day above specified.
5. TERMINATION.
-----------
(A) The Executive's employment under this Agreement and the Term
shall be terminated immediately on the death of the Executive and may be
terminated by the Company:
(i) at any time after the Permanent Disability of the
Executive;
(ii) at any time for "Cause" (as defined below) by action of the
Board; or
(iii) at any time without Cause by action of the Board.
For purposes hereof, Cause shall mean:
Active participation by the Executive in fraudulent conduct, a
felony, or an act or series of acts of dishonesty, recklessnes or
gross negligence or the Executive's willful failure to perform any of
his duties under this Agreement. The Executive's breach of any
provision of this Agreement, which breach had not been cured (if it is
of a nature that can be cured) to the President's reasonable
satisfaction within ten (10) days after the Company gives written
notice thereof to the Executive;
(B) Upon any termination of this Agreement, the Executive shall be
deemed to have resigned from all offices and directorships held by the Executive
in the Company.
(C) TERMINATION BY DEATH. If the Executive's employment is
--------------------
terminated by death, the Executive's estate shall be entitled to receive (i)
life insurance benefits pursuant to any life insurance purchased by the Company,
and (ii) other benefits, payable within ninety (90) days after the date of
death, accrued by him hereunder up to and including the date of Executive's
death. In addition, if Executive's employment is terminated by death, any stock
options granted to the Executive prior to the date of such termination shall
immediately vest and be exercisable by Executive's estate for a period of at
least 90 days.
(D) TERMINATION FOR CAUSE. If the Executive's employment is
---------------------
terminated by the Company for Cause, the Company shall not have any other or
further obligations to the Executive under this Agreement (except (i) as may be
provided in accordance with the terms of retirement and other benefit plans
pursuant to Section 3(c), (ii) as to that portion of any unpaid Base
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Salary and other benefits accrued and earned under this Agreement through the
date of such termination, and (iii) as to benefits, if any, provided by any
insurance policies in accordance with their terms), and any stock options that
shall not have vested within ninety (90) days following such termination shall
terminate. The foregoing sentence shall be in addition to, and not in lieu of,
any and all other rights and remedies which may be available to the Company
under the circumstances, whether at law or in equity.
(E) TERMINATION WITHOUT CAUSE. If the Executive's employment is
-------------------------
terminated by the Company without Cause, the Executive shall be entitled to
receive (i) severance compensation equal to what would have been his Base Salary
under Section 3(a), payable at such times as his Base Salary would have been
paid if his employment had not been terminated, for a period of six (6) months
from the date of his termination, and (ii) other benefits, payable within ninety
(90) days after the date of such termination, accrued by him hereunder up to and
including the date of such termination.
(F) TERMINATION FOR PERMANENT DISABILITY. If the Executive's
------------------------------------
employment is terminated by the Company for Permanent Disability, the Executive
shall be entitled to receive (i) severance compensation equal to what would have
been his Base Salary under Section 3(a) for six (6) months after the date of
such termination, payable at such times as his Base Salary would have been paid
if his employment had not been terminated, less any disability insurance
payments received by the Executive, and (ii) other benefits, payable within
ninety (90) days after termination for Permanent Disability, accrued by him
hereunder up to and including the date of termination for Permanent Disability.
6. COVENANTS AND CONFIDENTIAL INFORMATION.
--------------------------------------
(a) The Executive acknowledges the Company's reliance on and
expectation of the Executive's continued commitment to performance of his duties
and responsibilities during the Term. In light of such reliance and expectation
on the part of the Company, during the periods hereafter specified in Section
6(b), the Executive shall not, directly or indirectly, do or suffer either of
the following:
(i) Be employed by any other corporation, partnership,
proprietorship, firm, association or other business entity directly or
indirectly engaged in the business of local or long distance telephone
network services within the United States; or
(ii) Disclose, divulge, discuss, copy or otherwise use or suffer
to be used in any manner, other than in accordance with the Executive's
duties hereunder, any confidential or proprietary information relating to
the Company's business, prospects, finances, operations, properties or
otherwise to its particular business or other trade secrets
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of the Company, it being acknowledged by the Executive that all such
information regarding the business of the Company compiled or obtained by,
or furnished to, the Executive while the Executive shall have been employed
by or associated with the Company is confidential and/or proprietary
information and the Company's exclusive property; provided, however, that
the foregoing restrictions shall not apply to the extent that such
information:
(A) is clearly obtainable in the public domain;
(B) becomes obtainable in the public domain, except by reason of
the breach by the Executive of the terms hereof; or
(C) is required to be disclosed by rule of law or by order of a
court or governmental body or agency.
(b) The applicable period shall be six months for all items described
herein.
(c) The Executive agrees and understands that the remedy at law for
any breach by him of this Section 6 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that the Company shall be
entitled to immediate injunctive relief. Nothing in this Section 6 shall be
deemed to limit the Company's remedies at law or in equity for any breach by the
Executive of any of the provisions of this Section 6 which may be pursued or
availed of by the Company.
(d) THE EXECUTIVE HAS CAREFULLY CONSIDERED THE NATURE AND EXTENT OF
THE RESTRICTIONS UPON HIM AND THE RIGHTS AND REMEDIES CONFERRED UPON THE COMPANY
UNDER THIS SECTION 6 AND HEREBY ACKNOWLEDGES AND AGREES THAT THE SAME ARE
REASONABLE IN TIME AND TERRITORY, ARE DESIGNED TO ELIMINATE COMPETITION WHICH
OTHERWISE WOULD BE UNFAIR TO THE COMPANY, DO NOT STIFLE THE INHERENT SKILL AND
EXPERIENCE OF THE EXECUTIVE, WOULD NOT OPERATE AS A BAR TO THE EXECUTIVE'S SOLE
MEANS OF SUPPORT, ARE FULLY REQUIRED TO PROTECT THE LEGITIMATE INTERESTS OF THE
COMPANY AND DO NOT CONFER A BENEFIT UPON THE COMPANY DISPROPORTIONATE TO THE
DETRIMENT TO THE EXECUTIVE.
(e) The Executive acknowledges that the Executive's obligations under
this Section 6 shall survive regardless of whether the Executive's employment by
the Company is terminated, voluntarily, by the Company or the Executive, with
Cause or without Cause.
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<PAGE>
7. MISCELLANEOUS.
-------------
(a) The Executive represents and warrants that he is not a party to
any agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
(b) The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction nevertheless shall be
binding and enforceable.
(c) At all times during and after Executive's employment and the
effectiveness of this Agreement, the Company shall indemnify (including
reasonable attorneys fee) Executive (as a director, officer, employee and
otherwise) to the fullest extent permitted by law and shall at all times
maintain appropriate provisions in its articles of incorporation and bylaws
which mandate that the Company provide such indemnification.
(d) The rights and obligations of the Company under this Agreement
shall inure to the benefit of, and shall be binding on, the Company and its
successors and assigns, and the rights and obligations (other than obligations
to perform services) of the Executive under this Agreement shall inure to the
benefit of, and shall be binding upon, the Executive and his heirs, personal
representatives and assigns.
(e) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then pertaining in the metropolitan Washington, D.C. area, and judgment upon the
award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. The arbitrator or arbitrators shall be deemed to
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration; provided, however, that nothing in this
Section 7(e) shall be construed so as to deny the Company the right and power to
seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of his covenants contained in this
Agreement.
(f) All notices and other communications required or permitted under
this Agreement shall be writing, and shall be deemed properly given if delivered
personally, mailed by registered or certified mail in the United States mail,
postage prepaid, return receipt requested, sent by facsimile, or sent by the
Express or other nationally recognized express delivery service, as follows:
If to the Company or the Board:
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Telco Communications Group, Incorporated
4219 Lafayette Center Drive
Chantilly, VA 22021-1209
Attention: President and Chief Executive Officer
Fax Number: (703) 803-3430
With a copy to:
Swidler & Berlin, Chartered
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
Attn: John J. Klusaritz, Esq.
Fax Number: (202) 424-7643
If to the Executive:
Mark Stodter
2806 Deer Ridge Drive
Silver Spring, Maryland 20904
Notice given by hand, certified or registered mail, or by Express Mail, Federal
Express or other such express delivery service, shall be effective upon actual
receipt. Notice given by facsimile transmission shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices by facsimile
transmission shall be confirmed promptly after transmission in writing by
certified mail or personal delivery.
Any party may change any address to which notice is to be given to it by
giving notice as provided above of such change of address.
(g) The failure of either party to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions as to any future violations thereof, nor
prevent that party thereafter from enforcing each and every other provision of
this Agreement. The rights granted the parties herein are cumulative and the
waiver of any single remedy shall not constitute a waiver of such party's right
to assert all other legal remedies available to it under the circumstances.
(h) This Agreement supersedes all prior agreements and understandings
between the parties and may not be modified or terminated orally. No
modification or attempted
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<PAGE>
waiver shall be valid unless in writing and signed by the party against whom the
same is sought to be enforced.
(i) This Agreement shall be governed by, and construed in accordance
with the provisions of, the law of the State of Virginia, without reference to
provisions that refer a matter to the law of any other jurisdiction. Each party
hereto hereby irrevocably submits itself to the non-exclusive personal
jurisdiction of the federal and state courts sitting in Virginia; accordingly,
subject to the provisions for arbitration provided in Section 9(d), any
justiciable matters involving the Company and the Executive with respect to this
Agreement may be adjudicated only in a federal or state court sitting in
Virginia.
(j) All payments required to be made by the Company hereunder to the
Executive shall be subject to the withholding of such amounts relating to taxes
and other government assessments as the Company may reasonably determine it
should withhold pursuant to any applicable law, rule or regulation.
(k) Captions and section headings used herein are for convenience and
are not a part of this Agreement and shall not be used in construing it.
(l) Where necessary or appropriate to the meaning hereof, the
singular and plural shall deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first set forth above.
TELCO COMMUNICATIONS GROUP,
INCORPORATED, a Virginia corporation
By: /S/ Donald A. Burns
---------------------------------------
Name: Donald A. Burns
---------------------------------------
Title: President & CEO
---------------------------------------
/s/ Mark Stodter
---------------------------------------
Mark Stodter
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