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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
VIRTUAL TELECOM, INC.
(Name of Small Business Issuer in its charter)
Delaware 98-0162893
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12, Av. des Morgines
1213 Petit-Lancy 1
Geneva, Switzerland N/A
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(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
Issuer's telephone number, including area code 011-4122-879-0879
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SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None N/A
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.001 par value
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(TITLE OF CLASS)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
Virtual Telecom, Inc., a Delaware corporation ("Company"), was recently
organized to engage in the business of developing and marketing various Internet
content-based products and, secondarily, to act as an Internet Service Provider
("ISP") providing dial-up access to the Internet. The Company's initial
content-based products offered over the Internet consist of the delivery of
financial data from securities and commodities exchanges world-wide on a real
time and near real-time basis. The Company presently markets its services and
products to the Swiss market. During 1996 and the first quarter of 1997, the
Company acquired and implemented the hardware, consisting of routers and
servers, and leased telephone lines through which it offers its financial data
service and dial-up access to over 90% of the Swiss market. The Company
commenced commercial operations in March 1997 and, as of the date of this
registration statement, has not incurred significant revenues from operations.
Subsequent to the acceptance of its Internet products and services by the Swiss
market, the Company intends to expand its operations throughout Europe.
The Company was organized on July 3, 1996 under the laws of the State of
Delaware and has two corporate predecessors, Virtual Telecom SA, a Swiss
Corporation, and Moke Acquisition Corp. ("Moke"), a Delaware corporation.
Virtual Telecom SA was organized on May 19, 1994 to engage in the development
and marketing of Internet content-based products and Internet dial-up access to
the Swiss market. Pursuant to a Securities Purchase Agreement and Plan of
Reorganization dated July 3, 1996, the holders of all of the issued and
outstanding capital shares of Virtual Telecom SA transferred those shares to the
Company in exchange for the Company's issuance of 3,193,540 shares of its $.001
common stock ("Common Stock"). The share for share exchange between the
shareholders of Virtual Telecom SA and the Company was formally consummated
effective as of July 22, 1996. Virtual Telecom SA presently exists as the
wholly-owned operating subsidiary of the Company. Pursuant to an Agreement and
Plan of Merger dated July 31, 1996 between the Company and Moke, Moke merged
with and into the Company effective as of August 30, 1996. Prior to the merger,
Moke was a publicly-held shell corporation with approximately 4,090,448 shares
of Common Stock outstanding. Pursuant to the Agreement and Plan of Merger, each
outstanding share of Moke common stock was converted into .0867471 shares of the
Company's Common Stock, for an aggregate issuance of 355,039 shares of the
Company's Common Stock to the shareholders of Moke.
From October 1 through December 2, 1996, the Company conducted a private
placement of units ("Units") of its securities at $3.50 per Unit. Each Unit
consisted of one share ("Series A Preferred Share") of the Company's Series A
Preferred Stock and one common stock purchase warrant ("Unit Warrant"). The
Company sold 283,781 Units to European institutional investors for the gross
proceeds of $993,233.50. See"Item 8. Description of Securities" for a summary
of the terms and conditions of the Series A Preferred Shares and the Unit
Warrants.
From January 8, 1997 through March 10, 1997, the Company conducted a
private placement of shares of Common Stock. In the private placement, the
Company sold 509,091 shares of Common Stock to two European institutional
investors, at an offering price of $1.65 per share, for the gross proceeds of
$840,000.
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Unless the context otherwise requires, all references to the Company
include its wholly-owned subsidiary, Virtual Telecom SA, a Swiss corporation.
The Company's executive offices are located at 12, Av. des Morgines, 1213 Petit-
Lancy 1, Geneva, Switzerland; telephone number 011-4122-879-0879.
BUSINESS OF THE ISSUER
CERTAIN TERMS USED HEREIN ARE DEFINED BELOW IN THE SECTION "GLOSSARY." THE
COMPANY HAS ENTERED INTO CERTAIN FINANCIAL COMMITMENTS PAYABLE IN SWISS FRANCS,
THE UNIT OF CURRENCY OF SWITZERLAND. ALL SWISS FRANC BASED AMOUNTS ARE
DESIGNATED BY THE SYMBOL "SFR." AS OF MARCH 28, 1997, THE SWISS FRANC-DOLLAR
EXCHANGE RATE WAS 1.4515 SWISS FRANCS TO 1 U.S. DOLLAR.
GENERAL
The Company is a value-added Internet Service and Information provider.
The Company has developed and intends to commercialize its ISP and content
provider operations through a network of strategic alliances with
internationally recognized businesses. The Company's ISP operations are
conducted pursuant to an agreement with Digital Equipment Corporation ("DEC")
under which DEC has designed, implemented and operates a network of routers and
servers located at 13 to 20 PoP's throughout Switzerland and, in time,
additional PoP's throughout Europe. Frame relay and IP connectivity services
are provided by Swiss Telecom PTT and British Telecom. The Company's financial
data service is offered pursuant to separate non-exclusive licenses entered into
by the Company with the Standard & Poor's ComStock Division of McGraw-Hill
International (UK) Ltd ("S&P ComStock"), which supplies the Company with a raw
feed of market data from securities and commodities exchanges world-wide, and
Townsend Analytics, Ltd. ("Townsend"), which has licensed to the Company its
proprietary software program which can organize the raw data feed from S&P
ComStock for presentation in tabular and chart formats. DEC operates and
manages the central server over which the Company's subscribers will access the
financial data. See "Strategic Alliances" below for a summary of the terms and
conditions of the Company's contracts with DEC, S&P Comstock, Townsend, Swiss
Telecom PTT and British Telecom.
The Company's objective is to establish itself as a recognized Internet
content provider of financial services and information throughout Europe. The
Company believes, and independent studies confirm, that the development and
distribution of Internet content will be the last major area of commercial
exploitation of the Internet. The Company believes that Europe is at least
three to four years behind the United States in its use and commercialization of
the Internet and, as a result of the lag, significant opportunities exist for
businesses engaged in the aggressive marketing of Internet content-based
services throughout Europe.
The Company's strategy is to focus on the development of content-based
Internet services through alliances with internationally recognized service
providers, such as DEC, S&P ComStock and Townsend, and to aggressively market
those services throughout Europe. Through these strategic alliances, the
Company hopes to readily establish a reputation for quality and reliability and,
more importantly, out-source the required expertise in the areas of software
development and system operation, thereby allowing the Company to focus on the
marketing of its products and services. The Company's business strategy also
includes the development of the ISP network which can be marketed as a stand-
alone service and as a tie-in with its content-based products.
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BACKGROUND
The Internet is a collection of computer networks linking millions of
public and private computers around the world. Historically, the Internet was
used by government agencies and academic institutions to exchange information,
publish research and transfer electronic mail. A number of factors, including
the proliferation of communication-enabled personal computers, the availability
of intuitive graphical user interface software and the wide accessibility of an
increasingly robust network infrastructure, have combined to allow non-technical
users to easily access the Internet and, in turn, have produced rapid growth in
the number of Internet users. The number of users worldwide is variously
estimated to be between 70 and 110 million. Durlacher Multimedia Ltd. estimates
that the number of Internet users will reach 200 million by 2000.
This growth, combined with the emergence of the World Wide Web, the
graphical, multimedia environment of the Internet, has resulted in the
development of the Internet as a new mass communications medium. The ease and
speed of publishing, distributing and communicating text and graphics over the
Internet has lead to a proliferation of Internet-based content, including online
magazines, news feeds, interactive games and a wealth of educational and
entertainment information, as well as to the development of online communities.
In addition, the reduced cost of executing transactions over the Internet
provides individuals and organizations with a new means to conduct business.
These factors have created a rapidly growing market for Internet services.
To date, users have gained access to the Internet primarily through two types of
service providers. The first of these, online service providers, are primarily
focused on the presentation of proprietary content to subscribers by means of
closed networks, although these providers typically offer access to the Internet
from their networks. This access often tends to be slow and expensive for the
customer. The second of these, ISPs, offer direct access to the Internet at a
lower price, but often provide an uneven quality of service to their customers.
The Company intends to differentiate itself from other ISP's in the Swiss market
by offering a high quality of service by means of its arrangements for DEC's
development and operation of the ISP network and by establishing and maintaining
a low ratio of PoP's to subscribers, thereby ensuring reliability of access and
high data speed.
The Company believes that significant opportunities exist for a Swiss-based
ISP and content provider of financial data. Switzerland is one of the
wealthiest countries in the world and has one of the highest GDP per capita in
Europe. In 1994, Switzerland had a population of approximately 7 million people
and spent approximately $6.6 billion on information technology (or $985 per
capita). By comparison, in 1994 the United States spent approximately $587 per
capita on information technology. In addition, Switzerland is well known for a
strong economy dominated by financial institutions. The Company believes that
the unique importance of the financial markets to the Swiss economy provides a
significant ready-made market for its ISP and financial data services.
THE OBJECTIVES OF THE COMPANY
The Company's objectives are to establish itself as an Internet-based
content provider of investor information services and, secondarily, as a
provider of dial-up Internet access for the Swiss market. To achieve its
objectives as a provider of investor information, the Company (i) offers
competitive pricing (with pricing at a 25% discount to the Company's
competition), (ii) provides detailed content with respect to information
provided to investors (including maintaining a wide range of available stock
symbols), and (iii) intends to exploit unfilled opportunities with respect to
untapped European markets. To achieve its objectives as an ISP for the Swiss
market, the Company provides (i) competitive pricing (maintaining a price
advantage over the Company's major competitors), (ii) high-availability
(including the provision
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of call-forwarding so that a subscriber never gets a busy tone) and (iii) dial-
up portability to subscribers (as one would enjoy with respect to use of a
portable computer).
THE COMPANY'S SERVICES AND PRODUCTS
"FIRSTSWISS" DIAL-UP INTERNET ACCESS (ISP). The Company provides
commercial Internet service under the mark "FirstSwiss." The Internet consists
of high speed telecommunications circuits connecting routers that transmit data
packets. The circuits are maintained by large telecommunication (telco) firms
(such as, AT&T, MCI, Sprint, Swiss Telecom PTT, British Telecom, etc. ). The
routers are owned by the ISP's. As a Swiss-based ISP, the Company leases lines
from Swiss Telecom PTT and British Telecom to connect its routers located at
miscellaneous PoP's located throughout Switzerland. The customers will dial-up
into the PoPs through their local phone lines. Their call is then routed to the
Company's central server in Geneva, which then connects the call to the
Internet.
As an ISP, the Company is selling a commodity to consumers, and the
commodity is bandwidth. The Company purchases bandwidth (or line communication
capacity) from Swiss Telecom PTT and British Telecom; then resells bandwidth to
its local subscribers. The Company charges the subscriber or customer a mark-up
to cover the provision of services and the Company's investment in support
equipment. Separately, the subscriber is charged by the local telco for the
phone connection to the Company's PoPs. The greater the bandwidth that the
Company can provide leads to a higher quality to more subscribers
simultaneously.
The Company provides individual and corporate subscribers with local
dial-up Internet access with the following characteristics:
- A high speed reliable Internet connection for a 33.6 kilo kbps modem
or an ISDN (64 kbps) terminal.
- Local dial-up capability throughout Switzerland via 13 PoPs initially
and additional PoPs as subscribers increase.
- An E-mail account (multiple E-mail accounts for an additional one time
fee)
- Access to 13,000 world wide Usenet News groups
- Access to a local FTP software library containing many types of
software, upgrades and documents
- Log-in access to a multi-lingual Web homepage with links to daily
news, financial news, transportation timetables, classified
advertising, etc.
FINANCIAL DATA SERVICE. The Company has implemented a system of providing
real-time and near real-time financial market quotation data in tabular or chart
form. The Company offers two services for different market mixes, service
content and types of presentation. A professional online investor service is
offered to professionals under the mark "1stQuote" and includes real time market
data. A commercial online investor service is provided to individual investors
under the mark "InvestMaster" and provides market data on a 15 minute delayed
basis and costs one-tenth the price of the professional service.
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"1ST QUOTE" PROFESSIONAL ONLINE INVESTOR SERVICE. At a relatively low
cost, the Company provides the subscriber with a professional online investor
(intranet) service under the mark "1st Quote." The 1st Quote service has the
following characteristics:
- After first installing an interface program, the subscriber can
dial-up and access real-time or near real-time data feed from the
Internet
- Provides access to up to 280,000 stock symbols
- Provides real-time price data in a boardview (tabular) or chart format
for a major stock exchanges, option/futures markets, currency
markets, commodities markets
- Runs on Microsoft Windows system and information is presented in true
Windows-style format
- Additional value-added features such as alarms, closed captioned news,
trend tools, and automated spreadsheet updates
- Information can be saved to disk or printed while on-line
"INVESTMASTER" COMMERCIAL ONLINE INVESTOR SERVICE. For a nominal
monthly subscription, the Company offers individual investors with a commercial
on-line investor (web) service known as "InvestMaster" with the following
characteristics:
- Provides personal investors with information in a multi-lingual format
- Provides access to 70,000 stock symbols for all international markets
- Provides delayed price data in a boardview (tabular) or chart format
for a major stock exchange, option/futures markets, currency markets,
commodities markets
- Information presented in true Windows-style format
- Provides additional value-added features such as alarms, closed
captioned news, trend tools, and automated spreadsheet updates
- Information can be saved to disk or printed while on-line
STRATEGIC ALLIANCES
The Company's operations and Internet services are provided through a
network of strategic alliances with the following internationally recognized
businesses:
DIGITAL EQUIPMENT CORPORATION. The Company's ISP operations are
conducted pursuant to Partnership Outsourcing Agreement ("DEC Agreement") dated
September 9, 1996 between Virtual Telecom SA and DEC Digital Equipment
Corporation ("DEC"). Pursuant to the DEC Agreement, DEC has designed,
implemented and operates on behalf of the Company a network of routers and
servers located at 13 to 20 PoP's throughout Switzerland and, in time,
additional PoP's throughout Europe. Pursuant to the DEC Agreement, the Company
has purchased from DEC the hardware and software required to operate an Internet
dial-up access network, including a central server site located in Geneva
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that is built around two (2) DEC Alpha 1000 computers running the UNIX operating
system. The DEC Agreement is for an initial four year term subject to one year
renewals thereafter unless either party provides the other with notice of its
intent to cancel at least six months prior to the pending termination date. The
Company is required to pay DEC an aggregate of SFr2,128,000 for its services,
hardware and software, of which SFr300,000 has been paid as of March 31, 1997.
The balance of SFr1,828,000 is to be paid to DEC over the remaining term of the
DEC Agreement in quarterly installments of SFr83,000 over the remainder of the
contract.
STANDARD & POOR'S COMSTOCK. The Company's financial data service is
provided through separate arrangements with S&P Comstock and Townsend Analytics.
The Company receives stock and commodity information on a real time basis
pursuant to an Information Distribution License Agreement ("S&P Comstock
Agreement") dated August 23, 1996 between McGraw-Hill International (UK) Ltd.
and Virtual Telecom SA. The Standard & Poor's Comstock Division of McGraw-Hill
is licensed to distribute trading information from most U.S. and international
stock, mercantile, option and currency exchanges. Pursuant to the S&P Comstock
Agreement, McGraw-Hill provides the Company with trading information from S&P
Comstock on a real time basis via a satellite transmission and has granted the
Company a non-exclusive license to redistribute such information as part of the
Company's Internet financial data service. In consideration of the license, the
Company has agreed to pay to McGraw-Hill 50% of all revenues (net of license
fees payable by the Company to Townsend Analytics) received by the Company from
subscribers to its financial data service. The S&P Comstock Agreement has an
initial term of 30 months, subject to consecutive one year extensions thereafter
unless either party provides the other with notice of its intent to cancel at
least 90 days prior to the pending termination date.
TOWNSEND ANALYTICS. The Company receives raw financial data from S&P
Comstock pursuant to the S&P Comstock Agreement and then organizes and
repackages the information for presentation to its subscribers in tabular and
chart formats by way of certain computer software programs licensed from
Townsend Analytics, Ltd. ("Townsend Analytics"). Pursuant to a Computer
Software License Agreement ("Townsend Agreement") dated January 16, 1997 between
Townsend Analytics and the Virtual Telecom SA, Townsend Analytics has appointed
the Company as a non-exclusive distributor for the sale, support and servicing
of Townsend Analytics' proprietary software programs. Pursuant to the Townsend
Agreement, the Company is authorized to purchase and resell the Townsend
Analytics software programs as part of its financial data service or as a stand
alone product. Townsend Analytics has agreed to sell the program to the Company
at its standard distributor prices as established by Townsend from time to time.
The Townsend Agreement has an initial term of three years, subject to
consecutive one year extensions thereafter unless either party provides the
other with notice of its intent to cancel at least 90 days prior to the pending
termination date.
SWISS TELECOM/BRITISH TELECOM. The Company's ISP network is carried
out over separate frame relay telecommunication lines operated by Swiss Telecom
PTT ("Swiss Telecom") and BT Limited Londres, the Swiss subsidiary of British
Telcom ("British Telecom"). Pursuant to a UNIDATA Frame Relay & Unimaster
Services Contract dated October 22, 1996 between Swiss Telcom and Virtual
Telecom SA, Swiss Telecom has installed the Company-owned routers and provided
connectivity by way of a frame relay telecommunication line and the direct
connection of that network to the Internet. In order to ensure continued
service, the Company has arranged for a similar back-up frame relay system from
British Telecom pursuant to an Agreement for Global Telecommunications Services
("BT Agreement") dated October 1, 1996 between British Telecom and Virtual
Telecom SA.
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MARKETING
The Company markets its ISP and content-based financial services throughout
Switzerland. The Company's strategy is to focus its marketing efforts on the
sale of its 1stQuote and InvestMaster financial data products to the Swiss
investment community. The 1stQuote financial service is marketed primarily to
private banks, investment bankers and money managers, and the InvestMaster
financial service is marketed primarily to private investors. The Company's
strategy is to sell its ISP operations to the 1stQuote and InvestMaster
subscribers as a tie-in service. In addition, the Company markets its ISP
service as a stand-alone product to Swiss internet users. The Company employs a
combination of direct marketing, print advertisements and direct mailings in
order to market its ISP and content-based financial services. The Company
promotes itself and its unique financial data services to the Swiss internet and
financial trade publications for purposes of generating feature articles that
promote the Company and its business. The Company also endeavors, whenever
possible, to market its services to the clients of those companies through which
it outsources its ISP and financial data operations. As of the date of this
registration statement, DEC has advised the Company that it intends to assist
the Company in marketing its ISP and financial data services directly to the DEC
clients and to promote the Company as a strategic partner of DEC.
COMPETITION
The market for Internet products and services is highly competitive and the
Company expects that this competition will intensify in the future. The
Company's current and prospective competitors include many companies that have
substantially greater financial, technical, marketing, and other resources than
the Company. Increased competition could result in price reductions and
increased spending on marketing and product development. Any of these events
could have a material adverse affect on the Company's financial condition and
operating results. There can be no assurance that the Company will be able to
compete successfully against current and future competitors or that competitive
pressures faced by the Company will not materially adversely affect its
business, financial condition, and results of operations.
As of the date of this Registration Statement there are several ISP's
providing dial-up access to Swiss Internet users. There are also several
companies that provide for the delivery of financial data over the Internet or
electronic means, including Reuters, Telerate, Fastnet and Span.
GOVERNMENT REGULATION
The Company's ISP operation and content-based products are not currently
subject to direct regulation by Swiss, US or other law, other than regulations
applicable to businesses generally. Changes in the regulatory environment
relating to the Internet content or connectivity industries, including
regulatory changes that directly or indirectly affect telecommunications costs
or increase the likelihood or scope of competition from regional telephone
companies or others, could have a material adverse affect on the Company's
business. The Company cannot predict the impact, if any, that future regulation
or regulatory changes may have on its business.
LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or
to which the property interests of the Company are subject.
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EMPLOYEES
The Company is staffed with six full-time employees and two full-time
consultants at present, four of whom are involved in the Company's network and
Web operations. The Company intends to hire at least two additional employees
in the next 12 months.
GLOSSARY
Set forth below are definitions of certain terms used in this Registration
Statement.
BACKBONE A centralized high-speed network that
connects smaller, independent networks. In
other terms, the backbone of a network is its
means of linking its major nodes so all of
its PoPs feed into backbone nodes with high
speed uninterrupted flow.
BANDWIDTH The number of bits of information which can
move over a communications medium in a given
amount of time.
DIAL UP LINE A local access line and number provided by
domestic telecom operators allowing the
subscriber to dial the service provider's PoP
and connect to their backbone.
ELECTRONIC MAIL OR E-MAIL As application that allows a user to send or
receive messages to or from any other user
with an Internet address, commonly termed an
e-mail address.
GRAPHICAL USER INTERFACE A means of communicating with a computer by
manipulating icons and windows rather than
using text commands.
INTERNET An open global network of interconnected
commercial, education and governmental
computer networks which utilize a common
communications protocol, TCP/IP.
ISDN Integrated Services Digital Network. A
digital network that combines voice and
digital network services through a single
medium, making it possible to offer customers
digital data services as well as voice
connections. In Europe, a 64 kilobit (64,000
bits per second) leased line is currently the
smallest bandwidth transmission data circuit
useful in Internet applications. It is also
roughly the bandwidth needed for a voice
phone call.
KBPS Kilobits per second. A rate of digital
information transmission. One kilobit equals
1,000 bits.
LEASED LINE A leased line is the telephone circuit
transmission channel reserved for the
customer's use from point "a" to point "b"
through phone company physical lines and
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switches. The line may be of different
bandwidths of data carrying capacity.
MBPS Megabits per second. A rate of digital
information transmission. One megabit equals
1,000 kilobits.
MODEM A piece of equipment that connects a computer
to an analog transmission line (typically a
telephone line).
ONLINE SERVICES Commercial information services that offer a
computer user access through a modem to a
specified slate of information, entertainment
and communications menus. These services are
generally closed systems but may offer
Internet access at additional cost.
POPS Points of Presence. An interlink group of
modems, routers and other computer equipment,
located in a particular city or metropolitan
area, that allows a nearby subscriber to
access the Internet through a local telephone
call.
ROUTER A device that receives and transmits data
packets between segments in a network or
different networks.
SERVER Software that allows a computer to offer a
service to another computer. Other computers
connect the server program by means of
matching client software. In addition, such
term means the computer on which server
software runs.
WINDOWS A computer operating system developed by
Microsoft that provides a graphical user
interface and multitasking capabilities.
WORLD WIDEWEB A network of computer servers that uses a
special communications protocol to link
different servers throughout the Internet and
permits communications of graphics, video and
sound.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company was recently organized to engage in the business of developing
and marketing various Internet content-based products and, secondarily, to act
as an ISP providing dial-up access to the Internet. The Company's initial
content-based products to be offered over the Internet consist of the delivery
of financial data from securities and commodities exchanges world-wide on a real
time and near real-time basis. The Company presently markets its services and
products in Switzerland. The Company commenced commercial operations in March
1997 and, as of the date of this registration statement, has
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not incurred significant revenues from operations. Subsequent to the acceptance
of its Internet products and services by the Swiss market, the Company intends
to expand its operations throughout Europe.
The Company has entered into certain financial commitments payable in Swiss
Francs, the unit of currency of Switzerland. All Swiss Franc based amounts are
designated by the symbol SFr. As of March 28, 1997, the Swiss Franc-Dollar
exchange rate was 1.4515 Swiss Francs to 1 U.S. Dollar.
To date, the Company's activities have included the market analysis and
development of its ISP operations and value-added content-based products.
During 1996 and the first quarter of 1997, the Company acquired and implemented
the hardware, consisting of routers and servers, and leased telephone lines
through which it offers its financial data service and dial-up access to over
90% of the Swiss market. The Company has financed its activities to date
through the sale of its securities. See "Item 4, Part II - Recent Sales of
Unregistered Securities" for a description of the Company's sale of shares of
its securities since inception. The Company commenced commercial operations in
March 1997 and, in the opinion of management, has sufficient cash resources in
order to sustain its operations over the next 12 months and fund the full scale
roll-out of its ISP and financial data service to the Swiss market.
The Company's plan of operations for the next 12 months includes the full-
scale roll-out of its ISP and financial services products to the Swiss market.
Subsequent to the acceptance of its Internet products and services by the Swiss
market, the Company intends to expand its operations throughout Europe and is
presently conducting preliminary analysis of certain target European markets
outside of Switzerland. The Company will require additional capital to finance
the cost of development of Internet services in other geographic locations and
intends to finance those costs, in part, by joint venturing the development of
Internet related operations in those areas with local businesses which will be
responsible for contributing capital to the venture as well as technical or
marketing support. As of the date of this registration statement, the Company
has no definite plans for the development of any Internet related operations
outside of Switzerland nor are there any understandings or agreements with any
third parties for the organization of a joint venture or partnership for the
development of any such operation.
This registration statement contains various forward-looking statements
that are based on the Company's beliefs as well as assumptions made by and
information currently available to the Company. When used in this registration
statement, the words "believe," "expect," "anticipate," "estimate" and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions,
including, without limitation, the Company's recent commencement of commercial
operations and the risks and uncertainties concerning the acceptance of its
services and products by the Swiss market; the Company's present financial
condition and the risks and uncertainties concerning the availability of
additional capital as and when required; technological changes; increased
competition; and general economic conditions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, or
projected. The Company cautions potential investors not to place undue reliance
on any such forward-looking statements all of which speak only as of the date
made.
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ITEM 3. DESCRIPTION OF PROPERTY.
The Company's executive offices are located in Geneva, Switzerland and
consist of approximately 1,800 square feet of leased premises. The Company's
lease for these premises expires on August 30, 1999 and provides for monthly
rent of SFr7,500.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the beneficial
ownership of the shares of Common Stock as of March 31, 1997 by (i) each person
who is known by the Company to be the beneficial owner of more than five percent
(5%) of the issued and outstanding shares of Common Stock, (ii) each of the
Company's directors and executive officers and (iii) all directors and executive
officers as a group.
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OWNED
---------------- ---------------- -----------------
Neil Gibbons (1) 1,596,770 34.9%
Daniel Huber (1) 1,596,770 34.9%
William Cordeiro (2) -0- --
All officers and directors as a group (2) 3,193,420 69.8%
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(1) Address is 12, Av. des Morgines, 1213 Petit-Lancy 1, Geneva, Switzerland.
(2) Address is 23852 Pacific Coast Hwy., Suite 283, Malibu, California 90265.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the directors and officers of the Company.
Name Age Position
---- --- --------
Neil Gibbons 48 Chairman of the Board, Chief Executive Officer
and President
Daniel Huber 30 Vice President, Chief Financial Officer,
Secretary and Director
William Cordeiro 52 Director
Mr. Gibbons co-founded Virtual Telecom SA in 1994 and has served as Chief
Executive Officer, President and director of the Company since its inception in
July 1996. From 1991 to 1994, Mr. Gibbons was engaged as an independent
investment manager.
Mr. Huber co-founded Virtual Telecom SA in 1994 and has served as Vice
President, Chief Financial Officer, Secretary and director of the Company since
its inception in July 1996. Since 1992, Mr. Huber has also served as Chief
Executive Officer of Profilinvest SA, an investment management firm founded by
Mr. Huber.
Mr. Cordeiro has served as director of the Company since July 1996. Since
1990, Mr. Cordeiro has served as Professor of Management at California State
University, Los Angeles. Mr. Cordeiro holds a Ph.D. in Executive Management
from the Peter F. Drucker Graduate Management Center of the Claremont Graduate
School. Mr. Cordeiro also serves as a director of Harrier, Inc., Naturade, Inc.
and Cardiodynamics, Inc.
-12-
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
CASH COMPENSATION OF EXECUTIVE OFFICERS. The following table sets forth
the cash compensation paid by the Company to its executive officers for services
rendered during the fiscal years ended December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------ ---------------------------
COMMON
SHARES
RESTRICTED UNDERLYING
OTHER STOCK OPTIONS
ANNUAL AWARDS GRANTED ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION ($) (# SHARES) COMPENSATION
- ---------------------- ---- --------- ----- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Neil Gibbons, CEO (1) 1996 SFr62,000 -0- -0- -0- -0- -0-
1995 -0- -0- -0- -0- -0- -0-
1994 -0- -0- -0- -0- -0- -0-
Daniel Huber, CFO (2) 1996 SFr64,800 -0- -0- -0- -0- -0-
1995 -0- -0- -0- -0- -0- -0-
1994 -0- -0- -0- -0- -0- -0-
- ------------------------------------------------
</TABLE>
(1) Commencing May 1, 1996, Mr. Gibbons has been paid a salary of SFr8,000 per
month. Mr. Gibbons serves pursuant to an employment agreement dated
May 31, 1996 with Virtual Telecom SA. The agreement is for a period of
five years, subject to up to three consecutive three-year terms. In
addition to his salary, Mr. Gibbons is provided with a monthly car
allowance of SFr600 per month.
(2) Commencing May 1, 1996, Mr. Huber has been paid a salary of SFr8,000 per
month. Mr. Huber serves pursuant to an employment agreement dated May 31,
1996 with Virtual Telecom SA. Mr. Huber's employment agreement is for an
initial term of five years, subject to up to three consecutive three-year
terms. In addition to his base salary, Mr. Huber is provided with a car
allowance of SFr600 per month.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price
Name Granted (#) Fiscal Year ($/Sh) Expiration Date
- ------------ ------------ ------------- ----------- ---------------
NONE
COMPENSATION OF DIRECTORS. Mr. Cordeiro receives a $500 per month
director's fee and is entitled to receive 10,000 shares of Common Stock as a
bonus for joining the Board. All directors receive reimbursement for
out-of-pocket expenses in attending Board of Directors meetings. From time to
time the Company may engage certain members of the Board of Directors to perform
services on behalf of the Company. The Company will compensate the members for
their services at rates no more favorable than could be obtained from
unaffiliated parties.
-13-
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company's Chief Financial Officer, Daniel Huber, is also Chief
Executive Officer of Profilinvest SA, an investment management firm in Geneva,
Switzerland. At the present time and for the forseeable future, Mr. Huber
intends to devote substantially all of his business time to the Company.
However, Mr. Huber's association with Profilinvest SA presents a potential
conflict between his provision of his services to the Company and to
Profilinvest.
ITEM 8. DESCRIPTION OF SECURITIES.
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock, $.001
par value, of which, as of March 31, 1997, 4,582,614 shares were issued and
outstanding and held by approximately 350 stockholders of record. As of March
31, 1997, there are no outstanding options, warrants or other securities which
upon exercise or conversion entitle their holder to acquire shares of Common
Stock, other than the Unit Warrants and Series A Preferred Stock described
below.
Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders generally. The approval of
proposals submitted to stockholders at a meeting other than for the election of
directors requires the favorable vote of a majority of the shares voting, except
in the case of certain fundamental matters (such as certain amendments to the
Certificate of Incorporation, and certain mergers and reorganizations), in which
case Delaware law and the Company's Bylaws require the favorable vote of at
least a majority of all outstanding shares. Stockholders are entitled to
receive such dividends as may be declared from time to time by the Board of
Directors out of funds legally available therefor, and in the event of
liquidation, dissolution or winding up of the Company to share ratably in all
assets remaining after payment of liabilities. The holders of shares of Common
Stock have no preemptive, conversion, subscription or cumulative voting rights.
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of preferred stock,
$.001 par value ("Preferred Stock"). The Company's Board of Directors is
authorized to issue from time to time, without shareholder authorization, in one
or more designated series or classes, any or all of the authorized but unissued
shares of Preferred Stock with such dividend, redemption, conversion and
exchange provisions as may be provided in the particular series. Any series of
Preferred Stock may possess voting, dividend, liquidation and redemption rights
superior to that of the Common Stock. The rights of the holders of Common Stock
will be subject to and may be adversely affected by the rights of the holders of
any Preferred Stock that may be issued in the future. Issuance of a new series
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisition and other corporate purposes, could make it more difficult
for a third party to acquire, or discourage a third party from acquiring, a
majority of the outstanding voting stock of the Company.
The Board of Directors of the Company has designated an initial series of
Preferred Stock known as "Series A Preferred Stock" consisting of 750,000
authorized shares, and the Company has issued 283,781 units ("Units") of its
securities, each Unit consisting of one share ("Series A Preferred Share") of
the Company's Series A Preferred Stock and one common stock purchase warrant
("Unit Warrant"). Each Series A Preferred Shares has a par value of $.001 and a
liquidation preference of $3.50 per share. The Series A Preferred Stock does
not carry dividend rights or any other rights senior to the Common Stock, and
the Series A Preferred Stock has equal voting rights with the Common Stock.
Each Series
-14-
<PAGE>
A Preferred Share is convertible into Common Stock at a conversion price of
$3.50 per share, provided that on the one year anniversary of the original
issuance of the Series A Preferred Stock the conversion price shall be adjusted
to 70% of the average last sale price of the Common Stock during the 30 trading
days immediately preceding the first anniversary date. The Series A Preferred
Stock is redeemable by the Company, at a price equal to the liquidation
preference plus any unpaid dividends, at the earlier of one year from the date
of initial issuance or upon the closing of a public offering of the Company's
Common Stock where immediately following such offering the Common Stock is
listed on the New York or American Stock Exchange or the NASDAQ Stock Market.
UNIT WARRANTS
As noted above, the Company has issued 283,781 units ("Units") of its
securities, each Unit consisting of one Series A Preferred Share and one common
stock purchase warrant ("Unit Warrant"). Each Unit Warrant entitles its holder
to purchase one share of Common Stock at an exercise price of $7.00 per share
until July 31, 1998, at which time the unexercised Unit Warrants shall expire by
their own terms. The Unit Warrants are subject to customary anti-dilution
provisions.
TRANSFER AGENT
The Transfer Agent for the Company's Common Stock is Progressive Transfer
Company, 1981 East 4800 South, Salt Lake City, Utah 84117.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
The Company's Common Stock has been listed on the OTC Bulletin Board under
the symbol "VITE" since November 18, 1996. During the period November 18, 1996
to March 31, 1997, the high and low last sale prices were $2.56 and $.50,
respectively. The Company considers its Common Stock to be thinly traded and
that any reported bid or sale prices may not be a true market-based valuation of
the Common Stock.
As of March 31, 1997, there were approximately 350 record holders of the
Company's Common Stock.
The Company has not paid any cash dividends since its inception and does
not contemplate paying dividends in the foreseeable future. It is anticipated
that earnings, if any, will be retained for the operation of the Company's
business.
ITEM 2. LEGAL PROCEEDINGS.
There are no pending legal proceedings to which the Company or the property
of the Company are subject. In addition, no proceedings are known to be
contemplated by a governmental authority against the Company or any officer or
director of the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Inapplicable.
-15-
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years the Company sold unregistered shares of its
Common Stock in the following transactions:
A. Pursuant to a Securities Purchase Agreement and Plan of Reorganization
dated July 3, 1996, the holders of all of the issued and outstanding capital
stock of Virtual Telecom SA, Messrs. Neil Gibbons and Daniel Huber, transferred
those shares to the Company in exchange for the Company's issuance of 3,193,540
shares of its Common Stock to Messrs. Gibbons and Huber. The issuance was
conducted pursuant to Regulation S under the Securities Act of 1933 ("1933
Act").
B. Pursuant to an Agreement and Plan of Merger dated July 31, 1996 between
the Company and Moke Acquisition Corp. ("Moke"), Moke merged with and into the
Company effective as of August 30, 1996. Pursuant to the Agreement and Plan of
Merger, each outstanding share of Moke common stock was converted into .0867471
shares of the Company's Common Stock, for an aggregate issuance of 355,039
shares of the Company's Common Stock to the shareholders of Moke. The issuance
of the Company's shares of Common Stock to the shareholders of Moke was
conducted pursuant to Rule 504 under the 1933 Act.
C. In August 1996, the Company issued 191,611 shares of Common Stock to a
Swiss investment banking firm in consideration of certain advisory services.
The issuance was conducted pursuant to Regulation S under the 1933 Act.
D. In August 1996, the Company issued 200,000 shares of Common Stock to
four Swiss residents in consideration of services rendered. The issuance was
conducted pursuant to Regulation S under the 1933 Act.
E. From October 1 through December 2, 1996, the Company conducted a
private placement of units ("Units") of its securities at $3.50 per Unit. Each
Unit consists of one share of the Company's Series A Preferred Stock and one
common stock purchase warrant. The Company sold 283,781 Units to European
institutional investors for the gross proceeds of $993,233.50. There was no
underwriter involved in this placement. The issuance was conducted pursuant to
Regulation S under the 1933 Act.
F. From January 8, 1997 through March 10, 1997, the Company conducted a
private placement of shares of Common Stock. In the private placement, the
Company sold 509,091 shares of Common Stock to two European institutional
investors, at an offering price of $1.65 per share, for the gross proceeds of
$840,000. There was no underwriter involved in this placement. The issuance
was conducted pursuant to Rule 504 under the 1933 Act.
G. In March 1997, the Company issued 133,333 shares of Common Stock in
consideration of the cancellation of $200,000 of indebtedness owed under a Loan
Agreement dated May 15, 1996 with New Capital Investment Fund. There was no
underwriter involved. The issuance was conducted pursuant to Regulation S under
the 1933 Act.
-16-
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
DELAWARE STATUTES
Section 145 of the Delaware General Corporation Law, as amended, provides
for the indemnification of the Company's officers, directors, employees and
agents under certain circumstances as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
-17-
<PAGE>
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees). (Last amended by Ch.261,L.'94,eff.7-1-94.)"
-18-
<PAGE>
CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation provides that the directors of
the Company shall be protected from personal liability to the fullest extent
permitted by law. The Company's Bylaws also contain a provision for the
indemnification of the Company's directors (see "Indemnification of Directors
and Officers - Bylaws" below).
BYLAWS
The Company's Bylaws provide for the indemnification of the Company's
directors, officers, employees, or agents under certain circumstances as
follows:
"7.1 AUTHORIZATION FOR INDEMNIFICATION. The Corporation may indemnify, in
the manner and to the full extent permitted by law, any person (or the estate,
heirs, executors, or administrators of any person) who was or is a party to, or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
7.2 ADVANCE OF EXPENSES. Costs and expenses (including attorneys' fees)
incurred by or on behalf of a director or officer in defending or investigating
any action, suit, proceeding or investigation may be paid by the Corporation in
advance of the final disposition of such matter, if such director or officer
shall undertake in writing to repay any such advances in the event that it is
ultimately determined that he is not entitled to indemnification. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a determination is
reasonably and promptly made by the Board by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs) by independent legal
counsel in a written opinion, or by the stockholders, that, based upon the facts
known to the Board or counsel at the time such determination is made, (a) the
director, officer, employee or agent acted in bad faith or deliberately breached
his duty to the Corporation or its stockholders, and (b) as a result of such
actions by the director, officer, employee or agent, it is more likely than not
that it will ultimately be determined that such director, officer, employee or
agent is not entitled to indemnification.
7.3 INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body
-19-
<PAGE>
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article or applicable law.
7.4 NON-EXCLUSIVITY. The right of indemnity and advancement of expenses
provided herein shall not be deemed exclusive of any other rights to which any
person seeking indemnification or advancement of expenses from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. Any agreement for
indemnification of or advancement of expenses to any director, officer, employee
or other person may provide rights of indemnification or advancement of expenses
which are broader or otherwise different from those set forth herein."
INDEMNITY AGREEMENTS
The Company's Bylaws provide that the Company may indemnify directors,
officers, employees or agents to the fullest extent permitted by law and the
Company has agreed to provide such indemnification to its directors, Neil
Gibbons, Daniel Huber and William Cordeiro, pursuant to written indemnity
agreements.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheet at December 31, 1996 . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the years
ended December 31, 1996 and 1995. . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1996 and 1995 . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . F-6
-21-
<PAGE>
RAIMONDO, PETTIT & GLASSMAN
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Virtual Telecom, Inc.
(A Development Stage Company)
Geneva, Switzerland
We have audited the accompanying consolidated balance sheet of Virtual Telecom,
Inc. (a development stage company) at December 31, 1996 and the related
consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows for the years ended December 31, 1996 and 1995, and
for the period from inception (May 19, 1994) through December 31, 1996. The
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Virtual Telecom,
Inc. (a development stage company) as of December 31, 1996 and the results of
its operations and its cash flows for the years ended December 31, 1996 and 1995
and for the period from inception (May 19, 1994) through December 31, 1996, in
conformity with generally accepted accounting principles.
RAIMONDO, PETTIT & GLASSMAN
Torrance, California
March 14, 1997
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------
December 31,
1996
- -------------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 219,139
Advances to stockholder and related party 38,645
Prepaid expenses and other receivables 23,836
- -------------------------------------------------------------------------------
Total current assets 281,620
- -------------------------------------------------------------------------------
Property and equipment, net 634,472
Other assets 32,838
- -------------------------------------------------------------------------------
Total assets $ 948,930
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 298,635
Accrued liabilities 37,171
Current portion of capital lease obligations 10,849
Advances and convertible loans from stockholders and related parties 590,507
- -------------------------------------------------------------------------------
Total current liabilities 937,162
- -------------------------------------------------------------------------------
Long term capital lease obligations, net of current maturities 10,707
- -------------------------------------------------------------------------------
Total liabilities 947,869
- -------------------------------------------------------------------------------
COMMITMENTS (NOTE 8)
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 10,000,000
shares authorized; Series A convertible
preferred stock, 750,000 shares authorized,
283,781 issued and outstanding, liquidation
preference of $993,233 284
Common stock, $.001 par value, 20,000,000 shares
authorized, 3,940,190 issued and outstanding 3,940
Additional paid-in capital 994,465
Deficit accumulated during the development stage (1,063,088)
Cumulative translation adjustment 65,460
- -------------------------------------------------------------------------------
Total stockholders' equity 1,061
- -------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 948,930
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Period From
Inception (May 19,
Year Ended Year Ended 1994) through
December 31, December 31, December 31,
1996 1995 1996
- --------------------------------------------------------------------------------
OPERATING EXPENSES:
General and administrative $ 818,738 $ 48,520 $ 884,678
Research and development 130,335 19,406 159,001
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 949,073 67,926 1,043,679
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating loss (949,073) (67,926) (1,043,679)
- --------------------------------------------------------------------------------
Interest income (expense), net (15,237) (2,230) (19,409)
- --------------------------------------------------------------------------------
NET LOSS $ (964,310) $ (70,156) $(1,063,088)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Weighted average number of
common shares 3,374,108 3,193,540 3,263,437
NET LOSS PER COMMON SHARE (.29) (.02) (.33)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock Common Stock
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Issuance of common stock at
inception (May 19, 1994) 3,193,540 $ 3,194
Net loss
Cumulative translation adjustment
- -------------------------------------------------------------------------------------------
Balance, December 31, 1994 3,193,540 3,194
Net loss
Cumulative translation adjustment
- -------------------------------------------------------------------------------------------
Balance, December 31, 1995 3,193,540 3,194
Issuance of Series A preferred stock at
$3.50 per share, net of $167,713
issuance cost (November 1996) 283,781 $ 284
Issuance of common stock in consider-
ation for Moke Acquisition Corp. stock
(July 31, 1996) 355,039 355
Issuance of common stock in consider-
ation for consultation fees (November
1996) 191,611 191
Issuance of common stock in consider-
ation for preferred stock issuance fees
(November 1996) 200,000 200
Net loss
Cumulative translation adjustment
- -------------------------------------------------------------------------------------------
Balance, December 31, 1996 283,781 $ 284 3,940,190 $ 3,940
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Additional Total
Paid-In Accumulated Translation Stockholders'
Capital Deficit Adjustment Equity (Deficit)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock at
inception (May 19, 1994) $ 67,980 $ 71,174
Net loss $ (28,622) (28,622)
Cumulative translation adjustment $ 4,974 4,974
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 67,980 (28,622) 4,974 47,526
Net loss (70,156) (70,156)
Cumulative translation adjustment 5,559 5,559
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 67,980 (98,778) 10,533 (17,071)
Issuance of Series A preferred stock at
$3.50 per share, net of $167,713
issuance cost (November 1996) 825,236 825,520
Issuance of common stock in consider-
ation for Moke Acquisition Corp. stock
(July 31, 1996) 3,735 4,090
Issuance of common stock in consider-
ation for consultation fees (November
1996) 47,714 47,905
Issuance of common stock in consider-
ation for preferred stock issuance fees
(November 1996) 49,800 50,000
Net loss (964,310) (964,310)
Cumulative translation adjustment 54,927 54,927
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $994,465 ($ 1,063,088) $ 65,460 $1,061
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------------
Period From
Inception (May 19,
Year Ended Year Ended 1994) Through
December 31, December 31, December 31,
1996 1995 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (964,310) $ (70,156) $ (1,063,088)
Adjustments to reconcile net
loss to net cash used-in
operating activities:
Depreciation and amortization 28,566 16,738 53,307
Write-off of Moke goodwill
and assets 104,090 - 104,090
Interest accrued on loans
payable 26,362 - 26,362
Capitalization of interest (12,883) - 15,975
Stock issued for consultation
fees 47,903 - 47,903
Increase (decrease) resulting from
changes in:
Prepaid expense and
other receivables (25,789) 2,228 (23,836)
Accounts payable 67,623 3,636 74,754
Accrued liabilities 33,015 4,713 37,171
- --------------------------------------------------------------------------------------------
Net cash used-in operating activities (695,423) (42,841) (727,362)
- --------------------------------------------------------------------------------------------
CASH USED-IN INVESTING
ACTIVITIES:
Purchase of equipment (358,449) (11,660) (411,957)
Purchase of Moke Acquisition
Corp. (100,000) (100,000)
Other non-current asset
expenditures (26,023) (1,000) (35,761)
Advances to stockholder and
related party (40,775) - (40,775)
- --------------------------------------------------------------------------------------------
Net cash used-in investing activities (525,247) (12,660) (588,493)
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
- --------------------------------------------------------------------------------------------
Period From
Inception (May 19,
Year Ended Year Ended 1994) Through
December 31, December 31, December 31,
1996 1995 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
preferred stock $ 875,520 $ - $ 875,520
Proceeds from bridge loans 500,000 - 500,000
Collection of subscription
receivable 40,000 - 40,000
Issuance of common stock - - 35,587
Advances from stockholders
and related parties 72,282 58,834 154,363
Reimbursement of advances
from stockholders and
related parties (64,673) - (64,673)
Payment of capital lease
obligations (19,190) (18,361) (46,200)
Bank overdraft (1,217) 1,217 -
- --------------------------------------------------------------------------------------------
Net cash provided by financing
activities 1,402,722 41,690 1,494,597
- --------------------------------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents 37,087 1,495 40,397
- --------------------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 219,139 (12,316) 219,139
Cash and cash equivalents,
beginning of period - 12,316 -
- --------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 219,139 $ - $ 219,139
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
- --------------------------------------------------------------------------------------------
Period From
Inception (May 19,
Year Ended Year Ended 1994) Through
December 31, December 31, December 31,
1996 1995 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTARY DISCLOSURE:
Amounts paid for:
Interest $ 2,056 $ 2,227 $ 6,254
Income taxes $ - $ - $ -
Non-cash financing transactions:
Capital leases to finance
property and equipment $ 15,806 $ - $ 65,776
Common stock issued in con-
sideration for Moke Acqui-
sition Corp.'s stock $ 4,090 $ - $ 4,090
Common stock issued in con-
sideration for consultation
fees $ 47,903 $ - $ 47,903
Preferred stock issuance costs $ 117,713 $ - $ 117,713
Common stock issued in con-
sideration for preferred
stock issuance fees $ 50,000 $ - $ 50,000
Interest accrued on loans
Payable $ 26,362 $ - $ 26,362
Capitalization of interest $ 12,883 $ - $ 12,883
Accrued invoice for equip-
ment acquired $ 223,881 $ - $ 223,881
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE COMPANY
THE COMPANY
Virtual Telecom, Inc. ("Virtual Telecom" or the "Company") was incorporated
in Delaware on July 3, 1996. The Company was incorporated for the purpose of
holding all the shares of Virtual Telecom S.A., a Swiss corporation formed in
1994. The owners of Virtual Telecom S.A. contributed all of the Virtual
Telecom S.A. shares in consideration for 3,194,540 common shares of Virtual
Telecom, Inc. The accompanying financial statements have been prepared as if
the acquisition had occurred at Virtual Telecom S.A.'s inception (May 19,
1994), using the historical costs of each entity as if the merger was a
pooling of interest.
MERGER WITH MOKE
On July 31, 1996, the Company entered into an agreement and plan of merger
with Moke Acquisition Corp. ("Moke"), a publicly-held shell corporation with
no operations. The Company issued 355,039 shares in exchange for the
4,090,448 shares of Moke's common stock outstanding and incurred
approximately $100,000 in acquisition costs. The business combination was
accounted for using the purchase method. The purchase price was allocated as
follows:
Organization costs $ 4,090
Other assets 100
Goodwill 100,000
Accrued liabilities (100)
---------
Total purchase price $104,090
---------
---------
Since Moke's operations were not expected to generate any cash flows in the
future, all of Moke's assets and goodwill were written off.
VIRTUAL TELECOM S.A.
Virtual Telecom S. A. is engaged in the development of financial information
services for use by the private investor and delivered by electronic
publishing systems such as fax-on-demand, terminal based on-line systems, and
PC modem based on-line systems.
Virtual Telecom S. A. is in the development stage and is currently developing
value-added Internet based services and plans to implement a Dial-Up Internet
Access service for the Swiss market. The Company concentrates its activities
in developing its products, securing strategic agreements to enable the
Company to provide planned services (see Note 8) and securing additional
capital (see Notes 5, 6, and 9).
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE COMPANY (CONTINUED)
GOING CONCERN
Since inception, the Company and Virtual Telecom S.A. have not generated any
revenues, had recurring losses and negative working capital. Susbequent to
year end, the Company sold common stock and converted debt into common stock
(see Note 9). Management believes that such funds will be sufficient to
cover the Company's cash requirements during the remainder of its development
stage period and until attainment of breakeven operations. Accordingly, the
accompanying financial statements were prepared assuming the Company will
continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLE OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company and
its wholly-owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.
MANAGEMENT'S ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
FOREIGN CURRENCY TRANSLATION
The Company accounts for foreign currency transactions in accordance with
Statement of Financial Accounting Standard (SFAS) No. 52, "Foreign Currency
Translation" which provides for the translation of assets and liabilities at
the end of period current rate and of operations and cash flows at the rates
existing at the date of the transaction, or appropriate average. Foreign
currency transactions are translated into the functional currency at the rate
existing at the date of the transactions and outstanding balances are
reevaluated at year end rate with the resulting exchange gain or loss
included in the statement of operations. The Company's functional currency
is the Swiss Franc (SFR). The December 31, 1996 assets and liabilities were
translated into U.S. Dollars (the reporting currency) at 1.34 SFR per U.S.
Dollar and operations and cash flows at an average rate of
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION (CONTINUED)
1.24 SFR and 1.17 SFR per U.S. Dollar for 1996 and 1995, respectively. The
resulting gain or loss on translation into the reporting currency is included
as a separate component of equity under "cumulative translation adjustment."
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Assets are depreciated on the
straight-line method over their estimated useful lives, which range from 3 to
5 years. Leasehold improvements are amortized over the shorter of the life
of the lease or the life of the asset. Upon sale, any gain or loss is
included in the statement of operations. Maintenance and minor replacements
are charged to operations as incurred.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Research and development costs are expensed as incurred. The Company
accounts for its software development costs in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed." This statement provides for capitalization of certain
software development costs once technological feasibility is established by
completion of a working model and ending when a product is available for
general release to customers. The costs capitalized are then amortized on a
straight-line basis over the estimated product life (generally eighteen
months to three years), or on the ratio of current revenue to total projected
product revenue, whichever is greater. To date, completion of a working
model of the Company's products and general release have substantially
coincided. Accordingly, the Company has not capitalized any software
development costs.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
initial maturity of three months or less to be cash equivalents.
The Company is required to maintain a $30,000 compensating balance in one of
its bank accounts to secure the credit line available on credit cards used by
Company personnel.
INCOME TAXES
The Company utilizes the liability method to account for income taxes. Under
this method, deferred taxes are determined based on the differences between
the financial statement and tax
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (CONTINUED)
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
bases of assets and liabilities, using enacted tax rates in effect for the
year in which the differences are expected to reverse. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments included in current assets and
liabilities approximates fair value because of the short maturity of these
items.
ISSUANCE OF STOCK FOR SERVICES
Shares of the Company's common stock issued for services are recorded in
accordance with APB16 and SFAS No. 123, "Accounting for Stock-Based
Compensation" at the fair market value of the stock issued or the fair market
value of the services provided, whichever value is more clearly evident.
NET LOSS PER COMMON SHARE
Net loss per common share is based on the reported net loss divided by the
weighted average number of common shares outstanding. Convertible preferred
stock, outstanding warrants and/or options have not been included as their
effect would be anti-dilutive.
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Software $ 4,301
Computer equipment 30,600
Computer equipment under capital lease 49,201
Furniture and fixtures 43,129
Vehicle under capital lease 19,313
Network equipment in process of installation 528,928
- --------------------------------------------------------------------------------
675,472
Less: Accumulated depreciation and amortization (41,000)
- --------------------------------------------------------------------------------
$ 634,472
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Depreciation and amortization amounted to $28,566 and $9,573, including
$11,527 and $5,334 in amortization of assets under capital leases for the
years ended December 31, 1996 and 1995, respectively. During 1996, the
Company capitalized $12,883 in interest expense incurred during the
installation of the network equipment. No depreciation was recorded during
1996 when the network equipment was being installed. The network equipment
was approved for operation in March 1997.
It is the Company's policy to depreciate its computer and network equipment
over their estimated useful lives based on current conditions. Given the
rapid technological change affecting such equipment, it is at least
reasonably possible that the Company's estimates may change in the near term.
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
4. CAPITAL LEASE OBLIGATIONS
The Company leases computer equipment and a vehicle under long term capital
lease contracts. The capital lease obligations consist of the following:
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Future minimum lease payments:
1997 $ 11,633
1998 4,164
1999 4,164
2000 3,470
- --------------------------------------------------------------------------------
23,431
Less amount representing interest 1,875
- --------------------------------------------------------------------------------
21,556
Less current maturities 10,849
- --------------------------------------------------------------------------------
Long term capital lease obligations $ 10,707
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. ADVANCES AND CONVERTIBLE LOANS TO AND FROM STOCKHOLDERS AND RELATED PARTIES
Advances to stockholder and related party represent an advance due on demand.
Advances and loans from stockholders and related parties consist of the
following:
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Bridge loans $ 526,362
Advances from stockholders and related parties 64,145
- --------------------------------------------------------------------------------
$ 590,507
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
5. ADVANCES AND CONVERTIBLE LOANS TO AND FROM STOCKHOLDERS AND RELATED
PARTIES (CONTINUED)
In May 1996 and December 1996, the Company received bridge loans of $300,000
and $200,000, respectively, with principal and interest accrued at 12%, due
one year from the date such loans were made. The loans are convertible into
common shares of the Company at the option of the borrower. If the Company
elects to pay in common stock, the common stock will be valued at 75% of the
average public market price for a 90 day period preceding the repayment date.
In connection with these loans, the Company paid 1.25% of the loan's
principal in loan origination fees. The Company also entered into a
consulting agreement with an investment banking firm related to the lender to
assist in the implementation of the public emergence, as well as to raise
additional funds from private placements. The Company paid $80,000 and
issued 191,611 shares of its common stock in consideration for such services.
The stock was valued at 25CENTS a share, its opening trading price in
November 1996, which represents a consulting fee expense of $47,903.
Amounts payable to stockholders and related parties consist of advances made
by related parties and the stockholders of the Company to finance the
development of the Company's operations. The advances are due on demand.
6. CONVERTIBLE PREFERRED STOCK
Preferred shares may be issued from time to time in one or more series. The
Board of Directors is authorized to fix the number of shares of any series of
preferred shares and to determine the designation of any such series. The
Board of Directors is also authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any
privileges and restrictions granted to or imposed upon any wholly unissued
series of preferred shares and, within the limits and restrictions stated in
any resolution or resolutions of the Board of Directors originally fixing the
number of shares constituting any series, to increase or decrease (but not
below the number of shares of any such series then outstanding) the number of
shares of any series subsequent to the issue of shares of that series.
On July 31, 1996, the Board of Directors of the Company designated an initial
series of preferred stock known as "Series A Preferred Stock" consisting of
750,000 authorized shares. Each share of Series A Preferred Stock has a par
value of $0.001 and a liquidation preference of $3.50 per share. The Series
A Preferred Stock does not carry dividend rights or any other rights senior
to the common stock. The Series A Preferred Stock has equal voting rights
with the Common Stock and each share of Series A Preferred Stock is
convertible into one share of Common Stock. The Series A Preferred Stock is
redeemable by the Company, at a price equal to the liquidation preference
plus any unpaid dividends, at the earlier of one year from the date of
initial issuance or upon the closing of a public offering of the Company's
common stock, where, immediately following such offering, the common stock is
listed on the New York or American Stock Exchanges or the NASDAQ Stock Market.
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
6. CONVERTIBLE PREFERRED STOCK (CONTINUED)
During 1996, 283,781 Series A Preferred shares and warrants were issued for a
total consideration of $875,520, net of $117,713 in issuance costs. In
connection therewith, the Company also issued 200,000 shares of its common
stock to related parties as commissions for the issuance of the preferred
stock. The shares were valued at 25CENTS a share, the opening trading price
of the Company's stock in November 1996, resulting in a $50,000 deduction
from the preferred stock proceeds.
The 283,781 warrants provide the holder with the right to acquire 283,781
shares of the Company's common stock at $7 per share by July 31, 1998. No
warrants were exercised in 1996. Management believes the fair market value
of the warrants to be insignificant, because during 1996 the common stock
traded significantly below the exercise price of the warrants and the short
term of the exercise period.
7. INCOME TAXES
The Company is subject to U.S. federal income taxes, and Virtual Telecom S.A.
is subject to federal, county and city income and capital taxes in
Switzerland. There is no difference between Swiss statutory accounts and tax
bases. The Swiss income tax rates are linked to the rate of return on
equity. Effective income tax rates in Switzerland range from 17% to 43%.
Deferred tax assets of approximately $84,000 and $305,000 relate primarily to
the benefits of net operating losses of the Company and Virtual Telecom S.A.,
respectively. A valuation allowance was established to offset the deferred
tax assets.
For U.S. tax reporting purposes, the Company has a net operating loss
carryforward of approximately $247,000 to offset federal income taxes which
expires in 2012.
Virtual Telecom S.A. has a net operating loss carryforward available of
approximately $727,000 may be applied against future taxable income and
begins to expires in 2002. Capital taxes were immaterial for the period from
inception through December 31, 1996.
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
8. COMMITMENTS, RELATED PARTY TRANSACTIONS AND MAJOR AGREEMENTS
NETWORK EQUIPMENT SERVICE AGREEMENT
In September 1996, the Company entered into an equipment purchase and network
maintenance service agreement with a major computer equipment manufacturer,
whereby the Company committed to purchase approximately $450,000 in computer
network equipment (included in property and equipment at December 31, 1996)
and to outsource the maintenance and operation of the network for a total of
approximately $1.1 million from 1997 through 2000. Decreasing cancellation
fees ranging from approximately $740,000 to $110,000 will apply if the
Company terminates the agreement before the end of the four year term of the
agreement. There are other major suppliers of similar equipment and services.
A change in supplier, however, could cause disruption in service and a
possible loss of revenues which would adversely affect future operating
results.
LICENSE TO USE AND DISSEMINATE STANDARD & POORS STOCK MARKET INFORMATION
In August 1996, the Company entered into a 30-month license agreement to use
and disseminate stock market information. After the initial term, the
agreement is renewable in twelve month increments, with a 90 day cancellation
notice period. License fees are based on 50% of the net revenues (as
defined) produced from giving access to the Standard & Poors information to
Internet users with minimum monthly fees increasing from approximately $3,500
in January 1997 to $17,000 in February 1998. A major portion of the
Company's future revenues will be dependent upon maintaining this license.
EMPLOYMENT AGREEMENTS
Commencing May 1, 1996, the Company entered into 5 year term employment
agreements with the Company's two majority stockholders. Both agreements
provide for a compensation of approximately $6,000 per month plus monthly car
allowance of approximately $500 per month. The agreements can be extended up
to three additional three year terms and are subject to yearly CPI increases.
Total compensation paid under these agreements in 1996 amounted to
approximately $102,000.
ADMINISTRATIVE ASSISTANCE
In May 1996, the Company entered into an agreement with a related party
whereby the related party provides administrative services to the U.S.
holding corporation for $4,000 per month. Amounts charged under this
contract during 1996 were approximately $26,000.
<PAGE>
VIRTUAL TELECOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
8. COMMITMENTS, RELATED PARTY TRANSACTIONS AND MAJOR AGREEMENTS (CONTINUED)
OFFICE LEASE
From January 1, 1996 through September 30, 1996, the Company subleased space
from a company affiliated with a stockholder. Since September 1996 the
Company has been leasing an office building in Geneva, Switzerland under a
noncancellable lease agreement which expires on August 31, 1999. After that
date the lease is renewable year to year for an additional five year period.
The commitment under this lease approximates $75,000 per year. Rent expense
for 1996 and 1995 amounts to approximately $50,000 and $0, respectively.
In October 1996, the Company entered into a month to month sublease agreement
with a company affiliated with a stockholder, whereby the Company recovers
approximately $1,175 per month for use of its premises, utilities and
computer systems usage. Amounts charged to the affiliate amounted to
approximately $3,525 from October through December 1996.
9. SUBSEQUENT EVENTS
Subsequent to year end the Company raised $840,000 from the sale of 509,091
shares of its common stock and agreed to convert $200,000 of the first
$300,000 bridge loan into 133,333 shares of common stock. The lender also
agreed to consider renegotiating the payment terms of the remainder of the
loans after the Virtual Telecom network is operational for 90 days.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS PAGE
----
2.1 Securities Purchase Agreement and Plan of Reorganization dated
July 3, 1996 between the Company and Neil Gibbons and Daniel Huber.
2.2 Agreement and Plan of Merger dated July 31, 1996 between the Company
and Moke Acquisition Corp.
3.1 Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Specimen of Common Stock Certificate
4.2 Certificate of Designations of Series A Preferred Stock
10.1 Loan Agreement dated May 15, 1996 between Virtual Telecom SA and New
Capital Investment Fund
10.2 Partnership Outsourcing Agreement dated September 9, 1996 between
Virtual Telecom SA and Digital Equipment Corporation
10.3 Employment Agreement dated May 31, 1996 between Virtual Telecom SA and
Neil Gibbons
10.4 Employment Agreement dated May 31, 1996 between Virtual Telecom SA and
Daniel Huber
10.5 Computer Software License Agreement dated January 16, 1997 between
Virtual Telecom SA and Townsend Analytics, Ltd.
10.6 Information and Distribution License Agreement dated August 23, 1996
between Virtual Telecom SA and McGraw-Hill International (UK) Ltd.
10.7 Agreement for Global Telecommunications Services dated October 1, 1996
between Virtual Telecom SA and BT Limited Londres (British Telecom)
10.8 Unidata Frame Relay & Unimaster Services dated October 22, 1996
between Virtual Telecom SA and Swiss Telecom ITT
10.9 News Distributor Agreement dated January 7, 1997 between Virtual
Telecom SA and AFX News Limited
21.1 The Company has one subsidiary, Virtual Telecom SA, a Swiss
corporation
27.1 Financial Data Schedule
-22-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
VIRTUAL TELECOM, INC.
/s/ Neil Gibbons
Date: April 4, 1997 By:________________________________________
Neil Gibbons, Chief Executive Officer
-23-
<PAGE>
SECURITIES PURCHASE AGREEMENT
AND PLAN OF REORGANIZATION
THIS SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION ("Agreement")
is entered into on July 3, 1996 by and among VIRTUAL TELECOM, INC., a Delaware
corporation ("VTI-Delaware"); and NEIL GIBBONS and DANIEL HUBER. (Mr. Gibbons
and Mr. Huber are sometimes referred to herein as the "Selling Stockholders.")
R E C I T A L S
A. VTI-Delaware has authorized capital stock consisting of 20,000,000
shares of common stock, $.001 par value, and 10,000,000 shares of preferred
stock, $.001 par value. VTI-Delaware has no shares of Common Stock or Preferred
Stock issued or outstanding.
B. The Selling Shareholders are the sole stockholders of Virtual Telecom
SA, a Switzerland corporation ("Virtual-SA"). Virtual-SA has an authorized
capitalization consisting of 100 uncertificated shares of capital stock, all of
which are issued, outstanding and held by the Selling Shareholders.
C. The Selling Stockholders wish to sell, and VTI-Delaware wishes to
acquire, all of the issued and outstanding shares of Virtual-SA capital stock on
the Closing Date (as defined below), in exchange for VTI-Delaware's transfer to
the Selling Stockholders of an aggregate of 3,193,540 shares of VTI-Delaware
common stock, subject to and upon the terms and conditions hereinafter set
forth.
A G R E E M E N T
It is agreed as follows:
1. SECURITIES PURCHASE AND REORGANIZATION.
1.1 AGREEMENT TO EXCHANGE SECURITIES. Subject to and upon the terms
and conditions set forth herein, each Selling Stockholder agrees to sell,
assign, transfer and deliver to VTI-Delaware, and VTI-Delaware agrees to
purchase from each Selling Stockholder, on the Closing Date, all of the Selling
Shareholders' right, title and interest in and to the outstanding shares of
capital stock of Virtual-SA (collectively, the "Virtual-SA Shares") owned by the
respective Selling Stockholder, in exchange for the transfer, on the Closing
Date, by VTI-Delaware to each Selling Stockholder of 1,596,770 shares VTI-
Delaware's $.001 par value common stock (collectively, the "VTI-Delaware
Shares")
<PAGE>
1.2 INSTRUMENTS OF TRANSFER.
(a) VIRTUAL-SA SHARES. Selling Stockholder hereby endorses,
assigns and transfers all of his right and interest in and to the Virtual-SA
Shares. From time to time after the Closing Date, and without further
consideration, the Selling Stockholders will execute and deliver such other
instruments of transfer and take such other actions as VTI-Delaware may
reasonably request in order to more effectively transfer to VTI-Delaware the
securities intended to be transferred hereunder.
(b) VTI-DELAWARE SHARES. VTI-Delaware shall deliver to the
Selling Stockholders on the Closing Date original certificates evidencing VTI-
Delaware Shares, in form and substance satisfactory to the Selling Stockholders,
in order to effectively vest in the Selling Stockholders all right, title and
interest in and to the VTI-Delaware Shares. From time to time after the Closing
Date, and without further consideration, VTI-Delaware will execute and deliver
such other instruments and take such other actions as the Selling Stockholders
may reasonably request in order to more effectively issue to them VTI-Delaware
Shares.
1.3 CLOSING. The closing ("Closing") of the exchange of the Virtual-
SA Shares and the VTI-Delaware Shares shall take place at the offices of
Virtual-SA, at 10:00 a.m., local time, on July 3, 1996, or at such other time
and place as may be agreed to by the Selling Shareholders and VTI-Delaware
("Closing Date").
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder severally represents, warrants and covenants to and with
VTI-Delaware with respect to himself, as follows:
2.1 POWER AND AUTHORITY. The Selling Stockholder has all requisite
individual power and authority to enter into and to carry out all of the terms
of this Agreement and all other documents executed and delivered in connection
herewith (collectively, the "Documents"). All individual action on the part of
the Selling Stockholder necessary for the authorization, execution, delivery and
performance of the Documents by the Selling Stockholder has been taken and no
further authorization on the part of the Selling Stockholder is required to
consummate the transactions provided for in the Documents. When executed and
delivered by the Selling Stockholder, the Documents shall constitute the valid
and legally binding obligation of the Selling Stockholder enforceable in
accordance with their respective terms.
2.3 OWNERSHIP OF AND TITLE TO SECURITIES. The Selling Stockholders
represent that they are the sole owner of all of the issued and outstanding
shares of capital stock of Virtual-SA and that there are no warrants, options,
subscriptions, calls, or other similar rights of any kind for the issuance or
purchase of any securities of Virtual-SA held by the Selling Stockholder or any
other persons. The Selling Stockholder represents that the Selling Stockholder
has and will transfer to VTI-Delaware good and marketable title to the Virtual-
SA Shares which he owns, free and clear of all pledges, security interests,
mortgages, liens, claims, charges, restrictions or encumbrances.
2.4 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. The Selling
Stockholder represents that, to his best knowledge, no order of any court or
administrative agency is in effect which restrains or prohibits the Selling
Stockholder from consummating the transactions contemplated hereby, and no suit,
action, investigation, inquiry or proceeding by any governmental body or other
person or legal or administrative proceeding has been instituted or threatened
which
<PAGE>
questions the validity or legality of the Selling Stockholder's consummation of
the transactions contemplated hereby.
2.5 APPROVALS AND CONSENTS. The Selling Stockholder represents that,
to his best knowledge, there are no permits, consents, mandates or approvals of
public authorities, either Swiss or foreign, federal, state or local, or of any
third party necessary for the Selling Stockholder's consummation of the
transactions contemplated hereby.
2.6 INVESTMENT AND RELATED REPRESENTATIONS. The Selling Stockholder
is aware that neither the VTI-Delaware Shares nor the offer or sale thereof to
the Selling Stockholder has been registered under the U.S. Securities Act of
1933, as amended ("Securities Act"), or under any foreign or state securities
law. The Selling Stockholder acknowledges that the VTI-Delaware Shares are
being offered pursuant to Regulation S under the Securities Act. The Selling
Stockholder acknowledges that it is not a "U.S. person" as defined by Rule
902(o) under the Securities Act, and that it is not acquiring the VTI-Delaware
Shares for the account or benefit of any "U.S. person." The Selling Stockholder
understands that to the extent Regulation S does not apply to VTI-Delaware's
issuance of VTI-Delaware Shares to the Selling Stockholder, the VTI-Delaware
Shares will be characterized as "restricted" securities under U.S. federal
securities laws inasmuch as they are being acquired in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances. The Selling Stockholder agrees that the
Selling Stockholder will not sell all or any portion of VTI-Delaware Shares
except in accordance with Regulation S, pursuant to registration under the
Securities Act or pursuant to an available exemption from registration under the
Securities Act. The Selling Stockholder understands that each certificate for
VTI-Delaware Shares issued to the Selling Stockholder or to any subsequent
transferee shall be stamped or otherwise imprinted with an appropriate legend
summarizing the restrictions described in this Section 2.6 and that VTI-Delaware
shall refuse to transfer the VTI-Delaware Shares except in accordance with such
restrictions.
3. MISCELLANEOUS.
3.1 CUMULATIVE REMEDIES. Any person having any rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages by reason of any breach of any provision of
this Agreement, and to exercise all other rights granted by law, which rights
may be exercised cumulative and not alternatively.
3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
3.3 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement or the other documents.
3.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts when taken together will constitute one and the
same agreement.
<PAGE>
3.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject matter
thereof, and supersedes all prior and contemporaneous agreements and
understandings.
IN WITNESS WHEREOF, each of the parties to this Agreement has executed or
caused this Agreement to be executed as of the date first above written.
"VTI-Delaware"
VIRTUAL TELECOM, INC.,
a Delaware corporation
By: /s/ Neil Gibbons
--------------------------------------
Neil Gibbons, Chief Executive Officer
"Selling Shareholders"
/s/ Neil Gibbons /s/ Daniel Huber
- -------------------------------------------------------------------------------
Neil Gibbons Daniel Huber
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger
Agreement") is made as of July 31, 1996, by and between Virtual Telecom, Inc., a
Delaware corporation ("Virtual Telecom"), and Moke Acquisition Corp., a Delaware
corporation ("Moke"). Virtual Telecom and Moke are sometimes referred to as the
"Constituent Corporations," with reference to the following facts:
A. The authorized capital stock of Virtual Telecom consists of twenty
million (20,000,000) shares of $.001 par value common stock and ten million
(10,000,000) shares of $.001 par value preferred stock. The authorized capital
stock of Moke consists of twenty million (20,000,000) shares of common stock,
$.001 par value.
B. There are 3,193,540 shares of common stock of Virtual Telecom
outstanding.
C. The directors of the Constituent Corporations deem it advisable and to
the advantage of said corporations that Moke merge into Virtual Telecom upon the
terms and conditions herein provided.
D. Moke has no subsidiaries, and has a total of 4,090,448 shares of
common stock issued and outstanding, and no other shares of any class are
outstanding, nor are there any options to acquire, or rights outstanding which
would give any person the right to acquire any share of Moke's stock.
NOW, THEREFORE, the parties do hereby adopt the plan of merger encompassed
by this Merger Agreement and do hereby agree that Moke shall merge with and into
Virtual Telecom on the following terms, conditions, and other provisions:
1. TERMS AND CONDITIONS
1.1 MERGER. Moke shall be merged with and into Virtual Telecom (the
"Merger"), and Virtual Telecom shall be the surviving corporation (the
"Surviving Corporation") effective upon the date when this Merger Agreement or a
Certificate of Merger is filed with the Secretary of State of the State of
Delaware (the "Effective Date").
1.2 SUCCESSION. On the Effective Date, Virtual Telecom shall continue
its corporate existence under the laws of the State of Delaware, and the
separate existence and corporate organization of Moke, except insofar as it may
be continued by operation of law, shall be terminated and cease.
1.3 TRANSFER OF ASSETS AND LIABILITIES. On the Effective Date, the
rights, privileges, powers and franchises, both of a public as well as of a
private nature, of each of the Constituent Corporations shall be vested in and
possessed by the Surviving Corporation, subject to all of the liabilities,
duties and restrictions of or upon each of the Constituent Corporations; and all
and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, of each of
the Constituent Corporations, and all debts due to each of the Constituent
Corporations
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<PAGE>
on whatever account, and all things in action or belonging to each of the
Constituent Corporations shall be transferred to and vested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest, shall be thereafter the property of the Surviving
Corporation as they were of the Constituent Corporations, and the title to any
real estate vested by deed or otherwise in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of the Merger;
provided, however, that the liabilities of the Constituent Corporations and of
their stockholders, directors and officers shall not be affected and all rights
of creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved or repaired, and any claim existing or action or
proceeding pending by or against either of the Constituent Corporations may be
prosecuted to judgments as if the Merger had not taken place except as they may
be modified with the consent of such creditors and all debts, liabilities and
duties of or upon each of the Constituent Corporations shall attach to the
Surviving Corporation, and may be enforced against it to the same extent as if
such debts, liabilities and duties had been incurred or contracted by it.
1.4 MANNER OF ACCOMPLISHING MERGER. The Merger shall be accomplished
by way of converting all of the issued and outstanding shares of Moke for the
common stock of Virtual Telecom at the ratio of .0867471 share of Virtual
Telecom for each one share of Moke outstanding on the effective date of the
Merger. All Moke shares of record outstanding on the date of the Merger will be
deemed "cancelled," and the transfer agent will automatically be instructed to
issue new certificates of Virtual Telecom, based on the above ratio, to each of
the shareholders of Moke, at the address listed in the register of shareholders.
No fractional shares will be issued, but each fractional share will be rounded
up to the next share and a certificate for Virtual Telecom will be issued to
each record holder of Moke accordingly. The exchange will be accomplished
pursuant to an exemption from registration provided by Regulation D, Section 504
in each state where said exemption or a registration of the issuance can be
accomplished. In each state where an exemption from registration is not
available pursuant to Rule 504 of Regulation D or some other available exemption
from registration which can be reasonably complied with, Virtual Telecom shall
issue cash in lieu of the exchanged securities of Moke at par value ($.001 per
share exchanged).
1.5 RIGHTS OF APPRAISAL. This Merger shall be subject to the rights
of appraisal granted to the shareholders of a Delaware corporation in accordance
with the General Corporation Law of the State of Delaware. Should more than five
percent (5%) of the shareholders of Moke, regardless of the number of shares
owned, seek to enforce their rights of appraisal, the Merger shall be deemed
cancelled and all parties relieved of any obligation pursuant to this Agreement.
1.6 OBLIGATIONS OF MOKE TO ISSUE ITS SECURITIES. As of the date of
this Merger Agreement and until the Effective Date, Moke will have no
obligations to issue any additional shares of its common stock to any person or
entity whatsoever, including as a result of having previously issued any
warrants to acquire common stock, any options to acquire its securities as a
result of any employee stock option plan or otherwise, or pursuant to any
employee benefit plan. Moke further represents that the capitalization, as set
forth in paragraph D of the preamble to this Agreement, is true and accurate in
all respects.
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<PAGE>
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of Virtual Telecom in effect on the Effective Date shall continue
to be the Certificate of Incorporation of the Surviving Corporation. The Bylaws
of Virtual Telecom shall be the Bylaws of the Surviving Corporation, as they may
be amended from time to time.
2.2 DIRECTORS. The directors of Virtual Telecom immediately preceding
the Effective Date shall become the directors of the Surviving Corporation on
and after the Effective Date to serve until the expiration of their terms and
until their successors are elected and qualified.
2.3 OFFICERS. The officers of Virtual Telecom immediately preceding
the Effective Date shall become the officers of the Surviving Corporation on and
after the Effective Date to serve at the pleasure of its Board of Directors.
3. REPRESENTATIONS AND WARRANTIES
Moke represents and warrants to Virtual Telecom as follows:
3.1 ORGANIZATION. Moke is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware, has all necessary
corporate powers to own properties of and carry on a business, and is duly
qualified to do business and is in good standing in Delaware. All actions taken
by the Incorporators, directors and/or shareholders of Moke have been valid and
in accordance with the laws of the State of Delaware. The execution, delivery
and performance by Moke of this Merger Agreement has been duly authorized by the
board of directors and stockholders of Moke.
3.2 CAPITAL. The authorized capital stock of Moke consists of
20,000,000 shares of common stock, $.001 par value, of which 4,090,448 shares
are issued and outstanding. All outstanding shares are fully paid and non
assessable, free of liens, encumbrances, options, restrictions and legal or
equitable rights of others not a party to this Merger Agreement. As of the
Effective Date, there will be no outstanding securities, or other agreements or
commitments obligating Moke to issue or to transfer from treasury any additional
shares of its capital stock. None of the outstanding shares of Moke are subject
to any stock restriction agreements. There are approximately 331 bona fide
shareholders of Moke. All of such shareholders have valid title to such shares
and acquired their shares in a lawful transaction and in accordance with
Delaware corporate law.
3.3 FINANCIAL STATEMENTS. Exhibit A to this Merger Agreement
includes the balance sheets of Moke as of July 11, 1996 and the related
statements of income and retained earnings for the period from inception (April
6, 1996) to July 11, 1996. The financial statements have been prepared in
accordance with generally accepted accounting principles consistently followed
by Moke throughout the periods indicated, and fairly present the financial
position of Moke as of the date of the balance sheet included in the financial
statements, and the results of its operations for the periods indicated.
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<PAGE>
3.4 ABSENCE OF CHANGE. Since July 11, 1996, there has not been any
change in the financial condition of operations of Moke, except changes in the
ordinary course of business, which changes have not in the aggregate been
materially adverse.
3.5 LIABILITIES. Moke does not have any debt, liability, or
obligation of any nature, whether accrued, absolute, contingent, or otherwise,
and whether due or to become due, that is not reflected in Moke's balance sheet
of July 11, 1996. Moke is not aware of any pending, threatened or asserted
claims, lawsuits or contingencies pending, threatened or asserted claims,
lawsuits or contingencies involving Moke or its common stock. There is no
dispute of any kind between Moke and any third party, and no such dispute will
exist on the Effective Date of this Agreement. As of the Effective Date, Moke
will be free from any and all liabilities, claims and/or commitments.
3.6 TAX RETURNS. Within the times and in the manner prescribed by
law, Moke has filed all federal, state, and local tax returns required by law
and has paid all taxes, assessments, and penalties due and payable. No federal
income tax returns of Moke have been audited by the Internal Revenue Service.
The provision for taxes, if any, reflected in Moke's balance sheet as of
July 11, 1996, is adequate for any and all federal, state, county and local
taxes for the period ending on the date of that balance sheet and for all prior
periods, whether or not disputed. There are no present disputes as to taxes of
any nature payable by Moke.
3.7 ABILITY TO CARRY OUT OBLIGATIONS. Moke has the right, power and
authority to enter into, and perform their obligations under this Merger
Agreement. The execution and delivery of this Merger Agreement by Moke and the
performance by Moke of its obligations hereunder will not cause, constitute, or
conflict with or result in (a) any breach or violation or any of the provisions
of or constitute a default under any license, indenture, mortgage, charter,
instrument, articles of incorporation, bylaw, or other agreement or instrument
to which Moke is a party, or by which it may be bound, nor will any consents or
authorizations of any party other than those hereto be required, (b) an event
that would cause Moke to be liable to any party, or (c) an event that would
result in the creation or imposition of any lien, charge, or encumbrance on any
asset of Moke.
3.8 FULL DISCLOSURE. None of the representations and warranties made
by Moke, or in any certificate or memorandum furnished or to be furnished on
behalf of Moke, or on their behalf, contains or will contain any untrue
statement of a material fact, or omit any material fact the omission of which
would be misleading.
3.9 CONTRACTS AND LEASES. Moke does not and has never carried on any
business. Moke is not a party to any contract, agreement or lease. No person
holds a power of attorney from Moke.
3.10 COMPLIANCE WITH LAWS. Moke has complied with, and is not in
violation of any federal, state, or local statute, law, and/or regulation
pertaining to Moke. Moke has complied with all federal and state securities
laws in connection with the offer, sale and distribution of its securities. At
the time Moke filed its Form D with the Securities and Exchange Commission, Moke
was entitled to use the exemption provided by
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<PAGE>
Section 504 of the Securities and Exchange Commission relative to the
distribution of its shares or any other transaction described in such Form D.
3.11 LITIGATION. Moke is not (and has not been) a party to any suit,
action, arbitration, or legal, administrative, or other proceeding, or pending
governmental investigation. To the best knowledge of Moke, there is no basis
for any such action or proceeding and no such action or proceeding is threatened
against Moke. Moke is not subject to or in default with respect to any order,
writ, injunction, or decree of any federal, state, local or foreign court,
department, agency, or instrumentality.
3.12 CONDUCT OF BUSINESS. Prior to the Effective Date, Moke shall
conduct its business in the normal course, and shall not (without the prior
written approval of Virtual Telecom): (i) sell, pledge or assign any assets;
(ii) amend its Articles of Incorporation or Bylaws; (iii) declare dividends,
redeem or sell stock or other securities; (iv) incur any liabilities;
(v) acquire or dispose of any assets, enter into any contract, guarantee
obligations of any third party; or (vi) enter into any other transaction.
3.13 CORPORATE DOCUMENTS. Copies of each of the following documents,
which are true, complete and correct in all material respects, will be attached
to and made a part of this Agreement:
(i) Articles of Incorporation;
(ii) Bylaws;
(iii) Minutes of Shareholders Meetings;
(iv) Minutes of Directors Meetings;
(v) An Opinion Letter from our attorney attesting to the
validity and condition of the Corporation;
(vi) List of Officers and Directors;
(vii) List of Shareholders;
(viii) Copy of Form D filed with Securities and Exchange
Commission;
(ix) Balance Sheet as of December 31, 1995, together with other
financial statements described in Section 2.03;
(x) Secretary of State Filing Receipt;
(xi) Copies of all federal and state income tax returns of
Moke;
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<PAGE>
(xii) Stock register and stock certificate records of Moke
and a current, accurate list of Moke shareholders;
(xiii) A copy of Form M-11 filed with the State of New York.
3.14 CLOSING DOCUMENTS. All minutes, consents or other documents
pertaining to Moke to be delivered as of the Effective Date shall be valid and
in accordance with the laws of Delaware.
4. MISCELLANEOUS
4.1 FURTHER ASSURANCES. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of Moke such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other action, as
shall be appropriate or necessary in order to vest or perfect in or to conform
of record or otherwise, in the Surviving Corporation the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Moke and otherwise to carry out the purposes of this
Merger Agreement, and the officers and directors of the Surviving Corporation
are fully authorized in the name and on behalf of Moke or otherwise to take any
and all such action and to execute and deliver any and all such deeds and other
instruments.
4.2 AMENDMENT. At any time before or after approval by the
shareholders of Moke, this Merger Agreement may be amended in any manner (except
that, after the approval of the Merger Agreement by the shareholders of Moke,
the principal terms may not be amended without the further approval of the
shareholders of Moke) as may be determined in the judgment of the respective
Board of Directors of Virtual Telecom and Moke to be necessary, desirable, or
expedient in order to clarify the intention of the parties hereto or to effect
or facilitate the purpose and intent of this Merger Agreement.
4.3 CONDITIONS TO MERGER. The obligation of the Constituent
Corporations to effect the transactions contemplated hereby is subject to
satisfaction of the following conditions (any or all of which may be waived by
either of the Constituent Corporations in its sole discretion to the extent
permitted by law):
(a) the Merger shall have been approved by the shareholders of
Moke in accordance with applicable provisions of the General Corporation Law of
the State of Delaware; and
(b) the Merger shall have been approved by the shareholders of
Virtual Telecom in accordance with applicable provisions of the General
Corporation Law of the State of Delaware; and
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<PAGE>
(c) any and all consents, permits, authorizations, approvals,
and orders deemed in the sole discretion of Moke to be material to consummation
of the Merger shall have been obtained; and
(d) the securities issued by Virtual Telecom may be issued
pursuant to an exemption from registration pursuant to the Securities Act of
1933, as amended, Regulation D, Section 504, and the shareholders who reside in
certain states which comport with said Regulation D, Section 504, or other
tandem exemptions from registration, may receive unrestricted securities in
exchange for the securities of Moke; and
(e) an audit of the books and records of Moke, conducted in
accordance with generally accepted accounting practices, shall have been
delivered to Virtual Telecom.
4.4 ABANDONMENT OR DEFERRAL. At any time before the Effective Date,
this Merger Agreement may be terminated and the Merger may be abandoned by the
Board of Directors of either Moke or Virtual Telecom or both, notwithstanding
the approval of the Merger by the shareholders of Moke or Virtual Telecom, or
the consummation of the Merger may be deferred for a reasonable period of time
if, in the opinion of the Boards of Directors of Moke and Virtual Telecom, such
action would be in the best interest of such corporations. In the event of
termination of this Merger Agreement, this Merger Agreement shall become void
and of no effect and there shall be no liability on the part of either
Constituent Corporation or its Board of Directors or shareholders with respect
thereto.
4.5 COUNTERPARTS. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original.
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IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Boards of Directors of Moke and Virtual Telecom, is hereby executed on
behalf of each said corporation and attested by their respective officers
thereunto duly authorized.
MOKE ACQUISITION CORP.,
a Delaware corporation
By: /s/ Morris Diamond
--------------------------------------------
Morris Diamond
President
ATTEST:
/s/ Shirley Diamond
- --------------------------
Shirley Diamond
Secretary
VIRTUAL TELECOM, INC.,
a Delaware corporation
By: /s/ Neil Gibbons
-------------------------------------------
Neil Gibbons, Chief Executive Officer
ATTEST:
/s/ Daniel Huber
- --------------------------
Daniel Huber
Secretary
<PAGE>
CERTIFICATE OF INCORPORATION
OF
VIRTUAL TELECOM, INC.
ARTICLE I
Name of Corporation
The name of this corporation is Virtual Telecom, Inc.
ARTICLE II
Registered Office and Agent
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road in the City of Wilmington, County of New Castle,
and the name of its registered agent at that address is Corporation Service
Company.
ARTICLE III
Purpose
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
Authorized Capital Stock
This Corporation is authorized to issue two classes of shares designated
respectively "Common Stock" and "Preferred Stock" and referred to herein as
Common Stock or Common Shares and Preferred Stock or Preferred Shares,
respectively. The total number of shares of Common Stock this Corporation is
authorized to issue is 20,000,000 and each such share shall have a par value of
$.001, and the total number of shares of Preferred Stock this corporation is
authorized to issue is 10,000,000 and each such share shall have a par value of
$.001. The Preferred Shares may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares of any
series of Preferred Shares and to determine the designation of any such series.
The Board of Directors is also authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Shares and, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series, to increase or decrease (but not below the
number of shares of any such series then outstanding) the number of shares of
any series subsequent to the issue of shares of that series.
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<PAGE>
ARTICLE V
Incorporator
The incorporator is Daniel K. Donahue, One Newport Place, Tenth Floor,
Newport Beach, California 92660.
ARTICLE VI
Limitation of Director Liability
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, a director of this corporation
shall not be liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director.
ARTICLE VII
Perpetual Existence
The corporation is to have perpetual existence.
ARTICLE VIII
Stockholder Meetings
Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the bylaws of the corporation.
ARTICLE IX
By laws
In furtherance and not in limitation of the powers conferred by statute,
the board of directors is expressly authorized to make, repeal, alter, amend and
rescind the bylaws of this corporation, subject to any limitations expressed in
such bylaws.
ARTICLE X
Amendment of Certificate of Incorporation
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
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<PAGE>
I, the undersigned, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make, file and record this Certificate, hereby declaring
and certifying under penalty of perjury that this is my act and deed and the
facts herein stated are true, and accordingly have hereunto set my hand.
Dated: July 1, 1996
/s/ Daniel K. Donahue
---------------------------------------
Daniel K. Donahue, Incorporator
-3-
<PAGE>
BYLAWS
OF
VIRTUAL TELECOM, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICE
1.1 REGISTERED OFFICE. The registered office of Virtual Telecom, Inc., a
Delaware corporation (hereinafter called the "Corporation"), in the State of
Delaware shall be at 1013 Centre Road, City of Wilmington, County of New Castle,
and the name of the registered agent in charge thereof shall be Corporation
Service Company.
1.2 PRINCIPAL OFFICE. The principal office for the transaction of the
business of the Corporation shall be 60, Rue du Stand, Geneva, Switzerland. The
Board of Directors (hereinafter called the "Board") is hereby granted full power
and authority to change the principal office from one location to another.
1.3 OTHER OFFICES. The Corporation may also have an office or offices at
such other place or places, either within or without the State of Delaware, as
the Board may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 ANNUAL MEETINGS. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other business as may properly come before such meetings in accordance with
Section 2.11 of these Bylaws may be held at such time, date and place as the
Board shall determine by resolution.
2.2 SPECIAL MEETINGS. A special meeting of the stockholders for the
transaction of any proper business may be called at any time by the Board, the
Chief Executive Officer (Chairman of the Board), the President or one or more
stockholders holding shares in the aggregate entitled to cast not less than ten
percent (10%) of the votes at that meeting.
2.3 PLACE OF MEETINGS. All meetings of the stockholders shall be held at
such places within or without the State of Delaware, as may from time to time be
designated by the person or persons calling the respective meeting and specified
in the respective notices or waivers of notice thereof.
2.4 NOTICE OF MEETINGS.
(a) Except as otherwise required by law, written notice of each
meeting of the stockholders, whether annual or special, shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder of record entitled to vote at such meeting. If mailed, notice
is given when deposited in the United States mail, postage prepaid, directed to
the stockholder at his address as it appears on the records of the Corporation.
Except
<PAGE>
as otherwise expressly required by law, no publication of any notice of a
meeting of the stockholders shall be required. Every notice of a meeting of the
stockholders shall state the place, date and hour of the meeting, and in the
case of a special meeting, shall also state the purpose or purposes for which
the meeting is called. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall have waived such notice and
such notice shall be deemed waived by any stockholder who shall attend such
meeting in person or by proxy, except as a stockholder who shall attend such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Except as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken.
(b) Whenever notice is required to be given to any stockholder to
whom (i) notice of two consecutive annual meetings, and all notices of meetings
or of the taking of action by written consent without a meeting to such person
during the period between such two consecutive annual meetings, or (ii) all, and
at least two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any person shall deliver to the Corporation a written notice setting
forth his then current address, the requirement that notice be given to such
person shall be reinstated. In the event that the action taken by the
Corporation is such as to require the filing of a certificate under any of the
other sections, the certificate need not state that notice was not given to
persons to whom notice was not required to be given pursuant to this section.
2.5 QUORUM. Except as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. The stockholders present at a duly
called or held meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum, and by any greater number of shares otherwise required to
take such action by applicable law or the Certificate of Incorporation. In the
absence of a quorum at any meeting or any adjournment thereof, a majority in
voting interest of the stockholders present in person or by proxy and entitled
to vote thereat or, in the absence therefrom of all the stockholders, any
officer entitled to preside at, or to act as secretary of, such meeting may
adjourn such meeting from time to time. At any such adjourned meeting at which
a quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
2.6 VOTING.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 2.10 of these Bylaws
as the record date for the determination of stockholders entitled to notice of
and to vote at such meeting,
<PAGE>
or
(ii) if no such record date shall have been so fixed, then (A) at
the close of business on the day next preceding the day on which notice of the
meeting shall be given or (B) if notice of the meeting shall be waived, at the
close of business on the day next preceding the day on which the meeting shall
be held.
(b) Voting shall in all cases be subject to the provisions of the
Delaware General Corporation Law and to the following provisions:
(i) Subject to Section 2.6(b)(vii), shares held by an
administrator, executor, guardian, conservator, custodian or other fiduciary may
be voted by such holder either in person or by proxy, without a transfer of such
shares into the holder's name; and shares standing in the name of a trustee may
be voted by the trustee, either in person or by proxy, but no trustee shall be
entitled to vote shares held by such trustee without a transfer of such shares
into the trustee's name.
(ii) Shares standing in the name of a receiver may be voted by
such receiver; and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into the receiver's name if
authority to do so is contained in the order of the court by which such receiver
was appointed.
(iii) Subject to the provisions of the Delaware General
Corporation Law, and except where otherwise agreed in writing between the
parties, a stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
(iv) Shares standing in the name of a minor may be voted and the
Corporation may treat all rights incident thereto as exercisable by the minor,
in person or by proxy, whether or not the Corporation has notice, actual or
constructive, of the non-age, unless a guardian of the minor's property has been
appointed and written notice of such appointment given to the Corporation.
(v) Shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent or proxyholder as the bylaws of
such other corporation may prescribe or, in the absence of such provision, as
the Board of Directors of such other corporation may determine or, in the
absence of such determination, by the chairman of the board, president or any
vice president of such other corporation, or by any other person authorized to
do so by the board, president or any vice president of such other corporation.
Shares which are purported to be executed in the name of a corporation (whether
or not any title of the person signing is indicated) shall be presumed to be
voted or the proxy executed in accordance with the provisions of this
subdivision, unless the contrary is shown.
(vi) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
(vii) Shares held by the Corporation in a fiduciary capacity,
and shares of the Corporation held in a fiduciary capacity by any subsidiary,
shall not be entitled to vote on any
<PAGE>
matter, except to the extent that the settlor or beneficial owner possesses and
exercises a right to vote or to give the Corporation binding instructions as to
how to vote such shares.
(viii) If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise, or if two or more persons (including proxyholders) have the same
fiduciary relationship respecting the same shares, unless the Secretary of the
Corporation is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect:
(A) If only one votes, such act binds all;
(B) If more than one vote, the act of the majority so
voting binds all;
(C) If more than one vote, but the vote is evenly split on
any particular matter, each fraction may vote the securities in question
proportionately. If the instrument so filed or the registration of the shares
shows that any such tenancy is held in unequal interests, a majority or even
split for the purpose of this section shall be a majority or even split in
interest.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting. A validly executed proxy which
does not state that it is irrevocable shall continue in full force and effect
unless revoked by the person executing it, prior to the vote pursuant thereto,
by a writing delivered to the Corporation stating that the proxy is revoked or
by a subsequent proxy executed by, or attendance at the meeting and voting in
person by the person executing the proxy; provided, however, that no such proxy
shall be valid after the expiration of three (3) years from the date of such
proxy, unless otherwise provided in the proxy. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
the Delaware General Corporation Law.
(d) At any meeting of the stockholders all matters, except as
otherwise provided in the Certificate of Incorporation, in these Bylaws or by
law, shall be decided by the vote of a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat and
thereon, a quorum being present.
(e) The vote at any meeting of the stockholders on any question need
not be written ballot, unless so directed by the chairman of the meeting;
provided, however, that any election of directors at any meeting must be
conducted by written ballot upon demand made by any stockholder or stockholders
present at the meeting before the voting begins. On a vote by ballot each
ballot shall be signed by the stockholder voting, or by his proxy, if there be
such proxy, and it shall state the number of shares voted.
2.7 ACTION WITHOUT A MEETING. Any action which is required to be taken or
which may be taken at any annual or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted and shall be
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of
<PAGE>
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
In the case of election of directors, such a consent shall be effective only if
signed by the holders of all outstanding shares entitled to vote for the
election of directors; provided, however, that a director may be elected at any
time to fill a vacancy on the Board that has not been filled by the directors,
by the written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors. All such consents shall be
filed with the Secretary of the Corporation and shall be maintained in the
corporate records.
Every written consent shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered in the manner required by this section to the
Corporation, written consents signed by a sufficient number of holders or
members to take action are delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. In the event that the action which is consented
to is such as would have required the filing of a certificate under any other
section of this title, if such action had been voted on by stockholders at a
meeting thereof, the certificate filed under such other section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written consent has been given in accordance with this
section, and that written notice has been given as provided in this section.
2.8 LIST OF STOCKHOLDERS. The Secretary of the Corporation shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.9 JUDGES. If at any meeting of the stockholders a vote by written
ballot shall be taken on any question, the chairman of such meeting may appoint
a judge or judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of a judge at
such meeting with strict impartiality and according to the best of his ability.
Such judges shall: (i) decide upon the qualification of the voters; (ii) report
the number of shares represented at the meeting and entitled to vote on such
question; (iii) conduct the voting and accept the votes; and (iv) when the
voting is completed, ascertain and report the number of shares voted
respectively for and against the question. Reports of judges shall be in
writing and subscribed and delivered by them to the Secretary of the
Corporation. The judges need not be stockholders of the Corporation, and any
officer of the Corporation may be a judge on any question other than a vote for
or against a proposal in which he shall have a material interest.
<PAGE>
2.10 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board, and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board, and which date
shall not be more than ten days after the date upon which the resolution fixing
the record date is adopted by the Board. If no record date has been fixed by
the Board, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
is required, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the Corporation
by delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the Board and prior action by the Board is required, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on which
the Board adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action.
If no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto.
If no record is fixed by the Board, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
2.11 STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS.
(a) Business may be properly brought before an annual meeting by a
stockholder only upon the stockholder's timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than thirty (30) days nor more than sixty (60) days prior
to the meeting as originally scheduled; provided, however, that in the event
that less than forty (40) days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of
<PAGE>
business on the tenth (10th) day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. For
purposes of this Section 2.11, any adjournment(s) or postponement(s) of the
original meeting shall be deemed for purposes of notice to be a continuation of
the original meeting and no business may be brought before any reconvened
meeting unless such timely notice of such business was given to the Secretary of
the Corporation for the meeting as originally scheduled. A stockholder's notice
to the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business. Notwithstanding the
foregoing, nothing in this Section 2.11 shall be interpreted or construed to
require the inclusion of information about any such proposal in any proxy
statement distributed by, at the direction of, or on behalf of the Board.
(b) The chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 2.11, and
if the chairman should so determine, the chairman shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
2.12 NOTICE OF STOCKHOLDER NOMINEES.
(a) Nominations of persons for election to the Board of the
Corporation shall be made only at a meeting of stockholders and only (i) by or
at the direction of the Board or (ii) by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 2.12. Such nominations, other
than those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than thirty (30) days
nor more than sixty (60) days prior to the meeting; provided, however, that in
the event that less than forty (40) days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth (10th) day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. For purposes of this
Section 2.12, any adjournment(s) or postponement(s) of the original meeting
shall be deemed for purposes of notice to be a continuation of the original
meeting and no nominations by a stockholder of persons to be elected directors
of the Corporation may be made at any such reconvened meeting unless pursuant to
a notice which was timely for the meeting on the date originally scheduled.
Such stockholder's notice shall set forth: (i) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to the Securities Exchange Act of 1934, as amended,
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (ii) as to the
stockholder giving the notice (A) the name and address, as they appear on the
Corporation's books, of such stockholder, and (B) the class and number of shares
of the Corporation which are beneficially owned by such stockholder.
Notwithstanding the foregoing, nothing in this Section 2.12 shall be interpreted
or construed to require the inclusion of information about any such nominee in
any proxy statement distributed by, at the discretion of, or on behalf of the
Board.
<PAGE>
(b) The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 2.12, and if the
chairman should so determine, the chairman shall so declare to the meeting and
the defective nomination shall be disregarded.
ARTICLE III
BOARD OF DIRECTORS
3.1 GENERAL POWERS. The property, business and affairs of the Corporation
shall be managed by or under the direction of the Board.
3.2 NUMBER AND TERM OF OFFICE. The authorized number of directors shall
be no less than three (3) and no more than seven (7). The exact number of
authorized directors shall be set by resolution of the board of directors,
within the limits specified above. Directors need not be stockholders. Each
director shall hold office until the next annual meeting and until a successor
has been elected and qualified, or he resigns, or he is removed in a manner
consistent with these Bylaws.
3.3 ELECTION OF DIRECTORS. The directors shall be elected annually by the
stockholders of the Corporation and the persons receiving the greatest number of
votes in accordance with the system of voting established by these Bylaws shall
be the directors.
3.4 RESIGNATION AND REMOVAL OF DIRECTORS. Any director of the Corporation
may resign at any time by giving written notice to the Corporation. Any such
resignation shall take effect at the time specified therein, or, if the time be
not specified, it shall take effect immediately upon its receipt; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Any or all of the directors may be removed with
or without cause if such removal is approved by the affirmative vote of a
majority of the outstanding shares entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before his term of office expires.
3.5 VACANCIES. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors or any other cause, may
be filled by a majority of the remaining directors, though less than a quorum.
Each director so chosen to fill a vacancy shall hold office until his successor
shall have been elected and qualified or until he shall resign or shall have
been removed in the manner hereinafter provided.
The stockholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
3.6 PLACE OF MEETING, ETC. The Board may hold any of its meetings at such
place or places within or without the State of Delaware as the Board may from
time to time by resolution designate or as shall be designated by the person or
persons calling the meeting or in the notice or a waiver of notice of any such
meeting. Directors may participate in any regular or special meeting of the
Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
<PAGE>
3.7 FIRST MEETING. The Board shall meet as soon as practicable after each
annual election of directors and notice of such first meeting shall not be
required.
3.8 REGULAR MEETINGS. Regular meetings of the Board may be held at such
times as the Board shall from time to time by resolution determine. If any day
fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as may be
required by law or specified herein, notice of regular meetings need not be
given.
3.9 SPECIAL MEETINGS. Special meetings of the Board shall be held
whenever called by the Chairman of the Board, the President or any two or more
directors. Except as otherwise provided by law or by these Bylaws, notice of
the time and place of each such special meeting shall be mailed to each
director, addressed to him at his residence or usual place of business, at least
five (5) days before the day on which the meeting is to be held, or shall be
sent to him at such place by telegraph or cable or be delivered personally not
less than forty-eight (48) hours before the time at which the meeting is to be
held. Except where otherwise required by law or by these Bylaws, notice of the
purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
3.10 QUORUM AND MANNER OF ACTING. Except as otherwise provided in these
Bylaws, in the Certificate of Incorporation or by law, the presence of a
majority of the authorized number of directors shall be required to constitute a
quorum for the transaction of business, at any meeting of the Board, and all
matters shall be decided at any such meeting, a quorum being present, by the
affirmative votes of a majority of the directors present. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, provided any action taken is approved by at least a
majority of the required quorum for such meeting. In the absence of a quorum, a
majority of directors present at any meeting may adjourn the same from time to
time until a quorum shall be present. Notice of an adjourned meeting need not
be given. The directors shall act only as a Board, and the individual directors
shall have no power as such.
3.11 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the Board or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.
3.12 COMPENSATION. The directors shall receive only such compensation for
their services as directors as may be allowed by resolution of the Board. The
Board may also provide that the Corporation shall reimburse each such director
for any expense incurred by him on account of his attendance at any meetings of
the Board or Committees of the Board. Neither the payment of such compensation
nor the reimbursement of such expenses shall be construed to preclude any
director from serving the Corporation or its subsidiaries in any other capacity
and receiving compensation therefor.
3.13 COMMITTEES OF DIRECTORS.
(a) The Board may, by resolution passed by a majority of the whole
Board, designate one or more committees, each committee to consist of one or
more of the directors of the
<PAGE>
Corporation. Any such committee, to the extent provided in the resolution of
the Board and except as otherwise limited by law, shall have and may exercise
all the powers and authority of the Board in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; provided, however, that no such
committee shall have the power or authority to act on behalf of the Board with
regard to:
(i) the approval of any action which, under the Delaware
General Corporation Law, also requires stockholders' approval or approval of
the outstanding shares;
(ii) the filling of vacancies on the Board of Directors or in
any committees;
(iii) the fixing of compensation of the directors for serving
on the Board or on any committee;
(iv) the amendment or repeal of Bylaws or the adoption of new
Bylaws;
(v) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable;
(vi) a distribution to the stockholders of the Corporation,
except at a rate or in a periodic amount or within a price range determined
by the Board of Directors; or
(vii) the appointment of any other committees of the Board of
Directors or the members thereof.
(b) Meetings and action of committees shall be governed by, and held
and taken in accordance with, the provisions of these Bylaws dealing with the
place of meetings, regular meetings, special meetings and notice, quorum, waiver
of notice, adjournment, notice of adjournment and action without meeting, with
such changes in the context of these Bylaws as are necessary to substitute the
committee and its members for the Board of Directors and its members, except
that the time or regular meetings of committees may be determined by resolutions
of the Board of Directors. Notice of special meetings of committees shall also
be given to all alternate members, who shall have the right to attend all
meetings of the committee. The Board of Directors or a committee may adopt
rules for the government of such committee not inconsistent with the provisions
of these Bylaws.
Any such committee shall keep written minutes of its meetings and report
the same to the Board at the next regular meeting of the Board. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
3.14 OTHER COMMITTEES. The Board may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more non-employee directors and one or more other disinterested
persons, who need not be directors, for the purpose of providing advice to the
Board regarding any matter, including but not limited to the compensation of
officers and other key employees. For the purposes of this Section, a
"disinterested person" means any person having no significant interest in the
actions of the committee, as determined by the Board. Any such committee, to
the extent provided in the resolution of the Board and except as otherwise
limited by law, shall assist the Board in exercising its powers and authority in
the management of the business and affairs of the Corporation, but shall
<PAGE>
not itself exercise such powers and authority. Any such committee shall keep
written minutes of its meetings and report the same to the Board at the next
regular meeting of the Board. In the absence or disqualification of a member of
any such committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint any disinterested person to act at the meeting in the place
of any such absent or disqualified member. The compensation and reimbursement
of expenses of the members of any such committee shall be determined by
resolution passed by a majority of the whole Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be construed to
preclude any such member from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
3.15 CERTAIN TRANSACTIONS. In the absence of fraud, no contract or other
transaction between the Corporation and any other corporation, and no act of the
Corporation, shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are financially or otherwise interested in, or
are directors or officers of, such other corporations; and, in the absence of
fraud, any director, individually, or any firm of which any director may be a
member, may be a party to, or may be financially or otherwise interested in, any
contract or transaction of the Corporation; provided, in any case, that the fact
that he or such firm is so interested shall be disclosed or shall have been
known to the Board of Directors or committee. Any director of the Corporation
who is also a director or officer of any such other corporation or who is so
interested may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation that shall authorize any
such contract, act or transaction, and may vote thereat to authorize any such
contract, act or transaction, with full force and effect as if he were not such
director or officer of such other corporation or not so interested.
ARTICLE IV
OFFICERS
4.1 CORPORATE OFFICERS.
(a) The officers of the Corporation shall be a Chief Executive
Officer (Chairman of the Board), a President, one or more Vice Presidents (the
number thereof and their respective titles to be determined by the Board), a
Secretary, Chief Financial Officer (Treasurer) and such other officers as may be
appointed at the discretion of the Board in accordance with the provisions of
Section 4.1(b).
(b) In addition to the officers specified in Section 4.1(a), the
Board may appoint such other officers as the Board may deem necessary or
advisable, including one or more Assistant Secretaries and one or more Assistant
Treasurers, each of whom shall hold office for such period, have such authority
and perform such duties as the Board may from time to time determine. The Board
may delegate to any officer of the Corporation or any committee of the Board the
power to appoint, remove and prescribe the duties of any officer provided for in
this Section 4.1(b).
(c) Any number of offices may be held by the same person.
4.2 ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers of the
Corporation, except such officers as may be appointed in accordance with
Sections 4.1(b) or 4.5. shall be appointed annually by the Board at the first
meeting thereof held after the election of the Board. Each officer shall hold
office until such officer shall resign or shall be removed by the Board (either
with or without cause) or otherwise disqualified to serve, or the officer's
successor shall be appointed and qualified.
<PAGE>
4.3 REMOVAL. Any officer of the Corporation may be removed, with or
without cause, at any time at any regular or special meeting of the Board by a
majority of the directors of the Board at the time in office or, except in the
case of an officer appointed by the Board, by any officer of the Corporation or
committee of the Board upon whom or which such power of removal may be conferred
by the Board.
4.4 RESIGNATIONS. Any officer may resign at any time by giving written
notice of his resignation to the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, upon receipt thereof by the Board,
President or Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
4.5 VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or other cause may be filled for the unexpired portion
of the term thereof in the manner prescribed in these Bylaws for regular
appointments or elections to such office.
4.6 CHIEF EXECUTIVE OFFICER (CHAIRMAN OF THE BOARD). The Chief Executive
Officer (Chairman of the Board) of the Corporation shall be the chief executive
officer of the Corporation, unless otherwise determined by the Board, and shall
have, subject to the control of the Board, general and active supervision and
management over the business of the Corporation and over its several subordinate
officers, assistants, agents and employees. The Chief Executive Officer shall
preside at all meetings of the stockholders and at all meetings of the Board.
4.7 PRESIDENT. The President shall have, subject to the control of the
Board and/or the Chief Executive Officer (Chairman of the Board), general and
active supervision and management over the business of the Corporation and over
its several subordinate officers, assistants, agents and employees. The
President shall have such other powers and duties as may from time to time be
assigned to him by the Chief Executive Officer (Chairman of the Board), the
Board or as prescribed by the Bylaws. At the request of the Chief Executive
Officer (Chairman of the Board), or in the case of the absence or inability to
act of the Chief Executive Officer (Chairman of the Board) upon the request of
the Board, the President shall perform the duties of the Chief Executive Officer
(Chairman of the Board) and when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer (Chairman of
the Board).
4.8 VICE PRESIDENTS. Each Vice President shall have such power and
perform such duties as the Board may from time to time prescribe. At the
request of the President, or in the case of the President's absence or inability
to act upon the request of the Board, a Vice President shall perform the duties
of the President and when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the President.
4.9 CHIEF FINANCIAL OFFICER (TREASURER). The Chief Financial Officer
(Treasurer) shall supervise, have custody of, and be responsible for all funds
and securities of the Corporation. The Chief Financial Officer (Treasurer)
shall deposit all such funds in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected by the Board or in
accordance with authority delegated by the Board. The Chief Financial Officer
(Treasurer) shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. The Chief Financial Officer (Treasurer)
shall exercise general supervision over expenditures and disbursements made by
officers, agents and employees of the Corporation and the preparation of such
records and reports in connection therewith as may be necessary or
<PAGE>
desirable. The Chief Financial Officer (Treasurer) shall, in general, perform
all other duties incident to the office of Chief Financial Officer (Treasurer)
and such other duties as from time to time may be assigned to the Chief
Financial Officer (Treasurer) by the Board.
4.10 SECRETARY. The Secretary shall have the duty to record the
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose. The Secretary shall see that all notices are
duly given in accordance with these Bylaws and as required by law; shall be
custodian of the seal of the Corporation and shall affix and attest the seal to
all documents to be executed on behalf of the Corporation under its seal; and,
in general, he shall perform all the duties incident to the office of Secretary
and such other duties as may from time to time be assigned to him by the Board.
4.11 COMPENSATION. The compensation of the officers of the Corporation
shall be fixed from time to time by the Board. None of such officers shall be
prevented from receiving such compensation by reason of the fact that he is also
a director of the Corporation. Nothing contained herein shall preclude any
officer from serving the Corporation, or any subsidiary corporation, in any
other capacity and receiving proper compensation therefor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS,
BANK ACCOUNTS, ETC.
5.1 EXECUTION OF CONTRACTS. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or in any account.
5.2 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment
of money, notes or other evidence of indebtedness, issued in the name of or
payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such person shall give such bond, if any, as the
Board may require.
5.3 DEPOSITS. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board may select, or as may be
selected by any officer or officers, assistant or assistants, agent or agents,
or attorney or attorneys of the Corporation to whom such power shall have been
delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the Chief Executive Officer,
President, any Vice President or the Chief Financial Officer, (or any other
officer or officers, assistant or assistants, agent or agents or attorney or
attorneys of the Corporation who shall from time to time be determined by the
Board), may endorse, assign and deliver checks, drafts and other orders for the
payment of money which are payable to the order of the Corporation.
5.4 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from time to time
authorize the opening and keeping of general and special bank accounts with such
banks, trust companies or
<PAGE>
other depositories as the Board may select or as may be selected by any officer
or officers, assistant or assistants, agent or agents, or attorney or attorneys
of the Corporation to whom such power shall have been delegated by the Board.
The Board may make such special rules and regulations with respect to such bank
accounts, not inconsistent with the provisions of these Bylaws, as it may deem
expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
6.1 CERTIFICATES FOR STOCK.
(a) The shares of the Corporation shall be represented by
certificates, provided that the Board may provide by resolution or resolutions
that some or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate, in such form
as the Board shall prescribe, signed by, or in the name of, the Corporation by
the Chief Executive Officer (Chairman of the Board), or the President or Vice
President, and by the Chief Financial Officer (Treasurer) or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation
representing the number of shares registered in certificate form. Any of or all
of the signatures on the certificates may be a facsimile. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any such certificates, shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, such certificate
may nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue.
(b) A record shall be kept of the respective names of the persons,
firms or corporations owning the stock represented by such certificates, the
number and class of shares represented by such certificates, respectively, and
the respective dates thereof, and in case of cancellation, the respective dates
of cancellation. Every certificate surrendered to the Corporation for exchange
or transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.4.
6.2 TRANSFERS OF STOCK. Transfers of shares of stock of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof, or by such holder's attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.3, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
6.3 REGULATIONS. The Board may make such rules and regulations as it may
deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or
<PAGE>
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
6.4 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In any case of
loss, theft, destruction or mutilation of any certificate of stock, another may
be issued in its place upon proof of such loss, theft, destruction or mutilation
and upon the giving of a bond of indemnity to the Corporation in such form and
in such sum as the Board may direct; provided, however, that a new certificate
may be issued without requiring any bond when, in the judgment of the Board, it
is proper to do so.
6.5 PAYMENT FOR SHARES. Certificates for shares may be issued prior to
full payment under such restrictions and for such purposes as the Board may
provide; provided, however, that on any certificate issued to represent any
partly paid shares, the total amount of the consideration to be paid therefor
and the amount paid thereon shall be stated.
ARTICLE VII
INDEMNIFICATION
7.1 AUTHORIZATION FOR INDEMNIFICATION. The Corporation may indemnify, in
the manner and to the full extent permitted by law, any person (or the estate,
heirs, executors, or administrators of any person) who was or is a party to, or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
7.2 ADVANCE OF EXPENSES. Costs and expenses (including attorneys' fees)
incurred by or on behalf of a director or officer in defending or investigating
any action, suit, proceeding or investigation may be paid by the Corporation in
advance of the final disposition of such matter, if such director or officer
shall undertake in writing to repay any such advances in the event that it is
ultimately determined that he is not entitled to indemnification. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a determination is
reasonably and promptly made by the Board by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs) by independent legal
counsel in a written opinion, or by the stockholders, that, based upon the facts
known to the Board or counsel at the time such determination is made, (a) the
director, officer, employee or agent acted in bad faith or deliberately
<PAGE>
breached his duty to the Corporation or its stockholders, and (b) as a result of
such actions by the director, officer, employee or agent, it is more likely than
not that it will ultimately be determined that such director, officer, employee
or agent is not entitled to indemnification.
7.3 INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article or applicable law.
7.4 NON-EXCLUSIVITY. The right of indemnity and advancement of expenses
provided herein shall not be deemed exclusive of any other rights to which any
person seeking indemnification or advancement of expenses from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. Any agreement for
indemnification of or advancement of expenses to any director, officer, employee
or other person may provide rights of indemnification or advancement of expenses
which are broader or otherwise different from those set forth herein.
ARTICLE VIII
MISCELLANEOUS
8.1 SEAL. The Board shall provide a corporate seal, which shall be in the
form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Delaware
and the year of incorporation.
8.2 WAIVER OF NOTICES. Whenever notice is required to be given by these
Bylaws or the Certificate of Incorporation or by law, the person entitled to
said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.
Attendance of a person at a meeting (whether in person or by proxy in the case
of a meeting of stockholders) shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of any regular or special meeting of the
stockholders, directors or members of a committee of directors need be specified
in any written waiver of notice.
8.3 AMENDMENTS. The original or other Bylaws of the Corporation may be
adopted, amended or repealed by the incorporators, by the initial directors if
they were named in the Certificate of Incorporation, or, before the Corporation
has received any payment for any of its stock, by its Board. After the
Corporation has received any payment for any of its stock, the power to adopt,
amend or repeal Bylaws shall be in the stockholders entitled to vote; provided,
however, the Corporation may, in its Certificate of Incorporation, confer the
power to adopt, amend or repeal Bylaws upon the directors. The fact that such
power has been so conferred upon the directors shall not divest the stockholders
of the power, nor limit their power to adopt, amend or repeal Bylaws.
<PAGE>
8.4 REPRESENTATION OF OTHER CORPORATIONS. The Chief Executive Officer
(Chairman of the Board), President, any Vice President or the Secretary of this
Corporation is authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
to do so by proxy or power of attorney duly executed by said officers.
8.5 STOCK PURCHASE PLANS. The Corporation may adopt and carry out a stock
purchase plan or agreement or stock option plan or agreement providing for the
issue and sale for such consideration as may be fixed of its unissued shares, or
of issued shares acquired or to be acquired, to one or more of the employees or
directors of the Corporation or of a subsidiary or to a trustee on their behalf
and for the payment for such shares in installments or at one time, and may
provide for aiding any such persons in paying for such shares by compensation
for services rendered, promissory notes, or otherwise.
Any stock purchase plan or agreement or stock option plan or agreement may
include, among other features, the fixing of eligibility for participation
therein, the class and price of shares to be issued or sold under the plan or
agreement, the number of shares which may be subscribed for, the method of
payment therefor, the reservation of title until full payment therefor, the
effect of the termination of employment and option or obligation on the part of
the Corporation to repurchase the shares, the time limits of and termination of
the plan and any other matters, not in violation of applicable law, as may be
included in the plan as approved or authorized by the Board or any committee of
the Board.
8.6 CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise,
the general provisions, rules of construction and definitions in the Delaware
General Corporation Law shall govern the construction of these Bylaws. Without
limiting the generality of this provision, the singular number includes the
plural, the plural number includes the singular, and the term "person" includes
both a corporation and a natural person.
<PAGE>
C E R T I F I C A T E O F S E C R E T A R Y
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of Virtual
Telecom, Inc., a Delaware corporation; and
2. That the foregoing Bylaws, comprising twenty (20) pages,
constitute the Bylaws of said Corporation as duly adopted by the incorporator of
said Corporation and as duly approved by the directors of said Corporation by
unanimous written consent effective as of July 3, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said Corporation effective as of July 3, 1996.
/s/ Daniel Huber
------------------------------
Daniel Huber, Secretary
<PAGE>
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
VIRTUAL TELECOM, INC.
AUTHORIZED COMMON STOCK 20,000,000 SHARES
PAR VALUE. $001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
SHARES OF COMMON STOCK OF VIRTUAL TELECOM, INC.
TRANSFERABLE ON THE BOOKS OF THE CORPORATION IN PERSON OR BY DULY AUTHORIZED
ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. THIS
CERTIFICATE IS NOT-VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT AND
REGISTERED BY THE REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
DATED:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
[SEAL] ------------------------------ ------------------------------
SECRETARY PRESIDENT
INTERWEST TRANSFER CO. INC. P.O. BOX 17406 / SALT LAKE CITY, UTAH 84117
/s/ [ILLEGIBLE]
------------------------------
COUNTERSIGNED & REGISTERED COUNTERSIGNED Transfer Agent-Authorized Signature
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF
VIRTUAL TELECOM, INC.
A DELAWARE CORPORATION
The undersigned, Neil Gibbons and Daniel Huber, hereby certify that:
1. They are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of Virtual Telecom, Inc., a Delaware corporation (the
"Corporation").
2. The Corporation, in its Certificate of Incorporation, has authorized
10,000,000 shares of preferred stock. By resolution, the Board of Directors of
the Corporation has designated 750,000 shares of preferred stock authorized by
the Certificate of Incorporation as Series A Preferred Stock. No shares of
Series A Preferred Stock have been issued.
3. Pursuant to authority given by the Corporation's Certificate of
Incorporation, the Board of Directors of the Corporation has duly adopted the
following recital and resolution:
WHEREAS, Article IV of the Certificate of Incorporation
of the Corporation authorizes this Corporation to issue
10,000,000 shares of preferred stock, US$.001 par value per
share, issuable from time to time in one or more series (the
"Preferred Stock").
RESOLVED, the Board of Directors hereby determines that
it is in the best interests of this Corporation to designate
750,000 shares of Series A Preferred Stock upon the
following terms and conditions:
Section 1. DESIGNATION. The initial series of Preferred Stock shall be
designated and known as "Series A Preferred Stock." The number of authorized
shares constituting such series shall be 750,000. The Series A Preferred Stock
shall have a par value of US$.001 per share.
Section 2. DEFINITIONS. For the purposes of this Certificate of
Designations, the following terms shall have the meanings indicated:
"COMMON STOCK" shall mean the Company's $.001 par value common stock.
"CONVERSION PRICE" has the meaning assigned to such term in Section
7(a).
"INITIAL CONVERSION PRICE" shall mean US$3.50 per share of Series A
Preferred Stock; provided, however, on the Maturity Date such the Initial
Conversion Price shall be adjusted to, and shall then mean, the amount which is
seventy percent (70%) of the average last sale price of the Common Stock during
the thirty (30) trading
<PAGE>
days immediately preceding the Maturity Date as reported on the New York Stock
Exchange, American Stock Exchange or the National Association of Securities
Dealers Automated Quotation System.
"JUNIOR STOCK" shall mean any capital stock of the Corporation,
including without limitation the Common Stock, ranking junior to the Series A
Preferred Stock with respect to dividends, distribution in liquidation or any
other preferences, rights and powers.
"LIQUIDATION PREFERENCE" shall mean $3.50 per share of Series A
Preferred Stock.
"MATURITY DATE" shall mean the date which is one year following the
Original Issue Date.
"ORIGINAL ISSUE DATE" shall mean the first date on which shares of
Series A Preferred Stock first issued by the Corporation.
"PARITY STOCK" shall mean any capital stock of the Corporation ranking
on a parity with the Series A Preferred Stock with respect to dividends,
distributions in liquidation and all other preferences, rights or powers.
"PERSON" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"SENIOR STOCK" shall mean any capital stock of the Corporation ranking
senior to the Series A Preferred Stock with respect to dividends, distribution
in liquidation or any other preference, right or power.
Section 3. RANKING. The Series A Preferred Stock shall, with respect to
rights on liquidation, dissolution or winding up, rank senior to all other
equity securities of the Corporation, including the Common Stock and any other
series or class of the Corporation's preferred or common stock, now or hereafter
authorized.
Section 4. DIVIDENDS. If any dividends or other distributions (including,
without limitation, any distribution of cash, indebtedness, assets or other
property, but excluding any dividend payable in shares of its common stock) on
Common Stock ("Dividends") are so permitted and declared, such Dividends shall
be paid pro rata to the holders of the Common Stock and Series A Preferred
Stock. The holders of Series A Preferred Stock shall receive a Dividend in an
amount that would be payable to such holder assuming that such shares had been
converted on the record date for determining the stockholders of the Corporation
entitled to receive payment of such Dividends into the maximum number of shares
of Common Stock into which such shares of Series A Preferred Stock are then
convertible as provided in Section 7.
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Section 5. VOTING RIGHTS.
In addition to any voting rights provided by law, the holders of
shares of Series A Preferred Stock shall have the following voting rights:
(a) Except as otherwise required by applicable law and without
limiting the provisions of Section 5(b) below, each share of Series A Preferred
Stock shall entitle the holder thereof to vote, in person or by proxy, at each
special and annual meeting of shareholders, on all matters voted on by holders
of Common Stock, voting together as a single class with the holders of Common
Stock and with holders of all other shares entitled to vote thereon. With
respect to any such vote, each share of Series A Preferred Stock shall entitle
the holder thereof to cast the number of votes that such holder would be
entitled to cast assuming that such shares of Series A Preferred Stock had been
converted, on the record date for determining the stockholders entitled to vote
on any such matters, into the maximum number of shares of Common Stock into
which such shares Series A Preferred Stock are then convertible as provided in
Section 7(c) below.
(b) Unless the consent or approval of a greater number of shares
shall then be required by law, the affirmative vote of the holders of more than
50% of the outstanding shares of the Series A Preferred Stock shall be necessary
to (1) authorize, increase the authorized number of shares of or issue
(including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of any class or classes of Senior
Stock or Parity Stock or any additional shares of Series A Preferred Stock,
(2) authorize, adopt or approve any amendment to the Articles of Incorporation,
the Bylaws or this Certificate of Designations that would increase or decrease
the par value of the shares of the Series A Preferred Stock, alter or change the
powers, preferences or rights of the shares of Series A Preferred Stock or alter
or change the powers, preferences or rights of any other capital stock of the
Corporation if after such alteration or change such capital stock would be
Senior Stock or Parity Stock, (3) amend, alter or repeal the Certificate of
Incorporation or this Certificate of Designations so as to affect the shares of
Series A Preferred Stock adversely, including, without limitation, by granting
any voting right to any holder of notes, bonds, debentures or other debt
obligations of the Corporation, or (4) authorize or issue any security
convertible into, exchangeable for or evidencing the right to purchase or
otherwise receive any shares of any class or classes of Senior Stock or Parity
Stock.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, before any distribution or payment
to holders of Junior Stock may be made, the holder of each share of Series A
Preferred Stock shall be entitled to be paid an amount equal to the Liquidation
Preference of such share.
(b) If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to the
holders of Series A Preferred Stock shall be insufficient to permit payment in
full to such holders of the sums which such holders are entitled to receive in
such case, then all of the assets available
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for distribution to holders of the Series A Preferred Stock shall be distributed
among and paid to such holders ratably in proportion to the amounts that would
be payable to such holders if such assets were sufficient to permit payment in
full. Neither the consolidation or merger of the Corporation into or with
another corporation or corporations, nor the sale of all or substantially all of
the assets of the Corporation to another corporation or any other entity shall
be deemed a liquidation, dissolution or winding up of the Corporation within the
meaning of this Section 6.
Section 7. CONVERSION OF PREFERRED STOCK INTO COMMON STOCK.
(a) RIGHT TO CONVERT. At any time during the period commencing six
(6) months from the Original Issue Date and ending five (5) years after the
Original Issue Date, the outstanding shares of Series A Preferred Stock shall be
convertible, at the option of the holders thereof, into fully paid and
nonassessable shares of Common Stock at the Initial Conversion Price, subject to
adjustment as set forth in this Section 7 (the "Conversion Price").
Notwithstanding the foregoing, in the event the Corporation gives written notice
of its intention to redeem the Series A Preferred pursuant to Section 8(b)
below, any such shares called for redemption shall be or become eligible for
conversion up through the date of redemption identified in the written notice
issued pursuant to Section 8(b) below.
(b) NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION. The
number of shares of Common Stock to be issued upon conversion of shares of
Series A Preferred Stock shall be equal to the product of (X) and (Y), where (X)
is a fraction, the numerator of which is the Liquidation Preference and the
denominator of which is the applicable Conversion Price and (Y) is the number of
shares of Series A Preferred Stock to be converted.
(c) ANTIDILUTION ADJUSTMENTS. The Conversion Price of the Series A
Preferred Stock shall be adjusted from time to time in certain cases as follows:
(i) DIVIDEND, SUBDIVISION, COMBINATION OR RECLASSIFICATION OF
COMMON STOCK. If the Corporation shall, at any time or from time to time, (a)
declare a dividend on the Common Stock payable in shares of its capital stock
(including Common Stock), (b) subdivide the outstanding Common Stock, (c)
combine the outstanding Common Stock into a smaller number of shares, or (d)
issue any shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation), then in each
such case, the Initial Conversion Price or the Conversion Price in effect at the
time of the record date for such dividend or at the effective date of such
subdivision, combination or reclassification shall be adjusted to that price
which will permit the number of shares of Common Stock into which the Series A
Preferred Stock may be converted to be increased or reduced in the same
proportion as the number of shares of Common Stock are increased or reduced in
connection with such dividend, subdivision, combination or reclassification.
Any such adjustment shall become effective immediately after the record date of
such dividend or the effective date of such subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur. In the event, if a dividend is declared, such
dividend is not paid, the Conversion Price shall be adjusted to the Conversion
Price in effect immediately prior to the record date of such dividend.
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(ii) ISSUANCE OF ADDITIONAL COMMON STOCK. If the Corporation
shall, at any time or from time to time, directly or indirectly, sell or issue
shares of Common Stock (regardless of whether originally issued or from the
Corporation's treasury), or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock (excluding shares issued in any of the transactions described in
Section 7(c)(i)) at a price per share of Common Stock (determined, in the case
of rights, options, warrants or convertible or exchangeable securities, by
dividing (X) the total consideration received or receivable by the Corporation
in consideration of the sale or issuance of such rights, options, warrants or
convertible or exchangeable securities, plus the total consideration payable to
the Corporation upon exercise or conversion or exchange thereof, by (Y) the
total number of shares of Common Stock covered by such rights, options, warrants
or convertible or exchangeable securities) lower than the Conversion Price in
effect immediately prior to such sale or issuance, then the Conversion Price of
the Series A Preferred Stock shall be reduced to the price determined by
multiplying the Conversion Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to such sale or issuance plus the
number of shares of Common Stock which the aggregate consideration received
(determined as provided below) for such sale or issuance would purchase at the
Conversion Price and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such sale or issuance.
Such adjustment shall be made successively whenever such sale or issuance is
made. For the purposes of such adjustments, the shares of Common Stock which
the holder of any such rights, options, warrants, or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall be deemed to be
issued and outstanding as of the date of such sale or issuance and the
consideration "received" by the Corporation therefor shall be deemed to be the
consideration actually received or receivable by the Corporation (plus any
underwriting discounts or commissions in connection therewith) for such rights,
options, warrants or convertible or exchangeable securities, plus the
consideration stated in such rights, options, warrants or convertible or
exchangeable securities to be payable to the Corporation for the shares of
Common Stock covered thereby. If the Corporation shall sell or issue shares of
Common Stock for a consideration consisting, in whole or in part, of property
other than cash or its equivalent, then in determining the "price per share of
Common Stock" and the "consideration" received or receivable by or payable to
the Corporation for purposes of the first sentence and the immediately preceding
sentence of this Section 7(c)(ii), the fair value of such property shall be
determined in good faith by the Board of Directors. The determination of
whether any adjustment is required under this Section 7(c)(ii) by reason of the
sale and issuance of rights, options, warrants or convertible or exchangeable
securities and the amount of such adjustment, if any, shall be made only at the
time of such issuance or sale and not at the subsequent time of issuance or sale
of Common Stock upon the exercise of such rights to subscribe or purchase.
(iii) DE MINIMIS ADJUSTMENTS. No adjustment of the Conversion
Price shall be made if the amount of such adjustment would result in a change in
the Conversion Price per share of less than $.05 but in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent adjustment,
which together with any adjustment so carried forward, would result in a change
in the Conversion Price in
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excess of $.05 per share. All calculations under this Section 7(c) shall be
made to the nearest cent, or the nearest 1/100th of a share, as the case may be.
If the Corporation shall, at any time or from time to time, issue Common Stock
by way of dividends on any stock of the Corporation or subdivide or combine the
outstanding shares of the Common Stock, such amount of $.05 (as theretofore
increased or decreased, if such amount shall have been adjusted in accordance
with the provisions of this clause) shall forthwith be proportionately increased
in the case of a combination or decreased in the case of a subdivision or stock
dividend so as appropriately to reflect the same. Notwithstanding the
provisions of the first sentence of this Section 7(c)(iii), any adjustment
postponed pursuant to this Section 7(c)(iii) shall be made no later than the
earlier of (a) two years from the date of the transaction that would, but for
the provisions of the first sentence of this Section 7(c)(iii), have required
such adjustment and (b) the date of any redemption or conversion of the shares
of Series A Preferred Stock.
(iv) FRACTIONAL SHARES. Notwithstanding any other provision of
this Certificate of Designations, the Corporation shall not be required to issue
fractions of shares upon conversion of any shares of Series A Preferred Stock or
to distribute certificates which evidence fractional shares. In lieu of
fractional shares of Common Stock, the Corporation shall pay therefore, at the
time of any conversion of shares of Series A Preferred Stock as herein provided,
an amount in cash equal to such fraction multiplied by the Conversion Price then
in effect.
(d) REORGANIZATION AND RECLASSIFICATION ADJUSTMENT. If there occurs
any capital reorganization or any reclassification of the Common Stock of the
Corporation, then each share of Series A Preferred Stock shall thereafter be
convertible into the same kind and amounts of securities (including shares of
stock) or other assets, or both, which were issuable or distributable to the
holders of outstanding Common Stock of the Corporation upon such reorganization
or reclassification in respect of that number of shares of Common Stock into
which such shares of Series A Preferred Stock might have been converted
immediately prior to such reorganization or reclassification; and, in any such
case, appropriate adjustments (as determined in good faith by the Board of
Directors of the Corporation) shall be made to assure that the provisions set
forth herein (including provisions with respect to changes in, and other
adjustments of, the Conversion Price) shall thereafter be applicable, as nearly
as reasonably may be practicable, in relation to any securities or other assets
thereafter deliverable upon the conversion of the Series A Preferred Stock.
(e) MECHANICS OF CONVERSION. The option to convert shall be
exercised by surrendering for such purpose to the Corporation, certificates
representing the shares to be converted, duly endorsed in blank or accompanied
by proper instruments of transfer, and at the time of such surrender, the Person
in whose name any certificate for shares of Common Stock shall be issuable upon
such conversion shall be deemed to be the holder of record of such shares of
Common Stock on such date, notwithstanding that the share register of the
Corporation shall then be closed or that the certificates representing such
Common Stock shall not then be actually delivered to such person. In the event
the Corporation has given written notice of its intention to redeem any or all
of the shares to be converted, the certificates representing such shares, duly
endorsed in blank or accompanied by proper instruments of transfer, shall be
delivered into the possession of the Corporation no later than the close of
business on the date of redemption identified in the written notice issued
pursuant to Section 8(b) below.
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(f) CERTIFICATE AS TO ADJUSTMENTS. Whenever the Conversion Price or
the securities or other property deliverable upon the conversion of the Series A
Preferred Stock shall be adjusted pursuant to the provisions hereof, the
Corporation shall promptly give written notice thereof to each holder of shares
of Series A Preferred Stock at such holder's address as it appears on the
transfer books of the Corporation and shall forthwith file, at its principal
executive office and with any transfer agent or agents for the shares of Series
A Preferred Stock and the Common Stock, a certificate, signed by the Chairman of
the Board, Chief Executive Officer or one of the Vice Presidents of the
Corporation, and by its Chief Financial Officer, its Treasurer or one of its
Assistant Treasurers, stating the adjusted Conversion Price and the securities
or other property deliverable per share of Series A Preferred Stock calculated
to the nearest cent or to the nearest one one-hundredth of a share and setting
forth in reasonable detail the method of calculation and the facts requiring
such adjustment and upon which such calculation is based. Each adjustment shall
remain in effect until a subsequent adjustment hereunder is required.
(g) RESERVATION OF COMMON STOCK. The Corporation shall at all times
reserve and keep available for issuance upon the conversion of the shares of
Series A Preferred Stock, the maximum number of its authorized but unissued
shares of Common Stock as is reasonably anticipated to be sufficient to permit
the conversion of all outstanding shares of Series A Preferred Stock, and shall
take all action required to increase the authorized number of shares of Common
Stock if at any time there shall be insufficient authorized but unissued shares
of Common Stock to permit such reservation or to permit the conversion of all
outstanding shares of Series A Preferred Stock.
(h) NO CONVERSION CHARGE OR TAX. The issuance and delivery of
certificates for shares of Common Stock upon the conversion of shares of Series
A Preferred Stock shall be made without charge to the holder of shares of Series
A Preferred Stock for any issue or transfer tax, or other incidental expense in
respect of the issuance or delivery of such certificates or the securities
represented thereby, all of which taxes and expenses shall be paid by the
Corporation.
Section 8. REDEMPTION OF SERIES A PREFERRED STOCK.
(a) At any time commencing upon the earlier of: (i) the Maturity
Date; or (ii) the closing of a public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public where immediately following the closing of such offering the Common Stock
is listed on the New York Stock Exchange or the American Stock Exchange or
quoted on the National Association of Securities Dealers Automated Quotation
System; the Corporation shall have the right to redeem for cash out of funds
legally available therefor each share of Series A Preferred Stock. Redemptions
pursuant to this Section 8(a) shall be made for a price per share equal to the
Liquidation Preference plus an amount equal to the amount of all unpaid
Dividends payable in accordance with Section 4 hereof on each share of Series A
Preferred Stock to be redeemed.
(b) The Corporation shall give written notice of its intention to
redeem the Series A Preferred Stock as provided herein, to each holder thereof,
at such holder's
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address as it appears on the transfer books of the Corporation, which notice
shall specify (i) the total number of shares of Series A Preferred Stock being
redeemed (which shall be all of such shares then outstanding); (ii) the number
of shares of Series A Preferred Stock held by the holder which the Corporation
intends to redeem (which shall be all of such shares then held by the holder);
(iii) the date of redemption (which shall be at least 30 days from the date of
mailing of such notice by the Corporation); and (iv) the redemption price. On
or after the date of redemption, each holder of Series A Preferred Stock shall
surrender his certificate for the number of shares to be redeemed as stated in
the notice provided by the Corporation. Dividends will cease to accumulate on
shares of Series A Preferred Stock called for redemption.
(c) For the purpose of determining whether funds are legally
available for redemption of shares of Series A Preferred Stock as provided
herein, the Corporation shall value its assets at the highest amount permissible
under applicable law. If on the redemption date funds of the Corporation
legally available therefor shall be insufficient to redeem all the shares of
Series A Preferred Stock required to be redeemed as provided herein, funds to
the extent legally available shall be used for such purpose and the Corporation
shall effect such redemption pro rata according to the total redemption amount
owed to each holder of Series A Preferred Stock as of the redemption date. The
redemption requirements provided hereby shall be continuous, so that if such
requirement shall not be fully discharged, funds legally available shall be
applied therefor until such requirements are fully discharged in accordance with
the preceding sentence.
Section 9. NOTICE OF CERTAIN EVENTS. In case the Corporation shall
propose at any time or from time to time (A) to declare or pay any dividend
payable in stock of any class to the holders of Common Stock or to make any
other distribution to the holders of Common Stock, (B) to offer to the holders
of Common Stock rights or warrants to subscribe for or to purchase any
additional shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (C) to effect any reclassification of its Common
Stock, (D) to effect any consolidation, merger or sale, transfer or other
disposition of all or substantially all of the property, assets or business of
the Corporation which would, if consummated result in the mandatory conversion
of shares of Series A Preferred Stock, or (E) to effect the liquidation,
dissolution or winding up of the Corporation, then, in each such case, the
Corporation shall mail to each holder of shares of Series A Preferred Stock via
first class mail at such holder's address as it appears on the transfer books of
the Corporation, a written notice of such proposed action, which shall specify
(1) the date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants or, if a record is not to be taken, the date
as of which the holders of shares of Common Stock of record to be entitled to
such dividend, distribution or rights are to be determined, or (2) the date on
which such reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up is expected to become effective, and such
notice shall be so given as promptly as possible but in any event at least ten
(10) business days prior to the applicable record, determination or effective
date, specified in such notice.
Section 10. CERTAIN REMEDIES. Any registered holder of shares of Series A
Preferred Stock shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Certificate of Designations and to enforce
specifically the terms and provisions of this Certificate of Designations in any
court of the United States or any
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state thereof having jurisdiction, this being in addition to any other remedy to
which such holder may be entitled at law or in equity.
Section 11. METHOD OF ELECTION. For purposes of this Certificate of
Designations, any election required or allowed to be made by the majority of the
holders of Series A Preferred Stock shall be effective upon receipt by the
Company of the written consent of a majority of such holders.
Section 12. STATUS OF REACQUIRED SHARES. Shares of Series A Preferred
Stock which have been issued and converted or redeemed shall (upon compliance
with any applicable provisions of the laws of the State of Delaware) have the
status of authorized and unissued shares of Preferred Stock issuable in series
undesignated as to series and may be redesignated and reissued.
The undersigned, Neil Gibbons and Daniel Huber, Chief Executive Officer and
Secretary of Virtual Telecom, Inc., respectively, hereby declare and certify
under penalty of perjury that the foregoing Certificate is the act and deed of
the Corporation and that the facts herein stated are true.
Executed at Geneva, Switzerland on July 31, 1996.
/s/ NEIL GIBBONS
-------------------------
NEIL GIBBONS
Chief Executive Officer
/s/ DANIEL HUBER
-------------------------
DANIEL HUBER
Secretary
<PAGE>
LOAN AGREEMENT
LOAN Agreement (the "Agreement") dated as of 15 May, 1996 by and between Virtual
Telecom SA (the "Borrower") and New Capital Investment Fund, a Cayman Islands
corporation (the "Lender").
RECITALS:
A. The Borrower desires to borrow from the Lender an amount of up to three
hundred thousand U.S. DOLLARS (USD $300,000) upon the terms and
conditions set forth herein, and
B. The Lender is willing, subject to and upon the terms and conditions
herein set forth, to lend this amount to the Borrower.
<PAGE>
AGREEMENT:
NOW, THEREFORE in consideration of the foregoing recitals and of the mutual
undertakings set forth herein, it is hereby agreed as follows:
1. AMOUNT AND TERMS OF LOAN
1.1 LOAN AND CLOSING DATE. Subject to the terms and conditions herein set
forth, the Lender shall land to the Borrower three hundred thousand U.S.
DOLLARS (USD $300,000). The loan is being made simultaneously with the
execution of this Agreement (the "Closing Date") at the offices of the \
Borrower.
1.2 INTEREST. The loan shall bear interest from the Closing Date to
maturity on the unpaid principal balance at an annual rate equal to
twelve percent (12%) and, after maturity, whether by acceleration or
otherwise, at an annual rate of fifteen percent (15%), or the highest
rate allowed by law, whichever is less. Interest shall be accrued
monthly from the Closing Date until the entire loan amount (principal
and interest) is paid in full. Interest shall be payable in full at the
maturity date of the loan. Therefore, interest shall be accrued during
the term of the loan and payable at the maturity of the loan.
1.3 MATURITY AND REPAYMENT. Maturity is defined as 366 days from the day
and year first above written, on which day the entire principal amount
of three hundred thousand (USD $300,000) and all unpaid interest
(accrued and other) shall be due and payable in full.
(a) At the sole discretion of the Borrower, the loan principal shall be
payable In cash or In the common stock of Virtual Telecom SA (or any
successor company or corporation), or a combination thereof. If the
Borrower elect to pay in the common stock of Virtual Telecom SA (or any
successor company or corporation), the common will be valued at
seventy-five percent (75%) of the average public market price for the
immediate 90 days preceding the repayment date.
(b) At the sole discretion of the Borrower, the loan interest (accrued and
other) will be payable in cash or in the common stock of Virtual Telecom
SA (or any successor company or corporation), or a combination thereof.
If the Borrower elects to pay in the common stock of Virtual Telecom SA
(or any successor company or corporation), the common stock will be
valued at seventy-five percent (75%) of the average public market price
for a 90 day period preceding the repayment date.
1.4 ORIGINATION FEE. Lender will receive a non refundable payment
consideration of one and one quarter percent (1.25%) of the principal
loan amount as an origination and processing fee. The origination Fee
will be deducted from the loan proceeds.
<PAGE>
1.5 EQUITY INCENTIVE. Lender will receive one half of one percent (0.5%)
of the outstanding common stock of Virtual Telecom SA as an incentive to
make the loan to the Borrower. The outstanding common stock" is
determined as the amount of common stock issued and outstanding in the
30 day period immediately after Virtual Telecom SA becomes a US public
corporation, either through the acquisition of, or merger with, a Us
public corporation or through a Public Offering or Registration of its
shares under the laws of the US Securities and Exchange Commission
(SEC).
2. USE OF PROCEEDS
2.1 The proceeds from this loan shall be used exclusively for the
expenditure categories listed in Appendix "A" to the agreement. Any
change in the actual use of proceeds must be approved, in writing by the
Lender, prior to the expenditure of funds by the Borrower.
3. REPAYMENTS
3.1 REQUIRED PREPAYMENTS. The Borrower shall not be required to @e any
prepayment of principal prior to the maturity thereof, except in the
Event of Default as defined herein.
3.2 OPTIONAL PREPAYMENT. The Borrower shall have the absolute right from
time-to-time and at any time to pay the outstanding balance, in whole or
in part, provided that, in no event, shall the total interest payment
payable by the Borrower to the Lender be less than the amount of
interest which would have accrued if the Total Loan Amount were
outstanding in full on the Closing Date and for a continuous period of
three (3) months thereafter: a minimum of three months interest is Due
and payable at the time of any prepayment.
4. CONDITIONS
4.1 CORRECTNESS OF WARRANTIES. All representations and warranties
contained herein or otherwise made by the Borrower to the Lender in
connection herein shall be true and correct.
4.2 PROCEEDINGS; RECEIPT OF DOCUMENTS. All corporate and legal proceedings
and all documents and instruments in connection with the borrowing under
this Agreement shall be satisfactory in form and substance to the Lender
and Raiskin and Revitz, counsel to the Lender. The Lender shall have
received all information and copies of all documents, including records
of corporate proceedings which the Lender has reasonably requested. Such
documents where requested by the Lender shall be certified by
appropriate corporate or governmental authorities.
5. COVENANTS
The Borrower covenants and agrees that, until the entire principal
balance together with interest thereon and all its other indebtedness to
the Lender under this Agreement are paid in full, unless specifically
waived by the Lender in writing.
<PAGE>
5.1 TAXES AND CLAIMS. The Borrower shall duly Pay and discharge and shall
cause each of its subsidiaries to pay and discharge:
(a) All taxes, assessments and governmental charges upon or against the
Borrower or its subsidiaries or their respective properties or assets
prior to the date of which penalties attach thereto, unless and to the
extent that such appropriate proceedings and appropriate reserves
thereof have been established and (b all lawful claims, whether for tort
damages, labor, materials, supplies, services, repairs, wages or
otherwise, which might or could if unpaid, become a lien or charge upon
the properties or assets of the Borrower or its subsidiaries, unless and
to the extent only that the same are being diligently contested on good
faith and by appropriate proceedings and appropriate reserves thereof
have been established.
6. OTHER REQUIREMENTS
6.3 INSPECTION BY LENDER. The Borrower shall allow any representative of
the Lender to visit and inspect any of the properties of the Borrower,
to examine the books of account and other records and files of the
Borrower, to make copies thereof and to discuss the affairs, business,
finances and accounts of the Borrower with its officers and employees,
all at such reasonable times and as often as the Lender may request.
6.4 BUSINESS OF THE BORROWER. The Borrower shall only conduct those
businesses and activities in which it is presently engaged, except for
now activities related to the Use of Proceeds.
6.5 PAY INDEBTEDNESS AND PERFORM COVENANTS. The Borrower shall:
(a) Make full and timely payment of the principal and interest of
indebtedness of the Borrower to the Lender, whether now existing of
hereafter arising.
(b) Duly comply with all terms and pursuant with or pursuant to this
Agreement, all at the times and places and in the manner set forth
therein.
7. EVENTS OF DEFAULT AND REMEDIATION
The following shall constitute events of defaults:
(a) Failure to pay interest or principal within ten (10) days of due dates,
(b) Failure to provide accounting of Use of Proceeds,
(c) Failure to use proceeds in accordance with provisions of Section 2 of
the Agreement,
(d) Failure to comply with covenants and other requirements contained in
Section3 5 and 6 of this Agreement,
(e) Upon discovery of any misrepresentations made by the Borrower in
connection with this Agreement. Upon any default, the principal and
unpaid interest shall become due and payable from the Borrower on demand
by the Lender.
<PAGE>
8. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the loan
as herein provided for, the Borrower makes the following representations
and warranties to the Lender, which shall survive the execution and
delivery of this Agreement and any inspection or examination at any time
made by or an behalf of the Lender.
8.1 CORPORATE STATUS. The Borrower has the corporate power and authority to
own its properties and to transact the business in which it is engaged
or presently proposes to engage in. The Borrower is duly qualified as a
business organization under the laws of Switzerland and is in good
standing in all legal entities in which its business or the ownership
and use of its properties requires such qualification.
8.2. NO VIOLATION OF AGREEMENT. Neither the Borrower nor any subsidiary is
in default under any indenture, mortgage, deed of trust, agreement, or
other instruments to which it in a party or by which it may be bound.
Neither the execution and delivery of this Agreement, or any of the
instruments and documents to be delivered pursuant to this Agreement,
nor the consummation of the transactions herein or therein contemplated,
nor compliance with the provisions thereof or thereof will violate any
law or regulation or any order or decree or any court of governmental
instrumentality, or will conflict with, or result in the breach of, or
constitute a default under, any indenture, mortgage, deed of trust,
agreement or other instrument to which the Borrower or any subsidiary is
a party or by which any of them may be bound, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the
property of the Borrower, or any subsidiary thereunder, or violate any
provision of the Articles or Certificate of Incorporation or Bylaws of
the Borrower or any subsidiary.
9. MISCELLANEOUS
9.1 COLLECTION COST. In the event that the Lender shall retain or engage
an attorney or attorneys to collect, enforce or protect its interests
with respect to this Agreement or any Instrument or document delivered
pursuant to this Agreement, the Borrower shall pay all of the costs and
expenses or such collection, enforcement or protection, including,
without limitation, reasonable attorneys 1 fees and court costs, and the
lender may take judgement for all such amounts, in addition to the
unpaid principal and accrued interest.
9.2 MODIFICATION AND WAIVER. No modification or waiver of this Agreement
and no consent by the Lender to any departure therefrom by the Borrower
shall be effective unless such modification or waiver shall be in
writing and signed by the duly authorized officer of the Lender, and the
same shall then be effective only for the period, on conditions and for
specific instances an purposes specified in such writing. No notice to
or demand
<PAGE>
on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar circumstances.
9.3 LAW. This Agreement shall be construed to be in accordance with and
governed by the laws of Switzerland.
9.4 NOTICES. All notices, requests, demands or other communications
provided for herein shall be in the written English language and shall
be deemed to have been given when sent by registered or certified mail,
return receipt requested, addressed, as the case may be to:
The Lender Jurg Kehrli, Director
New Capital Investment Fund
Georgetown, Grand Cayman
Cayman Islands, British West Indies
With a copy to Raiskin and Revitz
Attn: Dan Raiskin
10390 Santa Monica Boulevard
Los Angeles CA 90254 USA
The Borrower Virtual Telecom SA
Attn: Neil Gibbons 60, rue du Stand
CP 5473, CH-1211 Geneva, Switzerland
9.5 WAIVER OF JURY TRIAL AND SETOFF. The Borrower hereby waives trial by
jury in any litigation in any court with respect to, in connection with,
or arising out of this Agreement or any other instrument or document
delivered pursuant to this Agreement or the validity, protection,
interpretation, collection or enforcement thereof or any other claim or
dispute however arising between the Borrower and the Lender; and the
Borrower hereby waives the right to interpose any setoff, counterclaim
or cross-claim in connection with any such litigation, irrespective of
the nature of such setoff, counterclaim or cross-claim. Borrower and
Lender agree to use a Swiss mediator of mutual choice.
9.6 U.S. CURRENCY. All dollar amounts set forth in the Agreement shall be
designated and payable in the currency of the United States of America
(USD $).
9.7 ENGLISH. All communications, letters and documents related to any and
all aspects of this Agreement shall be made in the English language.
9.8 COUNTERPART EXECUTION. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original out all of which
together shall constitute a single original Agreement.
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Agreement
consisting of seven (7) pages, including a one page Appendix "All, to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
THE BORROWER,. Virtual Telecom SA, Geneva
BY: Neil Gibbons, Chief Executive Officer
/s/ Neil Gibbons
-----------------------------------------
THE LENDER,. NEW CAPITAL INVESTMENT FUND
Cayman Islands Corporation
BY: Jurg Kehrli, Director
/s/ Jurg Kehrli
-----------------------------------------
<PAGE>
PARTNERSHIP OUTSOURCING AGREEMENT
(hereinafter called "PO Agreement")
between
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Virtual Telecom SA
12, avenue des Morgines
1213 Petit-Lancy
(hereinafter called "CUSTOMER")
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and
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DEC Digital Equipment Corporation SA
12, avenue des Morgines
1213 Petit-Lancy
(hereinafter called "DIGITAL")
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created on: 130996
based on version: August 96
created by: DEC Digital Equipment Corporation SA
12. avenue des Morgines
1213 Petit-Lancy
<PAGE>
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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PARTS
A) PO AGREEMENT
1. Preamble................................................................. 4
2. Subject and Prerequisites of the PO Agreement............................ 5
3. Responsibilities.........................................................
3.1. Responsibilities and Performances of DIGITAL.................... 6
3.2. Responsibilities and Performances of CUSTOMER................... 7
4. System Manager........................................................... 8
5. Remuneration............................................................. 9
6. Control of the Services.................................................. 10
7. Liability of DIGITAL..................................................... 11
8. Property and Risks....................................................... 12
9. Force Majeure............................................................ 13
10. Responsibility for Data.................................................. 14
11. Term..................................................................... 15
12. Early Termination and Non-Renewal of PO Agreement........................ 16
12.1. Early Termination.............................................. 16
12.2. Non-Renewal.................................................... 17
13. Change Orders............................................................ 18
14. Export/Re-export......................................................... 19
15. Confidentially........................................................... 20
16. Security Regulations..................................................... 21
17. Final Provisions......................................................... 22
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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B) ATTACHMENTS
- Attachment 1: Project Plan
- Attachment 2: Parameters and Equipment Acquisition
- Attachment 3: Service Description
- Attachment 4: Hardware-Purchase and Software-License Agreement
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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1. PREAMBLE
This Partnership Outsourcing Agreement (hereinafter "PO Agreement") is
established for a fixed period of 4 years. The CUSTOMER delegates to
DIGITAL the implementation and the network management of its "Swiss
Internet Dial up Network". The PO Agreement includes the sale and
license of the telecommunication products (equipment and software)
installed over the 13 Dial up sites nationally and the servers located
in DIGITAL's FM Center.
This means that DIGITAL will manage, on behalf of the CUSTOMER, the
Internet IT Platform and commit to service levels based on agreed
parameters.
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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2. SUBJECT AND PREREQUISITES OF THE PO AGREEMENT
2.1. The subject of the PO Agreement is to define the responsibilities and
performances as well as the rights and obligations which arise out of
the Facility Management services for CUSTOMER and DIGITAL.
The following attachments form an integral part of the PO Agreement:
- Attachment 1: Project Plan
- Attachment 2: Parameters and Equipment Acquisition
- Attachment 3: Service Description
- Attachment 4: Hardware-Purchase and Software-License Agreement
2.2. Prerequisites of the PO Agreement:
The PO Agreement is based on the parameters as set out in Attachment 2
"Parameters and Equipment Acquisition". Should these parameters not
materialize as a whole or in part, DIGITAL will provide the necessary
adjustment to the PO Agreement.
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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3. Responsibilities
3.1. Responsibilities and Performances of DIGITAL
3.1.1. DIGITAL shall operate and maintain computer systems according to
Attachment 3 Service Description. The services will be performed by
DIGITAL on the systems defined in the section Hardware and Network of
Attachment 3 "Service Description".
3.1.2. The contents and scope of the services performed by DIGITAL for
CUSTOMER as set out in Attachment 3 "Service Description" are binding.
This attachment forms an integral part of the PO Agreement and shall
prevail in case of contradictions.
For the relevant Facility Management services DIGITAL cannot guarantee to
perform services beyond the limit described in Attachment 3 "Service
Description".
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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3.2. RESPONSIBILITIES AND PERFORMANCES OF CUSTOMER
3.2.1. CUSTOMER assists DIGITAL in delivering the services described in
Attachment 3 "Service Description" as follows:
- make available appropriate locations and necessary infrastructure
according to the environment prerequisites as specified by DIGITAL
in the relevant section of Attachment 3" Service Description";
- make available all necessary information to fulfil the obligations
of the PO Agreement;
- ensure permanent access rights for all authorized DIGITAL personnel.
The contents and extent of the services performed by CUSTOMER as set
out above are binding. All costs arising out of CUSTOMER's non
performance of the above mentioned activities shall be charged to
CUSTOMER.
3.2.2. CUSTOMER is fully responsible for the proper licensing of all and any
software products (system and application software) which have not been
provided by DIGITAL in connection with the services performed under the
PO Agreement, but which are installed in the CUSTOMER's IT environment
and fall under the P0 Agreement.
All license rights of the applications provided by CUSTOMER remain the
property of the pertinent licensee. CUSTOMER ensures compliance with
possible license transfer provisions of the licensors.
CUSTOMER holds DIGITAL harmless of any claims of third parties based on
alleged or proven infringements of license or other intellectual
property rights.
3.2.3. CUSTOMER shall notify DIGITAL as soon as possible of any intended
re-location of the system (according to section "Computer room" of
Attachment 3 "Service Description ). In this case both parties will
start promptly to negotiate the new conditions which shall apply to
perform the service in the new facility.
Any additional costs which might occur by the re-location of the system
and the equipment will be charged to CUSTOMER.
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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4. SYSTEM MANAGER
4.1. All personnel providing service under the PO Agreement will remain solely
under the conditions of employment and management of DIGITAL, which is
authorized to give instructions at any time.
In addition, DIGITAL staff which permanently work at CUSTOMER's site are
submitted to security and other operational regulations stipulated by
CUSTOMER for its own employees.
4.2. CUSTOMER is obliged to respect and accord the usual level of professional
courtesy to DIGITAL staff working at its premises. CUSTOMER shall take
all reasonable precautions to safeguard the health and safety of DIGITAL
employees and take all further measures required by Art. 328 of the Swiss
Code of Obligations.
4.3. The DIGITAL System Manager shall decide on the daily operational issues
together with CUSTOMER's Project Manager.
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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5. REMUNERATION
5.1. The total project price is of CHF 2'128'000.- and is set out as follows:
5.1.1 Equipment and Licenses:
Payment of CHF 300'000.- (31/07/06)
Payment of CHF 100'000.- (31/10/06)
Payment of CHF 100'000.- (30/11/96)
Payment of CHF 100'000.- (31/12/96)
The remainder, i.e. CHF 1'528'000.-, is payable and included in the
following table.
5.1.2 Services and remainder of the Equipment and Licenses' price:
--------------------------------------------------
AMOUNT INVOICING DATE-
--------------------------------------------------
CHF. 133'000.- 31/10/96
CHF: 133'000.- 31/01/97
CHF. 133'000.- 30/04/97
CHF. 133'000.- 31/07/07
CHF. 83'000.- 31/10/97
CHF. 83'000.- 31/01/98
CHF. 83'000.- 30/04/98
CHF. 83'000.- 31/07/98
CHF. 83'000.- 31/10/98
CHF. 83'000.- 31/01/99
CHF. 83'000.- 30/04/09
CHF. 83'000.- 31/07/99
CHF. 83'000.- 31/10/99
CHF. 83'000.- 31/01/00
CHF. 83'000.- 30/04/00
CHF. 83'000.- 31/07/00
5.2. The following prices are exclusive of sales tax (VAT). The relevant
taxes are set out and billed separately.
5.3. The price set orth in 5.1.2 is due quarterly in advance. Invoices are
payable 30 days net. The Facility Management services shall not be
submitted to any discount agreement between Digital Equipment
Corporation and CUSTOMER or its mother company.
5.4. CUSTOMER shall only be authorized to counter-charge claims which have
been approved in written by both parties or confirmed by enforceable
court decision.
5.5. The parties may agree separately on major modifications which have an
impact on the prices of the services under the PO Agreement.
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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6. CONTROL OF THE SERVICES
Periodical controls of the services are carried out quarterly, for the
first time on October 31, 1996.
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Partnership Outsourcing Agreement Virtual Telecom SA 13.09.96
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7. LIABILITY OF DIGITAL
7.1. DIGITAL's total liability for personal damages is unlimited.
DIGITAL's liability for other direct damages due to negligence in the
performance of the PO Agreement except those mentioned under 7.2.
shall be limited to the amount of CHF 300'000.-.
7.2. In no event shall DIGITAL or its agents be liable for other or further
claims and damages, especially for indirect or consequential damages,
damages resulting from lost profit, loss of gain or loss of data,
access to CUSTOMER's data by third party by the means of the public
network or the CUSTOMER's sites, regardless of the form of action.
7.3. Further liability stipulated by law for gross negligence or willful
intent remains reserved.
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Partnership Outsourcing Agreement Virtual Telecom
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8. PROPERTY AND RISKS
8.1. All products furnished by DIGITAL under the PO Agreement (according to
section "Hardware" of Attachment 2 "Parameters and Equipment
Acquisition") shall remain the property of DIGITAL until their full
payment over the 4 years contract period as per Attachment 2 "Parameters
and Equipment Acquisition" and shall be under the entire disposal of
DIGITAL. As long as they belong to DIGITAL, these products shall neither
become accessories nor parts of the premises on which they are
installed. DIGITAL shall be entitled to mark these products as its own
property.
8.2. CUSTOMER shall announce to the commission of bankruptcy or to any other
competent authority the property of DIGITAL in case of seizure,
confiscation, insolvency, bankruptcy, retention, or any other legal
proceeds.
8.3. Performance under the PO Agreement includes a Recover-All-Service
Contract (according to section "Recover All Services" of Attachment 3
"Service Description"). This contract is valid for server/host systems
supported by DIGITAL and listed in section "Hardware" of Attachment 2
"Parameters and Equipment Acquisition" provided that they are installed
in DIGITAL's FM Center.
Insurance of all other products is under CUSTOMER's responsibility.
8.4. CUSTOMER's staff shall apply all necessary care when using the Facility
Management infrastructure. With regard to intellectual property, use of
installed software and confidentiality, the license terms and
conditions of DIGITAL (see Attachment 4) or of pertinent third parties
(for example PC software suppliers) are applicable. CUSTOMER is obliged
to provide DIGITAL with an index of the workstation locations and notify
DIGITAL in case of changes.
8.5. CUSTOMER is entitled to modify the installed hardware and/or software
only upon written approval by DIGITAL.
8.6. After termination of the PO Agreement, CUSTOMER will acquire any and all
not fully paid material and equipment listed in Section "Hardware" of
Attachment 2 "Parameters and Equipment Acquisition" such as hardware,
software and documentation from DIGITAL upon payment of the amount
stipulated under 12.1.4 "Indemnity for early termination".
8.7. All data and programs provided by CUSTOMER shall remain its property.
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Partnership Outsourcing Agreement Virtual Telecom
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9. FORCE MAJEURE
In case of force majeure (e.g. fire, earthquake, lightening) the parties
are released from performing their contractual services.
In case of other violent events in one party's environment (e.g. attacks,
liquids, gases, nuclear and chemical reactions or nuclear radiation, or
injury caused by misuse) the other party is released from performing its
contractual service.
Both parties agree that in such case they will start negotiations
promptly to agree under which conditions and within which delay the
performance of the service can be restarted.
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Partnership Outsourcing Agreement Virtual Telecom
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10. RESPONSIBILITY FOR DATA
CUSTOMER acknowledges that the data processed under the IT systems are
submitted to legal prescriptions (e.g. Data Protection Law, Legal
provisions on business activities).
Compliance with those prescriptions is CUSTOMER's sole responsibility.
CUSTOMER shall hold DIGITAL harmless of any claims of third parties
based on infringements of these regulations.
DIGITAL declines all responsibility for the contents of the data.
If CUSTOMER does not comply with legal prescriptions, DIGITAL reserves
the right to terminate the PO Agreement after expiration of an additional
period of time and written notice to CUSTOMER.
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Partnership Outsourcing Agreement Virtual Telecom
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11. TERM
The PO Agreement shall become effective upon signature by CUSTOMER and
countersignature by DIGITAL for an initial term of 4 years as from
________________, 1996. However, the PO Agreement may be terminated at
any time for serious reasons as defined under 12.1.1.
After the initial term, the PO Agreement will be tacitly extended for
12 month periods unless terminated by either party giving the other
6 months written notice. The remunerations due for the following period
will be newly negotiated.
In case of disagreements the following shall apply:
a) DIGITAL will set a 6 month period for the system transfer by CUSTOMER.
b) During this period the services will be invoiced under the same
conditions.
c) The scope and price of the know-how transfer shall be negotiated and
determined before the commencement of the transfer period.
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Partnership Outsourcing Agreement Virtual Telecom
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12. EARLY TERMINATION AND NON-RENEWAL OF THE PO AGREEMENT
12.1. EARLY TERMINATION
12.1.1. Either party is entitled to terminate the PO Agreement at any time for
serious reasons. Serious reasons are in particular:
- serious default of either party which is not remedied despite
written notice thereof and after an additional period of three (3)
months;
- bankruptcy or insolvency of either party.
12.1.2. If DIGITAL provides the serious reason by defaulting seriously in its
contractual obligations, e.g. in case of
- failure of DIGITAL to remedy defaults unduly preventing productive
use of the system;
- repeated failure in availability as warranted under sections
"Availability" and "Warranted Availability" of Attachment 3 "Service
Description", which unduly prevents CUSTOMER's use of system;
which has not been remedied despite written notice and after an
additional period of three (3) months, or if bankruptcy proceedings are
instituted against DIGITAL, CUSTOMER is entitled to terminate the PO
Agreement with immediate effect, with the exclusion of further claims,
and to purchase the non fully paid Equipment listed in section
"Hardware"
of Attachment 2 "Parameters and Equipment Acquisition" upon payment of
the indemnity for early termination set out in 12.1.4. reduced by 10%.
12.1.3. If CUSTOMER provides the serious reason for early termination or
declares early termination based on Art. 404 of the Swiss Code of
Obligations, CUSTOMER shall pay DIGITAL an indemnity for early
termination as set out hereinafter.
DIGITAL shall assist CUSTOMER in re-establishing the operational
know-how. In such case the services shall be invoiced to CUSTOMER as
performed.
12.1.4. Indemnity for early termination:
The indemnity for early termination amounts to the following.
in case of termination before 30. Nov. 96 CHF. 990'000.--
31. Dec. 96 CHF. 890'000.--
31. Oct. 97 CHF. 700'000.--
31. Oct. 98 CHF. 500'000.--
31. Oct. 99 CHF. 350'000.--
31. Aug. 2000 CHF. 150'000.--
If CUSTOMER intends to further use the license rights for the installed
automation tools, it shall purchase the rights from DIGITAL at the
depreciation cost valid at that time. The related maintenance contracts
shall continue at CUSTOMER's expense unless terminated by CUSTOMER by
written notice.
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Partnership Outsourcing Agreement Virtual Telecom
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12.2. NON-RENEWAL
12.2.1. If CUSTOMER does not renew the PO Agreement upon its expiry, DIGITAL
shall assist CUSTOMER in re-establishing the operational know-how. In
such case the services shall be invoiced to CUSTOMER as performed.
12.2.2. In such case, CUSTOMER shall purchase the license rights for the
installed automation tools from DIGITAL at the depreciation costs valid
at that time.
12.2.3. The infrastructure installed at CUSTOMER shall be under maintenance by
DIGITAL after termination of the PO Agreement, at the official list
price valid at the time.
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Partnership Outsourcing Agreement Virtual Telecom
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13. CHANGE ORDERS
13.1. Any PO Agreements on changes in content, services or schedule shall be
examined as to their impacts on the project and the scope of service as
well as on the obligations of DIGITAL or its subcontractors.
DIGITAL may notify the CUSTOMER by unilateral declaration of simple
adjustments of the project to different circumstances in processing,
legal situation, etc. which have no effect upon the services performed,
the schedule or prices.
13.2. Any change request with regard to the PO Agreement and/or its annexes
shall be issued by CUSTOMER in writing. DIGITAL will submit a change
offer indicating the effects of the changes on the performance of the
PO Agreement (especially with regard to prices and availability).
CUSTOMER shall indicate within a period of time agreed upon by both
parties if they accept the offer or withdraw the change request.
13.3. Services resulting from additional functional specifications required by
CUSTOMER, which exceed the scope as set out in Annex 1 "Service
Description" shall be performed by DIGITAL if possible and shall be
invoiced separately. The relevant PO Agreements must be made in writing;
the parties may request a separate contract addendum.
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Partnership Outsourcing Agreement Virtual Telecom
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14. EXPORT/RE-EXPORT
14.1. Notwithstanding any other provisions of these terms and conditions, the
selling, reselling and licensing of Digital products and/or delivery of
technical data (software and technical information in any form) is
subject to the export license or authorization as required by the Swiss
and U.S. Export Administration Regulations. Regardless of any
notification made by CUSTOMER to DIGITAL of an ultimate destination of
the products and/or technical data, it is CUSTOMER's sole responsibility
to ensure compliance with the relevant regulations. CUSTOMER shall
obtain the necessary approvals from the Swiss and U.S. Government, if
required.
14.2. DIGITAL reserves the right to refuse performance of its contractual
obligations or to terminate the PO Agreement with immediate effect if
there is any indication that further performance of the PO Agreement or
individual obligations under the PO Agreement will result in a violation
of Swiss or U.S. provisions with regard to the CUSTOMER, its users or
DIGITAL, or if there is any indication of CUSTOMER's violation of Swiss
or U.S. export regulations.
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Partnership Outsourcing Agreement Virtual Telecom
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15. CONFIDENTIALITY
15.1. Any information disclosed by CUSTOMER in connection with the performance
of the PO Agreement remain the exclusive property of CUSTOMER. DIGITAL
shall keep confidential CUSTOMER's proprietary information and data and
treat them with the same care as its own proprietary information.
15.2. CUSTOMER shall keep confidential information which it obtains through
means of DIGITAL and shall not disclose this information as a whole or
in part to third parties in any form.
15.3. Material provided by DIGITAL to CUSTOMER or third parties for the
performance of the PO Agreement, such as diagnostic software,
documentation, service processors and other material remain the exclusive
property of DIGITAL and shall be of DIGITAL's sole use. Such program or
material may neither be reproduced nor disclosed or made available to
any third party or unauthorized staff of CUSTOMER.
15.4. Upon termination of the PO Agreement these products and possible back-up
copies shall be deleted by DIGITAL, and the parties shall mutually return
proprietary information. The obligation to maintain secrecy remains valid
for 5 years after termination of the PO Agreement.
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16. SECURITY REGULATIONS
16.1. DIGITAL shall ensure compliance with the security standards according to
the chapter "Security Management" of Annex 1 "Service Description" and
shall be responsible within its scope of activities that other (CUSTOMER
or third parties) are also compliant. DIGITAL shall not access any
protected data of CUSTOMER.
16.2. DIGITAL declines its responsibility for unauthorized access to
server/host systems via the connected network if the causes are beyond
DIGITAL's control and scope of responsibility.
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17. FINAL PROVISIONS
17.1. DIGITAL shall be entitled to use subcontractors in order to perform its
contractual obligations upon prior written notice to CUSTOMER. CUSTOMER
may refuse the appointment of a subcontractor if there is a compelling
reason.
17.2. CUSTOMER may transfer its rights and obligations under the PO Agreement
only subject to prior written approval by DIGITAL.
17.3. The PO Agreement and its annexes specify the parties' rights and
obligations under the PO Agreement and shall prevail any specifications
made during contractual negotiations.
17.4. Any contractual agreements, modifications or additions as well as any
new annexes or service descriptions shall be in written with explicit
reference to the PO Agreement and signed by both parties.
17.5. If one or several clauses of the PO Agreement or one of its annexes are
declared void or not applicable, then shall the rest of the contract
remain valid. Such clauses shall be construed according to the general
intent of the whole PO Agreement.
17.6. The court of jurisdiction is Geneva. The PO Agreement and its annexes
and service descriptions are governed by the laws of Switzerland.
For the CUSTOMER: For Digital:
Place/Date: Geneva 20.9.96 Place/Date: ILLEGIBLE
-------------------------- ---------------------------
Signature(s): ILLEGIBLE Signatures: ILLEGIBLE
-------------------------- ---------------------------
ILLEGIBLE ILLEGIBLE
-------------------------- ---------------------------
Name(s) of ILLEGIBLE Names of ILLEGIBLE
-------------------------- ---------------------------
signatory/signatories: 2 signatories: 2 ILLEGIBLE
--- ---
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Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
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Attachment 1
PROJECT PLAN
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Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
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Summary
I- Expected functionality description
II- Validated technical choice
II-1 Access sites choice
II-2 Access switch choice
II-3 Telecom operator choice
II-4 Software and hardware choice
III- General architecture
IV- Complementary technical information
IV-1 Security
1- Statistical packet filter
2- Firewall protection
IV-2 Invoicing and authentication
1. Authentication
2. Invoicing
IV-3 Mailing service
IV-4 Fault tolerance
IV-5 IP Adressee Plan
IV-6 Network Management
V- VIRTUAL TELECOM Technical responsibilities
V-1 WEB server Management
V-2 News server management
V-3 Mail server management
VI- Project phase
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I- EXPECTED FUNCTIONALITY DESCRIPTION
VIRTUAL TELECOM will implement an Internet network access system for the Swiss
Territory.
Different services connections will be proposed to customers of the VIRTUAL
TELECOM network;
- - Dial-up through telephone network with modems
- - Dial-up through ISDN Network with specialized controllers for adapters.
- - Fixed links with specialized communications lines.
VIRTUAL TELECOM will offer traditional Internet services (WEB, News, Email,
FTP) and will provide a secure environment for authentication. An invoicing
system will interface different equipment
To offer these services. VIRTUAL TELECOM will establish a Network based on
access switch ASCEND MAX-4000 interconnected through Frame Relay links.
The whole network will be protected from intrusion with a Firewall service, a
development and monitoring network will be linked to the WEB platform.
II- VALIDATED TECHNICAL CHOICE
II-1 ACCESS SITES CHOICE
in the first phase the following sites have been selected:
Lausanne, Bern, Zurich, Fribourg, Neuchatel, Basel, Winterthur, St-Gallen.
For other sites are foreseen later:
Chur, Bienne, Olten, Rapperswil.
The network administration site which includes the Web, Mail and News servers
will be Geneva.
II-2 ACCESS SWITCH CHOICE
The ASCEND MAX-4000 has been selected for the remote access management.
Directly connected to one or several primary access ISDN (PRI) they can supply
up to 96 simultaneous access with a maximum of 48 connections by V32bis abd V34
modems.
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- ------------------------------------------------------------------------------
---------------------------------------------------------------------
Access sites ASCEND CONFIGURATION
---------------------------------------------------------------------
PRI Links Number of MAX Modems Adaptation
(Primary Rate 4000 Cards 12 V34 Cards V110
Interface)
---------------------------------------------------------------------
Winthertur 1 1 2 -
---------------------------------------------------------------------
St Gallen 2 1 4 -
---------------------------------------------------------------------
Rapperswil 1 1 2 -
---------------------------------------------------------------------
Olten 1 1 2 -
---------------------------------------------------------------------
Basel 2 1 4 -
---------------------------------------------------------------------
Bienne 1 1 2 -
---------------------------------------------------------------------
Neuchatel 1 1 2 -
---------------------------------------------------------------------
Fribourg 1 1 2 -
---------------------------------------------------------------------
Chur 1 1 2 -
---------------------------------------------------------------------
Lausanne 2 1 4 -
---------------------------------------------------------------------
Zurich 2 2 5 1
---------------------------------------------------------------------
Bern 2 1 4 -
---------------------------------------------------------------------
Geneva 2 1 4 1
---------------------------------------------------------------------
PRI: Primary Rate Interface
II-3 Telecom operator choice
Unisource has been selected as Telecom Operator who will provide Frame
Relay links across the Swiss Territory. The sites as well as the
bandwidth are showed on the following table.
Some of the MAX 4000 devices will be installed at the Unisource premises.
Unisource and BT (British Telecom) will provide a 1 Mbit/s connection
through the worldwide Internet Backbone.
-------------------------------
Sites Speed
-------------------------------
Geneva 2048 Kbit/s
-------------------------------
Bern 512 Kbit/s
-------------------------------
Zurich 512 Kbit/s
-------------------------------
Lausanne 128 Kbit/s
-------------------------------
Fribourg 64 Kbit/s
-------------------------------
Neuchatel 64 Kbit/s
-------------------------------
Bienne 64 Kbit/s
-------------------------------
Basel 128 Kbit/s
-------------------------------
Chur 64 Kbit/s
-------------------------------
Olten 64 Kbit/s
-------------------------------
Wintherthur 64 Kbit/s
-------------------------------
St Gallen 128 Kbit/s
-------------------------------
Rapperswil 64 Kbit/s
-------------------------------
-26-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
II-4 SOFTWARE AND HARDWARE CHOICE
Geneva site will be composed of the following systems:
- - A main server:
DIGITAL ALPHA 1000 with the following software:
- Digital Unix Operating system
- Web server
- DNS Server
- POP 3 server
- SMTP Gateway
- RADIUS ASCEND Server
- Proxy server
- - Safety and Back-up server:
Digital Alpha 1000 with the following software:
-Digital Unix Operating system
- WEB server
- DNS server
- POP 3 server
- SMTP Gateway
- RADIUS ASCEND server
- Proxy server... (to be detailed)
- - Complementary server
DIGITAL ALPHA 255
This server will be dedicated to the Network Management as well as the News
server
It will be implemented with the following software:
- Digital Unix Operating System
- News server
- Network management server: clear VISN + Manager on Netview
- Station NT
1 PC DIGITAL PRIORIS
- Windows NT system
- Firewall...
- ASCEND SAM -Administration (Secure Access Manager)
-27-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
III- GENERAL ARCHITECTURE
From a Telecom point of view, the access network to Internet from Virtual
Telecom has the following architecture:
- PRI connections coming from the ISDN SWISSNET, these will enable modem
connections types ISDN terminals or GSM (the bandwidth conversion will be
done by the access switch ASCEND MAX 4000).
- Frame relay links from Unisource will be used to interconnect the
different sites
- Two connections on the Internet backbone will come from BT and
Unisource.
SWISSNET ISDN
[GRAPH]
-28-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
GENEVA SITE
The main MAX 4000 device will be connected to a CISCO Router who will manage
the Telecom links that go to the Internet worldwide backbone. The usage of
two Frame Relay links at 1 Mbit/s with two different Telecom operators will
guarantee a higher reliability.
Nevertheless the MultiHoming adds a higher complexity in the implementation
of the equipment and requires a CISCO Router with a min. of 32 MB of memory
[GRAPH]
-29-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
IV- COMPLEMENTARY TECHNICAL INFORMATION
IV-1 SECURITY
1-Statistical packet filter
This technique offers good protection against inexperienced hackers but it is
inefficient as it does not provide an intelligent way of opening and closing
TCP ports selectively. This method opens ports that have a high value
(1024-65535), hackers usually use them to enter the network. We will not use
this method.
2-Firewall protection
Without a Firewall it is nearly impossible to guarantee intrusion as hackers
get hocked as piggyback to actual data.
Secure access Firewall from ASCEND (optional software of MAX 4000) provides
an official protection to the Network. This software monitors all request for
open sessions, only the necessary ports are open, all the others are closed
and do not leave any security holes for hackers.
The applications that are not explicitly allowed will be forbidden for a full
security.
We propose to install secure access from ASCEND on all MAX 4000 as well as
Windows SAM (Security Access manager) for the configuration of all Firewall.
IV-2 INVOICING AND AUTHENTICATION
In order to authenticate the user on the network of Virtual Telecom, we will
use the RADIUS (Remote Authentication Dial-In User service). RADIUS is a
database server specified by IETF and Livingston Enterprise Inc. Used jointly
with MAX 4000, RADIUS provides 2 very important services: the authentication
of session and the invoicing.
1-Authentication
RADIUS supports the same authentication mode than MAX 4000 (PAP, CHAP,
callback etc.) that will communicate with the Unix server (ALPHA 1000)
containing a security database. This database (ASCII or indexed DBM) will
contain the list of users, passwords and authorisations. When a query is
treated by RADIUS server, MAX 4000 provides a user ID and the password for
the server. The server sends a profile with all information concerning the
restriction for that user. Using RADIUS the number of authentication entries
is no longer limited by the number of connected profiles supported by MAX 4000
(32).
RADIUS has been chosen instead of TACACS (Terminal Access Concentrator Access
Control Server) also supported by MAX 4000 because as -TACACS does not
support CHAP and PPP protocol.
-30-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
In order to benefit of a better integration we will install the RADIUS daemon
modified by ASCEND.
A higher security level can be attend it the RADIUS server if linked to a
dynamic password server. This type of server (Security Dynamics ACE or Enigma
Logic SAFEWORD AS) is used with security cards.
The dynamic password will not be used in this phase of project.
2-Invoicing
Several methods can be used for invoicing:
RADIUS
The RADIUS daemon has an option that manages the capturing of session
information. These information can be used for invoicing, but the utilization
of such a solution is cumbersome.
CDR: CALL DETAIL REPORTING
ASCEND switches integrate a function of activity report related to each call
and includes the date, the time and duration, number of caller (ISDN), the
type of service, ports. etc... As with RADIUS server, general information are
difficult to use.
COOLWORLD
There is a specific software developed for the ISP (Internet Service
Provider) in order to exploit the network usage.
Internet Billing of Cool World Inc. proposes different dataprocessing related
to invoicing. As a Unix application, Internet billing offers the following
functionalities:
- - Creation of personalized invoices, based on the number of hours of
connection, the used bandwidth, the usage of FTP server etc...
- - Invoice listing daily, weekly or monthly.
- - Multiple print outs (user history, active users. daily transactions)
- - Possibility to invoice by E-Mail
- - Management of credit cards or checks
- - possibility to produce a single invoice for several users of the same
company
- - Multiple search tool (Customer ID, Company name etc...)
IV-3 MAILING SERVICE
In order to insure the mailing functionality for VIRTUAL TELECOM users, two
components are necessary:
- - A mail server POP 3 (post Office Protocol)
- - A gateway function SMTP (Simple Mail Transport Protocol)
-31-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
The mail server POP 3 will be installed in the DEC ALPHA 1000. This server
will store the messages for the dial-up users using the mailing software
Eudora, Microsoft Exchange, etc...)
The SMTP gateway will be installed in the DEC ALPHA 1000 and will receive and
send the messages of VIRTUAL TELECOM users to the worldwide Internet backbone.
IV-4 FAULT TOLERANCE
Different types of faults and scenarios are covered:
GENEVA MAIN SITE
Main system down
A back-up server DEC ALPHA 1000 will be able to continue providing the actual
service. This back-up server is installed on the same rack as the main server
and will use the same disks.
Disk failure
The proposed system implements a mirroring system which in case of disks
faults. the second disk will undertake automatically.
Frame Relay link failure with a worldwide Internet backbone
The architecture includes two frame Relay links with 1Mbit/s towards the
Internet backbone. A link failure will have only a performance effect for
VIRTUAL TELECOM users.
MAX 4000 failure
Two MAX 4000 will be installed at Geneva Server site. A MAX 4000 back-up
system will be connected to the CISCO and will take over in case of main
system failure
POP sites (Point of Presence)
Max 4000 failure. There is no fault tolerance implemented for the moment on
these sites. Nevertheless. the replacement of a MAX 4000 could be made in a
short term. In fact, Digital will implement a replacement procedure for this
equipment in order to reduce the delay. The full configuration image will be
stored at each site as well on the main site.
IV-5 IP ADDRESSEE PLAN
With 14 MAX 4000 the potential simultaneous connections is 1344 (96 x 14
switches). So 6 class C TCPIP Addresses (1530) will be required (6 x 255 1530)
Digital will install a DNS server using the DEC ALPHA 1000 server. The DNS
will be in charge of solving the username of VIRTUAL TELECOM customers.
The VIRTUAL TELECOM domain should also be cleared on other domains.
-32-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
In the case of MultiHoming configuration, the addresses should be requested
to the RIBE organization. In the case of mono-operator configuration, it is
the operator who directly provides the addressee range in order to operate
the connection on the Internet worldwide backbone.
IV-6 NETWORK MANAGEMENT
The management of the Network will be done with Polycenter manager on Netview
and Clear VISN.
Netview, developed by IBM and DIGITAL will enable the monitoring of MAX 4000.
In fact, the MAX 4000 have the MIBs (Management Information Base) which are
used via SNMP (Simple Network Management Protocol).
The MIBs are integrated into the Management platform. Different information
(incidents, traffic etc...) will be displayed in a graphic form.
Clear VISN is complementary to Netview mainly concerning the RMON Management
(Remote Monitoring) and the capacity of managing the CISCO Routers being used
as entry point to the Internet backbone (Clear VISN Router Manager modules).
V- VIRTUAL TELECOM TECHNICAL RESPONSIBILITIES
V-1 WEB.SERVER MANAGEMENT
Digital will install the WEB kernel on the DEC ALPHA 1000. VIRTUAL TELECOM
will develop the HTML pages. Some page editors require an extension to the
WEB kernel. VIRTUAL TELECOM will be in charge of these extensions.
V-2 News server management
DIGITAL will install the News software in the DEC ALPHA 255. The management
of this software is done by VIRTUAL TELECOM.
V-3 Mail server management
DIGITAL will install POP3 server as well as the SMTP Gateway. VIRTUAL TELECOM
is responsible to maintain the mail accounts and manage the disks space used
by the users.
-33-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
Vl- Project phase
Phase 1: Agreement on technical points
Week 2-7 September 96
Phase 2: Installation and test
T, DEC systems delivery
T, + 1 week Installation of Geneva site without telecom link
T, Telecom links delivery
T, + 2 days Worldwide Internet backbone link with the Frame Relay
T, + 6 days ISDN dial-up access functionality test and modem test
WEB functionality test, News and Email test
Security functionality test
T, Implementation of the second site (Lausanne)
Same test as Geneva
T, Implementation of other sites
-34-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
ATTACHMENT 2
Parameters and Equipment Acquisition
-35-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
1. LICENSES
All licenses (as defined in attachment 1, Section 11-4 and attachment 2.
Section 3) have been acquired at the sign off date of the contract.
2. FULLY PAID SITES VERSUS CLIENT PROPERTY
The following equipment will be the property of VIRTUAL TELECOM as per the
following pattern:
- -------------------------------------------------------------------------------
Other Sites Simulta- Site Value Full payment date
neous
access
- -------------------------------------------------------------------------------
Licences Licence value is at the contract
included in the sign off date of
site value Virtual Telecom
and Digital
- -------------------------------------------------------------------------------
PC Office* Fr. 113'245.- 31.10.96
- -------------------------------------------------------------------------------
Geneva 48 Fr. 291'000.- 31.10.96
- -------------------------------------------------------------------------------
Zurich 60 Fr. 138'000.- 31.01.97
- -------------------------------------------------------------------------------
Basel 48 Fr. 80'000.- 31.07.97
- -------------------------------------------------------------------------------
St-Gallen 48 Fr. 80'000.- 31.01.98.
- -------------------------------------------------------------------------------
Winterthur 24 Fr. 56'000.- 31.07.98
- -------------------------------------------------------------------------------
Bem 48 Fr. 90'000.- 31.01.99
- -------------------------------------------------------------------------------
Lausanne 48 Fr. 80'000.- 30.04.99
- -------------------------------------------------------------------------------
Rapperswil 24 Fr. 56'000.- 31.07.99
- -------------------------------------------------------------------------------
Olten 24 Fr. 56'000.- 31.10.99
- -------------------------------------------------------------------------------
Lugano 24 Fr. 56'000.- 31.01.2000
- -------------------------------------------------------------------------------
Luceme 24 Fr. 56'000.- 30.04.2000
- -------------------------------------------------------------------------------
Coire 24 Fr. 56'000.- 31.07.2000
- -------------------------------------------------------------------------------
* See Offer Nr L61 96400020-B (Attachment
NOTE: News server with 64 Moctets and disk with 12 Goctets
Internet Server with 256 Moctets, disk and high availability 9 Goctets
Internet server will be used for:
- DNS
- Mailing
- Radius server
- Proxy server
- Internet server (Netscape Communication Server)
The proposed solution will not include any PC for the invoicing
The router towards Internet are not included
-36-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
GENEVA
48 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 modems Card digital 4
----------------------------------------------------------
8 Channel card V110 1
----------------------------------------------------------
Terminal-Keyboard 1
----------------------------------------------------------
Unshielded twisted pair cable 9
----------------------------------------------------------
IP Router 1
----------------------------------------------------------
DECrepeater 2
----------------------------------------------------------
AlphaServer 1000 4/266 256 MB 1 GB 1
----------------------------------------------------------
Disk windowing of 8Goctets 1
----------------------------------------------------------
High disponibility and mirriring 1
----------------------------------------------------------
News server 64MB 12GB 1
----------------------------------------------------------
240 V Retma Cabinet assembly 2
----------------------------------------------------------
ZURICH
60 Simultaneous
access
----------------------------------------------------------
Quantity
Rack MAX4000 E1/PRI 2
----------------------------------------------------------
Software Release MAX4000E1/PRI 2
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 2
----------------------------------------------------------
12 Modems Cards digital 5
----------------------------------------------------------
8 Channel card V110 1
----------------------------------------------------------
Terminal + Keyboard 1
----------------------------------------------------------
Unshielded twisted pair cable 3
----------------------------------------------------------
IP Router 1
----------------------------------------------------------
DECrepeater 1
----------------------------------------------------------
-37-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
BASEL
48 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 4
----------------------------------------------------------
Software Frame Relay 1
----------------------------------------------------------
Terminal + Keyboard 1
----------------------------------------------------------
ST.-GALLEN
48 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 4
----------------------------------------------------------
Software Frame Relay 1
----------------------------------------------------------
Terminal + Keyboard 1
----------------------------------------------------------
WINTERTHUR
24 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 2
----------------------------------------------------------
Software Frame Relay 1
----------------------------------------------------------
Terminal+ Keyboard 1
----------------------------------------------------------
-38-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
BERN
48 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 4
----------------------------------------------------------
Terminal + Keyboard 1
----------------------------------------------------------
5-port repeater 1
----------------------------------------------------------
Unshielded twisted-pair cable 2
----------------------------------------------------------
IP Router 1
----------------------------------------------------------
LAUSANNE
48 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 4
----------------------------------------------------------
Software Frame Relay 1
----------------------------------------------------------
Terminal + Keyboard 1
----------------------------------------------------------
RAPPERSWILL
24 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 2
----------------------------------------------------------
Software Frame Relay 1
----------------------------------------------------------
Terminal + Keyboard 1
----------------------------------------------------------
-39-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom SA 13/09/96
- ------------------------------------------------------------------------------
OLTEN
24 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 2
----------------------------------------------------------
Software Frame Relay 2
----------------------------------------------------------
Terminal + Keyboard 2
----------------------------------------------------------
LUGANO
24 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 2
----------------------------------------------------------
Software Frame Relay 2
----------------------------------------------------------
Terminal + Keyboard 2
----------------------------------------------------------
LUCERNE
24 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 2
----------------------------------------------------------
Software Frame Relay 2
----------------------------------------------------------
Terminal + Keyboard 2
----------------------------------------------------------
-40-
<PAGE>
- ------------------------------------------------------------------------------
Partnership Outsourcing Agreement Virtual Telecom
- ------------------------------------------------------------------------------
COIRE
24 Simultaneous
access
----------------------------------------------------------
Quantity
----------------------------------------------------------
Rack MAX4000 E1/PRI 1
----------------------------------------------------------
Software Release MAX4000 E1/PRI 1
----------------------------------------------------------
Software VN3 ISDN PRI Signalling 1
----------------------------------------------------------
12 Modem Card digital 2
----------------------------------------------------------
Software Frame Relay 2
----------------------------------------------------------
Terminal + Keyboard 2
----------------------------------------------------------
3. PC DESCRIPTION
See offer No L61 96400020-B (document attached)
-41-
<PAGE>
0FFRE
No L61 96400020-B
pour
VIRTUAL TELECOM SA.
Rue du Stand 60
Case Postale 5473
1211 Geneva 11
M.GIBBONS
de
Digital Equipment Corporation SA
12, avenue des Morgines
C.P. 176
1213 Petit-Lancy 1
Jean-Marc Bongni
Geneva, le 29.05.1996
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into this 31st day of May 1996, at Geneva,
Switzerland by and between VIRTUAL TELECOM S.A. a Swiss corporation (hereinafter
"Company"), and Neil GIBBONS (hereinafter "Employee").
RECITALS
WHEREAS, the Company engages as a service provider in telecommunications
services and as an information provider in elctronic publishing industries; and
WHEREAS, the Employee is experienced in the business of the company and has
served as Management Consultant and in various International Marketing
Management positions in consumers goods and financial services industries; and,
WHEREAS, the Company desires to continue to employ the Employee and the
Employee desires to continue serving the Company, on the terms and conditions
provided herein;
NOW THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Company hereby agrees to hire and employ Employee as Chief Executive
Officer of the Company, and the Employee agrees to accept such employment
under and subject to all of the terms, conditions and provisions hereof for
a period of five (5) years from the date hereof, which period will be
subject to renewal for up to three (3) additional three (3) year terms a
provided in Section 9 hereof. Employee's duties shall be designated by
Company's Board of Directors and shall be subject to such reasonable
policies and directions as may be established or given by the Company from
time to time.
2. Employee agrees further to well and faithfully serve Company and to devote
substantially his full-time attention and energies to such service. During
the term hereof, the Employee will not have any affiliation, direct or
indirect with any other business entity which competes with the business of
the Company.
3. Company agrees to pay Employee compensation for his services hereunder
for each year of the term at the minimum rate of SFr 96'000.- (approx.
$80'000.- ) per annum. Said compensation shall be payable in equal
weekly, monthly or semi-monthly payments or otherwise as has been the
Company's past practice, commencing upon execution of this Agreement.
The above stated minimum salary shall be increased automatically each
year of the term by a factor equal to the increases in the Consumer
Price Index for Switzerland (Geneva) . Effective each yearly
anniversary of the date hereof, the above stated minimum salary shall
be multiplied by a fraction of the numerator of which is the CPI for
the month of July of that year and the denominator is the CPI for the
month of July of the previous year. Company and Employee agrees that
with regard to any year of the term for which Company grants Employee
an increase in salary in excess of the salary for that year of the
term which would prevail through application of the above formula, the
formula will not be applied for such year of the term.
4. Incentive compensation in the form of bonuses or other cash or non-cash
incentives shall be considered for Employee by Company annually based
upon Company's earnings before income taxes or such other performance
standards as are established by Company's Board of Directors. The
performance standards applicable for the first year of the term are
set forth in Schedule "A" hereto.
5. Company will provide Employee with disability insurance coverage (or
reimburse Employee for his cost therefor ) in an amount of at least
equal to sixty percent (60%) of the Employee's minimum salary as set
forth in paragraph 3 above.
6. Company agrees to provide Employee with a monthly allowance of $600 during
the term for expenses and operating costs incurred by Employee in carrying
out his responsibilities. In addition Company will cover expenses incurred
in the operating of an office from the Employee's home.
7. Company will provide Employee with paid vacation consistent with the
Company's polices and practices, but no less than four (4) weeks per year.
Employee will participate in all other so-called fringe benefits afforded
by Employer to other employees.
<PAGE>
8.
a) If Employee shall be rendered incapable, by illness or by other cause,
from complying with the terms, conditions and provisions on his part
to be kept, observed and performed then Employee and Company shall be
subject to the terms and conditions of Swiss invalidity insurance and
such Swiss laws applying thereto.
b) This Agreement may be terminated by Company for "Cause", as
hereinafter set forth, after delivery to the Employee of written
notice which identifies such cause and establishes an effective date
of termination. In the event of the death of Employee during the term
of this Agreement, the sum payable to him for services rendered to the
date of his death and any sums payable thereafter shall be paid to his
authorized personal representative.
c) The employment of Employee shall further be terminable by the Company
for "Cause" upon determination at any time that Employee has engaged
in any act of dishonesty whatsoever arising out of performance or
failure to perform his duties hereunder. Such acts of dishonesty shall
include pilferage, embezzlement, unfair competition and other similar
acts.
d) In addition to the foregoing "Cause" will include, but not limited to:
i) Employee's adjudication as an incompetent;
ii) Employee's persistent or excessive use of drugs or alcohol to an
extent that such use is substantiated by reliable objective
evidence and significantly interferes with the proper
performance of his duties hereunder;
iii) Employee's conviction of any criminal act, including without
limitation, misappropriation of corporate funds and property,
provided, however that conviction of a misdemeanor shall not be
grounds for termination unless such misdemeanor shall have
involved misappropriation of corporate funds or property, fraud
or other activity which bears directly upon Employee's ability
to faithfully perform his duties hereunder;
iv) Employee's breach of any term of this Agreement, unless cure of
such breach is promptly commenced upon receipt of written notice
specifying the breach, authorizing by Company's Board of
Directors and served by any officer of Company and such cure is
either completed by Employee not later then thirty (30) days
thereafter, or if such cure cannot be completed in thirty
(30) days, if diligently undertaken by Employee within said
thirty (30) days and pursued to completion as soon as thereafter
is possible; or
v) Employee's commission of any act constituting gross negligence
in the performance of his duties hereunder or willful
misconduct, or after notice to such effect, Employee's
commission of another act constituting negligence or
insubordination.
Cause shall be deemed to include, in addition to the above, such conduct
which the courts of Geneva, Switzerland recognize at the time of any such
conduct as being sufficient grounds to constitute cause for dismissal or
termination of employment.
e) In the event that this Agreement is terminated by Company for a reason
other than Employee's death or disability or "Cause", Employee shall
receive, in equal monthly installments over the remainder of the term,
the balance of the compensation owed the Employ e hereunder. The
amounts payable pursuant to this paragraph 8 (e) will be reduced by
the amount of any compensation received or to be received by Employee
with respect to any other employment during the term hereof. Upon
request from time to time, employee will furnish the Company with a
true and complete certificate specifying any such compensation due to
or received by Employee.
f) If Employee should desire of his own volition to terminate this
Agreement, then the decision of the majority of Company's Board of
Directors shall be binding as to the terms and conditions of such
Employee's termination.
g) The parties hereto agree that the foregoing termination benefits shall
be the sole and exclusive obligation of Company with respect to any
such termination of Employee
<PAGE>
and the same are accepted by Employee in lieu of any and all other
rights hereunder or as provided by law.
2. The term of this Agreement shall be subject to extension for up to three
(3) additional three (3) year renewal terms on the following terms and
conditions. No later than ninety (90) days prior to the expiration of the
initial term hereof and no later than sixty (60) days prior to the
expiration of any renewal term hereof, Company shall notify Employee in
writing to the effect that Company desires to extend the term of this
Agreement for an additional three (3) year period. Timely delivery of such
notice shall serve to renew this Agreement, as provided above. In the event
no such notice is delivered then this Agreement shall be automatically
renewed at the end of the then current year of the term. The employment of
Employee during any renewal term shall be on the same terms and conditions
as are applicable for the initial term,
3. This Agreement shall not be transferable or assignable by Employee, nor
shall Employee's interest herein be transferred or assigned by operation of
law, and any assignment or attempted assignment, transfer, mortgage,
hypothecation, or pledge of this Agreement or of his interest herein by
Employee, shall be null and void and, at the option of the Company, this
Agreement may be forthwith terminated and canceled for such, cause.
4. Employee agrees at all times during the term of this Agreement to conduct
himself in such manner as not to injure or adversely reflect on the credit
standing, reputation or the business of the Company.
5. Subject to the terms and conditions which may be set forth in a
Non-Disclosure and Secrecy Agreement with Company (the form of which is
attached hereto as Exhibit "A") which Employee agrees to execute as
additional consideration for this Agreement, Employee agree that he will
not disclose to any person or use (except for the sole and exclusive
benefit of the Company) information obtained by him during the period of
his employment as to the plans, network designs, software, processes,
business methods, names of customers, partnering or strategic alliance
arrangements, financial statements or any other trade secrets or other
confidential or proprietary information owned by or respecting the Company,
its business or properties. Nothing herein contained shall authorize
Employee to make use of any confidential or proprietary information of
Company after termination of this agreement without written prior consent
of Company. The terms and conditions set forth in any NonDisclosure and
Secrecy Agreement between Employee and Company shall be incorporated herein
and become a part of this Agreement.
6. All notices, requests demands and other communications provided for by this
Agreement shall be in writing and (unless other wise specifically provided
for herein) shall be deemed to have been given at the time when postmarked
by a post office or dated for airway bill number purposes by a courier
service, addressed to the address of the parties stated below or to such
changed address as such party may have fixed by notice:
TO COMPANY: VIRTUAL TELECOM INC.
1013 Centre Road
Wilmington
Newcastle
COPY TO: VIRTUAL TELCOM S.A.
rue du stand
CP 5473
Geneva 11
Switzerland(3
and COPY TO: BRUCK & FERRY (ATTORNEYS AT LAW)
10th floor
One Newport Place
Newport Beach, CA 92660
USA
<PAGE>
TO EMPLOYEE: Neil GIBBONS
4, Tour-de-Champel
1206 Geneva
Switzerland
7. This agreement sets forth the entire agreement and understanding between
the parties as to the subject matter hereof and merges and supersedes all
prior discussions, agreements and understandings of every kind and nature
between them and no party hereto shall be bound by any conditions,
definition, warranty or representations other than expressly provided for
in this Agreement or as may be on a date subsequent to the date hereof duly
set forth in writing signed by the party hereto which is to be bound
thereby. This Agreement shall not be changed, modified or amended except by
a writing signed by the party to be charged.
8. This Agreement and its validity, construction and performance shall be
governed in all respects by the laws of the State of Delaware irrespective
of the fact that one or more of the parties hereto may become residents of
another state and without giving effect to principles of conflicts of laws.
9. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective representatives, heirs, successors and
assigns.
10. In the event that any provision of this Agreement shall be held to be
invalid, the same shall not effect, in any respect whatsoever, the validity
of the remainder of this Agreement.
11. This Agreement may be executed in any number of counterparts each of which
shall be deemed to be an original and all of which, when taken together,
shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date written above.
"Employee"
/s/ (Illegible)
- -------------------------------------
"Company"
VIRTUAL, TELECOM, INC.
By: /s/ (Illegible)
----------------------------------
Its:
---------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into this 31st day of May 1996, at Geneva,
Switzerland by and between VIRTUAL TELECOM S.A. a Swiss corporation
(hereinafter "Company"), and Daniel HUBER (hereinafter "Employee").
RECITALS
WHEREAS, the Company engages as a service provider in telecommunications
services and as an information provider in electronic publishing industries;
and
WHEREAS, the Employee is experienced in the business of the company and has
served as Financial Analyst and Portfolio Manager in the Investment Services
Industry; and,
WHEREAS, the Company desires to continue to employ the Employee and the
Employee desires to continue serving the Company, on the terms and conditions
provided herein;
NOW THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Company hereby agrees to hire and employ Employee as Chief Executive
Officer of the Company, and the Employee agrees to accept such
employment under and subject to all of the terms, conditions and
provisions hereof for a period of five (5) years from the date hereof,
which period will be subject to renewal for up to three (3) additional
three (3) year terms a provided in Section 9 hereof. Employee's duties
shall be designated by Company's Board of Directors and shall be
subject to such reasonable policies and directions as may be
established or given by the Company from time to time.
2. Employee agrees further to well and faithfully serve Company and to
devote substantially his full -time attention and energies to such
service. During the term hereof, the Employee will not have any
affiliation, direct or indirect with any other business entity which
competes with the business of the Company.
3. Company agrees to pay Employee compensation for his services hereunder
for each year of the term at the minimum rate of SFr 96'000.- (approx.
$80'000.- ) per annum. Said compensation shall be payable in equal
weekly, monthly or semi-monthly payments or otherwise as has been the
Company's past practice, commencing upon execution of this Agreement.
The above stated minimum salary shall be increased automatically each
year of the term by a factor equal to the increases in the Consumer
Price Index for Switzerland (Geneva). Effective each yearly
anniversary of the date hereof, the above stated minimum salary shall
be multiplied by a fraction of the numerator of which is the CPI for
the month of July of that year and the denominator is the CPI for the
month of July of the previous year. Company and Employee agrees that
with regard to any year of the term for which Company grants Employee
an increase in salary in excess of the salary for that year of the
term which would prevail through application of the above formula, the
formula will not be applied for such year of the term.
4. Incentive compensation in the form of bonuses or other cash or non-cash
incentives shall be considered for Employee by Company annually based
upon Company's earnings before income taxes or such other performance
standards as are established by Company's Board of Directors. The
performance standards applicable for the first year of the term are
set forth in Schedule "A" hereto.
5. Company will provide Employee with disability insurance coverage (or
reimburse Employee for his cost therefor) in an amount of at least
equal to sixty percent (60%) of the Employee's minimum salary as set
forth in paragraph 3 above.
6. Company agrees to provide Employee with a monthly allowance of $600
during the term for expenses and operating costs incurred by Employee
in carrying out his responsibilities. In addition Company will cover
expenses incurred in the operating of an office from the Employee's
home.
7. Company will provide Employee with paid vacation consistent with the
Company's polices and practices, but no less than four (4) weeks per
year. Employee will participate in all other so-called fringe benefits
afforded by Employer to other employees.
<PAGE>
8.
a) If Employee shall be rendered incapable, by illness or by other cause,
from complying with the terms, conditions and provisions on his part
to be kept, observed and performed then Employee and Company shall be
subject to the terms and conditions of Swiss invalidity insurance and
such Swiss laws applying thereto.
b) This Agreement may be terminated by Company for "Cause", as
hereinafter set forth, after delivery to the Employee of written
notice which identifies such cause and establishes an effective date
of termination. In the event of the death of Employee during the term
of this Agreement, the sum payable to him for services rendered to the
date of his death and any sums payable thereafter shall be paid to his
authorized personal representative.
c) The employment of Employee shall further be terminable by the Company
for "Cause" upon determination at any time that Employee has engaged
in any act of dishonesty whatsoever arising out of performance or
failure to perform his duties hereunder. Such acts of dishonesty shall
include pilferage, embezzlement, unfair competition and other similar
acts.
d) In addition to the foregoing "Cause" will include, but not limited to:
i) Employee's adjudication as an incompetent;
ii) Employee's persistent or excessive use of drugs or alcohol to an
extent that such use is substantiated by reliable objective
evidence and significantly interferes with the proper
performance of his duties hereunder;
iii) Employee's conviction of any criminal act, including without
limitation, misappropriation of corporate funds and property,
provided, however that conviction of a misdemeanor shall not be
grounds for termination unless such misdemeanor shall have
involved misappropriation of corporate funds or property, fraud
or other activity which bears directly upon Employee's ability
to faithfully perform his duties hereunder;
iv) Employee's breach of any term of this Agreement, unless cure of
such breach is promptly commenced upon receipt of written notice
specifying the breach, authorizing by Company's Board of
Directors and served by any officer of Company and such cure is
either completed by Employee not later then thirty (30) days
thereafter, or if such cure cannot be completed in thirty (30)
days, if diligently undertaken by Employee within said thirty
(30) days and pursued to completion as soon as thereafter is
possible; or
v) Employee's commission of any act constituting gross negligence
in the performance of his duties hereunder or willful
misconduct, or after notice to such effect, Employee's
commission of another act constituting negligence or
insubordination.
Cause shall be deemed to include, in addition to the above, such conduct
which the courts of Geneva, Switzerland recognize at the time of any such
conduct as being sufficient grounds to constitute cause for dismissal or
termination of employment.
e) In the event that this Agreement is terminated by Company for a reason
other than Employee's death or disability or "Cause", Employee shall
receive, in equal monthly installments over the remainder of the term,
the balance of the compensation owed the Employee hereunder. The
amounts payable pursuant to this paragraph 8 (e) will be reduced by
the amount of any compensation received or to be received by Employee
with respect to any other employment during the term hereof. Upon
request from time to time, employee will furnish the Company with a
true and complete certificate specifying any such compensation due to
or received by Employee.
f) If Employee should desire of his own volition to terminate this
Agreement, then the decision of the majority of Company's Board of
Directors shall be binding as to the terms and conditions of such
Employee's termination.
g) The parties hereto agree that the foregoing termination benefits shall
be the sole and exclusive obligation of Company with respect to any
such termination of Employee
<PAGE>
and the same are accepted by Employee in lieu of any and all other
rights hereunder or as provided by law.
2. The term of this Agreement shall be subject to extension for up to three
(3) additional three (3) year renewal terms on the following terms and
conditions. No later than ninety (90) days prior to the expiration of the
initial term hereof and no later than sixty (60) days prior to the
expiration of any renewal term hereof, Company shall notify Employee in
writing to the effect that Company desires to extend the term of this
Agreement for an additional three (3) year period. Timely delivery of such
notice shall serve to renew this Agreement, as provided above. In the event
no such notice is delivered then this Agreement shall be automatically
renewed at the end of the then current year of the term. The employment of
Employee during any renewal term shall be on the same terms and conditions
as are applicable for the initial term,
3. This Agreement shall not be transferable or assignable by Employee, nor
shall Employee's interest herein be transferred or assigned by operation of
law, and any assignment or attempted assignment, transfer, mortgage,
hypothecation, or pledge of this Agreement or of his interest herein by
Employee, shall be null and void and, at the option of the Company, this
Agreement may be forthwith terminated and canceled for such, cause.
4. Employee agrees at all times during the term of this Agreement to conduct
himself in such manner as not to injure or adversely reflect on the credit
standing, reputation or the business of the Company.
5. Subject to the terms and conditions which may be set forth in a
Non-Disclosure and Secrecy Agreement with Company (the form of which is
attached hereto as Exhibit "A") which Employee agrees to execute as
additional consideration for this Agreement, Employee agree that he will
not disclose to any person or use (except for the sole and exclusive
benefit of the Company) information obtained by him during the period of
his employment as to the plans, network designs, software, processes,
business methods, names of customers, partnering or strategic alliance
arrangements, financial statements or any other trade secrets or other
confidential or proprietary information owned by or respecting the
Company, its business or properties. Nothing herein contained shall
authorize Employee to make use of any confidential or proprietary
information of Company after termination of this agreement without written
prior consent of Company. The terms and conditions set forth in any
NonDisclosure and Secrecy Agreement between Employee and Company shall be
incorporated herein and become a part of this Agreement.
6. All notices, requests demands and other communications provided for by this
Agreement shall be in writing and (unless other wise specifically provided
for herein) shall be deemed to have been given at the time when postmarked
by a post office or dated for airway bill number purposes by a courier
service, addressed to the address of the parties stated below or to such
changed address as such party may have fixed by notice:
TO COMPANY: VIRTUAL TELECOM INC.
1013 Centre Road
Wilmington
Newcastle
COPY TO: VIRTUAL TELCOM S.A.
rue du stand
CP 5473
Geneva 11
Switzerland
and COPY TO: BRUCK & FERRY (ATTORNEYS AT LAW)
10th floor
One Newport Place
Newport Beach, CA 92660
USA
<PAGE>
TO EMPLOYEE: Daniel HUBER
22A, ch.-de Tremessaz
1222 Vesenaz/GE
Switzerland
7. This agreement sets forth the entire agreement and understanding between
the parties as to the subject matter hereof and merges and supersedes all
prior discussions, agreements and understandings of every kind and nature
between them and no party hereto shall be bound by any conditions,
definition, warranty or representations other than expressly provided for
in this Agreement or as may be on a date subsequent to the date hereof duly
set forth in writing signed by the party hereto which is to be bound
thereby. This Agreement shall not be changed, modified or amended except by
a writing signed by the party to be charged.
8. This Agreement and its validity, construction and performance shall be
governed in all respects by the laws of the State of Delaware irrespective
of the fact that one or more of the parties hereto may become residents of
another state and without giving effect to principles of conflicts of laws.
9. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective representatives, heirs, successors
and assigns.
10. In the event that any provision of this Agreement shall be held to be
invalid, the same shall not effect, in any respect whatsoever, the validity
of the remainder of this Agreement.
11. This Agreement may be executed in any number of counterparts each of which
shall be deemed to be an original and all of which, when taken together,
shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date written above.
"Employee"
Daniel HUBER
/s/ Daniel Huber
- ---------------------------------------------
"Company"
VIRTUAL TELECOM, INC.
By: /s/ (Illegible)
------------------------------------------
Its: CEO
-----------------------------------------
<PAGE>
SOFTWARE
DISTRIBUTOR AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into and made this 16th day
of January, 1997, by and between TOWNSEND ANALYTICS, LTD., an Illinois
corporation, having a principal office at 100 South Wacker Drive, Suite 1506,
Chicago, Illinois 60606 ("Townsend"), and Virtual Telecom S.A., a corporation
whose principal office is located at MBC-Morgines Business Center, 12, av.
des Morgines, 1213 Petit-Lancy, Switzerland (the "Distributor").
W I T N E S S E T H:
WHEREAS, Townsend designs, develops, markets and sells computer software
and computer-based software systems and has developed a personal computer
software product (the "Product") called "TAL Trading Tools Package" a suite
of real time software products. Among the TAL Trading Tools package is a
program called RealTick Software which product consists in part of Market
Profile Graphic Format Software ("MPGF Software") owned and licensed by the
Board of Trade of the City of Chicago ("CBOT") and which reads and displays
real time exchange trade price information; and
WHEREAS, Townsend has been granted a license from the Chicago Board of
Trade to incorporate the MPGF Software into the product; and
WHEREAS, Distributor acknowledges that the Market Profile Graphic format
does constitute valuable property of the CBOT, not within the public domain,
and that, but for this Agreement, and rights granted herein, Distributor
would have no rights with respect thereto; and
WHEREAS, Distributor acknowledges that TAL Trading Tools does constitute
valuable property of Townsend Analytics, Ltd. not within the public domain,
and that, but for this Agreement, and rights granted herein, Distributor
would have no rights with respect thereto; and
WHEREAS, Distributor is in the business of selling, supporting,
installing and servicing computer software, and has represented that it has
the resources, facilities and personnel necessary to maintain the high
standards of performance which are necessary to achieve maximum sales of
Townsend's products through satisfaction of the end user, and
WHEREAS, Townsend and Distributor have agreed that throughout the course
of this Agreement and in terminating this Agreement they will act in a fair,
equitable and ethical manner to each other as well as to the end user;
NOW, THEREFORE, Townsend and Distributor agree as follows:
1. APPOINTMENT AND ACCEPTANCE. Townsend hereby appoints Distributor, subject
to the provisions, terms and conditions set forth in this agreement, as a
non-exclusive distributor for the sale, support and servicing of the Product or
Products listed in Appendix E of the agreement, which appendix may be amended
from time to time. Because this appendix may include or may later be amended to
include MPGF enabled software, this agreement contains conditions for the
license and distribution of the MPGF enabled software. Distributor hereby
accepts such appointment, and by accepting said appointment, acknowledges that
it has read and understood this Agreement and the Schedules attached hereto.
Townsend reserves the right to sell, support and service the Product in
competition with the Distributor and to appoint, without limitation, other
distributors for the Product.
<PAGE>
2. DISTRIBUTOR OWNERSHIP, MANAGEMENT AND BUSINESS. This Agreement is entered
into by Townsend in reliance upon the representations and agreements by
Distributor regarding its ownership, management and conduct of its business.
Distributor agrees to give Townsend thirty (30) days prior written notice
of its intention to effect any of the following changes, and no such change
shall be made without the prior written approval of Townsend, which approval
shall not be unreasonably withheld.
(a) A change or transfer which would materially affect, either
directly or indirectly, the ownership, management or control of
Distributor.
(b) A sale or transfer of any substantial portion of Distributor's
business property or business assets other than in the ordinary course of
business.
3. TERM.
(a) This Agreement shall become effective as of the date first above
written and shall remain in effect for a period of three (3), year(s),
unless earlier terminated in accordance with the provisions of Paragraph 4.
(b) This Agreement shall thereafter be automatically renewed for
successive one (1) year periods unless either party notifies the other not
less than ninety (90) days prior to the end of any particular term that it
does not agree to such an automatic renewal. Exercise of this right shall
not, under any circumstance, be deemed a violation of any provisions of
this Agreement, and upon the subsequent expiration of the Agreement neither
party shall be liable to the other for any damage, costs or expenses.
4. TERMINATION.
(a) BY TOWNSEND. Townsend may terminate this Agreement if, at any
time during the term of this Agreement or any renewal hereof,
Distributor is in material breach of any of the terms, conditions,
duties or obligations contained in or referred to in this Agreement, and
such breach remains uncorrected for a period of fifteen (15) days following
written notice by Townsend to Distributor of said breach and Townsend's
intention to terminate this Agreement, provided, however, that Townsend
may elect to terminate this Agreement immediately upon written notice to
Distributor, if Distributor has violated any of the material terms,
conditions, duties or obligations contained in or referred to in
Paragraph 5(c), Paragraph 7(g) or Paragraph 7(h) hereof or upon the
termination or expiration of the License Agreement between the CBOT and
Townsend, a copy of which is attached hereto as Exhibit A. For purposes
of this provision, but without limiting Townsend's right to terminate,
each of the following is considered to be a material breach:
(i) Failure by Distributor to make any payment when such payment
becomes validly due to Townsend, provided that nothing contained
herein shall, or is intended to, change or limit either Townsend's
right to take any other or further action as provided for in
Townsend's then-current credit policy, or Townsend's right to pursue
any other remedy at law or in equity to collect any sums past due.
(ii) Distributor's violation of any of the provisions for
Paragraph 6 hereof.
(iii) Distributor's violation of any provision of Paragraph 7
hereof.
2
<PAGE>
(iv) Failure by Distributor to correct any practice or conduct
after its receipt of written notice from Townsend that such practice
or conduct is considered by Townsend to be detrimental to the
interests or reputation of Townsend or the CBOT or in violation of
Townsend's license from the CBOT.
(v) Dissolution or insolvency of Distributor, or the filing by
or against Distributor of a petition in bankruptcy or for an
arrangement, composition or reorganization, which is not dismissed
within sixty (60) days, or the appointment of a receiver, trustee or
custodian for any substantial part of Distributor's property or
business, or an assignment by Distributor for the benefit of its
creditors.
(vi) Distributor's violation of any provision of Paragraph 2
hereof.
(vii) Submission by Distributor of any information in connection
with this Agreement which proves to be false or incorrect in any
material respect on the date submitted, omission by Distributor to
submit information required under this Agreement, or failure to update
information previously supplied, if such causes other information
submitted to be false or incorrect in any material respect.
(b) BY DISTRIBUTOR. Distributor may terminate this Agreement at any
time with or without cause by giving Townsend not less than ninety (90)
days prior written notice. Termination does not relieve distributor for
obligations already incurred for ongoing leases.
5. TERMS OF SALE.
(a) DISTRIBUTOR PRICE. Townsend's price to Distributor for the
Product shall be the Distributor price established by Townsend from time to
time, plus all applicable taxes and shipping charges. Townsend's general
terms and conditions of sale shall be shown in its order forms, or in
various memoranda, bulletins or correspondence issued by Townsend from time
to time. Townsend may change, at any time and from time to time upon
thirty (30) days prior written notice, the price and/or terms of sale to
Distributor provided that change in prices or terms that are less favorable
to the Distributor shall not be applied to orders placed by distributor and
accepted by Townsend prior to the date of notice, and scheduled for
immediate shipment. Such changes in prices or terms that are more
favorable to Distributor shall be applied to all orders not shipped. All
prices are F.0.B. Townsend's facilities, and Distributor shall bear all
costs, insurance premiums, freight and all other charges and expenses
incurred after Townsend has placed the Products in the custody of the
carrier at the place of shipment to Distributor.
(b) PAYMENT. Unless Distributor has qualified for credit, payment
for all Products shall be by payment in advance accompanying each order
submitted to Townsend.
(c) END-USER AGREEMENT. Distributor shall not accept an order for
the Product without first obtaining from each Customer an executed Townsend
License Agreement attached hereto as Exhibit D and, if the order includes
RealTick enabled for the Market Profile Graphic, a CBOT End-User Agreement,
attached hereto as Exhibit B. Each End-User Agreement shall identify the
MPGF Software serial number and may be revised only with express permission
of the CBOT. Distributor shall send executed End-User Agreements to the
CBOT promptly upon its receipt thereof, and shall furnish a copy of the
appropriate executed End-User Agreement to Townsend when it submits an
order to Townsend for the MPGF Software.
3
<PAGE>
(d) ORDER ACCEPTANCE AND DELIVERY. Each of Distributor's orders is
subject to acceptance by Townsend at its principal office, which acceptance
shall not be unreasonably withheld, provided that the order is accompanied
by full payment of the price and a completed and signed End User Agreement
signed the end user, a copy of which is attached hereto as Exhibit B.
Townsend will use its best efforts to maintain an inventory of Product
adequate to meet the reasonably anticipated sales of Distributor. Townsend
shall endeavor to promptly fill all accepted orders, but reserves the right
to allocate the sale and shipment of Products. Townsend shall not be
liable for any delays in filling accepted orders.
(e) RISK OF LOSS. Risk of loss for all Products shall pass to
Distributor at the F.O.B. point. Townsend's responsibility for loss or
damage occurring in shipment, storage, delivery or otherwise, to any
items being sent to Distributor, or being sent to others for
Distributor, shall under all circumstances cease after such items have
been delivered by Townsend to any carrier.
6. WARRANTIES. Townsend expressly disclaims all warranties, express or
implied with respect to the Product and related materials, or their quality of
performance including warranties of merchantability and fitness for a
particular purpose. TAL makes no representation concerning the likelihood of
profitable trading using the Product. The Product is licensed "as is" and "with
all faults". Distributor shall not extend any warranties for or on behalf of
Townsend or the CBOT and shall make no representation or warranty regarding the
Product or the MPGF Software or the likelihood of profitable trading based on
the Product, the MPGF Software or the Market Profile Graphic Format. In no
event shall Townsend or the CBOT incur any liability to Distributor or any
customer of Distributor arising out of any contract or arrangement between
Distributor and any of its customers unless Townsend or the CBOT shall
expressly and in writing agree to the contrary.
ANY CURRENT WARRANTY STATEMENT PUBLISHED BY TOWNSEND IS EXCLUSIVE, AND IS MADE
EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WHETHER IN FACT
OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR USE. NEITHER TOWNSEND OR THE CBOT ASSUMES, NOR
AUTHORIZES ANY OTHER PERSON TO ASSUME FOR IT, ANY OTHER LIABILITY IN CONNECTION
WITH THE DESIGN, MANUFACTURE, SALE, INSTALLATION OR USE OF ANY OF ITS PRODUCTS.
TOWNSEND AND THE CBOT SHALL HAVE NO LIABILITY WHATSOEVER FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THE SALE,
DESIGN, MANUFACTURE, INSTALLATION OR USE OF ANY PRODUCTS, WHETHER DUE TO
NEGLIGENCE OR ANY OTHER CAUSE.
Townsend's liability, if any, under any warranty statement shall in all
events be limited to repair or replacement at Townsend's sole option of any
defective Product, which shall be Distributor's sole and exclusive remedy;
provided, however, that if any defective Product cannot in Townsend's sole
opinion be replaced then Townsend's liability shall be limited to the return of
the last month's lease payment thereof. Any unauthorized modification or
improvement to the Product which affects the Product as delivered to
Distributor will void Townsend's then-current warranty.
7. DISTRIBUTOR STANDARDS OF OPERATION. Distributor shall use its best efforts
to promote the sale of the Product. Distributor shall also undertake to maintain
high standards of performance, and shall conduct its business at all times in
such a manner as will reflect favorably on Townsend and its products and avoid
in any way any deceptive, misleading or unethical practice or advertising.
Distributor shall comply with each of the following standards.
(a) SALES QUOTA. Townsend may establish a mutually-agreed quota for
sales by Distributor for one or more periods during the term of this
Agreement. Distributor shall
4
<PAGE>
endeavor to meet or exceed the quota and any other quota which may be
established during the term of this Agreement or any renewal thereof.
(b) PLACE OF BUSINESS, EQUIPMENT AND FACILITIES. Distributor will
equip, staff and maintain a place of business and the equipment and
facilities which reflect favorably upon Townsend and its products.
(c) FINANCIAL RESPONSIBILITY. At Townsend's request, Distributor
shall provide Townsend with financial information about Distributor's
operations in order to establish and maintain lines of credit.
(d) RECORDS AND RECORD KEEPING. Distributor agrees to keep accurate
book and records of account for a period of up to three (3) years after the
close of each calendar year showing all information necessary for the
accurate determination of the number of units of the Product sold and the
gross proceeds thereof and agrees that the Distributor, CBOT or an
independent firm of accountants selected by either of them shall have right
to inspect the books and records of the Distributor, it being agreed that
any books or records reviewed in connection with such inspection shall be
kept strictly confidential and shall not be utilized in any commercial
manner other than in connection with determining compliance with this
Agreement. In the event such inspection discloses a liability to Townsend
or a liability of Townsend to the CBOT as the result of the failure of the
Distributor to properly discharge its obligations hereunder in the amount
of ten (10%) percent or more, the Distributor shall pay to Townsend the
cost of such audit in addition to the amount of such discrepancy. The
provisions of this Paragraph shall survive termination of this Agreement
for a period of forty-two (42) months after termination.
(e) MARKETING REPORTING. Distributor will, at Townsend's request,
provide Townsend with sales and marketing data and reports.
(f) TOWNSEND'S TRADEMARKS.
(i) ADVERTISING AND PROMOTION. Distributor will comply with
Townsend's then-current policies regarding advertising and promotion
and the use of Townsend's service marks and the like, which policies
may be amended by Townsend at any time, or from time to time.
Additionally, Distributor will prominently feature Townsend's Product
on any sales floor and in promotional activities. As part of its
general promotional activities for the Product, Distributor will
feature the appropriate Townsend tradename or trademark wherever
practicable. Any display of Townsend's tradename shall be accompanied
by the words "Authorized Distributor For" or other words approved by
Townsend, and Distributor shall not, under any circumstance, use the
words "agent", "agency" or other such words in connection with its
display of Townsend's tradename.
Prior to any use, Distributor shall provide Townsend with copies,
duplicates, photographs or samples of packaging, advertising, copy,
brochures, marketing and promotional materials, documentation and
technical materials, and other documents and materials of Distributor
bearing any trademark of Townsend for review of the manner in which
such trademarks are proposed to be used. Townsend shall be deemed to
have consented to any proposed use of the trademarks of which it has
been given notice as provided herein if it does not object to such use
in writing to Distributor within thirty (30) days of receipt of such
notice of proposed use.
5
<PAGE>
From time to time Townsend may furnish Distributor with manuals
and technical material prepared to facilitate Distributor's sales
efforts. All such materials, manuals and lists remain the property
of Townsend and are to be returned to Townsend upon the termination
or expiration of this Agreement, except as Townsend and Distributor
may otherwise agree.
(ii) TRADEMARKS AND TRADENAMES. All Products sold by Distributor
may bear the appropriate Townsend and CBOT trademarks. Distributor
shall not be deemed by anything contained in or done pursuant to
this Agreement to acquire any right, title or interest in or to the
use of any Townsend tradename, trademark or service mark, and shall
do nothing to prejudice the value or validity of Townsend's rights
therein or ownership thereof. Distributor shall not use any Townsend
tradename, trademark, service mark, symbols or the like in
connection with the offer and/or sale of any other product or in any
manner found objectionable by Townsend. Upon termination or
nonrenewal of this Agreement, Distributor shall discontinue any use
of Townsend's trademarks and service marks, tradenames, identifying
symbols and the like, and all labels, brochures, displays and any
and all literature and advertising media relating to Townsend or any
of its products.
(g) Trademark Rights and Quality Standards.
(i) Subject to the terms and conditions contained herein,
Townsend hereby grants to Distributor, for the term of this
Agreement, a nonexclusive, nontransferable, right and license to use
the trademarks set forth in Exhibit C, attached hereto, as amended
from time to time by Townsend (the "CBOT Trademarks") solely in
connection with the marketing and the servicing of the MPGF Software.
(ii) During the term of this Agreement, Distributor shall use
and prominently display the CBOT Trademarks on the packaging of the
MPGF Software and in the advertising, copy, brochures, marketing and
promotional materials, documentation and technical materials, and
other materials used, produced or distributed by Distributor for the
MPGF Software in accordance with, and subject to, the limitations
specified herein.
(iii) During the term of this Agreement, Distributor shall use
the CBOT Trademarks solely in connection with the marketing and the
servicing of the MPGF Software. Distributor shall not use the CBOT
Trademarks directly or indirectly in connection with, or in relation
to, any product except the MPGF Software or any business activity
except an activity relating to the marketing or servicing of the
MPGF Software.
Except as otherwise provided herein or with the consent of the
CBOT, during the term of this Agreement, Distributor shall not use
the CBOT Trademarks or the phrases "CBOT", "Board of Trade",
"Chicago Board of Trade" or "Board of Trade of the City of Chicago,"
or any phrase which is confusingly similar to or a colorable
imitation or translation thereof, as part of a company name or trade
name, as a product name, trademark or service mark, in its
advertising or on its stationary, business cards or the like, and
Distributor shall not seek to protect or to register the CBOT
Trademarks or any of the foregoing as a trademark or any other form
of intellectual property protection.
(iv) Distributor shall not exercise the rights and licenses
granted pursuant to Paragraph 7 (g)(i) hereof, or otherwise use the
CBOT Trademarks in any country which requires the registration of
users of trademarks, until such time as the parties hereto and
6
<PAGE>
the CBOT have entered into a mutually acceptable registered user's
agreement and for which an application to record or register the
same in such country, at the CBOT's expense, has been made and
recorded. Distributor's use of the CBOT Trademarks shall be in
strict compliance with applicable standards and statutes, including
those standards and statutes of countries other than the United
States, in each instance where the CBOT Trademarks are used by
Distributor. In each instance where the CBOT Trademarks are used,
Distributor shall apply the legend that the applicable CBOT
Trademark is a trademark of the CBOT, or, in countries where
registered, that the applicable CBOT Trademark is a registered
trademark of CBOT.
(v) Distributor will at no time assert any claim of ownership
of, or make any claim to, the CBOT Trademarks or any goodwill or
reputation associated with the CBOT Trademarks, by reason of the
Distributor's licensed use thereof or otherwise. No right or license
is granted hereby, by implication or otherwise, under any mark,
trademark, service mark or tradename of the CBOT except as
specifically provided herein. Distributor shall nor take or permit
others to take any action or omission in derogation of any of the
rights of the CBOT in the CBOT Trademarks, during the term of or
after this Agreement.
Any and all right, title or interest in or to the CBOT
Trademarks which may accrue to the benefit of, or be acquired by
Distributor as a result of Distributor's exercise of the rights and
licenses granted pursuant hereto shall be assigned to, and inure to
the benefit of, the CBOT; and Distributor hereby assigns and shall
assign to the CBOT any and all such right, title and interest as and
to the extent requested by the CBOT. All rights not granted to
Distributor are hereby expressly reserved by the CBOT.
(vi) Registration and any other protection for the CBOT
Trademarks shall only be obtained by the CBOT in its name. Expenses
for such registration incurred by the CBOT in connection with the
CBOT Trademarks shall be borne by the CBOT. In those jurisdictions
where registration of a user of CBOT Trademarks or registration of
trademark licenses is required by law, the CBOT and Distributor shall
make joint application to the Registrar of Trade Marks, or to such
other person as is required by the laws of the relevant jurisdiction,
for the registration of Distributor as the registered user of the
CBOT Trademarks or for the registration of this Agreement
respectively. Distributor shall furnish the CBOT with all reasonably
requested information (including specimens and samples illustrative
of the manner of use of the CBOT Trademarks) and documentation
(including the execution and delivery of any and all affidavits,
declarations, oaths, and other documentation) to assist the CBOT in
obtaining and maintaining trademark protection and registrations in
any litigation related thereto.
(vii) Distributor, at the CBOT's expense, shall take all steps
and shall provide all materials reasonably required to assist the
CBOT in maintaining and enforcing the CBOT Trademarks in connection
with MPGF Software. Distributor shall promptly notify the CBOT in
writing of any actual or suspected infringement or misuse of the CBOT
Trademarks. The CBOT may take action against such infringers or
suspected infringers and any and all recoveries resulting from such
actions initiated by the CBOT shall be retained by the CBOT.
(viii) Distributor shall at all times during the term of this
Agreement maintain reasonable quality control standards for the MPGF
Software, as specified by the CBOT, to protect the CBOT's name,
reputation and the CBOT Trademarks (the "Quality Standards").
Distributor shall implement all modifications or supplements to the
Quality Standards requested by the CBOT.
7
<PAGE>
(ix) Prior to any use, Distributor shall provide the CBOT with
copies, duplicates, photographs or samples of packaging, advertising,
copy, brochures, marketing and promotional materials, documentation
and technical materials, and other documents and materials of
Distributor bearing the CBOT Trademarks for the CBOT's review of the
manner in which the CBOT Trademarks are proposed to be used. The
CBOT shall be deemed to have consented to any proposed use of the
CBOT Trademarks of which it has been given notice as provided herein,
if it does not object to such use in writing to Distributor within
twenty (20) days of receipt of such notice of proposed use.
Distributor shall not use, or shall cease to use, such of the
foregoing if such use of the CBOT Trademarks (i) is in contravention
of any statute, standard or practice, (ii) impairs the validity or
enforceability of the CBOT Trademarks, or (iii) reflects poorly on
the CBOT.
(x) Distributor will use all reasonable efforts to correct any
use of the CBOT Trademarks which the CBOT identifies to Distributor
as objectionable. Upon termination of this Agreement, Distributor
shall immediately cease using, directly or indirectly, the CBOT
Trademarks, and shall not thereafter use any marks or terms
confusingly similar thereto.
(h) MODIFICATION OR CONVERSION OF PRODUCTS. Distributor shall not
remove, deface or otherwise change any descriptive markings, labels, the
language of the End-User Agreement, or the copyright notice on any of the
Products. Distributor shall not, without the prior written consent of
Townsend, make, sell, license or distribute any modifications or
improvements to the Products which affect the Product as delivered to
Distributor. Townsend will not maintain or support software which has
been modified or converted without Townsend's prior authorization.
(i) SOFTWARE DISTRIBUTION POLICY. Distributor shall limit its
sale of the Product only to customers of quotation vendors listed on
the form attached hereto as Exhibit C, as amended from time to time
in the sole discretion of Townsend. Townsend may modify the list of
quotation vendors at any time, or from time to time. Distributor
further agrees that it will not copy the Product except with the
prior written consent of Townsend and the CBOT. Where it is
authorized to make such copies, Distributor further agrees to
reproduce all copyright notices and other restrictive legends found
on the Product as received from Townsend on all copies of the Product
made by Distributor. Townsend shall have the right to audit
Distributor and any Distributor installation to ensure compliance
with the foregoing, and Distributor shall cooperate with Townsend in
any such audit.
(j) COMPLIANCE WITH LICENSE AND LAWS. Townsend and Distributor
shall comply with all requirements imposed on Townsend (and its
distributors) in Townsend's license agreement with the CBOT, attached
hereto as Exhibit A, and with all federal, state and local laws,
regulations, rules and ordinances pertaining to the operations and
conduct of its business and the sale of the Product, including but not
limited to all laws pertaining to the export of Products to foreign
countries.
(k) CUSTOMER SUPPORT. Distributor shall be adequately familiar with
the Product to provide assistance to customers in the installation and use
of the Product.
8. CONFIDENTIALITY OF TRADE SECRETS. Distributor agrees that all
confidential information received from Townsend, including without limitation
all technical information and service manuals received in training sessions,
is and shall remain the property and confidential information of Townsend or
the CBOT. Similarly, Townsend agrees that all confidential information
received from
8
<PAGE>
Distributor is and shall remain the property and confidential information of
Distributor. Both parties agree, on behalf of themselves and their employees,
to use their best efforts to maintain such information in the strictest
confidence and not to disclose the same to any third party, including their
employees not having a need to know. Neither party shall copy or reproduce any
such confidential information without the prior written approval of the other.
Both parties agree to obtain from each of its employees having access to such
information a written agreement that states that the employee has been informed
of the confidential nature of such information and that the employee agrees to
maintain such information in confidence. Each party further agrees to return
all such information and all copies thereof to the other immediately upon
termination of this Agreement.
The obligations of confidence set forth hereinabove, however, shall impose
no obligation upon either party with respect to any confidential information
which: (i) is now or which subsequently becomes generally known or available by
publication, commercial use or otherwise; (ii) is known by the receiving party
at the time of receiving such information; (iii) is furnished to third parties
without restriction on disclosure; (iv) is subsequently rightfully furnished by
a third party without a restriction on disclosure; or (v) is independently
developed by Distributor or Townsend, provided that the person or persons
developing same have not had access to the confidential information. Nothing
contained herein shall obligate Distributor to return to Townsend any service
manuals which were purchased by Distributor from Townsend at the then
prevailing Distributor price.
The obligations set forth in this paragraph shall survive the expiration
or any earlier termination of this Agreement.
9. MISCELLANEOUS.
(a) RELATIONSHIP OF PARTIES. The relationship between the parties
to this Agreement is that of independent contractors. Neither is an agent
or employee of the other nor has any right or authority to assume or create
any obligation of any kind, expressed or implied, on behalf of the other,
nor shall the acts or omissions of either create any liability for the
other. Subject to the provisions of this Agreement, Distributor shall
conduct its business at its own initiative, responsibility and expense.
(b) INDEMNIFICATION.
(i) Distributor agrees that it will indemnify, defend and hold
harmless Townsend, its officers, directors, employees and agents from
any and all losses, claims, damages, expenses and causes of action of
every nature whatsoever, including attorneys' fees, which are caused
by the breach of this Agreement by Distributor or by the negligent
acts, omissions or intentional wrongdoing of Distributor in connection
with the performance or nonperformance of its obligations hereunder.
(ii) Distributor shall hold, indemnify and save the CBOT, its
members, officers and employees, harmless from any costs, expenses,
(including reasonable attorneys' fees), judgments, settlements,
losses, or other liabilities incurred by the CBOT, directly or
indirectly, as a result of any claim, action, suit or litigation
brought against the CBOT by any party arising out of or relating to:
(a) any failure by Distributor to perform any obligation under this
Agreement including but not limited to any failure to obtain executed
End-User Agreements, (b) any representations or warranties made by
Distributor except as provided herein; or (c) any damages or claims
resulting from the termination or expiration of the License Agreement
between Townsend and the CBOT.
9
<PAGE>
(c) ASSIGNABILITY. Neither this Agreement, nor any right or
obligation hereunder, is assignable in whole or in part, whether by operation of
law or otherwise, by Distributor without the prior written consent of Townsend.
This Agreement may be assigned by Townsend and its duties hereunder may be
delegated.
(d) NOTICES AND OTHER COMMUNICATIONS. Unless otherwise provided,
every notice hereunder shall be in writing and deemed given when delivered in
person or when mailed, postage prepaid, to the intended recipient at the
address specified in this Agreement, or other address previously designated by
the intended recipient by written notice, provided, however, that notices to
Townsend shall be addressed Attention: Vice-President, Marketing and Sales. Any
notice of termination or nonrenewal shall be given by registered or certified
mail.
(e) FORCE MAJEURE. Townsend shall not be liable for any loss,
damage, delay or other consequence resulting from causes beyond reasonable
control, including but not limited to, acts of God, fire, strikes, labor
disputes, riot or civil commotion, case of war (declared or undeclared), labor
or material shortages or governmental regulations, orders or decisions.
(f) NON-WAIVER. No failure of exercise, and no delay in exercising,
on the part of either party hereto or of the CBOT, of any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by either party of any right, power or privilege hereunder
preclude any other or further exercise thereof.
(g) ENTIRE AGREEMENT. This Agreement and the attached Addendum set
forth the entire understanding of, and supersedes and revokes all prior
agreements between, the parties relating to the subject matter contained herein
and merges all prior discussions between them. This Agreement may not be
modified except by a writing signed by a duly authorized officer of Townsend.
The Addendum contains specific details of distributor prices and terms and may
be modified from time to time. Nothing in the Addendum can modify the Agreement
with respect to the obligations of the Distributor to the Chicago Board of
Trade and the Market Profile graphic.
(h) GOVERNING LAW. The validity, construction, and enforceability
of this Agreement shall be governed in all respects by the law of the state of
Illinois.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate as of the day first above written.
Virtual Telecom SA, Geneva
By: Neil Gibbons Daniel Huber
Title: CEO CFO
ACCEPTED:
TOWNSEND ANALYTICS, LTD.
By: __________________________________
Title: _______________________________
10
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
STANDARD & POOR'S COMSTOCK REVENDOR INFORMATION DISTRIBUTION
LICENCE AGREEMENT
This Agreement is made 23rd August 1996 between
(1) McGraw-Hill International (UK) Ltd - Standard & Poor's ComStock Division
("Standard & Poor's ComStock") whose registered office is at McGraw-Hill
House, Shoppenhangers Road, Maidenhead, Berks. SL6 2QL and whose Principal
place of Business is at Wimbledon Bridge House, 1 Hartfield Road, London
SW19 3RU, UK, and
(2) Virtual Telecom
Morgines Business Center
12 avenue des Morgines
1213 Petit-Lancy 1 - Geneve - Switzerland
WHEREAS:
A) Standard & Poor's ComStock is licensed to distribute information from
various Stock Exchanges, Commodity Exchanges, and other sources ("Sources");
and
B) The parties desire that certain information from Standard & Poor's ComStock
("Information") as specified in Exhibit A, attached hereto and made a part
hereof, be made available to Licensee for dissemination by Licensee through
its services ("Service") as described more fully in Exhibit C, attached
hereto and made a part hereof.
WHEREBY IT IS AGREED AS FOLLOWS
1. LICENCE
a) Standard & Poor's ComStock hereby grants a non-exclusive licence to Licensee
to permit dissemination of Information through the Service upon the terms
and non-transferable conditions set out herein.
b) Licensee is hereby granted the right to provide electronic access to the
Information to any or all of its present and future Service users ("Users")
provided that the Information is supplied to the User by means (such as
data encryption, or packet transmission-digitizing) which prevent
unauthorised reception, use or retransmission and further provided that
Licensee has executed any and all necessary documents with various Sources,
which documents have been accepted and approved by the Sources. Notice of
such Source acceptance and approval must be supplied to Standard & Poor's
ComStock prior to Licensee's use of Information. A User is defined as a
direct customer of Licensee having access to the Service and who has
executed a subscription Agreement which contains the terms and conditions
set forth in clause 3d. Licensee shall strictly control access to
Information so that it may not be used by persons or firms other than
Users.
c) Licensee understands that it is not entitled to sublicense, transfer or
assign its rights hereunder, licensee shall make the Information available
only to the Users of the Service. Licensee represents and warrants that
each User shall use the Information supplied hereunder wholly and solely
for User's internal business purposes, and that Users shall not reproduce,
publish, or distribute the Information in any format, in whole or in part,
for sale or commercial use.
d) In the event that Licensee desires to sell any or all of the Information to
resellers or information vendors, such sale is not permitted under this
Agreement, and must be authorised by Standard & Poor's ComStock under a
separate agreement or by mutually agreeable amendment executed and attached
hereto.
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
2. EQUIPMENT
a) Licensee shall have no right in or to any Standard & Poor's ComStock
equipment or associated communications equipment ("Standard & Poor's
ComStock Equipment") or to the Information received, except the rights of
use herein granted. Where Standard & Poor's ComStock is provided via
satellite the Licensee shall not use (without Standard & Poor's ComStock's
express prior written consent) any of the satellite receiver equipment
including both indoor and outdoor devices, for any other purpose other than
the purpose of this Agreement.
b) Licensee shall not attach, or permit or cause to be attached, any devices or
communication lines to the Standard & Poor's ComStock Equipment except for
the purpose of receiving the Information.
c) Licensee shall not move the Standard & Poor's ComStock Equipment without
the permission of Standard & Poor's ComStock.
d) The Standard & Poor's ComStock Equipment will include Standard & Poor's
ComStock Terminal Interface Device (TID) which will be maintained by
Standard & Poor's ComStock in good working order as part of the Licence
fee. The installation cost of the TID shall form part of the set-up and
installation fee shown in Schedule of Fees in Exhibit D, attached hereto
and a part hereof. All other Standard & Poor's ComStock Equipment
(including without limitation all communication equipment) will be subject
to additional installation and maintenance fees. Licensee shall be liable
for the cost of any extraordinary installation, repair or replacement of
any of the Standard & Poor's ComStock Equipment. Extraordinary installation
includes (without limitation) special cable requirements such as cabling in
excess of 10 feet, installation work performed during non-business hours,
electrical work done external to the Standard & Poor's ComStock Equipment,
and expedited order-handling and shipping. Extraordinary maintenance
includes (without limitation) electrical work external to the Standard &
Poor's ComStock Equipment, maintenance on accessories or attachments and
includes repair of damage to the Standard & Poor's ComStock Equipment,
resulting from accident, neglect, misuse, failure of electrical power or
causes other than ordinary use. Licensee shall return the Standard & Poor's
ComStock Equipment in good condition, ordinary wear and tear excepted, upon
termination of this Agreement.
3. INFORMATION
a) The Information shall be categorised and delivered to Licensee according to
the Data Specifications described in Exhibit B attached hereto and made a
part hereof. The furnishing of the Information is conditional upon strict
compliance with the provisions of this Agreement, the applicable policies
of the Sources, and with all local, and national regulations which might
pertain to the use of the Information or the Service. Standard & Poor's
ComStock may discontinue provision of the Information hereunder, without
notice, whenever the terms of its agreements with the Sources require such
discontinuance, or in its judgement it finds a breach by Licensee of any of
the provisions in this Agreement. In the event Standard & Poor's ComStock
discontinues providing some or all Information hereunder through no fault
of the Licensee, then an equitable adjustment will be made in the fees
charged hereunder.
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
b) Notwithstanding clause 3(a), Standard & Poor's ComStock will use reasonable
endeavours to deliver the information, for each Source that it is able to
do so, delayed in a manner that conforms with the requirements of the
Sources to the extent that such a delay will result in the Users of the
Service not incurring end-user Source fees. Where Standard & Poor's
ComStock is not able to fulfil the requirements of the Source for delayed
data then the Licensee shall be responsible directly to the Source in
fulfilling such requirements. Standard & Poor's ComStock accepts no
liability for any breach of Source requirements howsoever arising from
Standard & Poor's ComStock's or Licensee's obligations in this sub-clause.
c) Neither Standard & Poor's ComStock nor any of its Sources warrants that the
information will be uninterrupted or error-free. Standard & Poor's ComStock
and all Sources involved with the Information supplied as part of the
Standard & Poor's ComStock service shall in no way be liable to Licensee
for any inaccuracies, errors or omissions, regardless of cause, in the
Information received on Standard & Poor's ComStock, or for any damages
(whether direct, indirect or consequential) resulting therefrom. All
representations, warranties and conditions whether expressed or implied by
statute, common law or otherwise in relation to the Information are hereby
excluded. In the event that Standard & Poor's ComStock is held liable for
damages under this Agreement, in no event shall such liability whether
arising from breach of contract, negligence, warrant or strict liability or
otherwise in the aggregate exceed one month's Standard & Poor's ComStock
License Fees.
d) Prior to commencing distribution of the Information to any User, Licensee
shall enter into a written subscription agreement with each such User, the
form of which agreement shall be subject to the prior review and approval
of Standard & Poor's ComStock. Such subscription agreement shall include
the provisions to the effect that each User:
(i) agrees that Standard & Poor's ComStock and the Sources shall have no
liability for the accuracy or completeness of the Information or for
delays, Interruptions, or omissions therein;
(ii) agrees not to use or permit anyone to use the information for any
unlawful purpose;
(iii) agrees that the information is to be used soley for the internal use
of the Users and its employees and not for redistribution to any
other person or entity; provided, however, that "internal use" shall
be deemed to include use by third parties with whom the User share
but to whom User does not sell or beneficially provide the
information, provided that the usage by such third parties
constitutes an integral and inseparable part of the User business;
(iv) agrees that its arrangements with Licensee for receipt of the
information is subject to termination in the event that this
Agreement between Licensee and Standard & Poor's ComStock, is
terminated for any reason;
(v) agrees, where applicable, to make application to and receive written
approval for receipt of the Information from each and every Source
prior to commencing receipt of the information and agree to comply
with any conditions, restrictions or limitations imposed by any of
the Sources, including paying all such fees or charges as such
Sources may impose either directly or through Standard & Poor's
ComStock or Licensee; and
(vi) acknowledges that the Sources described in the preceding paragraph
may have the right to terminate provision of the information to
subscriber with or without notice and that neither any such Source,
Standard & Poor's ComStock nor Licensee shall have any liability in
connection therewith.
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
e) Licensee agrees to indemnify and hold Standard & Poor's ComStock and its
affiliates harmless from and against any and all losses, damages,
liabilities, costs, charges and expenses, including reasonable attorneys'
fees, arising out of: (i) any liability of Standard & Poor's ComStock to any
User where Licensee has failed to incorporate the foregoing provisions in
its agreement with such User; or (ii) any breach of alleged breach on the
part of Licensee or any User with respect to its/their obligations to obtain
prior approvals from appropriate Sources and to comply with any applicable
conditions, restrictions or limitations imposed by a Source.
f) Standard & Poor's ComStock represents that it has the rights and licenses,
if any, necessary to transmit the Information to Licensee, and that so far
as Standard & Poor's ComStock is aware, Licensee's planned use of
Information under the terms and conditions contained herein does not
infringe any proprietary right or any third party right.
g) Standard & Poor's ComStock shall deliver the Information to Licensee at
Morgines Business Center
12 avenue des Morgines
1213 Petit-Lancy 1 - Geneve - Switzerland
or at such other locations as Licensee and Standard & Poor's ComStock may
agree. Where Standard & Poor's ComStock is provided to the Licensee via
telephone lines then Standard & Poor's ComStock shall, at Licensee's
expense, install, furnish, and maintain or arrange to be installed,
furnished and maintained, necessary modems, communication lines and/or
interface equipment. Where Standard & Poor's ComStock is provided via
satellite then Standard & Poor's ComStock shall, at Licensee's expense,
install, furnish, and maintain or arrange to be installed, furnished and
maintained, the indoor and outdoor equipment necessary to receive Standard
& Poor's ComStock by satellite.
4. PAYMENTS
In consideration for the rights granted by Standard & Poor's ComStock in
this Agreement, Licensee shall make payments to Standard & Poor's ComStock
as follows:
a) Licensee shall pay to Standard & Poor's ComStock a one time non-
refundable set-up and installation fee as shown in Exhibit D due and
payable upon execution of this Agreement.
b) Standard & Poor's ComStock shall invoice Licensee for all communications
equipment (including without limitation modems and/or satellite receiver
equipment) supplied and/or maintained pursuant to this Agreement. The
cost of supply and/or maintenance of such communications equipment is
shown in Exhibit D.
c) Non-recurring charges such as relocation, and removals will be billed in
accordance with Standard & Poor's ComStock's then current published
rates.
d) Licensee will pay quarterly in advance minimum Licence fees, the total of
which after this Agreement becomes effective will be the amount as shown
in Exhibit D. The payment for the first quarter shall be made upon
execution of this Agreement.
e) Licensee shall be responsible for the payment of any and all applicable
fees billed to Standard & Poor's ComStock or directly to Licensee by
Sources, which fees result from Licensee's use of Information.
f) Standard & Poor's ComStock may, in its sole discretion and at any time
following the initial term of this Agreement, modify the amounts in
Exhibit D as specified herein after having
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
provided written notice to Licensee of at least one hundred and eighty
days (180) days before expiry of the initial term.
g) Standard & Poor's ComStock may audit Licensee's records for the sole
purpose of verifying the accuracy of Licensee's reported annual License
fees as provided for in clause 4(d). Licensee will make such records
readily available to Standard & Poor's ComStock for inspection during
normal working hours on one week's notice. Standard & Poor's ComStock
agrees that all of Licensee's records will be treated as confidential and
will not be used for any purpose other than the audit.
h) All charges and amounts referred to in this Agreement are stated
exclusive of VAT or other applicable local taxes which shall be added at
the then current rate.
i) All invoices submitted by Standard & Poor's ComStock are payable
within 30 days of the invoice date. Standard & Poor's ComStock
reserves the right without prejudice to any other rights it may have
to charge interest at the rate of 3% over the National Westminster
Bank plc Base Rate from time to time on overdue accounts, such
interest to run from the date payment is due to the date it is made.
5. INFORMATION ENHANCEMENTS
Any improvements or beneficial alterations to the Standard & Poor's
ComStock service which might occur during the term of this Agreement,
while unidentified at this time, will be offered to Licensee under terms
and conditions to be negotiated provided:
a) Standard & Poor's ComStock has the right to supply new information to
Licensee; and
b) Licensee and Standard & Poor's ComStock execute a separate agreement or
an amendment to this Agreement.
6. TERM
a) This Agreement shall take effect upon its execution by an authorized
representative of Standard & Poor's ComStock and of the Licensee.
b) The term of this Agreement shall be for an initial term of thirty (30)
months commencing on the effective date and shall continue thereafter
for additional consecutive twelve (12) month periods unless written
notice of termination shall have been received by either party from the
other at least ninety (90) days prior to the end of the initial term or
any additional twelve (12) month period.
c) If Standard & Poor's ComStock shall increase its charges pursuant to
paragraph 4(f) above, Licensee shall have the option to terminate this
Agreement by written notice to Standard & Poor's ComStock within ninety
(90) days of Licensee's receipt of notice of such rate increases, such
notice to expire on the final day of the initial term or any additional
twelve (12) month period.
7. USE OF MARK
Licensee may not use any of the names Standard & Poor's, SPC or Standard
& Poor's ComStock in marketing or advertising materials without the prior
written consent of Standard & Poor's ComStock.
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
8. RIGHTS OF SPECIFICATION
The Standard & Poor's ComStock Data Specification described in Exhibit B
is proprietary to Standard & Poor's ComStock or its licensor and nothing
in this contract conveys any rights whatsoever with regard to the use of
Data Specification to Licensee. The Data Specification is provided to
the Licensee strictly for the purpose of developing internal computer
software to receive the information. Licensee may not use the Data
Specification for any other purpose whatsoever, including, but not
limited to, the development of systems for transmission of computer
data. Licensee may not give, transmit, or sell the specification to any
other party. Neither Standard & Poor's ComStock nor its licensor shall
have any liability or responsibility for any loss or damage resulting
from use by Licensee of the said Data Specification. Upon the
termination of the Agreement for any reason, Licensee agrees to return
the Data Specification to Standard & Poor's ComStock and provide a
written certification that Licensee has not retained any copies of the
Data Specification.
9. CONFIDENTIALITY
In addition to the duties imposed on Licensee pursuant to clause 8 above
Standard & Poor's ComStock and Licensee agree to hold confidential any
and all of each other's trade secrets, procedures, formula, Data
Specification Agreements, financial data, User lists, and future plans,
which may be learned before and during the term of this Agreement. The
learned information will be held confidential throughout the term of
this Agreement and five years thereafter, unless it becomes freely and
publicly available otherwise than as a result of breach by either party
of its obligations under this Agreement or is independently developed
without reference to the other party's confidential information.
10. PREVENTION OF PERFORMANCE
Standard & Poor's ComStock shall not be liable for any failure in
performance of this Agreement if such failure is caused by acts of God,
war, governmental decree, power failure, judgement or order, strike, or
other circumstances, whether or not similar to the foregoing, beyond its
reasonable control.
11. RIGHT OF TERMINATION IN THE EVENT OF BREACH OR BANKRUPTCY
a) Subject as otherwise provided in this Agreement, in the case of any
serious breach of this Agreement either party may give written notice to
the other party requiring the breach to be remedied by that other party
within 30 days of the date of that written notice and if the other party
fails to comply with the notice the first mentioned party may forthwith
terminate the Agreement by giving written notice to the other party.
b) This Agreement may be terminated forthwith on summary notice in writing
by either party in the event that the other party shall have a receiver
manager or administrator appointed over the whole or any part of its
assets or if any order shall be made or resolution passed for the
winding up of the other party (except for the purpose of amalgamation or
reconstruction) or if the other party shall enter into any composition
or arrangement with its creditors or shall cease or threaten to cease to
carry on business.
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
12. ASSIGNMENT
This Agreement shall not be assigned, sublicensed or otherwise transferred
by Licensee without the prior written consent of Standard & Poor's ComStock.
13. ENTIRE AGREEMENT
This Agreement and its exhibits embodies the whole Agreement between the
contracting parties. There are no promises, representations, conditions or
terms other than those herein contained.
14. NON-WAIVER
The failure of either party to exercise any of its rights under this
Agreement for a breach thereof shall not be deemed to be a waiver of such
rights nor shall be deemed to be a waiver of any subsequent breach.
15. AMENDMENTS
No modification, change or alteration of this Agreement shall be effective
unless in writing and signed by the parties hereto.
16. NOTICES
All notices under this Agreement shall be given in writing to the parties as
follows:
TO: Standard & Poor's ComStock
Wimbledon Bridge House
1 Hartfield Road
London SW19 3RU, UK
Attn: Mr Mark Hepsworth-General Manager.
TO: Virtual Telecom
Morgines Business Center
12 avenue des Morgines
1213 Petit-Lancy 1 - Geneve - Switzerland
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
17. GOVERNING LAW
This Agreement shall be governed by English Law and the parties agree
hereby to submit to the jurisdiction of the English Courts.
IN WITNESS WHEREOF Licensee and Standard & Poor's ComStock have caused
this Agreement to be executed by their duly authorized respective
officers, as of the day and year above written.
SERVICE REQUESTED BY: SUBSCRIPTION ACCEPTED BY:
<TABLE>
<S> <C>
[Illegible] [Illegible]
- ---------------------------------- -----------------------------------------------
(Duly Authorized Signatory) (Authorized Standard & Poor's ComStock Officer)
[Illegible] [Illegible]
- ---------------------------------- -----------------------------------------------
(Name and Title) (Name and Title)
VIRTUAL TELECOM McGraw-Hill International (UK) Ltd
--------------- ----------------------------------
(Company Name) Standard & Poor's ComStock Division
-----------------------------------
10 Sept. 1996 19 Sept '96
- ---------------------------------- -----------------------------------------------
(Date) (Date)
</TABLE>
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
EXHIBIT A
INFORMATION DEFINITION
This information shall include delayed and real time data from Exchanges and
Sources covered by Standard & Poor's ComStock, as shown below, provided that
such Exchanges and Sources have given their approval, and agreements with them
have been completed when required:
ASIA & AUSTRALIA SWITZERLAND
Hong Kong Futures Exchange (HKFE) Basle Stock Exchange and Bonds
Singapore International Monetary Exch. (SIMEX) Berne Stock Exchange and Bonds
Geneva Stock Exchange and Bonds
CANADA Zurich Stock Exchange and Bonds
SOFFEX
Montreal Stock Exchange EBS International
Toronto Stock Exchange
UNITED KINGDOMh
FRANCE
London Stock Exchange (LSE)
MATIF SEAQ International Level 1
MONEP LIFFE
Paris Stock Exchange London Metal Exchange (LME)
Paris Bonds, Paris Cash
NORTH AMERICA
GERMANY
Chicago Board of Trade (CBOT)
Frankfurt Stock Exchange (FSE) Chicago Mercantile Exchange
Deutsche Termin Borse (DTB) (CME) and (IMM)
New York Mercantile Exchange
(NYMEX)
Options Price Reporting
Authority (OPRA)
ITALY New York Stock Exchange (NYSE)
American Stock Exchange (AMEX)
Mercato Italiano dei Futures (MIF) NASDAQ
Mercato Reddito Fisso (MRF) Foreign Currency Options (PHLX)
Mercato Continuo Italia (MCI)
Mercato Secondario dei Titoli di Stato (MTS) FOREIGN EXCHANGE
NETHERLANDS Combined quotes
Amsterdam Stock Exchange (ASE) INTERNATIONAL INDICES
European Options Exchange (EOE)
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
EXHIBIT B
STANDARD & POOR'S COMSTOCK DATA FORMAT
The information shall be delivered in broadcast mode via a dedicated Satellite
installation at Virtual Telecom office at Morgines Business Center, 12 avenue
des Morgines, 1213 Petit-Lancy 1 - Geneve-Switzerland or at such other locations
as Licensee and Standard & Poor's ComStock may agree.
The Information described in exhibit A shall be made available to the Virtual
Telecom TAL Server via a ComStock Terminal Interface device (TID).
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
EXHIBIT C
DESCRIPTION OF LICENSEE SERVICE
TO BE PROVIDED BY VIRTUAL TELECOM
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
EXHIBIT D (page 1 / 2)
SCHEDULE OF FEES
1. STANDARD & POOR'S COMSTOCK LICENCE FEES
INTERNET WEB SERVICE
Licensee will pay Licence Fees in the following way:
Licensee shall send a monthly report to Standard & Poor's ComStock indicating
the number of Users of the WEB Service that have access to the Standard & Poor's
ComStock Information including the generated revenue from this service. Virtual
Telecom will provide copy of client invoices if requested.
Standard & Poor's ComStock will invoice Licensee for 50% of the remaining
monthly revenue (as specified below). This is payable quarterly in arrears.
INTERNET TAL SOFTWARE BASED SERVICE
Licensee will pay Licence Fees in the following way:
Licensee shall send a monthly report to Standard & Poor's ComStock indicating
the number of Users of the TAL software based Service that have access to the
Standard & Poor's ComStock Information including the generated revenue from this
service.
Standard & Poor's ComStock will invoice Licensee for 50% of the remaining
monthly revenue (i.e. after Townsend and basic AFX News service, Foreign
Exchange and indexes royalties, quarterly in arrears.
The minimum monthly amount to Standard & Poor's ComStock, payable quarterly in
advance, will be:
September 96 to January 97 L 2,000 per month
February to April 97 L 2,750 per month
May to July 97 L 3,500 per month
August to October 97 L 5,000 per month
November to January 98 L 7,500 per month
From February 98 L 10,000 per month
The above assume less than 400 TAL Users. Beyond 400 TAL Users, Standard &
Poor's ComStock will invoice Licensee for 50% of the remaining monthly revenue,
as specified above.
The above are datafeed charges only and exclude exchange pass through and end
user fees.
2. SATELLITE RENTAL AND COMMUNICATIONS COSTS
L 200 per month
<PAGE>
STANDARD & POOR'S
A DIVISION OF THE MCGRAW-HILL COMPANIES
EXHIBIT D (page 2/2)
SCHEDULE OF FEES
3. STANDARD & POOR'S COMSTOCK SETUP AND INSTALLATION FEES (ONE OFF)
Setup and installation L 1,700
Security Deposit L 2,000
(refundable on termination of service)
PLEASE NOTE:
(a) All prices are exclusive of VAT and local taxes.
(b) Communication prices above are subject to change without notice.
(c) Exchange fees - as required,
(d) Sources and Exchanges fees are subject to change without notice
(e) Standard & Poor's ComStock reserves the right to increase its service
fees for additional data required by Virtual Telecom in addition to
that listed in Exhibit A.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Contract
between
BT LIMITED LONDRES
SUCCURSALE DE MEYRIN
and
VIRTUAL TELECOM S.A.
dated : 1st October, 1996
Contract Number: GNS-9610-10-40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BT CONDITIONS FOR GLOBAL NETWORK SERVICES
<PAGE>
IN COMMERCIAL CONFIDENCE
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AGREEMENT FOR GLOBAL TELECOMMUNICATIONS SERVICES
DATED 1ST OCTOBER, 1996
BETWEEN
BT Limited
ICC Immeuble F-G, 20 Route de Pre-Bois, 1215 Geneva, Switzerland ("BT")
AND
Virtual Telecom S.A.
12, avenue des Morgines, 1213 Geneva, Switzerland
THIS AGREEMENT SETS OUT THE TERMS AND CONDITIONS UNDER WHICH BT AGREES TO
PROVIDE THE CUSTOMER WITH THE GLOBAL TELECOMMUNICATIONS SERVICE(S) DESCRIBED
BELOW
NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:
1. The following documents form an integral part of this Agreement:
- This form of Agreement
- General Terms and Conditions
- CIP Service Schedule
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In case of any inconsistencies or contradiction between the documents, the
order of precedence shall be the following.:
- The Form of Agreement
- Service Schedule (s)
- General Terms and Conditions
AS AGREED BY THE AUTHORIZED REPRESENTATIVES OF THE PARTIES:
On behalf of BT On behalf of Virtual Telecom
/s/ Hans Ivanovitch /s/ N. Gibbons /s/ D. Hizber
- ----------------------------------- ------------------------------------
signature signature
Hans Ivanovitch N. Gibbons D. Hizber
- ----------------------------------- ------------------------------------
name name
General Manager CEO
- ----------------------------------- ------------------------------------
title title
24/10/96 03.x.96
- ----------------------------------- ------------------------------------
date date
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GENERAL TERMS AND CONDITIONS
1. Interpretation
2. Duration
3. Provision of Service
4. Future Service
5. Use of Service
6. Equipment
7. Access
8. Regulatory Matters
9. Charges
10. Variations
11. Dispute Resolution
12. Termination
13. Limitation of Liability
14. Ownership and Intellectual Property Rights
15. Intellectual Property Rights Indemnity
16 Confidentiality
17 Matters beyond the Parties' Reasonable Control
18. Law and Jurisdiction
19. Export Control
20. Notices
21. Assignment
22. Entire Agreement
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1. INTERPRETATION
1.1 The following definitions apply:
AGREEMENT means the Form of Agreement or Order
Form, whichever is applicable, any
Service Schedule(s), the General Terms
and Conditions, Appendices, and any
other document specifically incorporated
into this agreement in writing;
APPENDIX means the appendix to this Agreement
setting out inter alia Charge(s),
network configuration, any applicable
service level agreements,
BT means BT Limited (Succursale de Meyrin)
ICC Immeuble F-G, 20 Route de Prebois
1215 Geneva Switzerland ("BT")
BT EQUIPMENT means equipment owned by BT which is
supplied by or on behalf of BT to the
Customer or placed at or on a Site for
the purpose of providing Service;
CHARGE(S) means the charge(s) payable for Service
as contained in each relevant Appendix;
CUSTOMER means the customer as stated on the Form
of Agreement or Order Form, whichever is
applicable,
INTELLECTUAL PROPERTY means all those rights in intellectual
RIGTHS property as defined in Article
2 (viii) of the Convention establishing
the World Intellectual Property
Organization, 1967;
OPERATIONAL SERVICE DATE means the date when any Service, or part
of it, is first made available to the
Customer by BT or the date when the
Customer first starts to use such
Service (or part of it) whichever date
is the earlier, or where a Appendix so
provides the date when the Service (or
part of it) successfully passes its
Tests;
PERFORMANCE CREDIT means a payment made by BT to the
Customer as specified in any Service
Level;
SERVICE means each service as described in the
relevant Service Schedule and further
specified in the Appendix;
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SERVICE DESCRIPTION means the description of the Service as
contained in the relevant Service
Schedule;
SERVICE LEVEL means the service level applicable to a
Service as set out in the relevant
Appendix;
SERVICE SCHEDULE means the schedule to this Agreement
which includes the Service Description
and any additional terms and conditions
or other matters relevant to the Service;
SITE means the premises owned or occupied by
the Customer or any third party and at
which BT agrees to provide Service;
TESTS means the installation or acceptance
tests (if any) referred to in a Service
Schedule.
2. DURATION
2.1 This Agreement shall commence on the date of signature by both
parties and shall continue unless and until terminated under
paragraph 12
2.2 Each Service shall have the period of service, which may include a
minimum period of service, as specified in its Appendix.
3. PROVISION OF SERVICE
3.1 BT agrees to provide the Customer with the Service described in the
Service Schedule and relevant Appendix.
3.2 The Service shall commence on its Operational Service Date and any
delivery date for the provision of Service is an estimate unless the
Appendix provides otherwise.
3.3 BT agrees that each Service will:-
3.3.1 conform in all material respects with its Service Description;
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3.3.2 be provided with the reasonable care and skill of a
competent telecommunications service provider; and
3.3.3 meet any express contractual standard of performance agreed
with the Customer and specified in a Service Level.
3.4 In the absence of any express contractual provision to the
contrary, whether contained in a Service Level or otherwise, BT
does not undertake that any Service will be fault-free or
uninterrupted, but BT does agree to remedy any faults which
significantly impair performance as soon as reasonably practicable.
3.5 For operational reasons BT may vary the technical specification of any
Service.
4. FUTURE SERVICE
4.1 The Customer may, upon 90 days' notice in writing to BT, replace a
Service by another Service from BT's list of global telecommunications
services, as prevailing at the time of replacement, subject to the
following conditions:-
4.1.1 the Service to be replaced shall have completed a continuous
period of service of at least 12 months or, if it has not, the
Customer shall pay to BT all Charges which would have been
payable had such Service completed a period of service of 12
months;
4.1.2 the Customer shall pay any outstanding Charges, including
connection and access Charges (or any lesser amount
determined by BT), for the Service to be replaced;
4.1.3 the period of service for the replacement Service shall, as
a minimum, be equal to the outstanding period of service for
the Service to be replaced and in any event shall not be
less than 12 months;
4.1.4 the Customer shall pay BT's reconfiguration charge and the
Charges for the replacement Service; and
4.1.5 the parties shall agree such changes to the Agreement as may
be appropriate to the replacement Service, using the
variations procedure described in paragraph 10.
5. USE OF SERVICE
5.1 The Customer may use any Service for its own purposes, provided that:
5.1.1 the Customer complies with the terms of any telecommunications
legislation or any license applicable to the Customer in any
country where Service is provided; and
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5.1.2 the Customer or any other party does not use any Service to
send any communication which is illegal.
5.2 If the act or omission of the Customer affects or is likely to
affect the proper working or safety of the telecommunications
network by which BT is providing any Service to the Customer,
BT reserves the right to suspend the provision of such Service.
BT shall give the Customer reasonable notice of its intention to
suspend any Service, except in the case of an emergency. Following
remedial action by the Customer, BT shall resume the provision
of the Service as soon as reasonably practicable.
5.3 The Customer agrees to indemnify BT against all costs, claims,
demands, actions and proceedings which arise from the Customer's
use of any Service and which are threatened or brought against BT
by another party, except as described in paragraph 15.
6. EQUIPMENT
6.1 The Customer shall connect and use any equipment for use with any
Service in accordance with BT's instructions and any reasonable
security procedures applicable to the use of such equipment with
any Service.
6.2 If the Customer attaches any equipment to a Service or any part of
a Service, such equipment shall be technically compatible with that
Service or part of a Service and shall be approved for the purpose
under the relevant telecommunications legislation.
6.3 The Customer shall at its own expense provide reasonable assistance
and facilities to BT in the installation of BT Equipment, any
electricity required for the proper functioning of BT Equipment and
shall provide or procure suitable accommodation, facilities and
environmental conditions for housing of the BT Equipment and all
necessary electrical and other installations and fittings.
6.4 The Customer shall be responsible for BT Equipment while it is at a
Site and shall not add to, modify or in any way interfere with the
BT Equipment. The Customer shall be liable to BT for any loss or
damage to BT Equipment, except in so far as any such loss or damage
is attributable to the negligent or wilful act or omission of BT,
its agents or subcontractors.
7. ACCESS
7.1 The Customer agrees to provide BT with all reasonable access to its
Sites and any other premises for BT to carry out its obligations
under this Agreement.
7.2 BT undertakes that its employees, agents and sub-contractors shall
observe the Customer's reasonable site regulations previously
advised in writing to BT. In the event of any conflict between such
site regulations and this Agreement, the terms and conditions of
this Agreement shall prevail.
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8. REGULATORY MATTERS
8.1 If BT is required by law or regulation to modify any Service or the
provision of any Service, BT reserves the right to do so and BT
will notify the Customer as soon as possible of any such
modification.
8.2 The delay or failure by BT to perform any of its obligations under
this Agreement which is caused by or materially contributed to by a
restriction of a legal or regulatory nature which affects, wholly
or partly, the provision of any Service, shall not constitute a
breach of this Agreement.
8.3 Paragraph 8.2 shall apply in the event of a refusal or delay by a
third party telecommunications service provider to supply
telecommunications services to BT and where there is no alternative
to such Services available to BT at reasonable cost.
9. CHARGES
9.1 The Customer agrees to pay the Charges described in any Appendix.
9.2 The Charges for each Service shall commence on its Operational
Service Date.
9.3 All Charges are quoted in and shall be invoiced and paid in the
currency stated in the relevant Appendix. Charges are exclusive of
value added tax, sales tax and any other applicable duties and
taxes (other than taxes on BT's income), however designated, which
shall be added to invoices appropriately.
9.4 Charges shall be paid within 30 days of the date of BT's invoice.
BT shall send invoices to the Customer at such addresses as may
from time to time be agreed for the purpose. Should the Customer
wish to change an address which has been agreed with BT, BT will
implement the change as soon as reasonably practicable.
9.5 Without prejudice to BT's rights under paragraph 12, if payment of
any Charge for a Service is late BT reserves the right to:
9.5.1 charge the Customer interest on a daily basis at the rate of
4 percentage points above the base lending rate of Credit
Suisse, Geneva, as prevailing from time to time, and
9.5.2 suspend such Service after 14 days' written notice to the
Customer of such late payment and the Customer having failed
to pay within such period. Upon payment by the Customer, BT
shall resume the provision of Service as soon as reasonably
practicable. The Customer shall continue to be liable for
the Charges during any period of suspension.
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10. VARIATIONS
10.1 The Customer may request new services. All such requests shall be
in writing and shall be subject to paragraph 10.5.
10.2 Except in the circumstances described in paragraph 3.5, if either
party wishes to vary any Service or any part of any Service, it
shall notify the other party in writing, detailing the proposed
change and the reason for it, in accordance with this paragraph.
10.3 Within a reasonable time, not exceeding 30 working days, after
receipt of a proposal under paragraph 10.2, the receiving party
shall respond by notifying the other party in writing whether such
proposal is feasible, together with the resulting financial,
contractual, technical and other effects.
10.4 The proposing party shall notify the other party in writing,
within 10 days of receipt of the receiving party's response under
paragraph 10.3, whether or not the receiving party is to proceed
and make the change.
10.5 A proposed change shall not be effective until and unless
authorized by both parties in writing and incorporated into the
Agreement by written amendment.
11. DISPUTE RESOLUTION
11.1 If any dispute (except for a dispute arising under paragraph 9)
should arise between the parties under this Agreement, including
any claim by either party that the other party has breached the
terms of this Agreement, the parties shall use reasonable
endeavors to settle the matter in accordance with the escalation
procedure set out in this paragraph.
11.2 Any dispute which is not settled between the parties' respective
nominees within a reasonable period of time shall be escalated to
the first level of representation. If the dispute has not been
resolved by the first level of representation within 14 days, it
shall be referred to the second level of representation.
11.3 If the dispute remains unresolved after a further period of 30
days of such escalation, either party may pursue any remedy it may
have at law, subject to the exclusions and limitations under this
Agreement.
12. TERMINATION
12.1 This Agreement terminates automatically on or after the date of
expiry or termination of all of the Services provided under this
Agreement. Either party may terminate any of the Services
provided under this Agreement at any time after the Minimum Period
of Service, as defined in the relevant Appendix, by notice of at
least 90 days given to the other party subject to:
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12.1.1 payment by the Customer to BT of any outstanding Charges,
including connection Charges, for the Service so
terminated; and
12.1.2 payment of the applicable termination Charges, if any,
specified in the Service Schedule for such Service.
12.2 Either party may terminate this Agreement by notice if the other
party is the subject of a bankruptcy order, or becomes insolvent,
or makes any arrangement or composition with or assignment for the
benefit of its creditors, or if any of the other party's assets
are the subject of any form of seizure, or goes into liquidation,
either voluntary (otherwise than for reconstruction or
amalgamation) or compulsory or if a receiver or administrator is
appointed over its assets (or the equivalent of any such event in
the jurisdiction of such other party).
12.3 Either party may immediately by notice terminate that part of the
Agreement relating to a Service:
12.3.1 if any matter beyond the other party's reasonable control
prevents the performance of the whole or a substantial part
of the other party's obligations in relation to that
Service for a continuous period of 3 months after the date
on which it should have been performed; or
12.3.2 if the other party commits a material breach of its
obligations in relation to that Service and the dispute
resolution procedure set out in paragraph 11 has been
exhausted without a resolution being achieved.
12.4 Upon expiry or termination of this Agreement (or any Service
provided under it):
12.4.1 the rights of the parties accrued up to the date of such
expiry or termination shall remain unaffected;
12.4.2 the Customer shall co-operate fully with BT to recover any
BT Equipment; and
12.4.3 BT shall co-operate fully with the Customer to achieve a
smooth handover to any other telecommunications service
provider nominated by the Customer.
12.5 Termination of the Agreement implies termination of all the
Services provided under this Agreement.
13. LIMITATION OF LIABILITY
13.1 Except to the extent the law otherwise requires, BT's liability in
contract, tort (including negligence) or otherwise is:
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13.1.1 limited to
a) CHF 1.000.000 for any incident, or series of related
incidents, giving rise to any loss of or damage to
physical property, subject to a maximum of CHF 2.000.000
for all such incidents in any period of twelve months; and
b) the amount of any Performance Credits up to the limit
specified in the Service Level under which they are
payable; and
c) CHF 500.000 for any other incident, or series of related
incidents, causing the Customer to suffer loss or damage
subject to a maximum of CHF 1.000.000 for all such
incidents in any period of twelve months.
13.1.2 excluded entirely for loss (whether direct or indirect) of
profits, business or anticipated savings, loss or
destruction of data, or for any indirect or consequential
loss or damage whatever.
13.2 BT shall implement reasonable precautions to prevent any
unauthorized access by third parties to any part of the
telecommunications network used to provide Service to the
Customer, but BT shall not be liable for any loss or damage
sustained by the Customer in the event of any unauthorized access
in spite of BT's reasonable precautions.
14. OWNERSHIP AND INTELLECTUAL PROPERTY RIGHTS
14.1 Ownership and all Intellectual Property Rights in any BT
Equipment, software, operating manuals and associated
documentation, made available as part of any Service or otherwise
generated in connection with this Agreement, shall remain the
absolute property of BT or its licensees.
14.2 Where software is made available to the Customer in connection
with any Service, BT grants the Customer a non-exclusive,
non-transferable license to use such software solely in connection
with such Service and for no other purpose.
14.3 The Customer shall not reproduce any licensed software except to
the extent strictly necessary for proper use of the Service and
for back-up purposes; any such permitted reproduction being solely
in object code form.
14.4 The Customer shall keep any licensed software and any other
material containing BT's Intellectual Property Rights in
confidence and shall ensure that it is not copied, disclosed or
used other than as authorized under this Agreement.
14.5 The Customer shall not make any modification to any licensed
software without BT's prior written consent. The Intellectual
Property Rights in any permitted modifications shall vest in BT.
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14.6 The Customer agrees to sign any agreement reasonably required by
the owner of the Intellectual Property Rights in any material
supplied to the Customer under this Agreement. The Service Schedule
may contain supplementary terms and conditions relating to
Intellectual Property Rights.
15. INTELLECTUAL PROPERTY RIGHTS INDEMNITY
15.1 BT shall indemnify the Customer against all claims and proceedings
arising from infringement (or alleged infringement) of any
Intellectual Property Rights enforceable in any country in which
Service is provided, by reason of the Customer's use of any
Service or any item provided as part of the Service. As a
condition of this indemnity the Customer shall:-
15.1.1 notify BT promptly in writing of any allegation of
infringement;
15.1.2 make no admission relating to the infringement; and
15.1.3 allow BT to conduct all negotiations and proceedings and
give BT all reasonable assistance.
15.2 If at any time an allegation of infringement of the Intellectual
Property Rights is made, BT may at its own expense modify the
Service, or any item provided as part of the Service, so as to
avoid the infringement, provided that any such modification does
not materially affect the performance of the Service.
15.3 The indemnity in paragraph 15.1 does not apply to infringements
occasioned by the Customer's use of the Service, or any item
provided as part of the Service, in conjunction with other
apparatus or software not supplied by BT, or to infringements
occasioned by designs or specifications made by the Customer. The
Customer shall indemnify BT against claims, proceedings and
expenses arising from such infringements.
16. CONFIDENTIALITY
16.1 BT and the Customer shall keep in confidence any information
obtained under this Agreement which is designated as confidential
by the disclosing party and shall not divulge the same to any
person (other than their employees who need to know the
information) without the consent of the other party.
16.2 This paragraph 16 shall not apply to information which is:
16.2.1 in the public domain other than in breach of this Agreement;
16.2.2 in the possession of the receiving party before such
divulgence has taken place; and
CIP Version 1 Page 12 of 15
Issue 30 09 96
<PAGE>
IN COMMERCIAL CONFIDENCE
- --------------------------------------------------------------------------------
16.2.3 obtained from a third party who is free to divulge the same.
CIP Version 1 Page 13 of 15
Issue 30 09 96
<PAGE>
IN COMMERCIAL CONFIDENCE
- --------------------------------------------------------------------------------
17. MATTERS BEYOND THE PARTIES' REASONABLE CONTROL
Neither party shall be liable for any breach of this Agreement which is
caused by a matter beyond its reasonable control including Acts of God,
fire, lightning, explosion, war, disorder, flood, industrial disputes
(whether or not involving their employees), extremely severe weather or
acts of local or central government or other competent authorities.
18. LAW AND JURISDICTION
This Contract shall be governed by Swiss Law. Any dispute, controversy or
claim arising out of or in connection with this Contract, or the breach,
termination or invalidity thereof, shall be settled by the competent Courts
in Geneva.
19. EXPORT CONTROL
19.1 Service may comprise equipment, software, services, technical
information, training materials or other technical data which,
because of their origin, or otherwise, are subject to the United
States of America export control regulations or the laws or
regulations of another country. In such case, provision of Service
shall be conditional upon the parties obtaining and providing all
necessary consents. The parties shall provide reasonable
assistance to each other to obtain such consents.
19.2 The Customer agrees to comply with any applicable export or
re-export laws and regulations, including obtaining written
authority from the U.S.A. government if the Customer intends at
any time to re-export any items of U.S.A. origin to any proscribed
destination.
20. NOTICES
All notices given under this Agreement shall be in writing and shall be
sent by prepaid post or delivered to BT's or the Customer's principal place
of business shown on the Form(s) of Agreement or Order Form(s) whichever is
applicable or to any other address either party has given to the other for
the purpose.
21. ASSIGNMENT
The Customer may assign all or part of this Agreement to any other party
with the prior written agreement of BT which shall not be unreasonably
withheld. BT reserves the right to assign all or part of this Agreement
at any time to any member of' the British Telecommunications plc group of
companies or any other third party which could sufficiently execute the
obligations.
CIP Version 1 Page 14 of 15
Issue 30 09 96
<PAGE>
IN COMMERCIAL CONFIDENCE
- --------------------------------------------------------------------------------
22. ENTIRE AGREEMENT
This Agreement states the entire agreement between the parties and
supersedes all prior representations, agreements, proposals,
correspondence, discussions, meetings, negotiations and any other
understandings relating to its subject matter.
CIP Version 1 Page 15 of 15
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<PAGE>
SERVICE SCHEDULE FOR CONCERT INTERNETPLUS SERVICE
- --------------------------------------------------------------------------------
1. DEFINITIONS
For the purpose of this Service Schedule the following definitions apply:
"ACCESS LINE" means a frame relay or leased line connecting the
Customer's network to an Access Port;
"ACCESS PORT" means the physical and logical termination point to
access the CIP Network;
"ALU" means Access Link Utilization as described in paragraph
7.5 of this Service Schedule;
"CIP" means Concert InternetPlus as described in this Service
Schedule;
"CIP NETWORK" means the CIP IP network used to provide CIP;
"CIP POP" means a Point of Presence, the location where the CIP
Network is accessed;
"INTERNET" means the global data network comprising interconnected
networks using IP;
"INTERNET STANDARDS" means the protocols and standards defined in the
Internet documents, including without limitation,
documents designated RFC 990, 997, 1009, 1122, 1123,
1250 and 1771 and any future such protocols and
standards as appropriate. Border Gateway Protocol (BGP4)
is defined in the Internet Standards;
"ISP" means an Internet service provider;
"MINIMUM PERIOD
OF SERVICE" means the period specified in paragraph 3;
"NAME" means any name specifically requested by or allocated to
the Customer for the provision of the CIP and shall
include, without limitation, any domain name or mailbox
name;
"SERVICE" means CIP.
Page 1 of 7
<PAGE>
2. SERVICE DESCRIPTION
2.1 CIP OVERVIEW
2.1.1 CIP is a transit service for the transmission of IP traffic
between ISPs, Resellers and corporate customers using the
CIP Network. The Customer can send IP traffic to the chosen
regions specified on the Order Form. The regions available
to the Customer are specified in the Charges Schedule.
2.1.2 CIP offers a number of Service Levels which are designed to
match the requirements of the different types of customer
described in the table below:
- ------------------------------------------------------------------------------
SERVICE LEVEL TYPE OF CUSTOMER
- ------------------------------------------------------------------------------
CIP Premium ISP
- ------------------------------------------------------------------------------
CIP Enhanced ISP or Reseller
- ------------------------------------------------------------------------------
CIP Standard (Leased Line) Reseller with customers connected
to its network via leased line
or dial-up connection
- ------------------------------------------------------------------------------
CIP Standard (Dial) Reseller with customers connected
to its network via dial-up
connection
- ------------------------------------------------------------------------------
CIP Corporate Corporate customer who is not an
ISP or Reseller
- ------------------------------------------------------------------------------
The Service Levels are detailed in paragraph 2.3 below.
2.1.3 CIP also includes additional Service options which are
listed in the Charges Schedule.
2.1.4 The appropriate Service Level and any Service options
requested by the Customer will be specified on the Order
Form. The Customer will only receive those parts of CIP
specified on the Order Form.
2.2 CONNECTION TO CIP
2.2.1 Connection to CIP is via an Access Line which connects the
Customer's router to an Access Port at an CIP PoP specified
by BT. The Access Port capacity will be specified on the
Order Form.
2.2.2 The CIP boundary is the Access Port at the CIP PoP.
Page 2 of 7
<PAGE>
2.3 SERVICE LEVELS
2.3.1 CIP Premium
(a) CIP Premium supports Border Gateway Protocol (BGP4) only.
(b) CIP Premium is designed to carry 50% of the Access Port
capacity. Higher throughput can be achieved subject to
the volume of traffic on the CIP Network. However,
throughput on the CIP Network cannot be guaranteed and
performance may degrade below the stated level.
(c) The Service upgrade provisions specified in paragraph 7.4
of this Service Schedule apply.
(d) Monthly reports showing ALU rates, Access Port
availability and faults reported and fault status are
provided to the Customer.
2.3.2 CIP Enhanced
(a) CIP Enhanced is designed to carry 25% of the Access Port
capacity. Higher throughput can be achieved subject to
the volume of traffic on the CIP Network. However,
throughput on the CIP Network cannot be guaranteed and
performance may degrade below the stated level.
(b) The Service upgrade provisions specified in paragraph 7.4
of this Service Schedule apply.
(c) Monthly reports showing ALU rates, Access Port
availability and faults reported and fault status are
provided to the Customer.
2.3.3 CIP Standard (Leased Line) and CIP Standard (Dial)
(a) Throughput across the CIP Network is totally dependent on
the volume of traffic on the CIP Network.
(b) The Service upgrade provisions specified in paragraph 7.4
of this Service Schedule do not apply.
(c) Monthly reports are not provided.
2.3.4 CIP Corporate
The Service Level for CIP Corporate is the same as for CIP
Standard, but is not available to customers for the purpose
of reselling Internet access.
Page 3 of 7
<PAGE>
3. MINIMUM PERIOD OF SERVICE
Each component of the Service will be provided for a Minimum Period
Service of three years beginning on its Operational Service Date and
thereafter until terminated in accordance with Paragraph 12 of the
General Conditions.
4. CUSTOMER'S RESPONSIBILITIES
4.1 The Customer is responsible for leasing the appropriate Access Line
from a local telecommunications service provider. The Customer must
also provide a compatible router on Site for connection to the CIP
Network. The Access Line and all equipment located on the
Customer's side of the CIP boundary are the sole responsibility of
the Customer and not included as part of CIP.
4.2 The Customer is responsible for ensuring that the Customer's
equipment connected to the CIP Network conforms to the interface
specifications and routing protocols specified by BT.
4.3 If the Customer has selected CIP Premium, the Customer must have an
Autonomous System Number.
4.4 The Customer will report faults in CIP by telephone, fax or
electronic mail to the regional Service Centre specified on the
Order Form or as otherwise notified by BT. The Service Centre will
be available 24 hours a day, 365 days a year. Faults diagnosed as
occurring in the Access Line(s) should be reported direct to the
local telecommunications service provider.
4.5 If the Customer has selected CIP Premium or CIP Enhanced, the
Customer agrees to comply with the Service upgrade provisions
specified in paragraph 7 of this Service Schedule.
4.6 If the Customer has selected CIP Standard (Dial), the Customer
agrees to connect its own customers to its network via dial-up
connection only.
4.7 If the Customer has selected CIP Corporate, the Customer agrees not
to use the CIP Network for reselling Internet access to third
parties.
4.8 Unless the Customer has requested BT to provide the relevant Domain
Name Services, the Customer is responsible for registering its
domain name and providing Primary and Secondary DNS. If the
Customer is moving to CIP from another ISP, the Customer is
responsible for notifying the local registration authority of the
change to the Customer's existing Primary DNS.
4.9 If the Customer is an ISP or Reseller, the Customer will:
Page 4 of 7
<PAGE>
4.9.1 include in its contracts with its customers conditions of
use equivalent to those in paragraphs 5 and 6 of this Service
Schedule; and
4.9.2 provide a support function for the provision of support to
its own customers connected to its network who must be
required and directed to use this route to report all
faults, queries and complaints. For the avoidance of doubt,
BT shall have no responsibility for provision of support to
the Customer's own customers.
5. BT's RESPONSIBILITIES
5.1 BT will manage traffic flows within the CIP Network 24 hours a day,
365 days a year.
5.2 BT will respond to faults reported to the Service Centre without
undue delay by taking any network management measures it deems
appropriate. BT will notify the Customer if the fault lies beyond
the Service boundary.
5.3 For the purposes of providing new connections, changing routing
tables, updating facilities and general maintenance scheduled
downtime may occur from time to time. BT will use its reasonable
endeavors to schedule downtime in accordance with the Customer's
requirements.
5.4 For Enhanced, Standard and Corporate Service Levels, BT will be
responsible for allocating IP addresses to the Customer. IP
addresses will allocated in accordance with the Internet Standards.
BT can only accept the Customer's existing IP addresses which are
official registered IP addresses.
5.5 BT will provide Domain Name Services as specified in the Charges
Schedule and requested by the Customer. BT will not be responsible
for providing Secondary DNS to the Customer's own customers.
5.6 BT is only responsible for the CIP Network and is not responsible
for any faults in or failures of other interconnected networks.
5.7 BT undertakes no liability whatever whether in contract, tort
(including liability for negligence) or otherwise for the acts or
omissions of other telecommunication service providers or for
faults in or failures of their equipment and lines including,
without limitation, the Access Line(s).
6. USE OF SERVICE
6.1 BT may give the Customer instructions which it believes are
necessary for reasons of health and safety or the quality of
Service to the Customer or any other customer.
Page 5 of 7
<PAGE>
6.2 CIP must not be used:
6.2.1 to send or receive any material which is offensive, abusive,
indecent, obscene or menacing, or in breach of confidence,
copyright, privacy or any other rights, or in connection
with a criminal offence; or
6.2.2 to cause annoyance, inconvenience or needless anxiety; or
6.2.3 in breach of instructions BT has given under paragraph 5.1;
or
6.2.4 other than in conformance with the acceptable use policies
of any connected networks and the Internet Standards.
6.3 The Customer must not, nor must any other person, use a Name such
as to infringe the rights of any person, whether in statute or
common law, in a corresponding trade mark or name.
6.4 If anyone other than the Customer uses CIP with or without the
Customer's knowledge or approval, in contravention of paragraphs
5.2 or 5.3 above, BT can treat the contravention as a breach by the
Customer of this Agreement.
6.5 BT may suspend CIP for contravention of paragraph 5.2 or 5.3 above
and it can refuse to restore CIP until it receives an acceptable
assurance from the Customer that there will be no further
contravention.
6.6 The Customer acknowledges that BT has no control over the
information transmitted via CIP and that BT does not examine the
use to which customers put CIP or the nature of the information
they are sending or receiving. BT hereby excludes all liability of
any kind for the transmission or reception of information of
whatever nature.
6.7 The Customer must indemnify BT against any claims or legal
proceedings arising from the provision of CIP which are brought or
threatened against BT by a third party because CIP is used in
breach of paragraph 5.2 or 5.3 or because CIP is faulty or cannot
be used by a third party.
7. NAME
7.1 The Customer confirms and warrants that it is the owner of or is
duly authorized by the owner to use any trade mark or name
requested or allocated to it.
7.2 The Customer acknowledges that BT cannot guarantee that any Name
requested by the Customer will be available or approved for use.
7.3 BT shall have discretion to require the Customer to select a
replacement Name and may suspend CIP if, in BT's opinion, there
are reasonable
Page 6 of 7
<PAGE>
grounds for BT to believe that the Customer's current choice of
Name is, or is likely to be, in breach of the provisions of
paragraph 5.3 above.
8. CHARGES
8.1 Charges for CIP will be as detailed in the Proposal.
8.2 Charges may be amended by BT from time to time upon not less than
28 days' notice. If BT increases the charges (except as provided in
paragraph 7.4 below) during the Minimum Period of Service by an
amount exceeding ten percent a year, the Customer may (within
fourteen days of receipt of the notice of the increased charges)
terminate that part of CIP concerned.
8.3 Any upgrade in Access Port capacity will be subject to a new
Minimum Period of Service.
8.4 BT will monitor the Customer's ALU rate in accordance with the
procedure detailed in paragraph 7.5. If the Customer's monthly ALU
rate (as calculated in accordance with paragraph 7.5) exceeds 70%
during a calendar month BT will advise the Customer of the need to
upgrade the Access Port capacity. If the Customer does not upgrade
the Access Port capacity by the next occasion that the Customer's
ALU rate exceeds 70%, BT may automatically adjust the Access Port
charge to the next level. BT will give the Customer 30 days' prior
notice of any such adjustment.
8.5 BT will monitor the Customer's ALU rate as follows:
8.5.1 The ALU rate will be measured by the following formula:
Transmitted or Received Packets of Data per second x 100
ALU Rate = --------------------------------------------------------
Access Port Capacity
The ALU rate for each calendar month will apply to either
transmitted or received packets which ever is the greater
8.5.2 During each 24 hour period samples will be taken every 15
minutes of the transmitted or received packets to determine
an ALU rate.
8.5.3 The eight highest ALU rates within that 24 hour period will
then be averaged to calculate the daily ALU rate.
8.5.4 The 20 highest daily ALU rates will then be averaged to
establish the monthly ALU rate.
Page 7 of 7
<PAGE>
Unidata Frame Relay & Unimaster Services
for
Virtual Telecom S.A.
<PAGE>
Contract Unidata Frame Relay & Unimaster Services
- -------------------------------------------------------------------------------
UNIDATA Frame Relay & Unimaster Services
Contract for the
Virtual Telecom S.A. Network
This Contract is made and Swiss Telecom PTT
entered into by and between
represented by Swiss Telecom PTT, Geneva
hereinafter referred to as Swiss Telecom
and the corporation Virtual Telecom S.A.
hereinafter referred to as Customer
The Customer and Swiss Telecom acknowledge that their rights and obligations
are according to the Swiss Telecommunications Act (Fernmeldegesetz) and its
regulations.
- -------------------------------------------------------------------------------
Contract / Version 1.1 Page 1/5
Project-no. SS.CH 961300, 16 l0.1996
<PAGE>
Contract Unidata Frame Relay & Unimaster Services
- -------------------------------------------------------------------------------
Table of contents
1. Subject of the Contract
2. Contents of the Contract
3. Definitions
4. Services delivered by Swiss Telecom
5. Sub-Contracting
6. Subsidiaries and Affiliates of the Customer
7. Obligations of the Customer
8. Charges, Fees and Terms of Payment
9. Liability of Swiss Telecom
10. Service Period
11. (11-x Specific Provisions)
12. Amendments to the Contract
13. Notices
14. Jurisdiction and Applicable Law
- -------------------------------------------------------------------------------
Contract / Version 1.1 Page 2/5
Project-no. SS.CH 961300, 16.10.1996
<PAGE>
Contract Unidata Frame Relay & Unimaster Services
- -------------------------------------------------------------------------------
1. SUBJECT OF THE CONTRACT
The Contract contains services to build up, manage and maintain the
Customer network around the globe based on the Unidata Frame Relay and
Unimaster services.
2. CONTENTS OF THE CONTRACT
The Contract between Swiss Telecom and the Customer consists of this
Cover Contract and the following Attachments and Appendices (the
"Contract"):
Attachment I Specification of the Services and the Network
Attachment II Charges, Fees and related Provisions
Attachment III CPE
Attachment IV Security Management, Help Desk
Attachment V List of Subsidiaries and Affiliates
Attachment VI-1 Compensation Schedule
Attachment VI-2 Compensation Schedule
Appendix A General Terms and Conditions
Appendix B General Procedures and Requirements
Appendix C Service Level Agreement
Appendix D Service Description: Unidata Frame Relay
In the event of a conflict between this Cover Contract and the
Attachments and Appendices, this Cover Contract shall prevail over the
Attachments and Appendices.
(In the event of a conflict between Attachment I and the other Attachments
and Appendices, Attachment I shall prevail.)
3. DEFINITIONS
The terms and expressions defined in clause 1 of Appendix A shall, unless
otherwise expressly stated herein, have the same meaning throughout the
Contract.
4. SERVICES DELIVERED BY SWISS TELECOM
Swiss Telecom shall provide the Services as specified in Attachment I and
III in accordance with the terms and conditions set out in this Contract.
5. SUBCONTRACTOR
For the provisioning of the Services, Unisource Business Networks
(Switzerland) S.A. hereinafter referred to as Unisource, shall be the main
Subcontractor of Swiss
- -------------------------------------------------------------------------------
Contract / Version 1.1 Page 3/5
Project-no. SS.CH 961300, 16 10 1996
<PAGE>
Contract Unidata Frame Relay & Unimaster Services
- -------------------------------------------------------------------------------
Telecom. Swiss Telecom shall be fully liable for its Subcontractors, to
the extent of Article 9.
6. SUBSIDIARIES AND AFFILIATES OF THE CUSTOMER
For the purpose of the Contract, the subsidiaries and affiliates of the
Customer as listed in Attachment V may make use of the Services, however,
the Customer shall be solely responsible for and entitled to request the
fulfilment of the Contract. The list of subsidiaries and affiliates may be
amended from time to time if agreed upon between the parties.
7. OBLIGATIONS OF THE CUSTOMER
In no event the Customer shall be entitled to resell the Service to any
other third party if this is in conflict with the relevant applicable laws
of the countries concerned. Swiss Telecom reserves the right to refuse any
request for service, at any location or in any country, or to suspend
immediately or terminate any service if Swiss Telecom has reasonable
grounds for suspecting that such provision of service is not in accordance
with the intent of this sub-clause. Breach of this clause by the Customer
shall be considered as a breach of a material obligation as referred to in
Article 14.2 of Appendix A.
8. CHARGES, FEES AND TERMS OF PAYMENT
The charges and fees for each Service are set out in Attachment II. The
Terms of Payment are set out in Appendix A.
9. LIABILITY OF SWISS TELECOM
Swiss Telecom shall be liable for loss or damage according to the
relevant provisions of the Swiss Telecommunications Act.
10. SERVICE PERIOD
The period for which the Contract is initially entered into shall be
one (1) year, starting on the first Ready-for-Service date. The First
Ready-for-Service Date is December 1st, 1996. The service period may be
extended in accordance with clause 2 of Appendix A. (Notwithstanding
clause 2 of Appendix A, the period of notice shall be six (6) months.)
(11. X-SPECIFIC PROVISIONS)
12. AMENDMENTS TO THE CONTRACT
- -------------------------------------------------------------------------------
Contract / Version 1 1 Page 4/5
Project-no. SS.CH 961300, 16.10.1996
<PAGE>
Contract Unidata Frame Relay & Unimaster Services
- -------------------------------------------------------------------------------
This Contract may be amended at any time by mutual agreement. Any such
amendment must be made in writing.
13. NOTICES
Notices to Swiss Telecom shall be sent to:
Telecom PTT, DT Geneva
Commercial Division
Route de Meyrin 49
1211 Geneve 2
Notices to the Customer shall be sent to:
Virtual Telecom S.A.
Morgines Business Center
Av. des Morgines 12
1213 Pt-Lancy
Invoices intended for the Customer shall be sent to:
(same as above)
14. JURISDICTION AND APPLICABLE LAW
This Contract is governed by Swiss law. Place of jurisdiction and
process shall be according to the relevant provisions of the Swiss law
(Verwaltungsverfahrensgesetz; Bundesgesetz uber die Organisation der
Bundesrechtspflege and PTT-Organisationsgesetz).
In witness thereof, the parties hereto have caused this Contract to be
signed in duplicate by their duly authorised representatives.
Place, Date: Place, Date:
/s/ illegible /s/ illegible 22/10/96
-------------------------------- --------------------------------
Swiss Telecom PTT: Customer.
/s/ illegible /s/ illegible
-------------------------------- --------------------------------
- -------------------------------------------------------------------------------
Contract / Version 1 1 Page 5/5
Project-no. SS.CH 961300, 16.10.1996
<PAGE>
ATTACHMENT I
SPECIFICATION OF THE SERVICES AND THE NETWORK
for data- and telecommunications services provided
by Swiss Telecom PTT.
Specification of the Network and Services, Locations, Ready-for-service
Date(s), and relevant standard terms and conditions for the provisioning of
the Access lines
The concept is based on a "Uniplus Internet Direct TCP/IP access" combined
with a "Unidata Frame Relay" and "Unimaster" telehousing solution. The
present contract and specifications apply only to the Unidata Frame Relay and
Unimaster services. A separate contract has to be signed for the Uniplus
Internet Services.
[graphic]
Notes: It should be mentioned that amongst the 13 planned points of presence,
4 will be installed at a latter stage (project phase II), i.e. Rapperswil,
Olten, Bienne, Coire.
- -------------------------------------------------------------------------------
Attachment I - Specification of the services and the network Page 1
<PAGE>
1.1 Unidata Frame Relay Services
The following remotes sites are to be linked via Unidata Frame Relay to
the Geneva Frame Relay node. The sites marked with a "*", will be
installed at a later stage (project phase II)
Service Unidata Frame Relay (Port & PVC
--------------------------------------------------------------------------
From To Access rate/CIR Provisional RFS Final RFS
--------------------------------------------------------------------------
Geneva Lausanne 128 / 64 1.11.96
--------------------------------------------------------------------------
Geneva Bern 128 / 64 1.11.96
--------------------------------------------------------------------------
Geneva Basel 128 / 64 1.11.96
--------------------------------------------------------------------------
Geneva Zurich 256 / 128 1.11.96
--------------------------------------------------------------------------
Geneva St-Gall 128 / 64 1.11.96
--------------------------------------------------------------------------
Geneva Winterthur 128 / 64 1.11.96
--------------------------------------------------------------------------
Geneva Lucerne 128 / 64 1.11.96
--------------------------------------------------------------------------
Geneva Lugano 128 / 64 1.11.96
--------------------------------------------------------------------------
Geneva Bienne* 128 / 64 Project phase II
--------------------------------------------------------------------------
Geneva Olten* 128 / 64 Project phase II
--------------------------------------------------------------------------
Geneva Rapperswil* 128 / 64 Project phase II
--------------------------------------------------------------------------
Geneva Coire* 128 / 64 Project phase II
--------------------------------------------------------------------------
1.2 Leased line Swiss Link Data
The following access line links Unisource Frame Relay node in Geneva to
Virtual Telecom computer facilities in Petit-Lancy GE.
--------------------------------------------------------------------------
From To Access rate Provisional RFS Final RFS
kbit/s
--------------------------------------------------------------------------
Geneva Pt-Lancy 1024 1.11.1996
--------------------------------------------------------------------------
1.3 Unimaster Telehousing Service
Unimaster telehousing services are used to host Ascend Max access
routers belonging to the customer. The sites marked with a "*", will be
installed at a later stage (project phase II)
--------------------------------------------------------------
Location Type Provisional RFS Final RFS
--------------------------------------------------------------
Lausanne One-shelf 1.11.96
--------------------------------------------------------------
Bern One-shelf 1.11.96
--------------------------------------------------------------
Basel One-shelf 1.11.96
--------------------------------------------------------------
Zurich One-shelf 1.11.96
--------------------------------------------------------------
St-Gall One-shelf 1.11.96
--------------------------------------------------------------
Winterthur One-shelf 1.11.96
--------------------------------------------------------------
Lugano One-shelf 1.11.96
--------------------------------------------------------------
Lucerne One-shelf 1.11.96
--------------------------------------------------------------
Olten* One-shelf Project phase II
--------------------------------------------------------------
Bienne* One-shelf Project phase II
--------------------------------------------------------------
Rapperswil* One-shelf Project phase II
--------------------------------------------------------------
Coire* One-shelf Project phase II
--------------------------------------------------------------
- -------------------------------------------------------------------------------
Attachment I - Specification of the services and the network Page 2
<PAGE>
ATTACHMENT II
CHARGES, FEES AND RELATED PROVISIONS
for data- and telecommunications services provided
by Swiss Telecom PTT.
Swiss Telecom PTT shall provide the Customer with the Service specified in
Attachment l. If the Customer requests any additional service it shall be
charged according to the applicable charges prevailing at the time of such
request (or as otherwise agreed by the Parties).
1) Leased line Swiss Link Data: (CHF, exclusive VAT)
--------------------------------------------------------------------------
From To Access rate Installation Monthly
kbit/s
--------------------------------------------------------------------------
Geneva Pt-Lancy 1024 0.- 1480.-
--------------------------------------------------------------------------
2) Service Unidata Frame Relay (Port & PVC): CHF, exclusive VAT
--------------------------------------------------------------------------
From To Access rate/CIR Installation Monthly
--------------------------------------------------------------------------
Geneva (port only) 1024 2400.- 1560.-
--------------------------------------------------------------------------
Geneva Lausanne 128 / 64 1750.- 701.-
--------------------------------------------------------------------------
Geneva Bern 128 / 64 1750.- 701.-
--------------------------------------------------------------------------
Geneva Basel 128 / 64 1750.- 701.-
--------------------------------------------------------------------------
Geneva Zurich 256 / 128 2550.- 1206.-
--------------------------------------------------------------------------
Geneva St-Gall 128 / 64 1750.- 701.-
--------------------------------------------------------------------------
Geneva Winterthur 128 / 64 1750.- 701.-
--------------------------------------------------------------------------
Geneva Lugano 128 / 64 1750.- 701.-
--------------------------------------------------------------------------
Geneva Lucerne 128 / 64 1750.- 701.-
--------------------------------------------------------------------------
Total phase I 17200.- 7673.-
--------------------------------------------------------------------------
Geneva Rapperswil* 128 / 64 1750.- 821.-
--------------------------------------------------------------------------
Geneva Olten* 128 / 64 1750.- 821.-
--------------------------------------------------------------------------
Geneva Bienne* 128 / 64 1750.- 701.-
--------------------------------------------------------------------------
Geneva Coire* 128 / 64 1750.- 821.-
--------------------------------------------------------------------------
Total phase I+II: 24200.- 10837.-
--------------------------------------------------------------------------
Notes: Out of the 13 above sites, 4 will be installed at a latter stage
(project phase II)
- -------------------------------------------------------------------------------
Attachment II - Charges, fees and related provisions Page 1
<PAGE>
3) Unimaster Service: telehousing charges: (CHF, exclusive VAT)
--------------------------------------------------------------
Location Type Installation Monthly
--------------------------------------------------------------
Lausanne One-shelf 360.- 450.-
--------------------------------------------------------------
Bern One-shelf 360.- 450.-
--------------------------------------------------------------
Basel One-shelf 360.- 450.-
--------------------------------------------------------------
Zurich One-shelf 360.- 450.-
--------------------------------------------------------------
St-Gall One-shelf 360.- 450.-
--------------------------------------------------------------
Winterthur One-shelf 360.- 450.-
--------------------------------------------------------------
Lugano One-shelf 360.- 450.-
--------------------------------------------------------------
Lucerne One-shelf 360.- 450.-
--------------------------------------------------------------
Total phase I: 2880.- 3600.-
--------------------------------------------------------------
Rapperswil* One-shelf 360.- 450.-
--------------------------------------------------------------
Olten* One-shelf 360.- 450 -
--------------------------------------------------------------
Bienne* One-shelf 360.- 450.-
--------------------------------------------------------------
Coire* One-shelf 360.- 450.-
--------------------------------------------------------------
Total phases I+II: 4320.- 5400.-
--------------------------------------------------------------
The above charges cover for the installation and housing of a single
Ascend Max in a standard 19" cabinet. A monthly flat fee covering
electrical power cost is included. Out of the 13 above sites, 4 will be
installed at a latter stage (project phase II)
- -------------------------------------------------------------------------------
Attachment II - Charges fees and related provisions Page 2
<PAGE>
5. Pricing summary: CHF, exclusive VAT
5.1 Phase I only
--------------------------------------------------------------
Services Installation Monthly
--------------------------------------------------------------
Leased lines 0.- 1480.-
--------------------------------------------------------------
*Frame Relay and PVC's 17200.- 6906.-
--------------------------------------------------------------
Telehousing (housing) 2880.- 3600.-
--------------------------------------------------------------
Telehousing (service) 0.- eff. costs
--------------------------------------------------------------
Total: 20080.- 11986.-
--------------------------------------------------------------
*The above prices apply to a 1 year's contract, including a 10% discount
on the Frame Relay and PVC's monthly charges
5.2 Option (Phase I + II)
The prices below apply to services provided to all points of presence,
i.e. after installation of the remaining 4 points of presences.
--------------------------------------------------------------
Services Installation Monthly
--------------------------------------------------------------
Leased lines 0.- 1480.-
--------------------------------------------------------------
*Frame Relay and PVC's 24200.- 9754.-
--------------------------------------------------------------
Telehousing (housing) 4320.- 5400.-
--------------------------------------------------------------
Telehousing (service) 0.- eff. costs
--------------------------------------------------------------
Total: 28520.- 16634.-
--------------------------------------------------------------
*The above prices apply to a 1 year's contract, including a special 10%
discount on the Frame Relay and PVC's monthly charges
- -------------------------------------------------------------------------------
Attachment II - Charges, fees and related provisions Page 3
<PAGE>
SERVICES FOR VIRTUAL TELECOM A. UNIDATA FRAME RELAY & UNIMASTER
- -------------------------------------------------------------------------------
ATTACHEMENT III
CUSTOMER PREMISES EQUIPMENT (CPEs)
Customer-specific Equipment
Ascend Max equipment, property of Virtual Telecom S.A., serviced by Digital
Equipment S.A., will be installed at the following locations as part of our
Unimaster Telehousing Services.
Sites addresses:
Unisource Switzerland S.A.
Street::_________________
City::___________________
Technical contact for Switzerland: Urs Schafli 031 688 8451
1) Lausanne: Av. Schnetzler 3
1003 Lausanne
2) Berne: Ey 8
3063 Ittigen
3) Bale: Wallstrasse 22
4002 Basel
4) Zurich: ZH- Herden
Aargauerstrasse 10
8048 Zurich
5) St-Gall: Hauptpost
9001 St-Gallen
6) Winterthur: Teusstalstrasse 162
8400 Winterthur
7) Lugano: Via Vergio 8
6932 Breganzona
8) Lucerne: Geissensteinring 45
6005 Luzern
9) Olten: Telecom PTT (to be defined)
10) Rapperswil: Telecom PTT (to be defined)
11) Bienne: Telecom PTT (to be defined)
12) Coire: Telecom PTT (to be defined)
- -------------------------------------------------------------------------------
TELECOM PTT PAGE 1
<PAGE>
Security Management Unidata
- -------------------------------------------------------------------------------
ATTACHMENT IV
SECURITY MANAGEMENT, HELP DESK
for Unisource Data and Telecommunications Services
of Telecom PTT
This document will be updated as required.
1. SECURITY MANAGEMENT
The persons listed below are entitled, under their own signature, to
commission changes in Access Points, Configurations and Passwords, etc.
Unisource reserves the right to verify the signatures for such commissions.
FAMILY NAME / GIVEN NAME SIGNATURE
1. ( ) Gibbons, Neil /s/ Neil Gibbons
---------------------------- ----------------------------
2. ( ) Huber, Daniel /s/ Daniel Huber
---------------------------- ----------------------------
3. ( ) Webster, Richard /s/ Richard Webster
---------------------------- ----------------------------
4. ( )
---------------------------- ----------------------------
5. ( )
---------------------------- ----------------------------
6. ( )
---------------------------- ----------------------------
- -------------------------------------------------------------------------------
Att_iv / Version 1.0 Page 1/2
Project-no CH9613.00, 4 9.96
<PAGE>
Security Management Unidata
- -------------------------------------------------------------------------------
2. HELP DESK
Unisource
Calls from Switzerland: 155 70 70 Fax 155 70 71
Calls from abroad: +41 46 05 70 70 Fax +41 46 05 70 71
Virtual Telecom S.A. +41 22 310 2536 Fax +41 22 310 5969
Morgines Business Center
Av. des Morgines 12
1213 Pt-Lancy
Date and place: Date and place:
Geneve, le 22 octobre 1996 Geneve 22/10/96
---------------------------- ----------------------------
Telecom PTT: Customer:
illegible illegible
---------------------------- ----------------------------
- -------------------------------------------------------------------------------
Att_iv / Version 1.0 Page 2/2
Project-no CH961300, 4 9.96
<PAGE>
ATTACHMENT V
LIST OF SUBSIDIARIES AND AFFILIATES
for data- and telecommunications services provided
by Swiss Telecom PTT.
Virtual Telecom S.A. computer facilities will be housed at the following
location:
1) Digital Equipment Corporation International (Europe)
12 avenue des Morgines
C.P. 176
1213 Petit-Lancy 1
Geneva Switzerland
Phone: +41 22 709 5665
Fax: +41 22 709 5358
Sales contact: Mr Jean-Marc Bongni, Sales Account Mgr.
Technical contact: Mr Gilbert Bontemps
- -------------------------------------------------------------------------------
Attachment V - List of subsidiaries and affiliates Page 1
<PAGE>
Compensation Provisions Unidata
- -------------------------------------------------------------------------------
ATTACHMENT VI-1
COMPENSATION PROVISIONS
in the event of failure to meet Ready-for-Service Dates
for Unisource Data and Telecommunications Services
provided by Telecom PTT
If Telecom PTT fails to meet the Ready-for-Services and Final
Ready-for-Service Dates, the following compensation shall be payable, subject
to the provisions of the Agreement, of Appendix A (General Terms and
Conditions) and Appendix B (General Procedures and Requirements).
The compensation shall be provided in the form of a reduction in the one time
fee for Standard Services:
1. Telecom PTT shall pay compensation of 50 % (fifty percent) of the
relevant installation fee for which the customer has been charged,
insofar as one or more Ready-for-Service Dates and/or the Final
Ready-for-Service Date has been exceeded by one whole month (30 days).
2. If Ready-for-Service Dates have been met in respect of some but not all
Locations, the compensation shall be calculated on the basis of the
number of Locations for which the Ready-for-Service Date was not met as a
proportion of the total number of Locations which are to be installed
under the Agreement.
3. If the Final Ready-for-Service Date is not met, the compensation shall
be calculated on the basis of the number of Locations for which the
final Ready-for-Service Date was not met as a proportion of the total
number of Locations which are to be installed under the Agreement.
4. The compensation shall be a maximum of 100 % (one hundred percent) of the
relevant installation fee for which the Customer has been charged.
5. The compensation shall cease to be paid in the month after the
Ready-for-Service and/or Final Ready-for-Service Dates have been
subsequently met.
6. Once this Agreement has been terminated in whole or in part, the
Customer shall have no further entitlement to compensation.
- -------------------------------------------------------------------------------
Att_vil / Version 1 0 Page 1/1
Project-no. CH961300, 4.9.96
<PAGE>
Compensation Provisions Unidata
- -------------------------------------------------------------------------------
ATTACHMENT VI-2
COMPENSATION PROVISIONS
in the event of failure to meet guaranteed Network Performance
for Unisource Data and Telecommunications Services
provided by Telecom PTT
If the Network Performance guaranteed in Attachment I and specified in the
Service Level Agreement is not met, Swiss Telecom PTT shall pay the Customer
compensation based on the criteria set out below.
NETWORK AND SERVICE AVAILABILITY
Compensation payments shall be made if the values of Customer Network
Availability (CNA) defined in Attachment I or of the defined Network parts
are not achieved. The CNA shall be measured and calculated in accordance with
the SLA (Service Level Agreement, Appendix C) and shall commence on the RFS
(Ready-for-Service) Date.
Compensation payments shall be calculated as follows:
- - Compensation payments for Standard Services, not including Access Lines,
shall be 1 % (one percent) of the monthly fee charged to the Customer.
Compensation payments shall be made for every 0.1 % (one tenth of a percent)
by which the guaranteed value, based on the 30-day period immediately
preceding, was not achieved. If several of these values are not achieved at
one and the same time, the compensation payments shall be made only for
failure to achieve the lowest value.
- - Compensation payments for Standard Services shall be a maximum of 40%
(forty percent) of the relevant Services, not including Access Lines, for
which the Customer has been charged. The Customer shall have no entitlement
to compensation payments in respect of any period after termination of the
Agreement in whole or in part and in respect of the terminated part of the
Agreement.
- -------------------------------------------------------------------------------
Att_vi2 / Version 1 0 Page 1/1
Project-no. CH961300, 4.9.96
<PAGE>
TELECOM
Appendix A: See contract / Version 1.0
Appendix C: See contract / Version 1.0
Appendix C: See contract / Version 1.0
Appendix D: See contract / Version 1.0
<PAGE>
AFX NEWS
DISTRIBUTOR AGREEMENT
WITH
VIRTUAL TELECOM
PREPARED BY: GRAHAM PARRY
DATED: 7TH JANUARY 1997
REFERENCE: VT0810.SAM/CON
<PAGE>
AN AGREEMENT dated this seventh day of January 1997
BETWEEN AFX NEWS LIMITED
(hereinafter referred to as "AFX")
OF FITZROY HOUSE, 13 - 17 EPWORTH STREET, LONDON, EC2A 4DL
AND VIRTUAL TELECOM
(hereinafter referred to as "the Distributor")
OF MBC MORGINES
BUSINESS CENTRE
12 AVENUES DES MORGINES
1213 PETIT-LANCY
GENEVA
AFX agrees to supply and the Distributor agrees to accept the Service(s) as
defined in Schedule 1 subject to the terms and conditions set out herein.
THE Distributor's ATTENTION IS DRAWN TO ARTICLE 9 AS IT CONTAINS EXCLUSIONS
AND LIMITATIONS OF AFX's LIABILITY IN CERTAIN CIRCUMSTANCES, WHICH EXCLUSIONS
AND LIMITATIONS AFX CONSIDERS REASONABLE.
<PAGE>
TERMS AND CONDITIONS
1. DEFINITIONS
In this Agreement and in any Schedules and Exhibits attached hereto
(which shall be deemed to be incorporated into and to form part of this
Agreement) the following expressions shall have the following meanings
and the singular shall include the plural and vice versa:
Schedule - the document(s) attached to this Agreement detailing
inter alia the Service, Charges, Commencement Date,
Site and method of supply.
Service - the service described in Schedule 1.
Business Day - any day on which at least London, New York, Tokyo and
Frankfurt exchanges are open for business.
Commencement - the date specified in Schedule 1 for the commencement
Date of the Service.
Term - the period during which this Agreement is to remain
in force as described in article 3.
Charges - the charges described in article 8 and Schedule 2.
Initial Term - the period of one year from the Commencement Date.
Primary Site - the geographical site specified in Schedule 1 to which
the Service is delivered and used by the Distributor.
Additional Site - any geographical site other than the Primary Site
where the Service is used by the Distributor.
Site - Primary Site or Additional Site.
Stock Exchange - the Stock Exchanges or other sources of information
from which AFX obtaining information for inclusion in
the Services.
Subscriber - Distributor's own Subscriber.
Terminal - any Distributor or Subscriber equipment on which the
Service is displayed.
Quarter Day - any 31 March, 30 June, 30 September or 31 December.
Quarter - a period of three calendar months ending on any
Quarter Day.
<PAGE>
2. SUPPLY OF SERVICE
2.1 Subject to the terms and upon the conditions stated herein AFX will
supply the Service to the Distributor at the Primary Site.
2.2 The Service will be provided via the delivery route detailed in
Schedule 1 and in formats detailed in the AFX Technical
Specification - copies of which are available on request.
2.3 AFX may from time to time vary the formats detailed in the AFX
Technical Specification but will only do so following written notice
giving three months notice in advance where such variations are under
AFX control or such shorter notice as is reasonable in other
circumstances. In the event that such proposed changes are
unacceptable to the Distributor the Distributor shall notify AFX in
writing within fourteen days of receipt of the notice from AFX. AFX
shall have the opportunity to withdraw such proposed changes by
giving written notice of withdrawal within seven days of receipt
of the said notice from the Distributor. Absent such notice of
withdrawal by AFX the Distributor shall have the right to terminate
the Agreement without penalty by giving prior written notice to AFX
such notice to take effect on the proposed date of change or the
actual date of change if earlier.
2.4 Unless otherwise specified in the Schedule the Service will be
provided only in respect of Business Days.
3. TERM
This Agreement shall take effect on the date of execution and, subject
to the provision of article 4 below, shall remain in force for the
Initial Term and shall continue until terminated by either party giving to
the other not less than three months' prior written notice to expire at
the end of the Initial Term or thereafter on any Quarter Day.
4. TERMINATION
4.1 Either party may terminate this Agreement by written notice to the
other if the other party is in breach of any of its obligations under
this Agreement, and in the event of a breach capable of being
remedied, fails to remedy such breach within thirty days of receipt
of notice in writing specifying the nature of the breach.
4.2 Either party may terminate this Agreement by written notice to the
other if the other party shall make an arrangement with or assignment
in favor of its creditors or shall go into liquidation (other than a
voluntary liquidation for the purposes of amalgamation or
reconstruction) or have a receiver or administrator appointed over
its property or assets or any part thereof.
4.3 AFX may terminate this Agreement by giving one months' prior
written notice to the Distributor if any amount due from the
Distributor has not been paid within thirty days of the date on which
it becomes payable under the provisions of this Agreement.
4.4 Except where the Distributor terminates this Agreement pursuant to
article 2.3, 4.1 or 4.2 above or paragraph 7 of Schedule 2, AFX shall
be under no liability to refund any pre-paid amounts.
<PAGE>
4.5 The Distributor hereby agrees that upon termination of this
Agreement for whatever reason it shall expunge the Service from its
computer equipment, certify in writing to AFX that it has done so and
cease using the Service forthwith.
4.6 Termination of this agreement for whatever reason shall not affect
any rights of either party which may have accrued up to the date of
termination.
4.7 Should the Distributor undergo a significant change in ownership
such that a competitor of AFX obtains effective control, AFX shall
have the right summarily to terminate this Agreement by giving to the
Distributor notice in writing, provided that such notice is given by
AFX within three months of such change of ownership coming to the
attention of AFX.
5. PROVISION OF EQUIPMENT
5.1 The Distributor shall be responsible for providing and maintaining
any terminal or other equipment required to receive the Service.
5.2 Whilst AFX will provide general advice to the Distributor with
respect to the compatibility of the Service and the Distributor's
equipment AFX cannot guarantee and specifically disclaims any
responsibility for continued compatibility between the Distributor's
equipment and the Service. The Distributor hereby assumes all
liability arising from or in connection with the use of Distributor's
equipment including, without limitation, interface software, printing
capabilities and quality and response times.
6. USE OF SERVICE
The Service may be used only in accordance with the provisions set out
in Schedule 2.
7. PROPRIETARY RIGHTS
7.1 The Distributor confirms that as between itself and AFX, AFX is
throughout the world the beneficial owner of the entire copyright in
the compilation of information contained in the Service for the full
period of copyright therein. The Distributor further acknowledges
that the information contained in the Service is the property of AFX
and the Distributor agrees that it will not use or disseminate such
information except as expressly provided in this Agreement
7.2 The Distributor will at the request and expense of AFX do all such
further acts, deeds and things, other than the filing or pursuit of
legal action, and execute all such further documents, deeds and
instruments, both during the term of this Agreement and thereafter,
from time to time reasonably necessary for the protection and
enforcement of all AFX proprietary rights in the Service and
information contained therein.
7.3 The Distributor shall not use or distribute the Service in any
manner except as expressly provided in this Agreement; provided,
however, that this restriction shall not apply to any data which
is coincidentally contained in the Service insofar as such data is
collected, acquired and organized by agents or employees of, or
vendors to, the Distributor, completely independently and without
reference to or use of the Service or any related documentation
therefor.
<PAGE>
8. CHARGES
The Charges specified in Schedule 2 as amended from time to time are
payable in accordance with the provisions thereof.
9. LIABILITY AND WARRANTY
9.1 NOTWITHSTANDING ARTICLES 9.2 AND 9.3 BELOW AFX SHALL INDEMNIFY
THE Distributor IN RESPECT OF ANY LIABILITY FOR DEATH OF OR
PERSONAL INJURY TO ANY PERSON TO THE EXTENT THAT SUCH DEATH
OR INJURY IS CAUSED BY AFX's NEGLIGENCE.
9.2 THE LIABILITY OF AFX AND/OR ITS SUPPLIERS TO THE Distributor FOR
DIRECT LOSS OR DAMAGE WHETHER IN CONTRACT TORT OR OTHERWISE
ARISING FROM WHATEVER CAUSE NEGLIGENT OR OTHERWISE OUT OF OR
IN CONNECTION WITH THE PERFORMANCE OR THE TOTAL OR PARTIAL
FAILURE TO PERFORM IN ACCORDANCE WITH THIS AGREEMENT SHALL IN
RESPECT OF ANY ONE INCIDENT OR SERIES OF INCIDENTS ATTRIBUTABLE
TO THE SAME CAUSE BE LIMITED TO AND SHALL NOT IN ANY
CIRCUMSTANCES EXCEED AN AMOUNT EQUAL TO THE ANNUAL PRIMARY
SITE LICENCE FEE PAYABLE PURSUANT TO THIS AGREEMENT IN RESPECT
OF THE Service PROVIDED TO THE Distributor ON THE DATE OF THE
INCIDENT (OR IN THE CASE OF A SERIES OF INCIDENTS ATTRIBUTABLE TO
THE SAME CAUSE THE DATE OF THE FIRST INCIDENT IN SUCH SERIES).
9.3 NEITHER PARTY NOR ITS SUPPLIERS IF ANY SHALL IN ANY
CIRCUMSTANCES BE LIABLE WHETHER IN CONTRACT TORT OR
OTHERWISE FOR ANY CONSEQUENTIAL OR INDIRECT LOSS OR DAMAGE
OR FOR ANY LOSS OF PROFITS OR OF CONTRACTS HOWSOEVER ARISING
THROUGH NEGLIGENCE OR OTHERWISE AND OF WHATSOEVER NATURE
SUFFERED OR INCURRED DIRECTLY OR INDIRECTLY BY THE OTHER
PARTY.
9.4 EXCEPT IN THE CASE OF GROSS NEGLIGENCE WILFUL DEFAULT WILFUL
ACT OR WILFUL OMISSION OF AFX THE Distributor AGREES TO INDEMNIFY
AND KEEP INDEMNIFIED AFX FROM AND AGAINST ANY THIRD PARTY
CLAIMS AGAINST AFX ARISING FROM OR RELATING TO THE EXHIBITION
DISSEMINATION OR PUBLICATION BY THE Distributor OF ANY MATTER IN
ANY WAY INCLUDED IN OR FOUNDED UPON THE Service SUPPLIED BY AFX
HEREUNDER.
9.5 IT IS HEREBY AGREED THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, ALL CONDITIONS OR WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE (INCLUDING BUT NOT LIMITED TO ANY
CONCERNING THE FITNESS OF THE Service OR ANY DATA INCLUDED
THEREIN FOR A PARTICULAR PURPOSE) ARE HEREBY EXCLUDED.
<PAGE>
10. FORCE MAJEURE
Neither party shall be liable for any delay or failure to perform its
obligations caused by any industrial dispute or other circumstances
beyond its reasonable control.
11. ASSIGNMENT
This Agreement is personal to the Distributor the Distributors parent
and subsidiaries entirely owned by the Distributor and the Distributor
shall not assign or otherwise transfer its rights or obligations under
this Agreement without the prior written consent of AFX.
12. CONFIDENTIALITY
Each party agrees to preserve the confidentiality of all "Confidential
Information" of the other party which is obtained in connection with this
Agreement, and shall not, without the prior written consent of the other
party, disclose or make available to any person, or use for its own
benefit other than as contemplated by this Agreement, any such
"Confidential Information" of the other party.
For the purpose of this section, "Confidential Information" shall mean
information pertaining to the business of either party which is actually
confidential, is disclosed at the request of or with the consent of the
receiving party, and is clearly labelled or identified as confidential;
provided that all customer lists, pricing information, business methods
and financial records of either party shall be deemed Confidential
Information even if not so labelled; and provided further that
Confidential Information shall not include any information which is or
becomes publicly available (other than through unauthorized disclosure by
the receiving party), is in the possession of or known to the receiving
party prior to its disclosure hereunder, is independently developed by the
receiving party, or is made available to the receiving party by any person
other than the disclosing party without breach of any obligation of
confidentiality of such other person.
14. AFX warrants that at the date of execution of this Agreement the
Distributor is not required to enter into any third party licence
agreement or to pay any fees to a third party. This Agreement is however
subject to any requirement of the Stock Exchange as may be imposed from
time to time. AFX will notify the Distributor of any such requirements. In
the event that the imposition of such requirements would render delivery
of the Services by the Distributor no longer commercially viable, and as a
consequence, the Distributor finds the requirements unacceptable the
Distributor may inform AFX of the position in writing within thirty days
of the notification of the requirements by AFX. AFX and the Distributor
shall then discuss the best way of proceeding in the circumstances
bearing in mind the need for both parties to fulfil existing obligations
to Customers but if no mutually acceptable arrangements can be found under
which the Distributor can continue to deliver the Services, the
Distributor may terminate this Agreement by giving AFX at least fifteen
weeks' notice in writing, such notice to expire on a Quarter Day.
15. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between AFX and the
Distributor as to the subject matter hereof and supersedes all previous
communications, representations and arrangements, either written or oral,
and the Distributor hereby acknowledges that no reliance is placed on any
representation made but not embodied in this Agreement.
<PAGE>
16. SURVIVAL OF PROVISIONS
Notwithstanding the termination of this Agreement for whatever reason
articles 7, 9 and 12 shall continue in full force and effect.
17. LAW
This Agreement shall be subject to English Law and English Jurisdiction.
FOR AND ON BEHALF OF THE DISTRIBUTOR
Signature /s/ Daniel Huber /s/ Neil Gibbons
---------------------------------------------------
Name Daniel Huber Neil Gibbons
---------------------------------------------------
Title CFO CEO
---------------------------------------------------
Date 23.1.1997 28.01.1997
---------------------------------------------------
FOR AND ON BEHALF OF AFX
Signature
---------------------------------------------------
Name
---------------------------------------------------
Title
---------------------------------------------------
Date
---------------------------------------------------
<PAGE>
SCHEDULE 1
THE SERVICE
The Service comprises of AFX-Europe as described in the current Brochure,
copies of which are available on request.
COMMENCEMENT DATE 1st February 1997
THE PRIMARY SITE MBC Morgines
Business Centre
12 Avenue des Morgines
1213 Petit-Lancy
Geneva
Switzerland
ADDITIONAL SITE(S) To be advised
DELIVERY ROUTE(S) Via S & P Comstock to Primary Site
<PAGE>
SCHEDULE 2 (REDISTRIBUTOR)
TERRITORY/NETWORK PRODUCT EUROPE (Professional Service)
LICENSE GLOBAL (Private Investor Service)
GRANT OF LICENSE FOR THE DISTRIBUTOR TO MAKE INTERNAL USE OF AND TO REDISTRIBUTE
THE SERVICE
1. GRANT OF LICENSE FOR THE DISTRIBUTOR TO MAKE INTERNAL USE OF THE SERVICE
AFX grants to the Distributor the non-exclusive right and license to
store the Service on the Distributor's computer system, and to use the
data comprising the Service for marketing demonstrations and other
internal purposes not involving any direct distribution of the Service
to the Distributor's customers or to any other persons or organizations
and not involving any usage of any part of the Service as source material
for any service run by the Distributor.
2. GRANT OF LICENSE TO REDISTRIBUTE THE SERVICE
Subject to the Charges specified herein and the provisions of paragraph
3 below, AFX hereby grants to the Distributor the non-exclusive right and
license to redistribute the Service, or portions thereof, to Subscribers
within the Territory on the following basis:
a) Private Investors - WEB Delivery-Delayed
i. Base new service provided to ALL Virtual Telecom customers by
selection of:
All stories coded "SUM"
ii. Optional upgrade to full Swiss service and key economic indicators
by selection of:
All stories coded "SWI"
All stories coded "IND" and "GBR"/"USA"/"GER"/"JPN"
b) Professional Users - Townsend Software Delivery
i. Base new service provided to ALL Virtual Telecom customers by
selection of:
All stories coded "SUM"
ii. Optional upgrade to full Swiss service and key economic indicators
by selection of:
All stories coded "SWI"
All stories coded "IND" and "GBR"/"USA"/"GER"/"JPN"
iii. Optional upgrade to full AFX-Europe service - Real Time
<PAGE>
3. ARRANGEMENTS BETWEEN THE DISTRIBUTOR AND SUBSCRIBERS FOR THE SERVICE
The Distributor shall exert its best efforts to ensure that, before any
Subscriber may obtain access to or is provided any delivery of the
Service, such Subscriber shall have executed the Distributor's standard
form of subscription agreement, examples of which are appended hereto.
Should the Distributor wish to modify its standard form of subscription
agreement it shall give AFX reasonable prior notice of such proposed
modifications.
In the event that such proposed modifications are unacceptable to AFX,
AFX shall notify the Distributor in writing within fourteen days of
receipt of the notice from the Distributor. The Distributor shall have
the opportunity to withdraw such proposed modifications by giving written
notice of withdrawal within seven days of receipt of the said notice from
AFX. Absent such notice of withdrawal by the Distributor AFX shall have
the right to terminate the Agreement without penalty by giving prior
written notice to the Distributor such notice to take effect on the
proposed date of modification or the actual date of modification if
earlier.
4. SUBSCRIBER COMPLIANCE
The Distributor shall be under no affirmative obligation to AFX to
monitor Subscribers' on-going compliance with the specific terms of their
respective subscription agreements. However, in the event that it should
come to the attention of an officer of the Distributor, or if AFX should
notify the Distributor, Subscriber is then using the Service other than as
permitted under the terms of that Subscriber's subscription agreement for
the Service, the Distributor shall, upon becoming so aware or upon receipt
take prompt corrective action, if appropriate. Unless such breach is cured
within a reasonable period by the Subscriber after notice by the
Distributor, the Distributor shall so notify AFX, and upon receiving
appropriate written instructions from AFX, the Distributor shall
discontinue providing the Service to such Subscriber and shall take such
further action on behalf of AFX as is reasonably requested by AFX to
protect its proprietary rights in the Service; provided that any
litigation initiated against any such Subscriber shall be initiated in the
name and at the sole expense of AFX; and provided, further, that;
i) in no event shall the Distributor be under any obligation to AFX to
initiate litigation in the Distributor's own name against any
Subscriber; and
ii) in no event shall the Distributor have any obligation hereunder to
pay royalties to AFX relating to the period prior to receipt of
notice from AFX given under this Section for any such unpermitted
use of the Service by any Subscriber of which an officer of the
Distributor did not have actual knowledge or the Distributor could
not reasonably prevent.
AFX hereby agrees to indemnify the Distributor against any claims
asserted against the Distributor by Subscribers whose subscriptions to
receive the Service have been terminated by the Distributor at the
instruction of AFX in so far as such claims relate to such termination.
5. REPORTS
i) The Distributor shall provide written notification to AFX within
thirty days of the end of each month the name, address and locations
and number of Terminals of each Subscriber which had access to or
was provided any delivery of the Service within each Territory during
such months together with a listing of the Charges payable in
respect of each such Subscriber, and (for any new Subscriber) the
date of commencement of use of the Service by such Subscriber during
each month.
<PAGE>
ii) Charges are payable quarterly in arrears and shall be remitted to AFX
together with the reports specified in paragraph 5.1 above. Charges
in respect of part periods shall be payable pro rata.
iii) The Distributor shall provide written notification to AFX on a regular
basis on Subscribers trilling the Service. See also 8 (c) below.
6. DEMONSTRATION AND TEST DATA
In connection with the Distributor's marketing efforts, the Distributor
shall have the right to conduct limited demonstrations of the use of the
Service to potential Subscribers. Such limited demonstrations shall not
include the accommodation of any person's needs beyond a point reasonably
necessary to obtain such person as a Subscriber for the Service.
Un-charged Subscriber trials of the Service will not normally exceed one
month.
7. CHARGES
i) The Distributor's Charge obligations hereunder shall arise upon
delivery of the Service. Payments shall be remitted to AFX in
Pounds Sterling at the address in London specified by AFX from time
to time.
ii) The Distributor shall maintain such books and records as are necessary
to establish the accuracy of the Charge payments and reports to be
made hereunder. The Distributor shall, not more frequently than once
each calendar year, provide access to such records during normal
working hours to independent accountants appointed by AFX. for the
purpose of verifying the Charge payments paid and payable hereunder.
Such verification shall be at AFX's expense.
CHARGES:
MINIMUM CHARGES
QTR 1 L3000
QTR 2 L4500
QTR 3 L6000
QTR 4 L7500
(a) PRIVATE INVESTOR SERVICE
i. BASE NEWS SERVICE TO ALL VIRTUAL TELECOM CUSTOMERS
L1.00 PER USER/MONTH
ii. OPTIONAL UPGRADE TO SWISS SERVICE AND ECONOMIC INDICATORS
UPGRADE L5.00 PER USER/MONTH
(b) PROFESSIONAL SERVICE
i. BASE NEWS SERVICE TO ALL VIRTUAL TELECOM CUSTOMERS
L1.00 PER USER/MONTH
<PAGE>
ii. OPTIONAL UPGRADE TO SWISS SERVICE AND ECONOMIC INDICATORS
UPGRADE L5.00 PER USER/MONTH
iii. OPTIONAL UPGRADE TO FULL AFX-EUROPE SERVICE
UPGRADE L50.00 PER USER/MONTH
The Charges are subject to variation by AFX giving to the
Distributor at least three months written notice to expire on any
Quarter Day. In the event of AFX varying the Charges hereunder the
Distributor shall be bound to pay such varied Charges unless within
14 days of the receipt of said notice it gives AFX written
notification that it elects to treat the same as a valid notice to
terminate this Agreement in which case this Agreement shall terminate
on the expiration of said notice and AFX shall forthwith refund to
the Distributor any balance of Charges paid in respect of any period
beyond such termination date.
iii) The Distributor reserves the right to Charge its Subscribers such
fees for access to the Service as the Distributor may consider to be
appropriate under the circumstances, taking into account the
royalties payable hereunder to AFX, the prevailing market prices for
comparable services and the Distributor's own transmission services
and other costs.
8. MARKETING AND SUBSCRIBER SUPPORT
a) AFX agrees to provide to the Distributor and the Distributor's
Subscribers and prospective Subscribers, at no additional charge, copies
of documentation describing the Service. Such documentation shall
conform to AFX's usual standard.
b) Any publicity material and other documentation prepared by or at the
request of the Distributor which refers to the trademark 'AFX' or any
other name or mark owned by AFX shall first be submitted to AFX for
approval, and approval shall be obtained, before publication. Such
approval shall not unreasonably be withheld.
c) The Distributor agrees to exert all reasonable efforts to market the
Service and provide information to AFX on Subscriber reactions to
trials. The Distributor also agrees to provide Subscriber contact
information on prospective Subscribers in the event that the Distributor
is, for any period, unable to promote AFX fully.
9. NO AGENCY
The relationship between the parties is that of independent contractors and
nothing contained in this Agreement shall be construed so as to create any
partnership, agency, joint venture or similar relationship.
<PAGE>
EXHIBIT 21-1
The company has one subsidiary, Virtual Telecom SA, a Swiss corporation.
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0
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